FERC Filings
MOTION FOR LEAVE TO INTERVENE AND PROTEST ONE DAY OUT-OF-TIME OF THE ELECTRIC POWER SUPPLY ASSOCIATION re: MIDWEST INDEPENDENT TRANSMISSION SYSTEM OPERATOR, INC. AND AMERICAN TRANSMISSION COMPANY LLC
SUMMARY
Midwest Independent Transmission System
Operator, Inc.
American Transmission Company LLC
Docket No. ER02-2033-000
Pursuant to Rules 211, 212 and 214 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (“FERC” or “Commission”), 18 C.F.R. §§ 385.211, 212 and 214 (2002), the Electric Power Supply Association (“EPSA”) hereby moves to intervene and protest one day out-of-time in the above-captioned proceeding.
This proceeding involves a request by the Midwest Independent Transmission System Operator, Inc. (“Midwest ISO or MISO”), the American Transmission Company LLC (“ATCLLC”) (“Applicants or RTO”) and their member Transmission Owners (“MISO TOs”) to limit their liability for damages related to services provided under the Midwest ISO Open Access Transmission Tariff (“OATT”), including interruptions, deficiencies or imperfections of service. Specifically, Applicants propose to limit their and the MISO TOs’ liability to direct damages, capped at a specified monetary amount, unless the direct damages are due to gross negligence or intentional misconduct of Applicants or the MISO TOs.
This is an important proceeding. Certainly the creation of a federally regulated entity such as a Regional Transmission Organization (“RTO”) requires the Commission to rethink its current views on liability which were developed when transmission providers were largely vertically integrated utilities serving end-use customers. EPSA members, as entities that also purchase insurance for their businesses, can understand the difficulties in procuring, and the cost of, insurance in the post September 11th environment and the Applicants’ desire to limit their liability for damages, particularly for the catastrophic losses third parties may incur due to an outage. For that reason, EPSA does not oppose a narrowly crafted provision that carries forward, from the vertically integrated electric industry, the limitation on damages to end-use consumers of power due to an outage.
At the same time, the restructuring of the electric industry has unbundled the vertically integrated generation and transmission elements of utility operations and Applicants have provided no justification to lump the newly unbundled generation/marketer sector, with the end-use sector, for purposes of liability limitations. Doing so shifts the risk of unreliable and inefficient transmission service to generators/marketers.
However, generators/marketers in a newly restructured industry are simply not similarly situated to end users that were the affected parties under all of the precedent that is cited by Applicants in support of their proposal. Generators/marketers have no ability to procure insurance to protect against such damages, unlike the end-users in a vertically integrated world and the Applicants have provided no other justification for shifting the risk of unreliable and inefficient transmission service. Indeed, there is no such justification given that EPSA’s members are totally dependent on reliable and efficient transmission services to allow them to participate in electric markets. Moreover, generators are subject to taking action at the direction of the Midwest ISO and are subject to damages if the Midwest ISO performs such action negligently. For these reasons, while changes in liability policies should be revisited in the context of an unbundled electric industry, the Applicants’ proposal fails to achieve a reasonable allocation of liability vis-a-vis the generator/marketer sector. Simply put, to the extent that the RTO fails to perform and EPSA members incur direct damages for that failure to perform, they should be compensated if such damages are proven in an appropriate court of law.
Moreover, EPSA is concerned that the artificially low caps on direct damages -- absent making the nearly impossible finding that the Transmission Provider or Owner was grossly negligent or engaged in intentional misconduct -- sends the wrong signal to an RTO/TOs that must be responsive to the needs of market participants. Limiting liability for the direct damages incurred by a generator/marketer for failure of the RTO/TOs to perform, absent some showing that the Applicants or MISO TOs failed to perform in “reckless disregard of the consequences as affecting the life or property of another,” will not provide the right incentive to provide reliable and efficient service and does not protect generators/marketers whose business relies on the Applicants’ providing such service. To provide the right incentive, there should be no limitation for direct damages associated with the Applicants’ failure to perform. For that reason, while EPSA supports some sort of limitations on third-party claims due to outages, any damages for failure to perform under a service agreement for transmission service under the OATT should not be subject to a cap.
Finally, the Commission should clarify that nothing herein will abrogate or otherwise nullify limitations on liability previously negotiated by a Transmission Owner (“TO”) and a generator in an interconnection agreement, to the extent such provisions are contained therein. These provisions were the result of hard fought negotiations and the expectations of the parties of the risks of possible damage. Those expectations should not be modified by a tariff filing subsequently made by the MISO, ATCLLC and their member TOs.
Given the importance of this proceeding, the significant issues it raises, that the precedent established here will more than likely be a model for RTOs around the country and that the filing seeks a departure from the rules established and upheld in Order No. 888, the Commission should remand the filing back to the Midwest ISO for further discussions with affected stakeholders. In the past, when the Midwest ISO has been faced with difficult issues, such as in the consideration of operating protocols for existing generators, allowing the Midwest ISO additional time to vent such matters has resulted in a filing that better meets the needs of all market participants. In the event, that the Midwest ISO and the stakeholders are unable to resolve the issues, EPSA recommends that the Commission hold a technical conference to consider the issues involved prior to approving the Applicants’ proposal.