Errata Letter - Utilities · PDF fileComplaint by TransCanada Energy Ltd. Regarding Firm Sales to Alberta, Project No. 3698539 Errata for Exhibit B1 ‐7, Responses ... WPS then submitted

Suite 1100, Four Bentall Centre, 1055 Dunsmuir Street PO Box 49260, Vancouver, BC V7X 1V5

www.bctc.com

Janet L. Fraser Director, Regulatory Affairs Phone: 604‐699‐7318 Fax: 604‐699‐7229 E‐mail: [email protected] 19 March 2009 Ms. Erica Hamilton Commission Secretary British Columbia Utilities Commission 900 Howe Street, Sixth Floor Vancouver BC, V6Z 2N3 Dear Ms. Hamilton:

Re: British Columbia Transmission Corporation (BCTC) Application to Amend the Open Access Transmission Tariff and a

Complaint by TransCanada Energy Ltd. Regarding Firm Sales to Alberta, Project No. 3698539 Errata for Exhibit B1‐7, Responses to Information Request No. 1 (IR‐1)

BCTC files an errata to Exhibit B1‐7, its 27 February 2009 responses to IR‐1, in the above noted proceeding. BCTC submits the following: (a) a corrected response to BCUC IR 1.35.4. The first paragraph of the original response has

been replaced. The new paragraph is marked by a black line in the right margin; and

(b) the FERC Decision attachments to BCTC’s response to BCUC IR 1.116.1, namely:

i. Commonwealth Edison Company, 96 FERC ¶ 61,158 (Order Denying Rehearing, 30 July 2001);

ii. Excelon Generation Company, LLC v. Southwest Power Pool, Inc., 101 FERC ¶ 61,226 (Order Denying Rehearing, 22 November 2002); and

iii. Constellation Power Source, Inc. v. American Electric Power Service Corporation, 102 FERC ¶ 61,142 (Order Denying Rehearing, 5 February 2003).

Sincerely, Original signed by Janet L. Fraser Director, Regulatory Affairs

B1-7-1

markhuds

BCTC OAAT

British Columbia Utilities Commission Information Request 1.35.4 Dated 6 February 2009

British Columbia Transmission Corporation Corrected Response Issued 19 March 2009

British Columbia Transmission Corporation Amendment to the Open Access Transmission Tariff

1.35.0 Reference: Exhibit B‐1, Chapter 3, BCTC’s Proposed Changes in Response to Order

No. 890 Sec. 3.4.3, Conditional Firm Service, pp. 50‐61 Conditional Firm Service

1.35.4 Does BC Hydro’s NITS application consume any ATC on the BC to US path, AB to US path, US to BC path or US to AB paths, and if so, how much and in what months for the period shown in Table 3‐2?

CORRECTED RESPONSE:

With respect to the BC>US Path and AB>US Path, BC Hydro’s NITS consumes transfer capacity on the Interior to Lower Mainland (ILM) path. The amount of capacity consumed by BC Hydro’s NITS varies, depending on BC Hydro’s forecast monthly loads and forecast monthly generation dispatching pattern. BCTC anticipates BC Hydro maximum use of the ILM path will occur in the winter period, from November through February. Please refer to BCTC’s response to BCUC IR 1.35.2.

The reservations on the US>BC Path for BC Hydro’s NITS are:

1 August 2007 to 31 July 2008 1217 MW

1 August 2008 to 31 July 2009 1222 MW

1 August 2009 to 31 July 2010 1327 MW

1 August 2010 to 31 July 2011 1291 MW

1 August 2011 to 31 July 2012 1400 MW

The above reservations affect ATC on the US>AB Path in the same way.

96 FERC ¶ 61, 158

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Curt Hébert, Jr., Chairman; William L. Massey, Linda Breathitt, Pat Wood, III and Nora Mead Brownell.

Commonwealth Edison Company Docket No. ER01-1209-001

ORDER DENYING REHEARING

(Issued July 30, 2001)

On June 18, 2001, Commonwealth Edison Company (ComEd) filed a request for rehearing of the Commission's May 18, 2001 order (May 18 Order), which rejected certain transmission service agreements between ComEd and Wisconsin Public Service Company (WPS).1 For the reasons discussed below, the Commission denies rehearing. Background

On February 10, 2000, Wisconsin Public Service (WPS) submitted to ComEd two requests for long-term firm point-to-point transmission service. The first request was for 50 MW of service from Ameren Corporation to WPS and the second was for 50 MW of service from American Electric Power Company to WPS. The service under both contracts was to begin on January 1, 2002, and end on December 31, 2002. ComEd accepted the requests and WPS confirmed and executed the service agreements (2002 Service Agreements).

Subsequently, on December 22, 2000, WPS submitted requests to roll over each of the 2002 Service Agreements for a two-year period, covering the years 2003 and 2004. ComEd refused these rollover requests and told WPS that the rollover term for a one-year agreement was limited to one year. WPS then submitted requests to ComEd to roll over the two 2002 Service Agreements for one year, and to roll over the ensuing 2003 Service Agreements for one year. This would result in a reservation of service through the end of 2004.

1 95 FERC ¶ 61,252 (2001).

Attachment 1 to BCUC IR 1.116.1

Docket No. ER01-1209-001 -2-

ComEd accepted the 2003 Service Agreements subject to the condition that there would be no rollover rights for service in 2004, and rejected the 2004 Service Agreements. ComEd stated that it could not accommodate the 2004 Service Agreements because its open access transmission tariff (OATT) required it to consider the effect upon neighboring networks of reservations on its system. It stated that it could not accept the 2004 Service Agreement because of a lack of capacity on the Arpin-Eau Claire line of Northern States Power Company (Northern States). WPS asked ComEd to file the 2003 Service Agreements unexecuted because Section 2.2 of ComEd's OATT required it to grant rollover service through 2004 notwithstanding the lack of available transmission capacity on Northern States' system.

The Commission found that WPS was entitled to a rollover of service through 2004, and accordingly rejected the 2003 Service Agreements in the May 18 Order. The Commission found no limitation in Order No. 888 on the length of a rollover service term, and held that a transmission provider may not condition the right to roll over transmission service on the availability of transmission capacity on a third party's transmission system. It held that the only limitations upon the right to roll over service are: (1) that the underlying contract must have been for a term of one year or more; (2) that the existing transmission customer must agree to match the rate offered by another potential transmission customer; and (3) that the existing transmission customer must agree to accept a contract term at least as long as that offered by the potential new transmission customer. ComEd's Request for Rehearing

ComEd filed a timely request for rehearing of the May 18 Order. It argued that the Commission incorrectly concluded that a transmission provider may not condition a transmission customer's right to roll over service on the transmission provider's system based on whether there is enough transmission capacity available on a third-party system. ComEd states that it rejected the 2004 Service Agreements because there was no available transmission capacity on the Arpin-Eau Claire line on Northern States' transmission system, and challenges the Commission's "implicit finding" that the anticipated congestion would not occur.2 It requests a hearing or a technical conference to determine whether the transmission service in question would, in fact, overload the Arpin-Eau Claire line. ComEd describes the procedures that it used to verify the anticipated congestion, and argues that it does not appear that the congestion can be relieved prior to 2004. It argues that pursuant to the Commission's decision in Idaho Power Company, 94 FERC ¶ 61,311 (2001), reh'g

2 ComEd Request for Rehearing at 3-4.


Docket No. ER01-1209-001 -3- denied in relevant part 95 FERC ¶ 61,224 (2001) (Idaho Power), it is not required to allow WPS to roll over service if there is no available transmission capacity.

Additionally, ComEd questions the Commission's decision that, because Order No. 888 does not restrict the length of a rollover term, existing service agreements may be rolled over indefinitely. ComEd argues that this holding, read together with the Commission's decision in Entergy Power Marketing Corporation, 91 FERC ¶ 61,276 (2000), means that:

a long-term firm customer has the right of first refusal with respect to existing transmission capacity for an unlimited term and does not have to commit to the use of that capacity until 60 days before the end of its existing term. The customer thus has a perpetual option on existing capacity at no cost.[3]

ComEd argues that the Commission's conclusion is not supported by any reasoning and that it will not support orderly planning by transmission providers and transmission customers. It contends that the process will cause significant uncertainty in the process of state approval of new transmission facilities, because it will never be clear whether or not the new facilities are necessary. It also contends that existing transmission customers will have an incentive to withhold transmission capacity from the market.

ComEd requests clarification that the Commission's allegedly new policy was not retroactively effective. It argues that because it assumed that the capacity associated with an existing one-year reservation had to be sold now for the period after the one-year rollover term, it also assumed that the rollover term had to be granted subject to the condition that no further rollovers would be granted because of lack of capacity. As such, it complains that it and "many other transmission providers have granted firm service outside of such terms to other customers that use[] capacity that, under the Order, should have been set aside for potential rollovers of infinite duration or occurring in an indefinite series."4 Discussion

3 ComEd Request for Rehearing at 11 (citation omitted).

4 ComEd Request for Rehearing at 15.


Docket No. ER01-1209-001 -4-

With respect to ComEd's arguments that third-party system impacts prevent it from providing service to WPS in 2004, ComEd is not authorized by the pro forma tariff5 or by its own OATT6 to condition a transmission customer's right to transmission service on whether there is transmission capacity on a third party's transmission system; indeed, these documents suggest to the contrary. ComEd submits, however, that Idaho Power grants it the authority to impose such a condition on a transmission customer. We disagree. Idaho Power dealt with a very different situation, in which the transmission provider knew, at the time the transmission customer's first service agreement was initiated, that constraints on its own system prevented it from providing service in increments of more than eighteen months. This is not the case here, where there is no constraint on ComEd's system. We also note that while ComEd may not limit the rollover term, as noted in the May 18 Order, it is not responsible for additions to third-party systems.7

All long-term firm transmission customers have the right to roll over their service, but the potential that a transmission customer will choose to do so does not require ComEd to "remove[] the associated capacity from its OASIS forever, restoring it only if the customer declines to exercise its option at some future period."8 ComEd may post the associated capacity on its OASIS and accept competing reservations until the time that the existing customer chooses to roll over its contract by exercising its right of first refusal. If the existing customer does so, it then takes priority over the competing reservation. If the

5 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 Fed. Reg. 21,540 (May 10, 1996), FERC Stats. & Regs. ¶ 31,036 (1996), order on reh'g, Order No. 888-A, 62 Fed. Reg. 12,274 (March 14, 1997), FERC Stats. & Regs. ¶ 31,048 at 30,527 (1997) (Section 21.1 of the pro forma tariff), order on reh'g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh'g, Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff'd in relevant part, remanded in part on other grounds sub nom.,, Transmission Access Policy Study Group, et al. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), cert. granted, 69 U.S.L.W. 3574 (Nos. 00-568 (in part) and 00-809) and cert. denied, id. (No. 00-800)(U.S. Feb. 26, 2001).

