Midwest ISO Transmission Owners, 101509 FERC, ER08-15-002

Docket Nº:ER08-15-002
Party Name:Midwest ISO Transmission Owners
Judge Panel:Before Commissioners: Jon Wellinghoff, Chairman; Suedeen G. Kelly, Marc Spitzer, and Philip D. Moeller. Nathaniel J. Davis, Sr., Deputy Secretary.
Case Date:October 15, 2009
Court:Federal Energy Regulatory Commission
 
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129 FERC ¶ 61, 041

Midwest ISO Transmission Owners

No. ER08-15-002

United States of America, Federal Energy Regulatory Commission

October 15, 2009

          Before Commissioners: Jon Wellinghoff, Chairman; Suedeen G. Kelly, Marc Spitzer, and Philip D. Moeller.

          ORDER DENYING REHEARING

         1. Several parties1 request rehearing of the Commission’s March 31, 2008 order2accepting Schedule 2-A for filing. Schedule 2-A revised the Midwest Independent Transmission System Operator, Inc. (Midwest ISO) Open Access Transmission and Energy Markets Tariff (Tariff) to institute zone-based3 compensation for Reactive Supply and Voltage Control from Generation or Other Sources Service (reactive power). For the reasons discussed below, we deny rehearing.

         I. Background

         2. Schedule 2-A allows transmission owners to choose which reactive power compensation provisions in the Tariff-those in Schedule 2 or those in Schedule 2-A- will apply in their zones.4 In a zone governed by Schedule 2, reactive power compensation will be paid on a capability basis; that is, each Qualified Generator can collect a cost-based revenue requirement that reflects its capability to provide reactive power, including its capability to provide reactive power inside the deadband. In contrast, in a zone governed by Schedule 2-A, reactive power compensation will be paid on a per MVar basis; each Qualified Generator will be paid only for the reactive power it provides outside the deadband.5 Prior to the March 2008 Order, Schedule 2 was the only option in the Tariff.

         3. Schedule 2-A was submitted for filing under section 205 of the Federal Power Act6 by a subset of Midwest ISO transmission owners (Filing Transmission Owners).7Several protesters argued that only Midwest ISO, as the independent Regional Transmission Organization (RTO), could propose to modify the Tariff. The protesters also argued, inter alia, that the Filing Transmission Owners should have submitted Schedule 2-A under section 206 of the Federal Power Act8rather than under section 205, that Schedule 2-A fails to meet Commission imposed criteria for amendments to Schedule 2, and that zone-based reactive power compensation conflicts with Commission precedent, specifically Order Nos. 2003 and 2003-A.9In the March 2008 Order, the Commission rejected these arguments and accepted Schedule 2-A for filing.

         II. Rehearing Requests

         A. Filing Rights under Section 3.9 of the Filing Rights Settlement

         1. March 2008 Order

         4. The Filing Transmission Owners relied on section 3.9 of the Filing Rights Settlement between Midwest ISO and the Midwest ISO transmission owners for the authority to submit Schedule 2-A.10 The Filing Rights Settlement allocates section 205 filing rights between Midwest ISO and the transmission owners. Section 3.9 allocates to both transmission owners and Midwest ISO the right to submit section 205 filings to govern the rates, terms, and conditions applicable to the provision of ancillary services:

Both [t]ransmission [o]wners that own or control generation or other resources capable of providing ancillary services (offered to customers pursuant to the [Tariff]) and the Midwest ISO shall have the right to submit filings under [Federal Power Act] section 205 to govern the rates, terms, and conditions applicable to the provision of ancillary services. A [t]ransmission [o]wner shall not be required to follow the governance and coordination provisions of [s]ections 4 and 5 of this [Filing Rights Settlement] to exercise the filing right provided for in this [s]ection 3.9; provided, however, that any ancillary service proposal that has regional impacts shall be subject to the governance and coordination provisions of [s]ections 4 and 5 of this [Filing Rights Settlement].

