96 FERC 61, 275 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

Transcription

1 96 FERC 61, 275 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Pat Wood, III, Chairman; William L. Massey, Linda Breathitt, and Nora Mead Brownell. Dynegy Power Marketing, Inc. Docket No. EL v. Southwest Power Pool, Inc. ORDER ON COMPLAINT (Issued September 13, 2001) On July 17, 2001, Dynegy Power Marketing, Inc. (Dynegy) filed a complaint against the Southwest Power Pool (SPP), alleging that SPP violated its obligations under section 22.2 of its Open Access Transmission Tariff (OATT) by limiting the ability of long-term point-to-point transmission service customers to change receipt and delivery points (redirect) on a firm basis. Dynegy requests that the Commission direct SPP to cease enforcement of such limitations. For the reasons discussed below, we grant the relief requested by Dynegy. Background Section 22.2 of SPP's OATT, "Modification on a Firm Basis," allows a customer to change the receipt and delivery of an existing firm point-to-point reservation. It reads as follows: Any request by a Transmission Customer to modify Receipt and Delivery Points on a firm basis shall be treated as a new request for service in accordance with Section 17 1 hereof, except that such Transmission Customer shall not be obligated to pay any additional deposit if the capacity reservation does not exceed the amount reserved in the existing Service Agreement for Long-Term Firm Transmission Service or confirmed Application for Short-Term Firm Transmission 1 Section 17 of SPP s OATT explains the procedures for arranging firm point-to-point transmission service.

2 Docket No. EL Service. While such new request is pending, the Transmission Customer shall retain its priority for service at the existing firm Receipt and Delivery Points specified in its Service Agreement for Long-Term Firm Transmission Service or confirmed Application for Short-Term Firm Transmission Service. In any instance where the remaining term of service, after modification pursuant to this provision, is less than (12) months the transmission customer will maintain existing rights of reservation priority on the original reservation. As the above quoted language indicates, under section 22.2, a customer holding a firm point-to-point transmission reservation may redirect transmission service to a different point of receipt or delivery; however, any request to redirect transmission service on a firm basis is treated as a new request for service and is contingent upon there being sufficient available transmission capability (ATC) on the new path. In addition, SPP s Business Practice section 3.2, interprets section 22.2 to require that any redirection must be permanent (i.e., the customer switching receipt or delivery points must do so for the remainder of the underlying service agreement's term). Specifically, Business Practice section 3.2 states that: The [point of Receipt/Delivery] of a firm transmission service reservation may be changed (redirected) on a firm basis, subject to [inter alia] the following conditions: (1) A new Firm Point-to-Point request must be submitted on the SPP OASIS with a Request Type of "Redirect" and have the active request being redirected in the Related Reference field. (2) The new request must be submitted for the remaining duration of the original firm reservation. (3) The new request must be submitted and processed in accordance with the SPP OATT timing requirements for the appropriate class and service increment required. (4) Sufficient ATC must exist to accommodate the new request. For purposes of ATC evaluation, the impacts of the original reservation will be replaced by the impacts of the new request during the overlapping period. (5) For the time frame that the new request is approved and confirmed, the capacity of the original reservation that is redirected can no longer be used. (6) Any Original Yearly service that is redirected on a shorter duration Service Increment will maintain its rollover rights under Section 2.2 of the OATT. Business Practice section 3.2, "Explanation/Rationale," further states that: A customer owning firm transmission service may change the [point of Receipt/Delivery] on a firm basis by submitting a new request for service. The new request for service must extend for the remaining duration of the original service and must be evaluated for sufficient ATC.... If an Original request is of a Yearly Service Increment and redirected on a term less than 12 months, the original service will retain its renewal rights under Section 2.2 of the OATT on the original path.