6 See 95 FERC at 61,875 n.7.

7 Pursuant to Section No. 21.1 of its OATT, ComEd is not responsible for additions to third-party transmission systems. See 95 FERC at 61,875 n.7.

8 ComEd Request for Rehearing at 12.


Docket No. ER01-1209-001 -5- existing customer declines to exercise its right of first refusal, the transmission provider may accept the next competing reservation.

With regard to the impact on system planning of allowing rollovers, we reiterate our finding in the May 18 Order that rollover rights facilitate orderly planning. As we explained in that order, rollover of the existing transmission service agreements, as contemplated by WPS, should facilitate ComEd's planning and operations since ComEd has already evaluated the impacts on its system of providing transmission service to WPS from the stated receipt points to the stated delivery point. Moreover, Com Ed may still accept competing service requests, from which it may determine whether there is additional demand for service and thus a need for new or additional facilities. In any event, WPS has not been granted service in perpetuity; competing service requests may (1) replace service to WPS absent a rollover of its request or (2) supplant such service if WPS declines to match a competing request with a longer term.

We deny ComEd's request for clarification that the policy is not retroactively effective. The Commission has consistently found that Section 2.2 of the pro forma tariff9 requires a transmission provider to allow a customer with a one-year firm reservation to roll over that service for a longer period of time, subject to matching competing requests for service. Order No. 888 contemplated such an arrangement10 and, as ComEd acknowledges, does not prohibit it.11 The policy took effect at the time Order No. 888 was issued. We have specifically declined to permit tariff changes that would require existing customers to make their commitments earlier.12 We see no reason to, and so we decline to, change our policy. The Commission orders:

ComEd's request for rehearing is hereby denied.

9 See Order No. 888-A at 30,511.

10 See Order No. 888 at 31,665; Order No. 888-A at 30,195, 30,197-98.

11 ComEd Request for Rehearing at 10-11.

12 See Ameren Services Company, 96 FERC ¶ 61,001 (2001) (rejecting Ameren's proposal to require an existing transmission customer to exercise its right of refusal within 30 days of the time Ameren received a competing request for service). See also Entergy Marketing Corporation v. Southwest Power Pool, 91 FERC ¶ 61,276 (2000).


Docket No. ER01-1209-001 -6- By the Commission. ( S E A L )

David P. Boergers, Secretary.


1Exelon Generation Company, LLC v. Southwest Power Pool, Inc., 99 FERC¶ 61,235 (2002) (May Order).

101 FERC ¶ 61, 226UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Pat Wood, III, Chairman; William L. Massey, Linda Breathitt, and Nora Mead Brownell.

Exelon Generation Company, LLC, Docket No. EL02-86-001Complainant

v.Southwest Power Pool, Inc.,

Respondent


(Issued November 22, 2002)

1. In an order issued on May 31, 2002,1 the Commission granted the complaint filedby Exelon Generation Company, LLC (Exelon) against Southwest Power Pool, Inc.(SPP) alleging that SPP had refused to honor Exelon's rollover rights related to itsexisting long-term firm point-to-point transmission service agreement in violation ofSection 2.2 of the SPP open access transmission tariff (OATT) and the Commission'spolicy. This order denies SPP's request for rehearing of the May Order.

BACKGROUND

2. On May 3, 2002, Exelon filed a complaint alleging that SPP refused to roll overExelon's one-year service agreement for 400 MW of firm point-to-point transmissionservice from a point of receipt on the Central & South West Services system (CSW) to apoint of receipt on the Entergy Services system (Entergy) for another one-year termbeginning on June 1, 2002. In response to Exelon's rollover request, SPP sent Exelon aSystem Impact Study (SIS) relating to the requested service which stated that there wasinsufficient transmission capacity available on the SPP system to grant Exelon's request. The SIS provided that if Exelon permitted SPP to curtail Exelon's 400 MW long-termfirm transmission service on the SPP system between the CSW system and the AmerenEnergy system (Ameren) in its entirety during the summer of 2002, SPP would be able to

20021122-3089 Issued by FERC OSEC 11/22/2002 in Docket#: EL02-86-001


Docket No. EL02-86-001 - 2 -

2Section 2.2 provides in relevant part:Reservation Priority For Existing Firm Service Customers: Existingfirm service customers (wholesale requirements and transmission-only,with a contract term of one-year or more, and retail) . . . have the right tocontinue to take transmission service from the Transmission Provider whenthe contract expires, rolls over, or is renewed . . . This transmissionreservation priority for existing firm service customers is an ongoing rightthat may be exercised . . . at the end of all firm contract terms of one yearor longer . . . If competing existing firm service requirements customersapply for service that cannot be fully provided, the priority rights will beranked in accordance with first-come, first-served principles. If firmservice customers tie, then the capacity for which they receive priorityrights under this Tariff shall be apportioned on a pro rata basis.

3May Order at P 26.

provide Exelon with 226 MW of long-term firm transmission service from CSW toEntergy. The SIS stated that if Exelon's service request over the CSW-to-Ameren pathcould not be curtailed, then the available transmission capacity on Exelon's requestedCSW-to-Entergy path would be zero.

3. In the May Order, the Commission granted Exelon's complaint and stated thatExelon has the right to request a rollover of its existing firm point-to-point transmissionservice. The May Order explained that SPP is obligated, under Section 2.2 of its OATT(which adopts the language of the Commission's pro forma OATT),2 to maintainavailable transmission capacity for its existing long-term transmission customers withrollover rights, such as Exelon, until the time expires for those customers to exercise theirrollover rights.3

REQUEST FOR REHEARING AND OTHER PLEADINGS

4. On June 27, 2002, SPP filed a request for rehearing arguing that the Commissionerred by determining that a transmission customer has an automatic right to renew itsservice even if studies regarding the transmission request show that insufficienttransmission capacity is available and that providing such service would adversely affectreliability. SPP contends that the Commission's determination will have an adverseeffect on reliability by causing greater curtailments and Transmission Loading Relief(TLRs) of existing firm load and outages. In addition, SPP argues that the Commissionerred by determining that a transmission provider may only recall capacity to serve nativeload and only if the need for this limitation is forecasted and is set forth in the initial



Docket No. EL02-86-001 - 3 -

4The Designated SPP Transmission Owners are: City Utilities of Springfield,Missouri, the Empire District Electric Company, Oklahoma Gas & Electric Company,Kansas City Power and Light Company, Westar Energy, Inc., and Kansas Gas andElectric Company.

service agreement, even if capacity is no longer available due to events or circumstancesthat arose after the initial service was entered into. SPP claims that the Commissionerred by announcing a new policy without providing adequate notice and opportunity foraffected parties to comment or participate. SPP further asserts that the Commission'sdecision represents an unexplained reversal of the Commission's prior orders on Section2.2 and the language of the pro forma OATT and SPP's OATT. SPP asks that we reversethe decision in the May Order or, at the very least, apply the decision prospectively.

5. On July 26, 2002, SPP filed a letter in support of its request for rehearing toprovide supplemental information describing recent TLRs which it alleges were caused,at least in part, by SPP being required to provide rollover service to various transmissioncustomers, including Exelon.

6. On July 26, 2002, the Designated SPP Transmission Owners4 filed comments insupport of the request for rehearing filed by SPP.

7. On July 17, 2002, the Western Farmers Electric Cooperative (WFEC) filed amotion to intervene out-of-time. On July 26, 2002, Midwest Energy, Inc. (MidwestEnergy) also filed a motion to intervene out-of-time and comments.

DISCUSSION

Procedural Matters

8. We will deny the motions to intervene out-of-time filed by WFEC and MidwestEnergy. When late intervention is sought after the issuance of a dispositive order, theprejudice to other parties and burden upon the Commission of granting the lateintervention may be substantial. Thus, movants bear a higher burden to demonstrategood cause for granting such late intervention. We find that this burden has not been methere. We will also dismiss the comments filed by the Designated SPP TransmissionOwners because they are not intervenors in these proceedings.



Docket No. EL02-86-001 - 4 -

5See Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs byPublic Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs.¶ 31,036at 31,694 (1996), order on reh'g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, orderon reh'g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh'g, Order No. 888-C,82 FERC ¶ 61,046 (1998), aff'd in relevant part sub nom. Transmission Access PolicyStudy Group, et al. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New Yorkv. FERC, 122 S. Ct. 1012 (2002). See also Commonwealth Edison Co., 95 FERC¶ 61,252 at 61,874, reh'g denied 96 FERC ¶ 61,158 at 61,690 (2001).

6Order No. 888 at 31,665; Order No. 888-A at 30,195.

Analysis

9. As discussed in greater detail below, SPP's request for rehearing of the May Order is basically a collateral attack of the Commission's rollover rights policy as established inOrder No. 888.5 In that order, the Commission concluded that all firm transmissioncustomers with contracts for a term of one-year or more should have the right to continueto take transmission service from their existing transmission provider upon the expirationof their contracts or at the time their contracts become subject to renewal or rollover.6 Once a transmission provider evaluates the impacts on its system of providingtransmission service to a customer and decides to grant such a request, the rollover rightspolicy obligates the transmission provider to plan and operate its system with theexpectation that it will continue to provide service to that customer should the customerrequest rollover of its contract term. In other words, the transmission provider isexpected to plan its system to accommodate transmission customers' rollover rights. Ifthe transmission system becomes constrained such that the transmission provider cannotsatisfy existing customers, then the obligation is on the transmission provider to eithercurtail service pursuant to the provisions of its OATT or to build more capacity to relievethe constraint.

10. Many of the issues raised by SPP on rehearing (e.g, the one-year minimum term;the impact of rollover on reliability of the transmission system) go to the heart of theCommission's rollover rights policy established in Order No. 888. On this basis, they areissues that should have been raised on rehearing of Order No. 888. The Commission willnot revisit in this order its prior determinations in Order No. 888, which have beenaffirmed by U.S. Court of Appeals for the District of Columbia Circuit and the U.S.Supreme Court.



Docket No. EL02-86-001 - 5 -

A. IMPACT ON RELIABILITY

i. Ability to Predict all Factors that Could Limit Capacity

11. SPP argues that the Commission's determination in the May Order will have adetrimental impact on reliability in the region. SPP contends that a transmission providercannot predict at the outset of entering into a service agreement all of the factors thatcould potentially limit the amount of available transmission capacity because thesefactors vary over time due to conditions that may not be predictable or may be outside ofthe transmission provider's control. SPP states that its denial of Exelon's requestedrollover service was due to circumstances beyond its control or ability to predict. SPPexplains that the amount of capacity available on its transmission system has diminishedover time due to factors such as loop flows from other systems, the effects of newgeneration going on-line in Entergy and other areas outside of the SPP footprint, andchanges in market conditions and system topology, so that SPP could not provideExelon's requested rollover service without potentially harming reliability or othercustomers.

