On September 16, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued two orders denying rehearing requests for Tres Amigas LLC’s (“Tres Amigas”) transmission project.  FERC denied the request for rehearing of the order where the Commission refused to disclaim jurisdiction over Electric Reliability Council of Texas (“ERCOT”) if it connected with the Tres Amigas Project.  Also, FERC denied the rehearing request of the order that conditionally approved the negotiated rate authority for transmission service at the Tres Amigas Superstation facility.

The Tres Amigas Superstation will connect the Eastern Interconnection, ERCOT, and the Western Electricity Coordinating Council (“WECC”) through a three-way alternating current/direct current near Clovis, New Mexico.  On March 18, 2010, FERC approved Tres Amigas’ request to sell transmission service at negotiated rates, with conditions on anchor customers and initial capacity offerings. In a separate order, FERC declined the petition to disclaim jurisdiction over the transmission facilities that will interconnect the Tres Amigas project with the ERCOT.  (see March 19, 2010 edition of the WER)

Occidental Chemical Corporation, Occidental Permian, Ltd, Occidental Power Marketing, L.P. (collectively “Occidental”), and the Texas Industrial Energy Consumers (“Industrial Consumers”) filed a limited request for rehearing due to a footnote that said transmission and distribution successors of ERCOT utilities were ordered to interconnect and wheel power under section 210 of the Federal Power Act (“FPA”).  According to Occidental and Industrial Consumers state law does not allow transmission and distribution utilities to sell power.  Occidental also claimed that FERC was expanding section 210 authority by stating successor utilities no longer selling power still qualify as electric utilities under section 210 orders.   Also, Occidental claims that the March 18 order never addressed Occidental’s argument against relying on uncontested settlement agreements as FERC precedent for future interconnections.  Finally, Occidental claimed the expansive definition of electric utilities under section 210 and footnote 66 will have unintended ramifications for future rates and transactions.  However, FERC summarily denied the rehearing request and said the March 18 order made no findings under section 210 because they were not presiding over a 210 application.

Occidental also filed the rehearing request regarding the negotiated rated authority.  Occidental claimed that Tres Amigas has not assumed the full risk of the project and failed to account for the lines that will need to be constructed by neighboring utilities with captive customers.  Also, Occidental contended FERC was wrong in finding Tres Amigas had sufficient checks in place to prevent the exercise of market power.  Finally, Occidental said FERC acted contrary to section 205 of the FPA by shifting the burden of proof over to the intervenors in the case.  FERC found that nothing in Occidental’s request could justify changing the determination that Tres Amigas has assumed full market risk for the project.  FERC also dismissed Occidental’s arguments regarding market power by reaffirming the March 18 order that found Tres Amigas’ had included sufficient long-term checks to ensure negotiated rates for transmission service will be just and reasonable and consistent with FERC’s merchant transmission policy.  The Commission also determined Tres Amigas met their original burden of proof showing their tariff was just and reasonable, so FERC never shifted the burden of proof to Occidental when conducting the negotiated rate analysis.
The full opinions are available at www.ferc.gov under Docket Nos. EL10-22-001 and ER10-396-001.