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[Federal Register Volume 65, Number 120 (Wednesday, June 21, 2000)]
[Notices]
[Pages 38530-38534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15572]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL00-46-000; et al.]

Entergy Power Marketing Corporation, et al., Order Granting 
Complaint and Rejecting Related Service Agreements, Denying Complaint 
and Accepting Related Service Agreement, and Providing Clarification of 
Order No. 888

Issued June 15, 2000.
Before Commissioners: James J. Hoecker, Chairman; William L. Massey, 
Linda Breathitt, and Curt Hebert, Jr.

    In this order, we address two complaints that involve the exercise 
of the right of first refusal provisions established in the Order No. 
888 \1\ pro forma tariff.\2\ In one complaint (Docket No. EL00-46-000), 
a customer alleges that the transmission provider violated its open 
access transmission tariff by attempting to require the customer to 
exercise its right of first refusal too early. In the other complaint 
(Docket No. EL00-53-000), a potential customer alleges that the 
transmission provider permitted its existing customer to exercise its 
right of first refusal too late. We now recognize that the right of 
first refusal provisions of the pro forma tariff are not sufficiently 
clear and provide clarification to the parties to these proceedings and 
of Order No. 888, as discussed below. As a result, we grant the 
complaint in Docket No. EL00-46-000 and reject the related service 
agreements and deny the complaint in Docket No. EL00-53-000 and accept 
for filing the related service agreement, as discussed further below.
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    \1\ Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities: Recovery 
of Standard Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 61 FR 21,540 (1996), FERC Stats. & Regs. para. 31,036 
(1996), order on reh'g, Order No. 888-A, 62 FR 12,274 (1997), FERC 
Stats. & Regs. para. 31,048 (1997), order on reh'g, Order No. 888-B, 
81 FERC para. 61,248 (1997), order on reh'g, Order No. 888-C, 82 
FERC para. 61,046 (1998).
    \2\ We also address two related filings of service agreements 
that were entered into based on the parties' understanding of when 
the right of first refusal may be exercised.

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[[Page 38531]]

Background

[Docket Nos. EL00-46-000 and ER00-1829-000]

Complaint

    Entergy Power Marketing Corporation (EPMC) currently has a one-year 
firm transmissions service agreement with Southwest Power Pool, Inc. 
(SPP) to transmit 600 MW. The term of the agreement is January 1, 2000 
to December 31, 2000. On January 24, 2000, SPP informed EPMC that SPP 
had received competing requests for EPMC's transmission capacity and 
demanding that EPMC exercise its right of first refusal under section 
2.2 of the Open Access Transmission Tariff (OATT). EPMC responded with 
a letter claiming that it had, under section 2.2 of SPP's OATT, until 
the end of the contract term to exercise its right of first refusal. 
EPMC maintained that it had until 60 days before the expiration of its 
contract (referencing section 17.1 of the OATT) to make its request for 
renewal of service. Upon receiving EPMC's response, SPP accepted the 
request for the capacity made by another customer, Tenaska Power 
Services Company (Tenaska).
    On February 16, 2000, EPMC filed its complaint asking the 
Commission to: (1) Declare that SPP had violated its OATT by requiring 
EPMC to make an early exercise of its right of first refusal; (2) 
require SPP to hold open EPMC's right of first refusal until at least 
October 31, 2000; and (3) direct SPP to refrain from making any further 
requests that EPMC exercise the right of first refusal before October 
31, 2000.
    Notice of EPMC's complaint against SPP was published in the Federal 
Register, 65 FR 9258 (2000), with comments, protests, or motions to 
intervene due on or before March 7, 2000.
    A timely answer was filed by SPP. SPP states that the complaint 
presents an issue of first impression to the Commission as to when a 
customer is required to inform the transmission provider whether it 
will exercise its right of first refusal. SPP suggests that if the 
Commission grants EPMC's complaint it will be encouraging transmission 
capacity hoarding by transmission customers. SPP asks that the 
Commission dismiss EPMC's complaint.
    Timely motions to intervene in support of the complaint were filed 
by ONEOK Power Marketing Company. Timely motions to intervene in 
support of SPP's position were filed by Enron Power Marketing, Inc. 
Duke Energy Corporation, jointly by Tenaska Power Services Company and 
Coral Power, LLC, and by Reliant Energy Services, Inc. A notice of 
intervention, raising no issues, was filed by the Arkansas Public 
Service Commission. Timely motions to intervene, raising no issues, 
were filed by Arkansas Electric Cooperative Corporation, Conoco Global 
Power, Duke Energy Trading and Marketing, LLC, Dynegy Power Marketing, 
Inc., the Municipal Energy Agency of Mississippi and Lafayette 
Utilities system, the Oklahoma Municipal Power Authority, Southwestern 
Electric Power Company and Public Service Company of Oklahoma. An 
untimely motion to intervene was filed by Ameren Services Company.
    EPMC filed an answer to SPP's answer to the complaint. Tenaska 
filed a motion to expedite the complaint proceedings and to reject 
EPMC's answer to SPP's answer. SPP supports Tenaska's motion for 
expedition.

