At its regular meeting held on September 20, 2012, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued orders on nearly two dozen electric agenda items. Of those, the following summarizes certain decisions that involve issues of general import. Please call us if you would like additional information on any of these proceedings.  

  1. Curtailment of Generation Resources:

Southwest Power Pool, Inc., Docket No. ER12-2292-000

In this order, FERC conditionally accepted Southwest Power Pool, Inc.’s (“SPP”) proposed revisions to its Open Access Transmission Tariff (“OATT”) addressing the curtailment of non-dispatchable resources, including qualifying facilities (“QFs”) in SPP’s Energy Imbalance market. Per SPP’s OATT, a non-dispatchable resource is a resource that is operating either in shut-down mode, start-up mode, test mode or under exigent circumstances, or is an intermittent resource or QF. FERC conditionally accepted SPP’s proposal to permit the systematic and automated (i.e., via computer software tools) curtailment of new and existing non-dispatchable resources. FERC accepted the proposal conditioned upon SPP submitting a compliance filing to make clear that the tariff changes will apply only prospectively to new non-dispatchable resources that become commercially operable on or after October 15, 2012. Moreover, due in part to the number of objections to SPP’s proposal filed by several parties, including the American Wind Energy Association, utility generators, and QFs that older, existing resources may not be able to comply with SPP’s proposed curtailment rules, FERC conditioned acceptance of SPP’s proposal to apply these provisions to existing resources upon SPP first holding a stakeholder process to address the issues raised by the existing non-dispatchable resources, with the results of this stakeholder process to be reflected in a further compliance filing that will become effective one year from today’s order. FERC also accepted SPP’s proposal that QFs selling in accordance with the Public Utility Regulatory Policies Act of 1978 (“PURPA”) will be curtailed at SPP’s “Transmission Loading Relief Level 5” subject to a further compliance filing to remove the words “all of” from the proposed tariff language (in connection with a requirement that a QF must be delivering “all of” its output to its host utility).  

  1. Ownership of Renewable Energy Credits and State versus Federal Rules:

Morgantown Energy Associates, Docket Nos. EL12-36-001 and QF89-25-009; and City of New Martinsville, West Virginia, Docket Nos. EL12-48-001 and QF85-541-003

FERC dismissed requests for reconsideration of an April 24, 2012, order in which FERC declined to initiate an investigation under PURPA, but found that certain statements issued by the Public Service Commission of West Virginia (“West Virginia PSC”) were inconsistent with the requirements of PURPA and the Commission’s regulations implementing PURPA. Specifically, the West Virginia PSC determined that renewable energy credits (“RECs”) associated with electric energy produced by QFs belonged to the utilities that purchased the electric energy from the QF, rather than to the QF, and that the avoided-cost rates paid by the utilities compensated the QFs for the RECs. Certain utilities sought reconsideration of the April 24 order, asserting that FERC erred by not identifying the specific statements of the West Virginia PSC that are inconsistent with PURPA and by wrongly assuming that the West Virginia PSC found that QF purchased power agreements compensate QFs for energy, capacity and RECs. In its September 20 order, FERC specifically identified the West Virginia PSC’s statements that FERC found are inconsistent with PURPA and FERC’s regulations. FERC also reaffirmed its findings that such statements indicated that the West Virginia PSC found that RECs produced by QFs are owned by the purchasing utility (while RECs produced by non-QFs are not), based on the West Virginia PSC’s expressly stated belief that avoided cost rates were overly generous to utilities and unfair to consumers. FERC found that the state commission’s findings were inconsistent with FERC’s ruling in American Ref-Fuel, 105 FERC ¶ 61,004, where FERC found that “[w]hile a state may decide that a sale of power at wholesale automatically transfers ownership of the state-created RECs, that requirement must find its authority in state law, not PURPA.”