12. SPP contends that if a transmission provider with limited available transmissioncapacity is compelled to provide service, the result will be more firm demand on thetransmission system than can be accommodated, which will adversely affect native loadcustomers and long-term customers, as well as potential new customers. SPP adds that,as a policy matter, it is neither fair nor appropriate for customers who only committed toa one-year term of service to cause curtailments of firm customers who have been payingfor the costs of the system for a much longer period of time and who are obligated tocontinue to pay for those system costs for a far longer period. Furthermore, SPP statesthat the May Order has forced it to reject new service requests because of uncertainty asto whether existing customers will roll over their requests.

Commission Response

13. SPP's arguments do not diminish Exelon's rollover rights under Section 2.2 of theSPP OATT. Under Section 2.2 of its OATT, SPP is responsible for maintainingavailable transmission capacity for existing long-term transmission customers withrollover rights, such as Exelon, until the time expires for those customers to exercise theirrollover rights. In providing for Exelon's rollover rights in Section 2.2, SPP isresponsible for evaluating the impact of the exercise of these rights on its system.

14. Notwithstanding SPP's attempt to portray rollover rights as detrimental toreliability, rollover rights are intended to promote system planning and reliability, not to



Docket No. EL02-86-001 - 6 -

7SPP Rehearing at 10.

8Pursuant to Section 21.1 of its OATT, SPP is not responsible for additions tothird-party systems.

9Commonwealth Edison Co., 96 FERC ¶ 61,158 at 61,690 (2001).

undermine it. Rollover rights should facilitate a transmission provider's orderly planningand operation, i.e., provide for available capacity, which is essential to SPP's obligationof preserving system reliability. A transmission provider is expected to include all long-term transmission customers (i.e., those with rollover rights) in its long-term planning. While it may be the case, as SPP suggests, that subsequent circumstances may negativelyimpact a transmission provider's available transmission capacity, the presence of suchconstraints do not give a transmission provider the right to deny a rollover request. Under Section 2.2 of its OATT, SPP is responsible for maintaining availabletransmission capacity for existing long-term transmission customers with rollover rights,such as Exelon, until the time expires for those customers to exercise their rollover rights. Thus, the constraints that SPP cites are not sufficient to override Exelon's rollover rights. If constraints arise after a transmission provider enters into a long-term agreement with atransmission customer (and that agreement contains no restrictions on the transmissioncustomer's rollover rights), the obligation is on the transmission provider to either buildadditional transmission facilities to relieve the constraint or to implement the curtailmentprocedures set forth in its OATT.

15. In its rehearing request, SPP states that "[t]he Commission's orders will force SPPand other transmission providers to presume that all long-term customers will renew theirservice, and evaluate the impact of the service for years beyond the requested term of theproposed service agreement."7 SPP is correct in this regard. Indeed, it was the intent ofthe Commission in establishing the rollover policy that long-term customers have theright to continue to take service and, accordingly, that the transmission provider be in theposition of continuing to provide it. Again, to the extent that SPP disagrees with theCommission's policy call in this regard, it should have sought rehearing and/orclarification at the time that the Commission established the rollover rights policy.

16. With respect to SPP's arguments that third-party system impacts prevent it fromproviding service to Exelon, SPP is not authorized by the pro forma OATT or by its ownOATT8 to condition a transmission customer's right to transmission service on whetherthere is transmission capacity on a third party's transmission system.9 A transmissionprovider may not condition a transmission customer's right to roll over transmissionservice on the transmission provider's system at the end of an existing service agreement



Docket No. EL02-86-001 - 7 -

10Commonwealth Edison Co., 95 FERC ¶ 61,252 at 61,875 (2001), reh'g deniedCommonwealth Edison Co., 96 FERC ¶ 61,158 (2001).

11Citing Idaho Power Co., 95 FERC ¶ 61,224 at 61,759 (2001) (Idaho PowerRehearing Order), aff'g Idaho Power Co., 94 FERC ¶ 61,311 (2001) (Idaho Power).

12Citing Northeast Utils. Serv. Co., 56 FERC ¶ 61,269 at 62,030 (1991), reh'gdenied, 59 FERC ¶ 61,042 (1992), aff'd in relevant part, 993 F.2d 937, 954-55 (1st Cir.199); New England Power Pool, 83 FERC ¶ 61,045 at 61,235 (1998); Duke Elec.Transmission, 96 FERC ¶ 61,145 at 61,626-27 (2001).

based on whether there is enough transmission capacity available on a third-partytransmission system.10

ii. Absolute Right to Capacity

17. SPP argues that the May Order grants transmission customers an absolute right tocapacity based on a one-year long-term contract. Consequently, SPP claims, the orderrequires transmission providers to accept transactions regardless of whether sufficientcapacity exists. As a result, according to SPP, transmission providers could overloadtheir systems and have to curtail reserved service as well as transmission service to othercustomers or risk severe and possibly cascading system outages.

18. SPP further contends that because construction times are usually longer than the60-day renewal period provided to customers, the Commission's policy could forcetransmission providers to build new capacity based on the possibility that a customer willroll over its service. SPP states that this is contrary to the Commission's prior statementsthat transmission owners are not obligated to build new capacity to serve a rolloverrequest.11 SPP states that this is also contrary to Section 13.5 (dealing with atransmission customer's obligations for facility additions or redispatch costs) of the proforma tariff and the Commission's cost-causation and "but for" pricing principles.12 SPPfurther notes that this may be difficult given the number of problems that transmissionowners have experienced when attempting to upgrade their transmission systems.

Commission Response

19. All long-term firm transmission customers have the right to roll over their service,but the potential that a transmission customer will choose to do so does not require SPPto remove the associated capacity from its OASIS forever and restore it only if thecustomer declines to exercise its option at some future period. As the Commission has



Docket No. EL02-86-001 - 8 -

13Commonwealth Edison Co., 96 FERC at 61,690.

14Id.

15Idaho Power Rehearing Order, 95 FERC at 61,759.

explained, SPP may post the associated capacity on its OASIS and accept competingreservations until the time that the existing customer chooses to roll over its contract byexercising its right of first refusal.13 If the existing customer does so and agrees to matchthe rate offered by another potential customer seeking the same transmission capacity (upto the transmission provider's filed rate), it then takes priority over the competingreservation. If the existing customer declines to exercise its right of first refusal, thetransmission provider may accept the next competing reservation.14 In any event, Exelonhas not been granted service in perpetuity to the extent that competing service requestsmay: (1) replace service to Exelon absent a rollover of its request; or (2) supplant suchservice if Exelon declines to match a competing request with a longer term.

20. Furthermore, SPP has misconstrued our statement that "the right of first refusalprovision applies to existing capacity and does not require a transmission provider tobuild additional capacity in response to a request to rollover a transmission service."15 By this statement, the Commission did not intend, as SPP seems to suggest, that atransmission provider could deny a customer's rollover request to the extent that thetransmission provider did not have sufficient available capacity to meet the request andcould only grant the request if it were to build additional capacity. Implicit in thisstatement was the expectation that the transmission provider had already studied theimpacts on its existing system of providing the transmission service and determined thatit could provide that service (including any rollover if requested) using its existingsystem. Because a determination to grant the initial service request carried with it theobligation to assume that the customer would continue to take service, the Commissionexpected that the transmission provider would have sufficient existing capacity to serve arollover request and not then need to build additional capacity to serve that rolloverrequest.

21. In evaluating Exelon's original request for long-term firm transmission service,SPP was obligated to determine whether or not it had available existing capacity to serveExelon, taking into account Exelon's right to renew or roll over its transmission service. As we have indicated above, if constraints arise after a transmission provider enters intoa long-term agreement with a transmission customer (and that agreement contains norestrictions on the transmission customer's rollover rights), the obligation is on thetransmission provider to determine whether or not to build additional facilities to



Docket No. EL02-86-001 - 9 -

16See Order No. 888 at 31,655. See also Order No. 888-A at 30,195, 30,197-98.

accommodate new transmission customers. If the transmission system is constrained tothe extent that the transmission provider cannot satisfy its existing transmissioncustomers' contracts, then the transmission provider has the choice of eitherimplementing the curtailment procedures set forth in its OATT or building additionaltransmission facilities to relieve the constraint.

iii. Gaming the System

22. SPP further contends that the May Order removes any incentives for customers torequest service for more than a year, which will inhibit the ability of transmissionproviders and transmission owners to engage in long-term planning, further harmingreliability. SPP argues that the May Order encourages gaming because customers whoare aware that a system is becoming increasingly constrained can simply requesttransmission service for a one-year period even if they intend to use the service for amuch longer period of time. SPP argues that by choosing a one-year service term,customers can avoid paying for upgrades necessary to support their service which theywould have to pay for if they had requested a multi-year service term. SPP claims thatthis is inconsistent with the Commission's "or" pricing and cost causation principles.

Commission response

23. The Commission has consistently found that Section 2.2 of the pro forma OATTrequires a transmission provider to allow a customer with a one-year firm reservation toroll over that service for a longer period of time, subject to matching competing requestsfor that service. Order No. 888 contemplated such an arrangement,16 and the policy tookeffect at the time Order No. 888 was issued. On this basis, we will not reexamine ourdecision that the rollover rights provisions of Section 2.2 apply to contracts with terms ofone year or more.

24. Further, a long-term firm transmission service customer cannot game the systemand avoid paying for upgrades simply by choosing a contract with a one-year term. Regardless of the length of the contract term, a transmission provider will grant a requestfor long-term firm transmission service only if it determines that it has sufficientavailable transmission capacity to provide the service. In making this determination, thetransmission provider is obligated to plan its system to meet all of its firm loads,including any prospective rollovers of the transmission services used to meet those loads. Thus, if, a transmission customer requests transmission service for only one year, but the



Docket No. EL02-86-001 - 10 -

17We also note that transmission customers do have incentives to request servicefor more than one year. If, for example, a transmission customer enters into a ten-yearcontract instead of a one-year contract, it does not face having to exercise its rolloverrights every year, with the risk that a competing customer seeks its transmission capacity,and the attendant risk that it must match any longer-term request in order to retain itstransmission service. The transmission customer with the ten-year contract has muchmore certainty than the customer with the one-year contract.

