[Federal Register Volume 76, Number 97 (Thursday, May 19, 2011)]
[Notices]
[Pages 28973-28983]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-12278]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket Nos. ER11-2127-001, ER11-2127-002, EL11-37-000]
Terra-Gen Dixie Valley, LLC; Order on Rehearing and Accepting
Tariff Filing, Subject to Modification, Establishing Hearing Procedures
and Directing Further Compliance Filing
Before Commissioners: Marc Spitzer, Philip D. Moeller, John R.
Norris, and Cheryl A. LaFleur.
1. In this order, the Commission addresses an open access
transmission tariff (OATT) submitted by Terra-Gen Dixie Valley, LLC
(Terra-Gen), in response to a Commission order issued in this
proceeding on January 14, 2011.\1\ The Commission will accept Terra-
Gen's OATT, to be effective May 14, 2011, and order modifications to
Terra-Gen's OATT and require a further compliance filing. We will also
establish hearing and settlement procedures. Finally, as discussed
below, we will grant in part and deny in part Terra-Gen's request for
rehearing of the January 14 Order.
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\1\ See Terra-Gen Dixie Valley, LLC, 134 FERC ] 61,027 (2011)
(January 14 Order).
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I. Background
2. Terra-Gen is the owner of a 60 MW geothermal plant (Plant),
located in northern Nevada, and an associated 214-mile, 230 kV radial
generator tie-line (Dixie Valley Line) (collectively, Dixie Valley QF).
Both the Plant and the Dixie Valley Line were certified as a single QF
under the Commission's regulations. Terra-Gen currently utilizes the
Dixie Valley Line by selling the 60 MW output of the Plant to Southern
California Edison (SoCal Edison) under a pre-existing power purchase
agreement.
3. On September 16, 2010, the Commission acted on a petition by
Terra-Gen, whereby Terra-Gen and two of its affiliates, TGP Dixie
Development Company, LLC, and New York Canyon, LLC, sought a
determination awarding priority to existing and future planned
expansion transmission capacity on the Dixie Valley Line. In that
Order, the Commission also addressed a complaint filed against Terra-
Gen by Green Borders Geothermal, LLC (Green Borders). In relevant part,
the Commission found that: (1) Terra-Gen must file an OATT as a result
of Green Borders' valid transmission service request made on May 8,
2007; (2) Terra-Gen is entitled to continue its present use of its 60
MW of capacity; (3) Terra-Gen had not supported its request for 100 MW
of priority transmission capacity for expansion of its generation
resource; and (4) Terra-Gen had not supported the claim for priority of
200 MW of expansion capacity for the two Terra-Gen affiliates.\2\
However, the Commission allowed Terra-Gen ``to submit further evidence
of pre-existing development plans that satisfy the criteria in Aero
Energy and Milford.'' The Commission explained that Terra-Gen ``must
demonstrate the existence of specific pre-existing generation
development plans, consistent material progress towards achieving such
plans, and that such plans and initial progress pre-date Green Border's
valid request for service.'' \3\
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\2\ Terra-Gen Dixie Valley, LLC, 132 FERC ] 61,215 (2010)
(September 16 Order).
\3\ Id. P 53.
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4. In compliance with the September 16 Order, Terra-Gen submitted
its OATT to the Commission on November 15, 2010, in Docket No. ER11-
2127-000. Terra-Gen also submitted additional materials to support its
request for 300 MW of priority transmission capacity.\4\ On January 14,
2010, the Commission rejected Terra-Gen's OATT because Terra-Gen had
not demonstrated that its OATT was consistent with or superior to the
pro forma OATT. The Commission directed Terra Gen to resubmit an OATT
that is consistent with the direction of the January 14 Order. On March
16, 2011, Terra-Gen submitted the instant filing in compliance with the
January 14 Order. Subsequently, Terra-Gen requested rehearing of the
January 14 Order.
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\4\ The additional materials were submitted in Docket No. EL10-
29-002.
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A. Request for Rehearing of January 14 Order
5. On February 14, 2011, Terra-Gen filed a Request for Rehearing of
the January 14 Order (Request for Rehearing). Terra-Gen alleges that
the Commission departed from precedent, failed to engage in reasoned
decision-making, and acted arbitrarily and capriciously ``by finding
that [Terra-Gen] had not justified an OATT exemption for its existing
or future priority transmission services when the Commission had
grandfathered [Terra-Gen's] priority transmission services in the
September 16 Order.'' \5\ Specifically, Terra-Gen argues that the
Commission improperly departed from precedent established in Sagebrush
by rejecting Terra-Gen's proposed OATT provisions that would provide
``an OATT exemption for its existing and any future service rights
confirmed by the Commission.'' \6\ According to Terra-Gen, its proposed
treatment of the 60 MW of existing capacity on the Dixie Valley Line is
no different than Sagebrush's ``treatment of capacity to which it had
pre-OATT grandfathered rights.'' \7\
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\5\ Request for Rehearing at 5.
\6\ Request for Rehearing at 6 (citing Sagebrush, a California
Partnership, 130 FERC ] 61,093 (2010) (Sagebrush)).
\7\ Id. at 7.
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B. Terra-Gen OATT
6. Terra-Gen asserts that its OATT complies with the directives in
the January 14 Order. Specifically, Terra-Gen explains that its
compliance OATT contains several deviations from the pro forma OATT due
to the design of the Dixie Valley Line as a generator tie-line. Terra-
Gen explains that its OATT has non-conforming provisions that include
limiting the applicability of the OATT with regard to any priority
transmission capacity granted to Terra-Gen and its affiliates,
providing alternative creditworthiness requirements for transmission
customers, clarifying how Terra-Gen will cluster transmission system
impact studies, and modifying the large generator interconnection
procedures.
7. In addition, as it did in its initial filing, Terra-Gen
reaffirms its requests for waiver of the pro forma OATT provisions
related to the provision of
[[Page 28974]]
network transmission service, ancillary services, Open Access Same-Time
Information System (OASIS), and Standards of Conduct. Terra-Gen also
requests waiver of various other pro forma provisions that Terra-Gen
asserts are not necessary given the nature and use of the Dixie Valley
Line. Finally, Terra-Gen proposes to modify or eliminate certain
schedules and attachments of the pro forma OATT, consistent with the
changes in the body of the Terra-Gen OATT.
II. Notice and Responsive Pleadings
8. Notice of Terra-Gen's OATT filing was published in the Federal
Register, 76 FR 16,621 (2011), with interventions and protests due on
or before April 6, 2011. On March 25, 2011, Green Borders filed a
motion for an extension of time to file comments. Subsequently, the
Commission issued a notice on March 30, 2011, extending the comment
date to April 11, 2011. On April 11, 2011, Green Borders filed a
protest requesting that the Commission reject Terra-Gen's OATT for
failure to comply with the directives of the January 14 Order or, in
the alternative, reject certain elements of the proposed OATT that are
outside the scope of the January 14 Order and set certain issues for
hearing.\8\ On April 26, 2011, Terra-Gen filed an answer to Green
Borders' protest.
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\8\ Green Borders April 11, 2011 Protest (Protest).
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III. Discussion
A. Procedural Matters
9. Rule 213(a)(2) of the Commission's Rules of Practice and
Procedure, 18 CFR 385.213(a)(2) (2010), prohibits an answer to a
protest unless otherwise ordered by the decisional authority.
Accordingly, we will reject Terra-Gen's answer.
B. Substantive Matters
1. Terra-Gen Rehearing
10. The Commission will grant in part and deny in part the Request
for Rehearing. As discussed in greater detail below, the Commission
clarifies that it is appropriate for Terra-Gen to utilize transmission
service outside the terms of the OATT for the 60 MW of pre-existing
service it has been providing for itself. Terra-Gen was utilizing the
capacity prior to Green Borders' May 8, 2007 request for transmission
service; that is, prior to the time when Terra-Gen was first required
to submit an OATT with the Commission. Therefore, the Commission will
grant Terra-Gen's Request for Rehearing with respect to the 60 MW of
existing transmission capacity.
11. The Commission will deny the Request for Rehearing with respect
to Terra-Gen's future use of the Dixie Valley Line. Contrary to the
situation presented by Terra-Gen's existing use of the Dixie Valley
Line, Terra-Gen is not currently providing any transmission service
beyond the existing 60 MW. Therefore, there is no ``existing use'' of
transmission capacity beyond the existing 60 MW of service that could
be considered for ``grandfathering'' outside of the OATT.
