FERC Poised to Review NERC Registration of Generator as Transmission Owner and Transmission Operator

On February 4, New Harquahala Generating Co., LLC (Harquahala), appealed to the Federal Energy Regulatory Commission (FERC) a decision by the North American Electric Reliability Corporation (NERC) to register Harquahala as a transmission owner and transmission operator (TO/TOP) for purposes of compliance with NERC’s mandatory reliability standards.  In the case, FERC will decide whether to uphold NERC’s determination that high-voltage interconnection facilities should be treated as integrated transmission facilities for reliability compliance purposes.  The decision may have significant consequences for generators that own interconnection facilities.

March 5, 2008 is the deadline for filing motions to intervene, comments, and protests in Harquahala’s appeal (FERC Docket No. RC08-4-000).

Background

Harquahala owns and operates a 1,100 MW generating facility, a 26-mile, 500 kV generator interconnection tie-line, and substation facilities located in Arizona.  Entities that own and operate generating facilities (and associated interconnection facilities) have typically registered with NERC as generator owners and generator operators and are required to comply with the applicable mandatory reliability standards.  NERC ruled that Harquahala’s sole-use, radial interconnection facilities were an “integrated transmission element associated with the bulk power system,” and therefore determined that Harquahala owns and operates transmission facilities.  As a result, NERC registered Harquahala as a TO/TOP and required Harquahala to comply with the additional mandatory reliability standards applicable to TOs/TOPs.  

Pursuant to FERC’s interconnection policy, interconnection customers are allocated the costs of sole-use radial transmission lines that benefit only the interconnection customer, because such facilities are not considered integrated network facilities that benefit all users of the transmission system.  Harquahala’s appeal presents FERC with the question of whether a generator that owns such interconnection facilities should be treated as the owner and operator of transmission facilities for purposes of compliance with the mandatory reliability standards. 

Implications

If FERC affirms NERC’s registration of Harquahala as a TO/TOP, other generator owners and operators are likely to be newly registered as TOs/TOPs.  The Western Electricity Coordinating Council (WECC), the regional reliability entity for the Western Interconnection, has already contacted other generators requiring them to register as TOs/TOPs.  Other regional reliability entities may follow suit.

Generators newly registered as TOs/TOPs would, upon registration, be immediately required to be in compliance with as many as 26 additional mandatory reliability standards and up to 248 additional requirements that are applicable to TOs/TOPs and do not apply to generator owners or operators.  Generators may also be required to have NERC-certified transmission operators operate the interconnection facilities.  Compliance with such standards is likely to result in additional costs and increased regulatory risk for generators.  Violations of mandatory reliability standards may result in the imposition of sanctions by NERC and FERC, including civil penalties of up to $1 million per day, per violation.

For More Information

Van Ness Feldman counsels generators, investor-owned utilities, municipal utilities, and power marketers on compliance with mandatory reliability standards and has assisted clients in disputes regarding NERC registration. For assistance or additional information, please contact Gary Bachman, Andrew Art , Vincenzo Franco or any other member of Van Ness Feldman’s Electric Practice at 202.298.1800.