Texas regulators: SPS does not possess exclusive right to build, operate transmission facilities within its service area

The Public Utility Commission (PUC) of Texas, in an Oct. 26 order, concluded that Southwestern Public Service (SPS) does not possess an exclusive right to build and operate transmission facilities, including new regionally funded transmission facilities, within its service area.

The PUC also concluded that transmission facilities that will serve the public cannot be built in Texas without first obtaining from the PUC a certificate of convenience and necessity (CCN). Furthermore, the PUC decided that it has the authority to grant a certificate to an entity that will provide only transmission service outside of ERCOT.

The order addresses a petition for a declaratory order that was jointly filed by SPS and the Southwest Power Pool (SPP), in which SPS and SPP requested that the PUC determine whether SPS has the exclusive right to build and operate new, regionally funded transmission facilities in areas of Texas that lie within SPS’ certificated service area.

In the docket, the PUC added, SPS contends that under Texas law, it has a right to build transmission facilities, or a right of first refusal, in its certificated service area. SPP does not believe that any provision of PURA would be violated by use of the SPP competitive process and, therefore, under FERC Order No. 1000, SPP may solicit and designate utilities, including transmission-only utilities, to build and operate new transmission facilities within SPS’ service area under the competitive bidding process set forth in SPP’s open access transmission tariff (OATT).

FERC Order No. 1000, the PUC noted, requires that each public utility transmission provider remove from its OATT all federal rights of first refusal to build transmission facilities selected in a regional transmission plan for cost allocation.
SPP has complied with Order 1000 and has devised a competitive bidding process for transmission projects that are no longer subject to a federal right of first refusal. In that process, the PUC added, SPP allows all who meet certain qualifications to submit bids to build transmission facilities, with SPP’s Board of Directors ultimately selecting a bidder to build the facilities.

Nevertheless, Order 1000 removes only federal rights of first refusal. Thus, the PUC added, if Texas state law provides an incumbent transmission owner, like SPS, with the right to build transmission facilities, or a right of first refusal, in its certificated service area, then Order 1000 does not remove those rights. However, if Texas state law does not provide incumbent transmission owners outside of ERCOT with such rights, Order 1000 controls, and projects must be competitively bid and awarded under SPP’s OATT.

The PUC added that it recently stated that transmission service includes the construction of a transmission substation and that construction includes the siting of the substation – that conclusion necessarily applies to all facilities that provide transmission service. Therefore, because a CCN is required to provide service to the public, and the construction of transmission facilities is included in the broad definitions of service and transmission service, an electric utility or other person must obtain a CCN from the PUC to build transmission facilities in Texas to provide service to the public, the PUC said.

The PUC noted that it has authority to grant a CCN to an electric utility or other person that will provide only transmission service outside of ERCOT without a service area – that authority exists under PURA. The PUC said that it implicitly decided that it has authority to issue a CCN to a new utility that would provide only transmission service by certificating such an entity in another docket (Docket No. 33734), in which Electric Transmission Texas (ETT) sought a new CCN from the PUC. The PUC noted that it based its decision simply on the definition of electric utility in PURA, which includes a person who owns or operates for compensation in Texas equipment or facilities to transmit electricity, and the prohibition that an electric utility cannot provide service without obtaining a CCN from the PUC.

The PUC said that while its decision in that docket applied to an electric utility in ERCOT, its analysis and conclusions were not limited to a specific power region or membership in an RTO. Thus, its decision that it had authority to grant a CCN to an electric utility without a service area that provided only transmission service is applicable to any area of the state, the PUC said.

On appeal, the PUC’s decision in Docket No. 33734 that a transmission-only utility was eligible for certification was overturned by a district court in Travis County, which held that the PUC lacked the authority to make such a certification. On further appeal, the PUC added, the Third Court of Appeals reversed the district court, finding that PURA authorizes the PUC to grant a CCN to a transmission-only utility without a service area.

The Legislature in 2009 amended the utility certification provisions in PURA in part by adding certain subsections, including subsection (d), which states that a certificate may be granted to an electric utility or other person under the section for a facility used as part of the transmission system serving the ERCOT power region solely for the transmission of electricity.

The PUC added that contrary to numerous assertions in the briefs submitted in the SPS/SPP matter, subsection (d) is not limited to transmission-only utilities, a term that is not defined in PURA. Both “electric utility” and “person” are defined in PURA, the PUC added, noting that neither the definition of electric utility nor the definition of person can reasonably be construed to mean someone who only provides transmission service. To limit the PUC’s authority in the manner suggested, one would have to add language to the end of subsection (d) like the following: but only if the electric utility is certificated to provide only transmission service.

The PUC added that it may not add words to a statute, and that its authority under those subsections is not limited to a transmission-only utility.

The express language of those provisions shows that the 2009 amendments were meant to authorize the PUC to issue a CCN in particular circumstances: for transmission facilities located in and used to transmit electricity in the ERCOT system. Thus, the PUC added, the 2009 amendments do not authorize the PUC to issue a CCN outside of ERCOT. However, there is no language in those subsections that expressly limits the authority of the PUC to issue CCNs outside of ERCOT under other provisions of PURA, the PUC said.

The PUC said that it has authority under PURA to issue CCNs to transmission-only utilities without a certificated service area outside of ERCOT, and it has authority under PURA to transfer certificate rights to a transmission-only utility without a certificated service area outside of ERCOT. By adopting the 2009 amendments to “chapter 37,” the Legislature did not intend to limit the PUC’s pre-existing authority to issue CCNs outside of ERCOT, the PUC said.

Noting that SPS does not have the exclusive right to build transmission facilities within its certificated service area, the PUC said that such a right would be inconsistent with the PUC’s authority to issue CCNs for transmission facilities, which is not limited to only utilities that have a certificated service area in which the facilities would be located.

Nowhere does PURA explicitly grant utilities an exclusive right to provide transmission-only service – including the right to build transmission facilities – within their certificated service areas, the PUC said.

Among other things, the PUC said that a CCN that is granted for a transmission line is for specific facilities, not for a specific service area. Thus, certificated service areas and CCNs for transmission facilities are distinct, and it is possible for a utility to have a CCN for transmission facilities that are located, wholly or partially, in another utility’s certificated service area. In fact, the PUC added, throughout Texas today, utilities have transmission facilities that are located, at least in part, in other utilities’ certificated service areas.

About Corina Rivera-Linares 3235 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.