2. Terra-Gen OATT
12. In Order No. 890,\9\ the Commission allowed transmission
providers to propose non-rate terms and conditions that differ from
those in Order No. 890 if those provisions are consistent with or
superior to the pro forma OATT.\10\ To the extent deviations from the
pro forma OATT are necessary, we have found that applicant transmission
owners must explain and support the deviations sufficiently,\11\ and we
will evaluate proposed OATT deviations on a case-by-case basis.\12\ The
Commission will only find that deviations from the pro forma OATT are
just and reasonable if the filing party explains how the deviations in
the proposed OATT are consistent with or superior to the pro forma
OATT, or fully explains how the pro forma provisions are not applicable
given the filing party's business model.\13\ In this order, we
summarily affirm the waivers granted in the January 14 Order. In
addition, we will reject in part and accept in part Terra-Gen's OATT,
effective May 14, 2011, as requested, and require Terra-Gen to submit a
compliance filing. In the January 14 Order, we granted waiver of the
provisions to provide network transmission service under Terra-Gen's
OATT. Additionally, we found that Terra-Gen may remove references to
local furnishing bonds, redispatch, and stranded cost recovery, as
those provisions do not apply to service that Terra-Gen will provide on
the Dixie Valley Line.\14\ We find that Terra-Gen's deletion of the
provisions for network service is consistent with the January 14 Order
and will therefore grant waiver in the instant submittal. Similarly, we
find that removal of the provisions for local furnishing bonds,
redispatch, and stranded cost recovery is consistent with the January
14 Order.\15\ We note, however, that, while Terra-Gen has proposed to
remove the references to stranded cost recovery,\16\ Terra-Gen has
retained the stranded cost recovery provision in its proposed OATT.
Accordingly, Terra-Gen will be required to submit a compliance filing
that removes the stranded cost provisions from its OATT.\17\
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\9\ Preventing Undue Discrimination and Preference in
Transmission Service, Order No. 890, FERC Stats. & Regs. ] 31,241,
order on reh'g, Order No. 890-A, FERC Stats. & Regs. ] 31,261
(2007), order on reh'g, Order No. 890-B, 123 FERC ] 61,299 (2008),
order on reh'g, Order No. 890-C, 126 FERC ] 61,228 (2009).
\10\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 135.
\11\ Chinook Power Transmission, LLC, 126 FERC ] 61,134, at P 47
(2009).
\12\ Montana Alberta Tie Ltd., 116 FERC ] 61,071, at P 55-60
(2006) (MATL).
\13\ Id. at 60.
\14\ See January 14 Order, 134 FERC ] 61,027 at P 12.
\15\ Id.
\16\ See Appendix C to Terra-Gen March 16, 2011 Filing at 7.
\17\ See Section 26 of Terra-Gen OATT. We note that removal of
this provision is not imperative. To the extent that Terra-Gen seeks
recovery of stranded costs, it must submit a future section 205
filing with the Commission. 16 U.S.C. 824d (2006). Retaining this
provision does not obligate Terra-Gen to seek recovery of stranded
costs.
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13. In addition to granting waiver of the network transmission
service and related provisions, we also find that Terra-Gen's removal
of references to OASIS and Standards of Conduct is appropriate because
we have already granted waiver to Terra-Gen of these requirements.\18\
This waiver will remain in effect unless and until the Commission takes
action in response to a complaint to the Commission that an entity
evaluating its transmission needs could not get the information
necessary to complete its evaluation (for an OASIS waiver) or an entity
complains that the public utility has unfairly used its access to
information about transmission to benefit the utility or its affiliate
(for a Standards of Conduct waiver).\19\ If there is a material change
in facts that affects this waiver, Terra-Gen must notify the Commission
within 30 days of such change.\20\
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\18\ See September 16 Order, 132 FERC ] 61,215 at P 55; January
14 Order, 134 FERC ] 61,027 at P 109.
\19\ See Entergy Mississippi, Inc., 112 FERC ] 61,228, at P 23
(2005) (citing Central Minnesota Municipal Power Agency, 79 FERC ]
61,260, at 62,127 (1997) and Easton Utilities Commission, 83 FERC ]
61,334, at 62,343 (1998)). Therefore, because Terra-Gen has
demonstrated that it is a small public utility, the waiver we
granted in the September 16 Order will not be revoked when an
interconnection becomes operable.
\20\ See Material Changes in Facts Underlying Waiver of Order
No. 889 and Part 358 of the Commission's Regulations, 127 FERC ]
61,141, at P 5 (2009).
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14. In addition to the waivers granted above, Terra-Gen proposes
several additional deviations from the pro forma OATT. Many of these
proposed deviations are a direct result of the determinations in the
January 14 Order. Other proposed deviations are new
[[Page 28975]]
requests for waivers. We address these matters in the following
sections.
a. Clustering and Effective Date
i. Terra-Gen Tariff Provisions
15. Terra-Gen proposes provisions to address clustering of
transmission system impact studies, consistent with the guidance
provided in the January 14 Order.\21\ In its submittal, Terra-Gen
proposes to include a new section 19.10 that provides procedures on how
Terra-Gen may cluster studies.\22\ Terra-Gen's proposed clustering
provisions provide, among other things, that ``[T]he costs of the
Cluster Study will be shared pro rata among the Eligible Customers
whose request for service are included in the Cluster Study based on
the amount of MW of service that the Transmission Customer has
requested compared to the total MW of service required in the
cluster.''\23\
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\21\ Transmittal Letter at 11 (citing January 14 Order, 134 FERC
] 61,027 at P 17).
\22\ Id.
\23\ Terra-Gen OATT at Section 19.10.
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ii. Protest
16. Green Borders asserts that Terra-Gen has modified provisions of
the OATT that the Commission found to be consistent with Commission
precedent in the January 14 Order. Green Borders states that Terra-Gen
proposes to change the cost sharing for cluster studies from being
equal among all customers to a method whereby costs will be allocated
based on the amount of MW of service requested by a transmission
customer as compared to the total MW of transmission service requests
included in the cluster study.\24\ Green Borders argues that the change
was not directed by the Commission and therefore should be rejected.
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\24\ Protest at 30.
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17. Green Borders also argues that the effective date of Terra-
Gen's tariff, including the clustering provisions, should have been
made effective retroactive to 60 days after Green Borders' valid
transmission request made in May 2007.\25\ Green Borders, citing the
Commission's guidance that the Terra-Gen OATT will dictate how the
assignment of available transmission capacity will be initially
allocated, asserts that it is unfair and discriminatory to now allow
Terra-Gen to extend the ``window'' for initial capacity until Terra-
Gen's affiliated projects are completed, thereby allowing Terra-Gen to
``dump Green Borders' request from 2007 into the same lottery.'' \26\
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\25\ Id.
\26\ Id.
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iii. Commission Determination
18. We will accept Terra-Gen's proposed clustering provisions as
consistent with Commission precedent.\27\ Like the proposal accepted in
Midwest ISO, Terra-Gen's clustering proposal would allocate the cluster
study costs to customers participating in the cluster based on the MW
of capacity they are requesting. Furthermore, we find this pro rata
allocation of the cost of the cluster study among eligible customers is
consistent with cost causation principles as customer requests that
require more study expenditures should pay the commensurate costs
related to their request. Nothing in the January 14 Order precludes
Terra-Gen from proposing additional deviations from the pro forma
tariff, so long as these proposals are consistent with or superior to
the pro forma tariff, and we find the clustering provisions to be
consistent with or superior to the pro forma tariff.
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\27\ See, e.g., Midwest Independent Transmission System
Operator, Inc., 126 FERC ] 61,108, at P 23-25 (2009); accepting
compliance filing detailing that costs of cluster studies are shared
``pro rata among customers * * * based on MWs of service
requested.''
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19. We also find that Green Borders' argument regarding the
effective date of the OATT is an impermissible collateral attack on the
January 14 Order. In the January 14 Order, we denied Green Borders'
request for a priority position in the transmission service queue. In
addition, we directed that all transmission service requests made
within the first 60 days of the effective date of the Terra-Gen OATT be
treated as being submitted simultaneously and subject to a lottery
system, if necessary, for assigning available transfer capability
(ATC), consistent with section 2.1 of the pro forma tariff.\28\ Green
Borders now seeks to inject a request for an effective date back to
2007 on the presumption that it may obtain a more favorable position in
the transmission queue for service on the Dixie Valley Line. We find
this is a collateral attack on the January 14 Order and will therefore
reject it. No party has provided cause for the Commission to consider a
retroactive effective date for Terra-Gen's proposed OATT. As discussed
above, Terra-Gen's OATT shall become effective, as modified as
discussed in this order, on May 14, 2011.
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\28\ January 14 Order, 134 FERC ] 61,027 at P 17.
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b. Service Exempted From the OATT
i. Terra-Gen Tariff Provisions
20. Terra-Gen's proposed OATT modifies section 2.1 of the pro forma
OATT to grandfather Terra-Gen's existing use of 60 MW of capacity on
the Dixie Valley Line outside of the rates, terms, and conditions of
the OATT, based on the Commission's prior confirmation of priority. The
provisions in section 2.1 also propose that, if the Commission awards
any additional priority rights to Terra-Gen or its affiliates to the
planned expansion capacity on the Dixie Valley Line, such service would
also be taken outside of the rates, terms, and conditions of the OATT.