3 Docket No. EL Dynegy states that it and other SPP customers have on a number of occasions tried to persuade SPP to revise its Business Practices to allow for the temporary redirection of firm transmission service, bringing the issue before SPP's Regional Tariff Working Group (RTWG) 2 ; in each instance, the RTWG considered the issue but denied the requests. In addition, Dynegy submitted several requests to SPP to redirect annual transmission service for one-month periods, and, each time, the request was immediately denied (even though ATC was sufficient), because Dynegy's request was not for the remainder of its reservation term. Notice of Filing and Responsive Pleadings Notice of Dynegy's complaint was published in the Federal Register, 66 Fed. Reg. 38,664 (2001), with interventions, comments, and protests due on or before July 27, Parties filing timely and untimely motions to intervene, notices of intervention, protests, comments, and other pleadings are listed in Appendix A. Dynegy's Complaint Dynegy alleges that SPP violated section 22.2 and pro forma section 22.2 by restricting the right of point-to-point transmission service customers to change receipt and delivery points on a firm basis and by requiring that these changes be made for the remainder of the original reservation term. Dynegy further states that SPP's balance of the term redirect policy has neither been approved by the Commission nor found to be consistent with or superior to pro forma section Therefore, Dynegy insists that SPP's restrictive limitation of firm redirect rights constitutes a violation of SPP s OATT and the Commission's orders and regulations. According to Dynegy, pro forma section 22.2 describes the minimally acceptable terms and conditions under which point-to-point customers can redirect transmission service on a firm basis. Therefore, Dynegy states, because SPP seeks to depart from the terms and conditions in pro forma section 22.2, in its Business Practice section 3.2, SPP must obtain Commission authorization to revise section 22.2 by demonstrating that the revisions are consistent with or superior to pro forma section In particular, Dynegy maintains that SPP is not permitted to unilaterally adopt operating practices, such as Business Practice section 3.2, that affect reservations, without filing the changes with the 2 The RTWG is comprised of nine transmission owners, nine transmission customers, one state commission staff member, and one representative of SPP.

4 Docket No. EL Commission. Thus, Dynegy maintains that SPP must file Business Practice section 3.2, and any other Business Practices, which pertain to section 22.2 firm redirect requests; demonstrate that they are consistent with or superior to pro forma section 22.2 (which, as discussed below, Dynegy does not believe they are); and obtain the Commission's approval prior to their implementation. Until that time, Dynegy states that SPP may not enforce limitations on the rights to change receipt and delivery points. Dynegy, furthermore, maintains that SPP's balance of the term limitation on firm redirects, in Business Practice section 3.2, is inconsistent with the Commission's expressed intention for implementing pro forma section 22.2, 3 because it limits the flexibility of point-to-point transmission customers from reacting to competitive conditions and impairs reliability. As a result, Dynegy claims, SPP's balance of the term limitation on firm redirects significantly impairs the value of transmission rights, essentially abrogating the redirect rights the Commission provided under pro forma section In addition, Dynegy states that SPP's balance of the term limitation on firm redirects is contrary to the Commission's reasoning in Commonwealth Edison Company, 4 because, according to Dynegy, the Commission rejected in that case the idea that the redirected reservation replaces the original reservation. 5 Accordingly, Dynegy requests that the Commission find that SPP has violated its OATT and Commission policy by unduly restricting firm redirect rights and that the Commission require SPP to cease enforcement of its balance of the term limitation on firm redirect requests. Interventions 3 See See 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, [ Reg. Preambles] FERC Stats. & Regs. 31,036 at 31, (1996), clarified, 76 FERC 61,009, 61,347 (1996), order on reh'g, Order No. 888-A, [ Regs. Preambles] FERC Stats. & Regs. 31,048 (1997), order on reh'g, Order No. 888-B, 81 FERC 61,248 (1997), aff'd and remanded sub nom., Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), cert. granted sub nom., People of the State of New York and Public Serv. Comm. of the State of New York v. FERC, 69 U.S.L.W (U.S. Feb. 27, 2001) (No ) FERC 61,027 (2001) (Commonwealth Edison). 5 In addition, Dynegy notes that other transmission providers (e.g., Commonwealth Edison Company and Illinois Power Company) permit changes in receipt and delivery points for periods less than the balance of a transmission reservation.

5 Docket No. EL Coral Power, L.L.C. (Coral); Enron Power Marketing, Inc. (Enron); Tenaska Power Services Co. (Tenaska); NRG Power Marketing Inc. (NRG); Duke Energy North America, LLC (Duke); ONEOK Power Marketing Company (Oneok); Aquila Energy Marketing Corporation (Aquila); and Reliant Energy Power Generation, Inc. (Reliant) (collectively, Intervenors ) filed comments, supporting Dynegy's complaint. Intervenors generally make the same arguments as Dynegy. In addition, Intervenors 6 also state that Dynegy's construction of section 22.2 is consistent with the fundamental policy underlying Order No. 888 (eliminating impediments to the development of a competitive environment), 7 because SPP's balance of the term limitation hinders the ability of transmission customers to react quickly to short-term changes in the market, acts as a disincentive to customers entering into long-term firm point-to-point service agreements, and decreases reliability and increases the cost of energy to customers. As a result, according to Intervenors, 8 SPP s balance of the term limitation impedes the development of competitive markets (i.e., a fluid electric power market) by causing transmission customers on SPP's system to incur needless costs to move power that would otherwise not be necessary and, thereby, frustrates the primary goal of Order No. 888 in the SPP region. 9 Intervenors 10 also state that Commonwealth Edison makes clear that the purpose underlying pro forma section 22.2 is to allow for competitive flexibility for transmission 6 See, e.g., NRG, Aquila, Duke, and Oneok. 7 See supra note 3. Some Intervenors also claim that the Commission acknowledged in Order No. 637 that flexible point rights for firm service in the gas industry are beneficial to competition, and that the Commission should apply this logic to electric transmission receipt and delivery points. See, e.g., Duke and Oneok. 8 See, e.g., Aquila and Duke 9 In addition, according to some Intervenors, pro forma section 17.1 clearly contemplates that it is the customer, and not the transmission provider, that determines the length of the service to be provided, so long as there is sufficient ATC to accommodate the requested term; thus, Intervenors maintain that SPP cannot dictate the term of a request for change in receipt or delivery points on a firm basis. See, e.g., NRG. 10 See, e.g., Reliant, NRG, and Coral