  1. Denial of Waiver of Transmission Queue Priority:

Public Service Company of New Mexico, Power Network New Mexico LLC, and New Mexico Renewable Energy Transmission Authority, Docket Nos. ER12-1698-000 and ER12-1699-000

In this order, FERC denied a request for waiver of certain Public Service Company of New Mexico (“PNM”) OATT provisions which would allow the Central New Mexico Transmission Collector Project (“Project”) to advance to the first position in the PNM transmission queue, and dismissed as premature requests for authorization to charge negotiated rates for transmission rights on the Project. The Project is an approximately 200-mile, 345 kV double-circuit transmission project from eastern and central New Mexico to Rio Puerco (north of Albuquerque) which is designed to ultimately provide transmission service to the Four Corners 345 kV switchyard, a gateway to western markets including Arizona and California. The applicants sought a waiver of PNM OATT provisions to allow the Project to be advanced in the transmission queue, ahead of approximately 45 other competing transmission queue projects, arguing that the Project would provide a near-term solution to the “backlog” of PNM’s transmission queue. FERC rejected the applicants’ waiver request (and concurrent request for authorization of negotiated rates for the Project), finding that the applicants had not established good cause for their requested waiver and that the Project would not ensure not unduly discriminatory access to transmission. FERC also found that granting the waiver and permitting the Project to be first in the queue could result in undesirable consequences, including harm to the parties that are not able to participate in the Project, including parties who had already committed to capacity proposed by other transmission projects higher in the existing queue. Finally, FERC found that the applicants’ waiver request was not limited in scope because it would displace a significant amount of the current customers in PNM’s transmission service queue.

  1. Allocation of Existing Regional Transmission Expansion Costs to New Entrant to an RTO:

American Transmission Systems, Inc., Docket No. ER09-1589-001, et al.

In this order, FERC addressed, and rejected, assertions on rehearing that the Commission erred regarding the conditions applicable to American Transmission Systems, Inc.’s (“ATSI”) (a subsidiary of First Energy) integration into the PJM Interconnection, LLC (“PJM”), namely, whether the ATSI zone (the facilities to be integrated) should be responsible for paying an allocated share of regional transmission expansion project (“RTEP”) costs for projects of 500 kV or above that were planned prior to ATSI’s integration into PJM, as the Commission previously held and as required in the PJM OATT. FERC’s order reaffirmed that ATSI is responsible for such RTEP costs, finding that PJM’s tariff is not unjust and unreasonable in allocating to a new member, such as ATSI, a share of the costs of RTEP projects rated 500 kV or above that were planned prior to the new member’s integration into PJM. FERC reemphasized that ATSI’s voluntary choice to realign from the Midwest Independent Transmission System Operator, Inc. (“MISO”) Regional Transmission Organization (“RTO”) to PJM does not render either RTO’s transmission expansion cost allocation methodology unjust or unreasonable or unduly discriminatory just because those methodologies differ from region to region, does not require ATSI zone customers to pay transmission project costs assessed by both PJM and MISO, and does not require PJM to adopt MISO’s methodology.

  1. State-Regulated Utility Tariff Revision May Not Trump PURPA and FERC Regulations under PURPA:

Idaho Wind Partners 1, LLC, Docket No. EL12-74-000

FERC granted Idaho Wind Partners 1, LLC’s (“Idaho Wind”) petition for declaratory order finding that a proposed state tariff revision filed by Idaho Power Company (“Idaho Power”), the utility to which Idaho Wind is connected, if approved by the Idaho Public Utilities Commission (“Idaho PUC”), would be inconsistent with PURPA. Idaho Power’s proposed state tariff revision concerns curtailment of purchases of energy and capacity from QFs during light loading periods. FERC found that a utility that is party to a long-term power purchase agreement with a QF, where the avoided cost rate was determined at the time the obligation was incurred, may not rely on FERC’s regulations allowing curtailment during light loading period to avoid its contractual obligations and curtail unilaterally. Idaho Power’s proposed tariff revision would govern the operational dispatch of those QFs interconnected with Idaho Power that have 10 MW or more of nameplate capacity and generator output limiting controls installed, and would allow Idaho Power to curtail unilaterally from such QFs if, due to operational circumstances, purchases from the QF would require Idaho Power to dispatch higher cost, less efficient resources to serve system load during must run periods. FERC found that while the Idaho PUC proceeding on Idaho Power’s proposed tariff revision is still pending, the proposed state tariff provision would improperly allow Idaho Power to unilaterally curtail Idaho Wind and similar QFs, contrary to PURPA and FERC’s regulations implementing PURPA.