In Docket No. EL22-31, FERC denied on rehearing the Northern Maine Independent System Administrator’s request for reciprocal elimination of Through and Out Rates between it and ISO-NE. Though FERC requires elimination of seams, including rate pancaking, within an RTO, such policy is to encourage, not require, reciprocal waivers of access charges between RTOs if such waivers can be accomplished in a manner that is reasonable in terms of cost recovery, cost shifting, efficiency, and discrimination. Furthermore, where a particular RTO application proposes to rely on an “effective scope” in lieu of a larger geographical control area to satisfy Order No. 2000’s scope requirement, the Commission requires the applicant to show that the integration of the RTO’s markets with those of its neighbors would serve as the functional equivalent of a larger RTO. ISO-NE’s RTO application was one that relied on an “effective scope” to satisfy the Commission’s scope and regional configuration requirement. However, NMISA misinterpreted FERC’s inter-RTO rate pancaking policy as a mandate and misinterpreted the condition placed on ISO-NE’s RTO status due to its reliance on an “effective scope” to meet Order No. 2000’s scope requirement. In granting ISO-NE RTO status, the Commission conditioned its approval upon ISO-NE reducing seams with NYISO specifically. While the parties that proposed the formation of ISO-NE as an RTO also committed to attempt to reduce seams more broadly, mentioning other neighboring control areas, FERC did not condition ISO-NE’s RTO status on that further commitment. Furthermore, the fact that the parties that formed ISO-NE made that further commitment does not equate to a condition on ISO-NE’s RTO status, nor does it transform the Commission’s policy to only require seams management agreements when an RTO proposal relies on an “effective scope” to satisfy Order No. 2000’s scope requirement into a universal requirement for seams management agreements. FERC found that the relationship between NMISA and ISO-NE is not the same as that between the NYISO and ISO-NE. NMISA has not sought or been granted RTO status as defined in Order No. 2000. Thus, the rate pancaking policy, by its express terms, does not encompass NMISA because it only encourages reciprocal waiver of access charges between RTOs. In reaching its decision to deny NMISA’s request, FERC considered whether NMISA was similarly situated with NYISO, and found that it was not. This finding was based on the following factors: 1) NMISA has not negotiated a comprehensive seams management agreement with ISO-NE like NYISO did, 2) NMISA is not directly and substantially interconnected with ISO-NE like NYISO is, and 3) NMISA does not operate organized energy and ancillary service markets like ISO-NE’s like NYISO does. The Commission pointed out that “[t]he principal purpose of the comprehensive seams management agreement between ISO-NE and NYISO is to address the high degree of interaction between their similar organized markets.” A review of NMISA’s tariff document shows that NMISA’s function related to energy and ancillary services is primarily to purchase such energy and ancillary services from New Brunswick (under a specific New Brunswick tariff) or from third-party sellers (under bilaterally negotiated contracts) on behalf of the Competitive Electricity Providers (CEP) that serve retail load in the NMISA area of Maine. Finally, the fact that NMISA and ISO-NE are electrically remote from each other (i.e., are not directly interconnected) means that the need for information sharing on such matters as real-time transmission congestion is markedly reduced between NMISA and ISO-NE compared to ISO-NE and NYISO.
In Docket No. ER22-1395, Public Service of New Mexico (PNM) filed two, late-filed, non-conforming, long-term firm point-to-point transmission service agreements (TSAs) with PacifiCorp and Tri-State Generation & Transmission Association, Inc. (Tri-State) under PNM’s Open Access Transmission Tariff (Tariff), with service commencing on December 1, 2005, and January 1, 2008, respectively. PNM stated that it discovered the non-conforming TSAs in the process of performing a comprehensive review of its TSAs and internal processes for identifying and filing jurisdictional agreements with the Commission. PNM noted that it was filing a report of the late-filed agreements to the Commission’s Office of Enforcement. On the same date, in Docket No. ER22-1396-000, PNM filed 13 non-conforming, long-term, firm, point-to-point TSAs with several customers, entered into on various dates from July 1, 2005, to June 1, 2019.
FERC’s initial orders in these two cases (PNM I and PNM II) directed PNM to refund the time-value of monies actually collected for the time period during which the rates were charged without Commission authorization. The orders directed PNM to make time-value refunds within 30 days for the TSAs, and to file a refund report within 30 days thereafter, and make a showing in the refund report, to the extent that time-value refunds would result in a loss. On June 16, 2022, PNM requested rehearing, arguing that the time-value refunds, which it claimed would require it to pay its customers more than $7 million as a result of PNM I and in excess of $28 million as a result of PNM II, are unlawful, substantial and punitive.
On rehearing, FERC continued to find that refunds are required for PNM I. FERC stated that its policy and precedent requiring refunds for late-filed agreements is well settled. FERC stated that time-value refunds serve two purposes, in connection with the Commission’s statutory obligations: (1) to protect customers, including against unduly preferential treatment, and (2) to incentivize public utilities to comply with the filing requirements of FPA section 205.
As for PNM II, FERC continued to find that PNM was under an obligation to file the 13 TSAs. However, they clarified in the order on rehearing that, even though PNM was required to file the TSAs, based upon the circumstances in the case, FERC relieved PNM of its obligation to provide time-value refunds with respect to the 13 TSAs. Section 35.1(g) of the Commission’s regulations requires that …”[a]ny individually executed service agreement for transmission, cost-based power sales, or other generally applicable services that deviates in any material respect from the applicable form of service agreement contained in the public utility’s tariff and all unexecuted agreements under which service will commence at the request of the customer, are subject to the filing requirements of this part.” Here, as PNM’s 13 TSAs deviate from the standard language of its pro forma TSA, the TSAs are necessarily non-conforming. In Order No. 2001, the Commission stated that “if an agreement does not precisely match the applicable standard form of service agreement . . . it is necessarily nonconforming and must be filed individually for Commission approval.” Notwithstanding, FERC relieved PNM of its financial obligations as PNM had been maintaining a log detailing when it waived the deposit requirement of contracts (the issue with the 13 TSAs). FERC stated that while the requirement to maintain a log arguably provides an alternative means for Commission oversight of PNM’s exercise of discretion under that Tariff provision, FERC concludes that the requirement, in and of itself, did not relieve PNM of its filing obligations under section 205 of the FPA given that the agreements are, as discussed above, nonconforming. Nonetheless, as PNM maintained a log to record waiver of the applicant deposit and that log was available for the Commission to review, there may have been confusion as to whether the agreements also needed to be filed to ensure Commission oversight.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.