FERC rejects complaint over Springerville coal plant transmission service

Members of the Federal Energy Regulatory Commission on Feb. 19 rejected a complaint by owners of part of the coal-fired Springerville plant in Arizona that claimed that Tucson Electric Power was not giving them a good transmission access for their power production.

Tucson Electric had been leasing this capacity from the financial parties that own it until the end of last year, when the lease ended and those owners then had to start marketing that capacity on their own.

In the Feb. 19 order, the commission denied a complaint filed on Nov. 7, 2014 by Alterna Springerville LLC, LDVF1 TEP LLC, Wilmington Trust Co. and William J. Wade against Tucson Electric, requesting firm transmission service over a specified path to a specific delivery point at Palo Verde.

Complainants and Tucson jointly own the Springerville Generating Station Unit 1, a 380 MW coal-fired facility. Complainants and Tucson are parties to separate 1986 leaseback agreements under which Tucson leased a 195 MW energy entitlement in Springerville 1. The lease agreements expired on Jan. 1, 2015. Upon expiration of the agreements, complainants’ energy entitlement, representing 50.5% (195 MW) of the capacity in Springerville Unit 1, reverted back to the complainants, who are now responsible for marketing their respective generation output.

In order to transmit their share of the Springerville Unit 1 generation, complainants require transmission service from Tucson, over the San Juan-Springerville-Vail transmission system, a network of transmission facilities running from the San Juan Generating Station in northwestern New Mexico to the Vail Substation in southeastern Arizona. Tucson has offered complainants firm transmission service with a delivery point of the San Juan Generating Station or the Four Corners Power Plant. Complainants requested delivery to Palo Verde, which they said was a better path for this power.

The complaint asserted that Tucson has denied firm transmission service rights to which complainants are entitled, in favor of transmitting Tucson’s own generation and generation owned by others. Complainants alleged that Tucson: denied them firm transmission service in violation of certain pre-Open Access Transmission Tariff (OATT) contractual commitments; failed to reserve transmission capacity needed to provide that transmission service, as required by Tucson’s OATT; unduly discriminated against complainants with regard to transmission access; and granted undue preference for its own generation with regard to transmission access.

Said FERC, in part, in its Feb. 19 rejection of that complaint: “We find that Tucson has not engaged in undue discrimination or preference in providing transmission service to Salt River Project because the transmission path utilized by Salt River Project has no impact on available transfer capability over the transmission path requested by Complainants. While transmission service from Springerville-Coronado (the service provided to Salt River Project) and Springerville-Palo Verde (the service requested by Complainants) share the same point of receipt, these requests do not create competing transmission service because they require separate paths. In fact, as Tucson explains, even if Salt River Project had no transmission rights over the Springerville to Coronado path, there still would be no available transfer capability for firm transmission service to meet Complainants’ transmission service request. Accordingly, we find that Tucson’s actions in providing transmission service to Salt River Project over a separate path did not have an adverse effect on Complainants and did not constitute a violation of Tucson’s obligation to provide transmission service on a non-discriminatory basis.”

Tucson Electric parent says this dispute goes beyond FERC

In a Feb. 19 financial report filed with Canadian regulators, Tucson Electric Power’s (TEP) indirect parent, Fortis Inc., wrote about this dispute: “In November 2014 the Springerville Unit 1 third-party owners filed a complaint (‘FERC Action’) against TEP with FERC alleging that TEP had not agreed to wheel power and energy for the third-party owners in the manner specified in the Springerville Unit 1 facility support agreement between TEP and the third-party owners and for the cost specified by the third-party owners. The third-party owners requested an order from FERC requiring such wheeling of the third-party owners’ energy from their Springerville Unit 1 interests beginning on January 1, 2015 for the price specified by the third-party owners.

“In December 2014 TEP filed a response to the FERC Action denying the allegations and requesting that FERC dismiss the complaint. In December 2014 the third-party owners filed a complaint (‘New York Action’) against TEP in the Supreme Court of the State of New York, New York County, alleging, among other things, that: TEP has refused to comply with the third-party owners’ instructions to schedule their entitlement share of power and energy; that TEP failed to comply with their instructions to specify the level of fuel and fuel handling services; that TEP has failed to properly operate, maintain and make capital investments in Springerville Unit 1 during the term of the leases; that TEP has not agreed to wheel power and energy in the manner required as set forth in the FERC Action; and that TEP has breached fiduciary duties claimed to be owed to the third-party owners. The New York Action seeks declaratory judgments, injunctive relief, damages in an amount to be determined at trial, and the third-party owners’ fees and expenses.

“In December 2014 Wilmington Trust Company, as owner trustees and lessors under the leases of the third-party owners, sent a notice to TEP that alleges that TEP has defaulted under the third-party owners’ leases. The notice states that the owner trustees, as lessors, are exercising their rights to keep the undivided interests idle and demanding that TEP pay, on January 1, 2015, liquidated damages totalling approximately US$71 million. In a letter to Wilmington Trust Company in December 2014, TEP denied the allegations in the notice. In January 2015 Wilmington Trust Company sent a second notice to TEP that alleges that TEP has defaulted under the third-party owners’ leases by not remediating the defaults alleged in the first notice. The second notice repeated the demand that TEP pay liquidated damages totalling approximately US$71 million. In a letter to Wilmington Trust Company, TEP denied the allegations in the second notice.

“TEP cannot predict the outcome of the claims relating to Springerville Unit 1 and, due to the general and non-specific scope and nature of the injunctive relief sought for these claims, TEP cannot determine estimates of the range of loss at this time and, accordingly, no amount has been accrued in the consolidated financial statements. TEP intends to vigorously defend itself against the claims asserted by the third-party owners.”

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.