18Citing Nevada Power Co., 97 FERC ¶ 61,324 (2001) (Nevada Power) andPublic Service Co. of New Mexico v. Arizona Public Service Co., 99 FERC ¶ 61,162(2002) (PSNM).

transmission provider determines that it has native load growth or another contractobligation that commences in the future, it can reflect those obligations in the requestedlong-term contract and thereby limit the prospective transmission customer's rolloverrights. If the transmission customer seeks service beyond the period when the nativeload growth or future contractual obligation becomes effective, it must pay for thefacility upgrades necessary to support its service request. Likewise, if a customerrequests transmission service for ten years, but the transmission provider indicates that ithas available capacity to provide the service for only three years, the customer must payfor facility upgrades if it wants service beyond the initial three-year period. Thus, if thetransmission provider properly reflects its planning in the initial transmission contract asdiscussed above, there will be no opportunity for a firm transmission service customer togame the system by requesting a shorter-term contract.17

B. APPLICATION OF ROLLOVER RIGHTS POLICY

i. Reservation in Initial Service Agreement

25. SPP states that the Commission's determination in the May Order that atransmission provider may only recall capacity to serve native load and only if thislimitation is forecasted and set forth in the initial service agreement is a change in policyannounced in orders issued after the service agreement with Exelon was entered into, andcould not have provided notice to SPP of the Commission's changed policy.18 SPPargues that the Commission has changed its policy and has failed to provide adequatenotice to all affected parties that the initial service agreements must include specificprovisions reserving capacity for native load growth. SPP states that the one case citedby the Commission that was adopted prior to the execution of the Exelon service



Docket No. EL02-86-001 - 11 -

1985 FERC ¶ 61,240 at 62,006 (1998) (1998 PSNM Order).

20Further, we find SPP's attempt to distinguish the 1998 PSNM Order to bemisplaced. The 1998 PSNM Order was an order on rehearing addressing, among otherthings, the requirement that "[t]he only way a transmission provider can reclaim capacityis if it explicitly includes in future transmission agreements language that the right of firstrefusal does not apply due to a need for the capacity that is reasonably forecasted at thetime of the agreement's execution." 85 FERC at 62,006. See also Public ServiceCompany of New Mexico, 82 FERC ¶ 61,127 at 61,457 (1998). What is relevant forpurposes of the instant rehearing is that both of these cases confirm and apply theCommission's policy that limitations to rollover rights must be included in the serviceagreement when it is first executed, thereby refuting SPP's argument that theCommission's action constitutes a change in policy.

agreement, Public Service Co. of New Mexico,19 did not involve a situation such as theone SPP faces, where a specific transmission service agreement had expired and thecapacity was simply not available. SPP argues that the 1998 PSNM Order involvedattempts by a single transmission provider to modify its tariff to place restrictions on itscustomers' rollover rights in undefined situations. Therefore, SPP contends, the 1998PSNM Order was inadequate to put the industry or SPP on notice as to the Commission'schanged interpretation of Section 2.2. and should not be applied here.

26. SPP adds that, if the Commission does not grant rehearing, it should state that theMay Order applies prospectively only to service agreements entered into after the date ofthe Commission's rehearing order in this proceeding or at least as of the date of the MayOrder. SPP also requests that the Commission state that the need to satisfy native loadgrowth is not the only reason why a rollover request can be denied, and that factors otherthan native load growth can justify rejection of a rollover request, if specified in theservice agreement. SPP contends that the Commission should state that any suchlimitation can be specified in both the initial service agreement and any agreement for arenewal term, not just in the initial service agreement.

Commission Response

27. We disagree with SPP's argument that the Commission's action in the 1998 PSNMOrder, the May Order, and other orders issued after the service agreement with Exelonwas executed constitutes a change in its policy with regard to rollover rights.20 To thecontrary, our action in the May Order and the other cases cited by SPP is fully consistentwith the rollover rights policy that we established in Order No. 888. In announcing therollover rights policy in Order No. 888, we explained that there are circumstances under



Docket No. EL02-86-001 - 12 -

21Order No. 888 at 31,694.

22Order No. 888-A at 30,198.

23See, e.g., 1998 PSNM Order, 85 FERC at 62,066 (discussing requirement tostate expressly in future transmission contracts (as distinguished from existing (i.e., pre-Order No. 888) contracts) if the right of first refusal does not apply due to a need for thecapacity that is reasonably forecasted at the time of the contract's execution; PSNM, 99FERC at 61,667; Nevada Power, 97 FERC at 62,493.


which a transmission provider can restrict a transmission customer's rollover rights underSection 2.2. For example, the Commission determined that public utilities may reserveexisting transmission capacity needed for native load growth reasonably forecastedwithin the public utility's current planning horizon.21 In Order No. 888-A, theCommission stated that "if a utility provides firm transmission service to a third party fora time until native load needs the capacity, it should specify in the contract that the rightof first refusal does not apply to that firm service due to a reasonably forecasted need atthe time the contract is executed."22

28. Since the issuance of Order Nos. 888 and 888-A, the Commission has consistentlyreaffirmed this policy, stating that a transmission provider can deny a customer the abilityto roll over its long-term firm service contract if the transmission provider includes in theoriginal service agreement a specific limitation based on reasonably forecasted nativeload needs for the transmission capacity provided under the contract at the end of the contract term.23

29. The industry was on adequate notice with the issuance of Order Nos. 888 and888-A of the Commission's policy regarding restrictions on rollover rights. To theextent that, after the issuance of those orders, SPP was uncertain as to the Commission'spolicy in this regard, SPP could have sought clarification at that time. In any event,because the 1998 PSNM Order, the May Order, and the other orders cited by SPP werefully consistent with the Commission's rollover rights policy as established in therulemaking proceeding, none of those orders provided a "changed interpretation ofSection 2.2", as SPP contends.24

30. On this basis, we also will reject SPP's request that the Commission apply itspolicy prospectively only to service agreements entered into after the date of theCommission's rehearing order in this proceeding or at least as of the date of the May



Docket No. EL02-86-001 - 13 -

25See, e.g., Order No. 888-A at 30,198; 1998 PSNM Order, 85 FERC at 62,008;Nevada Power, 97 FERC at 62,493; PSNM, 99 FERC at 61,667; Southern CompanyServices, Inc., 100 FERC ¶ 61,237 at P 17 (2002), reh'g pending.

26See, e.g., Southwest Power Pool, Inc., 100 FERC ¶ 61,358 at P 12; SouthwestPower Pool, Inc, 100 FERC ¶ 61,239 at P 26 (2002), reh'g pending.

27See Section 19.7 of the Order No. 888 pro forma tariff (concerning partialinterim service); see also Morgan Stanley Capital Group v. Illinois Power Company, 93FERC ¶ 61,081 at 61,220 (2000) ("[H]ad Morgan Stanley requested, for example, long-term service for a two-year period, but only one year was available, Illinois Power wouldhave been obligated to offer service for that one available year").

Order. We further will reject SPP's request that limitations on rollover rights can bespecified in both the initial service agreement and any agreement for a renewal term, notjust in the initial service agreement. Commission precedent is clear that such limitationsmust be clearly stated in the customer's original service agreement.25

31. SPP also requests that the Commission state that the need to satisfy native loadgrowth is not the only reason why a rollover request can be denied, and that factors otherthan native load growth can justify rejection of a rollover request, if specified in theservice agreement. In a number of recent orders, the Commission has addressed thisissue and specifically rejected requests by a transmission provider to reduce the capacityavailable for a renewal of transmission service by a transmission customer "due to factorssuch as changes in transmission system topology, loop flow impacts due to changes intransactions on other transmission systems, redispatch of designated networkresources."26

32. However, it may be reasonable for a transmission provider to limit the terms underwhich a new long-term agreement may be rolled over based on a pre-existing contractobligation that commences in the future. For example, to the extent that a SIS completedprior to the execution of the original service agreement indicates that available transfercapability to serve the customer will only be available for a particular time period, afterwhich time it is already committed to another transmission customer under a previously-confirmed transmission request (i.e., an agreement under which service would commenceat some time in the future), the transmission provider can reflect those obligations in thelong-term contract and thereby limit the prospective transmission customer's rolloverrights.27



Docket No. EL02-86-001 - 14 -

28Citing Order No. 888-A at 30,198; Idaho Power, 94 FERC at 62,144-45;Entergy Power Marketing Co. v. Southwest Power Pool, 91 FERC 61,276 at 61,936(2000); Wisconsin Public Power Inc. Sys. v. Wisconsin Public Service Corp., 84 FERC61,120 at 61,655 (1998).

ii. Tie-Breaker Provision

33. SPP argues that Order No. 888-A, the pro forma OATT, and prior Commissionorders describe Section 2.2 as a tie-breaker provision to be used when there arecompeting and substantially similar firm service requests.28 SPP further argues that theCommission's May Order directly contradicts the Commission's prior determinations thatSection 2.2 is intended to provide certain existing customers with a reservation prioritywhen there is a competing request for long term firm point-to-point transmission service,and is not an absolute right to service.

Commission Response

34. Once again, SPP has misconstrued our previous orders. While it is true, as SPPsuggests, that Section 2.2 can serve a a tie-breaking mechanism, that provision is notintended to function only as a tie-breaker. In other words, the rollover rights policy is notintended to apply only when there are competing and substantially similar firm servicerequests. As we have explained in previous orders, Section 2.2 provides a tie-breakingmechanism when a transmission provider has insufficient transmission capacity and thereare competing requests for that available capacity, including an existing long-term firmtransmission customer whose transmission service agreement is up for renewal orrollover. If the transmission provider has insufficient capacity, then Section 2.2 providesa tie-breaker mechanism that gives the transmission customer the right of first refusal. However, in the absence of a competing request for service, the transmission provider isobligated under Section 2.2 to grant a request for rollover by an existing long-termtransmission customer (assuming that the transmission agreement contains no restrictionson rollover rights, as discussed above).

C. APPLICATION OF THE PRO FORMA AND SPP OATTs

35. SPP argues that the May Order contravenes the plain terms of the pro forma andSPP OATTs that require that rollover requests be treated as new transmission requestssubject to the same procedures as all other requests, except that such requests havecertain priority rights over competing requests under Section 2.2. SPP contends that



Docket No. EL02-86-001 - 15 -

29Citing Entergy Power Marketing Corp. v. Southwest Power Pool, Inc., 91 FERC¶ 61,276 at 61,936 (2000) (Entergy).

under Section 2.2 of the SPP and the pro forma OATT, an existing long-term firmtransmission customer has a "transmission reservation priority" over a competing requestfor firm transmission service, provided that the existing long-term firm customer iswilling to match the term and price of the competing request. According to SPP, ifcompeting existing firm service customers apply for service that cannot be fullyprovided, priority rights will be assigned in accordance with first-come, first-servedprinciples. SPP argues that in an earlier decision, the Commission determined that "[b]yexercising a right of first refusal an existing transmission customer is, in effect, arranginga new long-term firm point-to-point transmission service."29

36. SPP states that Section 17 of the pro forma and SPP OATTs sets out theprocedures for arranging firm point-to-point transmission service and, under Section17.5, SPP is obligated to determine the amount of transmission capacity available when itreceives a request for firm point-to-point transmission service of one year or greater. SPP argues that nothing in Section 17 exempts rollover customers from the process. SPPfurther argues that nothing in Section 19 of the pro forma and SPP OATTs, which setsout the requirements for System Impact and Facilities Studies, exempts rollovercustomers.