21. In support of its proposal, Terra-Gen argues that the
grandfathering provision mirrors what was previously approved by the
Commission in Sagebrush. Specifically, Terra-Gen points out that, in
Sagebrush, the Commission excluded from the OATT existing transmission
service as well as planned expansion for which the Sagebrush partners
had been granted priority in Aero Energy. \29\ Terra-Gen also argues
that all provisions proposing modifications to accommodate
grandfathered service\30\ are consistent with or superior to the pro
forma OATT because they implement the September 16 Order and preserve
Terra-Gen's expectations with respect to its historic use of the Dixie
Valley Line. Additionally, in order to comply with the January 14
Order, which found that Terra-Gen had failed to explain the rules or
agreements it would use to implement the proposed grandfathered
service, Terra-Gen asserts that the proposed grandfathering provision
includes language that Terra-Gen and any affiliates' use of the Dixie
Valley Line capacity shall be subject to a future assignment, co-
tenancy, and shared facilities agreement governing their rights with
respect to each other. Finally, Terra-Gen explains that the proposed
provisions provide that any future requests for additional firm
transmission capacity, whether made by Terra-Gen, a Terra-Gen
affiliate, or an unaffiliated third party, will be governed by the
terms of the OATT.
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\29\ See Terra-Gen March 15 Filing at 10 (citing Sagebrush, 130
FERC ] 61,093 at P 27).
\30\ In addition to the proposed section 2.1a, Terra-Gen
indicates that it made additional modifications to the proposed OATT
to reflect that it does not apply to service grandfathered by the
Commission.
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ii. Protest
22. Green Borders asserts that, in contrast to the circumstances
present in Sagebrush, where the Commission had the opportunity to
review agreements related to prioritized service for an affiliate and
did so prior to the triggering of the OATT filing obligation in that
proceeding, Terra-Gen has failed
[[Page 28976]]
to provide any such agreements despite a Commission directive to do so.
Green Borders also argues that Terra-Gen has failed to comply with the
requirement in Order No. 888, which requires that public utilities must
take service under the same tariff used by others or demonstrate why
they should be allowed to do otherwise. Accordingly, Green Borders
urges the Commission to reject Terra-Gen's proposed grandfathering
provision (Section 2.1a).
iii. Commission Determination
23. We will allow Terra-Gen to utilize transmission service outside
of the OATT for the 60 MW of existing service. However, the Commission
will require that all other service must be taken under the rates,
terms, and conditions of the OATT. In Order No. 888,\31\ the Commission
determined that functional unbundling of wholesale services is
necessary to implement non-discriminatory open access transmission
service. As a result, the Commission required that a public utility
take transmission services (including ancillary services) for all of
its new wholesale sales and purchases of energy, with the exception of
transmission service used by native load, under the same tariff of
general applicability as do others, and a public utility must state
separate rates for wholesale generation, transmission, and ancillary
services.\32\ The principles underlying that policy also require a
transmission provider such as Terra-Gen to provide all new service
pursuant to the provisions of an OATT, while existing service may
continue under prior arrangements.
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\31\ See Promoting Wholesale Competition Through Open Access
Non-discriminatory Transmission Services by Public Utilities and
Recovery of Stranded Costs by Public Utilities and Transmitting
Utilities, Order No. 888, 61 FR 21,540 (May 10, 1996), FERC Stats. &
Regs. ] 31,036, at 31,654 (1996).
\32\ Id. The Commission has consistently indicated that native
(retail) load customers of the transmission provider do not take
transmission service under the OATT, but are required to designate
network load and network resources in a manner consistent with the
OATT. In this instance, the only service under the Terra-Gen OATT is
point-to-point transmission service, and Terra-Gen does not have any
retail load, as it has proposed to remove network service and native
load service requirement from the proposed OATT.
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24. Contrary to Terra-Gen's assertions, its OATT proposal with
respect to priority and grandfathering of future planned service is
inconsistent with Commission policy, as well as Order No. 888, which
requires that all new transmission be provided pursuant to an OATT.\33\
Terra-Gen is correct that, in Sagebrush, we excluded from the OATT
planned expansion for which the Sagebrush partners had previously been
granted priority.\34\ However, our determination in Sagebrush to exempt
the 33 MW which had been granted priority was made almost three years
after priority had been granted in Aero Energy, LLC,\35\ and the
parties had expected, during that intervening time, that the 33 MW
would be exempt from the OATT, as we did not impose an obligation to
file an OATT. In contrast, here, the obligation to file an OATT was
triggered by Green Border's valid transmission service request made on
May 8, 2007, prior to Terra-Gen's attempt to establish priority for
future service let alone a Commission order granting such priority. In
addition, here there was never any question that there would be an
obligation to file an OATT, as was the case in Aero Energy; there was
thus no assumption that service could be taken pursuant to an existing
agreement as in Sagebrush. Thus, in considering any future use of the
Dixie Valley Line, whether it be priority service to Terra-Gen itself,
or to a third-party such as Green Borders, the Commission will apply
its usual open access principals, which require that future service be
taken subject to the OATT.
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\33\ Id. at 31,654.
\34\ Sagebrush, 130 FERC ] 61,093 at P 27 & n.49.
\35\ 118 FERC ] 61,204, at P 19 (2007) (Aero Energy).
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25. In the instant case, Terra-Gen proposes tariff language that
would allow Terra-Gen to continue its existing service and initiate new
transmission service to itself, for any Commission approved priority
rights associated with its generation, outside of the rates, terms, and
conditions of the OATT. Such a provision is not consistent with or
superior to the pro forma OATT. Accordingly, Terra-Gen must revise its
proposed grandfathering provision (Section 2.1a) in order to reflect
that all future users of planned transmission capacity, for which
priority may be granted, must take service subject to the terms of the
OATT.
c. Ancillary Services
i. Terra-Gen Tariff Provisions
26. Terra-Gen requests waiver of the requirement to provide any
ancillary services to customers of the Dixie Valley Line. Terra-Gen
states that it does not operate a balancing area or have the generation
resources necessary to provide ancillary services to third-parties
seeking to take transmission service on the Dixie Valley Line. Terra-
Gen notes that in the January 14 Order, the Commission granted waiver
to Terra-Gen for the requirement to provide the ancillary services
stated in Schedules 3 through 6 and Schedule 9 of the pro forma
OATT.\36\ In addition to the waivers granted in the January 14 Order,
Terra-Gen now also requests waiver of the requirement to provide
Scheduling, System Control and Load Dispatch Services (Service Schedule
1) and Reactive Power and Voltage Support Service (Service Schedule
2).\37\ Finally, Terra-Gen seeks waiver of the requirement to act as an
agent to assist third parties in obtaining ancillary services.
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\36\ Transmittal Letter at 6, citing January 14 Order, 134 FERC
] 61,027 at P 48. These schedules are Regulation and Frequency
Response (Schedule 3), Energy Imbalance Service (Schedule 4),
Operating Reserve-Spinning Reserve Service (Schedule 5), Operating
Reserve-Supplemental Reserve Service (Schedule 6), and Generator
Imbalance Service (Schedule 9), and Section 1.2 and Section 3 of the
pro forma OATT.
\37\ Id. at 7.
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27. Terra-Gen explains that that scheduling of transmission service
on the Dixie Valley Line is dependent of the ability to schedule on the
SoCal Edison downstream transmission system. It continues that SoCal
Edison currently provides the scheduling service for Terra-Gen's
existing service and that any transmission customer may make similar
arrangements with SoCal Edison. Terra-Gen also states that transmission
customers may alternatively contract with a scheduling coordinator
operating in the California Independent System Operator Corporation
(CAISO) market in order to obtain all necessary ancillary services,
including Scheduling and Reactive Power services.
28. As a result of its request for waiver, Terra-Gen proposes to
include a new Schedule 12 provision stating that Terra-Gen will not
provide ancillary services or contract to supply ancillary services and
thus requires that transmission customers either self-supply ancillary
services or contract with a CAISO certified Scheduling Coordinator in
order to obtain any necessary ancillary services, including scheduling
service and reactive power. Terra-Gen also proposes to modify section
13.8 (Scheduling of Firm Point-To-Point Transmission Service) and
section 14.6 (Scheduling of Non-Firm Point-to-Point Transmission
Service) \38\ of its proposed tariff in order to state that
transmission service must be scheduled by a CAISO certified Scheduling
Coordinator.\39\
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\38\ Transmittal Letter at 13-14. Terra-Gen's transmittal stated
that sections 13.6 and 14.8 were modified, but apparently this is a
typographical error as sections 13.8 and 14.6 are instead modified
in the clean tariff included in the submittal.
\39\ Terra-Gen has included as section 1.42a, a new definition
to the pro forma OATT denoting that Scheduling Coordinator means
``an entity that the California Independent System Operator has
certified as a Scheduling Coordinator.''
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[[Page 28977]]
ii. Protest
29. Green Borders asserts that Terra-Gen's request for waiver of
all ancillary service obligations does not meet the Commission's
``consistent with or superior to'' test.\40\ Green Borders argues that
Terra-Gen has not provided sufficient information to justify a
deviation from the pro forma OATT. Green Borders, citing the January 14
Order, asserts that Terra-Gen was required to explain how scheduling
and reactive services may be obtained and who the balancing area
authority is for the Dixie Valley Line, which are required for the
Commission to evaluate Terra-Gen's requested waiver. Green Borders also
argues that Terra-Gen's reliance on Sagebrush is misplaced.\41\ Green
Borders states that, unlike the situation presented in Sagebrush,
Terra-Gen demonstrates in its OATT that it will make no effort to
either provide the services or to act as an agent to procure the
services.
