[Federal Register: May 26, 2006 (Volume 71, Number 102)]
[Notices]
[Page 30396-30398]
[DOCID:fr26my06-71]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. EL06-61-000, EL06-71-000]

Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead
Brownell, and Suedeen G. Kelly; Associated Electric Cooperative, Inc.,
Complainant v. Southwest Power Pool, Inc., Respondent; Order Denying
Complaint and Instituting Section 206 Proceeding

Issued May 19, 2006.
    1. Associated Electric Cooperative, Inc. (Associated Electric)
filed a complaint against Southwest Power Pool, Inc. (SPP), arguing
that SPP violated its Open Access Transmission Tariff (OATT) in
granting a rollover request by American Electric Power Service
Corporation, as agent for the subsidiaries of the American Electric
Power Company, Inc. d/b/a AEPM (collectively, AEP) for 250 megawatts
(MW) of long-term firm point-to-point transmission service from the
Union Electric Company d/b/a Ameren UE (Ameren UE) transmission system
to the Central and South West Services, Inc. (CSW) transmission system.
In this order, the Commission denies Associated Electric's complaint.
In this order, the Commission also institutes a proceeding pursuant to
section 206 of the Federal Power Act (FPA) \1\ to determine whether
certain language in section 2.2 of SPP's existing OATT may be unjust,
unreasonable, or unduly discriminatory or preferential. SPP is directed
to file comments on this matter within 30 days of the issuance date of
this order.
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    \1\ 16 U.S.C. 824e (2000).
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Associated Electric's Complaint

    2. Associated Electric contends that it is not possible for SPP to
grant AEP's rollover request for 250 MW of long-term firm service to
begin on June 1, 2005, because SPP no longer has the rights to the
underlying contract path needed to provide such service. Associated
Electric states that the preceding AEP service arrangements to be
rolled over relied on a contract path provided by an Interchange
Agreement dated September 22, 1971, as amended December 31, 1996, among
Associated Electric, Kansas Gas and Electric Company, Public Service
Company of Oklahoma, and Union Electric Company for the Missouri-
Kansas-Oklahoma 345kV interconnection (MoKanOk Line), which agreement
was terminated effective June 1, 2005,\2\ the same day AEP's requested
service was to begin.
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    \2\ See Union Electric Co., 112 FERC ] 61,089, order denying
clarification, 113 FERC ] 61,320 (2005).
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    3. Associated Electric states that without the MoKanOk Line
available to SPP to support AEP's rollover request, SPP should not have
granted AEP's request without first determining if sufficient Available
Flowgate Capacity (AFC) existed to continue to provide the service.\3\
Associated Electric further states that, alternatively, SPP should have
considered AEP's request for a new transmission service request and
processed it pursuant to the procedures for handling new service
requests under SPP's OATT.
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    \3\ Associated Electric argues that the initial 1998
Transmission Agreements for the 250 MW of service and subsequent
service requests plainly indicate that SPP's grant of AEP's
requested rollover is dependent upon the MoKanOk Line. Complaint at
13-17.
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    4. Associated Electric states that SPP was obliged under section
15.2 (Determination of Available Transmission Capability), section 19.1
(Additional Study Procedures for Firm Point-to-Point Transmission
Service Requests--Notice of Need for System Impact Study), and
Attachment D (Methodology for Completing a System Impact Study) of
SPP's OATT, to perform a study to determine whether sufficient
transmission capability existed to accommodate AEP's service request.
Associated Electric contends that by rolling over AEP's service without
first determining the sufficiency of AFC, SPP has adversely affected
the reliability of Associated Electric's system and neighboring
systems. Associated Electric, however, is unable to quantify the
financial impact of SPP's action.\4\
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    \4\ Complaint at 39.
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    5. Associated Electric alleges that SPP's reliance on section 2.2
(Reservation Priority for Existing Firm Service Customers) of its OATT
was misplaced because the cost of Associated Electric's portion of the
MoKanOk Line was not included as part of the SPP firm transmission
service rates that AEP had been paying.
    6. Associated Electric requests that the Commission (1) determine
it was inappropriate for SPP to grant AEP's rollover request without
studying the AFC in the region; (2) order SPP to conduct a study of the
AFC on SPP and neighboring transmission systems, including Associated
Electric, to determine if there is sufficient AFC to support AEP's
request; (3) order SPP to rescind AEP's service and treat it as a new
request, if SPP is unable to demonstrate sufficient AFC; and (4) order
SPP to coordinate with the neighboring transmission system owners with
respect to all future awards of transmission capacity under its OATT
that may effect neighboring systems.

