In an order issued January 31, 2011 (Sky River), the Federal Energy Regulatory Commission (FERC) rejected a Common Facilities Agreement (CFA) negotiated between Windstar Energy, LLC (Windstar), developer of a wind generation facility in California, and Sky River LLC (Sky River), an affiliate of NextEra and part owner and operator of a 9-mile transmission line known as the “Wilderness” line.  The CFA was structured as a licensing arrangement under which Windstar, as licensee, paid for rights to use the line on a pro rata basis over a 20-year term.  When Sky River filed the agreement, it sought waivers of the requirements of Order Nos. 888 and 890 to file an Open Access Transmission Tariff (OATT) and to maintain an Open-Access Same Time Information System (OASIS).

The Sky River order rejected the CFA and rejected Sky River’s requested waivers, finding that the purpose of the agreement was to provide an unaffiliated third party transmission services over the Wilderness line, and that any such services must be provided under the terms of FERC’s standard OATT.  FERC said that owners of limited and discrete transmission facilities—i.e., facilities that do not form an integrated transmission grid—may enjoy waivers of Orders 888 and 890 but only until the utility receives a request for transmission service from a third-party.  After such a request, the owner of the transmission facilities must file an OATT. 

 Sky River is silent on the issue of whether the decision is limited to license-type use arrangements, or whether the holding might also be extended to shared ownership arrangements.  Because Sky River involved only a license to use transmission facilities, it is possible FERC may still accept structures in which two unaffiliated parties hold ownership interests in a transmission line.  While this point is unclear, if joint ownership arrangements are pursued with a non-affiliate, we note that it also remains important that each generation developer seeking priority use of  part of a transmission line have concrete development plans for generation that will use the line, and can demonstrate material progress toward achieving such development in order to maintain priority use of part of the line. 

As noted in our February 28th entry “Upcoming FERC Technical Conference on the Ownership of and Priority Access Rights to New Transmission Lines” FERC Staff will be addressing closely related issues further in a March 15, 2011, Technical Conference (PDF).