6 Docket No. EL customers. That is, according to Intervenors, 11 in Commonwealth Edison, the Commission recognized and accepted the principle that long-term transmission service customers have the right to redirect their reservation rights for a term that is less than the remaining term of the underlying service agreement, subject to the availability of transmission capacity. Accordingly, Intervenors request that the Commission grant Dynegy's complaint and the relief sought by it. SPP's Answer SPP argues that its implementation of section 22.2 is consistent with pro forma section 22.2 and that SPP is under no obligation to adopt the practices that Dynegy requests. SPP further maintains that Dynegy does not cite any precedent that supports its position that SPP, or any other transmission provider, must adopt its interpretation of section In this regard, SPP states that the Commission's decision in Commonwealth Edison does not support Dynegy's position. SPP also argues that adopting Dynegy's interpretation of pro forma section 22.2 would render pro forma section superfluous, because the Commission included language in pro forma section 22.1 that allows a transmission customer to retain rights to its original receipt or delivery points. Moreover, SPP claims that because a request to switch points under section 22.2 is treated as a new service request demonstrates that the Commission did not intend to allow customers to retain rights to their original points of receipt or delivery, but, instead, it intended that the new service would supersede the original service. In addition, SPP states, the fact, that a small number of transmission providers have determined that allowing temporary redirects under section 22.2 is appropriate for their systems is irrelevant to this matter, because these decisions are not binding on SPP. SPP further explains that after considering the balance of the term issue a number of times through its RTWG, SPP has determined that its implementation of section 22.2 is 11 See, e.g., Reliant and NRG. 12 Under section 22.1, "Modifications On a Non-Firm Basis": "The Transmission Customer taking firm Point-to-Point Transmission Service may request the provision of transmission service on a non-firm basis over Receipt and Delivery Points other than those specified in the Service Agreement... without... executing a new Service Agreement for Long-Term Firm Transmission Service or submitting a new Application for Short-Term Firm Transmission Service...."

7 Docket No. EL consistent with pro forma section 22.2, is appropriate for its region, and is necessary to prevent gaming or the diminishment of the value of firm capacity. SPP also maintains that there is no evidence that SPP's practices will harm reliability, as alleged by Dynegy; rather, according to SPP, allowing a transmission customer to effectively tie-up two transmission paths makes it more difficult for others to access economical and reliable supplies. In addition, SPP states that it is under no obligation to file its Business Practices, because its Business Practices provide an administrative elaboration and clarification for the purposes of administering SPP s OATT. SPP further argues that the Commission has allowed regional transmission entities to utilize business practices and other materials without requiring the transmission provider to file the information with the Commission for acceptance or approval, especially where the relevant documents are publicly available. 13 SPP argues that because its Business Practices are available on its web site and are also accessible through its OASIS site, SPP satisfies the Commission's standards and precedent. Discussion A. Procedural Matters Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R (2000), the timely, unopposed motions to intervene serve to make the entities that filed them parties to this proceeding. Given the early stage of this proceeding and the absence of undue delay or prejudice, we find good cause to grant the untimely, unopposed interventions of Constellation Power Source, Inc., Aquila, and NRG. B. The Complaint We will grant the remedy requested by Dynegy and require SPP to implement its OATT consistent with our ruling here so that it permits redirections in long-term, pointto-point transmission service for periods less than the remainder of the contract. 14 The ability to redirect firm service for a period less than the balance of the term fosters a competitive environment in the bulk power market. As we stated in Commonwealth 13 SPP's Answer at 6 & n.8 (citing Central Hudson Gas & Elec. Corp., 88 FERC 61,138 at 61,403 (1999) (stating New York ISO did not have to file manuals that were available for public inspection and posted on the ISO's website) and Pennsylvania-New Jersey-Maryland Interconnection, 81 FERC 61,257 at 62,267 (1997) (stating that PJM did not have to file operating manuals if they were made available to the public)(pjm)). 14 This may mean that SPP will need to revise its Business Practices to be consistent with our ruling here.

