On September 20, 2012, the Federal Energy Regulatory Commission (FERC) issued an order conditionally accepting a proposal by Southwest Power Pool, Inc. (SPP) to begin systematic and automated curtailments of Non-Dispatchable Resources, including electric generation from wind and solar resources, during periods of congestion.  The order is designed to address the substantial increases in Non-Dispatchable Resources that have been experienced since the inception of the Energy Imbalance Service (EIS) market, as well as projections that an additional 4,000 MW of Non-Dispatchable Resources will be added to SPP’s system over the next three years.  Under the new market rules, Non-Dispatchable Resources will be curtailed in SPP’s EIS market based on their existing transmission service priority.  That priority is based on whether the Non-Dispatchable Resource is (i) scheduling against a transmission reservation, (ii) a Qualifying Facility (QF) exercising its rights under the Public Utility Regulatory Policies Act (PURPA) to deliver its net output to its host utility, or (iii) using unscheduled service.  Security-constrained economic dispatch is to be exhausted before any Non-Dispatchable Resources are curtailed.

QF output sold under PURPA will be curtailed proportionately and on a basis equivalent to firm service.  In other words, such output will be curtailed only during a North American Electric Reliability Corporation Transmission Loading Relief (TLR) level 5 event or activation of a constraint in SPP’s Market Operating System (MOS), and only after all other lower-priority service has been curtailed to relieve congestion.  QFs will not be subject to Uninstructed Deviation Charges if they do not participate in the EIS Market (these are QFs that exercised their rights under PURPA to deliver all of their net output to their host utilities and that did not register in the EIS Market but instead were involuntarily registered by SPP).  All other output from Non-Dispatchable Resources will be subject to Uninstructed Deviation Charges if such Non-Dispatchable Resources fail to comply with curtailment instructions.

The new automated curtailment rules will become effective October 15, 2012 for all Non-Dispatchable Resources that become commercially operable on or after that date.  For Non-Dispatchable Resources operable before that date, SPP is required to undertake a further stakeholder process in order to develop a revised proposal that must be filed with FERC and will become effective on September 20, 2013.  This difference in treatment stems from FERC’s findings that (i) SPP failed to justify applying its proposal to existing Non-Dispatchable Resources, (ii) until now, manual curtailment instructions have typically been issued only to the Non-Dispatchable Resource making the largest contribution to a constraint, not to all Non-Dispatchable Resources, and (iii) there may be older Non-Dispatchable Resources that are unable to comply with the new rules.

FERC further requires SPP to modify its tariff to provide that Non-Dispatchable Resources with point-to-point transmission service rights receive a TLR level 5 curtailment priority up to the amount of firm transmission service reserved.  In addition, SPP must modify the tariff to clarify that Non-Dispatchable Resources that are designated network resources will receive such priority up to the level of output designated for such Non-Dispatchable Resources, provided that the aggregate generation from designated network resources for a particular network load does not exceed the associated network load plus losses.

The order rejects calls to require SPP to implement 15-minute scheduling or “closer to real-time adjustments” to scheduling, noting that FERC Order No. 764 gives Regional Transmission Organizations until June 22, 2013 to implement 15-minute scheduling capability.  The order does, however, direct SPP to address in its compliance filing how its treatment of both existing and new Non-Dispatchable Resources will work within the Integrated Marketplace proposed by SPP in FERC Docket No. ER12-1179-000.

© 2012 Perkins Coie LLP