FERC Conditionally Accepts SPP Tariff Revisions to Implement Contingency and Regulation Reserve Demand Curves
On November 9, 2017, FERC issued an order conditionally accepting proposed revisions to Attachment AE of the Southwest Power Pool, Inc. (“SPP”) Open Access Transmission Tariff (“Tariff”). SPP’s proposed Tariff revisions modify SPP’s so-called “scarcity pricing” methodology in response to FERC Order No. 825. Under this newly-approved methodology, SPP will institute variable demand curves that will more accurately reflect the value of resources during times of shortages, thereby reducing price signal distortions that can reduce incentives for resources to respond to dispatch signals. In its order conditionally accepting the Tariff revisions, FERC directed SPP to make a compliance filing to show that certain provisions be placed in SPP’s Tariff as opposed to its Marketplace Protocols.
In Order No. 825, FERC directed each regional transmission organization and independent system operator to institute mechanisms to trigger shortage pricing whenever resources for a particular timing interval are deemed to be scarce. Following Order No. 825, SPP filed the present proposal on March 2, 2017, which FERC staff accepted for filing subject to refund and other FERC action under the February 3, 2017 Order Delegating Further Authority to Staff in Absence of Quorum (see February 21, 2017 edition of the WER).
In its filing, SPP proposed variable demand curves that would set prices to reflect the severity of a shortage of operating reserve products, such as regulation and contingency reserves. According to the proposal, the demand curve for contingency reserves would be calculated based on projected resource availability in the SPP Balancing Authority Area for the operating day. The regulation demand curves, in turn, would be based on the greater of the marginal resource clearing cost or a newly-devised pricing methodology that considers historical data.