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January 15, 2015

Concerned Over Implications for MISO Operations, FERC Punts on Wind Project's Transmission Service Petition

In Order No. 888,[1] FERC established the principle that non-jurisdictional utilities seeking to take advantage of jurisdictional utilities’ open access transmission tariffs (OATTs) must offer reciprocal service under OATTs of their own. At the time, FERC may not have foreseen all of the ramifications of that principle, especially as it was announced before the development of regional transmission organizations (RTOs). Confronted with some of those ramifications, in Geronimo Wind Energy, LLC, 150 FERC ¶ 61,010 (January 12, 2015), the Commission found the issues too complex to address without a trial-type evidentiary hearing and encouraged the parties to resolve the matter by settlement.

Geronimo involved a dispute over whether a generator needing transmission over both (a) MISO facilities, and (b) an electric co-op’s facilities embedded within the MISO grid, to sell power to its wholesale customer was required to pay separate charges to the co-op on top of the MISO tariff rate. The generator, a 200 MW wind farm, planned to interconnect with a substation of Otter Tail Power, a MISO member. From there, its power would flow over the Center-Maple River Line, which was jointly owned by Otter Tail and the co-op, Minnkota, en route to the customer, Xcel Energy. The generator duly submitted requests to MISO for interconnection service, which MISO granted. However, Minnkota informed the generator that it must secure Minnkota’s consent to use the Center-Maple River Line, and must pay for that use under the terms of Minnkota’s reciprocal OATT. The generator petitioned FERC for a declaratory order that the only rate it was required to pay was the MISO tariff rate.

In support of its petition, the generator argued that Otter Tail had assigned its transmission rights to MISO, including rights under a 1966 transmission sharing agreement, as amended, between Otter Tail and Minnkota. That agreement (which was incorporated in the MISO tariff as a grandfathered agreement) created a joint system out of certain 230 kV transmission facilities, some of which were owned by each party, and allowed each party to use specified portions of the joint facilities so long as the system had capacity in excess of that required by its owner for the owner’s own needs. The generator claimed that it was entitled, by virtue of the assignment, to use the joint facilities by taking service under the MISO tariff, without paying separate charges to Minnkota.

In its protest to the petition, Minnkota agreed that the 1966 agreement gave Otter Tail the right to use the Center-Maple River Line, and that Otter Tail had assigned its rights to MISO. However, it claimed that the agreement limited the parties to using excess capacity in their respective transmission facilities to serve their native loads, and that it did not have sufficient rights to transmit the output of the generator’s project over the Minnkota-owned portion of the facilities. It also asserted that the assignment did not give third parties an unfettered right to use Minnkota’s transmission system without complying with Minnkota’s OATT.

Equally important, Minnkota pointed out that as a non-member of MISO, it was not entitled to share in any transmission revenues paid into MISO. As a result, it would be unjust and unreasonable to require Minnkota to provide service under the MISO OATT without being able to charge separately for the service.

In declining to grant the petition and setting the matter for hearing, FERC stated that “Given the nature of this jointly planned system, with individual components owned by different transmission owners, one of which is a MISO member, and one of which is not, the issues raised…are complex.” The Commission added that those issues included “not only interpretation of the 1966 Agreement, but also the potential impacts on MISO’s operations that could occur if it is ultimately discovered that MISO controls capacity on only discrete non-contiguous components of this system owned by Otter Tail.” 150 FERC ¶ 61,010 at P 36.

Given that the Commission had before it all of the pertinent agreements and tariffs, it is not readily apparent that a trial-type hearing will make it much easier to resolve the dispute. No doubt the Commission was sincere in its encouragement to the parties to attempt to settle the matter. That is likely to provide little comfort to the generator, which claimed that it filed its petition only after it “worked for as long as it reasonably could to reach a settlement of Minnkota’s claim for compensation.” 150 FERC ¶ 61,010 at P 26.

[1] Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (May 10, 1996), FERC Stats. & Regs. ¶ 31,036 (1996), order on reh’g, Order No. 888-A, 62 Fed. Reg. 12,274 (March 14, 1997), FERC Stats. & Regs. ¶ 31,048, order on reh’g, Order No. 888- B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group v.  FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002).

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