Energy Legal Blog

Bonneville Holding Transmission Open Season to Speed Interconnections

Transmission providers and customers alike are increasingly complaining about the lengthy queues for interconnecting to the transmission grid.  Scores of generator projects sign up for interconnection service, which is then delayed for years while the transmission provider conducts an array of studies.  To clear backlog on its transmission network, the Bonneville Power Administration is conducting a Network Open Season for transmission service that asks customers to commit to the transmission service they are seeking. 

At present BPA’s transmission queue includes requests by 25 customers for approximately 180 applications for transmission service totaling about 8,500 MW of new capacity, but BPA states that many of these service requests are speculative.  Under its new procedure, BPA will give all customers applying for transmission service by May 15, 2008, a precedent service agreement.  If a customer signs the binding agreement and remits the required financial security by June 16, 2008, BPA commits to providing the service, so long as it can provide the service at its rolled-in rate and complete its environmental study obligations.  BPA also will assume the study costs itself and arrange financing for any required transmission facilities, instead of requiring customers to front these costs.  However, if a customer declines the offer, BPA will withdraw its service requests from the transmission request queue, while allowing the customer to participate in future Network Open Seasons.

In December 2007, the Federal Energy Regulatory Commission held a technical conference focusing on transmission queue logjams.  The interconnection queue process is governed by Order No. 2003, which standardized the agreements and procedures related to the interconnection of large generating facilities based on a first-come, first-served process.  However, the surge of new generation projects, including many based on wind and other forms of renewable energy, have led to long interconnection queues that transmission providers are now debating how to expedite. 

ERCOT Identifies Scenarios for Texas Wind Transmission

Texas Senate Bill 20 (2005) directed the Public Utility Commission of Texas (PUCT), in consultation with the Electric Reliability Council of Texas (ERCOT) and the Southwest Power Pool (SPP), to designate Competitive Renewable Energy Zones (CREZ) and develop transmission plans for areas in Texas with significant renewable resource potential and developer commitment to facilitate new electricity generation from renewable resources.  In July 2007 the PUCT designated five CREZs in West Texas and the Texas Panhandle.  In early April ERCOT filed its transmission study, which provides transmission plans and cost estimates for the four scenarios that the PUCT designated.  The study presents optimized transmission plans for developing between 12,000 MW and 24,000 MW of wind generation in the CREZs.

ERCOT applied three overarching criteria to its evaluation of the study scenarios: 1) system reliability, 2) sufficient transfer capability, and 3) benefit and cost-effectiveness for consumers.  ERCOT made a significant effort to evaluate the engineering feasibility of the interconnections and circuits that it proposed.  Consistent with the PUCT's directive, ERCOT also endeavored to design the transmission plans for each scenario to be staged and expandable to bring more wind generation on-line over time.

For Scenario 1, ERCOT designed two transmission proposals for 12,053 MW of wind generation.  Plan A has an estimated cost of $2.95 billion, excluding collection costs, and Plan B, which is a more scalable transmission proposal, has an estimated cost of $3.78 billion.  ERCOT recommended Plan B, since it provides for more cost-effective expansion in the future.

For Scenario 2, ERCOT's estimated cost of the transmission proposal for 18,456 MW of wind generation is $4.93 billion, excluding collection costs.

For Scenario 3, ERCOT's estimated cost of the transmission proposal for 24,859 MW of wind generation is $6.38 billion, excluding collection costs.

For Scenario 4, ERCOT's estimated cost of the transmission proposal for 24,419 MW of wind generation is $5.75 billion, excluding collection costs.
 

Too Much Adieu about Mobile-Sierra?

Did a panel of the US Court of Appeals for the District of Columbia Circuit bid adieu to the half century-old Mobile Sierra doctrine on contract stability when it otherwise affirmed the Federal Energy Regulatory Commission's approval of a multi-party settlement that phases in a Forward Capacity Market in New England?  Notwithstanding alarms to the contrary, it did not.   The panel in Maine Public Utilities Comm'n v. FERC ruled that the challenges of non-settling parties to prices set in the new Forward Capacity Market are to be judged under the statutory just and reasonable standard of review, and not the deferential standard applied under Mobile Sierra when a party to a contract (or its privies) unilaterally seeks to change the terms of its agreement.  That ruling does not show the Supreme Court's Mobile Sierra doctrine the door.

In companion cases, United Gas Pipe Line Co. v. Mobile Gas Serv. Corp and Fed. Power Comm'n v. Sierra Pacific Power Co., the Supreme Court in 1956 held that the terms of a valid, bilaterally negotiated wholesale energy contract are presumptively just and reasonable under the Federal Power and Natural Gas Acts, and that FERC has authority under those statutes to set aside such contracts only in extraordinary circumstances of unequivocal public interest.  Showing only that the contract had become unprofitable to one of the parties was not enough to allow that party unilaterally to change the contract.

Consistent with the Supreme Court's ruling, the Maine PUC panel affirmed a settlement provision that rates set in the Forward Capacity Market could be presumptively just and reasonable as to parties consenting to the settlement agreement, which parties thereafter could not set aside those rates except on a showing of unequivocal public necessity.  FERC erred, however, and the panel reversed when FERC extended that proposition to the eight (of over 150) parties who did not join but rather "vociferously" opposed the settlement.  In other words, the panel ruled that parties to a wholesale energy contract or settlement agreement who become unhappy with their bargain could be made subject to the higher burden of proof imposed by the deferential Mobile Sierra doctrine, but not non-parties.  This is not a rejection of Mobile Sierra.  Rather, the panel's language strongly reaffirms the doctrine's deference to all contracts and forcefully restates the heavy burden imposed on any party seeking to change its contract.

This reaffirmation is significant and timely, since the Supreme Court recently heard argument and will soon decide whether to reverse a ruling of the full US Court of Appeals for the Ninth Circuit that would eviscerate the Mobile Sierra doctrine.  The Ninth Circuit held that the doctrine applies only insofar as the contract was entered into in a market determined to be workably competitive at the time, FERC reviewed and approved the contract, and that the challenge came from a purchaser but not a seller.  The Maine PUC decision now joins the robust body of Mobile Sierra case law that requires reversal of the Ninth Circuit.