37. SPP contends that the May Order will interfere with the rights of customers whoexecuted longer-term firm transmission service agreements before many of the one-yearservice agreements, such as Exelon's, were entered into. SPP argues that under Section13.2 of the SPP Tariff, these customers have a higher reservation priority than atransmission customer whose service agreement was executed later in time. SPP statesthat a transmission provider has an obligation to offer an "infill" customer transmissioncapacity that will ultimately be needed by a higher priority customer at a later date, butthe transmission provider is not required to grant a transmission customer who comeslater in time perpetual and superior rights to this capacity. SPP argues that the MayOrder will contravene Section 13.2 and give an "infill" customer rights to the capacitythat will prevent or impair the use by the higher priority customer.

Commission Response

38. Contrary to SPP's assertions, the May Order is entirely consistent with theprovisions of the pro forma OATT and SPP's OATT. In Order No. 888, we concludedthat, subject to certain limitations, all firm transmission customers (requirements and



Docket No. EL02-86-001 - 16 -

30Order No. 888 at 31,665.

31Entergy, 91 FERC at 61,936.

32Id.


transmission-only), upon the expiration of their contracts or at the time their contractsbecome subject to renewal or rollover, should have the right to continue to taketransmission service from their existing transmission provider.30

39. In Entergy, when we stated that "[b]y exercising a right of first refusal an existingtransmission customer is, in effect, arranging a new long-term firm point-to-pointtransmission service,"31 we did not mean that the rollover request was to be treated as anew long-term request for service for purposes of a new determination of availabletransmission capacity under Section 17.5 or a new system impact study. The issue inEntergy was the time period within which a customer exercising its right of first refusalmust make an application for its new service term and notify the transmission providerthat it wishes to exercise its reservation priority. We concluded that, "[c]onsistent withthe reservation procedures in Section 17.1, we clarify that the pro forma tariff requirescustomers to notify the transmission provider that they are exercising their right of firstrefusal at the time they tender their request for the new service term, which must be noless than 60 days prior to the date the existing contract ends and the new service termcommences. This procedure should provide sufficient protection to existing transmissioncustomers (our original rationale for establishing a right of first refusal) as well asprovide a reasonable and consistent notice period for all transmission reservations."32

40. We did not intend to suggest or imply that a transmission provider would make adetermination of available transmission capacity or perform a new system impact studyeach time that a long-term firm transmission customer elects to roll over its existingtransmission service, and SPP's arguments to the contrary are wrong. Indeed, such aninterpretation would effectively undermine the entire rollover rights policy established inOrder No. 888 and set forth in Section 2.2 of the pro forma OATT. The only instance inwhich a transmission provider can require a new system impact study for an existinglong-term customer seeking to rollover over its service would be where that customerrequests a change to a receipt or delivery point in an existing long-term firm transmissionservice agreement. In that instance, the customer's request can be treated as a newrequest for service for purposes of the availability of capacity.33 In Order No. 888-A,with



Docket No. EL02-86-001 - 17 -

34Order No. 888-A at 30,198, n. 52.

respect to a proposal to limit the right of first refusal to the same points of receipt anddelivery as the terminating service, the Commission explained that such a proposal:

would competitively disadvantage existing customers seeking new sources ofgeneration. However, as we stated in Order No. 888, if the customer chooses anew power supplier and this substantially changes the location or direction of thepower flows it imposes on the transmission provider's system, the customer's rightto continue taking transmission service from its existing transmission providermay be affected by transmission constraints associated with the change.34

41. Based on the foregoing, we deny SPP's request for rehearing. Furthermore, wedismiss SPP's request that, in the alternative, the findings in the May Order be appliedprospectively only.

The Commission orders:

SPP's request for rehearing is hereby denied.

By the Commission.

( S E A L )

Magalie R. Salas, Secretary.



1Constellation Power Source, Inc. v. American Electric Power ServiceCorporation and Southwest Power Pool, Inc., 100 FERC ¶ 61,157 (2002) (AugustOrder).

2In Opinion No. 442, the Commission conditioned its approval of a mergerbetween AEP and Central and South West Corporation (CSW) on, among other things,the merged companies' contracting out their OASIS responsibilities to an independententity. In compliance with Opinion No. 442, AEP and CSW entered into an agreementwith SPP pursuant to which SPP would, among other things, independently calculateand post Available Transmission Capacity (ATC) and perform the OASIS function ofprocessing transmission service requests for customers seeking service over the AEP

(continued...)

102 FERC ¶ 61,142UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Pat Wood, III, Chairman; William L. Massey, and Nora Mead Brownell.

Constellation Power Source, Inc. ) Docket No. EL02-95-001Complainant )

v. )American Electric Power Service Corporation )

and )Southwest Power Pool, Inc., )

Respondents )

American Electric Power Service Corporation ) Docket No. ER02-2028-001


(Issued February 5, 2003)

1. In an order issued on August 5, 2002,1 the Commission granted the complaintfiled by Constellation Power Source, Inc. (Constellation) against American ElectricPower Service Corporation (AEP) and Southwest Power Pool, Inc. (SPP), asadministrator for AEP's OASIS,2 alleging that SPP had refused to honor Constellation's



Docket Nos. EL02-95-001 and ER02-2028-001 - 2 -

2(...continued)transmission system. (See American Electric Power Company and Central and SouthWest Corporation, Opinion No. 442, 90 FERC ¶ 61,242 at 61,788-89, order on reh'g, 91FERC ¶ 61,129 (2000), aff'd sub nom. Wabash Valley Power Ass 'n v. FERC, 268 F. 3d1105 (D.C. Cir., 2001); Order Accepting Compliance Filings, as Modified, 91 FERC ¶ 61,208 at 61,747-48 (2000); Order Accepting Compliance Filing, 93 FERC ¶ 62,065 (2000).

3Section 2.2 provides in relevant part:Reservation Priority For Existing Firm Service Customers: Existingfirm service customers (wholesale requirements and transmission-only,with a contract term of one-year or more, and retail) . . . have the right tocontinue to take transmission service from the Transmission Provider whenthe contract expires, rolls over, or is renewed . . . This transmissionreservation priority for existing firm service customers is an ongoing rightthat may be exercised . . . at the end of all firm contract terms of one year

(continued...)

rollover rights related to its existing long-term firm point-to-point transmission serviceagreement in violation of Section 2.2 of the AEP open access transmission tariff (OATT)and the Commission's policy. The order also accepted, subject to conditions, serviceagreements filed by AEP in Docket No. ER02-2028-000. This order denies rehearing ofthe August Order.

BACKGROUND

Docket No. EL02-95-001

2. On May 31, 2002, Constellation filed a complaint against AEP and SPP allegingthat SPP, as administrator for AEP's OASIS, refused to roll over Constellation's one-yearservice agreement for 50 MW of firm point-to-point transmission service from a point ofreceipt on the AEP system to a point of receipt on the TVA system for another one-yearterm beginning on June 1, 2002. Constellation stated that it was informed by SPP thatthe transmission request was refused due to network load growth and loopflow problemson AEP's transmission system.

3. In the August Order, the Commission granted Constellation's complaint and statedthat Constellation has the right to request a rollover of its existing firm point-to-pointtransmission service. The August Order explained that SPP is obligated, under Section2.2 of AEP's OATT (which adopts the language of the Commission's pro forma OATT),3




3(...continued)or longer . . . If competing existing firm service requirements customersapply for service that cannot be fully provided, the priority rights will beranked in accordance with first-come, first-served principles. If firmservice customers tie, then the capacity for which they receive priorityrights under this Tariff shall be apportioned on a pro rata basis.

4August Order at P 26.

5The unexecuted Agreements contained the following language in Article 1:

Due to delays in constructing certain transmission facilities, the AEPOASIS Administrator (Southwest Power Pool) expects there to belimited system capacity to allow renewal of this reservation. Renewal, in whole or in part, may be possible if conditions change. Further, depending on the final determination of the Federal EnergyRegulatory Commission in Docket No. EL02-86-000, this limitedrenewal right could be invalidated and this agreement terminatedbefore the specified termination date.

to maintain available transmission capacity for existing long-term transmission customerswith rollover rights, such as Constellation, until the time expires for those customers toexercise their rollover rights.4

Docket No. ER02-2028-001

4. On June 4, 2002, AEP, as agent for the operating utility subsidiaries of AmericanElectric Power Company, Inc., submitted two unexecuted transmission serviceagreements, at SPP's request, for long-term firm point-to-point transmission serviceunder its OATT with its marketing affiliate, AEP Wholesale Power MerchantOrganization (AEP Power Merchant) and Constellation. The unexecuted agreementscontained language advising the customer that SPP, as administrator of AEP's OASIS,expects there to be limited system capacity to allow renewal of the reservations.5

5. In the August Order, the Commission accepted the agreements for filing butdirected AEP to remove the language proposed in Article 1 of the unexecuted




6The service agreements were accepted in Docket No. ER02-2028-002 on October 8, 2002.

7Remedying Undue Discrimination Through Open Access Transmission Serviceand Standard Electricity Market Design, Notice of Proposed Rulemaking, 100 FERC¶ 61,138 (2002) (SMD NOPR).

agreements because the language improperly limited the transmission customers' rolloverrights under Section 2.2 of the AEP OATT.6

REQUESTS FOR REHEARING

6. On September 4, 2002, SPP filed a request for rehearing arguing that theCommission erred by determining that a transmission customer has an automatic right torenew its service even if studies regarding the transmission request show that insufficienttransmission capacity is available and that providing such service would adversely affectreliability. SPP contends that the Commission's determination will have an adverseeffect on reliability by causing greater curtailments and Transmission Loading Relief(TLRs) of existing firm load and outages. In addition, SPP argues that the Commissionerred by determining that a transmission provider may only recall capacity to serve nativeload and only if the need for this limitation is forecasted and is set forth in the initialservice agreement, even if capacity is no longer available due to events or circumstancesthat arose after the initial service was entered into. SPP claims that the Commissionerred by announcing a new policy without providing adequate notice and opportunity foraffected parties to comment or participate. SPP further asserts that the Commission'sdecision represents an unexplained reversal of the Commission's prior orders on Section2.2 and the language of the pro forma OATT and AEP's OATT. SPP also states that theAugust Order fails to consider the fact that AEP has posted notifications on its OASISthat constituted sufficient notice of potential lack of capacity in the future. Furthermore,SPP contends that the Commission's recent policy as announced in the Notice ofProposed Rulemaking on Standard Market Design7 supports SPP's position by settingforth the principle that customers who are willing to pay more should get the service. SPP asks that we reverse the decision in the August Order or, at the very least, apply thedecision prospectively.

