April 26, 2016

SPP board votes to lower planning reserve margins, award first competitively bid project, approve $363M in transmission upgrades


Southwest Power Pool’s (SPP) board of directors today approved two recommendations, lowering the regional transmission organization’s (RTO) planning reserve margin and naming the designated transmission owner (DTO) responsible for construction of SPP’s first competitively bid transmission project.

The board approved the reduction of SPP’s planning reserve margin from 13.6 percent to 12 percent, lowering capacity requirements in SPP by about 900 MW. The reduction is expected to save the organization’s load-serving members approximately $90 million annually, or $1.4 billion over the next 40 years.

Vice President of Engineering Lanny Nickell cites three primary factors that enabled SPP to take this cost-saving step while maintaining reliability: significant transmission buildout – nearly $6 billion in the last decade – that allows the RTO to deliver resources from any part of its footprint to wherever they’re needed; geographic diversity, magnified by the expansion of SPP’s service territory into all or part of 14 states as of October 2015; and the success of SPP’s markets, which integrates more than 700 generating resources into the organization’s capacity mix.

“This action greatly illustrates the power of our stakeholder process,” Nickell said. “Our staff and stakeholders worked together diligently to assess and confirm the feasibility and benefits of lowering our reserve margin, and thanks to their consensus-building efforts, our entire region will now benefit from improved reliability and capacity savings.”

The board also accepted the recommendation of an industry expert panel (IEP) complying with the Federal Energy Regulatory Commission’s (FERC) requirement to remove federal rights of first refusal for certain transmission projects. After scoring 11 competitive proposals, the IEP recommended that Mid-Kansas Electric Company be designated as the transmission owner responsible for construction of the “Walkemeyer” project: an estimated 22.6-mile, 115kV line from Walkemeyer to North Liberal in western Kansas. Oklahoma Gas and Electric was designated as an alternate if Mid-Kansas is unable to construct the project.

SPP’s process balances the company’s values of collaboration, efficiency and transparency alongside expectations of confidentiality and equity set by Order 1000. Under the process, interested parties were able to apply to participate in the competitive bidding process; the IEP reviewed, scored and ranked qualified proposals; and ultimately the board of directors considered the IEP’s recommendations.

“SPP is very proud to have seen this competitive paradigm to completion for the first time. The effort was reflective of our commitment to our stakeholder process while meeting the expectations of Order 1000. We will work with our stakeholders to identify lessons learned and continually refine this new, competitive process,” said Paul Suskie, SPP’s executive vice president of regulatory policy and general counsel.

Construction of the Walkemeyer project will now follow SPP’s standard process, in which SPP staff will issue the designated transmission owner a notification to construct the approved transmission project.

Finally, the board approved 86 transmission upgrades representing $363 million in new engineering and construction costs, pending further evaluation of seven of those projects to assess their ability to optimally meet the region’s needs. Proposed as part of SPP’s 2016 Integrated Transmission Planning Near-Term Assessment to address 262 projected reliability needs on the RTO’s transmission system, the portfolio of planned development includes a $20.5 million project to address needs in the Tulsa, Okla., area; a $30.5 million project to address needs near Woodward, Okla., through construction of a new substation and 138kV line; and a $145.7 million project to construct new substations and 115kV lines to address needs near the Bakken shale formation in northwestern North Dakota. The further evaluation directed by the board is expected to be completed in July.

Media Contacts
Derek Wingfield, dwingfield@spp.org, 501-614-3394
Dustin Smith, dbsmith@spp.org, 501-482-2085