Notice of Inquiry Concerning Conflicts between the Curtailment Priorities in NERC’s Transmission Loading Relief Reliability Standards Conflict and the Curtailment Priorities in FERC’s Pro Forma Open Access Transmission Tariff

On January 21, 2009, FERC issued an order on rehearing and a Notice of Inquiry indicating that NERC’s TLR procedures may conflict with the curtailment provisions of the pro forma open access transmission tariff (OATT). The two orders indicate that FERC is considering (i) changing NERC’s TLR procedures to require that network service be curtailed proportionately with interchange transactions or (ii) changing the curtailment priorities under the pro forma OATT to provide that network service has a higher curtailment priority than interchange transactions. The Notice of Inquiry could have a significant effect on curtailments of every electric utility that offers transmission service under an OATT, and every entity that reserves transmission service. It is important that each transmission provider and transmission customer carefully consider the issues and decide whether to submit comments to the FERC. A summary of the orders follows.

Comments on the Notice of Inquiry are due on March 29, 2010, 60 days from publication in the Federal Register. BGM is available to discuss potential comments with affected market participants.

A. Modification of Interchange and Transmission Loading Relief Reliability Standards; and Electric Reliability Organization Interpretation of Specific Requirements of Four Reliability Standards, Order No. 713-B, 130 FERC ¶ 61,032 (2009)

In Order No. 713-B, FERC denied the request for rehearing and clarification filed by NRG Companies, Electric Power Supply Association, and Constellation Energy Commodities Group (collectively, Rehearing Parties) with respect to Order No. 713-A, in which FERC accepted revisions to the NERC TLR requirements set forth in Reliability Standard IRO-006-4 (Reliability Coordination – Transmission Loading Relief). Reliability Standard IRO-006-4 provides Interconnection-wide transmission loading relief procedures that can be used to prevent or manage potential or actual system operating limit or Interconnection reliability operating limit violations.

The Rehearing Parties contended that the TLR Reliability Standard violates the curtailment priorities established in Order Nos. 888 and 890 and the pro forma OATT, because the standard favors native network load transactions over interchange transactions with respect to curtailment priority. In addition, the Rehearing Parties contend that FERC accepted the Reliability Standard without giving due consideration to the Standard’s impact on competition. FERC concluded that the concerns raised by the Rehearing Parties regarding the potential conflict between the TLR Reliability Standard and the OATT curtailment priorities are beyond the scope of the Order No. 713 rulemaking proceeding; however, FERC determined that the issue merited further inquiry. As a result, FERC concurrently issued the Notice of Inquiry concerning the interplay between Reliability Standard IRO-006-4 and the curtailment priority provisions of the pro forma OATT.

B. Notice of Inquiry, Transmission Loading Relief Reliability Standard and Curtailment Priorities (Docket No. RM10-9-000), 130 FERC ¶ 61,033 (2009)

In the Notice of Inquiry, FERC requested comments on the interplay between Reliability Standard IRO-006-4 and the curtailment priorities set forth in FERC’s pro forma OATT, particularly sections 13.6 and 14.7. FERC explained that the Rehearing Parties in Order No. 713-A noted several flaws with Reliability Standard IRO-006-4. The flaws in the Interchange Distribution Calculator may result in violations of sections 13.6 and 14.7 of the pro forma OATT (curtailment priorities). According to the Rehearing Parties, the flaws allow certain types of transactions to avoid curtailment, so that interchange transactions bear a disproportionate share of the system’s reliability obligations. They also contend that the Interchange Distribution Calculator does not distinguish between firm and non-firm native load transmission services, assuming that all internal transactions are firm and assigning firm curtailment priorities to them.

FERC seeks public comment on whether the current application of the transmission loading relief procedures and Reliability Standard IRO-006-4 are inconsistent with OATT curtailment priorities and, if so, recommended corrective actions. FERC also seeks an update from the ERO regarding its efforts to make improvements to the Interchange Distribution Calculator.

The Notice of Inquiry specifically requests comments on the following questions:

1. Whether Reliability Standard IRO-006-4, as implemented by various transmission providers, reliability coordinators and balancing authorities, results in firm service being made subordinate to non-firm service?

2. How do Transmission Providers currently implement OATT sections 13.6 and 14.7? Specifically, discuss whether Transmission Providers rely solely on the Interchange Distribution Calculator in determining which transactions to curtail, or whether they also take into account non-firm transactions internal to the Balancing Authority which are currently not reflected in the Interchange Distribution Calculator.

3. If the Interchange Distribution Calculator results in firm service being made subordinate to non-firm service, would including transactions internal to a Balancing Authority help resolve the problem? If so, what parties would be impacted? If there are affected parties, please provide examples of what the impacts on those parties would be.

4. If the Interchange Distribution Calculator results in firm service being made subordinate to non-firm service, would modifying it to calculate the Transfer Distribution Factors (TDF) for transactions within a Balancing Authority solve the identified issue of firm transactions being curtailed before non-firm transactions within a Balancing Authority?

5. What is the role and responsibility of the transmission provider, reliability coordinator and balancing authority, in the TLR procedures and curtailment?

6. As noted above, a Level 5 TLR is called to allow certain firm transactions to continue or to mitigate further operating limit violations and a Level 6 TLR is called to implement emergency procedures. Are commenters aware of Level 5 or Level 6 TLR procedures being called for reasons other than to allow certain other firm transactions to continue or to mitigate any further operating limit violations?

7. If this is an issue, does it occur in non-RTO/ISO regions, within ISO/RTO footprints, or both?

To view Order No. 713-B, please click here.

To view the NOI, please click here.