The following is a cross-post from an article written in SNL Energy on 3/18/14 by Esther Whieldon.

By Esther Whieldon

Entergy Corp.‘s recent integration into Midcontinent Independent System Operator Inc. appears to be making it quite expensive for Southern Co. to import wind from the West, according to Southern’s general manager of transmission policy and services, John Lucas.

Southern imports up to 400 MW of wind generation from the Southwest Power Pool Inc. area. To reach Southern’s service territory, that electricity must travel out of the SPP and cross through the part of MISO that was created when Entergy joined it, Lucas said during a March 13 webinar on transmission in the Southeast hosted by Americans for a Clean Energy Grid. Entergy was fully integrated into MISO in December 2013.

That integration created an RTO with an hourglass-shaped footprint in which the new southern region is connected by a single 1,000-MW contract transmission path to the rest of MISO.

The problem is that Southern must now pay congestion costs to bring the wind through MISO, Lucas said. “The level of congestion costs have sort of shocked us here,” and it is causing the company to mull its options, he said.

“Wind might look economical if you’re just paying a transmission charge,” he said. “When you have to pay two … systems plus congestion costs, that begins to make actual delivery of the remote resource a lot less attractive.”

Because it has only been a few months since Entergy joined MISO, Lucas said it is too soon to know whether the costs will remain that high or to determine the ultimate cause of the high congestion costs. It could be an anomaly caused by the recent winter cold snaps that hit much of the Eastern Interconnection and drove up demand for electricity, he said. It could also be a matter of partial-year financial transmission rights not offsetting the congestion costs, he said.

Making the matter more difficult is that the SPP and the old Entergy system do not respond to the variable performance of the wind generation, he said. “The way we implemented these wind arrangements, you don’t have the challenge of figuring out what the ancillary services are to go with those resources in the footprint. We’re moving them to the Southern footprint and, in effect, letting our balancing area be the swing machine.”

Worse, the long-term wind generation contracts have caps for how much the developer must pay for such costs, he said. “And we’re fast approaching those caps, and we’ve only been two months into the year.”

Southern utility subsidiary Alabama Power Co. has power purchase agreements for the output of TradeWind Energy Inc. facilities in Oklahoma. Another utility subsidiary, Georgia Power Co., has a contract for 250 MW from EDP Renewables North America wind facilities in Oklahoma beginning in 2016.

Possible solutions

Lucas is not yet sure what it would take to solve the issue. “I don’t think the best solution is necessarily to go to the FERC and declare you have a problem,” he said.

One option may be to have Southern “people inject themselves into” the MISO stakeholder process to “make sure we have the right understanding,” he said. “FERC is always a backstop,” but it should first be addressed by the industry players — the generation developers, the buyers, the sellers and the transportation providers, he said.

Another option may be to let the Southern subsidiary that has the contract “in effect dispose of that generation in the market where that resource sits to avoid some of the congestion,” he said.

“I feel pretty optimistic that we can work with those parties and try to say, is there a way that we can sort of pause the dynamic scheduling, let us dispose of the generation in that market and then resume it at a time when the congestion costs are not as detrimental.”

In the meantime, MISO and SPP continue to fight over a joint operating agreement that allows each to use the other’s lines to move power to a third party. MISO had used SPP’s lines for transmission with Entergy before the company joined MISO. But SPP argues that with Entergy now in the RTO’s footprint, the utility is no longer a third party and MISO should not use the capacity for free.

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