FERC Approves Settlement of Conditional Firm Transmission Service Dispute

On January 20, 2011, the Federal Energy Regulatory Commission (FERC) issued an order accepting 12 conditional long-term firm point-to-point transmission service agreements between PacifiCorp and Columbia Energy Partners (CEP).  This order, and these service agreements, concluded a two-year long dispute between PacifiCorp and CEP over the appropriate level and character of service to be provided by PacifiCorp.  The service agreements represent how transmission providers and customers can work collaboratively to produce meaningful conditional firm service under FERC Order No. 890.  Further, the involvement of FERC's Dispute Resolution Service (DRS) in assisting the agreement reached by PacifiCorp and CEP highlights the usefulness of a perhaps overlooked service offered by FERC.

The dispute between PacifiCorp and CEP started when PacifiCorp responded to a number of CEP's firm transmission service requests by finding no firm transmission service to be available and then, in response to a second CEP request, this one for conditional firm service, PacifiCorp only offered a highly limited service with a very large amount of curtailments, at PacifiCorp's maximum tariffed firm service rates.  After CEP and PacifiCorp could not agree on the conclusions reached by PacifiCorp's system impact studies, PacifiCorp filed the service agreements in unexecuted form in December 2008, thus elevating the dispute to FERC.  Over the course of the next 12 months, FERC would be mired in pleadings, compliance filings and protests, all while the parties attempted to negotiate a settlement.  When it became clear that the parties were unable to settle their differences, FERC issued an order in December 2009 which, among other things, suggested that the parties avail themselves of FERC's DRS service.  During the course of 2010, and through the mediation of FERC's DRS staff, PacifiCorp, CEP and, at times, the Bonneville Power Administration (BPA) worked towards resolving these issues in a settlement.  These discussions ultimately resulted in the filing (and subsequent FERC approval) of conditional firm service agreements that creatively resolved CEP's concerns in a manner satisfactory to PacifiCorp.

Unlike typical conditional firm transmission service that curtails firm service on an hours basis (a number of hours condition), or based on certain pre-defined system conditions (a system conditions condition), the conditional firm service that ultimately resolved this dispute has a number of unique features.  First, the service agreements provide firm service to CEP with varying numbers of curtailable hours and five-year terms, based on seasonal variations in firm service.  Second, the service agreements give CEP a one-time future right to convert the curtailable hours service to service that can be curtailed only under certain system conditions, depending on the occurrence of certain events in the future.  Third, the service agreements give CEP the ability to make an additional service request once certain delivery points on BPA's system are established while maintaining its position in the transmission service queue.  This package of conditions reduced the cost to CEP by shaping the service and further tailored the service agreements in ways associated with the needs of CEP's wind project.

This outcome highlights the value to transmission providers and generators in exploring  the creative use of conditional firm service in circumstances where firm service is not available.  It also highlights the benefit FERC's DRS staff can bring in resolving issues that would otherwise addressed through litigation before FERC.  The service agreements and the underlying pleadings can be found in FERC Docket Nos. ER09-408 and ER11-2170.