Editor's Note: It was an awkward spot. Power marketers wanted the Federal Energy Regulatory Commission to block the "tagging" rules imposed by the North American Reliability Council. Could the FERC do that? Having stalled for more than six months, with no sign of action, the Commission surprised the federal energy bar when, on April 7, with no mention on the agenda (there could be no agenda, since there was no meeting), it surreptitiously released its opinion. Also caught unawares, the Fortnightly asked Jeffrey Watkiss, an attorney in the case, to explain what it all means.
ON APRIL 7, 1998, THE FEDERAL ENERGY REGULATORY Commission unexpectedly issued its order in what has become known as the "tagging case," which the Coalition Against Private Tariffs (CAPT) had filed with the FERC last August. At first glance, the order appears simply to dismiss CAPT's complaint. The group had asked the FERC to order the North American Electric Reliability Council and its utility members to cease and desist from a policy that would make access to electric transmission (under tariffs filed at the FERC) conditional upon a requirement that the transmission applicant provide a complete "tag" for its power transaction. Order Dismissing Filing and Rejecting Without Prejudice Proposed Revisions to Open-Access Tariff, 83 F.E.R.C. ¶61,015 (1998).
In the same order, however, the FERC also rejected the proposal of investor-owned electric utility Western Resources Inc. to adopt a new operating practice for the Southwest Power Pool (Docket No. er98-900-000). The new practice would have assigned a new lowest tier of curtailment priority to power transactions that are not properly tagged. Read as a whole, the April 7th order sets precedent for two propositions:
1. A transmission provider can lawfully deny a transmission service application on the ground that an applicant did not provide the information called for by a NERC tag, but only insofar as the tag requires the applicant to provide the same information that is required by the transmission provider's FERC-approved transmission tariff; and
2. A transmission provider that chooses to provide transmission service to an applicant although the applicant has not provided all of the information required by the tariff (and the tag) cannot thereafter assign a curtailment priority to that customer that is not expressly provided for in the transmission provider's FERC-approved tariff.
The order is crafted to avert any assertion of FERC jurisdiction over the activities of NERC. Because of this craftsmanship, it is not immediately apparent that the Order, in fact, granted precisely the relief that CAPT had sought. To appreciate the magnitude of CAPT's success, understanding the context and genesis of tagging is important.
How NERC Imposes Its Tagging Rules
When CAPT filed its motion with the FERC on Sept. 11, 1997, tagging had just recently been introduced by NERC as a component of what was called the interim Transmission Information System (iTIS). That system in turn was part of a larger NERC initiative to identify, "tag" and prioritize power transactions so that transmission system security coordinators could curtail the tagged transactions to provide transmission line loading relief.
As tagging was originally proposed, and as it was being implemented by NERC members when CAPT filed its motion, tagging required the penultimate wholesaler in a chain to document for the transmission providers (and, in turn, for security coordinators) every transfer of title to the power that it would receive and resell to end users. At that time (and continuing today), some transmission providers would deny schedules of applicants that failed to provide a complete chain of title tag from generator to load-serving entity. CAPT asked the FERC to order transmission providers to cease and desist from tagging in this fashion because it amounted to imposing, without FERC approval, extra-tariff terms and conditions limiting eligibility for access to jurisdictional transmission services.
Between the date of filing the CAPT motion and the date of the order, the iTIS ceased to be interim and the amount of information called for in the tagging requirements of NERC's final Transmission Information System (TIS) had been scaled back substantially. Notably, the chain of title reporting obligation of the original tag was eliminated completely. By the order date, the TIS tag was a template that asked the service applicant to supply only the following information:
1. The service start/stop dates
2. The code assigned to the purchasing/selling entity (PSE)
3. PSE contact
4. PSE 24-phone, fax and email
5. Sending control area (CA)
6. Sending CA's phone, fax and email
7. Receiving control area
8. Receiving CA's phone, fax and email
9. Transaction path, including Sending CA, transmission provider, PSE, point of receipt and point of delivery, product and OASIS identifier
10. Energy profile
11. Ramp rate (where applicable)
How FERC Got Its Way
As the FERC recognizes in the order, these 11 pieces of information are already required of a transmission applicant by sections 17.2 (firm point-to-point), 18.2 (nonfirm point-to-point), and 29.2 (network) of its pro forma open-access transmission tariff, and by 18 C.F.R. § 2.20 (1997), which each of these sections of the pro forma tariff incorporates by reference. FERC Order, slip opinion, p. 7.
Interpreted against this background, the FERC's order finds that tagging imposes no terms or conditions on a transmission applicant's eligibility for service that are not already terms and conditions of the relevant transmission provider's FERC-approved open-access transmission tariff. In other words, the extra-tariff terms and conditions of the original iTIS tagging that CAPT's motion sought to enjoin were no longer a problem with respect to NERC. Accordingly, the CAPT motion could be dismissed. Electing to ignore original tagging under the iTIS allowed FERC to avert a jurisdictional battle with NERC.
However, to ensure that NERC and the industry did not mistake its message, the FERC joined its decision on CAPT's motion with the procedurally unrelated Western Resources filing in order to inform transmission providers and NERC that they cannot do what the original tag did: No industry participant can unilaterally change or add to the terms and conditions of eligibility for open-access service under FERC-jurisdictional transmission tariffs. The Western Resources decision further informs transmission providers that they alone, and not NERC or any trade association, are responsible for enforcing the letter of their FERC-approved transmission tariff.
Jeffrey D. Watkiss is a partner in the law firm of Bracewell & Patterson LLP. Previously, he worked as a FERC senior litigation attorney. In the case described here he represented the Coalition for a Competitive Electric Market, which joined with the Electricity Consumers Resource Council to form the Coalition Against Private Tariffs, the complainant in FERC Docket EL97-58-000. CCEM was composed of power marketers: Engage Energy US LLP, Enron Power Marketing Inc., Koch Energy Trading Inc., and Vitol Gas & Electric Services LLC.
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