ML20245J941
| ML20245J941 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 06/30/1989 |
| From: | Sampels M TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC), WORSHAM, FORSYTHE, SAMPELS & WOOLRIDGE (FORMERLY |
| To: | Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML20245J938 | List: |
| References | |
| A, NUDOCS 8907030221 | |
| Download: ML20245J941 (337) | |
Text
%$ c UNITED STATES OF AMERICA BEFORE THE
, NUCLEAR REGULATORY COMMISSION Before the Director of the Office of Nuclear Reactor Regulation TEXAS UTILITIES ELECTRIC ) Docket Nos. 50-445 A, COMPANY, et al. ) 50-446A
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Comanche Peak Steam Electric )
Station, Units 1 and 2 )
RESPONSE OF TEXAS UTILITIES ELECTRIC COMPANY j TO REQUEST OF CAP ROCK ELECTRIC COOPERATIVE,INC.
FOR AN ORDER ENFORCING AND MODIFYING ANTITRUST LICENSE CONDITIONS On May 12,1989, Cap Rock Electric Cooperative, Inc. (" Cop Rock"), citing Section 2.206 of the Commission's Rules of Practice, requested the Director of Nuclear ' Reactor Regulation (the " Director") to issue an order " enforcing and modifying" the Comanche Peak antitrust lleense conditions (the " License Con-ditions"). Cap Rock requested, inter alia, that the Director institute an antitrust hearing "for the purpose of amending" the License Conditions. Tex ts Utilities Electric Company ("TU Electric") submits that the Cap Rock Request should be denied, both because TU Electric has not violated the existing License Conditions in any way, and because, as the Commission Staff and the United States Department of Justice recently concluded, Cap Rock's demands for new antitrust proceedings and new license conditions are totally without basis.
The Cap Rock Request, like Cap Rock's other recent filings in these dockets,1!
-ddemonstrates once again that Cap Rock's complaint is solely related to
-1/ " Comments of Cap Rock Electric Cooperative, Inc. Concerning Significant Changes in Licensee's Activity That Warrant An Antitrust Review At The Operating License Stage," dated August 9, 1988; " Reply of Cap Rock Electric Cooperative, Inc. to the Comments of Texas Utilities Electric Company," dated February 10,1989; " Supplement to Comments and Reply Comments of Cap Rock Electric Cooperative, Inc.," dated March 20, 1989.
Cap Rock's Comments and TU Electric's response (excluding attachments) are appended as Attachments 31 and 32, respectively.
8907030221 690630 f PDR ADOCK0500g46_ C L ..
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C' a contractual dispute with TU Electric and raises no legitimate antitrust issues.
Simply stated, Cap Rock is seeking to use the License Conditions as a means to avoid its contractual obligations and to obtain preferential treatment. Cap Rock has a full requirements contract with TU Electric; the contract ob11 gates TU Electric to provide, and Cap Rock to purchase, all of Cap Rock's bulk power and energy requirements. It also provides that Cap Rock may terminate these obligations at any time upon three years' notice or, at its election,120 days after the effective date of any rate increase. (See p. 8 n.5, supra). Notwithstanding Onp Rock's obligation to purchase all of its electric power and energy requirements from TU Electric pursuant to a valid contract, Cup Rock, without terminating that contract, seeks to purchase some or all of its bulk power and energy requirements from other sources -- while continuing to insist that TU Electric be obligated to provide Cap Rock's full power and energy requirements in the future if Cap Rock subsequently determines that it is better off obtaining these requirements from TU Electric than from others. Cap Rock, in short, demands that the notice provisions of its valid full requirements contract with TU Electric immediately be cancelled, and at the same time seeks to obtain a " safety net" from TU Electric for its full requirements while it " shops" for better alternatives.
These extraordinary demands not only are inconsistent with the License Conditions -- which do not remotely suggest that they were intended to interfere with the valid termination and notice provisions of TU Electric's full requirements contracts2/ -- they turn the principles underlying the antitrust laws on their head.
When a purchasing utility cuts the umbilical cord from its full requirements supplier and becomes a partial requirements customer, this development may indeed present some new power purchase opportunities, but it also embodies some 2/ Indeed, Cap Rock is constrained to admit (Request at 16) that the License Conditions contemplate that full requirements customers must give " reason-able advance notice" before they become partial requirements customers.
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new risks, for the purchaser can no longer rely on serving its entire load at the ,
i average cost of a full requirements supplier, but must now depend in part on its .
1 own business acumen in obtaining alternative power supplies. Cap Rock seeks all 1 1
the benefits of this situation but wants TU Electric (and its other customers) to bear all the risk. The antitrust laws do not entitle firms to a guaranteed, risk free I future, and Cap Rock is no exception. .
1 The irony of Cap Rock's position is that it seeks the Commission's aid in I avoiding the purchase of energy generated by a nuclear facility -- a result hardly contemplated by Section 105(c) of the Atomic Energy Act of 1954, as amended, 42 U.S.C.A. S 2135(c) (1973) (the "Act"), and the Commission's implementing rules and regulations. This Cap Rock does by claiming that its customers will otherwise experience " rate shock" when Comanche Peak Steam Electric Station (" Comanche Peak") is licensed. Cap Rock charges that TU Electric has not told Cap Rock "the rates it will charge" for partial requirements service when Comanche Peak is operational, and argues that, therefore, Cap Rock should be relieved of having to elect whether or not to terminate full requirements customer status. Again, Cap Rock seeks a risk-subsidized future. Nothing in the License Conditions requires TU Electric to provide any guarantees of future rate levels. Indeed, with ratemaking treatment for Comanche Peak not yet established by the Public Utility Commission of Texas ("PUCT") and with the future never certain in any event, the notion that TU Electric is able to guarantee its future rate levels is simply not a serious proposition. TU Electric has advised Cap Rock that if furnished today its partial requirements rate would be at the level of its wholesale rate as approved by the PUCT (sg Section II, p.17, infra), and further has stated that it plans to seek an increase in its general revenues of about 10% in its upcoming rate case (see e p. 26, infra). It cannot say more. Cap Rock perhaps may wish the future tendered absolute guarantees, but it cannot rewrite its contract obligations merely because of alleged lingering fears over the rate impact of Comanche Peak.
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- .,_,1, L Cap Rock's allegations that TU Electric is in violation of the License Conditions and the antitrust laws by declining to accede to its untenable demands are without merit. TU Electric has honored its License Conditions in the past and 1
will continue to do so in the future. Indeed, as a result of the Commission's recent review of the activities of TU Electric since the issuance of the construction permit for Comanche Peak -- which included consideration of the various filings of Cap Rock in this proceeding -- the Commission Staff has concluded that "no significant changes in the activities or proposed activities of [TU Electric] have occurred since the prior antitrust reviews of the Comanche Peak Steam Electric Station Unit No.1, and that therefore an antitrust review . . . pursuant to Section 105(c)2) of the Act is not warranted." The United States Department of Justice, on June 5,1989, concurred in this conclusion (Attachment 1).
TU Electric has also honored the terms of its full requirements contract with Cap Rock and believes it is entitled to expect Cap Rock to do the same.
Neither the License Conditions nor the antitrust laws require TU Electric to cancel, change or otherwise amend that agreement. Nor do the License Conditions require TU Electric to facilitate Cap Rock's disregard and/or breach of those contractual obligations. See Section III, infra.
It is also instructive to note that there is no issue here as to whether TU Electric will provide transmission for economy energy or other bulk power supplies to Cap Rock if it does elect to become a partial requirements customer. TU Electric will do so, and has so stated repeatedly. Nor is there eny question here as to whether TU Electric will provide Cap Rock with the same assistance that it provides other similarly situated entities in the event Cap Rock elects to become a partial requirements customer. Although the License Conditions do not obligate TU Electric to do so, it has repeatedly stated its willingness to assist Cap Rock in a transition period from a full to partial requirements customer. See Section II, p.13, infra.
% . :,' a The issue here, in short, does not involve the License Conditions, with e:.hich TU Electric is in compliance, but rather the efforts of Panda Energy Corporation
(" Panda") to abrogate TU Electric's full requirements contracts.
In addressing Cap Rock's allegations that TU Electric is in violation of the License Conditions and the antitrust laws, and in order to put those allegations in the proper light, TU Electric believes it is also important for the Commission to have a clear understanding of the background and events prece' ding the filing of the Cap Rock Request, specifically Panda's efforts to sell power to Cap Rock and TU Electric's efforts to accommodate Cap Rock af ter its full requirements contract with TU Eicetric has ended.
I.
THE CAP ROCK / PANDA RELATIONSHIP A meaningful discussion of Cap Rock's desire to purchase power and energy from Panda and Houston Lighting & Power Company ("HLP") rec tres a perspective not apparent on the face of its Request.b TU Electric is one of the largest purchasers of cogenerated power and energy in the country and the largest purchaser of cogeneration in Texas by a sizable factor. TU Electric has firm contracts with cogenerators for 2,000 MW. In 1988, cogeneration provided for approximately 10% of TU Electric's load during its summer peak demand. Panda, 3/ Cap Rock and Panda are represented by the same consultant, despite the l conflict inherent in such representation. Mr. Steven Collier is Cap Rock's consultant in negotiating the Panda agreement. Mr. Collier is also a partner of C. H. Guernsey & Company. Mr. Collier has also been identified by Panda as its agent in all cogeneration proposals which Panda has made to TU Electric since 1985. These facts give rise to the question of whose interests are sought to be protected -- Panda's or Cap Rock's? In any case, neither Cap Rock nor Panda raises any antitrust concerns.
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- . , o being noncompetitive with other . cogenerators in Texas and having been un-successfulin its efforts to sell capacity to TU Electric, is merely attempting to use Cap Rock to force TU Electric to do indirectly what it could not do directly.
Panda's strategy was. discussed in the September 26, 1988 issue of the Dallas i
Business Journal: '
" Panda's inability to sell power to the most likely buyer, TU Electric, forced [ Bob] Carter (Chief Executive Officer of Pandal to try a new strategy, one that may pay big dividends.
In May of 1988, Panda announced a 15-year agreement to sell surplus power from the' Oscar Mayer facility to Cap Rock Electric Cooperative. * *
- A Panda spokesman said Cap Rock is the first rural electric coop . . . in Texas, ano perhaps in the nation to buy power directly from a cogenerator.
(Attachment 2). See also letter, dated March 2,1987, from Panda to TU Electric (Attachment 3). Thus, the real issue here is whether the Commission can be used to aid in achieving the profit-centered goals of Panda by aiding and abetting the interference with, and breach of, a valid full requirements contract. Obviously, i
the answer to that question is no.
In Texas, utilities, subject to PUCT oversight, are permitted to negotiate both price and non-price factors with cogenerators and other Qualifying Facilities
("QF") to obtain the most favorable proposals available in the marketplace in the interest of the utilities' customers. Utilities are not required to contract with a l particular QF for capacity purchases if capacity is not needed or if needed capacity can be obtained from another QF at lower costs or upon more favorable terms. TU Electric has, over a period of several years, negotiated with Panda on several cogeneration options. Panda simply has not been competitive with other offers received by TU Electric. See Attachments 3,4 and 5.
After having been turned down by TU Electric the last time, Panda filed a petition with the PUCT in which it asked the PUCT to order TU Electric to
o purchase cogeneration from Panda's Rock-Tenn project. The PUCT dismissed the L petition (Attachment 6). After that loss, TU Electric was informed of Panda's l
l intent to seek the au of the Commission and anyone else who it perceived might pressure TU Electrie into a preferential power purchase arrangement for the purpose of gaining an unfair advantage in the sale of its power. See Cap Rock's testimony (written and presented by Panda's Steve Collier) filed on August 8,1980, with the Select Committee on a Statewide Energy Plan (Attachment 7). One need not look far to see that such comments are a near mirror image of the comments previously filed by Cap Rock with the Commission regarding the alleged " changed circumstances" and clearly expose Panda as the real force behind Cap Rock's effort to force the sale of otherwise noncompetitive cogenerated power.
Having failed to compete in the market for sale of cogeneration to TU Electric, Panda has turned its attention to Cap Rock -- a TU Electric all requirements customer who not only is unable to take delivery of the pger, but is prohibited from doing so by a valid contract. Cap Rock's complaints, then, do not relate to the satisfaction of Cap Rock's future energy needs; the real issue is Panda, which is not an " entity" within the meaning of the License Conditions, has no standing before this Commission and which is simply bent on a course of action to interfere with TU Electric's full requirements contracts.
Cap Rock admits that it entered into its power purchase agreement with Panda while if was still obligated to purchase its full requirements from TU Electric. In March 1987, nearly six months before Cap Rock entered into its contract with Panda, Cap Rock was informed by TU Electric, in response to an inquiry regarding wheeling of cogenerated power, that the full requirements contract between Cap Rock and TU Electric "would need to be replaced by a new I agreement providing for Cap Rock's purchase of power from another source to replace power now furnished by TU Electric and establishing a framework for
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P't 4 wheeling and standby services." Attachment 8 at 1.4_/ Cap Rock then entered into its agreement with Panda in October 1987, providing for the purchase of 35 megawatts of cogenerated power beginning in 1991. Cap Rock Request at 18.
That same month, Cap Rock advised TU Electric that it had " entered into a letter contract with a cogenerator" and that Cap Rock would " formally, in the near future, per our wholesale power contract, give you written notice of our intent to
. terminate our all requirements contract." Attachment 9 at 1-2. Thus, Cap Rock, at least at one time, clearly recognized that before it could obtain power from other sources, its contract with TU Electric would have to be properly terminated.
TU Electric suggests that mere expediency is responsible for this change of heart.
Moreover, had Cap Rock given the required notice when it entered into the agreement with Panda or shortly thereafter, the three-year notice period ivbuld have expired at approximately the same time the Panda contract calls for Cap Rock to begin its power purchases -- 1991.W Yet Cap Rock declined, and has continued to decline, to give notice of cancellation to TU Electric. Instead, it has chosen to . adopt the position that TU Electric is obligated by the License Conditions to provide it partial requirements thus enabling it to proceed with its purchases from Panda and HLP, while TU Electric remains contractually obligated to sell Cap Rock its full requirements on demand. Clearly, TU Electric is not required to assist Cap Rock breach its contract in this fashion.
4/ See Section II, infra, for a complete discussion of the material developments in TU Electric's discussions with Cap Rock.
5/ Cap Rock's full requirements contract with TU Electric may be cancelled by either party upon three years' advance written notice. In addition, in the event of a change in the applicable TU Electric rates, Cap Rock may cancel the contract by giving written notice within 120 days after the effective date of the rate change, with the cancellation date to be no later than three years after the effective date of that change. See Attachment 27.
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II.
TU ELECTRIC'S WILLINGNESS TO ACCOMMODATE CAP ROCK While TU Electric is not obligated by the License Conditions or the antitrust -
laws to assist Cap Rock's disregard and/or breach of its full requirements contract (see Section III, infra), contrary to the distorted and self-servine, pictua Cap Rock .
has portrayed in its Request and other filings TU Electric hre consistee'.ly been willing to work with Cap Rock, and accommodate any reasonable ecclesta when and if C<tp Rock wishes to make the transition from a contractual full requirements customer to a partial requirements customer. A complete summary of material developments in TU Electric's discussions with Cap Rock in this regard is set forth below:
On February 27,1987, Cop Rock wrote TU Electric (Attachment 10) requesting information related to wheeling of power and energy from cogeneration facilities in the Dallas and Stanton, Texas, areas. TU Electric responded on March 27,1987 (Attachment 8), describing the need for additional information and point.ing out that the current wholesale power purchase agreement does not permit the transaction Cap Rock was considering. A draft agreement similar to that already executed with Texas-New Mexico Power Company was forwarded as a possible framework for a successor agreement. A copy of the appropriate wheeling tariff was also supplied and certain technical .
issues were discussed with possible solutions noted. ,
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On April 15, 1987, a meeting was held between TU Electric and Cap Rock to further discuss facilitating wheeling of the cogeneration i I
supply. At that time, Cap Rock noted that such supply was being proposed by Panda. TU Electric again pointed out that Cap Rock's full requirements contract would have to be replaced (Attach- )
l ment 11). ]
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On May 26,1987 (Attachment 12), Cap Rock noted in a conversation with.TU Electric that Cap Rock was "in the process of crunching some more numbers" on the cogeneration options and would probably be coming back in the near future to discuss wheeling. The attachment also notes that the Cap Rock Manager had resigned.
On October 29, 1987, Mr. David Pruitt, Cap Rock's new General Manager, in a letter to Mr. Jerry Farrington, Chairman and Chief Executive of Texas Utilities Company (Attachment 9), noted that "only recently" had Cap Rock entered into a letter contract with a cogenerator utilizing a Dallas area host, presumably ti,e Panda Rock-Tenn facility. He also noted that Cap Rock would formally in the near future give notice of termination of its wholesale power contract. No such notice has yet been given.
By letter dated November 11,1987 (Attachment 13), TU Electric forwarded to Cap Rock, pursuant to Mr. Pruitt's request, the same information that had been furnished on March 27, 1987 to Cap Rock's .
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former General Manager. In that letter, TU Electric acknowledged Cap Rock's stated intent to Mr. Farrington to formally terminate its current contract as a full requirements customer at some future date. TU Electric also agreed to a meeting on Cap Rock % co-generation plan.
By the spring of 1988, the cooperative and businesslike process between Cap Rock and TU Electric turned into an adversarial, ,
posturing attitude on the part of Cap Rock. By letter dated April 8, 1988 (Attachment 14), Mr. David Pruitt, General Manager of Cap Rock, began to ignore the provisions of Cap Rock's contract with TU L
Electric and TU Electric's offer to renegotiate that contract to
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convert Cap Rock to a partial requirements status. Without any mention of the provisions and effect of Cap Rock's current contract ,
l' with TU Electric, he asserted, among other things, Cap Rock's
" rights" to " generate, manufacture, purchase, acquire, transmit, distribute, furnish, sell and dispose of such electricity."
A meeting was held on August 2,1988, between TU Electric and Cap Rock, including Steven Collier of C. H. Guernsey & Company. In this meeting, as in a meeting following the April 8 letter, Cap Rock demanded proposals and projections for future rates and charges.
Two days after the foregoing meeting, an inaccurate posturing letter (Attachment 15) was delivered to TU Electric and three days later, without waiting for a reply, Cap Rock filed its comments with this Commission regarding the alleged " changed circumstances."
Contemporaneously with the filing of the TU Electric Response, TU Electric replied to Cap Rock's letter of August 4,1988 (Attach-ment 16).
On February 10,1989, Cap Rock filed with this Commission its reply comments to the TU Electric Response. Supplemental comments were filed by Cap Rock on March 20,1989 (a copy of which was never furnished to TU Electric by Cap Rock).
A meeting was scheduled between TU Electric's Chief Executive, Mr.
Erle Nye, and Cap Rock's General Manager, Mr. David Pruitt, for April 11, 1989. On April 10, an unexpected, detailed and entirely self-serving agenda was telecopied to Mr. Nye from Cap Rock's consultant, Steven Collier of C. H. Guernsey & Company, setting forth matters with which Mr. Nye had little familiarity (Attach-ment 17). Mr. Nye telephoned Mr. Pruitt and it was agreed that, in *
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l lieu of the scheduled meeting, representatives of the two utilities l
would meet at a later time to discuss these matters.
f On May 1,1989, Mr. Pruitt sent a completely inaccurate letter to Mr.
Nye claiming Mr. Nye had stated that TU Electric "has no intention of ever providing partial requirements service, standby service, or scheduling services for Cap Rock" (Attachment 18). No such state- )
i ment was ever made by Mr. Nye. See Attachment 19.
On May 5,1989, TU Electric communicated its position and offer in l
detail to Cap Rock as discussed below (Attachment 20).
On May 9,1989, Cap Rock responded to TU Electric's May 5 letter and informed TU Electric of its intent to file an enforcement request with this Commission (Attachment 21).
On May 12,1989, Cap Rock filed its Request for an order enforcing i
and modifying the License Conditions.
TU Electric has consistently treated Cap Rock with utmost fairness. Most recently, by its May 5,1989 letter, TU Electric reiterated its position that "should Cap Rock wish to become a fully self-sufficient electric utility or should it wish to purchase power from others or self-produce all or a part of its requirements, TU Electric will not be an impediment to these goals" provided Cap Rock's full requirements contract is properly terminated. Attachment 20 at 1.
TU Electric has no objection to Cap Rock's participation in the bulk power supply market after its full requirements contract with TU Electric is properly terminated. However, if Cap Rock wishes to do so, it must also make arrange-ments that will ultimately permit it to take delivery of that power at transmission voltages. This can be accomplished by Cap Rock's becoming a control area itself or obtaining that service from a third party. TU Electric is not willing, however, to commit to a long-term scheduling agent service for Cap Rock, and there is no
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' basis far Cap Rock's unreasonable demand that it do so. Nonetheless, contrary to Cap Rock's allegations, s_ee, e e.g., Cap Rock Request at 3, 37 and 45, TU Electric
-does not'take the position that Cap Rock must establish a control area'or secure such permanent services from a third party before TU Electric will provide partial requirements power and other services. TU Electric is aware that.a transition period may be necessary before Cap Rock 'can become a fully functioning control area or obtain this service from others. Therefore, after the full requirements contract has come to an end and during the transition period, TU Electric has offered to "make available a power scheduling arrangement until [ Cap Rock is]
able to telemeter [its] points of delivery, install the necessary equipment, train
[its] personnel and take whatever other steps are required to act in [its] own behalf"- Attachment 20 at I and 2 - an offer TU Electric is clearly not required to make under the License Conditions and one which should put to rest any doubts that TU Electric is making every effort to avoid controversy with Cap Rock. TU Electric does, however, reserve the right to withdraw this purely voluntary offer.
Thus, TU Electric has never refused to support Cap Rock's ambitions to participate in the bulk power supply market. Cap Rock's allegations to the contrary are wholly without merit. Cap Rock, for example, makes the completely inaccurate assertion that on April 10, 1989, TU Electric's Chief Executive Officer, Mr. Erle Nye, " stated unequivocally that [TU Electric] would not, under any circumstances, provide Cap Rock partial requirements and other essential co-ordination and backup services." Cap Rock Request at 30. Cap Rock cites as 6/ To further illustrate TU Electric's willingness to cooperate with Cap Rock and to evaluate the "non-lawyer," "non-Panda" influenced relationship, one l need not look further than to events in June of this year when TU Electric came to Cap Rock's aid by making available a mobile substation to restore service and temporary service to its customers. See Attachments 22 and 23.
TU Electric had absolutely no responsibility whatsoever to aid Cap Rock in this manner.
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- authority for this assertion its own communications to TU Electric- that is, a i letter dated May 1,1989, from Mr. David Pruitt to Mr. Erle Nye. See Attach-ment 18. However, as was subsequently confirmed by letter dated May 22,1989, to Mr. Pruitt, Mr. Nye "never made any statement concerning unwillingness on the part of TU Electric to provide any type of service to Cap Rock" (Attachment 19),
q nor has this ever been TU Electric's position. TU Electric has consistently been 1 willing to help Cap Rock make the transition to a partial requirements customer.
The License Conditions do not require that TU Electric act as a scheduling agent for a wholesale customer or another electric utility. See Section Hl.B., infra.
Nor is TU Electric required by the antitrust laws to render such services.
Simply stated, scheduling means causing power generated in one control area to be dispatched to another control area by adjusting the generators in each control area up or down to match each change required by a schedule negotiated by the parties to a power supply agreement.U Transmission (commonly known as wheeling), on the other hand, is the use of a third party's transmission system for the delivery of power from the seller to the buyer. Wheeling does not mean !
scheduling, and scheduling does not mean . wheeling -- they are two entirely different services. For example, scheduling economy energy from a control area (HLP) for a buyer having no native generation (Cap Rock) and thus unable to match generation with its load would require a utility (TU Electric), which has control capability, to provide Cap Rock with control area services by, among other things, varying the output of its generators up or down to accommodate the dispatch of power from HLP. In this case, TU Electric would be required to implement the HLP-Cap Rock power supply agreement to which it is a complete stranger and y See North American Electric Reliability Council Draft " Reliability Con-siderations for Wheeling and Other Electricity Transfers on the Bulk Electrie Systems," May 17,1989, pp.13-14 (Attachment 33).
