FERC sides with Xcel Energy, NIPSCO in ownership disputes

FERC on July 19 upheld Xcel Energy‘s (NYSE:XEL) and Northern Indiana Public Service Co.‘s (NIPSCO) positions in separate complaints involving American Transmission Co. and Pioneer Transmission, respectively.

Both ATC and American Electric Power (NYSE:AEP), which together with Duke Energy (NYSE:DUK) jointly owns Pioneer, expressed disappointment about the decisions.

Xcel Energy on Feb. 14 filed a complaint with FERC (Docket EL12-28) alleging that ATC’s unilateral pre-permitting activities for the La Crosse-Madison transmission line, or the Badger Coulee line, violated both the Midwest ISO’s (MISO) open access transmission tariff and the transmission owners agreement (TOA). Xcel Energy asked that FERC force ATC to the negotiating table to develop terms for shared ownership and construction of the line.

Pioneer on Feb. 8 filed a complaint against NIPSCO and the Midwest ISO (MISO) (Docket EL12-24) over the construction of the first segment of the Pioneer project, asking that FERC set aside MISO’s interpretation of its transmission owners agreement (TOA) that Pioneer is not currently eligible to become a party to the TOA.

AEP CEO Nick Akins said the FERC decision does not fully recognize the technical and factual basis that formed the company’s argument.

“The new line doesn’t even interconnect with NIPSCO – only Duke and AEP – and you can’t interconnect AEP’s 765-kV into NIPSCO’s 138-kV system. Technically, that just doesn’t work very well,” Akins said during the company’s 2Q12 earnings conference call on July 20. The CEO added AEP would evaluate its next steps.

FERC in its decision acknowledged that NIPSCO’s facility, the existing Reynolds station, would require substantial expansion, composed largely of new facilities, in order to accommodate the 765-kV bus to meet the 765-kV MVP, but said these upgrades do not negate NIPSCO’s ownership of the Reynolds station. (For a more detailed explanation of the case, click here.)

Akins said FERC’s decision sends a “wrong message to the promoters of transmission solutions,” but a source familiar with the situation said that FERC’s decisions affirm that the two cases were predicated on interpreting MISO’s existing TOA, rather than on FERC Order 1000 and its removal of the right of first refusal (ROFR). 

“There are not broad, huge future implications that FERC is backing off its ROFR,” the source familiar said.

Interpretation of the TOA revolved primarily around the language in Appendix B, section VI, which stipulates: “Ownership and the responsibilities to construct facilities which are connected between two or more owners’ facilities belong equally to each owner, unless such owners otherwise agree, and the responsibility for maintaining such facilities belongs to the owners of the facilities unless otherwise agreed by such owners.”

“In Pioneer [vs. NIPSCO], they were saying that ROFRs have to be removed, so go ahead and order that here,” the source familiar said. He added, though, that Order 1000 is prospective, meaning it will apply to new transmission facilities proposed after Order 1000 is implemented, and will not have retroactive application.

“[W]hile the Commission did require the elimination of a federal right of first refusal in Order No. 1000, it did so on a prospective basis upon Commission acceptance of the compliance filings due on October 11, 2012,” FERC said in the Xcel Energy vs. ATC order.

“Projects that were included in regional plans in 2011 and probably in 2012 are to be governed by the old agreements and tariffs,” the source familiar said.

ATC’s vice president of strategic planning and project development, John Flynn, said the company is evaluating its next move and that it is too early to say what that may be. Among ATC’s options for recourse are to seek rehearing in the case, to submit a complaint against the CapX2020 projects, or to pursue a combination of the two, he said.

“An argument we made was that if FERC ruled in favor of Xcel’s interpretation of the tariff agreement language that, by logical extension, that could entitle ATC to apply the same argument and seek 50% ownership in the CapX2020 lines,” Flynn told TransmissionHub July 20. “FERC seemed to at least affirmatively indicate that’s an issue for another complaint.”

A spokesperson for Xcel Energy declined to comment on the potential for ATC to file a complaint against the CapX2020 projects.

Xcel Energy in a statement said FERC “has recognized Xcel Energy’s contractual rights to an equal share of ownership of the proposed La Crosse-Madison 345-kV transmission line as approved by MISO in December 2011. We look forward to working with the American Transmission Company to develop this important project.” 

NIPSCO is a subsidiary of NiSource (NYSE:NI).

Carl Dombek contributed reporting to this article.  

This article was updated at 9:41 a.m. on July 23, 2012, to clarify that Xcel Energy, not ATC, had filed the complaint against ATC.  

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.