Notice of Filing and Responsive Pleadings

    7. Notice of the complaint was published in the Federal Register,
71 FR 16,137 (2006), with comments, interventions, and protests due on
or before April 10, 2006. Lafayette Utilities System, Ameren Services
Company, Western Farmers Electric Cooperative, and AEP filed timely
motions to intervene. Xcel Energy Service Inc.

(Xcel) filed an out-of-time motion to intervene. SPP filed an answer in
opposition to the complaint.

SPP's Answer

    8. SPP requests that the Commission dismiss the complaint and deny
Associated Electric's claim for relief. SPP states that it was required
to allow the rollover of existing firm service requested by AEP. It
explains that section 2.2 of its OATT obliges it to allow all existing
firm service to roll over service, subject only to allocations of
capacity if there are competing reservation requests, which SPP states
was not the case here. With respect to Associated Electric's contention
that SPP's reliance on section 2.2 was misplaced, SPP maintains that
Associated Electric misinterprets section 2.2.
    9. This reservation priority only applies to the facilities of the
Transmission Owner(s) where such facility costs have been included as
part of the firm service rates that the firm service customer has been
paying.
    10. SPP states that this language is only applicable if there are
competing requests for service which prevent SPP from allowing the full
rollover. It explains that the language only limits the amount of
capacity that a customer may obtain if there are competing requests,
according to SPP.
    11. SPP further states that section 2.2 does not require a study,
and, in fact, the Commission has expressly told the transmission
provider that it should not be performing studies to determine if it
can accommodate the rollover.\5\ With respect to section 15.2, SPP
states that it is only required to perform individual system impact
studies if it determines that there is insufficient transmission
capacity. SPP contends that it is given discretion as to whether or not
to conduct such a study elsewhere in its OATT.\6\ SPP states that, in
this particular case, SPP previously had concluded that there was
sufficient transmission capacity to fulfill AEP's service request. SPP
states that it based its decision to use its transmission system on its
ongoing plans and models, which indicated adequate capacity to support
the request. SPP further states that it has seen no evidence of any
adverse effect on Associated Electric's reliability, nor does it have
any knowledge that service to Associated Electric's loads is in
jeopardy.
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    \5\ Answer at 10 (citing Constellation Power Source, Inc. v. Am.
Elec. Power Serv. Corp., 102 FERC ] 61,142 (2003); Tenaska Power
Servs. Co. v. Sw. Power Pool, Inc., 102 FERC ] 61,140 (2003); Exelon
Generation Co., LLC v. Sw. Power Pool, Inc., 101 FERC ] 61,226
(2002)).
    \6\ Answer at 11 (citing to OATT Sec. Sec.  17.5, 19.1).
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    12. SPP avers that Associated Electric assumes the service to AEP
is tied to a specific path involving the 345 kV MoKanOk Line. However,
SPP explains that it is providing the service with a contract path
using only SPP transmission facilities which interconnect directly with
AmerenUE's transmission facilities, thereby allowing the service
without the MoKanOk Line.\7\ Indeed, SPP explains that ``[c]urrently,
including the AEP transaction, SPP has 680 MWs of transactions flowing
from AmerenUE or the Midwest ISO into SPP's region. This includes 105
MW of Aquila-MPS service that was not SPP's responsibility at the time
it accepted the AEPM reservation. Therefore, SPP has the ability to
satisfy the entire AEP rollover request over a contract path involving
SPP facilities, thus rendering service over the MoKanOk Line
unnecessary.'' \8\ The sole issue, according to SPP, is whether SPP
could provide the rollover service under its OATT to allow imports
directly from the AmerenUE system. SPP maintains that its grant of
transmission service to AEP was not contingent on the use of the
MoKanOk Line. Therefore, SPP concludes that Associated Electric's
arguments concerning the MoKanOk Line provide interesting historical
perspective, but are not particularly relevant.
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    \7\ SPP states that it had interconnections with AmerenUE,
involving 1018 MW of contract path capacity, at the time of SPP's
acceptance of the AEP reservation. SPP states that subsequently the
SPP interconnection with AmerenUE has increased to 1688 MW of
contract path capacity. Answer at 12-13.
    \8\ SPP Answer at 13.
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Discussion

Procedural Matters

    13. Pursuant to Rule 214 of the Commission's Rules of Practice and
Procedure, 18 CFR 385.214 (2005), the timely, unopposed motions to
intervene serve to make the entities that filed them parties to this
proceeding. We will grant Xcel's motion to intervene out-of-time, given
its interest in this proceeding, the early stage of this proceeding,
and the absence of any undue prejudice or delay.