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\40\ Protest at 16.
\41\ Id.
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30. Green Borders argues that Terra-Gen has failed to comply with
the January 14 Order by failing to fully explain how scheduling
services are to be provided. Green Borders asserts that the Commission
should reject the proposed scheduling provisions provided in sections
13.8 and 14.6, as these provisions provide no specificity regarding the
scheduling requirements that will be imposed by the Scheduling
Coordinator. Green Borders states, for example, that the proposed
revisions do not provide any indication of what time of day schedules
will be required for service over the Dixie Valley Line, how many times
a day scheduling changes will be permitted, and under what
circumstances or what the charge for such service will be, if any.
iii. Commission Determination
31. In the January 14 Order, the Commission found that Terra-Gen
had demonstrated that a deletion of the provisions for ancillary
services may be justified.\42\ The Commission stated that waiver of
these services was appropriate because transmission customers may
either obtain these ancillary services from a third-party participating
in the CAISO market or enter into appropriate agreements for similar
service, as Terra-Gen currently does.\43\ We continue to find that
waiver of ancillary service schedules 3 through 6 and 9 is justified
based on the fact that the Dixie Valley Line is a limited and discrete
transmission line. Therefore, consistent with the January 14 Order, we
will grant waiver of these provisions.\44\
---------------------------------------------------------------------------
\42\ January 14 Order, 134 FERC ] 61,027 at P 48.
\43\ Id.
\44\ Id. See also Sagebrush, 130 FERC ] 61,093 at P 29; MATL,
116 FERC ] 61,071 at P 58.
---------------------------------------------------------------------------
32. We also will grant Terra-Gen's request for waiver of the
obligation to provide scheduling services. Terra-Gen currently does not
provide scheduling for its own use. Terra-Gen's line interconnects only
to the CAISO controlled grid, and the CAISO is the balancing area
authority in which the Dixie Valley Line is located.\45\ Because any
output from a third-party generator using the Terra-Gen facilities will
sink to the CAISO controlled grid, we agree that scheduling service may
be obtained from any scheduling coordinator operating in the CAISO
market. Alternatively, any transmission customer can seek certification
as a scheduling coordinator and schedule for itself. Terra-Gen does not
need to supply scheduling service since certified scheduling
coordinators will provide the necessary schedules for users of the
Dixie Valley Line to the CAISO to perform scheduling and dispatch
functions.
---------------------------------------------------------------------------
\45\ Pursuant to the North American Electric Reliability
Corporation (NERC) Registry, Terra-Gen Dixie Valley is listed as
only a Generator Owner and Generator Operator. Because the Dixie
Valley Line is only connected to SoCal Edison, the CAISO must be the
Balancing Area Authority.
---------------------------------------------------------------------------
33. Consistent with Commission precedent, the Commission also will
grant Terra-Gen's request for waiver of the obligation to provide
reactive service.\46\ The Dixie Valley Line is not a network grid
supported by multiple resources from which ancillary services can be
provided. We also agree with Terra-Gen that requiring it to provide
reactive services from its existing Dixie Valley plant would impair a
pre-existing contractual obligation that it has with SoCal Edison.
Furthermore, reactive services are generally necessary as close to the
load as practicable. There is no load served on the Dixie Valley Line;
rather, all energy transmitted will sink to the CAISO system, thereby
allowing reactive services to be obtained from the CAISO-controlled
grid through the CAISO market. Accordingly, based on the design of the
facilities, Terra-Gen need not be the provider of reactive services.
---------------------------------------------------------------------------
\46\ Sagebrush, 130 FERC ] 61,093 at P 29 and n.52.
---------------------------------------------------------------------------
34. Finally, we will grant Terra-Gen's request for waiver of the
obligation to act as agent to assist third-parties in obtaining any
ancillary services, including scheduling and reactive power services.
In this instance, because the Dixie Valley Line interconnects only to
the CAISO market, third-party users may freely obtain the requisite
services by entering into bilateral agreements or otherwise obtaining
them from the competitive market. Based upon the current design and use
of the Dixie Valley Line, for example only delivering energy to a
Commission-approved organized market, with no load being served off of
the line prior to delivery to the CAISO-controlled system, we find that
the agent provisions are not necessary at this time. Accordingly, we
find that the revised sections 13.8 and 14.6 are just and reasonable.
d. Transmission Losses
i. Terra-Gen Tariff Provisions
35. In response to concerns raised by the Commission in the January
14 Order,\47\ Terra-Gen proposes a formula in Schedule 10 of its
proposed OATT to address the allocation of line losses to transmission
customers on the Dixie Valley Line. Specifically, Terra-Gen proposes a
formula to calculate the incremental line losses that are directly
attributable to a specific customer at the time the customer
interconnects with the Dixie Valley Line. According to Terra-Gen, the
proposed formula makes the determination of the line losses associated
with each new customer transparent and ensures that line losses are
being determined in a uniform and fair manner.\48\ Terra-Gen states
that application of the proposed formula will guarantee that each
transmission customer is responsible for the line losses attributable
to the customer's specific transmission request.\49\ Terra-Gen further
states that the proposed OATT provision is consistent with Commission
policy that customers should bear the costs they cause.\50\
---------------------------------------------------------------------------
\47\ See January 14 Order, 134 FERC ] 61,027 at P 49.
\48\ Transmittal Letter at 8.
\49\ Id.
\50\ Id. (citing Quachita Power, LLC v. Entergy La., Inc., 120
FERC ] 61,059, at P 10 (2007); Commonwealth Edison & Commonwealth
Edison of Ind., Inc., 123 FERC ] 61,122, at P 22 (2008)).
---------------------------------------------------------------------------
ii. Protest
36. Green Borders opposes Terra-Gen's proposed assignment of line
losses. First, Green Borders argues that Terra-Gen's shift from average
line losses in the November 15 OATT filing to incremental line losses
in the March 15 compliance filing goes beyond what the Commission
directed Terra-Gen to do in the compliance filing.\51\ Second, Green
Borders states that Terra-Gen has failed to provide support for the
[[Page 28978]]
proposed treatment of losses.\52\ Third, Green Borders argues that
Terra-Gen's proposed treatment of line losses is contrary to Commission
precedent. Specifically, Green Borders argues that Terra-Gen's proposal
is inconsistent with the policy that a transmission provider cannot use
incremental losses while charging average rates.\53\
---------------------------------------------------------------------------
\51\ Protest at 27.
\52\ Id. at 27-28.
\53\ Id. at 28-29 (citing Mw. Indep. Transmission Sys. Operator,
Inc., 129 FERC ] 61,172, at P 22 (2009)).
---------------------------------------------------------------------------
iii. Commission Determination
37. We find that Terra-Gen's proposed treatment of line losses is
not consistent with Commission policy.\54\ Specifically, under current
Commission policy, it is unreasonable for Terra-Gen to assign
incremental line losses while charging an average embedded cost rate
for existing transmission service on the Dixie Valley Line.\55\ We note
that the two cases cited by Terra-Gen in support of the proposed
assignment of line losses are not on point. Specifically, Quachita
Power, LLC v. Entergy La., Inc.,\56\ addresses the treatment of
transmission credits resulting from a customer-financed system upgrade,
and Commonwealth Edison & Commonwealth Edison of Ind., Inc., \57\
addresses the treatment of losses associated with service over non-
jurisdictional distribution facilities. The facts at issue in both
cases cited by Terra-Gen are not analogous to the situation here, where
the Commission's policy clearly requires like treatment for both the
development of transmission rates and the assignment of line
losses.\58\ To the extent that Terra-Gen charges an average embedded
cost rate to existing transmission service customers, it must assign
losses on an average basis. Should Terra-Gen prefer to assign losses on
an incremental basis, it is free to propose a rate methodology that is
consistent with Commission policy. Accordingly, we do not find Terra-
Gen's incremental loss proposal just and reasonable and we will require
a further compliance filing proposing a loss compensation methodology
that is consistent with Commission policy and precedent.
---------------------------------------------------------------------------
\54\ See Sithe/Independence Power Partners LP v. FERC, 165 F.3d
944, 334 U.S. App. DC 157 (DC Cir. 1999); Northern States Power Co.,
59 FERC ] 61,100, at 61,369, reh'g denied, 60 FERC ] 61,076, at
61,252-53 & n.25 (1992), clarification denied, 64 FERC ] 61,111, at
61,920 (1993), aff'd sub nom. Northern States Power Co. v. FERC, 30
F.3d 177, 308 U.S. App. DC 115 (DC Cir. 1994).
\55\ We note that Terra-Gen's proposed form of service agreement
notes that it may seek to charge a new transmission customer either
the average embedded cost rate stated in the OATT, or propose an
incremental transmission charge based on the cost of expansion of
the Dixie Valley Line caused by the transmission request.