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would have to manipulate its generators for each change in the amount of power being dispatched by HLP, even when these adjustments would require the use of leas efficient TU Electric generation and thus result in higher energy costs to its customers. Moreover. the equipment and personnel of TU Electric, otherwise dedicated to the ' management of its own bulk power generation and transmission system for the benefit of its customers, would be diverted from that task and 1
required to perform the work of others in a transaction providing it absolutely no '
l benefit. This' results in the impairment of a scheduling utility's capability to respond to the demands and dynamics of its own system, with both efficiency and reliability being denigrated. Aside from the fact that Cap Rock would thus be requiring TU Electric to "act for it" on perhaps a minute-to-minute basis, scheduling for Cap Rock would also result in an impact upon TU Electric's planners, on both the generation and transmission sides of its business, and on TU Electric's personnel in accounting for the energy scheduled. Further, in the case of Cap Rock, which would allegedly be purchasing power generated by Panda, TU Electric's control center and personnel would be called upon to constantly monitor, communicate and otherwise deal with enanges in the cogenerator's affairs and, in effect, dispatch power and otherwise make economic decisions for both Panda and Cap Rock.
Multiply these activities not only by the number of potential scheoules and changes in schedules which TU Electric and its control center could be required to juggle, and you would have an operational nightmare, threatening not only the efficiency of TU Electric's operation but its overall reliability as well. This is not a business that TU Electric has any legal responsibility to render.
While Cap Rock now claims that TU Electric is "the sole practicable source" for the services it demands (Cap Rock Request at 37), this is clearly not the case. l In June,1988, Cap Rock was of a different view when it stated to TU Electric "if 1
we must, we will become an independent control arec and we will arrange for I i
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. standby, supplemental power service and other power supply services independently of TU Electric." Attachment 24 at 2. Cap Rock has also stated that "[t] he necessary coordinating, services can be received elsewhere utilizing [TU Electric's] transmission system only for wheeling." Attachment 9 at 1. Again e
Cap Rock has only recently decided that such a position is expedient in its efforts to improperly seek to use the Director's Office for relief never contemplated by I the Act. Thus, not only is there no requirement under the License Conditions that TU Electric provide scheduling for Cap Rock, Cap Rock's own admissions demon-strate that control area services from TU Electric are not needed for Cap Rock to participate in the bulk power market. The only essential facilities for the delivery of bulk power are transmission lines, which TU Electric has and will make available i to Cap Rock as provided by the License Conditions. Moreover, it has been made clear to TU Electric that Cap Rock is seeking "the independence . . . to participate ;
in firra and interruptible power transactions within ERCOT." Attachment 15 at 2.
Becoming a control area affords precisely the independence Cap Rock has s
8/ The term coordination, as used in the electrie utility industry, has an entirely different meaning from scheduling. Coordination is simply:
[t]he practice by which two or more interconnected electric power systems augment the reliability of bulk electric power supply by establishing planning and operating standards; by exchanging per-tinent information regarding additions, retirements, and modifica-tions to the bulk electric power supply system; and by joint review of these changes to assure that they meet the predetermined standards.
Edison Electric Institute, Glossary of Electric Udlity Terms, p.13 {
(1983-1984). Thus, coordination has nothing to do with scheduling.
However, as in the above quote from Attachment 9, Cap Rock frequently l uses the term coordination when it appears from the context that it in fact means scheduling. See also Cap Rock Request at 3 ("the scheduling and other coordination services"), 36-37.
Coordination is simply a planning function which in this case is carried out through the Electric Reliability Council of Texas ("ERCOT"). It is this !
definition of coordination that is contemplated by the License Conditions which obligate TU Electric to " support requests by qualified Entitles in the ,
North Texas Area for membership in any . . . electric utility planning or l operating organization" of which TU Flectric is a member. Paragraph j i 3.D.(2)(b). Cap Rock is in fact a member of ERCOT and thus has access to "
all planning information. TU Electric is not required, and does not intend, to plan for Cap Rock. ;
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' u ,, U js professed to be seeking. TU Electric has no objection if Cap Rock wishes to make i
arrangements with another utility for control area services af ter the contract with TU Electric has come to an end. See Attachment 20 at 2. TU Electric will, as repeatedly stated, provide transmission service to Cap Rock in accordance with the License Conditions and pursuant to applicable PUCT rules or other mutually agreeable arrangements which fully compensate TU Electric for its costs plus a i reasonable return on investment. Id. l TU Electric has also made it abundantly clear to Cap Rock that, if Cap Rock wishes to terminate its contract, TU Electric will provide it with necessary I partial requirements bulk power plus emergency and/or scheduled maintenance services at rates approved by the PUCT. Attachment 20 at 2. Cap Rock, in a .;
i flagrant misrepresentation of fact, claims that the TU Electric Response (filed in i response to Cap Rock's comments on the alleged " changed circumstances") " stated that [TU Electric] would not provide the rates, terms and conditions for these l services because Cap Rock is a full requirements customer of [TU Electric] ." Cap I Rock Request at 24-30 (citing TU. Electric Response at 2). No statement of this ,
i kind was made in the TU Electric Response. Nor has TU Electric engaged in a
" charade of refusing to identify the rates, terms and conditions under which it would sell such service [that] is tantamount to a refusal to sell." Cap Rock Response at 30. TU Electric has unequivocally informed Cap Rock that any rate !
for partial requirements service would, if rendered today, be at the level set forth in its wholesale rate tariff (Rate WP) on file with and approved by the PUCT.E 9/ While the Panda contract was not included with the Cap Rock Request, it ;
apparently offers power and energy to Cap Rock at a fixed percentage lower )
than any rate offered by TU Electric even though it is argued that TU Electric's future wholesale rate is unknown. The Panda contract was signed even before Cap Rock began demanding to know the precise level of a wholesale rate not yet even submitted to the PUCT. Since the Panda contract has already been executed and since Panda does not seem to be inhibited in promising its energy to Cap Rock at a fixed discount to future rates from a non-existent facility, it is puzzling why Cap Rock is so insistent upon obtaining a fixed commitment from TU Electrie.
_ _ _ - - - _ _ _ _ - - .____-_________-_______D
l Attachment 20 at 2. That rate and rate structure are, of course, subject to change in any future rate proceeding. Thus, not knowing when or if Cap Rock will l terminate its contract, TU Electric cannot state what PUCT approved rates it will .
have at some unknown point in the future and TU Electric believes Cap Rock cannot reasonably expect it 'n be able to do so. Suffice it to say that TU j
Electric intends to offer electric service to all of its customers in accordance with .J
(
rates and charges established by the PUCT. Cap Rock is in as good a position as !
k TU Electric to speculate what rates and charges may be established by the PUCT in the future within the parameters and based upon information made available by TU Electric to Cap Rock, ERCOT, the PUCT and the public generally.
Finally, Cap Rock reiterates its " straw man" allegation argued repeatedly in )
l its Comments (see e p.1 n.1, supra) that TU Electric is subjecting Cap Rock "to a substantial price squeeze." Cap Rock Request at 5. This claim has nothing to do with the License and would be irrelevant here in any event. But moreover, it is demonstrably groundless, factually and legally.
Cap Rock claims that the primary cause of the alleged " price squeeze" is I
the impact of summer-winter differentiated rates which are not available to wholesale customers. The clear implication of Cap Rock's complaint is that TU Electric is free to discriminate in pricing and the application of pricing to customer classes and that TU Electric has somehow manipulated its rates to cause i a price squeeze. The facts are precisely the opposite. Unlike electric utilities in other states which are subject to dual federal and state rate regulation, both the retail and wholesale rates of TU Electric are regulated and set by the PUCT. In f l
filing for any rate changes, TU Electric - as well as all other Texas jurisdictional i 4
j 10/ With respect to future rates, Cap Rock can intervene, as it has typically I done in the past, in TU Electric's rate proceedings to insure that its j interests are protected. j i
I l
l i
J
utilities - must follow very precise and regulated processes. All aspects of rate application, i.e., rate levels, rate classes, cost of service studies, rate designs, etc.,
are reviewed by the PUCT staff and interveners, are subjected to extensive and !
l intensive public hearing and are ultimately determined by the PUCT, Interested l \
parties are provided full opportunity to intervene and participate in the' hearing process and, if dissatisfied with the PUCT's determination, may appeal to the state :
courts or institute a separate proceeding at a later date, but the end result is the setting of rates by an agency of the State of Texas, including the wholesale rate to be collected by TU Electric from Cap Rock. It is, of course, this same state agency -- the PUCT -- which fixes the rate Cap Rock is entitled to collect from its customers. Any difference between the two rates as set by the PUCT cannot, as a matter of law, constitute a " price squeeze."
Aside from the fact that in its 1984 rate case TU Electric proposed, and Cap Rock successfully opposed, a wholesale rate which included a summer-winter differential, TU Electric proposed relative rates of return of approximately 99% by its residential and wholesale customer rates and approximately 103% by its general service customer rate. ' By definition, TU Electric's rate proposal did not constitute a " price squeeze" because it proposed lower rates of return (i.e., a lower mark-up) for wholesale customers than for industrial customers and an equivalent mark-up for residential retail customers.$ If anything, TU Electric's proposal favored wholesale customers, hardly representing an effort to obtain any advantage over Cap Rock.
Cap Rock opposed the proposed rate increase and the proposed rates of return. After hearing, a rate decrease, not a rate increase, was ordered by the 11/ E.g., Southern California Edison Co., Op. No. 284, 40 FERC 1, 61,371 at 62,152-56 (1987) (one element of a price squeeze is significantly higher mark-up over costs to the wholesale customer).
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PUCT. In doing so, and over the objection of TU Electric, the PUCT set slightly disproportionate rates of return in TU Electric's rate structure; i.e., a relative rate of return by TU Electric's wholesale rate of '103.83% and general service and residential rates of return of 102.97% and 100.32%, respectively. At the time, Cap Rock did'not object to the slight difference in the relative rates of return for wholesale power versus TU Electric's residential and general service rates. Now that it seems expedient to do so, Cap Rock objects vituperatively, but in doing so, Cap Rock fails to advise this Commission of TU Electric's original proposal, Cap Rock's objection and the PUCT's action. Closely comparable rates of return imposed on TU Electric for wholesale and retail industrial classes by the same state regulatory commission which also sets Cap Rock's own rates can hardly be characterized as " substantial price squeeze," much less one imposed by TU Electric.E Also, and as stated earlier, Cap Rock complains that TU Electric's sea-sonally differentiated retail rate somehow constitutes a " price squeeze" imposed by TU Electric on Cap Rock. Aside from the fact that TU Electric's lower winter residential rate was found necessary by the PUCT to prevent an over-recovery from the electric space heating customers, Cap Rock again fails to point out that TU Electric has never objected to providing comparable seasonally differentiated rates for its wholesale customers and indeed, as earlier stated, proposed exactly this form of rate structure in its 1984 rate case. See Attachment 20 at 3. Id.
Ilowever, Cap Rock, along with other wholesale customers, opposed TU Electric's proposal which was finally rejected by the PUCT. I_d. It, therefore, seems 12/ Moreover, any challenge to those rates would have to be directed to the PUCT, not federal antitrust tribunals, because the PUCT's rate order under these circumstances clearly constitutes state action that is exempt from federal antitrust regulation. See e.g., Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48 (1985).
I~ a re incredible that Cap Rock continues to complain about the absence of a rate structure to which Cap Rock itself successfully objected -- again, another mere expedient change of beart. Additionally, TU Electric, as it has recently reaffirmed to Cap Rock, has no objection to implementing a seasonally differentiated or time 1 of day rate structure if such rates are approved by the PUCT in TU Electric's next rate case. M.
Cap Rock is and has been free, since 1984, to seek a change in TU Electric's wholesale rate. It, of course, has not done so; rather, it comes to this Commission -- which even Cap Rock acknowledges is not the proper forum in which to complain about rates, rate structure or rates of return -- and seeks to use its own inaction before the PUCT to justify action against TU Electric on the part of this Commission.
Cap Rock recently filed an application with the PUCT for authority to >
change its rates to eliminate or narrow any difference in its rate and TU Electric's PUCT-set rates. See Attachment 25. Ilowever, the PUCT rejected Cap Rock's application. See Attachment 26. Cap Rock had asserted that "the sole purpose behind ' the proposed rates was the implementation of rates that are more competitive with [TU Electric] ." id. at 13. Ilowever, the Hearings Examiner found that this assertion was " unjustified." M. at 7. (TU Electric was not a party to that proceeding.) " Cap Rock has not lost one existing customer to [TU Electric]
since January 1986. In the dually-certified areas,30 percent of the new connects have gone to Cap Rock." I_d. at 13. The PUCT also found that the rates proposed by Cap Rock were "not just and reasonable." M. at 14.
In short, TU Electric does not intend to make economic decisions for Cap Rock, plan its future energy resources, or provide energy banking or similar
1 F e' ,,' ,
1 l
services, as Cap Rock has demanded,El or to render any electric service which '
imposes a disproportionate share of TU Electric's costs on its customers for the benefit of Panda and Cap Rock.E Ilowever, as repeatedly indicated, when and if Cap Rock ceases to be a full requirements customer of TU Electric, TU Electric will treat Cap Rock the same as all other similarly situated entitles and, to the extent then being offered, will schedule short-term economy energy from third-party suppliers on Cap Rock's behalf and will provide transitional scheduling services for firm power provided all of these and any other services properly sought by Cap Rock are under terms which will fully compensate TU Electric for its costs plus a reasonable return on its investment.
3 1_3/ See, e_.g., letter, dated August 4; 1988, from Steven E. Collier of C. II. i Guernsey & Company to Darrell Bevelhymer of TU Electric (Attachment 15).
M/ Since Cap Rock does not want to install the necessary telemetry equipment at its various points of delivery and otherwise take action to permit it to take delivery of wheeled power at transmission voltages, as clearly required by the License Conditions, see Paragraph 3.D.(2)(G), or to acquire the capability to dispatch such power, it would have TU Electric " schedule" such l power purchases whleh is nothing more than an arrangement requiring TU l Electric to purchase power and energy generated by third parties (by {
crediting such power and energy to its account) to serve a part of Cap {
Rock's load, while requiring TU Electric to serve the remainder of Cap i Rock's load with power and energy supplied oy TU Electric on demand under the full requirements contract. Thus, Cap Rock is insisting that it is ;
entitled to " cherry pick" at random for a part of its load requirement while j relying on TU Electric to serve the balance of its load on demand, and it would also require TU Electric to provide the facilities and personnel, allegedly by reason of the License Conditions to do so. In this specific instance, it would also have Panda supply its base load requirements while seeking to require TU Electric to supply all or a part of its peaking power at the wholesale rate, thus imposing a disproportionate share of TU Electric's fuel costs on TU Electric's other customers.
l ' : . ,. ' ,
l.
III.
.THE RELIEF SOUGHT BY CAP ROCK l'
IS NOT SUPPORTED BY THE LICENSE CONDITIONS OR THE ANTITRUST LAWS l A. ' Cap ' Rock Seeks to Disregard and/or Breach its Obligations Under its Full-Requirements Contract with TU Electric.
l l The undeniable basis for the Cap Rock Request and Cap Rock's allegations that TU Electric is in violation of the License Conditioris and the antitrust laws boils down to nothing more than an effort to inject this Commission into a purely contractual dispute. Cap Rock is a full requirements wholesale customer of TU Electric under a valid contract (Attachment 27), which provides that:
i
[TU Electric] agrees to sell and deliver to [ Cap Rock], and
[ Cap Rock] agrees to purchase and receive from [TU Electric], all the electric power and energy that [ Cap Rock]
may require during the term of this agreement for the operation of those portions of its electric system that are or shall be connected to the points of delivery provided for '
herein.
Cap Rock has the absolute power to terminate that contract, although thus far it has declined to do so. See p. 8 n. 5, supra. !
Cap Rock admits that it is a contractual" full requirements customer" of TU Electrie (Cap Rock Request at 1, and 11) and that it " intends fully to honor its current contract, including the termination provisions," id. at 3. On the other I
hand, notwithstanding its contractual obligation to purchase its full requirements from TU Electric, Cap Rock also admits that it has entered into power purchase contracts with HLPb and Panda providing for the purchase of energy and firm 1
15/ Cap Rock attempts to attribute significance to the " approval" of the economy energy contracts with HLP by the PUCT Cap Rock Request at 2; s_ce e also Cap Rock Supplement at 2. Ilowever, those PUCT cases simply have no bearing on the issues presented by the Cap Rock Request and the relief Cap Rock seeks from this Commission. TU Electric was not a party to the PUCT dockets, nor did those cases address, in any respect, Cap Rock's right to take power from other sources in light of its prior contractual commitments to TU Electric. The PUCT certainly did not find that it would be in the public interest for Cap Rock to breach its contract with TU Electric.
g .
power, _without any intention to terminato its full requirements contract with TU Electric in accordance with its terms. Unfortunately, this contradiction is entirely consistent with the numerous misrepresentations which have characterized Cap Rock's position in this matter.N Even though the taking of power and energy under the llLP and Panda contracts would constitute a breach of Cap Rock's full requirement 3 contract with TU Electric, Cap Roc!: nonetheless demands,in essence, that TU Electric facilitate that breach by ignoring Cap Rock's obligations under the contract, while insisting that TU Electric continue to be bound by its obligations. Ilowever, Cap Rock has not cited, and indeed cannot cite, any provision of the License Conditions which requires TU Electric to cancel, change or otherwise amend a full requirements contract simply because the other contracting party no longer wishes to abide by 16/ 'In keeping with the pattern Cap Rock has established of totally misrepre-senting communications between Cap Rock and TU Electric, the Cap Rock Request contains an especially egregious example of Cap Rock's continued efforts to distort TU Electric's position and thereby mislead this Commis-sion. Cap Rock states that "[a] t a meeting in Midland, Texas on Thursday, April 28, 1988, representatives of [TU Electric] nianagement told Cap Rock senior management that under no circumstanea would [TU Electric]
permit the IILP economy energy purchase by Cap Rock." Cap Rock itcquest at 21. Cap Rock then continues: "[TU Electric] made it clear that this decision was not based on any engineering or like considerations, but rather was:
' based on a carefully considered decision by (TU Electric's] upper management and is based on the possibility that it would set an undesirable precedent which would allow other wholesale customers to participate in similar transactions.'"
I,d. at 21-22 (footnote omitted). Contrary to the impression Cap Rock clearly intended to convey by this carefully crafted statement, the Cap Rock Request quotes,.not from a TU Electric communication, but rather from a May 5,1988, letter written by Cap Rock's own representative, Mr.
David Pruitt, to Mr. Dale Scarth of TU Electric which sets forth Cap Rock's own distortion of TU Electric's position. See Attachment 28 at 1. TU Electric is frankly at a loss to understand why Cap Rock has chosen to adopt such unnecessary and objectionable tactics when it is fully aware that TU Electric's position has consistently been that, when and if Cap Rock chooses to cancel the valid contract it has with TU Electric, Cap Rock will be given the same services as all other similarly situated entities.
1
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the terms of that contract. Nor does Cap Rock cite any antitrust authority which
. would even arguably require TU Electric to do so. TU Electric is fully within its rights to expect that Cap Rock abide by the terms of its contract, and TU Electric believes this position is entirely consistent with its obligations under the License Conditions and the antitrust laws.
Cap Rock, on the other hand, seeks to have the Director intervene in the contractual relationship between TU Elcetric and Cap Rock, asking, in effect, that TU Electric be ordered to facilitate a breach by Cap Rock of its obligations under the contract by disregarding those obligations. Thus, while Cap Rock claims that it "has not requested, nor does it intend to request, this Commission to take any action with respect to the termination of its contract," id. at 24, there is no escaping the fact that this is precisely what Cap Rock secks. There is no jurisdictional basis for such action.
Finally, there is no merit to Cap Rock's contention that the Commission is
" obligated" to amend the License Conditions if they do not afford Cap Rock a means to obtain the relief it seeks. See I,d. at 24 n. 40, and 44-45. The License Conditions are clearly sufficient to serve their intended purposes. That Cap Rock makes such a demand simply demonstrates the weakness of its position. It is not the License Conditions that are lacking; rather, it is Cap Rock's attempt to utilize the Commission's antitrust jurisdiction for purposes completely opposite from those for which it was intended that is wholly without merit. The purpose of !
Section 105(e) of the Act is to assure that the licensing process affords fair access to nuclear power.EI By its own admission, Cap Rock seeks to use the License Conditions and the licensing process to avoid the purchase of what it inaccurately characterizes as "the astronomically priced Comanche Peak power." See Cap Rock E/ Consumers Power Company (Midland Plant, Units I and 2), 6 NRC 892, 897 (1977).
i
,. l I
(: Request at 13-14 ("TUEC is . . . attempting to force Cap Rock to buy Comanche Peak power"). Cap Rock's allegation regarding the price of Comanche Peak power represents nothing more than what TU Electric can only assume is a calculated misrepresentation of fact.E Cap Rock is well aware that TU Electric will seek a revenue increase of about 10% per unit. However,it d)es clearly demonstrate that Cap Rock is attempting to subvert the intended purpose of the Commission's antitrust jurisdiction to achieve results hardly contemplated by Section 105(c) of the Act and the Commission's implementing rules and regulations.E It is suggested that Cap Rock may be simply endeavoring to camouflage its own inefficiencies by attempting to blame the cost of nuclear energy for Cap Rock's relatively higher capital costs, lack of economies of scale due to the low density of its service area and perhaps higher operation and maintenance costs. Certainly, 18/ In a clear attempt to mask the fact that Cap Rock is attempting to avoid its contractual commitments, Cap Rock has embarked on a " scare tactic" campaign designed to mislead its, as well as TU Electric's, customers regarding the effect of Comanche Peak on future TU Electric rates. For example, the May 1989 edition of " Cap Rock Electric Ill-Lines", a publica-tion for Cap Rock members (customers), contains an article entitled " Power Supply 'roblem Is Major Consideration" which states that, as a result of Comanche Peak, " Cap Rock, as a wholesale customer of [TU Electric],
expects an inercase in wholesale prices possibly as high as 50 percent."
Attachment 29 at 2. Cap Rock continues: " Bills have been fairly stable fot-the last 3 to 5 years, but unless something is done to soften the future rate shock, Cap Rock members can expect a hef ty increase in rates. Alternative power supply appears to be the only way to soften the future rate shock."
I_d. Cap Rock's statements are indeed unfortunate as there is absolutely no basis for the claim that it expects a wholesale price increase of "possibly as high as 50 percent." Id. In its upcoming rate case TU Electric w"1 seek an increase in general revenues of only about 10% - an increase which clearly ,
will not result in the " rate shock" Cap Rock so inaccurately predicts. Since other fuel prices have decreased, TU Electric's overall rates would be back -
to 1984 levels.
H/ For yet other glaring examples of Cap Rock's blatant mischaracterization j and distortion of the License Conditions, see Cap Rock's press release issued l June 23,1989 (some six weeks after the filing of the Cap Rock Request),
relating to the filing of the Cap Rock Request (Attachment 30).
3
,j, there can be no' suggestion that TU Electric is responsible for regulating or subsidizing the costs associated with Cap Rock's business by somehow guaranteeing Cap Rock that its rates will always be the same or lower than TU Electric's general service or retail rates. This would be the antithesis of the public interest.
B. TU Electric is Not Obligated to Schedule Cap Rock's Purchases from 11LP and Panda in Disregard and/or Breach of its Contract.
Cap Rock alleges that Paragraph 3.D.(2)(i) of the License Conditions obligates TU Electric "to provide the transmission and scheduling service necessary to permit Cap Rock to effectuate economy energy purchases from III P and firm power purchases from Panda" (Cap Rock Request at 18-19). Paragraph 3.D.(2)(i) reads in full as follows:
[TU Electric] shall participate in and facilitate the exchange of bulk power by transmission over [TU Electric's] trans-mission facilities between or among two or more Entities in the North Texas Area with which [TU Electric is] connected, and between any such Entity (ies) and any Entity (les) outside the North Texas Area between whose facilities [TU Electric's] transmission lines and other transmission lines, including any direct current (asynchronous) transmission lines, form a continuous electrical path; provided, that (i) permission to ut!Eze such other transmission lines has been requested by the proponent of the arrangement, (ii) the arrangements rea-sonably can be accommodated from a functional and technical standpoint, and (iii) any Entity (ies) requesting such trans-mission arrangements shall have given [TU Electric] reason-able advance notice of its (their) schedule and requirements.