Commission Determination

    14. We will deny Associated Electric's complaint. Contrary to
Associated Electric's arguments, SPP properly applied section 2.2 of
its OATT in granting AEP's rollover request.\9\ The Commission has
consistently held that under section 2.2 all firm service customers
(requirements and transmission-only with contract terms of one year or
more) have the right to continue to take transmission service from
their existing transmission providers when their contracts expire, roll
over, or are renewed.\10\ SPP correctly implemented section 2.2 of its
OATT and granted AEP's rollover request.
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    \9\ In relevant part, section 2.2 of SPP's OATT provides that
``[e]xisting firm service customers (wholesale requirements and
transmission-only, with a contract term of one-year or more, and
retail) of the Transmission Owner(s) or Transmission Provider have
the right to continue to take transmission service from the
Transmission Provider when the contract expires, rolls over or is
renewed.''
    \10\ The right to rollover applies regardless of whether there
is a competing request for transmission service. If there is a
competing request, the existing transmission customer must agree to
accept a contract term at least as long as that offered by the
potential customer and to pay the current just and reasonable rate,
as approved by the Commission, for such service. Here, there were no
competing requests for transmission service. In this regard, we
reject Associated Electric's argument that SPP also violated section
2.2 ``because reservation priority pursuant to Section 2.2 is only
to be awarded with respect to the transmission owner's transmission
facilities where the cost of those facilities has been included as
part of the firm service rates that the customer has been paying.''
Complaint at 41. That portion of section 2.2 applies only in the
event of competing requests, of which there are none in this
proceeding, and thus is irrelevant to the issue raised in this
proceeding.
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    15. As we explained in a prior SPP order, ``[u]nder Section 2.2,
SPP is obligated to maintain available transmission capacity for its
existing long-term transmission customers with rollover rights * * *
until the time expires for those customers to exercise their rollover
rights.'' \11\ In explaining SPP's obligation to maintain available
transmission capacity to provide the rollover right, the Commission
rejected SPP arguments that it could not provide the requested rollover
service ``due to changes to existing firm uses on its system including
native load growth, changes in external trading patterns, generation
dispatch modeling assumptions, and loop flow changes.'' \12\ In this
proceeding, SPP, consistent with Commission precedent, maintained
available transmission capacity to provide AEP's requested rollover,
and Associated Electric's unsupported

