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
BACKGROUND
Applicants propose to limit the liability of the Midwest ISO and MISO TOs to direct damages, capped at a specified monetary amount, unless the direct damages are due to gross negligence or intentional misconduct of the Midwest ISO or MISO TO. The proposal includes:
• A limitation on liability for the MISO TO and the Midwest ISO “whether based on contract, indemnification, warranty, tort, strict liability or otherwise” against any Transmission Customer, User, or any third party for “any damages whatsoever” that are “in any way” associated with service provided under the MISO OATT. The limitation on liability does not apply where the Midwest ISO or the MISO TO is found liable for gross negligence or intentional misconduct. Where the Midwest ISO or MISO TO is found liable for gross negligence or intentional misconduct, it will not be liable for any incidental, consequential, punitive, special, exemplary or indirect damages.
• A limitation on liability for the Midwest ISO and MISO TOs for damages arising out of service provided under the OATT, “including, but not limited to, any act or omission that results in an interruption, deficiency or imperfection of service, occurring as a result of conditions or circumstances beyond the control of the [MISO TO and/or Midwest ISO] or as a result of electric system design common to the domestic electric utility industry or electric system operation practices or conditions common to the domestic electric utility industry. [The MISO TOs are] not liable for acts or omissions done in compliance, or good faith attempts to comply, with directives of [Midwest ISO].”
• A MISO TO’s liability is capped at direct damages not to exceed the greater of $500,000 or 0.25 percent of the MISO TO’s annual revenue from the use of its transmission system. This cap on direct damages does not apply if the MISO TO is found liable for gross negligence or intentional misconduct but as set forth above the MISO TO will not be liable for any incidental, consequential, punitive, special, exemplary or indirect damages if found grossly negligence or to have engaged in intentional misconduct.
• The Midwest ISO’s liability is capped at direct damages not to exceed $5 million except to the extent that the Midwest ISO is found liable for gross negligence or intentional misconduct but as set forth above the Midwest ISO will not be liable for any incidental, consequential, punitive, special, exemplary or indirect damages if found grossly negligence or to have engaged in intentional misconduct.
The Applicants justify their proposal as follows:
• Midwest ISO and ATCLLC have been unable to obtain adequate insurance to cover the unlimited liability that they currently face under the MISO OATT, and they have had to pay extremely high premiums for the insurance that they have procured.
• The premise underlying the Commission’s rejection of limitation on liability provisions in the past is not present because the Midwest ISO and ATCLLC have no state commission liability limitations as a backstop and must rely solely on the Commission for such limitations.
• Limitations on liability provisions serve the public interest. The liability limitations will protect Midwest ISO and MISO TOs from potential catastrophic losses, thus allowing them to attract capital for transmission expansion in an easier and less expensive fashion.
• Forcing RTOs and TOs to become compulsory insurers of transmission customers’ risk of loss is not the best method to manage risk because cross subsidies will result, the incentive on customers to mitigate potential damages will be removed, and damage claims will exceed the total cost.
• Unlimited tort liability is not the most economically efficient way of providing the transmission reliability that customers desire.