\56\ 120 FERC ] 61,059 (2007).
\57\ 123 FERC ]61,122 (2008).
\58\ See Midwest ISO, Inc., 129 FERC ] 61,172, at P 34 (2009);
Sithe/Independence Power Partners LP v. FERC, 165 F.3d 944, 334 U.S.
App. DC 157 (DC Cir. 1999); Northern States Power Co., 59 FERC ]
61,100, at 61,369, reh'g denied, 60 FERC ] 61,076, at 61,252-53 &
n.25 (1992), clarification denied, 64 FERC ] 61,111, at 61,920
(1993), aff'd sub nom. Northern States Power Co. v. FERC, 30 F.3d
177, 308 U.S. App. DC 115 (DC Cir. 1994).
---------------------------------------------------------------------------
e. Creditworthiness
i. Terra-Gen Tariff Provisions
38. Terra-Gen proposes to modify the pro forma creditworthiness
procedures in Attachment L. Specifically, Terra-Gen proposes several
alternatives for transmission customers to demonstrate
creditworthiness. First, Terra-Gen would allow a customer to establish
creditworthiness by demonstrating that it has a credit rating of BBB+/
Baa1 or better, and posting a letter of credit equal to three months of
its reservation charges at the time it executes its service
agreement.\59\ Alternatively, if a customer does not have a credit
rating of BBB+/Baa1, a transmission customer must post a letter of
credit equivalent to twelve months of reservation charges.\60\ For
customers seeking transmission service for less than one year, the
customer must be investment grade or provide a letter of credit equal
to two times the estimated monthly charges for service. Terra-Gen's
Attachment L also provides that the transmission customer and Terra-Gen
may agree on an alternative credit support arrangement.
---------------------------------------------------------------------------
\59\ Terra-Gen OATT at Attachment L, Section 1.2(i).
\60\ Both the three months of reservations or twelve months of
reservations apply to customers seeking long-term point-to-point
transmission service.
---------------------------------------------------------------------------
ii. Protest
39. Green Borders argues that Terra-Gen's proposed creditworthiness
procedures are not reasonable and are inconsistent with industry
commercial practices. Green Borders states that, while the proposed
creditworthiness provisions are a step forward from those the
Commission rejected in the January 14 Order, the provisions raise
questions about discrimination against unaffiliated generators.\61\
Green Borders argues that the precedent to which Terra-Gen refers in
support of it rating level to determine creditworthy parties is
inconsistent with other parties in the market and is not commercially
reasonable.\62\
---------------------------------------------------------------------------
\61\ Green Borders Protest at 21.
\62\ Id.
---------------------------------------------------------------------------
iii. Commission Determination
40. In Order No. 890, the Commission explained that an Attachment L
filing must specify both the qualitative and quantitative criteria that
the transmission provider will use to determine the level of secured
and unsecured credit required of customers. In addition, the Commission
required transmission providers to address six specific elements
regarding the transmission provider's credit requirements.\63\ We find
that Terra-Gen's proposed Attachment L provisions include both
quantitative and qualitative creditworthiness criteria, consistent with
Commission policy.\64\ We agree with Terra-Gen that the nature of its
business as only a generator developer and operator that is not a
publicly held entity from which it can obtain additional financial
resources, supports higher creditworthiness standards in order to
ensure that it is not financially harmed.
---------------------------------------------------------------------------
\63\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 1656-61.
See also NorthWestern Corp., 128 FERC ] 61,202, at P 8-9 (2009).
\64\ Id. See also Policy on Electric Creditworthiness, 109 FERC
] 61,186 (2004).
---------------------------------------------------------------------------
41. We also find that the provisions for non-creditworthy parties,
whereby those customers must provide a letter of credit of up to twelve
months of reservation charges, to be just and reasonable. Terra-Gen is
not a transmission owner and operator in the traditional sense. For
example, it does not plan for native load growth and other uses for
which transmission expansion is required. Accordingly, there are
limitations on its ability to expand the Dixie Valley Line without
these additional credit supports.
42. Additionally, we find acceptable the proposed credit
requirements of a letter of credit equal to two times the expected
monthly charge for service requests of less than one year. We disagree
with Green Borders at this time that the threshold credit rating of
BBB+/Baa1 is unreasonable. We also note that section 1.9 of Attachment
L provides that other forms of security may be agreed to between Terra-
Gen and its customers. In that regard, we remind Terra-Gen that any
additional creditworthiness provision that is agreed to that deviates
from the terms and conditions of Attachment L must be filed with the
Commission.
43. However, we still have some concerns regarding the proposal.
Terra-Gen has not explained why it is necessary to require a letter of
credit, or to otherwise require a cash deposit, for creditworthy
parties. Consistent with the provisions of section 17.2 of the OATT,
among other things, customers must submit a deposit when requesting
[[Page 28979]]
transmission service.\65\ If these parties are creditworthy, we agree
with Green Borders that the additional deposit requirements proposed by
Terra-Gen might be unnecessary. Accordingly, Terra-Gen is required to
explain why additional deposits for creditworthy customers are
necessary, or delete the letter of credit provision for creditworthy
parties.
---------------------------------------------------------------------------
\65\ Deposits for system impact studies and interconnection
studies and the requirement to fund system expansions required by
the transmission service request are required elsewhere in the OATT.
---------------------------------------------------------------------------
44. While we accept the creditworthiness provisions, subject to
further explanation or revision from Terra-Gen, to the extent a
transmission customer believes that the transmission provider has
discriminated in the application of its creditworthiness standards,
that customer may contact the Commission's enforcement hotline or file
a complaint pursuant to section 206 of the Federal Power Act (FPA).\66\
---------------------------------------------------------------------------
\66\ 16 U.S.C. 824e (2006).
---------------------------------------------------------------------------
f. Attachment C--Methodology for Calculating ATC
i. Terra-Gen Tariff Provisions
45. Terra-Gen requests waivers of certain Attachment C (calculation
of available transfer capability) requirements, to the extent necessary
to accept its proposed Attachment C provisions. Terra-Gen asserts that
its Attachment C methodology is consistent with or superior to the pro
forma OATT because it provides necessary information for assessing the
transfer capability of the Dixie Valley Line while avoiding the
imposition of unnecessary costs, such as those associated with various
modeling requirements. In addition, Terra-Gen commits to reassess its
proposed Available Transfer Capability (ATC) methodology in the event
there is a modification to or addition of a transmission component on
the Dixie Valley Line. Finally, until such time as Terra-Gen has an
available Web site, Terra-Gen requests a limited waiver from the
requirement to include a link to its ATC methodology.\67\
---------------------------------------------------------------------------
\67\ Terra-Gen suggests that it anticipates having an
operational Web site within ninety days from the date upon which its
filing was made and commits to amending its ATC provision to include
a link to its ATC methodology once the Web site becomes available.
---------------------------------------------------------------------------
46. Pursuant to the Commission's January 14 Order, Terra-Gen
identifies the Rated System Path Methodology, described in North
American Electric Reliability Corporation (NERC) Reliability Standard
MOD-29-1a, as the methodology it employs to calculate ATC. Terra-Gen
further states that it has included a process flow diagram illustrating
the steps taken in calculating ATC, as well as definitions of the ATC
components. Terra-Gen also includes an algorithm that it states would
apply to its scheduling, operating and planning horizons, but suggests
that ATC calculations for SoCal Edison would provide more useful
information because application of Terra-Gen's methodology results in
an ATC of zero.
47. In support of its ATC calculation, Terra-Gen states that
service on the Dixie Valley Line is contingent on the line being in
service and on SoCal Edison having sufficient ATC to schedule
deliveries from the line onto its system. Terra-Gen asserts that the
methodologies approved by NERC for the calculation of ATC demonstrate
that ATC is meaningless when applied to a single radial transmission
line with one point of interconnection. Specifically, Terra-Gen asserts
that Total Transfer Capability (TTC) is zero because a single radial
transmission line with one point of interconnection cannot sustain an
N-1 contingency and, thus, ATC is also zero.
ii. Protest
48. Green Borders states that Terra-Gen's calculations of TTC and
ATC as zero are in error, and that these calculations are an attempt to
reserve capacity on the Dixie Valley Line for Terra-Gen's affiliates
while denying service to others.\68\ Green Borders argues that Terra-
Gen has incorrectly applied NERC standards to arrive at a value of zero
for TTC. Green Borders asserts that the NERC Reliability Standard MOD-
29-1a is intended to ensure that contingencies will not result in
reliability problems elsewhere on the system when the contingency
occurs.\69\
---------------------------------------------------------------------------
\68\ Protest at 25.
\69\ Protest, Exhibit GBG-4; Testimony of David Becher at 5:8-
11.
---------------------------------------------------------------------------
49. Green Borders argues that if TTC and ATC are always zero for a
radial line, then there is no need for an OATT because no capacity
would ever be available until a second circuit is built.\70\ Green
Borders states that Terra-Gen is inconsistent in arguing that TTC is
zero and also arguing that existing users should have priority service
on the line, as a TTC value of zero should preclude any transfers on
the line.\71\ Finally, Green Borders argues Terra-Gen is wrong that ETC
(capacity held by existing users) reduces both TTC and ATC, as the
equations proposed by Terra-Gen show that ETC reduces only ATC.\72\
---------------------------------------------------------------------------
\70\ Testimony of David Becher at 5:15-16.
