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Texas Staff: PUC Should Consider Requiring AEP Texas To Obtain FERC Disclaimer of Jurisdiction As Part of TCC, TNC Merger

September 6, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Public Utility Commission of Texas should consider requiring the merged AEP Texas utilities to seek from FERC an order disclaiming jurisdiction over the merged AEP Utilities' wholesale transmission rates for service wholly within ERCOT as a condition of approving the merger of AEP Texas Central and AEP Texas North, PUC Staff said in a post-hearing brief

Staff noted that the Texas PUC has exclusive authority over AEP TCC's and AEP TNC's wholesale transmission rates for transmission service wholly within the ERCOT region. The jurisdiction of the PUC over transmission planning, licensing, and cost recovery for electric utilities within the ERCOT region, "has been firmly established," Staff noted

However, both AEP TCC and AEP TNC continue to seek FERC approval of wholesale transmission rates established by the PUC, Staff noted. "Because this practice was approved as a result of the merger between American Electric Power Company, Inc. and Central and South West Corporation (AEP & CSW Merger), the current case presents the Commission an opportunity to revisit the issue," Staff said

Specifically, a stipulation in the AEP & CSW merger proceeding incorporated agreements as to regulatory jurisdiction, including the agreement that AEP & CSW would file rates for transmission service at FERC in accordance with ERCOT regional pricing and terms and conditions as established by the PUC. Given the nature of the stipulation, the PUC in the AEP & CSW merger order did not make a conclusive finding on jurisdictional matters.

Staff noted that the case most often referenced to support a finding of FERC jurisdiction over AEP TCC and AEP TNC's wholesale sales within ERCOT is Central Power and Light Company, West Texas Utilities Company, Public Service Company of Oklahoma, and Southwestern Electric Power Company, 81 FERC 61,3111, FERC Docket Nos. OA97-24-000 and ER97-881-000, Order Directing Modifications to System Transmission Tariff, as Modified, and Accepting Service Agreements (December 10, 1997), where FERC determined the rates to be charged through the joint system-wide open access transmission' tariff (OATT) of the operating companies of CSW. Although FERC gave deference to the rate setting of the Commission, FERC stated that the deference was limited to a finding that the rate setting of the Commission is consistent with FERC's open access, non-discriminatory transmission policies, Staff noted

"However, that FERC order was issued during a time when AEP TCC and AEP TNC each owned a fleet of generating units, the output of which was optimized with the output of the generation fleets of its three affiliated CSW utilities. In other words, CSW jointly dispatched the generating units of Central Power and Light Company (now AEP TCC), West Texas Utilities Company (now AEP TNC), Southwestern Electric Power Company, and Public Service Company across the DC ties that asynchronously connect ERCOT and the Southwest Power Pool. CSW's joint dispatch of its utility subsidiaries' generating units was similar to Entergy Corporation's joint dispatch of Entergy Texas, Inc.'s and its other utility subsidiaries generating units prior to those utilities exiting the Entergy System Agreement, but with a potentially key difference that CSW jointly dispatched generating units through the use of the DC ties connecting ERCOT and SPP," Staff noted

"However, since the FERC's decision in FERC Docket Nos. OA97-24-000 and ER97-881-000 and the Commission's approval of the jurisdictional commitments in Docket No. 19265, AEP TCC and AEP TNC have undergone significant changes. Because AEP TCC and AEP TNC no longer own generation units in ERCOT, with the exception of generation owned pursuant to PURA § 39.051(c), AEP TCC and AEP TNC are no longer subject to joint dispatch with electric utilities or other entities outside of the ERCOT region. Despite this change in circumstances, AEP TCC and AEP TNC have continued to seek FERC approval of their wholesale transmission rates for service within ERCOT. As part of considering whether to approve the proposed transaction, including the transfer of AEP TCC's and AEP TNC's transmission facilities to AEP Utilities, the Commission should consider establishing conditions related to the jurisdictional status of wholesale transmission service provided by AEP Utilities," Staff said

"The Commission should consider whether it should, as a condition of approval of the proposed transaction, require AEP Utilities to seek from FERC an order that disclaims FERC jurisdiction over AEP Utilities wholesale transmission rates for wholesale transmission service wholly within the ERCOT region. At a minimum, Staff recommends that the Commission should require AEP Utilities to reaffirm all applicable commitments from the AEP & CWS merger docket regarding the Commission's authority to set the wholesale transmission rates of AEP Utilities for wholesale transmission service wholly within the ERCOT region," Staff said

Docket 46050

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