Service Agreements

    On March 7, 2000, in Docket No. ER00-1829-000, SPP filed service 
agreements under its OATT for service, using the disputed capacity, to 
Tenaska.
    Notice of SPP's filing was published in the Federal Register, 65 FR 
14,557 (2000), with comments, protests, or motions to intervene due on 
or before March 28, 2000.
    EPMC filed a timely motion to intervene and protest claiming that 
the service agreements are an attempt to sell capacity that is subject 
to EPMC's right of first refusal and are thus a violation of SPP's 
tariff. EPMC asks that this proceeding be consolidated with its 
complaint.
    Tenaska filed a timely motion to intervene in support of SPP's 
filing.

[Docket Nos. EL00-53-000 and ER00-1711-000]

    On August 26, 1999, Texas-New Mexico Power Company (TNMP) submitted 
to Public Service Company of New Mexico (PSNM) a request for firm 
point-to-point transmission service under PSNM's OATT for the period 
from January 1, 2000 to December 31, 2001. After receiving TNMP's 
request for transmission service, PSNM Transmission informed TNMP that 
it had no Available Transfer Capability (ATC) to satisfy TNMP's 
request, but stated that a 28 MW contract with PSNM Marketing was due 
to expire on December 31, 1999 and, if PSNM Marketing did not exercise 
its right of first refusal to extend the contract, PSNM Transmission 
would be able to provide the requested transmission service.\3\
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    \3\ Pursuant to this Commission's separation of functions 
requirements, PSNM Transmission performs PSNM's transmission 
function, while PSNM Marketing performs PSNM's wholesale merchant 
function. PSNM Transmission and PSNM Marketing are each departments 
of PSNM. PSNM Marketing has firm transmission rights on PSNM's 
transmission system through assignment from PSNM International 
Business Development (PSNM International).
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    PSNM Transmission notified PSNM Marketing of the competing 
transmission request and asked PSNM Marketing to confirm or deny that 
it would extend its transmission agreement. However, PSNM Marketing 
indicated that it needed additional time to consider whether or not to 
exercise its right of first refusal to extend the contract and match 
TNMP's contract term. Consequently, PSNM Transmission held TNMP's 
request first in the queue subject to PSNM Marketing's right of first 
refusal.
    On December 17, 1999, PSNM Marketing exercised its right of first 
refusal by matching TNMP's request for 28 MW of transmission service of 
two years.

Service Agreement

    On February 28, 2000, PSNM submitted, in Docket No. ER00-1711-000, 
an executed service agreement between PSNM Transmission and PSNM 
International under PSNM's OATT. Under the service agreement, PSNM 
Transmission will continue to provide PSNM Marketing (through an 
assignment from PSNM International) 28 MW of firm point-to-point 
transmission service. PSNM requests an effective date of January 1, 
2000.
    Notice of PSNM's filing was published in the Federal Register, 65 
FR 12,984 (2000), with comments, protests, or motions to intervene due 
on or before March 21, 2000.
    On March 21, 2000, TNMP filed an intervention, protest, request for 
investigation and motion for consolidation with its complaint in Docket 
No. EL00-53-000. TNMP argues that PSNM Marketing (through an assignment 
from PSNM International) was able to retain the transmission capacity 
as a result of PSNM Transmission acting in a manner that was unjust, 
unreasonable, unduly discriminatory and preferential to its affiliate. 
According to TNMP, the issue raised in its complaint are factually 
identical to those raised in its protest and the two proceedings should 
be consolidated.

