Xcel Energy 2014 Annual Report Download - page 41

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FERC Order 1000, Transmission Planning and Cost Allocation (Order 1000) — In 2011, the FERC issued a final ruling, Order
1000, adopting new requirements for transmission planning, cost allocation and development to be effective prospectively. Order
1000 requires:
• The development of tariffs that provide for joint regional transmission planning and cost allocation for all FERC-
jurisdictional utilities within a region;
• The coordination between regions for the development of interregional plans for transmission planning and cost allocation;
• Each public utility transmission provider to amend its Open Access Transmission Tariff to describe procedures that provide
for the consideration of transmission needs driven by public policy requirements in the local and regional transmission
planning processes; and
• The removal of ROFR provisions from FERC-jurisdictional wholesale transmission contracts and tariffs that presently grant
the incumbent transmission owner a federal ROFR to build certain types of transmission projects in its service area.
MISO, SPP and the jurisdictional WestConnect utilities, including PSCo, have submitted multiple compliance filings with the FERC
to implement the Order 1000 requirements. Some of the new compliance provisions that were filed have already been approved but
others remain under review by the FERC.
In August 2014, the D.C. Circuit denied all appeals and upheld Order 1000 in its entirety and indicated that challenges to the removal
of federal ROFR provisions from individual contracts or tariffs could be considered in individual compliance filings. The FERC’s
decisions to remove federal ROFR provisions in certain MISO and SPP agreements were appealed to federal courts of appeal in 2014,
and those appeals are pending. The removal of a federal ROFR would eliminate rights that NSP-Minnesota, NSP-Wisconsin and SPS
currently have under the MISO and SPP tariffs, respectively, to build certain transmission projects within their footprints.
In 2014, MISO and SPP both filed compliance plans that would allow the RTOs to recognize state law ROFRs in any selection process
for Order 1000 transmission projects. The commissions granted these requests in 2014. In 2015, the FERC issued orders on rehearing
on the compliance filing that would continue to allow MISO and SPP the authority to recognize state ROFRs. Xcel Energy has state
ROFRs in Minnesota, North Dakota, South Dakota and believes it has a state ROFR in Texas.
Order 1000 could create opportunities for third parties to build and own certain regional transmission projects that had previously been
reserved for the MISO and SPP transmission owners, potentially reducing NSP-Minnesota’s, NSP-Wisconsin’s and SPS’s financial
return on new investments in electric transmission facilities. Xcel Energy formed its TransCo entities to pursue opportunities for new
investments in electric transmission facilities that may be possible under Order 1000. The ultimate impact of Order 1000 on future
Xcel Energy transmission investment is not known at this time.
TransCos — In 2014, Xcel Energy formed the Xcel Energy Transmission Holding Company, LLC and two of its TransCo subsidiaries
that will participate in the MISO and SPP competitive bidding processes. Transmission assets held by these entities will be subject to
FERC jurisdiction. Xcel Energy has also formed an additional TransCo subsidiary to pursue transmission projects in the western
United States.
MISO
XETD was approved as a non-transmission owning member in MISO in April 2014, and a qualified transmission developer (QTD) in
December 2014. This allows XETD to competitively bid for MISO transmission projects starting in 2015 or 2016.
SPP
In September 2014, SPP determined that XEST’s participant application was complete. This allows XEST to competitively bid for
SPP transmission projects starting in 2015. The number of projects made available for competitive bidding in SPP in 2015, as the
RTO establishes its rules and processes, is not expected to be significant.
In November 2014, the FERC approved XETD and XEST’s forward-looking transmission formula rates that will apply in their
respective jurisdictions with an effective date retroactive to Nov. 1, 2014. The FERC approved the following items requested in the
TransCo rate filings:
• A capital structure based on 55 percent equity and 45 percent debt for both TransCos;
• Deferral of start-up costs for future recovery in rates, subject to a future filing prior to actual recovery;
• XETD’s request for a base ROE using the currently applicable MISO regional rate of 12.38 percent, subject to any potential
modifications resulting from a pending ROE complaint against the MISO transmission owners; and
• XEST’s base ROE of 10.64 percent. However, the FERC suspended the proposed ROE and the ROE will be subject to
refund and potential modifications resulting from settlement judge or hearing procedures set for 2015. Also, the FERC
granted XEST’s request for a 50 basis point adder for membership in SPP.