Monday, September 24, 2018

Issues, Schedule set for Texas ROFR Case

By Tom Kleckner

The Texas Public Utility Commission last week consented to a staff briefing order that lays out the issues to be considered in SPP and Southwestern Public Service’s joint request (Docket 46901) to determine whether Texas law includes a right of first refusal (ROFR) that overrides FERC Order 1000.

SPP and SPS filed a petition in February asking the PUC to consider whether the RTO can designate entities other than the incumbent utility to construct and own regionally funded transmission facilities in Texas outside the ERCOT service area. (See SPS, SPP Ask Texas to Rule on Transmission Competition.)

Transmission line foundation construction | Plocher Construction

At its May 18 meeting, the commission said the parties must address:

  • Whether an electric utility or other entity can construct transmission facilities in Texas without first obtaining a certificate of convenience and necessity from the PUC;
  • Whether the commission has authority under state law to grant a CCN to a utility that will provide only transmission service outside ERCOT; and
  • Whether SPS has the exclusive right to construct transmission facilities within its certified service area and, if it does, whether it can decline to exercise that right.

The commissioners directed the parties to not take up any issue “relating to the interpretation of a FERC order or tariff,” saying such issues are not within the PUC’s jurisdiction.

The briefs are due June 21, with reply briefs due July 6.

As an incumbent utility operating outside ERCOT, SPS contends the state’s Public Utility Regulatory Act (PURA) gives it a ROFR to build in the service area prescribed by the PUC. That would prevent a potential competitive project under Order 1000.

SPP claims that no such right exists, giving the RTO the ability to solicit and designate transmission-only utilities to construct and operate new transmission facilities within SPS’ service area under Order 1000.

The project in question, the 345-kV Potter-Tolk transmission line in the Texas Panhandle, was pulled from SPP’s 10-year planning assessment in April. SPP’s Board of Directors has directed staff to conduct a congestion study in the area, due within a year. (See SPP Board Cancels Panhandle Line, Seeks New Congestion Study.)

The PUC debated during its previous meeting whether to send the case to the State Office of Administrative Hearings (SOAH). The commissioners eventually agreed the docket could be decided based on written briefs. (See Texas PUC Agrees to Take up SPP, SPS Request on ROFR.)

SPS Rate-Recovery Request Moves Forward

The PUC also revised a preliminary order in SPS’ request to recover the cost of developing two wind farms in West Texas and New Mexico (Docket 46936).

Commissioner Ken Anderson directed staff to include in the order a discussion of the final approval’s effect on the city of Lubbock, which has said it wants to transfer load currently served by SPS from SPP into ERCOT. (See Texas PUC OKs ERCOT, SPP Studies on Lubbock Move.)

“Does it have the potential to create stranded costs that would have to be recovered?” he asked. “If the answer is yes, then the order should include a question about what should be done to eliminate that risk. It seems to me that because Lubbock has already filed to make that move, it shouldn’t be a surprise … that SPS will attempt to argue stranded costs. That issue should be teed up for the commission to consider.”

Anderson also asked SPS and its intervenors to address whether there should be a cap on costs — estimated at $1.6 billion, or about 40% of SPS’ rate base — as the PUC required of a Southwestern Electric Power Co. plant in western Arkansas.

“The truth of the matter is, we don’t know what the cost is going to be. It could result in very substantial increase in the rate base,” he said.

The company has asked the PUC to approve a “cost-reconciliation mechanism” for the period between the wind farms’ commercial operation date and their inclusion in the rate base. SPS has said it “cannot afford to wait eight to 10 months … to begin receiving revenue attributable to the facilities.”

SPS told the commission it hopes to have both wind farms in operation by the end of 2020, allowing it to capture the full federal tax credits. The two projects have a combined capacity of 1,000 MW.

The docket has been referred to SOAH. The Texas Industrial Energy Consumers and Golden Spread Electric Cooperative have intervened in the case.

The meeting was the PUC’s first without Donna Nelson, who retired from the commission May 15 after almost six years as the three-person panel’s chair. (See Texas PUC Chair Nelson Stepping Down.)

Her absence was notable from the start. With Nelson at the helm, Anderson would normally offer motions and Marquez would second them. On Thursday, Anderson had to prod Marquez into offering a motion to approve the consent agenda.

Momentarily flustered, Marquez said, “I’m sorry, that was a little out of order. You have that motion.”

Anderson seconded, and the hearing was underway.

Texas Gov. Greg Abbott has yet to announce a replacement for Nelson. The Texas Legislature’s 85th biennial session ends May 29, which may be delaying the announcement.

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