Energy Law

Parties Submit Joint Settlement of Pacific Intertie Dispute

By Tracy Davis

On November 21, PacifiCorp, Pacific Gas and Electric Company (PG&E), the California Independent System Operator (CAISO), and several others proposed to FERC an uncontested settlement that would resolve disputes over a 94-mile segment of the Pacific AC Intertie (PACI) transmission line between Oregon and northern California.  Uniquely, the 94-mile line at issue is jointly owned by two utilities, one, PG&E,  inside the CAISO, and the other, PacifiCorp, outside of it.  Under the proposed settlement, PacifiCorp and PG&E agreed to share equally the transmission capacity over the PACI between Malin, Oregon and Round Mountain, California, with PacifiCorp eventually providing service on its portion of the line under its open-access transmission tariff (OATT).

The dispute over the PACI began earlier this year.  The two 500 kV lines that comprise the PACI are co-owned by several parties.  PacifiCorp owns the northern half of the 94-mile segment on the eastern line, and PG&E owns the southern half of that segment and has turned operational control of its capacity over to the CAISO.  Since 1967, PacifiCorp had leased its share of the capacity for a low, fixed amount to several California utilities under a 40-year agreement.  Those utilities, in turn, placed PacifiCorp's portion of the line, along with PG&E's portion of the line, under the CAISO's operational control. 

With the capacity lease set to expire by its terms in July 2007, PacifiCorp filed a notice of termination in May, and informed FERC that it intended to begin to offer service over its 47-mile segment under its OATT.  This filing drew opposition from California utilities, the California Public Utilities Commission, and the CAISO.  PG&E in turn proposed revisions to the operating agreements for the line.  In July, FERC ruled that neither PacifiCorp's nor PG&E's proposals had been shown to be just and reasonable and convened a paper hearing to sort out the details. 

With the December 31 end of the suspension period fast approaching, the parties agreed that PacifiCorp and PG&E would "swap" portions of the capacity each owns under a 20-year agreement, such that each party will have rights to half of the capacity on the entire 94-mile path.  PacifiCorp also agreed to lease a portion of its capacity back to PG&E for a ten-year period, with some capacity becoming available under PacifiCorp's OATT beginning in 2012.  PacifiCorp and the CAISO also filed a joint operating agreement for PacifiCorp's share of the line, which continues to provide for CAISO operation of the capacity.  Other agreements relating to the operation of the California-Oregon Interface were also modified to reflect the settlement arrangements, and changes were made to PG&E's Transmission Owner tariff to implement cost recovery under the ten-year lease.  The settlement will thus compensate PacifiCorp for use of its portion of the line, while keeping the capacity within the CAISO's operational control.  The Commission has yet to act on the settlement agreement, and will need to do so by the end of the year in order for the new arrangements to take effect when the existing arrangements expire.

Full post as published by Energy Legal Blog on November 28, 2007 (boomark / email).