allegations to the contrary are unavailing.\13\
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    \11\ Exelon Generation Co., 99 FERC ] 61,235 at P 26 (2002).
    \12\ Id. SPP, as the Commission has consistently held, could
restrict a transmission customer's rollover rights only in certain
limited circumstances. Absent the limited circumstances that the
Commission has identified for a transmission provider to restrict a
transmission customer's rollover, and Associated Electric does not
argue that those circumstances exist, SPP had no basis to deny AEP's
rollover request.
    \13\ SPP also could not deny AEP's rollover request on a claim
that there was insufficient capacity on a third-party's transmission
system. See Commonwealth Edison Co., 95 FERC ] 61,252 at 61,875
(2001) (``A transmission provider may not condition a transmission
customer's rights to roll over transmission service on the
transmission provider's system at the end of an existing service
agreement based on whether there is enough transmission capacity
available on a third-party's transmission system.'').
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    16. Moreover, contrary to Associated Electric's complaint, section
2.2 contains no requirement that SPP perform any studies before
granting a rollover request.\14\ As explained above, SPP has an ongoing
obligation to plan its system and maintain available transmission
capacity to provide existing transmission customers' rollover requests.
To impose a study obligation on transmission providers, as Associated
Electric argues, would provide transmission providers the opportunity
to stall rollover requests and undermine the purpose of section 2.2 of
ensuring that transmission customers may continue to receive
transmission service.
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    \14\ AEP's rollover request is subject to section 2.2 of SPP's
OATT and is not a request for new transmission service. AEP is
requesting that it continue to receive the same service that it
previously received. In any event, as SPP points out, even if it
were treated as a new transmission request, studies would only be
needed if the transmission provider determined that sufficient
capacity did not exist to provide the service. See SPP Answer at 11.
That is not the case here.
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    17. Finally, we reject Associated Electric's arguments with respect
to loop flow. SPP is obligated under its OATT to offer to provide
transmission service on its system if there is available transmission
capacity. SPP has complied with the requirements of section 2.2 and
provided rollover service to AEP. To the extent that Associated
Electric faces loop flows on its system as a result of this transaction
or any other transaction, the Commission's policy is that owners and
controllers of the transmission facilities must attempt to resolve the
matter on a consensual, regional basis.\15\ The possibility that
Associated Electric may face loop flows as a result of the AEP rollover
transaction is no basis for SPP to deny AEP's request. In this regard,
we note that Associated Electric, to date, has chosen not to join the
SPP Regional Transmission Organization or any other regional entities
that would provide solutions for loop flow problems.
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    \15\ See, e.g., Southern California Edison Co., 70 FERC ] 61,087
at 61,241-42 (1995).
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    18. Accordingly, we will deny Associate Electric's complaint.
    19. In addition, pursuant to section 206 of the FPA, we find that
the language in the last three sentences of section 2.2 of SPP's
existing OATT may not be just and reasonable,\16\ and may be unjust,
unreasonable, unduly discriminatory or preferential, or otherwise
unlawful, because the language may place limitations on customers'
rollover rights that are contrary to Commission policy. Once a
transmission provider evaluates the impact on its system of serving a
customer, Commission policy requires the transmission provider to plan
and operate its transmission system with the expectation that it will
continue to provide service to the customer should the customer request
rollover.\17\ The Commission has explained that a transmission provider
can deny a customer the ability to roll over its long-term firm service
contract only if the transmission provider includes in the original
service agreement a specific limitation based on reasonably forecasted
native load needs for the transmission capacity provided under the
contract at the end of the contract term.\18\ The Commission also has
explained that a transmission provider may limit the terms under which
a new long-term agreement may be rolled over if it has a pre-existing
contract obligation that commences in the future.\19\ If the
transmission system becomes constrained (for reasons other than
reasonably forecasted native load growth or pre-existing contract
obligations that commence in the future) such that the transmission
provider cannot satisfy all existing long-term customers, then the
obligation is on the transmission provider either to curtail service to
all affected customers (not just the later-accepted firm customers)
pursuant to the provisions of its OATT or to build more capacity to
relieve the constraint.\20\
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    \16\ These sentences provide:
    This reservation priority only applies to the facilities of the
Transmission Owner(s) where such facility costs have been included
as part of the firm service rates that the firm service customer has
been paying. If competing existing firm service requirements
customers apply for service that cannot be fully provided, the
priority rights will be ranked in accordance with first-come, first-
served principles. If firm service customers tie, then the capacity
for which they receive priority rights under this tariff shall be
apportioned on a pro rata basis.
    \17\ See, e.g., Southern Company Services, Inc., 103 FERC ]
61,117 at P 5 (2003).
    \18\ See, e.g., Southern Company Services, Inc., 110 FERC ]
61,379 (2005).
    \19\ Id.
    \20\ Id.
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    20. The limitations included in section 2.2 of SPP's existing OATT
(the last three sentences) appear to go beyond those allowed by the
Commission. Consequently, we will institute an investigation, under
section 206 of the FPA, in Docket No. EL06-71-000, into the justness
and reasonableness of this language, and direct SPP to file comments on
this matter within 30 days of the issuance date of this order.
    21. In cases where, as here, the Commission institutes a section
206 investigation on its own motion, section 206(b) of the FPA requires
that the Commission establish a refund effective date that is no
earlier than publication of notice of the Commission's initiation of
its investigation in the Federal Register, and no later than five
months subsequent to that date. In order to give maximum protection to
customers, and consistent with our precedent,\21\ we will establish a
refund effective date at the earliest date allowed. This date will be
the date on which notice of our investigation in Docket No. EL06-71-000
is published in the Federal Register.
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    \21\ See, e.g., PJM Interconnection, L.L.C., 90 FERC ] 61,137
(2000); Cambridge Elec. Light Co., 75 FERC ] 61,177, clarified, 76
FERC ] 61,020 (1996); Canal Elec. Co., 46 FERC ] 61,153, reh'g
denied, 47 FERC ] 61,275 (1989).
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    The Commission orders:
    (A) Associated Electric's complaint is hereby denied, as discussed
in the body of this order.
    (B) Pursuant to the authority contained in and subject to the
jurisdiction conferred by the Federal Energy Regulatory Commission by
section 402(a) of the Department of Energy Organization Act,
particularly section 206 thereof, and pursuant to the Commission's
Rules of Practice and Procedure and the regulations under the Federal
Power Act (18 CFR chapter I), an investigation is hereby instituted, in
Docket No. EL06-71-000, concerning the justness and reasonableness of
the last three sentences of section 2.2 of SPP's existing OATT.
    (C) The Secretary shall promptly publish in the Federal Register a
notice of the Commission's initiation of the proceeding ordered in
Ordering Paragraph (B) above, under section 206 of the Federal Power
Act, in Docket No. EL06-71-000.
    (D) The refund effective date in Docket No. EL06-71-000,
established pursuant to section 206(b) of the Federal Power Act, shall
be the date of publication in the Federal Register of the notice in
Ordering Paragraph (C) above.

    By the Commission.
Magalie R. Salas,
Secretary.
[FR Doc. E6-8099 Filed 5-25-06; 8:45 am]

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