7. On September 4, 2002, AEP also filed a request for rehearing, as amended, inwhich it raises similar arguments to SPP's. AEP states that in granting Constellation'scomplaint and directing AEP to remove any limitation on the renewal of the rollover, theCommission erred in a number of respects. Specifically, AEP states that the




8See Exelon Generation Company, LLC v. Southwest Power Pool, Inc., 99 FERC¶ 61,235, reh'g denied, 101 FERC ¶ 61,226 (2002) (Exelon); Tenaska Power ServicesCo. v. Southwest Power Pool, Inc., 99 FERC ¶ 61,344 (2002), reh'g denied, 102 FERC¶ 61,140 (2003).

9See Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs byPublic Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs.¶ 31,036at 31,694 (1996), order on reh'g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, orderon reh'g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh'g, Order No. 888-C,82 FERC ¶ 61,046 (1998), aff'd in relevant part sub nom. Transmission Access PolicyStudy Group, et al. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom., New Yorkv. FERC, 122 S. Ct. 1012 (2002). See also Commonwealth Edison Co., 95 FERC¶ 61,252 at 61,874, reh'g denied, 96 FERC ¶ 61,158 at 61,690 (2001).

10Order No. 888 at 31,665; Order No. 888-A at 30,195.

Commission's recent decisions on rollover rights,8 including the August Order, constitutea change in policy on rollover rights without providing adequate notice to affectedparties. AEP contends that the Commission has departed from its previous precedentswithout justification or explanation and this does not constitute reasoned decision-making. AEP further argues that this alleged new policy contravenes the pro formaOATT. In addition, AEP asserts that the Commission, in rejecting the proposedlimitation on renewal as not sufficiently specific, ignored postings on its OASIS whichprovided the necessary specificity to affected transmission customers.

DISCUSSION

Docket No. EL02-95-001

8. As discussed in greater detail below, SPP's request for rehearing of the AugustOrder is basically a collateral attack of the Commission's rollover rights policy asestablished in Order No. 888.9 In that order, the Commission concluded that all firmtransmission customers with contracts for a term of one-year or more should have theright to continue to take transmission service from their existing transmission providerupon the expiration of their contracts or at the time their contracts become subject torenewal or rollover.10 Once a transmission provider evaluates the impacts on its systemof providing transmission service to a customer and decides to grant such a request, therollover rights policy obligates the transmission provider to plan and operate its systemwith the expectation that it will continue to provide service to that customer should the




customer request rollover of its contract term. In other words, the transmission provideris expected to plan its system to accommodate transmission customers' rollover rights. Ifthe transmission system becomes constrained such that the transmission provider cannotsatisfy existing customers, then the obligation is on the transmission provider to eithercurtail service pursuant to the provisions of the AEP OATT or to build more capacity torelieve the constraint.

9. Many of the issues raised by SPP on rehearing (e.g, the one-year minimum term;the impact of rollover on reliability of the transmission system) go to the heart of theCommission's rollover rights policy established in Order No. 888. On this basis, they areissues that should have been raised on rehearing of Order No. 888. The Commission willnot revisit in this order its prior determinations in Order No. 888, which have beenaffirmed by U.S. Court of Appeals for the District of Columbia Circuit and the U.S.Supreme Court.

A. IMPACT ON RELIABILITY

i. Ability to Predict all Factors that Could Limit Capacity

10. SPP argues that the Commission's determination in the August Order will have adetrimental impact on reliability in the region. SPP contends that a transmission providercannot predict at the outset of entering into a service agreement all of the factors thatcould potentially limit the amount of available transmission capacity because thesefactors vary over time due to conditions that may not be predictable or may be outside ofthe transmission provider's control. SPP states that its denial of Constellation'srequested rollover service was due to circumstances beyond its control or ability topredict. SPP explains that the amount of capacity available on the AEP transmissionsystem has become increasingly limited, especially along the north-to-south transmissionpaths that were the subject of the renewal request service, and SPP could not provideConstellation's requested rollover service without potentially harming reliability or othercustomers.

11. SPP contends that if a transmission provider with limited available transmissioncapacity is compelled to provide service, the result will be more firm demand on thetransmission system than can be accommodated, which will adversely affect native loadcustomers and long-term customers, as well as potential new customers. SPP adds that,as a policy matter, it is neither fair nor appropriate for customers who only committed toa one-year term of service to cause curtailments of firm customers who have been payingfor the costs of the system for a much longer period of time and who are obligated tocontinue to pay for those system costs for a far longer period. Furthermore, SPP states




11We note that SPP has not provided any evidence in support of its assertion thatthe TLRs it has called are the direct result of the Commission's policy on rollover rights.

12See Commonwealth Edison Co., 96 FERC ¶ 61,158 at 61,690 (2001).

that the August Order has forced it to reject new service requests because of uncertaintyas to whether existing customers will roll over their requests.

Commission Response

12. SPP's argument that the Commission's approach has affected reliability and hasbeen shown to exacerbate the need to call TLRs and to increase the severity of theseTLRs is disingenuous. To the extent that SPP's assertion is true, SPP's need to call TLRsmay be due to its failure to follow the requirements of Order No. 888 and not the resultof any change in Commission policy.11 Moreover, SPP's arguments do not diminishConstellation's rollover rights under Section 2.2 of the AEP OATT. Under Section 2.2of AEP's OATT, SPP is responsible for maintaining available transmission capacity forexisting long-term transmission customers with rollover rights, such as Constellation,until the time expires for those customers to exercise their rollover rights. In providingfor Constellation's rollover rights in Section 2.2, SPP is responsible for evaluating theimpact of the exercise of these rights on the AEP transmission system.

13. Notwithstanding SPP's attempt to portray rollover rights as detrimental toreliability, rollover rights are intended to promote system planning and reliability, not toundermine it. Rollover rights should facilitate a transmission provider's orderly planningand operation, i.e., provide for available capacity, which is essential to SPP's obligationof preserving system reliability.12 A transmission provider is expected to include alllong-term transmission customers (i.e., those with rollover rights) in its long-termplanning. While it may be the case, as SPP suggests, that subsequent circumstances maynegatively impact a transmission provider's available transmission capacity, the presenceof such constraints does not give a transmission provider the right to deny a rolloverrequest. Under Section 2.2 of AEP's OATT, SPP is responsible for maintaining availabletransmission capacity for existing long-term transmission customers with rollover rights,such as Constellation, until the time expires for those customers to exercise their rolloverrights. Thus, the constraints that SPP cites are not sufficient to override Constellation'srollover rights. If constraints arise after a transmission provider enters into a long-termagreement with a transmission customer (and that agreement contains no restrictions onthe transmission customer's rollover rights), the obligation is on the transmissionprovider to either build additional transmission facilities to relieve the constraint or toimplement the curtailment procedures set forth in AEP's OATT.





14Pursuant to Section 21.1 of its OATT, SPP is not responsible for additions tothird-party systems.


16Commonwealth Edison Co., 95 FERC ¶ 61,252 at 61,875 (2001), reh'g denied,Commonwealth Edison Co., 96 FERC ¶ 61,158 (2001).

14. In its rehearing request, SPP states that "[t]he Commission's orders will force SPPand other transmission providers to presume that all long-term customers will renew theirservice, and evaluate the impact of the service for years beyond the requested term of theproposed service agreement."13 SPP is correct in this regard. Indeed, it was the intent ofthe Commission in establishing the rollover policy that long-term customers have theright to continue to take service and, accordingly, that the transmission provider be in theposition of continuing to provide it. Again, to the extent that SPP disagrees with theCommission's policy call in this regard, it should have sought rehearing and/orclarification at the time that the Commission established the rollover rights policy.

15. With respect to SPP's arguments that third-party system impacts prevent it fromproviding service to Constellation, SPP is not authorized by the pro forma OATT or byAEP's OATT14 to condition a transmission customer's right to transmission service onwhether there is transmission capacity on a third party's transmission system.15 Atransmission provider may not condition a transmission customer's right to roll overtransmission service on the transmission provider's system at the end of an existingservice agreement based on whether there is enough transmission capacity available on athird-party transmission system.16

ii. Absolute Right to Capacity

16. SPP and AEP (collectively, Respondents) argue that the August Order grantstransmission customers an absolute right to capacity based on a one-year long-termcontract. Consequently, the Respondents claim, the order requires transmissionproviders to accept transactions regardless of whether sufficient capacity exists. As aresult, according to the Respondents, transmission providers could overload their systemsand have to curtail reserved service as well as transmission service to other customers orrisk severe and possibly cascading system outages.




17Citing Idaho Power Co., 95 FERC ¶ 61,224 at 61,759 (2001) (Idaho PowerRehearing Order), aff'g, 94 FERC ¶ 61,311 (2001) (Idaho Power), remanded on othergrounds, Idaho Power Company v. FERC, 312 F. 3d 454 (D.C. Cir., 2002).

18Citing Northeast Utils. Serv. Co., 56 FERC ¶ 61,269 at 62,030 (1991), reh'gdenied, 59 FERC ¶ 61,042 (1992), aff'd in relevant part, 993 F.2d 937, 954-55 (1st Cir.199); New England Power Pool, 83 FERC ¶ 61,045 at 61,235 (1998); Duke Elec.Transmission, 96 FERC ¶ 61,145 at 61,626-27 (2001).

19Commonwealth Edison Co., 96 FERC at 61,690.

20Id.

17. SPP further contends that because construction times are usually longer than the60-day renewal period provided to customers, the Commission's policy could forcetransmission providers to build new capacity based on the possibility that a customer willroll over its service. SPP states that this is contrary to the Commission's prior statementsthat transmission owners are not obligated to build new capacity to serve a rolloverrequest.17 SPP states that this is also contrary to Section 13.5 (dealing with atransmission customer's obligations for facility additions or redispatch costs) of the proforma tariff and the Commission's cost-causation and "but for" pricing principles.18 SPPfurther notes that this may be difficult given the number of problems that transmissionowners have experienced when attempting to upgrade their transmission systems.

