Reassignment of Transmission Capacity From Non-Jurisdictional Systems – A Cautionary Tale

On January 6, 2012, FERC approved PGE's proposed rate schedule seeking to eliminate the price cap on its reassignment of transmission capacity on non-jurisdictional transmission systems.  However, FERC cautioned that its approval of PGE's rate schedule would not affect PGE's obligations to comply with its non-jurisdictional transmission service agreements with Bonneville Power Administration (Bonneville), which included provisions imposing a price cap on PGE’s right to resell transmission capacity that it purchased from Bonneville.  FERC noted that its Order No. 739, which lifted the price cap on the reassignment of transmission capacity, did not intend to abrogate pre-existing transmission service arrangements over a non-jurisdictional entity’s transmission system.  Accordingly, FERC stated that its approval of PGE’s rate schedule does not affect any obligations that PGE may have to comply with its non-jurisdictional transmission service agreements with Bonneville.

Background

In Order 890, effective on May 14, 2007, the Commission lifted the price cap for all transmission customers reassigning transmission capacity in the secondary market.  The Commission stated that the elimination of the price cap would provide for more accurate price signals and would allow capacity to be allocated to those entities that value it most.  The Commission also directed its Staff to prepare a report summarizing the development of the secondary market for transmission capacity over a two-year study period following the removal of the price cap.  In Order 890-A, the Commission affirmed its decision to remove the price cap but limited the period during which reassignments could occur above the price cap by allowing for the reinstatement of the cap as of October 1, 2010.  The purpose of this limitation was to allow the Commission time to review the Staff Report, which was ultimately issued on April 15, 2010.  Based on the results of this report, the Commission issued Order 739 on September 20, 2010, allowing for the permanent removal of the price cap beyond October 1, 2010.

In Order 739-A, the Commission suggested that entities could file revised stand-alone rate schedules allowing them to resell transmission capacity above the price cap imposed by a non-jurisdictional entity.  The Commission stated that it would evaluate these filings on a case-by-case basis outside of the rulemaking process.

Bonneville, a non-jurisdictional transmission provider, reinstated the price cap on its system as of October 1, 2010.  Specifically, Part II, Section 23.1 of the Bonneville OATT caps the compensation to the reseller of reassigned transmission capacity to the higher of: (1) the original rate paid by the reseller; (2) the Transmission Provider's maximum rate on file at the time of the reassignment; or (3) the reseller's opportunity cost capped at the Transmission Provider's cost of expansion.

To date, Powerex, Macquarie, Morgan Stanley, PPL and PGE have each filed separate revised stand-alone rate schedules seeking to eliminate the price cap on the reassignment of transmission service capacity on non-jurisdictional transmission systems.  No comments or protests were filed in response to the revised rate schedules submitted by Powerex, Macquarie and Morgan Stanley, and the Commission accepted all three rate schedules.

Bonneville filed separate comments in response to the PPL and PGE filings requesting that the Commission acknowledge that the acceptance of each proposed rate schedule would not supersede the terms of each customer’s respective transmission service agreement with Bonneville.  Bonneville’s transmission service agreements with both PPL and PGE incorporate Bonneville’s price cap on reassigned transmission capacity.

PPL voluntarily agreed to incorporate a commitment in its rate schedule that it would abide by its transmission service agreement with Bonneville, i.e., it would not make resales of Bonneville transmission capacity at prices above the contractual price cap in PPL’s transmission service agreement with Bonneville.  FERC accepted the rate schedule with this commitment.

PGE Case

PGE did not provide a voluntary commitment to abide by the contractual price cap in PGE’s transmission service agreement with Bonneville.  FERC also accepted this rate schedule.  However, FERC cautioned that its approval of PGE's rate schedule would not affect PGE's obligations to comply with its non-jurisdictional transmission service agreements with Bonneville.  FERC noted that Order No. 739, which lifted the price cap on the reassignment of transmission capacity, did not intend to abrogate pre-existing transmission service arrangements over a non-jurisdictional entity’s transmission system.

For more information, please contact Toni Frost at  This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 202-296-1500 or Laura Chipkin at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 202-296-1500.