[[Page 38532]]

Complaint

    On March 15, 2000, TNMP filed, in Docket No. EL00-53-000, a 
complaint against PSNM alleging misconduct in PSNM's treatment of 
TNMP's application for 28 MW of firm point-to-point transmission 
service. TNMP argues that PSNM Transmission administered its OATT in a 
manner that is unjust, unreasonabale and unduly discriminatory and 
preferential to its corporate affiliate. Specifically, TNMP argues that 
PSNM Transmission violated section 2.2 of its OATT by allowing its 
affiliate, PSNM Marketing, an unreasonable amount of time to decide 
whether to exercise a right of first refusal under its existing 
transmission contract. TNMP argues that it has suffered economic harm 
as a result of PSNM Transmission's actions and that PSNM Transmission's 
corporate affiliate was a direct beneficiary of PSNM Transmission's 
action. TNMP requests that the Commission require PSNM Transmission to 
release the transmission capacity to TNMP or, in the alternative, TNMP 
should be compensated for its lost opportunity.
    Section 2.2 provides that an existing firm transmission customer 
has a transmission reservation priority that ``may be exercised at the 
end of all firm contract terms of one year or longer.'' According to 
TNMP, PSNM Marketing and PSNM Transmission interpret this to mean the 
right of first refusal may be exercised up until 11:59 p.m. on December 
31, 1999, the last minute of the last day of the existing contract 
term. TNMP disputes this interpretation. It asserts that the OATT does 
not intend for the holder of a right of first refusal to be able to 
exercise this right, at its discretion, when a competing transmission 
request has been submitted.
    TNMP argues that while it recognizes that the Commission, in Order 
No. 888-A, rejected requests to establish specific procedures for 
exercising the right of first refusal, any interpretation of section 
2.2 must be just and reasonable. TNMP points to section 17.7 of the 
OATT for support that a right of first refusal must be exercised in a 
reasonable time period. According to TNMP, section 17.7 contemplates a 
30-day time period in which to exercise rollover rights in the context 
of a request for extension of the commencement of transmission service 
under the OATT. TNMP argues that there is no basis to distinguish the 
circumstances in section 17.7 from those in section 2.2. Because PSNM 
Marketing did not respond in a timely manner, TNMP argues that the 
transmission capacity should be released to it.
    Notice of TNMP's complaint was published in the Federal Register, 
65 FR 15,630 (2000), with comments, protests, or motions to intervene 
due on or before April 14, 2000.
    PSNM filed an answer and requests that the Commission dismiss 
TNMP's complaint because TNMP has failed to demonstrate that it 
violated its OATT or acted in an unduly discriminatory manner. PSNM 
maintains that the commission expressly declined to adopt specific 
procedures for exercising the right of the first refusal under section 
2.2 when asked to do so on rehearing of Order No. 888. PSNM states that 
its actions regarding TNMP's request for transmission service were 
undertaken in strict compliance with section 2.2 of the OATT. According 
to PSNM, section 2.2 clearly states that a transmission customer with a 
right of first refusal may exercise that right at the end of the 
contract term. PSNM states that PSNM Marketing exercised its right and 
ultimately agreed to match TNMP's competing bid within the time frame 
permitted by section 2.2. \4\ PSNM states that section 2.2 does not 
provide for any different treatment in the event of a competing bid by 
another transmission customer; nor does it enable the transmission 
provider to force a customer taking service subject to a right of first 
refusal to make its decision prior to the expiration of its contract. 
Therefore, PSNM argues that PSNM Transmission has no authority under 
section 2.2 to compel PSNM Marketing or any other long term firm 
transmission customer to decide, in advance of the expiration of the 
contract, whether to exercise a right of first refusal.
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    \4\ Contrary to TNMP's assertion, PSNM states that it is 
unlikely that a customer with a right of first refusal will exercise 
its right in the last minute of the last hour of the last day of the 
contract since the customer with the right will need to plan its 
business just as the party seeking service will need to do. PSNM's 
Answer at 14.
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    PSNM also states that the Commission should reject TNMP's attempt 
to apply section 17.7, which PSNM points out, applies to the different 
issue of extensions of time for the commencement of service under the 
OATT.
    TNMP filed an answer to PSNM's answer to the complaint.