Such transmission shall be on terms that fully compensate [TU Electric] for lits] costs including a reasonable return on investment; provided, however, that such transmission services and the rates to be charged therefor shall be subject to any regulatory agency (les) having jurisdiction thereof. [TU Electric] shall not refuse to provide such transmission service merely because the rates to be charged therefor are the subject of dispute with such Entity. [TU Electric] shall not be required to enter into any arrangement which would un-reasonably impair system reliability or emergency transmis-sion capacity, it being recognized that while some trans-mission may be operated fully loaded, other transmission may be for emergency use and operated either unloaded or partially loaded. (The foregoing applies to any Entity (ics) to which [TU Electric] may be connected in the future as well as those to which they are now connected). (emphasis added)
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..c_ j It is plain from even a cursory reading of this Paragraph that it does not require TU Electric to facilitate the breach of its own contract by providing transmission wheeling service to assist a contractual full requirements customer obtain power and energy from other sources. Neither does any other provision of the License Conditions.
Cap Rock also makes the completely unfounded assertion that Para-graph 3.D.(2)(1) of the License Conditions "necessarily includes the obligation, where technically feasible, to act as scheduling agent to permit precisely the kinds i of transactions that [TU Electric] is now denying Cap Rock." Cap Rock Request at 19 n. 27. No such obligation exists. As is plain from its face, Paragraph 3.D.(2)(1) refers only to transmission service over TU Electric's transmission facilities. Nowhere does this Paragraph or any other provision of the License Conditions obligate TU Electric to provide scheduling or scheduling agent services.
Transmission and scheduling are entirely different services.20'* Although other provisions of the License Conditions address transmission, none icquires scheduling. For example, in connection with participation in Comanche Peak through ownership interests by North Texas Entities, Paragraph 3.D.(2)(a) requires that TU Electric " offer transmission service as may be required for delivery of such power to such Entity (ies) at a point or points on [TU Electric's] system."
Paragraph 3.D.(2)(j)(a) imposes certain obligations on TU Electric with respect to the planning and construction of " transmission capacity", " transmission facilities" and " transmission lines." Paragraph 3.D.(2)(k) regarding the sale of bulk power provides that TU Electric is not required to make such sales if, among other things, it does not have " adequate transmission to provide the requested service."
Paragraph 3.D.(2)(d)(a) deals with "the transmission of electric energy in interstate com merce."
2_0/ For a discussion of scheduling, its implications and the difference from transmission and coordination services, s_ce e pp.14-17 and p. 22 n.14, supra.
Thus, while Cap Rock claims that it "is asking no more than that this Commission enforce the letter of the license conditions", Cap Rock Request at 37, it is, in fact, seeking to graft requirements on the License Conditions that do not exist when it argues that the obligation to transmit power necessarily includes the obligation to act as the control area for Cap Rock and pwvide the equipment and personnel to schedule the power as well. Id. at 19 n. 27. See Section II, pp.14-17, supra. The phrase in Paragraph 3.D.(2)(i) which reads " facilitate the exchange of bulk power" does not, and cannot be read to, mean " scheduling," as this License Condition goes on to provide that TU Electric should facilitate "by transmission over [TU Electric's] transmission facilities." Nor does this phrase have the broad, If not unlimited, meaning Cap Rock attributes to it when it alleges that Paragraph 3.D.(2)(i) obligates TU Electric "otherwise to facilitate the exchange of bulk power," when it specifically adds ". . . over (TU Electric's] transmission facilities." Cap Rock Request at 25 and 30. Transmission is clearly all that is contemplated.
Cap Rock also argues that:
[i] f Paragraph 3.D.(2)(1) does not obligate [TU Electric] to provide such scheduling services, the provision is of little if any value to full requirements customers. By definition, full requirements customers are unlikely to maintain control areas and to be able to handle their own scheduling and related arrangements.
Cap Rock Request at 19 n. 27. Rather than supporting Cap Rock's position, this argument demonstrates its inherent inconsistencies. Although Cap Rock now seeks to obtain some of its requirements from other sources and thus become a partial requirements customer of TU Electric, it relies on its status as a full requirements customer- one which is not "able to handle [its] own scheduling and related arrangements"- to argue that TU Electric is somehow obligated under the License Conditions to provide it with scheduling services. There is simply no logie in such an argument. What Cap Rock really seeks is to hold TU Electric to all of
l ,
its obligations and responsibilities under the Cap Rock contract while Cap Rock will be free to demand its full o_r partial requirements from TU Electric simultaneously -- a result hardly contemplated or required by the License Con-ditions.
Cap Rock next contends that TU Electric should " schedule" economy energy purchases frorn IILP because its agreement with IILP is substantially the same as the arrangements HLP has entered into for the sale of economy energy to Rayburn Country Electric Cooperative, Inc., ("Rayburn Country") and Tex-La Electric Cooperative of Texas, Inc., (" Tex-La"). Cap Rock Request at 18 and 20. TU Electric is currently scheduling short-term economy energy for Tex-La and Rayburn Country pursuant to agreements cancellable by TU Electric on 30 days' notice. As Cap Rock is fully aware, neither Tex-La nor Rayburn Country is a full requirements customer of TU Electric, their 20-year power purchase agreements with TU Electric having expired in 1987.E Ilowever, Cap Rock characterizes Rayburn Country and Tex-La as ' full requirements customers" in a blatantly misleading attempt to cast itself in the same light as these cooperatives. Id. at 23.
Cap Rock also argues that TU Electric should act as its scheduling agent because TU Electric has entered into an agreement with Tex-La to act as a scheduling agent in connection with TU Electric's agreement to purchase Tex-La's ownership interest in Comanche PeakE . See Cap Rock Request at 34-37. As part of the consideration for the settlement of a longstanding legal dispute and for 21/ In addition, Rayburn Country and Tex-La were never full requirements customers of TU Electrie as both received and still receive a portion of their power and energy from Denison Dam, a Southwestern Power Admini-stration preference source.
~~22/ These arrangements are part of a comprehensive settlement of all out-standing claims and pending lawsuits between Tex-La and TU Electric regarding the sale of Tex-La's ownership interest in Comanche Peak to TU Electric.
- . o the purchase of Tex-La's interest in Comanche Peak, the previous power supply arrangements between TU Electric and Tex-La, which have expired, will be replaced, when the purchase of Tex-La's interest in Comanche Peak closes, with a power supply arrangement which provides an opportunity for Tex-La to substitute other capacity for Comanche Peak power, with TU Electric providing scheduling services to Tex-La for a limited period of time until Tex-La acquires control area capability. The nature of the settlement thus allows Tex-La, which had for a number of years been relying upon its Comanche Peak capacity to provide much of its future power and energy requirements, to replace that capacity with another source. It was these extraordinary circumstances which gave rise to the arrange-ments between TU Electric and Tex-La. Those arrangements certainly form no basis for Cap Rock's claim that TU Electric is obligated to schedule power for it in breach of Cap Rock's full requirements contract.
However, notwithstanding the fact that it has no obligation f ) do so, TU Electric has also offered to schedule power to Cap Rock r.fter its full requirements contract has come to an end, on a short-term basis while it establishes a control area or obtains that service from another utility.23/ Until recently, Cap Rock clearly recognized the need to put itself in a position to take delivery of power purchased from others by either becoming a control area or contracting with a third party to provide such services after its full requirements contract has come to an end.EI The recognition that control area services were 3
2_3/ See Section II, supra, for a full discussion regarding TU Electric's offer to Cap Rock should the contract be terminated in accordance with its terms.
M/ See pp.15-17, supra, and Attachments 15 and 24.
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necessary and that they were available from other sources was so inconsistent with Cap Rock's strategic plan to improperly attempt to enlist the aid of this Commission that, once again, mere expedience required it to abandon its earlier conclusion and adopt a completely inconsistent and illogical scenario.
Cap Rock also improperly seeks to rely on Paragraphs 3.D.(2)(c) and (d) to compel the wheeling of firm power without terminating the full requirements contract. Cap Rock Request at 25 and 30. These paragraphs impose certain obligations on TU Electric as follows:
"[TU Electric] will . . . coordinate reserves, and sell, pur-chase or exchange emergency and/or scheduled maintenance bulk power with any Entity (ies) in the North Texas Area . . . . "
(Paragraph 3.D.(2)(c)).
" Emergency service and/or scheduled maintenance service to be provided by each party shall be furnished to the fullest extent available . . . . " (Paragraph 3.D.(2)(d)).
However, in claiming that these provisions of the License Conditions require TU Electric to schedule power purchases from Panda, Cap Rock again ignores the fact ,
I that these provisions do not even ramotely address wheeling or scheduling, but address the need for a generating " Entity" in North Texas to have available emergency and backup service hi the event of the loss of generation and to participate with all ERCOT entities in the planning process.b TU Electric has not denied this service to Cap Rock. But these paragraphs in the License i
Conditions provide no justification for setting aside an otherwise valid contract I with Cap Rock.
Finally, Cap Rock does not even satisfy the requirements of an " Entity" as 1
contemplated by Paragraphs 3.D.(2)(c) and (d) of the License Conditions. For the ;
i purposes of these Paragraphs, an " Entity" is an electric utility which owns, opert.tes or contractually controls generation facilities or proposes in good faith to 5
2_5/ See p.16, supra, for a definition of coordination services. l o____ ___ _ _ _ _ _ _ _ _ . - - - .I
c . e do so. See Paragraph 3.D.(1)(c).b While Cap Rock relles on the Panda contract to claim " Entity" status under these paragraphs- a contract which is not included in trie Cap Rock Request -- it seems clear that a power supply agreement such as 1 that described by Cap Rock will not satisfy the " contractually controlling" provisions of the License Conditions, and even if such a contract could arguably satisfy such " contractual controlling" provision of Paragraph 3.D.(2)(c), Cap Rock ;
clearly does not meet the " good faith requirement" by its obvious attempt to disregard and/or breach those obligations with a tainted " agreement" from Panda.
IV.
CONCLUSION The Cap Rock Request presents nothing more than a complaint that TU Electric will not assist it in undertaking to disregard and/or breach its full requirements contract. Cap Rock still seeks exactly what it denies seeking-preferential treatment over other TU Electric customers and ultimately the effective reformation or rescission of an existing, valid contract. In so doing, Cap Rock demonstrates no basis in the License Conditions or the antitrust laws for the relief it seeks, and thus fails to raise any issue of jurisdictional interest to the Commission. TU Electric has repeatedly shown that it is fully in compliance with the License Conditions and the antitrust laws. TU Electric will also continue to 2_G/ An Entity is defined in Paragraph 3.D.(1)(c) as:
an electric utility . . . owning, operating or e cactually controlling, or proposing in good faith to own, operate, or contractually control, facilities for generation of electric power and energy; provided, however, that as used in paragraphs 3.D.(2)(a), 3.D.(2)(b), 3.D.(2)(g), 3.D.(2)(i), 3.D.(2)(j)(a) and (b),
3.D.(2)(k), 3.D.(2)(1) and 3.D.(2)(m), " Entity" means an electric utility owning or operating, or proposing in good faith to own or operate, facilities for generation, transmission and/or distribution of electric power and energy."
(emphasis added)
F k honor the terms of its full requirements contract with Cap Rock and expects no less of Cap Rock and, in doing so, will not act as an impediment to Cap Rock's desire to avail itself of other sources of bulk power. Cap Rock has complete control of its future and so long as it does not ask TU Electric to subsidize that future, or to plan, schedule or ctherwise act for it to the detriment of its customers and shareholders, there is no reason to expect that all legitimate issues between Cap Rock and TU Electric will not be resolved by their respective officers and employees on a local level who have worked so well together for over the past 50 years.
For the foregoing reasons, TU Electric respectfully requests that the Cap Rock Request for an enforcement ceder and an antitrust hearing be, in all respects, denied.
Respectfully submitted,
,{ ,
M. D. Sanipels _
!Wiki OF COUNSEL:
M. D. Sampels Angela A. Hatton WORSIIAM, FORSYTHE, SAMPELS
& WOOLDRIDGE 3200 - 2001 Bryan Tower Dallas, Texas 75201 (214) 979-3000 Douglas G. Green Newman & lioltzinger, P. C.
1615 L Street, N.W.
Washington, D. C. 20036 (202) 955-6600 -
ATTORNEYS FOR TEXAS UTILITIES ELECTRIC COMPANY Dated: June 30,1939 I
i UNITED STATES OF AMERICA ,
BEFORE THE j DIRECTOR OF NUCLEAR REACTOR REGULATION j TEXAS UTILITIES ELECTRIC ) Docket Nos. 50-445A, COMPANY, et al. ) 50-446A l{
1
) i Comanche Peak Steam Electric ) i Station, Units 1 and 2 )
ATTACHMENTS TO RESPONSE OF TEXAS UTILITIES ELECTRIC COMPANY TO 1
REQUEST OF CAP ROCK ELECTRIC COOPERATIVE,INC.
FOR AN ORDER ENFORCING AND MODIFYING ANTITRUST LICENSE CONDITIONS
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9 118. Departenant erJammes Antitrust DMaion am w asee a mwemen.xn j w.nc asse l
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i Joseph Rutberg, Esq.
Deputy Assistant General Counsel
) Nuclear Regulatory Colamission Washington, D.C. 20555 Re Texas Utilities Electric Company, et al (Comanche Peak Steam Electric Station, Unit 1); Operating License ADhitrust Review. NME Dacket 50-4dBA ;
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Dear Mr. Ruthergt You have requested that the Department of Justice
(" Department") review and comitent on a draft " comanche Peak Steam Electric Station, Unit 1, Texas Utilities Electric Company, et al, Docket 50. 50-445A -- Finding of No Significant Antitrust Changes."
) Section 105(c)(2) of the Atomic Energy Act of 1954 (as amended), 42 U.S.C. S 2135(c)(2), provides that the Department shall review applications for operating licenses only if the " Commission determines such review is advisable on the ground that significant changes in the licensee's activities or Proposed activities have occurred subsequent to the previous
, review by the Attorney General."
The draft finding concludes that no significant changes in the activities or proposed activities of the licensee have occurred since the prior antitrust reviews of the Comanche peak Steam Electric Station, Unit 1, and that therefore an antitrust review by the Department pursuant to Section 105(c)(2) is not Warranted. Based on the information that you have submitted to
) the Department, the Department agrees that an antitrust review of the Cemanche peak Steam Electric Station, Unit 1 operating license is not necessary.
Sincerely yours,
)
I Mark C. Schechter Chief Transportation, Energy si
..griculture Section l
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3 stSYX31 'SY11YO .tegt get ! Mdtt:C ! 89-33-9 : 3H1AG80d 'MVP30M:^9 A08
. ,..e. a .e,.es ,,sa
. Panda Energy looks to cogeneration to fuel future growth 1 Outlook for energy source appears bright, <
but IVinroadsROD laillef must be made with electric utilities Once shunned b insestment houses The circumstances seem incon. Panda Eners) lno )onger has to scrape l' gruous, esen impropable. On this Fn. compan su:
day morning. Bob Carter has
[odyecapitgl. " Nom." smiles Carter, with eeg,n,7,,[,"b : be eain r"
) representatnes from two of Amenca's y,
n[estm n ankers call from face largest corporations. Bechtel and Pacif. their calls'. ys lies all the affection of a C dsbns nvalry in the current ic Gas & Electne. w.sitmg in the com. strugsle.
Panda Eners) plans to go ,yublic at pany conference room. They recently me futu point. puhaps a earl) as The f"rst unheralded shots were fired joined forers with his compan). Panda , year, arter says. This .; a sery in 1973 when Congress passed the Puo5 Energy, on a 5:00 million deal and capitabintensne business, so we'll defi. lic Utilities Regulatory Power A hase returned to :alk about possible nitely become a ptblic compani." which directed utility compani
)' additional business sentures. Carter said. Panda util likely hase an purchase competitive raced On other Frida>s. in pres tous years. easin Ume raising capital through a from alternate scurces such as Carter sweated making pa> roll, not Public stock offering than it did neration, to help fulfill lon -
multimillion. dollar deals. Panda Ener. through pris ate insestors. capacity projecuens. Urality compan$e g) Corp . a small prnatch held com. . Carter predicts Panda mill be a bil- onginally dismissed the requirement as Mn> with only 12 emplo>ees, has been.,I8on dollar compan) *tthm 10 years. little more than a nuisance but na.e the energ) business for four years e currentl) have commitments of a since come to realize that entrepre. I
) J nas yet to make a dime. Nou, half bilhon dollars in project revenues neunal upstarts ljLe Panda are re'n
at:orcing to Chief Ese:utne Officer oser the next 15 years." Panda's joint mg the mdustry - and not ne:essar$n. 's i
Carter. that's about to change. venture with Bechtel and Pacific Gas &
Panda's business is cogeneranon. Electnc, for the purchase of a centraj l on terms fasorabie to them. i unut re:entl> a forgotten te nnology In the pre OPEC era of chen e e.
that generates power more effectentf( Texas gas pipeline. will bring the jom: gy, the inefficiency of consennona; ]
tnan todas's tommer::al power plants'. we ture revenues of more than 3:00 power plants mas of little . :er .
) The re emergence of :ogenciation, like milli n during the next decade. Panda Yhat is no longer true. Uulity m astes otner alterna:e sour:es of power. traces awe m use gas reserves ohm exmt Atnetty rates to nse ba:L to the OPEC. driven oil pnce mt ne m fuel possible cogenua.
n facihties, faw than Manon 6 tu duranen M increases of the 19*0s. While mterest in this century, providing a compellms mind and solar power has dissipated in . Next year we 11 have revenues of reason for both business and resident:at the late 1980s, cogeneration seems $25 million from the pipeline. The foi, users to demand efficient ele:tne poa.
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uniquely positioned to impact energy lowing year, as additional projects er-
) costs and availability during the come on line, we'll have revenues of Today,: large commercial pow er remamder of this century. , $50 to $100 million." plants arc less tnan 30 percent eff :ient The U.S. Department of Energy esti. Sitting in his well appointed North with the remairider lost as thermai mates (nat by ine 3 ear 2000, cogenera. Dallas office, the 50.yesti old Carter talks enthusiastically about his com. waste. That means that for 100 units of tion will produce 13 percent of the fuel input, only 30 units of eie:tt::.t pany's future. He compares tus 12 per. are produced. The cogeneranen pro >,
nation's power. By then, cogeneration could be a 560 billion industry.
son outfit to MCI the long distance cess uses one fuel source. usualb natu.
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) phone company, The potennal of cogeneration was tal gas, to create two sources of po er "They made no money for the first - typically steam and ele:tne:tn not an eas) sell for Carter at the outset. 10 years. Now, in their leth year of when he founded Panca m :983. Cart-Cosencratiors recosers part of ta.e busmess, they are a $3 billion dollar escapina heat and converts et inte ce tr:rd to raise capital for his fledghng company, company through area insestment steam energy. Federal uidel.nes ises, but they weren't interested, The affable Carter makes another require cogeneration to produce e .erp companson. "Our guis are hke 'The at a mmimum a2.3 percent erfre.ents.
) ndaunted. Panda raised 53 million Dirty Dozen' in the mosie. Some of us but it often produces eners) mtee
.ough prisate sources and set out to are a little crazy, and we operate percent to 50 percent range - acer:s compete agamst one of the most pom. behind enemy lines." The enemy lines erful and most protected industries in matrly a 50 percent improvement ose-in Panda's case, are esmbolized by the commercial power plants.
the state of Tesas - ine pubhc utili. power lines that supply his office with tiet To sell power, cogeneranon es .
electncity. panies must (md " hosts, sa a
) mariufacturing plants and n uaart ties for their po*er plants T*ese nos:s
O r.. .Je the site for cogeneration facili. in the country.' Clements 0 * " c. a l ties, and sign long term agreements to cogeneration development ("E "' ' Fort l 0 purchase some of the generaied ouipui % orth. .hich he soid in i,s.i.
at very attractne rates. Ususlh, more Panda's unhappiness with TL's electricit) is generated than the host see etne competien e. bid proced ires can utilize. and the surplus is sold b) ruffles no feathers at TU Electnc. at plant deselopers such as Panda. least net publicly.
A not her local des eloper is "% ith regard to cogenerated power.
E%ERCH. the rarent cem; an) of w>s Fiorelli. "Tesas utilities are in a O
L one Star Gas. EMERCH has also buyer'i market because there's so mu.n
, been attracted by the poten: al of coge. asailable. The result of an open com.
neration but with a different focus- petitne bid procedure would be to Subsidiar) ENSERCH Development make that power more expensne for os Corp. is building a large cogeneration and for our customers. Naturall), we facility in Sweetwater, scheduled to go think that's a bad idea."
on.line next spnng. EDC. according to "There's absolutely nothms to sub.
O Daud Roner, a 1.one 5:tr Gas Repre. stantiate TU Electne's claim that secte.
sentattse insobed in the Sweetwater cy serses the public interest." argues project, belieses cogeneration " pro. Carter. "Open bidding is a nationwide sides an important new market for standard when the public must ulti.
natural gas. The energy industry is mately pay. Secret bids are conduene sluggish, and cogeneration prosides to the highest pnce, not the lowest."
"*" demand." Panda's inability to sell power to the O Panda has signed host agreements in most likely buyer. TU Electric, forced the North Texas area with four com. Carter to try a new strategy, one that panies: Standard Meats, a meat pro. may pay big disidends. In May of cessing plant in Fort %'o rt h: Rock. 1988. Panda announced a 15 > ear Tenn, an Oak Cliff paperboard manu. agreement to sell surplus power from factunns pla.it: Bunge Edible Oil Co. the Oscar Meyer facility to Cap Rock O in Fort % ortn; and Oscar Meter meat Electric Cooperatne. Cap Rock is a packing plant in Sherman. Permitting member. owned electric cooperain e is underway for the Oscar Meyer facili. that supplies energy to 13 %'est Tesas ty w hile pirts for the o'her three are on counties. A Panda spokesman said Cap hold until Panda can find buyers for Rock is the first rural electric coop the escess electncity produced. A co. (CO.OP) in Texas, and perhaps in the generation plant can be built withn nation to buy power directly from c.
O about two > ears. cogenerator.
In that context. Panda's unprece.
To date. Panda has been unsuccess. dented agreement with Cap Rock may ful in its efforts to sell surplus capacity signal the emergence of
- hat Panda from any of its :entracted host plants officials call a " competitive supermat.
to its primary market - TU Electric, ket for electrical power in Texas.
the utility that otherwise provides pow.
er to area customers. if thcy begin to " defect" from the O ma3o, utii ty compantes and insiead Competitive bids are submitted for purchase independently cogenerated the purchase of additional capacity, power, utility ;:ompanies, burdened by and in each instance that Panda has fixed capitat costs. could be hurt. And sumbitted bids. they have not gotten a I they try to pass increased costs on to contract. "%'e feel we were compets. a declining customer base, they mas tive, but it's hard to say because bids end up fighting, and losing a political O aren'i disclosed." Carier esplained.
ESSERCH Development has fared. coniesi, g.hile the larger issues are being better. TU Electric has agreed to pur. sorted out. Bob Carter is hasing fun.
chase surplus power from its facility in His contract to supply Cap Rock with Sw eet w at er. .to percent of its power needs for :he A spousman for TU Electne. Dase n ,,. : i$ years proses that traditional Fiorelli, sa3s cogeneration can be utility companies aren't Panda's onb O advantageous for both the utility and prospectne customers.
for ratepayers in terms of suppl >ing **The opportunities are here. the reasonabh priced power. "%.e encour. resources are here, and the infrastruc.
age it." he says. , ture is here. The only way we'll failis II Howeser. Fort % orth cogeneration we don't manage the compan) Propef' consultani Jim Clements disagrees. 1). 'said Carter.
O 'TU Electrie is probably as strong an Rob Lather s : Dallas free. lance coeonent of cogeneration as an) utility a rst er.
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' PANDA Nmrw - a ENERGYCORPORATION An Alternate Energy Company Staren 2.1987
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Texas Utilities Electric Company 2001 Bryan Tower Dallas, Texas 75201
) Attn: Str. Darrell Bevelhymer )
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Subject:
Proposed Cogenerated Electricity {
Sale And Purenase Agreement Rock-Tenn Cogeneration Facility
) Gentlemen: 1 By letter 198"). dated February 6,1987 (as supplemented by letter dated February 20 Panda suomitted its latest proposal for subject Agreement. We understand that TUEC's decision relative to the purchase of Cogenerated Electricity is imminent:
I that TUEC may purchase considersely less than the quantity of electricity being
) offered by the hiimdful of remaining cogenerators that the window being f :ed by ;
TUEC does not extend .beyond 1989; and that Panda's prospects for receivmg an {
award are therefore limited. .
l' As you know. Panda has executed Cogeneration Agreements with several hosts in the TUEC service area and has been asked, by several additional hosts. to do
) the same. Panda (as an alternative to contracting for a sale of Roex-Tein electetetty to TUEC) is pursuing arrangements to sell electricity directly to its host industries and to other electric utilities. municipalities, and cooperatives. Panda will (as {
i a part of this alternative effort) consider designing its Cogeneration Projects to i accommodate such direct sales and to permit the sale of excess electricity, on an part as "as available" basis to-TUEC at TUEC's full avoided fuel cost. Panda will (also
) of this alternative effort) attempt to " pool" its projects electrically so as to provide more firm power gddits own backup power to said host industries, s electric utilities municipalities. and cooperatives. Appropriate applications will be made to the Texas PUC for permission to wheel power to and from the various projects to achieve this end.
