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Tres Amigas Tie Up

Synchronizing networks to bring green power to market.

Fortnightly Magazine - July 2010

power from the ERCOT terminal to one of the other two terminals at the EI or WECC interconnections. Transmission rights therefore would entail firm point-to-point service from one delivery point to one receipt point, but also would include the right to redirect schedules to an alternative delivery or receipt point on a firm or non-firm basis as permitted under FERC’s pro forma open access transmission tariff (OATT) and the right to resell transmission rights in the secondary market.

The application contemplated successive open season auctions of transmission rights in time blocks of different duration representing up to 80 percent of the project’s initial capacity before commercial start-up, the amount of capacity offered and the applicable time blocks to be based on Tres Amigas’ contemporaneous assessment of the market. Transmission rights would be sold on a non-discriminatory basis to the highest creditworthy bidder. The application also proposed that Tres Amigas would retain the right to reserve up to 20 percent of the capacity at each terminal for sale in open season auctions after the project commences commercial operation, by which time all available capacity at each of the scheduling points would have been made available for sale bilaterally, in open season auctions, or under the OATT.

Citing a recent FERC order as precedent, the application also took note of Tres Amigas’ probable need to support early development efforts by selling transmission rights representing up to 50 percent of the capacity of the project at each scheduling terminal to anchor customers under bilaterally negotiated agreements. In doing so, the application argued that the rates to be charged, being competitively determined, would be just and reasonable and that capacity would not be withheld as a means of raising prices.

This March, FERC granted Tres Amigas’ application, subject to certain limitations. It accepted allocation of 50 percent of initial capacity to anchor customers, but denied Tres Amigas’ request to hold back 20 percent of initial capacity for discretionary sale. It also required that, before entering into an anchor customer agreement, Tres Amigas first must obtain FERC’s authorization; be prepared to offer the same terms to open season customers; and refrain from withholding capacity that isn’t committed to anchor customers during the open season process, either through creation of tranches of capacity or by offering less than the full amount of available capacity in any auction. As a practical matter, Tres Amigas must declare the amount of initial capacity it will offer at the outset of the open season process and allocate later capacity additions or availability, if any, under the OATT.

FERC found that “sufficient long-term checks are in place to ensure that negotiated rates for transmission service … will be just and reasonable,” including competition from capacity owners’ secondary transmission rights, options to purchase capacity on existing AC/DC interties, differences in the price of generation in the relevant markets, and Tres Amigas’ commitment to expand the project at cost-of-service rates if expansion pursuant to negotiated rates isn’t feasible. “With no captive pool of customers from which [Tres Amigas] can recover its cost,” FERC concluded, “the