         5. Several parties challenged the Filing Transmission Owners’ reliance on section 3.9. For example, Dynegy argued that section 3.9 allocates to transmission owners the right to make section 205 filings that modify only their individual reactive power rates, not filings that modify the Tariff.11 Dynegy pointed to language in section 3.9 that appears to allocate filing rights only to transmission owners “that own or control generation or other resources capable of providing ancillary services (offered to customers pursuant to the [Tariff]), ” and asserted that because transmission owners in this subset share the incentive to recover costs associated with providing ancillary services, the purpose of section 3.9 must be to protect the rights of these transmission owners to make filings that pertain to their individual rates. Dynegy also argued that the Filing Transmission Owners violated section 3.9 by allowing transmission owners that do not own or control generation or other resources capable of providing ancillary services to join in filing Schedule 2-A.

         6. Although it found that section 3.9 is ambiguous, the Commission also found that when read in its entirety, and in the context of section 3 of the Filing Rights Settlement, section 3.9 allocates to transmission owners the right to make section 205 filings that modify the Tariff. The Commission rejected Dynegy’s alternative interpretation, explaining that section 3.9 allocates to transmission owners and to Midwest ISO the same section 205 filing right:

Section 3.9 states that “[b]oth [t]ransmission [o]wners . . . and the Midwest ISO shall have the right to submit filings under [Federal Power Act] section 205 to govern the rates, terms, and conditions applicable to the provision of ancillary services.” This language indicates that transmission owners and the Midwest ISO share the same section 205 filing right, which is “the right to submit filings under [Federal Power Act] section 205 to govern the rates, terms, and conditions applicable to the provision of ancillary services.” There is no language in section 3.9 that distinguishes the section 205 filing right granted to the transmission owners from the section 205 filing right granted to the Midwest ISO.12

         7. The Commission further explained that because section 3.9 allocates to transmission owners and to Midwest ISO the same section 205 filing right, Dynegy’s claim that the filing right granted in section 3.9 relates only to a transmission owner’s individual rates would render section 3.9 meaningless with respect to Midwest ISO. Midwest ISO itself does not own or control generation capable of providing ancillary services and therefore could not make a section 205 filing related to those services.13

         8. The Commission also found that Dynegy’s interpretation of section 3.9 was inconsistent with language in section 3.9 that subjects all ancillary service proposals that have regional impacts to the governance and coordination provisions of sections 4 and 5 of the Filing Rights Settlement. The Commission explained that there was no reason why section 3.9 would contemplate transmission owners submitting section 205 filings that have “regional impacts” if it merely authorized transmission owners to make section 205 filings that pertain only to their individual ancillary service rates.14

         9. The Commission did agree with Dynegy that section 3.9 allocates filing rights only to the subset of transmission owners that own or control generation or other resources capable of providing ancillary services (offered to customers pursuant to the [Tariff]). However, the Commission found that this restriction did not affect its conclusion that, when read as a whole, section 3.9 allocates to transmission owners in the subset the section 205 filing rights necessary to file Schedule 2-A. The Commission also determined that because Schedule 2-A provides all transmission owners, including those that do not have filing rights under section 3.9, with the option of continuing under Schedule 2 or switching to Schedule 2-A, there was no practical consequence to the possibility that transmission owners without filing rights may have joined in filing Schedule 2-A.15

         2. Arguments on Rehearing

         10. On rehearing, Dynegy argues that the Commission acknowledged, but then ignored, language in section 3.9 that limits the reservation of section 205 filing rights to transmission owners “that own or control generation or other resources capable of providing ancillary services (offered to customers pursuant to the [Tariff]).” Dynegy claims that this language has a direct bearing on section 3.9’s scope, and asserts that while both Midwest ISO and transmission owners with filing rights can file rate schedules with the Commission, section 3.9 provides that transmission owners can file only to establish the rates, terms, and conditions for their own recovery of non-Schedule 1 ancillary services.16 Dynegy contends that the Commission erred by failing to give effect to section 3.9’s plain language, and by expanding the scope of permitted filings and the class of transmission owners permitted to file.17

         11. Exelon argues that the Commission should have rejected Schedule 2-A as inconsistent with section 3.9, regardless of the Filing Transmission Owners’ filing rights, because non-uniform reactive power compensation inside Midwest ISO is inherently unjust and unreasonable. Exelon maintains that if section 3.9 grants transmission owners and Midwest ISO the same filing rights, then it follows that the Filing Transmission Owners here do not have greater filing rights than Midwest ISO and cannot successfully file a reactive power rate design that would be rejected if filed by Midwest ISO. Exelon argues that the Commission would have rejected Schedule 2-A if it had been filed by Midwest ISO because it discriminates between similarly situated generators.

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