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Panda would obviously rather sell power directly to TUEC in tqy-all. sell-all arrangements. Panda and its hosts are. however, firmly committed to cogeneration and its economics (particularly in light of the potential rate impact associated witn Commanche Peak) and are prepared to pursue this alternate approacn if necessary.
A considerable amount of work is required to complete these arrangements.
made.
Accordingly, we will appreciate TUEC's decision as'soon as it is
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I 4100 5prieto Valley Suite t00103:us Tms m a 214 980 7150
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aft. Darrell Bevelhymer Pare (
) 1 by the cogenerators under consideration) to needed through 1992.
ricity
.ed cont
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would work in the best interest of TUEC and its consumers.This wo (particularly in light of obscure, changing and i osat poss 4
4 and in light of previous pricing agreements and correspondence). ng criteria
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We hope that TUEC will decide to purchase capacity and energy di ourthis by projects letter). We(whether to fill look forward the response.
to your present window or the expanded window re Sincerely,
) $ , -
ans R. van kuil'ts.bu rp HRVK/tb "
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cc: Str. Steve Co!Iler -
C. H. Guernsey & Company -
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TEXAS UTILITIES GENERATING COMPANY "
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)L SKYWaf Towse ' 404 NORTet OL4WE STieEET. . L.S. et
- 04LLas TRE Au ,140L
=:.m :.=.=- ""
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) Mr.' Hans R. Vcn Kullenburg !
President Penec Energy Corporation j j
4100 Soring Volley, Suite 1001 i Oclics, Texas 75234
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Re:
Penda Energy Corporation Letter of Mov 2,1986 Dect Mr. Von Kuilenburg: .
I am in receipt of y.our letter of May 2,1986.
) That letter contains several statements which I would like to address.
You express disappointment that TUEC would not accept your initia '
As we indicated to you in our February meeting, your offer was ve simply n
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with the price et whib we can purchese cogenerated power from that you have not been presented with " formal criterio" for our essessment of cogeneration offers. You must realize, however, that TUEC chooses supplier .
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fcshion es any prudent business person, i.e., we evoluote meriy ,
ce, fact reliability, competency and experience of project participants, terms ed c , .
As we indiccted to you in our February meeting, your offer was not e compe
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tried to give you en idea of what the reorket was without violating c y confide cgreements in force. Our first and foremost interest in purchasing ecgenerate to provide reliable cogenerated power to our customers at the lecstEven .
possible if ecst
) we were c!! owed to discuss other competitive offers, which we cre not s ngdue to ex confidentiality cgreements, we believe that, for rather obvious reosons, t furthered by a detailed discussion with you of our available competitive ~
We ere optio
)- sorry if that mckes your business decisions more difficult but we steadfastly it best serves our retepoyers interests.
4 perrason or trzas ettstrars e&actate compant !
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Mr. Hans May H. Ve l<uitenburg 8.1984
) Pece T*e 1
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We believe that we have indeed gone beyond what should y steting, os be nece I
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) you mentioned, that a 5% discount on ecoccity and energy was competitive -
Just es we did then, we will try to communicate to you,in general terms, what the s without vioicting confidentiality agreements currently in effect.
Many of the proposcis that we .
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cre presently receiving are in the rango of 3.75 cAWh to 4.25 cAWh in 1 esecleting et 3% to 3.5% per year thereafter.
These values are calculated using a 70%
cepecity fector. i As you een see, ew your lotest procosci is outside the current competitive market.
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Your ietter mentions that you are concerned about having to comp i from cogenerators outside of TUEC's service cree. All other things be ,
prefer to purchese power from cogenerators within our serviceHowever, crec. we have i
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received offers from cogenerators outside dur service area which are attra -
we believe provide o high degree of reliability. Those offers cennot be ig beccuse they are from projects outside TUEC's service crec. Also, you we adjust all proposcis by the effect of system Ifne losses.~FM exemple , posal if produced a 1% reduction in loses, then in our comparing of your offer with others, we would fully consider that 1% reduction in our determination of
) competitiveness of the verlous proposals. l Your sistement regarding our supposed leek of response to your verba Februcry 21 is incorrect.
Not only was a response given to Steve Collier on March 4 by
) Rick Dickey of our office, but, in cddition, e similar response was given t on Mcrch 4. That response is attached.
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The Icst peregrcph of your letters states that you would like to continue contract terms.
) At our lest meeting with representatives of Pando on Merch 13, which <
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Mr. Huns n. Von Kuitenburg May 8.19M
) Pece Three you did not ettend, Ed Gwynn stated that he would send toems, our o ottor
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merl<-vo draft contcining Pando's suggested contract longuage g week.
during t Nothing was ever received. Since we never received that merk-up over a period of meny-weeks, we ossumed that Pondo's interest in selling power to TUEC had d e . We will
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be pleased to continue negotiations with you, but we believe se that it of time for all concerned unless some optimism can be developed end th willing to compete on price with other credible cogenerators.eet We will with you on May 15 et 9:00 c.m. in TUEC's offices et 400 North uss the Olive to
) potentiel for fruitful negotiations.
I cm disappointed that you are not satisfied with our response to .
TUEC ettempts to treat potential cogenerators quite fcirly. We must, .
our pub!ic service responsibilities, oct to further the best interests . Weof our cu believe that our reecrd in the cree of procuring cogeneration for our c good one.
Let me cssure you that it is TUEC's con' tinuing desire to purch
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cogene; ofion, et c price which is ottrective to our customers.Te hope that Pon a pcrt of that prog cm.
) erely,
/ fauf Ocrrell Bevelhymer C8/sw
) Enclosure
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PANbA b'M 1, .
ENERGYCORPORATION An AlttfM&e Energy Comgany I
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February 4,1987 I
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Mr. Darrell W. Bevelhymer Manager Cogeneration Texas Utilities Electric Company j 400 N. Olive j LB #81 l
) Dallas, TX 75201 j
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Dear Darrell:
i Thank Rock-Tenn youcogeneration for your time in meeting with us this morning to discuss our contract.
We are still expecting to reach a mutually
) agreesele power frombusiness arrangement under which you will purchase the surplus this project. .
However, we are bitterly disappointed to discover that we have been placed back at the end of your cogeneration contract queue 4 by alleged developments completely beyond our c;ntrol. We are especially }
frustrated and projectthat, after considerable effort on our part in arranging fuel supplies financing, our once acceptable competitive power sales rate is
) now deemed unacceptable because of new, highly prospective and unverified project developments.
The Rock-Tenn project has a superior combination of chara'eteristics including l j
Ceographic location, host industry, gas supply and project design and equipment.
i The Rock-Tenn project will be as reliable, available and durable as any cogeneration project available to TUEC. The Rock-Tenn project has more l
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certainty of gas supply, qualifying facility status, environmental permits and construction schedule than any other potential projects which you are l
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considering. We are certainly offering power to you for less than other projects with which you have signed even longer contracts. {
i Our first inclination is to abandon this endless. unfruitful " negotiation" process
) in favor of pursuing other purchasers and/or legal and administrative remedies. !
However, we feel we must make every reasonnele effort to sell you power 3
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RR...:D f
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FE3 ; *R '
CCCENLRATICN
' {1 4100 Soring Vaticy. Suite l001 Dattas ruas 75M
) 214e980 7159 l 1
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Mr. Darrell W. Bevelhymer (' '
Page 2
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from this power excellent now and into the project future. and we believe you need this rellaele and econ As a result. we will get back to you within the nextterms.
contract few days with any improvements which we can make e in our propos best offer to purchtse our power.In the meantime, we are always prepared to consid
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Sincerely, .
s /
I 3 4 j Hans u
.J R. van
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KutilE' burg
-r Passdent HVK/np
) cc: Mr. Steve Collier Mr. Ed Gwynn Mr. Robert W. Carter Mr. Mike Wollitz
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00CXET NO. 7470 PET: TION OF PANDA ENERGY l
} CORPOR.AT*0N, ET AL., FOR A CEASE PUBLIC UTILITY.COMM[$$ ION
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AND DESIST ORDER AGAINST TEXAS l UTILITIES ELECTRIC COMPANY 0F TEIAS
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ORDER
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In public meeting at its offices in Austin, Texas, the Public Utility Comission of Texas finds that the above referenced application nwas pro
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accordanc.e with acplicable statutes and rules by examiners who prepared filed a report Examiners' Reportcontaining Findings of Fact and Conclusions of Law, which is ADOPTED and made a part hereof.
issues the following Order: The Commission further
) 1.
Panda Energy Corporation and Rock-Tenn Mill Division, Inc.'s '
Petition is hereby DISMISSED for those reasons reflected in the Examiners' Report' in that' the Petitioners have failed to state a claim for which relief can be granted.
- 2. For the purposes of ruling upon Texas, .tjtilities Electric Company's Motion to Dismiss, the factual assertions contained in the Petition are taken as true.
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-continued-1
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O-00CKET No. 7470 O ORDER - PA'.E No. 2 3,
All motions, 4 Duplications, and requests for entry of scecific Fincings of Fact and Conclusions of Law, and any other recuests O f r relief, general e scecific, if not expressly granted herein are OENIED for want of merit.
SIGNED AT AUSTIN, TEIAS on this the ay of 1987.
O NBLIC UTILITY COMMISSION OF TEIAS
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SIGNED: 8 b, 4 O DEhMIS L. in0 MAS
$IGNEb: T 0 JCG o -J_N AMPQ Q
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- $1GNED: A -
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r in 2 pgi aggrigg <
ATTEST: -
O .
h PH h..P A.jn0LGER l$ N k ~
SECRETARY OF THE COMMISSION O
1sw O
O O
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l Public Utility Commission of Texas
). g 7800 Shoal Creeir Soulevard Suits 400N o.nna. rho _
7' . A cef Aman. Temu 74757 $12454 0100 Chau
{ Jo Cunobeil com a .n l Mart.a Crestok Octo:er 1, 1987 C'""""
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TO: Chair- an Thomas Cannissicner Camobell Commissioner Greytok All Parties of Record '
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Re:
Oceket No. 7470- Petition of Panda Energy Corocration, et al., for a Cease and Desist Order Against Texas Utilities Electric Company i
Dear Sir o'r Madam:
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the above referenced docket. Enclosed is a copy of the Examiners' Report and ~
open meeting on October The Commission will censider this case. at an 7800 Shoal. Creek Boulevarc, 21,1987, at 9:00 a.m. in the Commission's offices, Austin, Texas.
Report must be filed in writing by Monday, OctoberExceptions to the Examiner's 12, 1987
) Replies to exceptions must be filed in writing by Monday, Octooer 19, 1987 An' original and ten (10) copies of exceotions and replies to exceptions mus te filed with parties the Comission Filing Clerk, and a copy must be ' served of recorc. upon all argument Pursuant must tobeComis mace insion Procedural writing, Rule 21.143, recuests for oral filed with
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all parties Dy 5:00 p.m. the fourth the Comission, and servec on final orcer meeting. seneculeo working day crecectng tne this requirement discretion. may be waived and oral argument heard at the
) wele:me to attend if you want to.Your presence at the final order meeting is not r to you snortly af ter the final order meeting.A copy of the signec Orcer will be mailec Sumary of Examiners' Review and Recemendation
) This is a comolaint filed by an electric cogenerator against an electric utility. The cogenerator, Panca Energy Corporation,and its host offacility. reliefRock-Tenn Company Mill Division. Inc., are seeking various forms from the Commission, execute a retroac*ive cogeneration including an order requiring the utility to calculated contractcost at the full avoided cost as in the ut111ty's stancard avoicec docket (Docket fo. 6065).
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00CXET NO. 7470 Letter - Page No. 2 O
The utility.
Dismiss. Texas Utilities Electric Cemeany , has filed a Motion ::
The examiners are reccmencing that the Petition te cismissac in its entrelief wni:n rety basec can te on a fincing tnat it f ails to state a cause of action f:r grantec.
O upon tne finding that This racermendation is casec in large : art utility tnan there is more c generation cacacity available to. tne The acclicaeleis statutory necessary to fulfill its cogeneration cacacity recutrement provisions .
Policies Act (PURPA) and Section 16(g) include the Public Utility Regulatory P.U.C. SUBST. R. 23.66. of PURA; the issues are governec ty O Sincerely, l
MC.y Paula Cyr Administrative Law Judge O ~
yJ. Kay
' y,Trostle
/ s pi Q Hearings Examiner O .
1sw Enclosures O
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00CXET NO. 7470 -
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PETITION OF PANDA ENER3Y '
] pugtte g7;t.7y e*w"yg~ee,ry CORPORATION, ET AL., FOR A CEASE ~"
l AND DESIST ORDER AGAINST TEXAS I UTILITIES ELECTRIC COMPANY 0F TEXAS l
3 EXAMINERS' REPORT (This document serves as an Examiners' Report in Docket No. 7470 and Examiner's Order in Docket No. 7581.
) The only difference is that the Examiners' Report in Docket No. 7470 contains Findings of Fact and Conclusions of Law Section V and there are no findings or conclusions in the Examiner's Order in Docket No. 7581. In every other aspect the documents are identical.
fonnat facilitates This
) separate dockets.) -
the Comission's consideration of identical issues 'n i I. Procedural History
) A. Docket No. 7470 On April 14, 1987, Panda Energy Corporation and Rock-Tenn Company Mill Division, Inc. (Panda and Rock-Tenn or the Petitioners) filed a petition itn
) this Commission requesting that Texas Utilities Electric Canaany (TV Electric be orcered to enter into a long-term firm purchased power agreenent wica Par:a .
and that upon notice and hearing, the Comission order TU Electric to cease anc desist from entering into any contracts for the purchase of capac.ity anc ener;y
) fecm any other qualifying facility pendir.g final ruling on this matter. On April 23, 1987, TU Electric filed its Answer to the Petitioner's Recuest .
)
)
)
l 00CXET N05. 7470 and 7581 PAGE NO. 2
)-
Pursuant to notice, a prenearing c:nference was Ao:earances were c:nvened on May 5,1987 entered by the Petitioners, TU Electric, Elec:r:enemical C rporation Occicental (Occidental), Gentex/TSG, Ltd. (Gentex), C:;e9
)' Lyoncell, Inc. (0: gen Lyoncell) and the Commission's General Counsel. The moti:ns to intervene of Occidental and Gentex were grantec.
(Cogen Lyondell Mac not yet movec to intervene at the time of the prenearing conference ) .
) Pursuant to a prehearing order dated May 7,1987, the examiners establisn a briefing schedule on legal issues relating to the appropriateness of a cease and desist order.
The examiners also established the type of notice to be provided in this case.
On May 12,1987, the examiners set fortn a briefing
) schecule to ' address the Petitioners' request for a Comission orcer requirin TU Electri' to enter into a " contract with the Petitioners.
On May 8,1987, the Petitioners appealed the examiners' prenearing order regarcing the cease and desist
) issues to the Commission, and on May 15, 1967, TU Electric filed its appeal of the examiners
- order regarcing notice, anc further filed its response ' to the Petitioners' appeal. On May 18,1987, the examiners advised the parties that, by written ballot, the Com1ssion nac declinec to hear the appeals of the Petitioners and of TU Electric.
)
~
On May 20,1987, TU Electric, with concurrence of a11 parties of ree:re, recuested that the examiners stay their May 7,1987 orcer and further preposec a revised precedural schedule.
)
In its motion, TU Electric as serted that the Petitioners would file an Amended Petition and that TU Electric would file an Answer and/or Motion to Dismiss thereto. The parties further requested an opportunity to file briefs on the Petitioners' Amenced Petition anc TU Electric's Answer and/or Motion to Dismiss. In its motion, TV Electrse !
)
furtner proposed a revised procedural schecule for this case to whien all tne parties agreec.
On May 20, 1987, the examiners granted TU Electric's motion anc estaclishec a new precedural schedule to govern this case.
On May 21, 1987, the Petitioners filed their First Amencec Orig nal
'etiticn.
On June 5,1987, TU Electric filed its First Amenced Original Ans er anc Motien to Dismiss. On June 22, 1987, TU Electric filed its initial tr'e' "
);
)'
) 00CXET NOS. 7470 ar: 7581 PAGE No. 3 su:: ort of its Motion to Dismiss, anc the Petitioners filed their initial :rtef in c::osition to TU Electric's motion. On July 6, 1987, TU Electric, the
) petitt:rers and the Conunission's General Counsel all filed replyNobriefs.
otner triefs were filed.
On May 7,1987, the Petitioners filed a motion requesting a Camissio er:er excepting Panda from complying with
) the confidentiality agreement into which it had entered with TU Electric; such agreenent prohibited Panoa disclosing any infonnation it had obtained during the negotiation Onprocess May 15, 1987, TU Electric filed .
its response to the Petitioners' request for an y excepti:n and Conrnission order regarding the confidentiality agreement.
May 21, 1987, On Panda's request the Petitioners filed comments regarding TU Electric's respon se to to be excepted from complying with the agreement. On May 29,1987, confidentiality contnents the regarding the issue of the examiners directed the parties to file fir.al confidentiality agreement, orderec
)
TU Electric parties to file a proposed protective order, and established dates were required by w Order. to file conenents to TU Electric's croposed Prote:tise On June 8,1987, and June 9,1987, the Petitioners ano TU Electr - file:
final comments regarding the issue of the confidentiality agreement datec June 17, 1987, the . By or:er
) examiners detennined cisc:very on confidential information that parties could c: tai-relating to cogeneration contracts i .t:
.nich TV Electric had entered. ~
Such access, however, must first te in c=cliance with the discovery dispute procedures which the examiners establisne in their June 17, 1987 order.
)
On June 18, 1987, TU Electric filed a proposed Protective Order.
c=ments were filed. No timely On July 8,1987, the examiners issued a Protective Or:er
). tnat did not adopt TU Electric's pre;osed 3 toto, and that would te utili:ec n i
tnis case only after the parties complied witn the procedures relating to l
disc:very disputes outlined in the June 17th order, and only af ter the examin ers cetermined that the requested information is confidential, priv il eged , or etnerwise exem:te: from disclosure. ~-
)
On July 8,1987, :he Petitioners requested !
an opportunity to present Orsi !
ar;ument in cocesition to TV Electric's Motion to Dismiss.
(The examiners c:te i
)
}
DCCXET NOS. 7470 anc 7581 PAGE NO. A that TU Electric had mace a similar recuest at the May 5,1987 conference.) prenear ;
senecuted Pursuant to an orcer cated July 27, 1987, oral argument .as
> in Occket Nos. 7470 and 7581 for August 21, 1987 (Oral argume nt was hearc in Docket No. 7581, Petition of National Cogeneration Decuid c .
Inc. 'or a+ 0 :e-C:.canv, because Executionthe legalof Power Purchase Contract ev Texas U icentical to those presented in Docket No. 74701
~
issues presented in that case were virtual *y 1 .
anc On August 3,1987, and on August 6,1987. PSE, Inc. (PSE), Co Cogen recuired Lyondell to produce filed certain a motion for protection against TU Electri confidential
) information. On PSE, et al., filed affidavits in August 6, 1987, support of their , motion. On August 3,1987 Falcon Seaboard Oil Company (Power Resour;.es) (Falcon Seaboard) and Power Resources, Inc.
filed a similar motion, and further recuested limitec intervention to protect their interests against disclosure.
)
Applied Energy Resources, Inc. (AES) On August 20, 1987, filed its objections to certain recuests for infomation propounded upon intervention. TU Electric and further reques ted limite
.On August'21, 1987 Bio-Energy Rartners similar objections and motion. (Bio-Energy) filec On August 3, 1987, TU Electric filed its
)
00jections to Petitioners' First Set of Requests for Infomation, anc on Augusc 3, 1987, and August 18, 1987, to Petitioners , Second Infomation. Recuest for On August 3,1987, the Petitioners and TU Electric filec a joint motion requesting relief from complying with the procedural discovery schecule
) established in the examiners' June 17, 1987 order regarding objections to the First and Second Requests for Infomation, and further requested approval of a revised Orocedural schedule to address these objections.
examiners granted this motion. On August 4,1987, tne clarification of the examiners' June On August 12, 1987, the Petitioners re:ues tec
) 17, 1987 and July 8,1987 creers because these orcers did not delineate procedures to address third party discov Ot;ections, and further recuested an extension of time to file suchres:enses, On August 13, 1987, 1
) requests the examiners issuec an order stating thar cutstan: ;
for intervention, thirc-party discovery objections, anc tne i Petitioners' prenearing conference, request for clarification would be taken up at the August , '.937 21
)
)
'.' 00CXE7 N05. 7470 and 7531 PAGE NO. S 3 .
On August 21, 1987, a joint prenearing conference was c:nvenes.
Ac:earances Inc.
were entered by TU Electrie, the Petitioners, National Ccgenerati:n ,
(National), Falcon Seamcarc, Pewer Resources. Occicantal, Cogen Lyn ,
} C:;en Lyoncell, PSE, and the Commission's General Counsel.
intervent :n of Falc n Seaboard, Power Motions f:r limitec Resources, PSE, Cogen Lyne tur;,
C: gen Lyoncell, and AES were granted.
examiners' June 17, 1987 Under the mechanism estaclishec in the was also granted. order, the motion to intervene of Bio-Energy Resour:es
) All discovery to which objections had been filec were placee in abeyance pending the examiners' ruling on TU Electric's Motion to Dismiss Official notice was taken of .
the Examiner's Reports and Commission Orders in Docket No. 6065, Aeolication of Texas Utilities Electric Comoany Standard Avoided Cost Calculation; for acor val of Docket No. 6190, Aeolication
)
Utilities Electric Companv' of Texas Acclimation for Accreval of Notice of Intent to File an _
for Certification of Combustion Turbine Generatino Units in Warc.
Mitenell and Hood Counties; Occket No. 6526, Application of Texas Utilities Electric Comoany for Certification of Combustion Turbine Generat nq Units "in
)
Ward. Mitchell and Heed Counties; and of pages VII-1 through VII-23 anc VI'-56 through VII-58 of Volume I of the "Long-Tem Electric Peak Demand and Ca:acity Resource Plan for Texas," issued by the Commission in Augu~st 1986. (The examiners would note that official notice of these documents as also taken in
) Docket No. 7581.)
No notice, other than to the Texas Register, has been provices in tnis case.
)
(For purposes of simplification, when the examiners refer to Panca, they es not intend to ignore Rock-Tenn's position in the above case, but tecause it is icentical to that of Panda, the recort will simply refer to Panda f: P tne sa<e of efficiency.)
)
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k
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)
DOCKET N05. 7470 anc .'581
) PAGE NO. 6 Panda has requested the following relief, all of whien TU Electric :
oppo 1.
A Commission orcer recuird
) uoen the terms ng tMt this cogeneration contract be casec and concitions and the stanoarc avoided- cost calculations as approveo in Oceket No. 6065; 2.
A Commission order determining the true capacity neecs of TU Elec
)
and expanding the amount of firm energy and capacity for unien TU Electric must contract with qualifying cogenerators, above the requirements reflected in TU Electric's "t.ong-Term Electric Peak Demand anc Capacity Resource Forecast for Texas" as established unc
)
Section 16(f) of the Public Utility Regulatory Act (PURA), Tex. Rev.
Civ. Stat. Ann. art.14a6c (Vernon Supp.1987);
3.
A Commission orcer disallowing TU Electric's recovery of all payments mace 3 for cogenerated energy and capccity for all cogeneration contracts executed by TU Electric during the pendency of this case; 4
A Commission order prohibiting TU Electric from contacting any
) potential host of Panca or any utility with whom Panca is currea.t'y Attempting to negotiate a cogeneration contract; and ,
5.
A Commission order requiring TU Electric to acept a specific formal
) bid procacure for evaluating offers from qualifying facilities within a specified period of time.
B. Docket No. 75B1 !
)
{
On July 6,1987, National Cogeneration, Inc. (National) filed its Original I
)
Petition and Complaint.
orcer requiring:
In its Complaint, National prayed, in part, for an (1) that TU Electric satisfy all the matters complained of or ans er the Complaint within 20 days frem cate of service; (2) that~-TU Elect 9c
) state in detail and with specificity th e terms and conditions of National's pro::osed contract to which it oCjects and the basis for each objection; a*c (3) that an expeciteo hearing senecule te establisneo.
