Owners of Springerville Unit 1 protest Tucson Electric power line sale plan

The owners, and soon to be direct managers, of part of the coal-fired Springerville Unit 1 in Arizona on Dec. 3 protested at the Federal Energy Regulatory Commission about a partial sale of the power line they say they need to sell power out of that unit.

Financial entities Alterna Springerville LLC and LDVF1 TEP LLC are the protesting parties. Basically, at the end of this year, Tucson Electric Power’s lease on Unit 1, which those financial companies own, will lapse, meaning those companies will then need to sell power from the unit.

What they protested on Dec. 3 is a Nov. 12 application by Tucson Electric Power for commission authorization to sell to the Salt River Project an approximately 57.44% undivided interest in the 345-kV Springerville-Coronado transmission line and to purchase from SRP an approximately 42.56% undivided interest in certain upgrades installed by SRP on the Springerville-Coronado Line. The Springerville-Coronado Line is part of the San Juan Springerville-Vail Transmission System in which TEP has an interest. TEP has also asked for expedited commission approval of this transaction by Dec. 30.

Springerville Unit 1 is a 424.8 MW (nameplate) coal-fired facility located near Springerville, Arizona, in the Tucson Electric Power balancing authority area.

Said Alterna and LDVF1 TEP. which are known as the “Trustees”: “Intervenors submit that this transaction may have an adverse effect on competition and on regulation and thus would not be in the public interest. Action on the Section 203 Application on an expedited basis, as TEP has requested, may also adversely constrain the Commission’s discretion to implement a remedy, if one is determined to be needed, in response to Intervenors’ recently filed FPA Section 206 complaint concerning transmission rights on this same portion of TEP’s transmission system. Any Commission approval of the transaction should occur only after the Commission rules on this complaint or, alternatively, be subject to appropriate conditions to mitigate such adverse effects on competition and regulation and to preserve the Commission’s discretion in this pending complaint proceeding.

“Under the terms of an Amended and Restated Facility Support Agreement between the Trustees and TEP, as amended and restated as of December 15, 1992 (the ‘1992 FSA’), TEP is obligated, upon termination of the Lease Agreement on January 1, 2015, to provide firm transmission service from Springerville Unit 1 to a point of interconnection with the transmission system of another utility, subject to the reasonable approval of Intervenors, in order to enable Intervenors to market their respective scheduled entitlement shares of the output of Springerville Unit 1. Palo Verde is the only point on TEP’s system that is commercially reasonable for the sale of such electricity by Intervenors. Therefore, transmission service from Springerville Unit 1 to Palo Verde is essential to Intervenors’ ability to market their scheduled entitlement shares of the output of Springerville Unit 1. Such service would utilize TEP’s transmission path from Springerville to Vail over the San Juan-Springerville-Vail Transmission System and then from Vail to Palo Verde. Thus far, however, TEP has refused to provide this transmission service on the basis that it lacks available transmission capacity (‘ATC’).

“On October 17, 2014, TEP tendered for filing a series of long-term Transmission Service Agreements (‘TSAs’) pursuant to which it is proposing to provide up to 623 MW of firm transmission service for SRP on the Springerville-Coronado Line. Such service would involve transmission of electricity in either direction between the Springerville Generating Station and the Coronado bus. Intervenors filed a motion to intervene and protest in that proceeding in which they expressed concern that the provision of such transmission service to SRP may reduce the amount of capacity on the San Juan-Springerville-Vail Transmission System that would otherwise be available for TEP’s transmission of electricity from Springerville to Palo Verde on their behalf.

“After the Lease Agreement expires, Intervenors will become potential competitors of TEP and other generation suppliers in the Southwestern United States with respect to the sale of electricity at wholesale to purchasers in California. In order to do so, Intervenors need to obtain transmission service from TEP for transmission of electricity from Springerville Unit 1 to Palo Verde. To the extent that electricity is transmitted from Coronado to Springerville for delivery to Vail or other points on the TEP transmission system south of Springerville, the sale of an interest in the Springerville-Coronado Line by TEP to SRP may reduce the amount of transmission capacity on the San Juan-Springerville-Vail Transmission System owned by TEP that could otherwise be used by TEP to transmit electricity on behalf of Intervenors. Although TEP asserts that ‘the Transaction will not result in any change in market concentration,’ it may prevent the Intervenors’ shares of the output of Springerville Unit 1 from entering the market for sale of electricity at wholesale to purchasers in California, and therefore help to preserve TEP’s existing share of that market, which might otherwise be diluted. For these reasons, TEP’s sale of an interest in that line to SRP, without appropriate conditions, would adversely affect competition in wholesale electricity markets in the Southwestern United States.”

Tucson Electric: there is no room on the power line these companies want to use

Said Tucson Electric on Dec. 3 in response to these companies’ original complaint over transmission access: “The Commission should dismiss the Complaint forthwith as Tucson Electric has offered Complainants transmission service to move power out of the Springerville Generating Station (‘Springerville’) located in eastern Arizona in a manner fully in accordance with its obligations under the 1992 Facility Support Agreement (the ‘1992 FSA’) at issue. Yet, Complainants are not satisfied. They claim that the locations to which Tucson Electric has offered to wheel the power are not ‘commercially feasible,’ despite the fact that nowhere in the 1992 FSA does that term, or any term like it, appear. Rather, Complainants want Tucson Electric to wheel the power to Palo Verde―and only Palo Verde―despite the fact that there is no available transmission capability (‘ATC’) to move that power there. Additionally, Complainants accuse Tucson Electric of contractual and other violations as a result of it failing to provide Complainants firm transmission service from Springerville to Palo Verde―again, over a transmission path that presently has zero ATC.

“All of Complainants’ accusations are misplaced. Rather: (i) Tucson Electric has fully complied with the terms of the 1992 FSA, (ii) its granting of transmission service to the Salt River Project Agricultural Improvement and Power District (‘SRP’) had no bearing on Complainants’ transmission service request, and (iii) Tucson Electric rightfully maintained its existing rights on portions of the Springerville to Palo Verde path in order to serve reliably its native load. In addition, Tucson Electric has never actually denied Complainants’ transmission service application. Rather, the request is in limbo as a result of Complainants’ failure to provide a deposit as required by Tucson Electric’s Open Access Transmission Tariff (‘OATT’).”

The complainants and other parties lease to Tucson Electric an 85.9% interest in Springerville Unit 1 (SGS1) pursuant to leases that will expire on Jan. 1, 2015. Pursuant to the terms of those leases, Tucson Electric elected in 2013 to purchase a 35.4% interest in SGS1 from three of the owner/lessors at the end of the respective lease terms, but declined to exercise its purchase option with complainants, which hold a combined 50.5% interest in SGS1. The combination of the lease expirations and purchases of interests will result in a decrease of approximately 215 MW (nameplate) in Tucson Electric’s generating capacity at SGS1. SGS1 has summer net dependable capability of 387 MW.

In order to compensate for this loss of generating capacity at SGS1, Tucson Electric will soon acquire a 75% interest in the 550 MW (net) Block 3 of the Gila River Power Station located in Gila Bend, Arizona.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.