How does MISO Board approval of Transmission Projects impact electric utility customers?
Ultimately electric utility customers pay for transmission whether it is local or regional.
Around this time in the year, the Midcontinent Independent System Operator (MISO) Board approves transmission projects. MISO Board is scheduled to approve MTEP24 in December. This MTEP24 will the largest ($30 Billion) investment.
Source: MISO
These large investment raises some basic questions for those who are not knee-deep in MISO transmission projects.
Who ultimately pays for these transmission projects? How do Transmission Owners recover the costs? Who approves this cost allocation? What is the role of MISO in the transmission cost recovery? What does MISO Board approval mean for electric utility customers in a MISO state like Minnesota? What is the role of the Minnesota Public Utilities Commission (MN PUC) after MISO approves a transmission project that is entirely in Minnesota versus originates in Minnesota and crosses state lines?
When the MISO Board approves transmission lines as part of the MISO Transmission Expansion Plan (MTEP), it typically approves an entire package of transmission projects (Tx projects). This package consists of eight Transmission Project Types:[1]
Other Projects
Baseline Reliability Project (BRP)
Market Efficiency Project (MEP)
Multi-Value Project (MVP)
Generator Interconnection Project (GIP)
Transmission Delivery Service Project (TDSP)
Market Participant Funded Project (MPFP)
Targeted Market Efficiency Project (TMEP).
Not all MTEPs will have projects in all eight transmission project types. For example, MTEP22 (the MISO Transmission Expansion Plan approved in 2022) did not have MEP, MVP, TDSP and TMEP.[2] MTEP23 did not have MEP, TDSP and TMEP.[3]
Source: MISO
Who pays and what percentage depends on these eight Transmission Project Types.
Let’s look at these eight Project Types:
Source: Rao Konidena based on MISO Business Practices Manual Transmission Planning.
Who ultimately pays for these transmission projects? Electric utility customers. For example, a Transmission Owner pays for the Other Projects. However, I believe the Transmission Owner recovers those costs in their rate case before the Public Utility Commission. These costs become part of the transmission component of the utility bill paid by utility customers. My Xcel bill states, “For an average residential customer, 49% of your bill refers to power plant costs, 11% to high voltage line costs and 40% to the cost of local wires connected to your home.”
How do Transmission Owners recover the costs? Transmission Owners recover the costs based on the Project Type. If they are local project types like Other Projects and Baseline Reliability Projects, the costs are recovered from their utility customers in states that benefit from these projects. If they are regional project types like Multi Value Projects for example, MISO collects a usage fee from all Transmission Customers and distributes that revenue to Transmission Owners.
Who approves this cost allocation? The Federal Energy Regulatory Commission (FERC) approves the RTO’s cost allocation procedures for local and regional projects.
What is the role of MISO in the transmission cost recovery? As an RTO, MISO does not own the transmission system. The Transmission Owners own their respective transmission systems. MISO collects a usage fee based on who uses the transmission system and distributes that usage fee to the owners of the transmission system.
What does MISO Board approval mean for electric utility customers in a MISO state like Minnesota? In a state like Minnesota, which is in MISO, MISO does the transmission planning that includes both local and regional transmission projects. MISO Board approval for transmission projects in Minnesota means MISO has determined the need for the project not a specific MN utility like Xcel Energy. MISO has determined how the costs are allocated for that project based on the Project Type discussed above. Xcel might have proposed the transmission project, but ultimately MISO determined that this project is needed in Minnesota and benefits the entire region if the project type is an MVP.
What is the role of the Minnesota Public Utilities Commission (MN PUC) after MISO approves a transmission project that is entirely in Minnesota versus originates in Minnesota and crosses state lines? Even though the MISO Board has approved the transmission project, the transmission utility must seek the State’s permission to construct the project. I believe in most states, through state legislation, the regulatory authority to approve the construction of the transmission project is given to the Public Utilities Commission. For example, I believe the Minnesota PUC must approve the Certificate of Public Convenience & Need (CPCN) for all transmission projects in Minnesota, irrespective of the MISO Transmission Project Type. Once the MISO Board approves the package of transmission projects called MTEP in any given year, MN utilities file their CPCN with MN PUC, and only if the PUC approves construction on that line can start.
Regarding the added complexity of what happens if a transmission line originates in Minnesota but travels south to Iowa, for example. The MN utility is responsible for seeking regulatory approval in Minnesota, and the Iowa utility is responsible for seeking regulatory approval in Iowa.
[1] Source: MISO Business Practice Manual 020 Transmission Planning.
[2] Source: Slide 3, https://cdn.misoenergy.org/20231101%20System%20Planning%20Committee%20of%20the%20BOD%20Item%2003%20MTEP23%20Final%20Review630673.pdf
[3] Id.
[4] Section 7.5.5.2 Multi-Value Projects - Allocation of Eligible Costs, MISO Business Practice Manual 020 Transmission Planning.
[5] Section 7.2 Generation Interconnection Projects, Id.