1 J
)
OCCXET NOS. 7a70 anc 7531 PAGE NO. 7
)
Examiner's Order No. 1, entered on July 16, 1987, incluced the firs: :,o reevirements set out above, set ano set a prehearing conference. out a procecure to develop a protective arcar, On July 22, 1987, TU Electric filed a me:'en retaasting modification of certain portions of Examiner's Orcer .No 1.
1 A prenearing conference was held on July 24, 1987.
Portions cf National's Complaint requesting the amencment of certain Commission Substantive .ere Rules dismissed as being inappropriately includJd as part of a complaint ;,proceecir and as not following the appropriate procedures for a rulemaking petiticn.
Discovery procedures were set forth, and the examiner determined that shou material worthy of protection be requested, the protective orcer entere: in M Occket No. 7470 would be utilized in Occket No. 7581TUalso. Electric indicated that it would shortly be filing a motion to dismiss the cocketAfter .
determining that the issues in this docket were nearly identical to those raised in Occket No. 7470 ( tt. king into account certair factual differences between National and Panda / Rock-Tenn situations, and that the prayers for relief we're
) not identical), a briefing schedule was set that allowed the parties to
" piggyback" their efforts onto the work that had already been done in Docket No. 7470. -
TU Electric, in conformance with the examiner's order, filed
) its Mot :n to Dismiss of and Original Answer on July 29, 1987, and its Initial Brief in sup; ort its Motion to Dismiss on August 5,1987.
National filed its Response to ne Motion to Dismiss on August 12, 1987, in which it adopted the briefs filet by Panca in Occket No. 7470.
) Since National has adepted Panda's briefs, for convenience the examiners will refer only to Panda, unless it is appropriate to distinguish Detween the two.
TU Electric filed its Reply Brief August 18, 1987. on On August 19, 1987, the general counsel filed his Respense to TU Electric's Motion to Dismiss, incorporating the brief filed by the general counsel in Docket No. 7470.
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)
DOCKET NOS. 7470 anc 7531 PAGE NO. 8
)
TU Electric National has opposes: requested th e following substantive relief, all of wn c..
1.
That the Commission deter nine that National's Complaint states 4 ;ri a .
facie case and conforms *e the rules of the Corrrniss sn; 2.
That the Commission find that the proposed contract submitted as an attachment to the Complaint
) be found just, nondiscriminatory, reasonaole, in the public interest, and in compliancs with all applicable federal and state laws and rules; and that TU Electric te ordered or, to execute the contract at TU Electric's full avoided cost ,
> in the alternative, substantially in accordance with the rates, terms and conditioits of the proposed contract (as updated by National and Conmission amendments);
- 3. The amendment or
) elimination of P.U.C. SUBST. R. 23.66(d)(1)(F) arid (F)(iii), as.the rules are discriminatory in practice and effectively circumvent Section 210 of the Public Utility Regulatory Policies Act (PURPA), .16 U.S.C.A.
3824a-3 (this portion of the Ccmolaint was dismissed in Examiner's Order No. 1);
)
- a. . - -
The amencment of P.U.C. PROC. R. 23.66(d)(1)(G) in such a manner as to require each utility to set up timely and reasonable time periods or windows, with an orderly request for purchase procedure, during which
)
the utilities are first to solicit and evaluats capacity offers fecm projects within that utility's service area (this portion of tne Complaint was dismissed in Examiner's Order No. 1);
5.
' The disallowance, for ratemaking and rate recovery purposes, of any and all cogeneration contracts executed by. TU Electric during th e pencency of this docket, due to TU Electric's violation of the applica le federal and state statutes and rules; and -
)
- 6. Sucn further relief as may be lawful and proper if it is found that TU Electric wrongfully misled National into protracted and ex: ens .e ef forts to cotain a power purendse agreement.
)
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)
SELECT COMMITTEE ON A STATEWIDE ENERGY-PLAN
) -
Written Comments Submitted By CAP ROCK ELECTRIC COOPERATIVE Stanton, Texas
)
August 8,1988
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CAP RCCK ELECTR*: CCCPE?.A!!*lE. INC.
L'RITTEN COMMENTS FOR SELECT CO:".w.:! TIE ON A STATE 7:0E ENER;Y PLAN July 15. 1988
) .
Cap Rock Electric Cooperative. Inc., respectfully submits these commen:s purpose of to these the commsnes Select Committee is to: on a Statewide Ener5y Plan. The sta:ewide energy planning, (i) indicate strong supper: for and (ii) make the Select Co=mi::ee aware of
) certain matters char constrain the ability of independent electr;:
utilities, including rural electric cooperatives such as Cap Rock Elec:ric Cooperative. Inc., to participate in, or to gain any beneft:
from, statewide energy planning activities.
BACKCRO'.*ND INTCP.w.ATICN
)
headquar:ered Cap Rock in Electric Cooperative, Stanton. Texas. Rural Inc. is a rural electric cooperative electric coopera:Lves are elec:ric utility systems which were originally organi:ed to serve rural areas u:ili:ing financing from the Rural Electrification Administration (REA) of the United States Department of Agriculture. A rural electric cooperative is a nonprofit utility which is owned by its consu=er I members and operated by a professional staff which reports to a Board of Directors made up of consumer members elected by the consu=er memoers.
Although rural electric cooperatives were o~riginally built and operatec to types of loads.
se rve rural residential and agricul: ural loads, they now serve all including residential, com=secial, industrial. municipal and agricultural in both rural and suburban areas. One in ten Texans is
) a memoer of an elec:ric cooperative, and cooperatives provide service in all but nine of the State's 256 counties. Texas Rural Elec:r;:
Coopera:ives currently own and operate more than 250,0C0 miles of transmission and distribution line, and provida electric se rvice to consumers throu5h approximately 1.034,000 meters. This se rvice is provided throughout the State of Texas with only 5.524 employees
)
opera::ng more than two billion dollars in plant in service.
are electric There are 88 electric cooperative systems in Texas. Of these, 76 at wholesale for distribution subsequent coopera:1ves which buy all power requirements resale to retail and wholesale consumers.
Approximately one third of the Texas distribution cooperatives are y
memoors of one of the three operatin5 Eeneration and transmission systems (C&T's) which are :he=selves REA cooperative systems. C&T's prov:de all the wholesale power requirements of distribution thstr memoer resources. wholesale systemspower from wholly and/or j ointly owned generation purchases. and federal alloca:: ens. hydropower An opera:Ing C&T. along with i:s memoer dis:~ributi:n
)
1
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e
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cooperatives,' makes up an in:egra ed electri:
). plannan5 and opera: ion :o :he power sys:em sietlar in invas::r owned u:ill:ies (ICU's). The remaining power dis:rtbution requiremen:s fromcoopera:1ve sys: ems pur:hase their wholesale u:ili:1es and sta:e agencies such as the Lower Colorado Riverone (LCRA). Many Au:hort:y or more u::lities i C&T's which do of not these distribution cooperatives are members of " paper
- curren:ly opera:e generation and ::ansmission fac ci::,es.
) bu: which have belun to develop power supply plans.
including contrac:2 assignment of the memoer distribution system wholesale A few Else:ric Cooperative, individual distribution cooperatives, such as Cap Rock are independently pursuins develoFman: of P***:
supply plans involving acquisition and operation of genera: ion and transmission resources.
)
Cap Rock Electric Cooperative provides service to approximately 10,000 square miles in 13 counties in Vesc Texas. Seretce is provided to consumers through 16,300 meters with almose 5,000 miles of transmission and distribution line. More than half of the energy sold ^
by Cap Rock Electric Cooperative is provided to petroleum production
)
loads in the Permian Basin. This is a particularly important service since Persian Basin oil produe: ion accounts for approximately 20%.of the total oil produced in the United Scaces.
Most of the remaining energy sold by Cap Rock agricul: ural customers. Electric Cooperative is consumed by residential and Considerably less than 10% of total energy sales are provided to agricultural and irrigation loads on an annual basis, but as much loads during as 30%
irrigation of the energy sales may be consumed by these months.
)
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While Cap distribution Rock Electric Cooperative was originally formed as an REA cooperative, mor: gage and no it has since entirely refinanced its federal longer relies expansion of plan: in service.
on federally guaranteed funds :o finance pur:hases all. of Cap Rock Electric Cooperative currently
) Elec:ric Company (TUEC) its wholesale power requiremsnes frem Texas Utili::es Division. through the Texas Electric Service Company TUEC is also Cap Rock's principal compact:or for retail loads. More than half of Cap Rock's service territory is dually certified for service by both TUEC and Cap Rock Electric Cooperative. I Cap Rock opera:ing or "Electric paper" C&T.Cooperative is not currently affiliated wt:h any i
)
CAP RCCK SUPPCRTS STATE *J!:lE ENERCY PLANN!NC Thereofisthe opera:Lon a need within ERCCT for joint plannin5 and integra:ed bulk power system for maximum economy with acceptacle ,
reliability. There is also a need for ERCCT to be more strongly !
)
involved in regional bulk power system planning and operations. Cap )
Rock which:
Electric Cooperative strongly suppor:s legislation and regulations i planning(i)and provide stron5and operations. incentives (ii) for statewide and regional energy i remove the considerable barri,ers whi:n '
curren:1y cons::stn and even prohibi =eaningful s:atewide burk power I
)
i 2 '
.. o. j
)
) sys:em planning and opera:Lons.
opera:: ens to It is car:ainly possible for bulk power sys:em plannin5 and elec:r:c utilities. transcend :he bouncartes and self interests of individual Sys:em of Georgia An example of this is :he Integrated Transmissten which is join:ly planned, buil: and opera:ed by
) Cecrgia Power Company (an investor owned utili:y). Ogle:horpe Power Corpora::en mem:ers), (a C&T cooperative with 39 distribution coopera::ve power au:hority and :hewith Munici;al 49 Electric Authori y of Georgia (a municipal municipal electric systems). This joint bulk power as well system as nonopcimum has eliminated duplication of bulk power sys:em invas: men:s segregation of operations.
)
planning and operation of bulk power systems Also. are coordina:ed successfully accomplished in the Pacific Northwest and in many eastern s:ates.
Part of the reason given by ERCCT's few controlling utilities for the continuing isolation of ERCOT from the rest of the nation is the critical need for coordinated bulk power system within this carefully isolated bulkcontrol within ERCCT.
However, y
power island is a segmentation of plannin5, operations and bulk power that resource control operations.
really precludes true economies in system investment and Cap Rock urges the Select Committee to persist in the investigation and implemenca:icn of effec:ive joint bulk power sys:sm planning and
)
operations within ERCOT. These com:sents a numoer of issues and concensus that must be considsred inare intended to highligh:
this .ecessary obj ective. acccmolishing CES!?AB:1.!N OF "Pt'BLIC PCER" E!.'"'!T!ES Cap Rock Electric Cooperative believes,
)
elecerte cooperatives and municipali:1es in Texas, as do the other rural tha: the "puoli:
power" organi:ation structure (i.e., the public power elec:ric u:ili:7 is owned and governed by its consumer members) is a desirable form of electric utility, and provides for superior customer service anc mana5ement accountabill y. The public power organi:a:ional strue:ure dcas not suffer from the conflicting goals of profitability
)
stockholders and economy of power cost for consumers. Furthermore,fora public power electric utility which is wholly owned by its consuners, as well as govarned by its consumers, is more strongly oriented :cuare consumers. As a result, the public power utili:y has a singular incen:ive for maximum service and man mum cos:.
)
If Texas' public power en:1:ies are unable to maintain financial and organizational viabill:y in the face of aggressive compact: ion and preda:ory wholesale power pricing. this highly desirable form of elec inves: r.o.T.ed elec:ri
- u:ili:y will be absor:ed by neighboring proft: orien:ed.
utility,
- hereby fur: hor reducing .dastracle diversi:y of elec:ric utili:y s: rue:ure wi:hin the EP. COT bulk po er 3
)
)
)
sys:em. No u:ili:y o'rgan;:acional in Texas viab'li:y vi:n:u:can expec: :s maintain finan:.a' . :r access to transmissten and genera:1:n in :he bulk and join: opera ions. power system. and participa: ion in stacevide energy planning no: one of :he Those independent utilities in Texas which are no: survive by st= ply fewremaining major genera: ng u:ill:1es uhich control ERCOT may depencent
) for :..ese key ma::ers. on their principal compe :: ors Cap Rock Electric Cooperative finds that it cannot be assured of its survivalcompetitive economically as a public serviceutili:y or of its ability to provide to its consumer members unless it bagtns :o ac:1vely pursue direct power supply planning activities,
)
ir.cluding supply obtaining access to transmission service and alternative power resources, and possibly acquisition generacion resources. of transmission and POVER SUPPLY ?LANNING ACTIVIT!!S
) Cap Rock is engaged in several activities designed to improve its efficiency and strengthen its economic viability. Cap Rock is currently automating the monitoring electronic supervisory controland control of its utility system through an and data acquisition (SCADA) system.
Further improvements are expecced through automation of mapping and engineering func: ions with microcomputers.
)
well.Cap A Rock is aggressively pursuing power supply alternatives as Hous en Lighting & Power Company. con: race has been executed for purchase of econo =y en Another. contract has been execu:ed for purchase of 35,000 kW of capacity and associated energy : rem a cogeneration facility.
Several other opcions are being considered, and discussions are progressing vi:h utilities throu5hou: ERCOT.
I planning Capaccivities Rock has discovered during its relatively new powe r supply chac chere is little or no affective join: plannin5 and operation genera::ng utilicies of generacion and transmission resources among the major within ERCOT. There is certainly little access :o transmission for participation in the ERCOT bulk power system. The five
}
or six major generacing ucili:iss vichin ERCOT engage in joint planning.
cons:ru::1on necessary to and operacion achieve of generation and transmission only as their own control. As a result, objectives of independence and market few economies have been achieved and few energy planning and operations to maximize the economy of s:atew ce scra:egies have been developed maximi:e che control and independence instead of scra:eSies developed :o
> par:icularly unfortunate since of each major utility. This is these same u:111:tes have been responsible for na:.cn's interconnected grid. maintaining the isolation of ERCOT from the rest of the supply planning and opera:Ing effi:iencies.:hereoy foregoing poten:tal regional power 8, .
4
)
)
1 l
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) REASONS TCR pC'JER SUPPLY ALTEFSATrlES i
Theall passive, ques: ion migh: arise as to why Cap Rock, historically a ra:her requiremen:s l
wholesale power pur:haser. should now be so ac::vely involved in invas:tgation and procuremen: of power supply at:erna:1ves. Cap Rock believes tha: . aggressive pursut: of some partizi;a:::n reasons: in the bulk power sys:em is necessary for tne following i
(1) L'holesale Price Seueeze. Cap Rock cannot successfully coe;e:e for rotatl laads unen Les principal compact: ton (i.e. T'.*E )
is also *
, u:111:y from which it must buy wholesale elecerte power service .
)
supplier can setThis is especially true when this competing prices in a manner which adversely affects Cap Rock's ability to compece, In the last four general race 3 cases which TUEC has brought before the Texas Public Utili:y Commission, the level of increase was in each case much higher i for wholesale customers, such as Cap Rock Electric
)
Cooperative, than for TUEC's retail customers. This results in a form of " price squeeze which causes Cap Rock Elec:ric a
Cooperative to pay more for wholesale power in some months than TUEC charges its own retail customer.s for retail power s e rvic e . This necessarily results in unacceptably high races for Cap Rock's own retail customers. TUEC has summartly refused requests by its wholesale customses for mitigation of
) this price squeeze effect. TUEC has specifically refused to
~
consider coincident peak billing, summer winter differentials.
and consistent cost allocation metnods for retail wholesale classes. and Cap Rock's only avenue of relief in these matters is appeal :o
) the Texas Public Utili:y Commission whien. in most cases, will take a posizion favoring the larger cons:ituency represen:ed by TUEC retail
)
ratepayers rather than protect TUEC wholesale customers and their smaller number of retail consumers. This prcblem is also difficul for other public power entities who purchase power from suppliers who are regulated by the Federal
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Energy Re5ulatory Commission, but whose retail rates are regulated by the Texas Public Utili:y Commission.
Cap Rock is particularly concerned that this price squeeze vill intensify with the advent of the Comanche Peak nuclear plant. TUEC has repeatedly affirmed that i:s retail ra:e increase vill not exceed lot, but has made no such commt: men: 3 J
) regarding wholesale races.
(2) Mere Econe-ical Power surelv ce: ions. Cap Rock finds tha: i
- ..ere are sources of vnolesale power supply within the State of Texas :ha: are considerably more economical chan .:he arbt::arily priced wholesale power bein5 provided by TUEO. 1
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Cap Rock finds, chat,
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attractively priced ins:ead of takit5 advan: age of very I' continues to: (i) con::ac: capacity and energy, TUEC ins:aad surplus for more expensive capaci:y and energy from colonera:Lon p roj ects . (ii) plan new na: ural gas fired combus:1on to complets and place:urbines, and (iii) continue vt:h plans in service Comanene Peak nuclear generating plan .the incredibly expens:.ve
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Cap Rock Elec:ric Cooperative has not had, and does no: have any say in the planning decisions made by TUEO, but is expected to pay for the results of TUEC's unilateral planning decisions through can be obtained bywhatever TUEC. wholesale power rates and cariffs
) dispart:y between Given the previously described recovery of revenue requirernen:s as between ;
the wholesale and retail classes, Cap Rock expects to continue to pay a disproportionate share of even unreasonably high costs for inappropriate decisions over which Cap Rock has no control.
(3) Intense Retail Comoecition bv
) *UEC. TUEC has recen:ly ints:ated an )
to capture retailextremely aggresstve marketing and sales pro 5 ram loads in service carritories which are dually certified for WEC and rural electric cooperatives.
TUEC's predatory, competitive practices are so aggressive as to be l including plans for construction of extensive duplicate distribution
) misleading) facilities, high profile (and advertising campaigns in newspapers and billboards, and discrimination in favor of contractors and developers in dually certified serrica territories. TUEC has also been :alking up a plan to seek legislation :o en:irely eliminace certified service territories in Texas. Cap Rock Electric Cooperative has neither the financial and political
) resources, nor ;
the market power (i.e. , market power being the control of generation and transmission in the service i carritory) to effectively conpete with TUEC. !
j (4) n*EC C5struction of Desirsble Economy Energv Transacetons.
Cap Rock Electric Cooperative has contracted for economy j
) energy purchases from Houston Lighting and Power Company.
Netvichstanding the fact that the economy energy transaction t would Electricbe of economic beneft: both to TUIC and Cap Rock Cooperative. l TUEC his summarily refused to allow :he transaction to proceed, wt:hholding scheduling and i
transmission services . Cap Rock contrae:ed for :his economy
) energy purchaos at the express invita:Lon of HLSP, and wt:h no initial indication of refusal by TUEC. TUEC representatives ;
confirmed to Cap Rock Elec:::c Coopera:1ve managemen: thac
- hts refusal was based on management policy and not on ec:n=etes, reflecting *UE 's view that euch activitisa, by all-require =ents cust:mers would, in the lon5 run, bo
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) poten: tally damaging to TTI;'s marke:
carrt: ries. power in its servi:e TUEC refused Cocpera: ve, even to allow this :ransac:isn for Cap Rock Elec:ri:
- heugh 1:
transac: ion for ano: hor group had previously cllowed a sistlar cus:::ers, and even of all requirements wholesale
) power ecs: savings withthough TUIC.
Cap Rock has offered :o share :he transact:en Refusal to facilita:e this provisions of the is in NRCdirec:
licenseconflict with cer:ain of Comanche Peak. of the cri:ical :o note that the amount It is power costs through this transaction would allowthat Cap Rock would save in in races which would mitigate the " price squeezea* reduction discussed
) above.
(5) Possibili v of Displacement / Acquisition recently begun to snow a positive interestbvin TUEC. TCEC has acquirin5 public power utilities.
Specific offers have been made by TUEC to
) municipalities currentlyelectric purchase or lease the distribution systems of several se rved by Brazos Electric Cooperative. Cap Power ;
TUEC may be able to eventuallyRock Electric Cooperative is concerned thati succeed in acquiring public power systems leveraging its such as Cap Rock Electric Cooperative by immense financial and political resources, particularly when its current cash flow constraints related to
) Comanche Peak are eased. l (6) Lack of Access to Deregulated Bulk Power Market.
The electric uttlity incus:ry is currently faced wi:n the prospect of deregulation of at least :he generation side of businese. so=e So lon5 all as Cap Rock requiremen:s Electric Cooperative remains a captive, customer
) of TUEC, it is likely that Cap Rock Electric Cooperative will be precluded from any par:icipa:1cn in the economic or other benefits of independent power proJue:1cn Cap Rock would(IPP's),
not or statewide energy planning activities.
expect with IPP's because TUEC tohas benefit much from TUIC's dealings already, on repeated occasions, shown 1:s inclination to swin5 the majority of economic
) benefits :oward its retail consumer class at the expense of L:s wholesale consumer class, including Cap Rock Electric Cooperative, (7) Need to Suceer:
Cooperative nas Coseneratten Purchase. Cap Rock Elec:ri cen:ractec with Panda Energy Corpora:Lon to
) purchase 35,000 kW of capacity and associated energy from a cogeneration project. The purchase rate is significan:1y less than avoided costs, Electric Cooperative providing substantial benefits to Car Rock ra:spayers. However, Cap Rock Electric Cooperative is currently totally dependen: upon TC C's provision of wheeling, secndby power service, and suppleme(n:al
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) power se rvic e service, s . T"ECas well as con:rol area scheduling and dispa::n can, if i: so implementa:Lon of this desirable projectchooses, preven: sue:essfa' .
refusal :o ei:ner by ou:rign:
and unreasonable ra:escooperate or thr:ugn less direc: nego::a::en celay and contra:: terms and conca:: ens.
TUIC has already constraining :eres andindicated : hat it will be seeking very conci:Lons requirac for Cap in new contrac:s :o be Rock to deal with the co$enera:1:n pro;ec:. '
Cap Rock Electric Cooperative presents chose facts not to re c.u e s :
any in:erven: ion by the Select Committee, but ra:her to effec:tvely illus: rate why Cap Rock Electric Cooperative feels chac 1:
aggressively pursue alternative :us':
Fur:hormore, power supply planning activi:ies.
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insight theseunderlying into some mat:ers should provideto impediments the Salace Commi::ee with some efficiencies. . statewide ener$y planning RE0'J:REMENTS ?!R St*CCISS't*L PC'JEP. St*PPLY PLA.VNING ACT**?*T!ES
) al:ernative powerCap Rock Electric Cooperative is firniy committed to the pursuic of supply planning acrevities.
significant barriers in this pursuit. Those fewHowever. 1: faces major ERC07 utilities which control transmission and geraration can, by either oute:ght refusal or unreasonable pricing cnd contract Electric Cooperative from obtainir.g those survices whichterms, prevent Cap Rock to develop an are necessary par:icipa:e in adequately retirlois and economical power supply plan a~nd
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any meaningful way in statewide energy plann ng activi:1es. Cap Rock Elsetric Cooperat$ve will specifically require planning ac:tvi:1es: access :o the following services in order to succeed in 1:s power supp;y (1) Transmission Services
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For :he foreseeable future, the acquisi: ion by Cap P.oc k Elec:ric Cooperative o: hor than new generation in Cap Rockof any alterna:ive power supply resource Electric Cooperative's own That s e rv ce territory will require transmission s e rvic e s .
is, one or more neighboring utilities will be required to
) wheel capacity and taargy over their transmission systems from the alternative power supply resource to Cap Rock Electric Cooperative.
In order to be able to execute long term contracts for firm capacity and ener5y, Cap Rock will have to be assured of being able to receive corresponding firm transmission service. The exis:teg Texas Public Commission Substantive Rales provide for some Utility
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u:111cy to utility wheeling. limi:ed However. they allow enough la:itude ma;cr ir pricing and con:rac: :erms and condi:: ens for :na utili:ies to effec:tvely obstruce independen: u:ili:ies suen as Cap Rock. wheelin5 for to require :he coereination No provtsions ez,is:
services or supplemental power 8
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) services described below. !
(2) Coordination Services Cap Rock Electric maintenance Cooperative will require emerlency standby, stanchy, mos: 41:ernative and control area scheduling servtces for j
) power supply resources. i TUEC does no: -
curren:ly even have scandby cariffs or control area service f cariffs has on file with the Texas Public Utility Commission. and indica:ed timely fashion. some unwillingness to develop auch tariffs in a There is no provision in Texas state law or Texas PUC Substantive Rules these services. requiring utilities to provide
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1 (3) Supplemental Power Service k
It is unlikely that Cap Rock Electric Cooperative vill be able to immediately supply its entire load requirements from alternative power supply resources.
