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Open Access on Trial

The old rules don’t always fit with new commercial realities.

Fortnightly Magazine - December 2011

preference to its own affiliated entity or to an investor, per se . In contrast, for several years FERC has had no problem approving the construction, ownership, and operation by a generator of transmission facilities needed solely to connect that source of power to the grid, and several such facilities have been successfully completed. In developing this generator lead line policy, FERC has permitted a generator to build, own and operate transmission facilities solely for its own use, 11 with no requirement to hold an initial open season, and even, under limited circumstances, to reserve excess capacity in the line for future planned generation. 12 In a recent decision regarding the Alta Wind projects, FERC determined that where “transmission owners have specific, pre-existing generation expansion plans with milestones for construction of generation and have made material progress toward meeting those milestones, they may have firm priority rights on their transmission lines.” 13

Confirming that the Alta Wind projects had qualified for priority access rights to the entire initial capacity of three new lines, FERC stated:

We find that Petitioners have shown the existence of specific, pre-existing plans, with definite dates and milestones, for phased development of generation that will ultimately employ the full capacity of Transmission Lines I, II, and III. . . . [In addition] we find that Petitioners have sufficiently demonstrated that there will be a future transfer of ownership interests in Transmission Lines I, II, and III to affiliates that are not currently owners of the lines but that are developing their own generation projects and will use the lines in the future.

The legal distinction between a generator lead line, where FERC allows the owner certain access priorities, and a “standard” transmission line to be built, owned and operated by entities whose owners or affiliates are trying (unsuccessfully in most instances) to preserve a preference in the capacity they’re financially backing is becoming increasingly blurred as FERC attempts to accommodate transmission proposals that reflect legitimate commercial and financial considerations. During a March 2011 technical conference FERC held to examine priority access issues, it was instructive that no participant could provide a legal definition that could distinguish between a generator lead line and an otherwise standard transmission line built to connect new generation sources. Some participants suggested that a generator lead line must have no load, must have a one-way flow, and must connect with and flow all power to the integrated transmission grid. However, this could easily apply to many standard transmission lines, and the physical operation of a line could change over time. Factors such as length or capacity of the line, or how many generators feed into it, also did not seem to sufficiently distinguish the two types of lines. Other participants proposed more subjective standards, such as the “underlying purpose” of the line, the “business model,” or the intent of the transmission owner to serve a public (rather than a private) purpose. At the end of the day, there was no commonly accepted set of factors that emerged to distinguish between a generator lead line