Discussion

Procedural Matters

    Pursuant to Rule 214 of the Commission's Rules of Practice and 
Procedure, \5\ the notice of intervention and the timely, unopposed 
motions to intervene serve to make the entities which filed them 
parties to the proceedings in which they intervened. Further, we find 
good cause to grant the untimely motions to intervene filed in these 
proceedings, given the interests represented, the early stage of these 
proceedings, and the apparent absence of any undue prejudice or delay.
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    \5\ 18 CFR 385.214 (1999).
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    Rule 213(a)(2) of the Commission's Rules of Practice and Procedure, 
18 CFR 385.213(a)(2) (1999), prohibits the filing of an answer to an 
answer unless otherwise permitted by the decisional authority. We are 
not persuaded to allow the proposed answers, and accordingly will 
reject the answers.

Reservation Priority Under Section 2.2 of the OATT

    We now recognize that the timing provisions governing the right of 
first refusal in section 2.2 of the pro forma tariff are not 
sufficiently clear as illustrated by the two complaints before us. 
Because of these complaints, we believe that clarification is necessary 
to provide for a more orderly and consistent process. Therefore, we 
provide the following clarification as to the meaning of sections 2.2 
and 17.1 of the pro forma tariff and as to when the right of first 
refusal may be exercised. \6\
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    \6\ This clarification addresses the requirements of our pro 
forma tariff when customers are exercising the right of first 
refusal. It does not consider whether and to what extent a 
particular pre-Order No. 888 agreement imposes other obligations on 
existing customers who are converting from service under a bilateral 
agreement to service under the tariff.
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    Section 2.2, Reservation Priority for Existing Firm Service 
Customers states:

    Existing firm service customers (wholesale requirements and 
transmission-only, with a contract term of one-year or more), have 
the right to continue to take transmission service from the 
Transmission Provider when the contract expires, rolls over or is 
renewed. This transmission reservation priority is independent of 
whether the existing customer continues to purchase capacity and 
energy from the Transmission Provider or elects to purchase capacity 
and energy from another supplier. If at the end of the contract term 
the Transmission Provider's Transmission System cannot accommodate 
all of the requests for transmission service the existing firm 
service customer must agree to accept a contract term at least equal 
to a competing request by any new Eligible Customer and to pay the 
current just and reasonable rate, as approved by the Commission for 
such service This transmission reservation priority for existing 
firm service customers is an ongoing right that may be exercised at 
the end of all firm contract terms of one year or longer. (Emphasis 
added).

    Section 17.1, Procedures for Arranging Firm Point-to-Point

[[Page 38533]]

Transmission Service states, in relevant part:

    A request for Firm Point-To-Point Transmission Service for 
periods of one year or longer must contain a written Application to: 
[Transmission Provider Name and Address], at least sixty (60) days 
in advance of the calendar month in which service is to commence.* * 
* *. All Firm Point-To-Point Transmission Service requests should be 
submitted by entering the information listed on the Transmission 
Provider's OASIS. . . . (Emphasis added).