) Electric Cooperative will need to beAs wholesale a result, Cap Rock able to power to supply some portion of its purchase load requirements. Again, TUEC does not currently partial requirements cariff have a on file with with Texas Public Utility Commission, and has indicated some unwillin8 ness to do so for rates or terms and conditions any different than its
} currene all-requirements wholesale tariff.
provision in Again, there is no
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of partial-requiremanes power from any other supplier. state law or i (4) Control Area Requirements The major Generatin8 utilities
) within Texas, throu5h participation in the Electric (ERCCT) maintain their operation Reliability Council of Texas j in an interconnected grid with numerous overlapping responsibilities and privileges with regard :o transmission services, coordination services, and sa:plemental power services. Kany, and perhaps mose, of the
) chase available responsibilities to a " paper" C&T andor privileges are not immediately q
such as Cap Rock Electric Cooperative.
a rural electric coopera:ive Furthermore, generating self interest, utilities have in their power, and in facttheinmajor their j
the abili:y to make successful control area operation difficult for a small utility without diverse (
generation and transmission resources. The large Senerating j
) u:111 ties are not inclined :o provide k for a new entry, particularly whencontrol area services that new entry is a {
cerpetitor. On the other hand, the reserves, telemetry, and l dispatching capabili:ies required for control area operation i make it extremely difficult for a new entry to become a l con:rol area in order to be afforded the privileges of I
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) independen: operation wi:hin fRC07. Again, there is no provision in sca:e law or Texas services to " paper
- C&T's, rural P'.* C rules :o afford such elec:ric coopera::ves, municipalities, indepenten: power pr:ducers, cogenera: ors or other small, independent utilities.
(5) Par:i:1pation in Statewide Planning
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A rela:ively few, large generatin5 utili:ies completely control all generation and transmission resources curren:iy within ERCCT and all of the DC cies into other regions. There is really no incentive or even any pressing reason for them to ,
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cooperate in planning and operations other than as necessary for reliability and preservation of monopoly control of bulk power resources. Other independen: utilities such as Cap Rock are willing and even actively seeking to assume some of the risk and control of power supply planning and operation, However, they are without power to effectively participate in )
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the bulk power system except by transmission access and support services granted by the few maj or utili:1es with control of these facilities and services. Neither state laws nor Texas PUC rules grant such access in any comprehensive or consistent fashion. As a result. ERCOT operates throu6h occasional special deals between major, controlling utili:1es without j attention to statewide optimization and with prac:ical '
) elimination of most power supply competition.
(6) Just and Reasonable Races -
The wholesale suppliers in Texas have grown accus:omed to being able to design wholesale rates for captive all requirements customers in a
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towards manner that is unfavorable the wholesale customer. The utilization of noncetncident peak billing, demand ratchets, and arbitrary assumptions in j cosn allocation and rate design unfairly favor residential customers at the expense of wholesale customers.
The major wholesale suppliers view the development of races I
) and contract terme and conditions for transmission se rvic e ,
coordination 1
sarvice, and supplemental power service as entirely discretionary and merely an extension of historical discrimination. Some provision must be madethis for ,
these services to be properly cost based and to be provided j l
under carms and condt: tons that are not unduly constraining. I
)-~ In addition to this difficul:y, Cap Rock (and other cooperatives) have found it extremely difficul: to gain reasonable consideration at the Texas Public Utility Commission for tariff modifications and innovative race design )
as are necessary to meet the price squeeze and predatory pri:e l i
competi:1on of investor owned wholesale suppliers.
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Cap Rock does not seek or expect preferential treatment, advantages, or unreasonably favoracle rates and contracts. Howeve r,undue Cap Rock finds, in pursuing more economical and viable power supply options,
) that unreasonable barriers can and do exist. The Public tltility Soard of the City of Brownsvtlle has shown that these barriers can be overcoes, if only imperfectly, only by extended unpleasant and undesirable litigation in various forums. Cap Rock Electric Cooperative urges the the consider Select Committee needi of smalleron a Statewide Energy Plan to explicitly and municipalittat, electric utilities such as cooperatives I at well
) as for the maj or existing generat.ng '
utilities ERCCT.
which wrttntly control transmission and generation within Their prim / interests (e.g. , profitability for stockholders, maintenance of market power, acquisition of new service area, etc.)- may not be wholly compatible with the development of an opti: cum statewide ener$y plan which provides acceptable reliability and maximum economy.
) Cap Rock Electric Cooperative reminds the Select Comruittee of the desirability of developing and preserving meaningful competition in the bulk power supply market in ERCOT as one means of promoting maximum .
economy of stacevida energy supply. Cap Rock Electric Cooperative urges the Select Committee to consider that this cannot be accomplished unless provisions are made for rural electric cooperatives, municipalities,
) " paper" C&T's, and other independent utilities to obtain access to reasonably priced transmission service, coordination services, and supplemental power services. These smaller utilities must also be given a meaningful role in the development and implementation of seacevtte energy plans, Furthermore, without explicie legislation anc regulations, the few, existing major generating utilities will have no
) prevailing reason es really promote seacewide and even regiona.' power supply plannin5 and truly coordinated operations.
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) Etsc7asc- saavecs ~ ~
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CDMPAct l Mar:n 27, :527 a ~ =-c Cn. cn..e r s .
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Mr. Roe;er Burch Ca:
P. O.Rocx Box 700Electric Coccarative Inc.
Stant:n, Texas 79782
)
Dear Rodger:
This is in resconse to your letter of February 27, 1987 pre:csal for wheeling 30mw-50mw of cogenerated ,
power regarding a from the C l
) te cap Rock's delivery points or from the Trf angle Sub to McC a as area onald Sub.
Before a wheeling will be needed such as location of the cogeneration facilityre arrange ents and Cao Rock ceints of delivery that interconnect:n ,
will be affected Also,with Cao Roc a etted for matching ;cwer delivered by the cogenerator .
) anc adjusting would neec to load data at various points of delivery for billing Our:: e ea &. .
be c:ns cerec.be devele:ed.
If standby power is required, it also neecs t: .
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As an:
involve: basis for devel ing a wheeling agreemen't, heree are s:e:s so e of :n items that would need to be included in a wheeling arrange eet.
)
The cuc eat :cwer urchase agreement between Cao Rock and TU date: July 2,1Sc3, was not pre:ared with cogeneration 9n mind rc for Cao points Rock to purchase all of its power from TUasElectric of delivery.
it pr:vt:es for its vart:us ment power new reviding furnished b for Cap Rock's purchase of power ee- from anot re: lace
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art sta ::y services.y TU Electric and establishing a framework for *neeltr.;
Attached is a draft of such an agreement wnien 4s sim.11ar to those being used with other wholesale customers for .
Wheeling at* acred. service would be orovided under Rate TWC
, a c::y of which is delivered to the TV Electric system with ur-ey-nc,r Cao Rock's wer load
) tas ts and pur::ses. adjusting lead data at the various points of delivery f or eilling mat:"irg system with a::ro:riate char:es forcurre:
by TU Electric. administrati 5:ancby power can also be furnisned, if requested.
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- C SOE 970 . *Om? vr e s " = ftwag ,ste, 1
a O t w e l i C ** 08 78888 , vggge.ggg eg g ,p 238te
) WL*T'ES 4L CTm:C C Q aa p a ns e 9 i
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Mr. Roc;er BL,r:n 2-Ma *: : 27, ;p
- wh0se syster.s may be impac*,2c byother system.
e C0ugenerated
- ti::es po vered to the IU ;~1ec:rt; We will ; be glad to answer any :;uestions you have abo .
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anc to cisc ss cetails necessary to develop ut this infer ati:n a wnecling agreement Sincerely, f ,i / *'/ n
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jvh R. N. Rhodes attachment bec: Messrs. D. J. Ha3pton K. M. Webb
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C. W. Barclay h*.
e
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October 29, 1987
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O J. Mr. J. S. Farringtoa -
Chairman of the Board
)' and Chief Executive -
Texas Utilities Company J 2001 Bryan Tower -
Dallar. TI 75201 '
Dear Jerry:
W.
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V Thank you for the privilege to meet with you and Dale. Tour hospitality 9 was verydiscussion.
impressive and' appreciated. I write to _euemarise our position i and our '
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We consider your TESCO operating persoonsi' to he profemaional and
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very competent in handling our daily questions and requirements.
= d 2. -
However, my Board felt it proper to discuss our plans to become a partisi requirements customer initially with you as Chairmaa. Our !
. desire was to minimise the chances of you misinterpreting our ranson for Planning enough for to you become a partial to heer requiremaats customer and we fait it important it first hand.
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) with you versma breaking that talationship is our plaa and destra. Changing our lon 3.
The necessary coordinating services can be received elsewhere utilizing your treammission system only for wheeling; however, we hope to reach a suitshle agreement as to standby mad reserve requirements from TU Electrie. .
4.
) Daly arecently utilising Dallas have area we host entered site. into a letter contract with a cogenerator However, as early as 1985 we visited
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in gaaeral terms with Ray Rhodes and more specifically in the Spring of 1987 Ray discuse and our plansDarra11 Sevelbymer have been to our Stanton offi:es ta and cogeneration.
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Mr. J. S. Farriastoa October 29, 1987 page 2 5.
We vi.11 formally, in the near future, per our whelmaale contract, ower p
) give you w itten actice of en intent to terminate cur all requirements to contract.
request rates for wheelingI and willstandby.
be contacting Ray Rhodes ta Dela suggested Our hope in to contimum our appreciate your assistanea in se deias. Again, u thaak hospitality and look forward to a prompt respomos to our request .
) Sincerely, CAP ROCK ELECTRIC COOPERATIVE, INC.
p ,,
) David V. Pruitt Ceneral Manager DWP sah ec: Mr. Dala Scarth 4
) V Mr.RayRhodas[ .
Mr. Rusty Jonas '
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P.S. - Ray, Please provide me these charges and rates at your earliest convenica:e.
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. _ _ _ _ _ ________________Y-__-______-
l il CM ROCK !
) ELECTRIC COOPERATIVE.13c. - -_ _____
- 0 SCx700
- E1' *Ca AAv S: . 5?AN?"N ?ExAS 79762 .755323'
. *E 18=0NE 1'!:
uiouNC etE334 l'5,563 ' re3 siG Sam,NG 3il/26; 6I
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Fehraary 27, 1987 .
} Mr. Ray N. ' Rhodes .
Texas Electric Service Co. -
P. O. Box 970 Ft. Worth. TX 76101
Dear Ray:
[
We powerarefrom investigating th[ possibility of obtaining some co gener varimus entities. -
ated would accommodate the following two scenarios:Please furnish us with proposals tha 1.
The wheeling of 30W-50W of co-generated power f rom ,k-i
) the .Dallas area to Cap Rock's delivery points. -
2.
The wheeling of 30W-50W of power from Cap Rock's Triangle Sub to our Mcdonald Sub.
- Your prompt %c- .
\p 6%$. - JJ 4,</r.; 7 ge . //cy r. Jo:/ ;
attention to this would be greatly appreciated. '
) Sincerely, CAP ROCK LECTRIC COOPERATIVE, INC.
) Rodger C. _urch Manager RGB:la ' .
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' 4p6O M .'.? f ,.._.r-.
MEMO 70:
Cap Rock File FRCM:
A. N. Rhodes
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SU3;I T:
Cap Rock Electric Cooperative - Cogeneration Wheeling Darrell Bevelhymer and I met with Mr. Rodger Burch
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Electric Cooperative,at his office Vednesday April 15 , Manager of Cap Rock information provided to him with my letter of March 27,, 1987 to discuss che 1987 in r esponse to Cap Rock's request for a proposal to wheel cogenerated power .
if Cap Rock could benefitBurch said that his Board had given him " marching orders" e rmine
) them power from a cogeneration plant in the Dallas areafrom a proposal by Pa .
that was attached to my letter of MarchWe reviewed o thewith draft him the need for a ne
- 27. 1987 to provide the framework for Cap Rock being a partial requirement's customer purchasing of their power Ve discussed the application of the wheeling rate in particul .
ar that the why there may be wheeling' charges from eother ,,
impacted.
ut111 ties that Also Burch asked cogeneration if it would be possible for him to get a copy of one contracts. of our
) confidentiality agreement Bevelhymer explained 'that the contracts are under a not at liberty to reveal the information in those egntsacts.between TU Electric an We told Surchif thatBurch saida point Cap Rock reaches thatthat he is to meet with Panda next week f scussions.
in Panda's ment. proposal that we vill work with them on dthey are seriously interescec
) eveloping a wheeling agree-bp cc: Messrs. D. J. Hampton i
D. V. Sevelhymer K. M. Vebb u ,
C. V. Barclay ; - ' - .7 6 R. S. Nickels d hf J. H. Sanders C. F. Johnston
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June 1. 1987
) MEMO TO:
Cap Rock Electric Cooperative File .
FRCM:
R. N. Rhodes
SUBJECT:
Cogeneration - Wheeling
)
In a conversation with Rodger Burch on Tuesday, May 26, 1987 I asked if there had been any further developments in their considera-tion of purchasing cogenerated pcVer and a need for wheeling service .
He said they were "in the process of crunching some more numbers" and
) in the near future would probably be coming to us again regarding the wheeling. 3 On Wednesday, May 27. 1987 he had resigned as Manager of Cap Rock.Mr. Burch called to inform me that what effect It is not kncvn at this time this will have on Cap Rock's negotiations for the co-generated power. .
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s cc: Messrs. D. J. Hampton I
) K. M. Webb
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C. W. Barclay J. H. Sanders -
D. W. Sevelhymer /
H. A. Bunting R. S. Nickels
) C. F. Johnston C. V. Loeckle
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RfCt VEQ JUN 3 isi.-
CCCENE.ViiCN
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r.h rtnt ?
) ELECTRIC SERVICE com m r
- N #wC::E5 ca .cmea w.ee Novenbar 11, 1987 Mr. David W. Pruite
) Cap Rock Electric Cooperative. Inc.
P. O. Box 700 Stanton, Texas 79782
Dear David:
) Confirming o'G"r telephone conversation I an enclosing a copy of our Race TWC for Transmission Wheeling Service-Cogeneration and a draf t of a new These werePower sent Purchase Agtsesent between Cap Rock and TU Elaetric.
attention since you tobecame Cap Rock previously but may not have ec=e to your manager.
) the near future of,your intentVe understand ~that ycu plan to formally give us which Cap Rock is a full requirement's custozer.to terminate our current contract under The new agree:ent e.ll provide and standbyfor services.
partial requirement purchases and a framework for wheeling view it This draft will give you an opportunity to re-
=ent. prior to our meeting to discuss a cogeneration wheeling arrange-
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ing. I will wait to hear from you regarding setting a date for the eet- .
we need In the meantine to discuss, if you please have give meany questions or there is anything else a call.
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Yours truly,
,h -O-R. N. Rhodes bp attachment ec: E. D. Scarth beet D. J. Maopton ~~'
B. C. Povers 3
it. 3. Nickals -
H. A. Suntic.a. /
H. G. Creena o,go , ,,, , ,o a r o a v =. et=as teios .
v a t t e.o w e te t ti 23e-**
, o ,v ,sio = o n
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- s w ritivit s i t s c r aic co u ca = v
)
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CAP ROCK 8 3 8Cx *0o ELECTRIC COOPERATIVE. INC.
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- EST a'Ca*av 80 . staN7cs ?gAAS 71782 ?tLE8=
April 8, 1988 Miot.ANo CCES$a 915/%31943 eic spainc tisas si p
) Mr. Dale Scarth Division President 9 TU Electric P. O. Box 970 -
Tort Worth, TX 76101-0970
)
Dear Dale:
It wasJerry, night. a privilege Rust to meet with you and r Bill G if visit with us conce.y and I thank you very fin muchin Midland for taking last the time to
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for an adequate, reliable and reasonably prirning Cap plan Rock Electric ced power supply. 4 With regard to.the items va discussed:
1.
investigation and procurement of an alternativCap calls for the Rock Ele
- 2. e cheaper energy sources.
- a. .
) Contrary to your statement that Cap Rock Elect cannot generate empowered and transmit power, Cap Rock ric Cooperative Eleceri
, s Cooperative is "generar,e.under energy andmanufacture, to tran our Articles of Incorporation purchase, acquire and accumulate to.~among el...
other
" ectric electric energy...ssic, distribute, furnish, sell and dispose of such
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L Coc erative.
future. The window for this e toavailabiliThe Cap Rock Electric HL&P Econo procedures to accomodate the transfer of thiObviously, and work out the free last night, TU is still holding up this trans power, and your statements your intention to "dras your feet" until the saction.wi d We belitve it is
) transaction, thereby precluding Cap R n ow is past on this in this source of economy energy and the soprock Electric Cooperative's savings therefrom. that will accrue to Cap Rockoximate $100,000 Electric Coop per month erative's benefit 4.
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employees (and agents) is warranted.Your ~
request for direct m ock Electric Coo ~ perative's April 12. April 18, April 25, and/or April 26, 1988.
We propose the following dates:
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Mr. Dale Scarth April 8,1988 Page 2
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Although4,not November discussed last night but ref
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are various arrangements that will erhave between Cap Rock Electric C to there 29,.1987, be di1987 an alternative energy sources.ooperative and TU Electric, relative toscussed and set
) interconnection, a transmission network and theiSome multipleofpoints theseof are: '
setering for Cap Rock Electric Cooperative .
ntegrated net interchange Dale, time is of the essence in the matter of HL&P incourage you to change your position and make fir Economy Energy. We meetings to accomodate this orderly transfer of powerm plans to hold earl
) Bes t Regards, CAP ROCK ZI.ECTRIC COOPERATIVE, INC.
). David W. Pruitt Ceneral Manager.. D DVP:sah cc: Mr. Bill Criffin # -
) Mr. Rusty Jones .
Mr. Tom Cregg Mr. Earnest Casscevena _
Mr. Michael Moore Mr. Steve Collier
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)- C. H. GUER.NSEY & COMPS Cows nt wo tuos u r g ns de Amewerterg- --- -"" "
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August 4, 1988
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Mr. Darrell Bevelhymer Of rector of Marketing Texas Utilities Electric Company 400 N. Olive, Skyway Tower Dallas, TX 75201 .
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SUBJECT:
Cao Rock Electric Cooperative Arrangements f r Purchase of Cogeneration Power
Dear Darrell:
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the arrangements that might be made to allow Cap Rock E Cooperative to go forward with its plans to purchase capacity and energy from a cogeneration project to be developed by Pand meet me on Tuesday, August 2, 1988.
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allowed us to_get together sooner than might otherwise have beenThisI w possible. I Your preliminary concept for dealing with the' Panda cogeneration arrangement was intriguing.
to find a way of facilitating this transaction.I really appreciate your efforts in tryin
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your method would pretty much continue the all-requirements wholesalers I ca customer relationship currently applying to Cap Rock with an after-the fact billing adjustment to ratio the demand and energy taken divided by Cap Rock's annual peak load.from Panda in direct propor explicit treatment of wheeling, standby power service, partialThis could elimina requirements power service, or scheduling services. This approach is
) quite similar to the "X over Y" ratio method used by the Western Area !
j Power Administration in supplying preference power to utility cust:mers.
It would seem that this approach has two principal valtas. First, it is simple and straightforward.
Second, as you stated, i. would allow i TUEC to facilitate this transaction in the timeframe necessacy for Cao
) Rock to begin making purchases when the cogeneration project is planned l
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'A .
.Darrell Bevelhymer August 4, 1988 2-Page :
to come on-line. '
able to deal with all of the issues involved in developing exp wheeling, standby, partial requirements service, and scheduling in the
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necessary timeframe for Cao Rock to begin purchases from Panda.
Apparently another advantage to TUEC is that this approach would essentially preserve Cap Rock's existing all-requirements load characteristics, most notably load factor, by ratioing the amount of capacity and energy from TUEC and Panda so that each has identical load characteristics.
)' It appears that there are some key difficulties with this approach:
(1)
This approach does not provide Cap Rock with the independence it is seeking to participate in firm and interruptible power transactions within ERCOT.
and convenience facilitate the Panda transaction, it does notWhil
) provide within ERCOT. any . flexibility for Cap Rock to enter into other deals 4his approach could become quite difficult as multiple firm resources are added and would be especially difficult if Cap Rock were to add its own generation resources (e.g., a peaking turbine, taking over the cogeneration facility,etc.).
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(2) This approach would be very difficult if not impossible, for nonfirm resources such as economy ener,gy purchases.
Apparently, that is by design since TUEC continues to view these types of transactions as unacceptable for Cap Rock.
(3) The final principal disadvantage of this approach would be
) greatly reducing the amount 'of.enargy that Panda would be g selling to Cap Rock. Of course, Panda might 1 its load factor high by selling the excess'en.be er able to keep i would generate to TUEC or another buyer as "asavailable" gy that it j energy.
) It may be that all of these difficulties could be resolved with your approach, but it does not seem likely. Cap Rock still prefers to also receive specific rates, terms and conditions for " arms length" standby power scheduling services. service, partial requirements power service, and might contemplate is one in which Cap Rock has ceased to become
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all-requirements customer of TUEC and has reapproached TUEC for new standby, supplemental or partial requirements service, and scheduling services.
We are still hoping that whichever approach is ultimately taken, we will not be required to make everyone of our delivery points.4 transmission or bulk power celivery point and purchase or build the
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Darrell gevelhymer August 4, 1988 i p
t necessary transmission facilities to do so.
still urgeenergy economy you to reconsider transactions. your continuing refusal to contemplateFurther ]
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). I was very. pleased to learn that you recognize that your current wholesale rates tremendous price are not squeeze particularly during competitive and that they cause a winter months.
some attention is being given to this within the TUEC organization.I am enco However, I hope that you realize that this problem must be resolved sooner than over the several year term that you indicated would be required.
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We Panda will Energylook forward to working with you further on fa transaction.
, Sincerely,
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C.H. GUERNSEY & COMPANY
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- suc.4-Steven E. Collier, P. E.
Vice-President Analytical Services SEC:cm '
cc: David Pruitt '
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Steven E. Collier, P. E.
Vice-President - Analytica15ervices C. H. Guernsey & Company
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Landmark Towers West Buildng 3555 Northwest 54th Street Oklahoma City, Oklahoma 73112-4778
Dear Mr. Collier:
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' This is in reference to our meeting of August 2,1988, and yow follow-tp letter of Atgust 4. Regrettably, your letter does not reflect the substance of our Atgust 2 meeting, it seems that Guernsey & Company may be more interested in unng its relanonship mth Cap Rock as a " posturing" platform for the benefit of its other client, Panda Energy Corporation, than in dscussing Cap Rock's futre power reqtarements. For those reasors and ance Cap Rock has now elected to institute a
) complaint with the NRC, it appears that fwther discussions between us at tfus time will not be fruitful. A copy of our reponse to Cap Rock's NRC comments is enclosed for your information.
When and if the full requirements power purchese agreement with Cap Rock has terminated, TU Electrie will conunue to discharge all its legal obliganons to
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Cap Rock, whether in Cap Rock's capseity as a whoisale customer or an electrie utilitygeneration).
own company (provided it is fully equipped to procure, receive and dispatch its However, among others, these obligations do not include the making of economic decidons for Cap Rock, the providng of scheduling, energy banking or similar services as have been requested or the rendering of any electric service which imposes a disproportionate share of TU Electric's costs on its etstomers for the benefit of Panda or Cap Rock. We have indicated our willingness
) to condder a short-term scheduling arrangement for economy energy, on terms then purchasebetag offered to others, upon termination of Cap Rock's present power agreement.
TU Elaetrie intends to offer electric service to all of its customers at retail or at wholesale in accordance mth the rates and charges established by the Public
) Utility Commission of Temas and to engage in utility planning activities throtgh ERCOT on a non-discriminatory basis. You and your client are in as good a position as TU Elaetrie in speculating what rates and charges the PUCT may establish in the future. As a member of ERCOT, Cap Rock has acesa to its .
planning information. This, together with the data already on file at the PUCT and the FERC and that furnished to you by TU Electrie, should enable Cap Rock to
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2 make its own decision with respect to whether it desires to give the contractual notice with respect and purchase to the cancellation of the current power purchase agreement power and
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Corporation, upon expiration of its power purchase agreement with TU Si I 'V,
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' Darrell Bevel ymer cc: Mr. David Pruitt Cap Rock Electric Cooperative
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West Highway 80 P. O. Box 700 Stanton, Texas 79782 Nuclea.r Regulatory Commission Enclosure
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CAP ROCK ELECTRIC COOPER k. INC.
