Sunflower Electric Power Corporation
The Federal Energy Regulatory Commission (FERC) recently approved Southwest Power Pool’s (SPP) filing to share the costs of four power lines owned by Sunflower Electric.
Due to Kansas’ rich wind and solar natural resources, investors and developers continue to build renewable energy facilities across the state, particularly in Western Kansas.
In Sunflower’s service territory, wind resources not owned by Sunflower have a generating capacity more than double Sunflower’s annual peak load.
The excess generation not used locally is exported using high-voltage transmission lines. The ever-increasing amount of power being generated and exported is causing transmission line congestion, triggering the need for new and upgraded transmission lines.
Currently, for transmission projects between 100 kV and 300 kV driven by the SPP planning process, 67 percent of the cost for new and upgraded transmission infrastructure to export the power generated from renewable energy resources falls on local ratepayers in the Sunflower zone (primarily central and western Kansas). The other 33 percent is shared by the entire 14-state SPP region.
COST ALLOCATION DISPARITIES
To put this in perspective, imagine Interstate 70 traffic between Kansas City, Mo., and Denver has become so congested the U.S. Department of Transportation elects to add four more lanes to the existing highway.
Now that the need has been established and the path has been planned, the question arises as to who should pay for the construction cost. In this scenario, studies show minimal benefits for the people of Kansas but overwhelming benefits to the transportation sector and for Denver and Kansas City because of the new ability to easily move products between the two cities and states.
Most people would agree Kansas taxpayers shouldn’t be burdened with a majority of the costs for an upgraded highway that benefits others more.
Similar to the I-70 scenario, more transmission is needed to move electricity to population centers, and while there are some ancillary benefits for local co-op members, large population centers are benefitting more from the renewable energy exported out of Western Kansas.
The I-70 analogy illustrates the stark reality Sunflower and member utilities grapple with in regard to the cost burden and who should shoulder the high costs for the construction transmission lines and upgrades and in what proportion.
The current SPP transmission cost allocation methodology works when ratepayers in the local zone gain the most benefits from a transmission project.
However, western Kansas is unique because the imbalance between the cost-causers and the cost-payers of these four projects is large and unprecedented within the SPP. Sunflower’s area has lots of wind energy but not enough local users, making it unfair for the local Sunflower zone to bear a majority of the costs.
For nearly a decade, Sunflower staff persistently challenged the current cost allocation methodology at the SPP and demonstrated the unfairness of the cost assignments for four transmission line projects in our territory.
FERC APPROVES FILING
On May 31, 2024, Sunflower and its member-owners achieved a significant milestone in our efforts to get fair pricing. FERC accepted the filing by SPP to charge 100 percent of the remaining cost of Sunflower’s four projects to the region.
FERC agreed the costs of the transmission infrastructure need to match the benefits received. As a result of FERC’s ruling, the Sunflower region will see a nearly 13 percent reduction in transmission costs, which totals approximately $9.9 million annually.
“The decision by FERC came after a long process that started at SPP in 2018,” said Al Tamimi, Sunflower senior vice president and COO of transmission, who led the engagement at SPP to make cost allocation fair and reasonable to Sunflower’s members. “We proved to SPP and FERC that transmission upgrades between 100 kV and 300 kV built mandated by SPP inside the Sunflower zone are mainly utilized by entities outside of the Sunflower zone. The supermajority of their benefits actually benefited electric consumers outside of the Sunflower zone.”
Although the ruling is an important step for immediate rate relief on four completed projects, Sunflower continues our efforts to collaborate with SPP and its stakeholders for approval of a new SPP cost-allocation methodology enabling Sunflower to receive a fair cost allocation for future transmission projects.
“Sunflower’s mission is to provide wholesale energy services at the lowest possible cost to our members,” said Steve Epperson, Sunflower president and CEO. “We will continue to fight for our members and those they serve in central and western Kansas regarding fair cost allocations for any future SPP-mandated transmission upgrades.”
