FERC rejects waiver app related to minority share of Four Corners coal plant

The members of the Federal Energy Regulatory Commission on July 6 rejected a May 6 application from 4C Acquisition LLC for waiver of the commission’s requirements to file an Open Access Transmission Tariff (OATT), to establish and maintain an Open Access Same-Time Information System (OASIS), and to comply with the commission’s Standards of Conduct.

4C Acquisition, a wholly-owned subsidiary of Pinnacle West Capital Corp. and an affiliate of regulated utility Arizona Public Service (APS), is in the business of directly and indirectly constructing, investing in, acquiring, and holding interests in electric generation facilities. 4C Acquisition stated that, on July 6, 2016, it will acquire El Paso Electric’s 7% ownership interest in the coal-fired Four Corners Power Plant, which is located on the Navajo Nation in Fruitland, New Mexico.

4C Acquisition said Four Corners is a joint participation project that currently consists of two generation units (Units 4 and 5) and associated interconnection facilities. The acquisition of the 7% interest in Four Corners is also subject to a December 2013 Option Agreement between APS and the Navajo Transitional Energy Company LLC (Navajo Energy) under which Navajo Energy has the option to purchase El Paso’s 7% ownership interest from APS.

4C Acquisition states that Navajo Energy has elected to exercise this option and has until July 6, 2017, to close the transaction. 4C Acquisition states that, during the interim period between its acquisition and Navajo Energy’s closing, it will hold rights to the 7% interest in Four Corners and that, absent a waiver, its ownership interest in the Four Corner’s 345 kV and 500 kV switchyards and 345/500 kV transformer (collectively called the “Associated Facilities”) would subject it to the requirements to establish and maintain an OATT and an OASIS.

4C Acquisition asserted that during the interim period its ability to process requests over the Associated Facilities will be limited due to Navajo Energy’s rights. 4C Acquisition explained that Navajo Energy may require use of the Associated Facilities to deliver its entitlement in Four Corners to interconnections with transmission providers, which 4C Acquisition asserted will limit 4C Acquisition’s ability to enter into long-term transmission agreements during the interim period when it will own the Associated Facilities. 4C Acquisition states that currently it does not have in place an OATT, transmission personnel, or an OASIS that would enable it to make capacity over the Associated Facilities available for third-party use; therefore, 4C Acquisition sought waiver of each of thecCommission’s requirements.

Said the July 6 FERC order: “We find that the Associated Facilities do not qualify as limited and discrete and therefore deny 4C Acquisition’s requests for waiver. The Associated Facilities described in this filing consist of the 345 kV Switchyard connected to Unit 4 and the 500 kV switchyard connected to Unit 5, and the 345/500 kV transformer serves as the tie between Units 4 and 5, and allows for bi-directional flow across Four Corners, making it part of an integrated transmission grid. Indeed, the 345/500 kV transformer is listed on APS’s OASIS. Therefore, the Associated Facilities at the Four Corners station are not limited and discrete and do not qualify for waiver under the Commission’s traditional waiver analysis.

“Furthermore, we disagree with 4C Acquisition’s argument regarding the burden of maintaining an OASIS and filing an OATT. 4C Acquisition is an affiliate of APS, which maintains an OATT and has an OASIS for its transmission facilities including the 345/500 kV transformer at Four Corners, and 4C Acquisition has provided no explanation as to why it is unable to use APS’s OATT or OASIS. We are also not persuaded by 4C Acquisition’s statement that requiring it to post and market its limited capacity, which Navajo Energy has publicly announced that it intends to purchase, could impede or adversely affect the value of the Associated Facilities to Navajo Energy. 4C Acquisition has failed to explain how using these facilities to make short-term capacity available for third-party use during the interim period harms Navajo Energy.”

Also on July 6, Arizona Public Service filed with FERC a Participant Services Agreement between 4C Acquisition (4CA) and APS.

Said the APS filing: “On July 6, 2016, 4CA will take ownership of El Paso Electric Company’s (‘EPE’) share of the Four Corners Project (‘Four Corners’). Currently, EPE’s share of Four Corners resides in the EPE BAA. When the transfer of ownership to 4CA takes place, 4CA’s share of Four Corners will move from the EPE’s BAA to APS’s BAA. When 4CA’s generation capacity moves to the APS BA, APS’s responsibilities as a Balancing Authority will increase, which will necessitate the provision of essential reliability services such as spinning and supplemental reserves. As 4CA is not a BA and does not own any other generation assets, it is impossible for 4CA to provide all of the essential reliability services that will be necessary for its operation within the APS BA.

“APS and 4CA, therefore, are entering into a Participant Services Agreement (‘Agreement’) to ensure that 4CA has the essential reliability services necessary for its reliable operation within the APS BA and that APS is properly compensated for its costs associated with provision of such services and with its increased reliability responsibilities. The Agreement utilizes Commission-approved charges in APS’s OATT as appropriate compensation for the services APS will provide to 4CA.

“APS does not propose any charges other than those essential reliability services and costs that are already approved in its OATT or the pass-through of charges associated with its participation in the Southwest Reserve Sharing Group. Further, the attached Agreement proposed adheres to the Commission approved Rate Schedule Nos. 44, 98, and 211 that have been agreed to by all participants of Four Corners.”