) 8 0 BOK 1.4 ,f wtst micawAv 30 groN rEuAs 79782 .tttgewCNE 9t$efl6 3386 WOLANO . Ott$5A 915,5631943 siQ SPeiNG 91$/2C34461
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April 7, 1989 ,
l Pres and Erle Nye 2001ity%nTower Dallas, TX 201
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Dear Er e Wa look forward to a good, fruitful meeting with you and Mike Green April 11. at 11:00 a.m.
) Steve Collier and I have developed an agends we need addressed. I believe you will find our requests reasonable and I know we can work an agreement that will be satisfactory to both our needs.
See you next Tuesday.
) Theni you.
Sinemnly,
) David E Pruitt CEC /GM JVf:sah Enclosures
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ERLE NYE
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APR 10 Ill
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CAP ROCK ELECTRIC COOPERATIVE j MEETING WI1H TEXA5 UTILITIES ELECTRIC COMPA.W j
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April 11, 1989 l
DISCUSSION AGENDA I
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- 1. DESCRIPTION OF CAP ROCK'S OBJECTIVES Cap Rock plans to: (1) minimize its power supply costs, and
) (ii) increase its flexibility to deal with changes in both power supply and retail so wice circumstances. Cap Rock will be modernizing its distribution system, expanding its transmission system, and investigating alternative power supply options.
- 2. PARTIAL REQUIREMENTS AND OTHER ESSENTIAL SERVICES Cap Rock's contract with Panda Energy and other potential purchased power and generation options require arrangements for coordination services, including:
- a. partial requirements purchase power,
- b. scheduled and emergency standby service,
- c. scheduling And dispatch services, and
- d. transmission senice.
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Cap Rock requires rates and contract terms and conditions for thue j services. Will TUEC agne to provide these servi::gs to Cap Rock j under reasonabis rates and terras? When will TUEC pnvide rs.tes and draft contracts? Can TUtiC's arrangements with other nholss61e cus-temers be paralleled? If Cap Rock end ntEC cannot reach speenent
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on rates and teras within two or three months, will T'E premptly ;
file proposed rater and contracts with the TpUC? '
- 3. H1,$P ECONONY FEERGY CONTRACT Now that this contract has been for.nsily appnved by the TPUC as
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being in the public interest, vill TUEC agree te f egotiate a mutually satisfactory scheduling agreement? Are there altamative approaches that would be more acceptable to it'ECf
- 4. CAP ROCK'S PETITION AT 1HE NRC
) Will TUEC honor the Comanche Peak licensing conditions with regard to Items 2 and 3 above?
Page 1 of 2
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- 5. CLARIFICATION OF WEC'S POSITION ON CONTRACT TERMINATION
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WEC's nply connents at the NRC imply that the primary impediment is Cap Rock's failure to teminate its all-requirements wholesale service contract. Will TUEC agree to imediately facilitate the HLSP economy energy contract and provide rates and' contracts for partial requirements, standby, scheduling and transmission ser-
). vices if Cap Rock does terminate its contract! Does TUEC expect that such contract temination would be rffective immediately?
- 6. TUEC WH0!25 ALE RATT5
- s. Cap Rock was very favorably impressed by TUEC's retail
>' marketing and load shaping programs as described by Stan Carrison in Stanton, Texas on February 22, 1989. Will TUEC provide Cap Rock with altamative wholesale rates, discounts, incentives, credits, etc. to allow Cap Rock to similarly pursue these desirable results7 !
) b. TUEC's current wholesale rate structure causes a significant wintertime wholesale / retail price squeeze for Cap Rock, and does not provide the seasonal or time-of-day cost tracking necessary to allow Cap Rock to develop satisfactory retail rates. Will TUEC agree to address this problem in a timely mannerf
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- c. The final order in TUEC's last rate case (i.e. - TPUC Docket No.'s 5040 and 5661) provides that "WEC shall negotiate in good faith with the participants in' Docket No. 5640 regarding the nature and timing of the rate request seeking to include Comanche Peak Unit I in paint in service , , ." W111 TUSC
). imedicely enter into these negotiations with Cap kek?
- 7. CAP ROCX TRAH5 MIST.,1CN SYSTEM 5 EXPANSION PLAN Cap Rock plans to upgrade and interconnect its distribution system with an integrated transmission system. Will TUEC pn vade
) the necessary transmission points of delivery? Is it possiblo for TURC to consttuct some of the transmission facilities for Cap Rock? .l l
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CAP ROCK ELECTRIC COOPERATIVE. INC.
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eo so 700 west ear so . srANroN. TEXAS 79782C?00 . TELEN9t$1 f561181 14ao u24sse
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tin y 1, 1989
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ti r . Erle Nye President
) Texas Utilities Electric Company 2001 Bryan Tower Dallas. TX 75201
Dear Erle:
) I would be less than candid if I did not say that I was extremely disappointed that you canceled the meeting we had j scheduled for the morning of April 11, 1989. Although I appreciate your courtesy in calling me personally, I must say j thar. I am not accustomed to receiving telephone calls ac 5:30 j p.m. 9n the night before an important meeting .and being told enac
) there was nothing to discuss. The stiscuosien agenda that you j said you would not discuss wse notning more than a l i;e t of tae j same issues that neva uten in essouce between us for the past several years. We have had several discussions with your {
1 subordinates and we have filoo extentive c u ra m e n t s with the !
Nuclear Regulatory Commission on pracisely these matters. I had
) hoped that this meeting was finally to be a serious attempt to resolve the substantial disputes between your company and Cap j Rock Electric Cooperative concerning partial requirements.
standby. and other services essential fer an economical and l reliable power supply for Cap Roc k.
f Your s t a t e ts 2 n t that TUEC has no intention of ever providing l partial r e q u i r e tt e n t s service, standby service, or scheduling services for Cap Rock was the most disturbing aspect of our telephone conn rsation.
As I hope you are aware from our filings with the Nuclear Regulatory Commission, it is Cap Rock's firm belief that TUEC is obligated by the NRC license conditions to its Comanche Peak nuclear project to provide those services.
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Your abrupt, if candid, refusal to acknowledge any such ;
obligations leaves Cap Rock with no option but to continue to pursue enforcement of those obligations before the NRC.
ERLE NYE
"...trying Aasdes to utvs you [rstiss... "
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Mr. Erle Nye
) May 1, 1989 Page 2 As you indicated to me in our telephone conversation, Mr. Mike
) Green of your company did subsequently contact me. Mr. Green informed me that no purpose would be served by a. meeting at this time, but indicated that he would be responding to each issue in our discussion agenda in writing within the next couple of weeks. j Although, in light of our telephone conversation, I doubt Mr.
Green will substantially change the impasse that we appear to
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have reached, I await his written response.
I trust you recognize that your offer to work with Cap Rock to j get Cap Rock completely off your system as a customer is not a {
realistic option f or Cap Rock. We do not believe it is proper or legal for Texas Utilities Electric Company to insist that a
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wholesale from TUEC L.
customer must either purchase all of its service needs it cannot purchase any services at all. Completely severing all service ties with Texas Utilities Electric Company system is not reasonable or practical for Cap Rock. We are completely surrounded by your service territory and facilities.
In order to completely leave your system, Cap Rock would have to
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make arrangements with elect ric utilities remote from our service territory for all of our power supply service needs, including any standby, reserves, scheduling, or other services that may be necessary. j This seems especially undesirable when some or all of these services could be made available at a price which provides an acceptable profit to your company while still being economically viable for Cap Rock Electric. Moreover, we believe
) your t.'o s p a n y has already agreed to provide these services in your SRC license conditions.
It is not gealistic for C4p Rock to sever all business ties with the Texas Utilities Electric Company system, but it is necessary for us to gain flexibility in managing our power supply costs
) throtgh unbundling the services which we purchase from your company and in positioning to take advantage of more economic power supply options which may become available in the future.
In fact, we believe it is necessary shac we follow this path in order to be competitive with TUEC in the retail market. TUEC's opposicion to these efforts, inc:luding ene refusal to sell
) necessary pattial requirese.nte end coordination services, and, in j essence, to tie the provision of any sarvice to the purchase of bundled service, will be fought by Cap Rock. .
I Sincerely, 1 i
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David W. ruitt CE0/GM {
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E E filELECTRIC Erie Nyt c m onnesaan sad Charf Esecurow
)' May 22,1989 Mr. David W. Pruitt General Manager
) Cap Rock Electric Cooperative,Inc.
P. O. Box 700 Stanton, Texas 79782 0700 -
Dear Mr. Pruitt:
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This is in response to our letter dated May 1,1989. You reauested a meeting to Inc. talk about the relationsh between TU Electric and Cap Rock Electric Cooperative.
On April 10, the day efore the meeting was scheduled, I received an unexpected and detailed agenda telecopied from your consultant concerning matters with which I had little familiarity. I explained this to you in what I thought was an amicable conversation. and we agreed to get representatives of the two utilities together to
) work on this matter. I asked Mike Greene to confirm this with vou the following dav, ~
and he attempted to do so. I understand that the two of you did confer on April 12.'
Your letter was obviously drafted by someone who was not a carry to our te!ephone conversation and follows the p'attern established in the past of total y triisrepresenting
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our communications with Cap Rock. Specit cally, I never macie any statement con-
) cerning unwillingness on the part of TU Elect.:tc to provide any tvp'c of service to Cap Rock.
ncerely\
r EN/jw 1 L <-
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2001 Brvan Tower Dallas. Texas 73201
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Mr. David Pruitt '
Cap Rock Electric Cooperative, Inc.
P. O. Box 700 Stanton, Texas 79782 )
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Dear David:
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This is in reference to our recent telephone conversation and an attempt to !
clarify various communications we have had over the past several months regarding your efforts to examine bulk power alternatives for Cao Rock. We have enjoyed our relationship as your wholesale power supplier #cr nearly 50 j
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years and value Cap Rock as a customer. Notwithstanding the outcome of your l current studies, I want you to know that TU Electric will do its part and rore to see that our commercial relationship remains healthy and harmonious.
Despite the fact that TV Electric will soon seek a 10% increase in its overall (
revenues to include the cost of Comanche Peak Unit No.1, we are confident I that TV Electric will remain the low cost power supplier for all of its
) customers, im;luding Cap Rock. We inter.d to do everything within our ability l tc rerderby appreved tha themott SUC.reliable ar.d efficient electric service avail 6ble at rates l i
1 We want /ou to know that shculd Cap Pock wish to become a fully self-sufficier t elet tric utility or should it wish to purchase power from ctters or self-croduce all ur a part of f ts requirements, TV Electric will rot )
) be an impediment to these goals. i HJwever, as we have indicated in the past, there are two requirements tha+ Cao Pock r.Jst satisfy if it wishes to secure )
power rom other sources. First, your full reovirements bulk pcwer contract j I
with TU Electric mvst terninate in accordance with its terms, and seccnd, Cao Occk nust place itself in a positien of beir.g ablo to take delivery of power j chtained f*om other sources by becomira a control area or obtaining that
) service from a third party. It is unreasonable to expect TV Electric, aosent extraort*inary circumstances, to schedule power on a long-term basis for its customers. Attempting to render that service would inject TU Electric into the affairs of its customers to the extent that it is suply not willirg to do and could create an accounting and operational nightmare. We recognize, however, that power purchase alternatives may become available to you before
) Cap Rock can become a fully functioning control area. In that event, and after the tennination of the contract in accordance with its terms, we will make available a power scheduling arrangement until you are able to telemeter 1
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2001 Bryan Tower Dauas. Texas 75301
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your points of delivery, install the necessary equipment, train your :ersonnel and take whatever other steps are recuired to act in your own behalf, so long as such arrangements can be and are made within a reasonable period of time.
Of course, we have no objections if you make arrangements with other control area utilities to schedule power purchases for you following the termination of the contract in accordance with its terms. When you can be more specific
)' about your scheduling needs, we will be happy to enter into negotiations with you toward developing a fair and reasonable short-tenn agreement. For the protection of our other customers, I'm sure you will understand that. we must insist that the terms of any such arrangement fully compensate TV Electric for its costs plus a reasonable return on investment.
) TV Electric will provide necessary partial requirements bulk power plus emergency and/or scheduled standby services at rates approved by the PUC. If provided today, the rates for these services would be the same as available under TU Electric's wholesale rate structure. That rate structure is, of course, subject to change in the future. In any event, until your load cortrol area is in place, the load factor of your purchases from TU Electric
) must be proportionate to your total system load factor. In other words, your purchases must reasonably follow your load curve. Transmission service will be provided cursuant to PUC Substantive Rules 23.66 and 23.67, if applicaole.
or under such other arrangements as may be mutually agreeable and wn1cn fully c0mpersate I'J Electric for its costs plus a reasonable return on investment.
n aedition, Cap Rock must mske transmission arrangements with cther imoacted
). utilities be< ore TV Electric will be in a position of renderinc this service
- cr you. .
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- ith respect to scheduling of economy energy, when and if Cap Rock's full requirements centract has terminated ir. accordance with its tems. TU Electri-j will treet Cao Rock the same as all other simi7arly situated entities and, to
) the extent then being offered, will schedult short-term economy energy frw third-carty suppliers on Cao Rock's oehal' under terms which will #ully ]
j compensate TV Electric for its cests plus a reascnable return en its j investment.
You nave asked that TV Electric make available to Cac Rock its retsii )
I marketing and load-shaping programs, which include discounts, incentives, l creoits and the like. As you know, TV Electric's demand side programs are i designed to respond to market place conditions in support of long-terr load j shace objectives. Properly implemented and controlled, these programs benefit !
all of TV Electric's customers, including Cap Rock. As many of these programs l are designed for specific end-use customer application, we presently do not see how they can be successfully applied to diversified loads such as Cap
) Pock's. If it would be of any help to you, we will be happy to share infomation regarding TV Electric's load management and conservation efforts which may be of assistance to you in tailoring similar programs for Cap Pock's Customers.
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) TV Electric "as no objections to seasonally dif#erertiated rates 'tr wholesale customers, having proposed this form of rate structure in cur 1984 rate case.
As I am sure you are also aware, wholesale customers, inclucing Cao. Pock, opposed this rate structure, and the PUC rejected TU Electric's precosal. As an outccme of our next rate case, we would certainly have no objection to implementing a seasonally differentiated or time of day rate structure for all
) wholesale customers, if such rates are approved by the PUC.
Please be assured that, at the appropriate time, TV Electric will necotiate in good faith with all participants in Docket 5640 regarding the nature ano timinginofservice.
plant the rate recuest seeking to include Comanche Peak Unit No.14n
)
.The message we are attempting to convey in this letter is that we wish to cooperate with Cap Rock in its efforts to become a fully self-suf#icient utility with the ability to accept delivery of power purchased # rem sources it chooses. TV Electric intends to do its part in wheeling that cower to all points of delivery at transmission voltages. While we will otherwise
} cooperate with you in a businesslike manner, as we do with any otner certrc' area utility in ERCOT, Cap Rock must be responsible for its cwn plannirg are operations, and the construction of its own facilities.
When Cao Pock has achieved independent stat'Js, TU Electric will centinua :o treat Cap Rock the same as all similarly situated Nor*.h Texat ent es. 'n .
)- this regard, we cannot be e safety net for you unless, at the time you cestre te return as a customer of TU Electric, we nave the acility te serve your reeds. ^hether Cao Rock elects to remain a full requirements custcmer c# ~U Electrie er to pursue 4ndependent status, TV Electric will contirue to #ully nonor its licerse conditions obligations.
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Very truly yours,
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.j May 9, 1989
) Mr. Michael.S. Greene Vice President Texas Utilities Electric Company 2001 Bryan Tower Dallas, TX 75201
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Dear Michael:
This letter is in response to your letter of May 5 concerning the ongoing disputes between our respective companies. While I -
appreciate your efforts to clarify and in some respects soften the positions advanced by TUEC over th past several months, I
) regret to say that we appear to have reached an impasse. We obviously have an irreconcilable difference of opinion as to the obligations of TUEC under the antitrust license conditions to the Comanche Peak nuclear project.
You state that TUEC wi!) not impede Cap Rock's efforts to breome
) a partial requirements customer, or r.o leave the TUEC sysrem, yet you insist that, as a condition precedeat r. o TUI'C cooperation, Cap Rock cancel its current c o n t r a <. t and est4blish a control area. Mike, you know very well thet it ja not reasonable to require Cap Rock e c. incur the substantial cost of establishing a control area before you sell us partial requirements service,
) particularly as Mr. Nye told me that TUEC would never sell Cap a Rock partial requirements or related services. In yaur recent Amended ana Restated Power Supply Agreemt.nt with Tex La, TUEC committed to provid2 Ter. La, which is i n su r.h the same sit.uation as Cap Rock, partial requirescats, coctdination and transmission service right. away. Tex-La has until 1997 to establish a control
) area end, if it does not, TUEC will continue to sell Tex-La those services. Nor.is it prudent for Cap Rock to cancel its contract with your company until it has some assurance as to the rates, terms and conditions of the services that are necessary for Cap Rock to do business. Your letter, like all of your company's communications on this matter, does not make it clear when,
) assuming Cap Rock terminated its current contract, TUEC would provide the necessary rates, terms and conditions -- upon notice of te rmination o r not until three years later.
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TUEC's premise, as stated before the NRC, by Mr. Nye, and now in your letter, is that TUEC has no obligations under the Comanche Peak antitrust license conditions to Cap Rock or to any of its full requirements customers. . Cap Rock disagrees with that g position. Cap Rock therefore intends immediately to file the appropriate request with the Nuclear Regulatory Commission to obtain enforcement of Comanche Peak antitrust license conditions.
I believe that you know we are committed to obtaining cur rights under the license condition and, in candor, your letter appears to be an attempt to forestall that filing or to soften some of Q the years.
positions that your company has maintained for the past two Cap Rock would very much like to work out our differences and reach an accommodation that will meet the needs of each of our respective companies. I regret to say that your letter offers us O littl* h pe of such an amicable solution.
Very truly.yours, 9
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O- David W. Pruitt CE0/GM DWP:srh O
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CAP ROCK ELECTRIC COOPERATIVE, INC.
P O. BOX 700 WEST MAY 00 . STANTON. TEXAS ME24700 . TELEPHONE (915) N3301 B
14004424000 nuesivue ,
4teg15gg i May 25, 1989 JUN 11989 MJ 1989 g EXECUTIVE
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Mr. Bill Griffin ,
TU Electric P. O. Box 1230 Midland, TX 79702
Dear Bill:
)
We certainly appreciate you and your company's attitude and efforts toward our dilemma last night.
Your crews were very adept at their job of energizing the mobile {
substation.
) )
I would like to show my appreciation and invite you and Stan and your wives to be my dinner guests at the Plaza Club in Midland.
I'll call to check on a convenient date.
Again, I pe[schaD%nnk you for your company's attitude and y effort. Please pass on to your associates who had a hand in the operations a "Thank You" from Richard Lewis and myself. It goes, maybe without sayjng, but if we can reciprocate in the future in any way, please permit us the opportunity.
Thank you.
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Since ely, !
David W. Pruitt
) CEO/GM DWP:sah Mr. Stan Garrison l
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Mr. H. Jarrell Gibbs !
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"...ttying Aatdet to sewe you bettet...
F T H A N K S T O Y O U...
1-The directors, management, and employees of Cap Rock Electric owe you thanks for your patience and understanding during the outage the co-op experienced on May 24.
Usually when your lights go'out, it's because a bird has.gotten into equipment or a line has fallen. Our linemen go out to your property and within a short
) time, your lights are back on.
At 5:05 P.M. on May 24, Cap Rock suffered an outage, but it was not an average outage. A substation transformer, located in the Triangle Substation north of Stanton, inexplicably failed.
) This transformer weighs in excess of 40 tons and has the capability of lighting a small city. Life expectancy of this piece of equipment is 40 years. It is approximately eight years old and had presented no problems in the past. It was maintained on a regular basis and gave all indications of being in perfect working order. The co-op SCADA system continuously monitored the temperature, oil level, and gas level of all our substation transformers. This transformer
) showed normal performance right up to 5:05 P.M. '
Our goal on substation outages is to have a mobile substation in place and functioning within five hours. However, our spare transformer was being utilized elsewhere. With a price tag of a quarter of a million dollars each, we cannot economically justify many spares. _ Long-term el- are to have an electric trans-
) mission system that ties substations together, which would improve service relia-bility and shorten these outages if one shoufd ever occur again.
We do not know what happened to this transformer or why. That question can be answered only when the transformer is shipped off and checked. All we know at this point is that there was an equipment failure. The seven straight days of
) 100* temperature may or may not have contributed to the malfunction, but such hot temperatures put a massive strain on all utilities.
One thing that contributed to the length of this outage is that it could not have core at a worse time of day, as co-op crews had just lef t work and were dispersing in kil directions. We had to wait until they got home before we could call them 9
back to work.
If a mobile subate.tien had not bien svailable, this outage could have been days in length, We ove thanks to TV Electric for their cooperation, especially in view of f.he fact they had their cvn electrical problems due to high temperatu:es on the same date.
)
I would like to thank you, the member / customers of Cap Rock Electric, again for your pacience and your understanding. Equipment fails. It is no one's fault.
The failure is not~due to negligence or lack of maintenance. It is simply some-thing that happens in every business. We are sorry. We restored your power as quickly as possible. We sincerely hope this does not happen again. We will do everything in our power to assure that it does not.
)
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David Pruitt General Manager
) Cap Rock Electric Cooperative, Inc.
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) ,,- ,e e i C. H. GrEnssrv & COMPS Coxers.vno Escistras & AncNirre L...o w.ma to c as we s t Swnoaaeo
) se s s a<en,..c , so - s acre <
OXLAHOMA CITY 7311a 4778 aos, G -ssia i
1 1
June 29, 1988
)
Mr. Darrell Bevelhymer, Manager
)
Marketing Services TU Electric 2001 Bryan Tower Dallas, Texas 75201 '
SUBJECT:
Cap Rock Electric Cooperative
) Panda'* Energy Corporation Cogeneration Project
Dear Darrell:
On behalf of Cap Rock Electric Cooperative, I appreciate the opportunity that I had to meet with you and Henry Bunting regarding ,*
)
wheeling capacity and inergy from the Panda Energy Corporation Cogeneration Project ,at the Oscar Meyer plant in Sherr::an, Texas through the TU Electric transmission system tp Cap Rock Electric Cooperative in Stanton, Texas.
Panda will be contacting you directly to request the necessary wheeling transaction simulations and corresponding tariffs and contracts.
I will be assisting Panda on
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behalf of Cap Rock in ensuring that acceptable wheeling arrangements are developed. --
Cap Rock is quite aware that several significant challenges must be addressed to succes.sfully implement the co6eneration contract. We realize that it wi)1 be necessary for us to arrange coordination services including emergency st6 tid'cy, maintenance standby, l
) supplementary parcial requirements power service, and control area scheduling end dispatch services. Siner. we are currently an all requiremanes customer of TU Electric, it would seem r.atural to first consider having TU provide all of these coordination services in addition to However, we wheeling will not in the power frorri the cogeneration facility be agreeable to acquiring these services from TU
) Electric under rates that are unreasonable or contract terms and conditions that are unduly constraining. In our recent meeting with you and Dale Scarth in Midland Texas, Mr. Scarth made it quite evident that TU Electric is not at all interested in facilitating anything other than all requirements wholesale power service cnder our existing contract.
Furthermore, in our meeting with you in your
)
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Mr. Darrell Bevelhvder Page 2 June 29, 1988
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offices last Friday, you made it clear that TU Electric may not be interested in providing control area scheduling and dispatching s e rvices . I still believe that there should be a way in which we can arrange to our mutual benefit a set of circumstances in which Cap Rock purchases power from the cogeneration facility and purchases standby
)- and supplemental power tervices from TU Electric. I would expect that, in your role as manager of marketing services, you would be interested in promoting an arrangement which would result in TU Electric's preserving as many services as possible to Cap Rock.