Commission Response

18. All long-term firm transmission customers have the right to roll over their service,but the potential that a transmission customer will choose to do so does not require SPPto remove the associated capacity from AEP's OASIS forever and restore it only if thecustomer declines to exercise its option at some future period. As the Commission hasexplained, SPP may post the associated capacity on AEP's OASIS and accept competingreservations until the time that the existing customer chooses to roll over its contract byexercising its right of first refusal.19 If the existing customer does so, it then takespriority over the competing reservation. If the existing customer declines to exercise itsright of first refusal, the transmission provider may accept the next competingreservation.20 In any event, Constellation has not been granted service in perpetuity tothe extent that competing service requests may: (1) replace service to Constellationabsent a rollover of its request or (2) supplant such service if Constellation declines tomatch a competing request with a longer term.




21Idaho Power Rehearing Order, 95 FERC at 61,759.

19. Furthermore, SPP has misconstrued our statement that "the right of first refusalprovision applies to existing capacity and does not require a transmission provider tobuild additional capacity in response to a request to rollover a transmission service."21 By this statement, the Commission did not intend, as SPP seems to suggest, that atransmission provider could deny a customer's rollover request to the extent that thetransmission provider did not have sufficient available capacity to meet the request andcould only grant the request if it were to build additional capacity. Implicit in thisstatement was the expectation that the transmission provider had already studied theimpacts on its existing system of providing the transmission service and determined thatit could provide that service (including any rollover if requested) using its existingsystem. Because a determination to grant the initial service request carried with it theobligation to assume that the customer would continue to take service, the Commissionexpected that the transmission provider would have sufficient existing capacity to serve arollover request and not then need to build additional capacity to serve that rolloverrequest.

20. In evaluating Constellation's original request for long-term firm transmissionservice, AEP was obligated to determine whether or not there was available existingcapacity to serve Constellation, taking into account Constellation's right to renew or rollover its transmission service. As we have indicated above, if constraints arise after atransmission provider enters into a long-term agreement with a transmission customer(and that agreement contains no restrictions on the transmission customer's rolloverrights), the obligation is on the transmission provider to determine whether or not tobuild additional facilities to accommodate new transmission customers. If thetransmission system is constrained to the extent that the transmission provider cannotsatisfy its existing transmission customer's contracts, then the transmission provider hasthe choice of either implementing the curtailment procedures set forth in its OATT orbuilding additional transmission facilities to relieve the constraint.

iii. Gaming the System

21. SPP further contends that the August Order removes any incentives for customersto request service for more than a year, which will inhibit the ability of transmissionproviders and transmission owners to engage in long-term planning, further harmingreliability. SPP argues that the August Order encourages gaming because customers whoare aware that a system is becoming increasingly constrained can simply requesttransmission service for a one-year period even if they intend to use the service for a




22See Order No. 888 at 31,655. See also Order No. 888-A at 30,195, 30,197-98.

23 SPP also argues that our recent SMD NOPR supports its position. According toSPP, the SMD NOPR sets forth the principle that customers who are willing to pay morefor capacity should receive the service, and SPP argues that this is precisely what itsinterpretation of Section 2.2 would do. SPP contends that a customer who is willing toagree to a ten-year term of service, and pay for the system upgrades necessary to supportits service, would have greater certainty of service than a customer who chooses to enterinto only a one-year contract. We find that SPP's arguments in this regard are unclear. Nevertheless, with respect to SPP's argument that a customer who is willing to agree to aten-year contract, and pay for the system upgrades necessary to support its service, wouldhave greater certainty of service than a customer who chooses to enter into only a one-year contract we refer to our comments in footnote 24 below in which we point out that transmission customers have incentives to request service for more than one year.

much longer period of time. SPP argues that by choosing a one-year service term,customers can avoid paying for upgrades necessary to support their service which theywould have to pay for if they had requested a multi-year service term. SPP claims thatthis is inconsistent with the Commission's "or" pricing and cost causation principles.

Commission Response

22. The Commission has consistently found that Section 2.2 of the pro forma OATTrequires a transmission provider to allow a customer with a one-year firm reservation toroll over that service for a longer period of time, subject to matching competing requestsfor that service. Order No. 888 contemplated such an arrangement,22 and the policy tookeffect at the time Order No. 888 was issued. On this basis, we will not reexamine ourdecision that the rollover rights provisions of Section 2.2 apply to contracts with terms ofone year or more.

23. Further, a long-term firm transmission service customer cannot game the systemand avoid paying for upgrades simply by choosing a contract with a one-year term.23 Regardless of the length of the contract term, a transmission provider will grant a requestfor long-term firm transmission service only if it determines that it has sufficientavailable transmission capacity to provide the service. In making this determination, thetransmission provider is obligated to plan its system to meet all of its firm loads,including any prospective rollovers of the transmission services used to meet those loads. Thus, if, a transmission customer requests transmission service for only one year, but thetransmission provider determines that it has native load growth or another contractobligation that commences in the future, it can reflect those obligations in the requested




24We also note that transmission customers do have incentives to request servicefor more than one year. If, for example, a transmission customer enters into a ten-yearcontract instead of a one-year contract, it does not face having to exercise its rolloverrights every year, with the risk that a competing customer seeks its transmission capacity,and the attendant risk that it must match any longer-term request in order to retain itstransmission service. The transmission customer with the ten-year contract has muchmore certainty than the customer with the one-year contract.

25Citing Nevada Power Co., 97 FERC ¶ 61,324 (2001) (Nevada Power) andPublic Service Co. of New Mexico v. Arizona Public Service Co., 99 FERC ¶ 61,162(2002) (PSNM).

long-term contract and thereby limit the prospective transmission customer's rolloverrights. If the transmission customer seeks service beyond the period when the nativeload growth or future contractual obligation becomes effective, it must pay for thefacility upgrades necessary to support its service request. Likewise, if a customerrequests transmission service for ten years, but the transmission provider indicates that ithas available capacity to provide the service for only three years, the customer must payfor facility upgrades if it wants service beyond the initial three-year period. Thus, if thetransmission provider properly reflects its planning in the initial transmission contract asdiscussed above, there will be no opportunity for a firm transmission service customer togame the system by requesting a shorter-term contract.24

B. APPLICATION OF ROLLOVER RIGHTS POLICY

i. Reservation in Initial Service Agreement

24. The Respondents state that the Commission's determination in the August Orderthat a transmission provider may only recall capacity to serve native load and only if thislimitation is forecasted and set forth in the initial service agreement is a change in policyannounced in orders issued after the service agreement with Constellation was enteredinto, and could not have provided notice to the Respondents of the Commission'schanged policy.25 The Respondents argue that the Commission has changed its policyand has failed to provide adequate notice to all affected parties that the initial serviceagreements must include specific provisions reserving capacity for native load growth. The Respondents state that the one case cited by the Commission that was adopted priorto the execution of the Constellation service agreement, Public Service Co. of New




2685 FERC ¶ 61,240 at 62,006 (1998) (1998 PSNM Order).

27Further, we find the Respondents' attempt to distinguish the 1998 PSNM Orderto be misplaced. The 1998 PSNM Order was an order on rehearing addressing, amongother things, the requirement that "[t]he only way a transmission provider can reclaimcapacity is if it explicitly includes in future transmission agreements language that theright of first refusal does not apply due to a need for the capacity that is reasonablyforecasted at the time of the agreement's execution." 85 FERC at 62,006. See alsoPublic Service Company of New Mexico, 82 FERC ¶ 61,127 at 61,457 (1998). What isrelevant for purposes of the instant rehearing is that both of these cases confirm andapply the Commission's policy that limitations to rollover rights must be included in theservice agreement when it is first executed, thereby refuting the Respondents' argumentthat the Commission's action constitutes a change in policy.

Mexico,26 did not involve a situation such as the one they face, where a specifictransmission service agreement had expired and the capacity was simply not available. The Respondents argue that the 1998 PSNM Order involved attempts by a singletransmission provider to modify its tariff to place restrictions on its customers' rolloverrights in undefined situations. Therefore, the Respondents contend, the 1998 PSNMOrder was inadequate to put the industry or them on notice as to the Commission'schanged interpretation of Section 2.2. and should not be applied here.

25. SPP adds that, if the Commission does not grant rehearing, it should state that theAugust Order applies prospectively only to service agreements entered into after the dateof the Commission's rehearing order in this proceeding or at least as of the date of theCommission's decision in Exelon. SPP also requests that the Commission state that theneed to satisfy native load growth is not the only reason why a rollover request can bedenied, and that factors other than native load growth can justify rejection of a rolloverrequest, if specified in the service agreement. SPP contends that the Commission shouldstate that any such limitation can be specified in both the initial service agreement andany agreement for a renewal term, not just in the initial service agreement.

Commission Response

26. We disagree with the Respondent's argument that the Commission's action in the1998 PSNM Order, the August Order, and in other orders issued after the serviceagreement with Constellation was executed constitutes a change in its policy with regardto rollover rights.27 To the contrary, our action in the August Order and the other casescited by the Respondents is fully consistent with the rollover rights policy that weestablished in Order No. 888. In announcing the rollover rights policy in Order No. 888,




28Order No. 888 at 31, 694.

29Order No. 888-A at 30,198.

30See, e.g.,1998 PSNM Order, 85 FERC at 62,066 (discussing requirement to stateexpressly in future transmission contracts (as distinguished from existing (i.e., pre-OrderNo. 888) contracts) if the right of first refusal does not apply due to a need for thecapacity that is reasonably forecasted at the time of the contract's execution; PSNM, 99FERC at 61,667; Nevada Power, 97 FERC at 62,493.


we explained that there are circumstances under which a transmission provider canrestrict a transmission customer's rollover rights under Section 2.2. For example, theCommission determined that public utilities may reserve existing transmission capacityneeded for native load growth reasonably forecasted within the public utility's currentplanning horizon.28 In Order No. 888-A, the Commission stated that "if a utility providesfirm transmission service to a third party for a time until native load needs the capacity, itshould specify in the contract that the right of first refusal does not apply to that firmservice due to a reasonably forecasted need at the time the contract is executed."29

27. Since the issuance of Order Nos. 888 and 888-A, the Commission has consistentlyreaffirmed this policy, stating that a transmission provider can deny a customer the abilityto roll over its long-term firm service contract if the transmission provider includes in theoriginal service agreement a specific limitation based on reasonably forecasted nativeload needs for the transmission capacity provided under the contract at the end of the contract term.30

28. The industry was on adequate notice with the issuance of Order Nos. 888 and888-A of the Commission's policy regarding restrictions on rollover rights. To theextent that, after the issuance of those orders, the Respondents were uncertain as to theCommission's policy in this regard, they could have sought clarification at that time. Inany event, because the 1998 PSNM Order, the August Order, and the other orders citedby the Respondents were fully consistent with the Commission's rollover rights policy asestablished in the rulemaking proceeding, none of those orders provided a "changedinterpretation of Section 2.2", as the Respondents contend.31 On this basis, we also willreject SPP's request that the Commission apply its policy prospectively only to serviceagreements entered into after the date of the Commission's rehearing order in thisproceeding or at least as of the date of the Exelon Order. We further will reject therequest that limitations on rollover rights can be specified in both the initial service




32See, e.g., Southwest Power Pool, Inc., 100 FERC ¶ 61,358 at P 12; SouthernCompany Services, Inc., 100 FERC ¶ 61,237 at P 17 (2002), reh'g pending.