    The intent of section 2.2 is to provide the existing long-term firm 
customer a priority over competing requests for transmission service 
upon expiration, rollover or renewal of the existing customer's 
contact. While section 2.2 provides that the reservation priority may 
be exercised at the end of the contract term, section 17.1 sets forth 
the reservation procedures that customers must follow arranging firm 
point-to-point transmission service. By exercising a right of first 
refusal an existing transmission customer is, in effect, arranging a 
new long-term firm point-to-point transmission service. Consistent with 
the reservation procedures in section 17.1, we clarify that the pro 
forma tariff requires customers to notify the transmission provider 
that they are exercising their right of first refusal at the time they 
tender their request for the new service term, which must be no less 
than 60 days prior to the date the existing contract ends and the new 
service term commences. This procedure should provide sufficient 
protection to existing transmission customers (our original rationale 
for establishing a right of first refusal) as well as provide a 
reasonable and consistent notice prior for all transmission 
reservations. Therefore, we clarify the phrase ``may be exercised at 
the end of all firm contract terms'' in section 2.2 to mean sixty (60) 
days in advance of the date on which the contract expires, rolls, over 
or is renewed.
    Because the interrelationship between section 2.2 and section 17.1 
of the pro forma tariff was not clear prior to this order, we find that 
PSNM's interpretation of it OATT, that a transmission customer had 
until the end of its contract to execute its reservation priority under 
section 2.2, was not unreasonable when made. Thus, under these 
circumstances, we conclude that PSNM's customer (PSNM Marketing) 
properly exercised its right of first refusal. We, therefore, deny 
TNMP's complaint (Docket No. EL00-53-000) and accept for filing the 
service agreement (Docket No. ER00-1711-000) that renews the 
transmission service contract between PSNM and the existing customer--
PSNM Marketing (through an assignment from PSNM International), to be 
effective on January 1, 2000, as requested.\7\
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    \7\ Central Hudson Gas & Electric Corporation, 60 FERC 
para.61,106, order on reh'g, 61 FERC para.61,089 (1992).
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    We will grant EPMC's complaint against SPP (Docket No. EL00-46-
000), as discussed below. We find that SPP's OATT does not depart from 
the pro forma tariff and, as a result, EPMC has the right to exercise 
its right of first refusal until the end of the contract term. However, 
because the end of the contract term is more than sixty days from the 
date of this order, we will require EPMC to comply with the 
interpretation of section 2.2 and section 17.1 announced in this order, 
i.e., that the existing customer's right to execute its reservation 
priority at the end of the contract term, means that the existing 
customer, here EPMC, may exercise its right of first refusal no later 
than 60 days prior to the date the existing contract ends and the new 
service term commences, which, in this case, would be October 31, 2000. 
SPP cannot compel EPMC to exercise its right of first refusal and 
cannot award its capacity to a competing customer prior to that date. 
We, therefore, will reject the service agreements filed by SPP in 
Docket No. ER00-1829-000 without prejudice to their being refiled in 
the event that partial service can be provided or if EPMC does not 
exercise its right of first refusal for the contested transmission 
capacity.
    With the issuance of this order we are putting the industry on 
notice that, effective immediately (i.e., for contracts expiring August 
31, 2000 and after), no less than sixty (60) days prior to the date of 
existing contract ends and the new service term commences, the existing 
long-term customer must make an application for its new service term 
following the usual pro forma tariff procedures and notify the 
transmission provider that it wishes to exercise its reservation 
priority (right of first refusal) under section 2.2 of the pro forma 
tariff. To assure that existing long-term transmission customers are 
aware of this requirement, every transmission provider must update the 
business practices section on its OASIS to reflect the following 
clarification: ``Any existing long-term customer that wishes to 
exercise its reservation priority must make an application for its new 
service term following the usual pro forma tariff procedures and notify 
the transmission provider, no less than sixty days (60 days) prior to 
the date an existing long-term contract ends and the new service term 
commences, that the long-term transmission customer wishes to exercise 
its reservation priority (right of first refusal) under section 2.2 of 
the pro forma tariff.'' In addition transmission providers should 
notify present customers of the updated business practices. Finally, we 
will direct the Secretary to publish a copy of this order in the 
Federal Register. We also want to emphasize that this clarification 
applies to the pro forma tariff and the OATTs of all transmission 
providers unless and until a transmission provider has filed different 
procedures for exercising the right of first refusal that are 
consistent with or superior to the pro forma tariff.

The Commission Orders

    (A) All answers to answers filed in these proceedings are hereby 
rejected.
    (B) EPMC's complaint is hereby granted, as discussed in the body of 
this order.
    (C) TNMP's complaint is hereby denied, as discussed in the body of 
this order.
    (D) PSNM's service agreement filed in Docket No. ER00-1711-000 is 
hereby accepted for filing to be effective on January 1, 2000, as 
discussed in the body of this order.
    (E) SPP's service agreements filed in Docket No. ER00-1829-000 are 
hereby rejected, as discussed in the body of this order.
    (F) PSNM is hereby informed of the rate schedule designations in 
Attachment A.
    (G) The Secretary is hereby directed to published a copy of this 
order in the Federal Register.

    By the Commission.
David P. Boergers,
Secretary.
Attachment A

     Public Service Company of New Mexico Rate Schedule Designations
                       [Docket No. ER00-1711-000]
                      [Effective: January 1, 2000]
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                Designation                    Other party/description
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(1) Service Agreement No. 130 under First   PSNM international business
 Revised Tariff, Vol. No. 4 (Supersedes      development.
 Service Agreement No. 104).
(2) Supplement No. 1 under Service          Service specifications.
 Agreement No. 130 under First Revised
 Tariff, Vol. No. 4.

[[Page 38534]]

 
(3) Eighth Revised Sheet Nos. 106A-106F     Index of customers.
 (Supersedes Seventh Revised Sheet Nos.
 106A-106F).
(4) Nineth Revised Sheet Nos. 106           Index of customers.
 (Supersedes Eighth Revised Sheet No. 106).
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[FR Doc. 00-15572 Filed 6-20-00; 8:45 am]
BILLING CODE 6717-01-M
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