FERC Greenlights Game-Changing Cost Allocation Revisions for SPP's Transmission Facilities
On December 30, 2025, the Federal Energy Regulatory Commission (“FERC”) accepted Southwest Power Pool, Inc.’s (“SPP”) proposed revisions to its Open Access Transmission Tariff (“OATT”) to modify: (1) the cost allocation method of future transmission facilities larger than 100 kV and up to 300 kV (i.e., “Byway facilities”) selected in SPP’s transmission planning process; and (2) the “delivery point rule,” which is a unique cost allocation method for network upgrades associated with certain new or changed wind generation resources that are designated by transmission customers to serve network load in SPP (i.e., “Designated Resources”). Southwest Power Pool, Inc., 193 FERC ¶ 61,244 (2025) (“December 30 Order”). The new cost allocation will apply to qualifying transmission upgrades for which a notification to construct is issued on or after December 19, 2025. December 30 Order at P 28.
Previous Highway/Byway Cost Allocation
SPP’s Tariff provides for usage charges through which annual transmission revenue requirements are recovered. Schedules 7 (Long-Term Firm and Short-Term Firm Point-To-Point Transmission Service), 8 (Non-Firm Point-To-Point Transmission Service), and 9 (Network Integration Transmission Service) of SPP’s Tariff charge transmission service customers in a transmission pricing zone (“Zone”) to recover the cost of SPP member-initiated projects located within that Zone. Schedule 11 (Base Plan Zonal Charge and Region-wide Charge) of SPP’s Tariff charges transmission service customers to recover the cost of transmission facilities directed to be constructed by SPP in accordance with SPP’s Highway/Byway cost allocation method.
The Highway/Byway cost allocation method allocates the costs of most transmission facilities selected in SPP’s transmission planning processes (i.e. “Base Plan Upgrades”). Under the previously approved Highway/Byway cost allocation method, SPP allocated 100% of the costs of transmission facilities at 300 kV or above (Highway facilities) on a regional load ratio share basis. Id. at P 3. For facilities at 100 kV or below, SPP allocated all costs to transmission customers serving load in the Zone in which the facilities are located. Id. For Byway facilities, SPP allocated 33% of the costs on a regional load ratio share basis and 67% of the costs to transmission customers serving load in the Zone in which the facilities are located (i.e. the “host” Zone). Id.
New Highway/Byway Cost Allocation for Byway Facilities
The new Highway/Byway cost allocation for Byway facilities under Schedule 11 of SPP’s Tariff replaces zonal allocation with a subregional allocation. For that purpose, SPP consolidated 18 Zones into five subregions as follows:
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North Subregion: Upper Missouri (Zone 19).
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Nebraska Subregion:Lincoln Electric System (Zone 16), Nebraska Public Power District (Zone 17), OPPD (Zone 18).
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Central Subregion: Springfield (Zone 3), Empire District Electric Company (Zone 4), Evergy Kansas (Zone 14), Evergy Metro (Zone 6), Evergy Missouri (Zone 9), KCBPU (Zone 2), Midwest Energy (Zone 8), Sunflower (Zone 12).
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Southeast Subregion: American Electric Power - West (Zone 1), Grand River Dam Authority (Zone 5), OG&E (Zone 7), SWPA (Zone 10), Western Farmers (Zone 13).
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Southwest Subregion: SPS (Zone 11). at P 14.
FERC accepted SPP’s proposal to modify the existing zonal allocation for future Byway facilities to a subregional allocation whereby 67% of the costs would be allocated to the subregion in which the facility is located instead of the Zone in which the facility is located. Id. at P 12. The Highway/Byway cost allocation for facilities at 100 kV and below and for facilities at 300 kV and above remains the same. The cost allocation under Schedules 7, 8 and 9 remains zonal.
The new cost allocation spreads the costs of Byway transmission facilities among a broader group of transmission customers. Several protestors criticized this change as an improper cost shift, id. at PP 48-49; however, FERC found that SPP’s proposed cost allocation method for Byway facilities satisfies the cost causation principle and allocates the costs of Byway facilities in a manner that reasonably reflects the benefits that customers in the subregion receive. Id. at P 73. FERC further asserted that while it is not revisiting the entire Highway/Byway cost allocation method in its December 30 Order, it would do so if SPP proposes a plan to comprehensively revise the overall Highway/Byway cost allocation method. Id. at P 86.
Previous Delivery Point Rule
Under the Tariff, SPP applies a unique cost allocation method for Base Plan Upgrades below 300 kV associated with certain new or changed Designated Resources that are wind resources (i.e., the delivery point rule). The previously approved “delivery point rule,” allocated 67% of the costs of qualifying Base Plan Upgrades on a regional load ratio share basis, and 33% of the costs were directly assigned to the transmission customer with a delivery point located in a different Zone than where the Base Plan Upgrade is located. Id. at P 7. Otherwise, the cost of Base Plan Upgrades associated with designating wind resources were allocated in accordance with the Highway/Byway cost allocation method. Id.
New Delivery Point Rule
The revised delivery point rule extends this method to Base Plan Upgrades associated with Designated Resources regardless of fuel type (not just wind) and integrates the subregional allocation. Id. at P 28. Specifically, the costs of qualifying Base Plan Upgrades that are Byway facilities would be allocated, 67% on a regional load ratio share basis, and 33% directly assigned to the transmission customer with a delivery point located in a different subregion than the subregion where the Designated Resource is located. Id. However, for Base Plan Upgrades associated with a new or changed Designated Resource with nominal voltages below 100 kV, the delivery point rule will continue to apply on a Zonal basis.
FERC accepted SPP’s proposal to extend the rule to all resource types, agreeing with SPP that wind resources are no longer unique compared to other resources in terms of causing potential cost shifts as to justify limiting the delivery point rule to wind resources. Id. at P 89.
For more information, please contact Sean Neal, Bhaveeta Mody, Andrea Sarmentero Garzón, or Rose Eisenberg. This update is for informational purposes only and does not constitute legal advice. For legal guidance specific to your situation, please contact your attorney.
Article by Rose Eisenberg
