The Federal Energy Regulatory Commission has approved the merger of Public Service Co. of Colorado and Southwestern Public Service Co. to create "New Century Energies" (Docket Nos. EC96-2-000 and EC96-2-001).

In a separate order, the FERC has approved the open access transmission tariff for Southwestern Public Service, Public Service Co. of Colorado, and its subsidiary, Cheyenne Light, Fuel and Power Co. (Docket No. ER96-2572-000).

Public Service Co. of Colorado and Southwestern Public Service Co. had filed an unopposed settlement agreement. The FERC approved the agreement's "hold-harmless" provisions, in which the utilities agreed not to allow the merger to affect wholesale or transmission base rates for five years. Specifically, in any base rate increase proceeding during the first five years after the merger closes, the utilities will not request recovery of any merger-related costs incurred through the first two years after the merger's closing date, unless merger-related benefits offset such costs. The companies will amortize over five years the merger-related costs incurred before the end of the first two years after the merger closes. Rate recovery for new interconnections will be allowed. The commission will address the method of rate recovery later.

Because the merger applicants are not interconnected, they proposed to construct by 2001 a 300-mile, 345-kV transmission line, and a 400-MW DC intertie between their systems. Also, the FERC had expressed market power concerns that existing constraints limited transmission across SPS's system to the West. However, those concerns were mitigated because the settlement provided procedures for an open-study process.

Members of the Western Systems Coordinating Council, the Southwest Power Pool, regulatory authorities and other interested parties may participate in a process of conducting studies to identify two or more transmission line alternatives, at least one of which will increase transfer capability for the Southwestern Public Service system. The merger applicants then will solicit third-party participation, including joint ownership in, and the purchase of, firm transmission capacity on the new facilities. "The process for accomplishing the siting and construction [of the proposed transmission line] is the centerpiece of the settlement we are approving today," the FERC wrote.

Southwestern Public Service, Public Service Co. of Colorado, and its subsidiary, Cheyenne Light, Fuel and Power Co. had filed a single, joint tariff offering transmission service over their system. They proposed meeting the FERC's requirement that affiliated systems adopt a single system rate by assessing only one open-access tariff rates (the higher of them) for any service that uses more than one system. The FERC will agree to that approach until the systems become interconnected, but has noted that a rate based on the average costs of the combined systems (the type of single-system rate used by most affiliated systems) will be slightly different from the "higher of" approach proposed by the companies. Nonetheless, because the companies are not directly interconnected, do not immediately intend to operate their systems on an integrated basis, have no transmission agreements in place to accommodate such an integration and have individual rates that are nearly identical, the FERC will allow the tariffs on an interim basis. t

News items by Lori A. Burkhart, an associate legal editor at PUBLIC UTILITIES FORTNIGHTLY.

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