8 Docket No. EL Edison, "Section 22.2 of the pro forma tariff was intended to provide flexibility to transmission customers to permit them to react in a competitive market." 15 Much of this flexibility would be lost if customers could only redirect on a firm basis for the balance of the term of the reservation. For instance, this would result in customers redirecting their service on a firm basis for a longer period than necessary to meet their needs. SPP has not denied Dynegy's request for service on the basis of a lack of ATC at the requested points or for a violation of the SPP tariff, but rather for a violation of a provision contained in its unfiled Business Practices. Dynegy made its service request for alternate firm points under section 22.2, which does not specify any required duration for redirect requests made by long-term firm customers if there is sufficient ATC to satisfy that request. Instead, that section merely states that any redirect request will be treated as a new request for service pursuant to section 17. Section 17 also does not mandate a particular duration for a redirect request if there is sufficient ATC. Thus, SPP's tariff does not limit the requests for redirected service to the remainder of the term of the contract, as SPP's Business Practices would require. Nevertheless, even if the OATT could be construed to require a request for a firm redirect to be for the remainder of the term of the agreement, it certainly does not prohibit the customer from making an additional request to select another set of alternate firm points. Accordingly, even under SPP's interpretation of section 22.2, Dynegy could have asked for the alternate firm points and a month later could ask for its original points for the remainder of the term. This, of course, would require SPP to expend additional time and money, calculating ATC twice: once at the alternate points, for a period longer than which it will be used, and again at the original points where Dynegy, by contract, already has firm capacity and which SPP has already determined to be available. Thus, Dynegy's request merely represents the combination of these two requests into one. In addition to providing Dynegy with the certainty that it will have the primary and alternate firm points available as needed, dealing with both requests at the same time also provides SPP and other potential customers with greater ATC certainty, since capacity that will never be used by Dynegy (capacity at the alternate points after the period requested by Dynegy) will not be listed on the OASIS as unavailable. Furthermore, once a firm transmission customer redirects for a particular period of time, the capacity on the original path will be available to other customers for the period of that redirection. Accordingly, when a customer includes in its request for redirection a plan to return at a later date to the original path, this does not, contrary to SPP's claims, tie-up the original path during the period of the redirection FERC at 61,083.

9 Docket No. EL Accordingly, we find that the manner in which SPP is implementing section 22.2 is neither consistent with nor superior to pro forma section and agree with Dynegy that a more flexible redirect policy is consistent with the policy underlying Order No In fact, transmission customers will more readily commit to long-term firm transmission service when they can effectively respond to unexpected events and economic situations in a competitive electric power market. Consistent with our precedent, SPP is not required to file its Business Practices with the Commission 17 and must implement its Business Practices in a manner consistent with its Commission-approved OATT. The Commission orders: (A) Dynegy's requested relief is granted, as discussed in the body of this order. (B) SPP is directed to allow for redirects, under section 22.2 of its OATT, of less than the full term of the transmission service, as discussed in the body of this order. By the Commission. ( S E A L ) David P. Boergers, Secretary. Appendix A Listed parties have filed notices of intervention or motions to intervene in Docket No. EL Abbreviations for names of parties referred to in the order are indicated after their names below. Late interventions are indicated by an asterisk after the name of a party. 16 See Central Hudson Gas & Electric Corporation, et al., 83 FERC 61,352 (1998), on reh'g, 87 FERC 61,135 (1999) (stating that if a transmission provider seeks to depart from the pro forma OATT, it must obtain the Commission's authorization to do so and, in doing so, demonstrate that the revisions are consistent with or superior to the prof forma OATT). 17 In PJM, 81 FERC at 62,267, we stated that according to the rule of reason policy, we see no reason to require that the PJM Manuals be filed."

10 Docket No. EL Company Name Aquila Energy Marketing Corporation (Aquila)* Constellation Power Source, Inc.* Coral Power, L.L.C. (Coral) Duke Energy North America, LLC (Duke) Enron Power Marketing, Inc. (Enron) NRG Power Marketing Inc. (NRG)* ONEOK Power Marketing Company (Oneok) Reliant Energy Power Generation, Inc. (Reliant) Tenaska Power Services Co. (Tenaska)