33See Section 19.7 of the Order No. 888 pro forma tariff (concerning partialinterim service); see also Morgan Stanley Capital Group v. Illinois Power Company, 93FERC ¶ 61,081 at 61,220 (2000) ("[H]ad Morgan Stanley requested, for example, long-term service for a two-year period, but only one year was available, Illinois Power wouldhave been obligated to offer service for that one available year").

agreement and any agreement for a renewal term, not just in the initial service agreement. Commission precedent is clear that such limitations must be clearly stated in thecustomer's original service agreement.

29. SPP also requests that the Commission state that the need to satisfy native loadgrowth is not the only reason why a rollover request can be denied, and that factors otherthan native load growth can justify rejection of a rollover request, if specified in theservice agreement. In a number of recent orders, the Commission has addressed thisissue and specifically rejected requests by a transmission provider to reduce the capacityavailable for a renewal of transmission service by a transmission customer "due to factorssuch as changes in transmission system topology, loop flow impacts due to changes intransactions on other transmission systems, redispatch of designated networkresources."32

30. However, it may be reasonable for a transmission provider to limit the terms underwhich a new long-term agreement may be rolled over based on a pre-existing contractobligation that commences in the future. For example, to the extent that a SIS completedprior to the execution of the original service agreement indicates that available transfercapability to serve the customer will only be available for a particular time period, afterwhich time it is already committed to another transmission customer under a previously-confirmed transmission request (i.e., an agreement under which service would commenceat some time in the future), the transmission provider can reflect those obligations in thelong-term contract and thereby limit the prospective transmission customer's rolloverrights.33

ii. Tie-Breaker Provision

31. The Respondents argue that Order No. 888-A, the pro forma OATT, and priorCommission orders describe Section 2.2 as a tie-breaker provision to be used when there




34Citing Order No. 888-A at 30,198; Idaho Power, 94 FERC at 62,144-45;Entergy Power Marketing Co. v. Southwest Power Pool, 91 FERC ¶ 61,276 at 61,936(2000); Wisconsin Public Power Inc. Sys. v. Wisconsin Public Service Corp., 84 FERC ¶61,120 at 61,655 (1998).

are competing firm service requests.34 The Respondents further argue that theCommission's August Order directly contradicts the Commission's prior determinationsthat Section 2.2 is intended to provide certain existing customers with a reservationpriority when there is a competing request for long term firm point-to-point transmissionservice, and is not an absolute right to service.

Commission Response

32. Once again, the Respondents have misconstrued our previous orders. While it istrue, as SPP suggests, that Section 2.2 can serve a tie-breaking mechanism, that provisionis not intended to function only as a tie-breaker. In other words, the rollover rights policyis not intended to apply only when there are competing firm service requests. As wehave explained in previous orders, Section 2.2 provides a tie-breaking mechanism whena transmission provider has insufficient transmission capacity and there are competingrequests for that available capacity, including an existing long-term firm transmissioncustomer whose transmission service agreement is up for renewal or rollover. If thetransmission provider has insufficient capacity, then Section 2.2 provides a tie-breakermechanism that gives the transmission customer the right of first refusal. However, inthe absence of a competing request for service, the transmission provider is obligatedunder Section 2.2 to grant a request for rollover by an existing long-term transmissioncustomer (assuming that the transmission agreement contains no restrictions on rolloverrights, as discussed above).

C. APPLICATION OF THE PRO FORMA AND AEP OATTs

33. The Respondents argue that the August Order contravenes the plain terms of thepro forma and AEP OATTs that require that rollover requests be treated as newtransmission requests subject to the same procedures as all other requests, except thatsuch requests have certain priority rights over competing requests under Section 2.2. TheRespondents contend that under Section 2.2 of the AEP and the pro forma OATTs, anexisting long-term firm transmission customer has a "transmission reservation priority"over a competing request for firm transmission service, provided that the existing long-term firm customer is willing to match the term and price of the competing request. According to the Respondents, if competing existing firm service customers apply for




35Citing Entergy Power Marketing Corp. v. Southwest Power Pool, Inc., 91 FERC¶ 61,276 at 61,936 (2000) (Entergy).

service that cannot be fully provided, priority rights will be assigned in accordance withfirst-come, first-served principles. The Respondents argue that in an earlier decision, theCommission determined that "[b]y exercising a right of first refusal an existingtransmission customer is, in effect, arranging a new long-term firm point-to-pointtransmission service."35

34. The Respondents state that Sections 13, 17 and 19 of the pro forma and AEPOATTs set out the procedures for arranging firm point-to-point transmission service and,under Section 17.5, SPP is obligated to determine the amount of transmission capacityavailable when it receives a request for firm point-to-point transmission service of oneyear or greater. SPP argues that nothing in Section 17 exempts rollover customers fromthe process. SPP further argues that nothing in Section 19 of the pro forma and AEPOATTs, which sets out the requirements for System Impact and Facilities Studies,exempts rollover customers.

35. SPP contends that the August Order will interfere with the rights of customerswho executed longer-term firm transmission service agreements before many of the one-year service agreements, such as Constellation's, were entered into. SPP argues thatunder Section 13.2 of the AEP Tariff, these customers have a higher reservation prioritythan a transmission customer whose service agreement was executed later in time. SPPstates that a transmission provider has an obligation to offer an "infill" customertransmission capacity that will ultimately be needed by a higher priority customer at alater date, but the transmission provider is not required to grant a transmission customerwho comes later in time perpetual and superior rights to this capacity. SPP argues thatthe August Order will contravene Section 13.2 and give an "infill" customer rights to thecapacity that will prevent or impair the use by the higher priority customer.

Commission Response

36. Contrary to the Respondents' assertions, the August Order is entirely consistentwith the provisions of the pro forma OATT and AEP's OATT. In Order No. 888, weconcluded that, subject to certain limitations, all firm transmission customers(requirements and transmission-only), upon the expiration of their contracts or at the time




36Order No. 888 at 31,665.

37Entergy, 91 FERC at 61,936.

38Id.


their contracts become subject to renewal or rollover, should have the right to continue totake transmission service from their existing transmission provider.36

37. In Entergy, when we stated that "[b]y exercising a right of first refusal an existingtransmission customer is, in effect, arranging a new long-term firm point-to-pointtransmission service,"37 we did not mean that the rollover request was to be treated as anew long-term request for service for purposes of a new determination of availabletransmission capacity under Section 17.5 or a new system impact study. The issue inEntergy was the time period within which a customer exercising its right of first refusalmust make an application for its new service term and notify the transmission providerthat it wishes to exercise its reservation priority. We concluded that, "[c]onsistent withthe reservation procedures in Section 17.1, we clarify that the pro forma tariff requirescustomers to notify the transmission provider that they are exercising their right of firstrefusal at the time they tender their request for the new service term, which must be noless than 60 days prior to the date the existing contract ends and the new service termcommences. This procedure should provide sufficient protection to existing transmissioncustomers (our original rationale for establishing a right of first refusal) as well asprovide a reasonable and consistent notice period for all transmission reservations."38

38. We did not intend to suggest or imply that a transmission provider would make adetermination of available transmission capacity or perform a new system impact studyeach time that a long-term firm transmission customer elects to roll over its existingtransmission service, and SPP's arguments to the contrary are wrong. Indeed, such aninterpretation would effectively undermine the entire rollover rights policy established inOrder No. 888 and set forth in Section 2.2 of the pro forma OATT. The only instance inwhich a transmission provider can require a new system impact study for an existinglong-term customer seeking to rollover over its service would be where that customerrequests a change to a receipt or delivery point in an existing long-term firm transmissionservice agreement. In that instance, the customer's request can be treated as a newrequest for service for purposes of the availability of capacity.39 In Order No. 888-A,with respect to a proposal to limit the right of first refusal to the same points of receiptand delivery as the terminating service, the Commission explained that such a proposal:




40Order No. 888-A at 30,198, n. 52.

would competitively disadvantage existing customers seeking new sources ofgeneration. However, as we stated in Order No. 888, if the customer chooses anew power supplier and this substantially changes the location or direction of thepower flows it imposes on the transmission provider's system, the customer's rightto continue taking transmission service from its existing transmission providermay be affected by transmission constraints associated with the change.40

D. NOTIFICATION BY AEP OASIS POSTINGS

39. The Respondents argue that, in the August Order, the Commission ignores the factthat AEP's transmission customers have been provided with notice that transmissioncapacity along key portions of the AEP transmission system is limited, especially withrespect to north-to-south transfers such as the transaction at issue. The Respondents statethat AEP had posted notifications since May 1997, more than two years before theservice agreement with Constellation was executed, that capacity for north-to-southtransactions is becoming increasingly limited, and that AEP does not expect to be able toaccommodate firm transactions. Respondents argue that by the various postings onAEP's OASIS, transmission customers are fully apprised of the limitations, including thedetailed projections of native load growth underlying the limitations, and have notice thatrenewals might be adversely affected. AEP contends that the Commission, in rejectingthe proposed limitation on renewal in the service agreements filed in Docket No. ERO2-2028-000 as insufficiently specific, ignores these OASIS postings which it arguesprovides the necessary specificity.

Commission Response

40. As we have stated, there are certain limited circumstances under which atransmission provider can restrict a transmission customer's rollover rights under Section2.2 if those restrictions are clearly stated in the initial service agreement between theparties. On this basis, posting of anticipated transmission limitations on AEP's OASIS isnot an acceptable method for restricting a customer's rollover rights. Because theoriginal service agreement here contains no such limitations on Constellation's rolloverrights, Section 2.2 of the AEP OATT controls.




41. Based on the foregoing, we deny the Respondents' requests for rehearing. Furthermore, we dismiss SPP's request that, in the alternative, the findings in the AugustOrder be applied prospectively only.

The Commission orders:

SPP's and AEP's requests for rehearing are hereby denied.

By the Commission.

( S E A L )

Magalie R. Salas, Secretary.



Documents

Errata Letter - Utilities · PDF fileComplaint by TransCanada Energy Ltd. Regarding Firm Sales to Alberta, Project No. 3698539 Errata for Exhibit B1 ‐7, Responses ... WPS then submitted