\71\ Protest at 24, Testimony of David Becher at 6:16-17.
\72\ Testimony of David Becher at 7:4-13.
---------------------------------------------------------------------------
iii. Commission Determination
50. In the January 14 Order, we directed Terra-Gen to address
certain deficiencies with its proposed Attachment C. Specifically, we
directed Terra-Gen to include certain algorithms for calculating ATC
for the scheduling, operating, and planning horizons, explain the
application of all algorithms it includes, provide an ATC process flow
diagram and an Internet link to its ATC data and algorithms, and revise
its proposed definitions of ATC components to comply with the
requirements of Order No. 890.\73\
---------------------------------------------------------------------------
\73\ January 14 Order, 134 FERC ] 61,027 at P 58.
---------------------------------------------------------------------------
51. With respect to the aforementioned directives, we find that
Terra-Gen has substantially complied inasmuch as it has attempted to
provide the Commission with the missing information that was identified
in the January 14 Order. However, we find that Terra-Gen's treatment of
ATC in Attachment C is contradictory, when considering a TTC value of
zero, and we will therefore reject Terra-Gen's proposed Attachment C.
Moreover, it is illogical for Terra-Gen to state that TTC on the Dixie
Valley Line is zero, while simultaneously arguing that there is
capacity available to accommodate any grandfathered service but not
service for other potential users. Insofar as Terra-Gen's Attachment C
will always yield a TTC value of zero regardless of the line's actual
capacity, we find that such methodology is not consistent with or
superior to the pro forma tariff, and is thus not just and reasonable.
52. In prior orders, we have found that different transmission
provider business models and unique layouts and the resulting different
services offered may justify differences in the OATT applicable to such
facilities as compared to an OATT governing more traditional integrated
network transmission facilities.\74\ For example, as discussed
previously in this order, we will not require Terra-Gen to provide
network service on the Dixie Valley Line as it makes little sense to
provide such service.\75\ Similarly, we find here that Terra-Gen's
assertion that application of the N-1 analysis in computing transfer
capability makes little sense because the Dixie Valley Line is a radial
tie line, and do not find it to be reasonable. This standard, as
applied to the Dixie Valley Line, will always result in zero for ATC
[[Page 28980]]
and TTC, regardless of whether there may actually be capacity
available. Accordingly, we will direct Terra-Gen to re-file Attachment
C establishing the TTC value for the line based on the most limiting
component of the line, electrical characteristics, or other factors
(such as ground clearance) that impact reliable operation, and which is
consistent with the fact that that an allocation of capacity to
existing users implies that TTC on the Dixie Valley Line must exceed
zero.\76\
---------------------------------------------------------------------------
\74\ See, e.g., MATL, 116 FERC ] 61,071, at P 57-58.
\75\ Id. See also Sagebrush, 130 FERC ] 61,093 at P 29.
\76\ While we recognize that the downstream ATC at the SoCal
Edison system interface may limit the realizable ATC on the Dixie
Valley Line, service from the point where Terra-Gen's line
interconnect with SoCal Edison's line is a separate matter not
covered under Terra-Gen's OATT and, as such, is beyond the scope of
this proceeding. Additionally, because we reject the proposed
Attachment C, we find it unnecessary to address the limited request
for waiver of the requirement to provide an Internet link to the ATC
calculation data and methodology.
---------------------------------------------------------------------------
g. Transmission Planning Process--Attachment K
i. Terra-Gen Tariff Provisions
53. In the January 14 Order, the Commission addressed Terra-Gen's
proposed planning process. The Commission found that Terra-Gen's
planning process satisfied the coordination, transparency, and regional
participation principles. The Commission also found that Terra-Gen's
proposed planning process satisfactorily addressed how it would recover
the cost of planning activities. However, the Commission found that
Terra-Gen partially complied with the openness, information exchange,
comparability, and dispute resolution principles. In addition, the
Commission found that Terra-Gen did not satisfy the economic planning
or cost allocation principles.
54. As a result of the January 14 Order, Terra-Gen proposes an
Attachment K that is directed at addressing the guidance provided in
the January 14 Order. Specifically, Terra-Gen addresses further the
openness, information exchange, comparability, dispute resolution,
economic planning, and cost allocation principles.
ii. Protest
55. Green Borders comments that, while Terra-Gen's proposed
planning process addresses the guidance in the January 14 Order, the
Commission should require Terra-Gen to make further revisions to the
comparability, economic planning, and cost allocation principles.
56. With regard to comparability, Green Borders points out that
Terra-Gen's proposal provides Terra-Gen with sole discretion for
selecting which projects to undertake, based on factors over which
Terra-Gen has sole discretion to consider. Green Borders asserts that,
under such a process, stakeholders would not be able to ensure that
Terra-Gen is not discriminating against unaffiliated generators and
using the transmission planning process to allocate the cost of self-
serving projects to multiple parties.\77\
---------------------------------------------------------------------------
\77\ Protest at 18.
---------------------------------------------------------------------------
57. Green Borders also asserts that Terra-Gen's economic planning
proposal could lead to discriminatory planning and ignores the
interests of stakeholders in the planning process.\78\ For example,
Green Borders points out that, while a transmission customer must
assist in gathering the information for conducting the economic study,
the provisions do not provide an opportunity for the requesting
customer to participate in, oversee, or observe the study.
Additionally, Green Borders asserts that Terra-Gen's proposal to
reserve sole discretion of which economic studies are highest priority
is unreasonable.
---------------------------------------------------------------------------
\78\ Id.
---------------------------------------------------------------------------
58. Finally, Green Borders asserts that Terra-Gen's cost allocation
proposal doesn't satisfy the guidance provided in the January 14 Order.
Green Borders states that, while the Commission required that Terra-Gen
include a method by which Terra-Gen would allocate the costs of new
transmission facilities that do not fit under existing rate structures,
Terra-Gen's OATT only provides that the cost allocation of facilities
will be pursuant to the tariff.\79\ Green Borders asks that the
Commission require Terra-Gen to provide greater specificity regarding
the allocation of costs that are not already contemplated by the
existing rate schedules.\80\
---------------------------------------------------------------------------
\79\ Id. at 19.
\80\ Id.
---------------------------------------------------------------------------
iii. Commission Determination
59. Consistent with our findings in the January 14 Order, we
continue to find that Terra-Gen complies with the coordination,
transparency, and regional participation principles.\81\ For the same
reasons, Terra-Gen also satisfactorily addresses the recovery of
planning costs.\82\ In addition, Terra-Gen has addressed the openness,
information exchange, and dispute resolution principles, based upon the
guidance in the January 14 Order. For example, Terra-Gen has addressed
the openness principle by modifying its provisions to allow any
stakeholder to participate in the planning process. Terra-Gen also
addressed the information exchange by explaining how interested parties
may submit data to the planning process and provided the milestones and
timeframes for data submission and stakeholder review of the plan.
Terra-Gen has also specified the process by which disputes arising
during the planning process will be handled. Accordingly, in addition
to meeting the coordination principle, transparency principle, regional
participation principle, and the recovery of planning costs, we find
that Terra-Gen satisfactorily complies with the openness, information
exchange and dispute resolution principles.
---------------------------------------------------------------------------
\81\ See January 14 Order, 134 FERC ] 61,027 at P 68, P 76, and
P 89, respectively.
\82\ Id. P 98.
---------------------------------------------------------------------------
60. While we find that Terra-Gen complies with the principles
addressed above, we address below the comparability, economic planning,
and cost allocation principles, as addressed by Terra-Gen in the
instant filing.
Comparability
61. In the January 14 Order, the Commission found that Terra-Gen's
Attachment K partially complied with the comparability principle.
However, the Commission noted that Terra-Gen had not addressed how its
proposed planning provisions comply with Order No. 890-A.\83\
---------------------------------------------------------------------------
\83\ January 14 Order, 134 FERC ] 61,027 at P 83.
---------------------------------------------------------------------------
62. Terra-Gen addresses the requirement of the January 14 Order by
modifying its Attachment K to clarify that all interested stakeholders
in the transmission planning process may participate in the Planning
Advisory Group, including providers of transmission and non-
transmission alternatives. Additionally, Terra-Gen has clarified how
and when stakeholders in the transmission planning process may provide
data to the plan and offer alternatives to the transmission plan.
63. Based upon our preliminary review of Terra-Gen's transmission
planning process, we agree with Green Borders that Terra-Gen's proposal
to retain sole discretion to select projects based on ``cost, economic
impact, reliability and other considerations'' does not satisfactorily
explain how Terra-Gen will select projects for inclusion in the
transmission plan.\84\ To select one of the bases for evaluation ``at
its sole discretion'' without input from stakeholders fails to provide
transparency in the selection process. Accordingly, we will require
Terra-Gen to submit a further compliance filing that addresses the
basis on which competing projects will be selected.
