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Southwest Power Pool Approves Base Funding for Designated Wind Projects

June 24, 2008

In a victory for wind power advocates, the Southwest Power Pool’s (SPP’s) Regional State Committee voted unanimously to allow for a more equitable funding mechanism for transmission line upgrades and additions associated with certain wind projects. The Southwest Power Pool operates the transmission grid in Kansas, Oklahoma, and parts of six other surrounding states.

Referred to as “base funding,” the approved mechanism consists of paying for the transmission upgrades and additions out of SPP’s regional tariff paid by all users. The base-funding mechanism would apply to transmission lines associated with wind projects that have been selected by SPP members as Designated Network Resources (DNRs).

The vote is considered a major victory for wind power in the region, given that generators would otherwise bear the majority of cost burden for needed transmission upgrades and additions. Establishing equitable funding mechanisms for transmission is a widely acknowledged and national-scale challenge for the wind industry in its efforts to achieve its potential contribution to the nation’s electricity supply mix.

“This new policy will help get wind projects connected in SPP very soon because transmission cost allocation is the main barrier, and removing just this one discriminatory barrier reduces the cost by almost $10 million for a 100 MW project,” said AWEA Policy Director Rob Gramlich.

Under the base-funding mechanism that was approved, if a project is selected as a DNR by an SPP member, any associated transmission upgrades would qualify for base funding, thus providing greater assurance of cost recovery. A safe harbor limit of $180,000 of transmission upgrades per megawatt of nameplate capacity would apply just as it does to fossil-fueled plants; however, waivers to the limit can be requested. In addition, SPP members can only designate wind projects as DNRs up to a megawatt limit equivalent to 20% of their peak load.

The SPP Regional State Committee, which generally provides guidance on all cost allocation issues, is composed of six regulatory commissioners from SPP states.

The next step toward implementing the policy will be to create the related tariff language, a task that will be undertaken by the SPP Regional Tariff Working Group. AWEA and the Wind Coalition will participate in that process. Assuming all approvals are given, the base-funding mechanism would likely become a working policy in 2009.

Source: Wind Energy Weekly 1295 (20 June 2008)