On September 16, 2010, FERC issued two orders that continue to leave the owners of generator tie-lines guessing on the standards they have to meet to preserve the right to deliver energy from their future generating plants that would depend on using their tie-line facilities. Both cases involved requests from third parties for transmission access to the generator tie-lines, and raise knotty questions about the kinds of pre-existing development plans and activities that are necessary to persuade FERC that tie-line owners should be able to retain the right to use their lines, what constitutes a good faith request for transmission service over the tie-lines, and the open access transmission tariff (OATT) filing requirements the tie-line owners must satisfy once a third party makes a good faith transmission service request.
In Docket No. EL10-29-000, Petitioners, Terra-Gen Dixie Valley, LLC (Dixie Valley), TGP Dixie Development Company, LLC, and New York Canyon, LLC, requested FERC to issue a declaratory order confirming their firm priority transmission rights to 360 MW of capacity in Dixie Valley’s 212-mile long, 230 kV radial generator tie-line to interconnect the Petitioners’ existing and planned geothermal projects to the transmission network. The Dixie Valley line has been delivering energy from a 60 MW geothermal plant from Nevada into California for more than 20 years. Petitioners, affiliated entities, argued that under FERC’s precedent in Aero Energy, LLC1 and Milford Wind Corridor, LLC2 their existing and future plans and activities to develop geothermal projects that would ultimately connect to the Dixie Valley line entitled them to firm priority rights to use it. In Aero Energy, LLC and Milford Wind, FERC found that transmission owners may secure firm priority rights to capacity on their line when they have specific pre-existing generation expansion plans and show progress in meeting milestones to implement those plans. Petitioners argued that a Dixie Valley management decree to expand the existing Dixie Valley plant by up to 100 MW entitled Dixie Valley to an additional 100 MW of firm priority rights on the line. Petitioners also asserted that option agreements between Dixie Valley and its affiliate to lease up to 100 MW each of capacity on the line entitled the affiliates to firm priority rights in that capacity.
Green Borders Geothermal, LLC (Green Borders) intervened, however, and argued: (1) that it submitted a good faith request to interconnect and purchase transmission service on the line on October 23, 2006, which entitled it to firm transmission service on the Dixie Valley line ahead of Dixie Valley’s planned expansion and affiliates; and (2) that the Dixie Valley violated FERC precedent and Order No. 888 by failing to file an OATT when Green Borders submitted its good faith request for transmission service. Dixie Valley rejected these service requests as unclear, but Green Borders made a further request for service on May 8, 2007. The parties disputed whether Green Borders showed sufficient interest in the service after making this request to preserve any claim to use the Dixie Valley line. Green Borders also filed a complaint against Dixie Valley in Docket No. EL10-36-000 where the same issues arose.
A Good Faith Request for Transmission Service
Without much insight into its rationale, FERC held that Green Borders had made a valid request for transmission service on May 8, 2007, when its request satisfied the criteria of section 17.2 of the pro forma OATT. 132 FERC ¶ 61,215. FERC did not rule on the disputed issue whether Green Borders’ failure to provide financial security for transmission service studies or otherwise to pursue its service request meant that its claim to transmission rights had lapsed. As such, FERC denied Petitioners’ request for a waiver of Order Nos. 888 and 890 and directed Petitioners to file an OATT within 30 days of the order. Because FERC found that the Dixie Valley line “is currently only providing transmission service from the Dixie Valley Plant, and thus qualifies as limited and discrete,” FERC granted Dixie Valley waiver of the requirements of Order No. 889 and applicable requirements of the Standards of Conduct “until such time as another interconnection on the Dixie Valley line becomes operational or the Commission finds revocation appropriate in response to a complaint made to the Commission.” Order at P 55.
Specific Pre-Existing Development Plans
Regarding priority rights on the Dixie Valley line, FERC found that Dixie Valley has priority rights to 60 MW of existing capacity on the line, but had “not demonstrated sufficiently specific plans to develop generation resources” to claim an additional 100 MW of the line. Id. at P 51. Notwithstanding that Petitioners “generally describe a variety of development activities in which they are engaged” to connect their planned geothermal projects to the Dixie Valley line, FERC found that Petitioners “have not identified clearly the specific activity that is being undertaken in furtherance of [Dixie Valley’s] particular plans to expand the Dixie Valley Plant.” Id. With respect to Dixie Valley’s affiliates, FERC found that “the options are little more than an agreement to negotiate a potential grant of a lease to” Dixie Valley’s affiliates and thus, neither affiliate is entitled to priority rights on the line. Id. at P 52.
Nevertheless, perhaps realizing the dearth of guidance available on what constitutes an adequate demonstration of “specific preexisting development plans,” FERC will allow Dixie Valley to demonstrate in a compliance filing that it had “specific preexisting generation development plans, consistent material progress towards achieving such plans, and that such plans and initial progress pre-date Green Borders’ valid request for service.” Id. at P 53.
Transmission Service on Generator Tie-Lines
In Docket No. EL10-23-000, FERC granted rehearing of its earlier order requiring generator developers Sagebrush Partners to file an OATT. In the earlier Aero Energy orders, FERC found that the partnership had received a valid good faith request for transmission service on its 46 mile, 230 kV generator tie-line from Aero Energy and directed the Sagebrush Partners to file an OATT. FERC also directed Sagebrush Partners to clarify further how it would schedule services for third-party customers, and rejected Sagebrush Partners’ proposal to limit interconnection opportunities to qualifying facilities (QFs). Additionally, FERC denied Sagebrush Partners’ request for waiver of the requirement to establish an OASIS and Sagebrush’s proposal to plan transmission system requirements on a request-by-request basis.
Sagebrush Partners filed an OATT, but requested, among other things, to grandfather transmission service to existing partners on the line. On rehearing (132 FERC ¶ 61,234), FERC agreed to permit Sagebrush Partners to grandfather transmission service to existing partners already taking service on the line, but clarified that any future requests by Aero or other Sagebrush Partners must be governed by the OATT. FERC also denied Sagebrush Partners’ request to clarify that its OATT not become effective until a third party non-QF takes service under the OATT. On rehearing, FERC granted waiver of the OASIS and Standards of Conduct requirements because it found that the Sagebrush Line meets the small public utility criteria.
Of particular interest, FERC denied the Sagebrush Partners’ argument that the absence of a deposit invalidates a completed application. FERC noted that because the Sagebrush Partners had no OATT on file, its deposit requirement was not authorized by FERC, and thus it could not charge a deposit fee, thereby making Aero’s application valid and triggering an OATT filing.
The Bottom Line
Transmission access is a key element for new renewable generation projects that are frequently developed far from load centers. Using existing transmission corridors can speed project development by reducing the regulatory approvals that are required, which places a premium on securing the right to use those lines. FERC’s orders in the Dixie Valley and Sagebrush cases show that project developers that invest the time, money, and effort to build their own generator tie-lines to serve future projects run the risk of having competitors step ahead of them in the service “queue” unless they obtain an up-front ruling from FERC and follow a clear plan to develop their resources. The unintended consequence of FERC’s rulings may be to slow the pace of development as generators, investors, and power purchasers re-asses the project development risk of renewable generation.