---------------------------------------------------------------------------
\84\ See Terra-Gen OATT, Attachment K at Section 1.4.
---------------------------------------------------------------------------
[[Page 28981]]
Economic Planning
64. In the January 14 Order, the Commission found that Terra-Gen
did not satisfy the economic planning requirement.\85\ Specifically,
the Commission noted that Terra-Gen's proposed Attachment K did not
include any provisions for the study of economic considerations in the
transmission planning process.\86\
---------------------------------------------------------------------------
\85\ January 14 Order, 134 FERC ] 61,027 at P 93.
\86\ Id.
---------------------------------------------------------------------------
65. Terra-Gen has now included provisions that establish procedures
for conducting economic studies as part of the overall planning cycle.
Terra-Gen proposes a new section 4.6 to its Attachment K that provides
that, during its five year planning cycle, it will take into account
economic and reliability considerations proposed by interested
stakeholders. Terra-Gen's proposed provisions detail the time frames in
which interested stakeholders may submit information for conducting
economic studies and the obligations of a stakeholder to participate in
the economic study process. Terra-Gen proposes that it will conduct up
to two high-priority economic planning studies during each planning
cycle.
66. We find that Terra-Gen's Attachment K satisfies the economic
planning requirement. Terra-Gen has adequately described when and how
interested parties may request economic studies, and how Terra-Gen will
address which high priority economic study request will be undertaken
within the planning period. Additionally, we disagree with Green
Borders that the economic planning process is not transparent and open.
Terra-Gen explains that economic planning studies will be submitted to
the Planning Advisory Group as part of the planning process and will
consider the input of interested stakeholders.
Cost Allocation
67. In the January 14 Order, the Commission found that Terra-Gen
did not satisfy the cost allocation principle.\87\ Similar to the
economic planning requirement, the Commission noted that Terra-Gen's
proposed Attachment K did not include any provisions that address how
Terra-Gen proposed to allocate the cost of new facilities that do not
fit under existing rate structures.\88\
---------------------------------------------------------------------------
\87\ Id. P 96.
\88\ Id.
---------------------------------------------------------------------------
68. To address the cost allocation principle, Terra-Gen now
proposes a new section 10 to its Attachment K that states ``the costs
of new facilities required because of individual requests for
transmission and interconnection service shall be allocated to
customers pursuant to the Tariff.'' \89\
---------------------------------------------------------------------------
\89\ Terra-Gen OATT, Attachment K at Section 10.
---------------------------------------------------------------------------
69. The Commission finds that Terra-Gen's proposal does not satisfy
the cost allocation principle. We agree with Green Borders that Terra-
Gen's proposal is vague as to how the costs of new facilities that do
not otherwise fit under the existing rate structures of Terra-Gen's
OATT will be allocated. Accordingly, we will require Terra-Gen to
submit a further compliance filing that explains how such costs would
be allocated; whether, for example, allocated to the requesting
customer or allocated to transmission or interconnection customers that
benefit from the facilities.
h. Transmission Service Rates
i. Tariff Proposal
70. Terra-Gen proposes a cost-based, monthly rate of $3,600/MW for
both firm and non-firm point-to-point transmission service on the Dixie
Valley Line.\90\ Terra-Gen's proposed transmission service rate is
based upon an average annual revenue requirement of approximately $2.8
million.\91\
---------------------------------------------------------------------------
\90\ Transmittal Letter at 16.
\91\ Terra-Gen has only included monthly rates for Point-to-
Point Transmission Service. Because it does not provide Network
Transmission Service, the OATT does not include the $2.8 million
transmission revenue requirement in Attachment H.
---------------------------------------------------------------------------
71. Terra-Gen's proposed revenue requirement includes a proxy
capital structure adopted from SoCal Edison, the transmission provider
to which the Dixie Valley Line is interconnected.\92\ Terra-Gen states
that it does not issue publicly traded stocks, thus requiring a proxy
capital structure, and further asserts that Commission policy permits
an independent power producer to adopt the capital structure of its
interconnected transmission owner due to the fact that it has not been
subject to either traditional rate regulation or the FERC Uniform
System of Accounts.\93\
---------------------------------------------------------------------------
\92\ Id. at 17-18.
\93\ Id.
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72. In addition to the stated average embedded rates for
transmission service, Terra-Gen has also included a provision, as part
of the form of transmission service agreement, that it may charge a
transmission customer the higher of the rate established for firm
point-to-point transmission service or the rate developed from
amortizing the costs of any new facilities required by the transmission
customer's request for service, over the period of the transmission
customer's service agreement.\94\
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\94\ Terra-Gen OATT, Attachment A, Section 5.1.
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73. Terra-Gen also seeks permission to establish a regulatory asset
that will include expenses incurred in connection with the requirement
that Terra-Gen convert the Dixie Valley Line into a Commission-
regulated transmission line. Terra-Gen asserts that it has spent
approximately $1 million to address the regulatory ramifications of
Green Borders' decision to explore siting a generator on the Dixie
Valley Line.\95\ Terra-Gen asserts that the costs to be included in the
regulatory asset include, but are not limited to, consulting,
accounting and legal expenses, engineering studies, personnel, and
computer and communication expenses. Terra-Gen proposes to accrue
carrying charges on the regulatory asset from the effective date of the
Commission approval until such time as the regulatory asset is included
in rate base. Terra-Gen proposes to record the regulatory asset and
related carrying charges to FERC Account 182.3.
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\95\ Transmittal Letter at 19.
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ii. Protest
74. Green Borders states that Terra-Gen has failed to comply with
the January 14 Order in that it failed to submit all cost computations
used to develop the proposed rate, including, but not limited to,
detailed work papers.\96\ Therefore, Green Borders requests that the
Commission either reject the proposed rate or schedule a full
evidentiary hearing to review Terra-Gen's proposed rate.\97\ In
particular, Green Borders argues that Terra-Gen should not be permitted
to adopt SoCal Edison's capital structure because Terra-Gen is acting
as a transmission provider in the instant situation as opposed to a
merchant generator.\98\
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\96\ Protest at 9 (citing January 14 Order, 134 FERC ] 61,027 at
P 104).
\97\ Id. at 10.
\98\ Id.
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75. Green Borders also raises concerns with other aspects of the
proposed rate. First, Green Borders states that the plant-in-service
amount and depreciation methods used in the rate calculation appear to
be selected to artificially maximize Terra-Gen's rate base.\99\ Second,
Green Borders states that Terra-Gen's calculation of net tax balance is
unsupported by evidence. Green Borders also states that the amounts
used to calculate costs for other taxes appear abnormally high and
[[Page 28982]]
are not supported by evidence.\100\ In addition, Green Borders
questions the billing determinants used to calculate the proposed rate.
Specifically, Green Borders argues that Terra-Gen erred in using only
the 64 MW of current firm service rather than the actual current
capacity of 400 MW. Green Borders argues that, at a minimum, Terra-Gen
should include 60 MW of firm service for Green Borders in the
calculation.\101\ Finally, Green Borders states that Terra-Gen should
not use a non-levelized carrying charge in calculating the rate.\102\
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\99\ Id. at 11.
\100\ Id.
\101\ Id. at 10-12.
\102\ Id. at 12.
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76. Green Borders also asserts that Terra-Gen has provided no
explanation to justify the addition of the incremental cost provisions
in the form of service agreement. Green Borders requests that the
Commission reject this provision, recognizing that Terra-Gen must
submit any proposed rate with the Commission for approval.\103\
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\103\ Protest at 20.
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iii. Commission Determination
77. Our preliminary review of Terra-Gen's filing indicates that the
proposed rates have not been shown to be just and reasonable and may be
unjust, unreasonable, unduly discriminatory or preferential, or
otherwise unlawful. Several aspects of Terra-Gen's proposed rates raise
issues of material fact, including the reasonableness of Terra-Gen's
proposed return on equity of 10.30 percent, the verification of Terra-
Gen's plant-in-service, depreciation, operations and maintenance, and
other cost-of-service related data.\104\ We further note that Terra-Gen
has not provided any rates other than for monthly service, either for
firm point-to-point transmission service or non-firm point-to-point
service. Therefore, we will accept Terra-Gen's proposed rates, to be
effective May 14, 2011, as requested, and set the proposed rates for
hearing pursuant to section 206 of the FPA \105\ and settlement judge
procedures.
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\104\ Terra-Gen was formerly exempt from the Commission's
reporting requirements as a Qualifying Facility. Accordingly, no
publicly reported data, consistent with the Commission's Uniform
System of Accounts, is available for examination in this proceeding
without discovery and cross-examination.
\105\ The section 206 proceeding has been designated Docket No.
EL11-37-000.
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78. 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,\106\ we will establish a
refund date at the earliest possible date. This date will be the date
on which the notice of our investigation in this proceeding is
published in the Federal Register. The Commission is also required by
section 206 to indicate when it expects to issue a final order. In this
case, the Commission expects that it will be able to issue a final
order, should the case go to an initial decision, within one year of
the date of an initial decision.
