More Tres Amigas Interconnection Details Revealed in FERC Filings

Michael Giberson

Today Tres Amigas LLC submitted two filings to the Federal Energy Regulatory Commission, one seeking assurance from FERC that linking the ERCOT system to the proposed interconnection project would not subject ERCOT to FERC jurisdiction, and the other seeking authority to sell transmission services at negotiated rates. According to the filings, affirmative answers to both requests are necessary for the project to proceed.

In the jurisdictional request, Tres Amigas said:

The relief requested in this Petition is essential for the Tres Amigas project to move forward. The ERCOT parties with whom the Petitioner has discussed interconnecting with Tres Amigas have made clear that they will not likely obtain approvals in Texas to construct transmission lines to Tres Amigas without this jurisdictional disclaimer, and without an ERCOT interconnection the unique benefits of Tres Amigas will be lost.

In the request for authority to sell transmission services, Tres Amigas said:

Although this filing is styled as a request for negotiated rates, it is in reality a request for authorization to proceed with the Tres Amigas Superstation (“Tres Amigas”). The Applicant cannot realistically use traditional, cost-based transmission service pricing. Cost-based pricing normally applies to transmission providers that have captive customers who bear responsibility for the cost of transmission under an individual or regional open access transmission tariff (“OATT”) or other transmission arrangement.

The Applicant has no captive customers and there is no regional transmission organization (“RTO”) OATT under which the costs of Tres Amigas can be recovered. The beneficiaries of the Tres Amigas project will be in all three interconnections and therefore will be spread over a geographical area that far exceeds the scope of any existing or proposed OATT with cost-based rates. The very purpose of Tres Amigas is to eliminate the barrier created by the current separation of the U.S. transmission system into three asynchronous grids, providing new transaction opportunities across much of the United States.

The risks associated with Tres Amigas also exceed those associated with a typical cost-based transmission project. As discussed in Section VI.A below, the Applicant is taking on the full market risk associated with this project. This risk is unique in that no one has constructed a facility like Tres Amigas before. The economic success of this project will depend on the market’s response to the availability of service through this facility and on the willingness and ability of third parties to construct transmission lines to Tres Amigas, factors over which the Applicant will have virtually no control.

The Applicant has invested two years of effort and considerable expense to develop an engineering solution to a long-recognized transmission system need. Thus far, Tres Amigas has received a positive response from throughout the industry and from public officials. However, if this application is not approved, the Applicant will have no means to recover the $1 billion or more projected initial investment required to design and build Tres Amigas, and the project cannot proceed.

The request for authority to sell transmission service contains extensive discussions concerning the company’s proposed business model.  I anticipate finding time later in the week for a careful review.

[Various other Tres Amigas-related posts here at Knowledge Problem can be found using this search link.]

UPDATE: The Tres Amigas jurisdicational filing is assigned FERC docket number EL10-22; the transmission rate filing is ER10-396.  Comments on both filings are due at FERC on December 29, 2009.