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\106\ 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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79. While we are setting these matters for trial-type evidentiary
hearing, we encourage the parties to make every effort to settle their
dispute before hearing procedures are commenced. To aid the parties in
their settlement efforts, we will hold the hearing in abeyance and
direct that a settlement judge be appointed, pursuant to Rule 603 of
the Commission's Rules of Practice and Procedure. If the parties
desire, they may, by mutual agreement, request a specific judge as the
settlement judge in the proceeding; otherwise the Chief Judge will
select a judge for this purpose. The settlement judge shall report to
the Chief Judge and the Commission within 30 days of the date of the
appointment of the settlement judge, concerning the status of
settlement discussions. Based on this report, the Chief Judge shall
provide the parties with additional time to continue their settlement
discussions or provide for commencement of a hearing by assigning the
case to a presiding judge.
80. We will not reject section 5.1 of Terra-Gen's form of service
agreement allowing it to propose incremental transmission rates, capped
at the cost of expansion, in lieu of the stated average cost
transmission rates proposed in Services Schedules 7 and 8 of its OATT.
Pursuant to Commission policy, a transmission provider may seek to
charge a transmission customer the greater of the average embedded cost
of service or the incremental cost of providing service (capped at the
cost of expansion), but not both.\107\ We remind Terra-Gen that any
service agreement in which it seeks to charge an incremental rate to a
transmission customer, in lieu of the stated average cost rates
provided in its OATT, is a non-conforming service agreement that will
be required to be filed with the Commission. The transmission customer
must have opportunity to ensure that any proposed transmission rate
based on the incremental cost of expansion on the Dixie Valley Line is
just and reasonable.
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\107\ See Inquiry Concerning the Commission's Pricing Policy for
Transmission Services Provided by Public Utilities Under the Federal
Power Act; Policy Statement, FERC Stats. & Regs. ] 31,005 (1994).
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81. Finally, we will allow Terra-Gen to establish a regulatory
asset, as requested. Costs deferred as a regulatory asset must be
recorded in Account 182.3, Other Regulatory Assets, and may only
include amounts that would otherwise be chargeable to expense in the
period incurred, are not recoverable in current rates, and are probable
for recovery in rates in a different period.\108\ Furthermore, the
instructions to Account 182.3 require that amounts deferred in this
account are to be charged to expense concurrent with the recovery of
the amounts in rates. If rate recovery of all or part of the costs
deferred in Account 182.3 is later disallowed, the disallowed amount
shall be charged to Account 426.5, Other Deductions, in the year of
disallowance.
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\108\ The term ``probable'' as used in the definition of
regulatory assets, refers to that which can reasonably be expected
or believed on the basis of available evidence or logic but is
neither certain nor proved. Revisions to Uniform Systems of Accounts
to Account for Allowances under the Clean Air Act Amendments of 1990
and Regulatory-Created Assets and Liabilities and to Form Nos. 1, 1-
F, 2, and 2-A, FERC Statutes and Regulations, Regulations Preambles
January 1991-June 1996 ] 30,967 (1993).
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82. While this order provides Terra-Gen with the ability to record
certain costs as a regulatory asset, Terra-Gen must make a filing under
section 205 of the FPA when it proposes to include such costs in
transmission rates, in order to ensure that the incurred expenses are
just and reasonable. Terra-Gen also will have to establish that the
costs included in the regulatory asset are costs that would have
otherwise been chargeable to expense in the period incurred. Parties
will be able to challenge these costs at that time.
3. Waiver of Reporting Requirements
83. Terra-Gen requests that the Commission grant waiver to Terra-
Gen so that it will have to comply with the FERC Uniform System of
Accounts only with respect to the Dixie Valley Line.\109\ Terra-Gen
explains that, because the generator is a qualifying facility (QF),
imposing the FERC reporting requirements on its merchant function will
impose a burden of complying with new accounting rules. Terra-Gen
further
[[Page 28983]]
requests the Commission grant a deferral of the obligation to comply
with the Uniform System of Accounts with respect to the Dixie Valley
Line until such time as a third-party commences service under the OATT.
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\109\ Transmittal Letter at 18.
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84. We will grant the waiver Terra-Gen requests with regard to
requiring the Dixie Valley QF to be subject to FERC Uniform System of
Accounts. As we explained in the September 16 Order, our determination
does not affect the QF status of the Dixie Valley Generator.\110\ As a
result, Terra-Gen must only be required to report under the uniform
system of accounts, as a transmission service provider, for the Dixie
Valley Line. However, we will not grant deferral of the reporting
requirement. Terra-Gen will be required to submit the appropriate
reporting information consistent with the Commission regulations.
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\110\ September 16 Order, 132 FERC ] 61,215 at n. 80.
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4. Additional Matters
85. In review of Terra-Gen's proposed deviations from the pro forma
OATT,\111\ Terra-Gen lists the proposed changes it seeks approval of in
its OATT. We agree with Green Borders that certain uses of the term
``Transmitting Utility'' may remain in the OATT, notably in the Large
Generator Interconnection Procedures and Large Generator
Interconnection Agreement, despite Terra-Gen's removal of the term from
the master definitions. We will require Terra-Gen to correct these
instances and utilize the pro forma term Transmission Provider, as it
has committed to do.\112\
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\111\ See March 16 Filing, Attachment C.
\112\ Transmittal Letter at 15.
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86. Additionally, Terra-Gen has revised the language it filed as
Schedule 11, FERC Annual Charges, to clarify that all users of the
Dixie Valley Line, including grandfathered users, will be responsible
for FERC annual charges that are attributable to transmission service.
Additionally, Terra-Gen has incorporated pro forma sections 17.7
(Extensions for Commencement of Service), 19.8 (Expedited Procedures
for New Facilities), and 19.9 (Penalties for Failure to Meet Study
Deadlines), as well as pro forma sections 4.1.1 and 4.1.2 of the LGIP
into its proposed OATT. We find that Terra-Gen's proposals in this
regard satisfactorily comply with the January 14 Order.
The Commission orders:
(A) Terra-Gen's February 14, 2011 Request for Rehearing is hereby
granted in part and denied in part, as discussed in the body of this
order.
(B) Terra-Gen is hereby directed to file, within 30 days of the
date of this order, revisions to its proposed OATT, as discussed in the
body of this order.
(C) Terra-Gen's proposed OATT is hereby accepted in part and
rejected in part, effective May 14, 2011, as modified in accordance
with Ordering Paragraph (B) above, as discussed in the body of this
order.
(D) Terra-Gen's requested waivers are granted in part and denied in
part, as discussed in the body of this order.
(E) Terra-Gen's proposed transmission rates are hereby accepted,
effective May 14, 2011, subject to refund.
(F) Pursuant to the authority contained in and subject to the
jurisdiction conferred upon the Federal Energy Regulatory Commission by
section 402(a) of the Department of Energy Organization Act and the
Federal Power Act, particularly sections 205 and 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), a public
hearing shall be held concerning Terra-Gen's proposed revenue
requirement. However, the hearing shall be held in abeyance to provide
time for settlement judge procedures, as discussed in Ordering
Paragraphs (G) and (H) below.
(G) Pursuant to Rule 603 of the Commission's Rules of Practice and
Procedure, 18 CFR 385.603 (2010), the Chief Administrative Law Judge is
hereby directed to appoint a settlement judge in this proceeding within
fifteen (15) days of the date of this order. Such settlement judge
shall have all powers and duties enumerated in Rule 603 and shall
convene a settlement conference as soon as practicable after the Chief
Judge designates the settlement judge. If the parties decide to request
a specific judge, they must make their request to the Chief Judge
within five (5) days of the date of this order.
(H) Within thirty (30) days of the appointment of the settlement
judge, the settlement judge shall file a report with the Commission and
the Chief Judge on the status of the settlement discussions. Based on
this report, the Chief Judge shall provide the parties with additional
time to continue their settlement discussions, if appropriate, or
assign this case to a presiding judge for a trial-type evidentiary
hearing, if appropriate. If settlement discussions continue, the
settlement judge shall file a report at least every sixty (60) days
thereafter, informing the Commission and the Chief Judge of the
parties' progress toward settlement.
(I) If settlement judge procedures fail and a trial-type
evidentiary hearing is to be held, a presiding judge, to be designated
by the Chief Judge, shall, within fifteen (15) days of the date of the
presiding judge's designation, convene a prehearing conference in these
proceedings in a hearing room of the Commission, 888 First Street, NE.,
Washington, DC 20426. Such a conference shall be held for the purpose
of establishing a procedural schedule. The presiding judge is
authorized to establish procedural dates and to rule on all motions
(except motions to dismiss) as provided in the Commission's Rules of
Practice and Procedure.
(J) The Secretary shall promptly publish in the Federal Register a
notice of the Commission's initiation of the investigation ordered in
Ordering Paragraph (F) above, under section 206 of the Federal Power
Act.
By the Commission. Chairman Wellinghoff is not participating.
Dated: May 13, 2011.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2011-12278 Filed 5-18-11; 8:45 am]
BILLING CODE 6717-01-P