As we have discussed before, Cap Rock finds that it must take
) steps to gain some diversity of power supply resources because of the wholesale price squeeze being exerted by TU Electric in conjunction with extremely aggressive retail customer competition in the service ,
areas dually certified for Cap Rock and TU Electric. We would hope to continue our long-standing and valuable relationship and continue to be a customer of TU Electric for standby and supplemental services. I s
I am really hoping that we can accomplish this in cooperation with you without unnecessary antagonism or a stretched out ordeal of desultory negotiation tactics. However, if we must, we will become an independent control area and we will arrange for standby, r pplemental power service and other power supply services independently of TU ,*
Electric. ,
~
)
I have reviewed.your letter dated June 2,1988 to David Pruitt, the general manager of Cap Rock Electric Cooperative. We are entirely in agreement that properly cost based demand and energy rates should be paid for standby and partial requirements wholesale power supply service. It is hard for me to imagine that a partial requirements
)
tariff would not be in the interest of your company and in your customer's if it provide for you to receive adequate revenaes to cover your costs plus an acceptable profit from the parcial requirements customer. The provision of standby service through a rider to the partial requirements tariff is an acceptable concept provided thac the same ratchet provisions that apply to the partial requirements demar.d billing may not be appropriate for short-term emergency standby and
) rescheduled maintenance standoy.
Unleco TU Electric is anticipating filing a general rate case at the Texas Public Utility Cecmission in the next few months, it will not be acceptable for Cap Rock to wait for resolution of these matters until you decide to de e.o.
It veuld be our intent to be able to y
review definitive tariffs and contract terms and conditions and make a decision as to whether or not we will acquire partial requirements power service and/or standby power service frot TU Electric within the next three to six months. We certainly realize that it may take longer than that for final cariffs to be approved by the PUC,~but surely we can reach a final agreement (or disagreement, as the case
)
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- x. ... 't - ..
I Mr. Darrell Bevelhvmer Pane 3 June 29, 1988-l t
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may be) for filing with the PUC within the next few months, We will be looking forward to meeting with you soon to further explore these matters.
Sincerely,-
) '
C. H. CUERNSEY & COMPANY
[-
Steven E. Collier, P.E.
).
Vice President Analytical Services SEC/csh cc: David Pruitt Earnest Casstev, ens Tom Cregg
) John Adragna-Henry Bunting p
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- h. BROWN MARONEY RCSE BARBER & DYE ArTo#=OS Aaso CouwSCLost l/ )b 1300 Cat m ay;a(A3A ,,, i.
333 ON Ausw texas reroe
. . . = = ,
1 July 29, 1988 """**'"**"*"
479-7741
)
(
Public. Utility Commission 7600 Shoal Creek Suite 400-N
. Austin, Texas 78757
) ) ltcAN N Attn: Central Filing Clerk Re: Amendment to Tariff of Cap Rock Electric Cooperative, Inc. .
) Gentlemen:
five Enclosed copies offor afiling herewith please find an origin 4 proposed and amendment to Cap Rock Electric Coope rat ive , . Inc. , Tariff Section No. II, Sheet Nos. 2 and 3.
Submitted in conjunction with and in support of the proposed
) tariff and amendment is a statement from Carl Stover regarding the revenue neutrality of the proposed amendment together with documentation supporting his position in that regard.
Please call if you have any questions.
)- Sincerely,
)
/
Michael S. Hull MSH:vc/0662M
)
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( AP . ROCA ELECTRIC COOPERATIVE, ( . j J
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SECT!0W 71712:
f Section No. 11 RATES AND OiARCES Sheet No. 2 ,
y 4, Effective Date i Revision No. 1 APPLI C A31LITY:
ALL AREAS SERVED
)
202. Rate Schedules.
)
202.1 Ceneral Service Race Codes 10 and 15.
A. Availability.
General Service Single Phase is available to Members having 50 kVA or less of installed transformer capacity in
) accordance with the Cooperative's Se rvice Rules and Regulations for all domestic, farming, ranching, and public uses other than crop irrigation, and commercial uses.
B. Tvpe of Service.
Single or Three Phase Service at the Cooperative's standard distribution voltages, where availchle.
C. Monthly Race.
Each billing period the Member shall be obligated to pay the following charges:
)
(1) Customer Charme $8.50 per meter This charge is an availability charge for providing electric distribution service. It does not include any kWh; and (2) Energy Charge May through October: $0.071 per kWh
)
November through April:
First 600 kVh $0.071 per kVh N Over 600 kVh $0.044 per kWh.
)
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C C 1
h SECTION TIT 12:
Section No. II RATES AND CHARGES Sheet No. 3
)
Effective Date APPLICAJ!LITY:
Revision No. 1 ALL AREAS SERVED *E'
)
)'
D. Minimum Charge.
Each biling period the Member shall be obligated to pay the folloivng charges as a minimum, whether or not any energy is actually used: .
) (1) The customer charge plus $1.00 per kVA of installed transformer capacity in excess of 10 kVA; or (2) The amount stated in any agreement with the Member, whichever is greater. 1 E. Billing Adjustments.
)
This race is subject to all applicable billing adjust =ents. (
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C c C. H. GUE RSSEY & COMPANY Coxscs.rsvo Escistens 6r Ancmrzers j 4.Aacuama fo*cas
- cst ownoine
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35 5 5 None..e s, g e ,. seng g, Oxt.AHona Ctry rossa 4tte c.o s G- s ais !
l June 29, 1988 I
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) I FEDEPAL EXPRESS
]
Mr. Michael Hull 1 Brown, 'aroney, Rose, Barber 6 Dye Suite 1300 333 Cuadalupa
) Austin, Texas 78701
SUBJECT:
Cap Rock Residential Rate
Dear Michael:
)
the Cap Enclosed'is
~
Rock Ceneral supporting Serviceinformation regarding the proposed change in rate applicable to the residential customers.
The purpose of_.the change in es !?preve the eempetitive relationship between Cap Rock and RfEC__ residential service. Cap Rock has found that -
the current residential rate is not competitive with the TUEC rate during i the winter months for usage in excess of 1500 kWh. The problem occurs
) because of the TUEC race design in which TUEC offers a substantial differential during the winter months for usage in excess of 600 kWh.
Cap Rock's procesed rtte charts reflects the the same rate structure as found in the 'LUEC rata- TUEC has a customer charge and an energy charge during the summer months. The acergy charge during the winter
) achths for the first 600 kWh is exsetly the same as the enstgy charge during the summer months. For usage in excess of 600 kWh. the TUEC rate is approximately 2.7 cents per kVh less than the rate for the first block.
Cap Rock in not erving to j ustify the diffarancial in _e.ht_vinter rate based on cost of service; the justification is based solely on competitive y6TITen a tions . -
)
The attachments include the following:
(1) A copy of the proposed tariff. I have indicated a code "N" in the right hand column next to the rates. Whereas there is a change in the unit rate, which will cause some increases and
) some decreases, the overall class revenue remains the same. You might want to check and make sure this is the proper code designation.
(2) Schedules A 1.0 and A-2.0 compara the existing TUEC and Cap Rock rates. The comparison shows billing at different usage levels
)
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( 1 Mr. Michael Hull Page 2 May 29, 1958
)
i for both summer and winter usage. For usage of 2000 kVh during the winter months, the Cap Rock rate is 18.7% greater than TUEC's, and at 3000 kWh it is 25% greater .
l
) (3) i Schedules 5 1.0 and 5 2.0 compare the existin5 TUEC and the proposed Cap Rock rate.
Schedule B 2.0 shows the extent to which the competitive disadvanta5e is reduced for Cap Rock during the winter months for usage above 1000 kWh. Even with this change, the Cap Rock rate is higher than TUEC's.
I
) (4) Schedules C 1,0 and C 2.0 compare billing under the existin5 and proposed rates. Two different usage periods were used.
I Schedule C 1.0 uses the twelve months anding June 1985 and is j consistent with the data presented in Docket No. 6778. In that j proceeding, the total revenue under the final order rates was j
$7,118,020, and the total revenue under the proposed rates is
$7,113,991.
) When the PCRF that is common to both is subtracted, j the base rate revenue under the final order rate is $7.170,579, and the base rate revenue under the proposed race would be {
$7,166,550.
In either case, the difference is only $4,029,00.
Schedule C 2.0 is a proof of revenue using data for the eve (ve i months endin6 April 30, 1988. This analysis was performed to
)
determine any major shifts in revenue caused by changes in usage. You will note that even with the revised usage data the i Eropoced rate is within $10,000 of beine revenue neutral; the !
'rate.
proposed race produces revenues of $9,338 less chan the existing !
l (5) Schedules D-1.0 and D 2.0 provide a comparison showing the
)
change in the existing and proposed Cap Rock rates. During the summer months, the change does not have any material impace; the
{
billing under the proposed rates is generally within it of billing under the existing races. There is a change during the I winter months. The billing to customers wica usage in the 207' kWh~co evo kVh range will increase, whereas billing to customers
) with usage in excess of 2000 kWh will decrease. The decrease )
occurs because of the intent to make the Cap Rock race mor.s competitive with the TUEC race. All customers on the Cap Rock system with usage less than 600 kVh will pay the same rate during both the winter and summer months.
) I hope the enclosed information is sufficient. If you require any additional data, please let me know.
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Mr. Michael: Hull _
Pane ' 3 Mav 29,'1988
- r.
Sincerely...
C. ' H. CUEPSSEY & COMPAhY
)? O b d i(. ,
? .. ./. .
Carl N. Stover, Jr. , P.E.
CNS/csh Enclosures N
- cc: David Pruitt.(w/ encl)
Steve Collier (w/ enc 1)
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( ( schedule A.I.0 TUEC RCSICENTIAL SUMMER
)
First******** kWh/ Month eS 0415CO/kWh Minimum =S 6 00, Includes 00 kWh Customer Charge t 6 00
) !
CAP ROCK EXISTING GEN SERVICE SUMMER ,
First******** kWh/ Month eS 070237/kWh Minimum =S 8. 50. Includes 00 kWh i
) Customer Charge s 8. 50 1
COMPARISON OF RATE SCHEDULES
)'- kWh TUEC CAP ROCK INCREASE USAGE s s s %
DO 9.27 12.02 2.75 29.67 100 12.53 15.54 3.01 24.02 200 19.06 22.59 3.53 18 52 400 32.12 36.66
.l 4 54 14 13 )i 600 45.18 50.75 5. 57 l 12.33
{
800 58.24 64.83 6. 59 11.32 1000 71.30 78.92 7.62 10.69 I 2000 136.60 149.33 12.73 9.32
)
3000 201.90 219.75 17.85 8.84 5000 332.50 360.58 28.08 8.45 Fuel /PCA .0238000 0001790 . s/kWh j
)
.I 1
) l O
( ( Schedule A-2.0 TUEC RESIDEN7IAL WINTER O First 600 kWh/ Month es 041500/kWn Over eOO hWh/ Month es 0143OO/kWh
, Minamum=s 6 00. Includes 00 kWh Customer Charge S 6.00 CAP ROCK EXISTING CEN SERVICE WINTER Fiest******** kWh/ Month eS 055500/kWh Minimum =S 8. 50, Includes 00 kWh 9 Customer Charge S 8. 50 COMPARISON OF RATE SCHEDULES C) kWh TUEC CAP ROCK INCREASE USAGE 5 5 5 %
50 9 27 11.23 1.96 21.14 100 12.53 13.93 1.40 11.17 200 19.06 19.36 0.30 1 57 400 32.12 30.20 -1.92 -5 40 600 45.18 41.05 -4 13 -9 14 800 52. 80 51.90 -0.90 -1.70 1000 60.42 62.75 2.33 3.86 2000 98.52 116.98 18.46 18.74 O
3000 136.62 171.22 34.60 25.33 5000 212.82 279.69 66.87 31.42 Fuel /PCA .0238000 .0012635 , s/kWh O
O O
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Schedule 3-1,0 f
I TUEC RESIDENTIAL SUMMER
) k First**++++++ kWh/ Month ts i
.0415CO/kWh I Minimum =s Customer Charge 6.00. Includes .00 kWh s 6.00
) CAP i ROCK PRCPOSED GEN SERVICE SUhMER First******++ kWh/ Month eS
.0710CO/kWh i Minimum =s 8.50. Includes Customer Charge .00 kWh 1 s 8.50 l
8 COMPARISCN CF RATE SCHEDULES kWh TUEC CAP ROCK INCREASE
)- USAGE s s s */.
50 9.27 12.06 2.79 30.10 100 12.53 15.62 3.09 24.66 I
) 200 19.06 22.74 3.68 19.31 400 32.12 36.97 4.55 15.10 i 600 45.18 51.21 6.03 13 35
) 800 58.24 65.44 7.20 12. 36 1000 71.30 79.68 8.38 11.75 2000 136.60 150.86 14.26 10.4" 3000 ,,201.90 222.04 20.14 9. 9E 5000 332.5'O 364.40 31.90 9. 59 Fuel /PCA .0239000 0001790 . s/kWh 1
7
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)
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)
( ( Schedule B-2.0 TUEC RESIDENTIAL WINTER
)i .
First 600 kWh/ Month tS 041500/kWh Over 600 kWh/ Month ts 0143CO/kWh i
j Minimum =s 6.00, Includes 00 kWh Customer Charge s 6.00 {
)
l CAP ROCK PROPOSED GEN SERVICE WINTER' First 600 kWh/ Month ts 071000/kWh Over 600 kWh/ Month ts 044000/kWh
{
) Minimum =s 8.50. Includes 00 kWh Customer Charge s S. 50 , q
. I
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) COMPARISON OF RATE SCHEDULES kWh TUEC CAP ROCK INCREASE USAGE s s s %
50 9.27 12.00 2.73 29.45
) 100 12.53 15 48 2.95. 23 54 200 19.06 22.46 3.40 17.84 l
400 32.12 36.40 4 28 13.33
) 600 45.18 50.35 5.17 11.44 800 52.80 58.90 6.10 11.55 1000 60.42 67.45 7.03 11.64 !
) 2000 98.52 110.18 11.66 11.84 .
3000 136.62 152.92 16 30 11.93 5000 212.82 238.39 25.57 12.01
) Fuel /PCA .0238000 .0012635 , s/kWh l
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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . . _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _l
)
( ( Schedule C-1.0
)
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( ( Schedule D-I.0 CAP ROCK EXISTING GEN SERVICE SUMMER
)- First******** kWh/ Month eS 070237/kWh Minimum =S B 50. Includes 00 kWh Customer Charge S 9 50
)
CAP ROCK PROPOSED GEN SERVICE SUMMER First******** kWh/ Month tS 071000/kWh Minimum =S 8. 50, Includes 00 kWh Customer Charge S e. 50
)
COMPARISON OF RATE SCHEDULES
.hWh EXISTING PROPOSED INCREASE
) USAGE S S S %
SO 12.02 12.06 0.04 0.33 100 15.54 15.62 0.08 0. 51 y 200 22.59 22.74 O.15 0 66 400 16.66 36.97 0. 31 0.65 600 50 75 51.21 0.46 0. 91
) 800 64.83 65.44 0 61 0.94 1000 78.92 79.68 0. 76 O.96 2000 149.33 150.86 1.53 1.02
) 3000 219.75 222.04 2.29 1.04 -
i 5000 360.58 364.40 3.82 1.06 Fuel /PCA .0001790 0001790 , S/kWh
)
9 0
)
( ( Schedule D-2.0 i CAP ROCK EXISTING CEN SERVICE WINTdR FirSte******* kWh/ Month ts 055500/kWh i Minimum =s 8.50, Includes 00 kWh Customer Charge s 8. 50 CAP ROCK PROPOSED GEN SERVICE WINTER
) ;
First 600 kWh/ Month ts Over 071000/kWh 600 kWh/ Month es 044000/kWh Minimum =s 8. 50, Includes 00 kWh Customer Charge s 8. 50
)
COMPARISON CF RATE SCHEDULES kWh EXISTING CAP ROCK INCREASE
) USAGE s s s %
50 11.23 12.00 0.77 6.86 100 13.93 15.45 1.55 11.13
) 200 19.36 22.46 3.10 16.01 400 30.20 36.40 6.20 20 53 600 41.05 50.35 9.30 22 66
) 8C0 51.90 50.90 7.00 13.49 1000 62.75 67.45 4.70 7.49 2000 116.98 110.18 -6.80 -5. 81
) 3000 171.22 152.92 -18.30 -10.69 4
5000 279.69 238.39 -41.30 -14.77 Fuel /PCA .0012635 .0012635 , s/kWh
)
)
8
y
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- .! 517 - " : 35 DOCKET NO. 8283
- . . - ,. , . ~. N FETITION OF CAP ROCK ELECTRIC $
'" BEFORE TH' COOPERATIVE, INC..TO CHANGE $
l GENERAL SERVICE RATE PUBLIC UT!LITY COMMISSION ;
) $ OF TEXAS -
i PETITICN FOR AUTHORITY TO CHANGE RATES.
NOW COMES Cap Rock Electric Cooperative, Inc. (" Petitioner").
)
and files this its Petition for Authority to Change its General Service and in support thereof would respectfully show the following:
) I. .
1 Petitioner files herewith and incorporates herein for, all !
purposes its Statement of Intent to change its General Service
) Rate. in all areas to which it provides electric utility service.
Petitioner hereby requests the Commission to approve implementa-tion of the proposed change in all areas not within the inc:r-
) porated limits of a municipality. Jurisdiction of the Commissien arises under Section 17(e) of the Public Utility Regulatory Act, Article 1446c of the Texas Revised Civil Statutes.
t
)
II. i As a result of competition with Texas Utilities Elec i
Company in dually certified areas, Petitioner's present General '
)
Service Rate schedule should be mocified. The General Service rate proposed in Petitioner's Statement of Intent are just and l reasonable.
)
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WCL*.y ~ ~; '..
_. _ M*. : . -..
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)
III.
l Because this request is for a rate slightly lower than
) revenue r.eutral rate change and because implementation is desired right away the Commission is respectfully requested to waive any filing requirements not met by thfs application.
I V ..
)
Inquiries concerning this Petition for Authority to Change Rates may be directed to the undersigned, Attorney for Petitioner,
)
McGinnis, Lochridge E Kilgore, 1300 Capitol Center, 919 Congress Avenue, Austin, Texas 78701, telephone number (512) 476-6982.
WHEREFORE, Petitioner respectfully requests the Commission to issue notice to the public of a hearing to be held on Petitioner's
)
Statement of Intent and, upon final hearing, to approve its .mple-mentation in areas within the original jurisdiction of the Cor.m:s-sion.
)
Respectfully submitted, McGINNIS, LOCHRIDGE E KILGORE 1300 Capitol Center
) 919 Congress Avenue Austin, Texas 78701 (512) 476-6982
)
By [a h EARNEST CAS5TEVENS State Bar No. 03980400 ATTORNEYS FOR CAP ROCK ELECTRIC COOPERATIVE, INC.
Post Office Box 700
) Stanton, Texas 79782 e- .
_y
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STATEMENT OF !NTENT 7,
) TO THE PUBLIC UTILITY CCHMISSION OF TEXAS AND THE GOVERN NO BCOIES OF THE INCORPORATED MUNICIPALITIES OF ACKERLY, BIO SPRINO.
CCAHCMA, STANTON, AND MIDLAND.
Cap Rock Electric Cooperative, Inc. (the " Utility") files
) this its Statement of Intent to revise its tariffs and schedules pursuant to the requirements of Section 43(a) of the Public Ut.1-ity Regulatory Act of Texas (Art. 1446c, V.A.C.S.).
I.
)
The Utility intends to modify the rate charged to the General Service class effective as soon as may be permitted by law.
Exhibit i is a copy of the General Service tariff presently in
)
effect.
The modification embodied in the proposed tariff changes is to change the per kilowatt hour charge applicable during :ne months of May through October from 7.0227C per kilowatt hour to
)
7 ie per kilowatt hour and to change the per kilowatt hour rate ;
applicable during the months of November through April from 5.550 per kilowatt hours for all kilowatt hours to 7.ie per kilewat:
)
hour for the first 600 kilowatt hours and 4.4e per kilowatt hour i for all kilowatt hours over 600 kilowatt hours.
The attachments contained in the attached Exhibit 2 include !
i
) the following:
(1) A copy of the proposed tariff. The code "N" in the right-hand column next to the new rates. Whereas there is a change in the unit rate, which will cause some increases and some decreases, the overall class revenue
) remains the same.
(2) Schedules A-1.0 and A-2.0 compare the existing TUEC and i Cap Rock rates. The comparison shows billing at differ-
)
- ~
.. --.-..'1.*. *4 A 4.*F ELt". - - _ _ . . . , _ n.1,, ,;,,. _ W.E.
) .
)'
ent usage levels for both summer and winter usage. 70:
usage of 2000 kwn during the winter months, the Cap Rock rategreater.
25% is 18.7% greater than TUEC's, and at 3000 kWh it is
)
(3) Schedules B-1.0 and B-2.0 compare the existing TUEC and the proposed Cap Rock rate. Schedule B-2.0 shows tne extent to which the competitive disadvantage is reduced for Cap Rock during the winter months for usage acove 1000 kWh. Even with this change, the Cap Rock rate is.
) higher than TUEC's.
(4) Schedules C-1.0 and C-2.0 compare billing under the existing and proposed rates. Two different usage !
periods were used. Schedule C-1.0 uses the twelve months ending June, 1985 and is consistent with the data
) presented in Docket No. 6778. In that proceeding, the total revenue under the final order rates was E7,118,020, and the total revenue under the proposed rates is $ 7 ,1 *. 3 . 9 91.
both is subtracted, When the PCRT that is common to final order rate is $7,170,579,the base rate revenue under the and the base rate
)
revenue under the proposed rate would be $7,166,550. In either case, the difference is only $4,029.00 Schedule ;
C-2.0 is a proof of revenue using data for the twelve j months ending -April 30, 1988. This analysis was '
performed to determine any major shifts in revenue caused by changes in usage. The proposed rate is witnan
$10,000 of being revenue-neutral; the proposed rate
) produce revenues of $9,338 less than the existing rate.
(S) Schedules D-1.0 and D-2.0 provide a comparison showing the change in the existing and proposed Cap rock rates.
During the summer months, the change does not have any material impact; the billing under the proposed rates is
)
generally within 1% of billing under the existing rates.
There is e changs during the winter months. The billing to customers with usage in the 200 kWh to 600 kWh range will increase, whereas billing to customers with usage in excess of 2000 kWh will decrease. The decrease :
occurs because of the intent to make the Cap Rock rate j
) more competitive with the TUEC rate. All customers on the Cap Rock system with usage less than 600 kWh will !
{
pay the same rate during both the winter and su.=er l months.
)
l 4
l.
)
)
)
II.
The changes are applicable to all areas to which the Utility provides electric utility service. Based upon the twelve montas ending April 30, 1988, the decrease amount of which results frem the proposed modification of the General Service class is $9.338 or approximately .13% of test year revenues. The Utility does ne:
propose to recover this decrease from any other class.
III.
)
Consumer classification and rate applicability will remain unchanged.
IV.
Inquiries concerning this Statement of Intent should be directed to the undersigned at McGinnis, Lochridge ti Kilgore. 1300 Capitol Center, 919 Congress Avenue, Austin, Texas 78701, tele-phone number (512) 476-6982.
)
Respectfully submitted, McGINNIS, LOCHRIDGE ti KILGCRE 1300 Capitol Center
}
919 Congress Avenue Austin, Texas 78701 (512) 476-6982 By L# ~~#
) EARNEST CASSTEVENS State Bar No. 03980400 ATTORNEYS FOR CAP ROCK ELEC R:C COOPERATIVE, INC.
Post Office Box 700
) Stanton, Texas 79782 3
1
) ___._._.- '*
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- _ _ . _ _ _ _ _ - - - - . _ _ . - - )
)
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)
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)
EXHIBIT 1
)
)
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SECT'ON: N-Section No. rr RATES AND CHARGES ~
)
Sheet No._
Cffective Date '
) . .
AP P t.!CA 8 II,I;y ev sion No._
ALL AREAS SERVED '"I' *f - l I
) !
- 02. Rate Schedules.
202.1 Ceneral Service - Rate Codes 10 and 15.
?-
A. Availability.
General Service - Single Phase is available to Members ,
) having 50 KVA or less of' installed tr6nsformer capa- :
city in accordance with the Cooperative's Service Rules and Regulations for all domestic, farming, ranching, and public uses other than crop irrigation,
)
and commercial uses.
- 8. Two of Service.
Single or Three Phase Service at the Cooperative's standard distribution voltages, where available.
C. Monthiv Rate.
i Each billing period the Member shall be obligated to
)
pay the following charges:
(1) Customer Charge
$8.50 per meter This charge is an availability charge for pro-
}
viding electric distribution servich. It does not include any KMt; = ad PU8UC UiluiY COMMISSION OF TEUS APPROVED EXHIBIT 1
) .
8Y i
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TAMIFF" CLERK
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IAd ;;CX E:.EC F:: C : : F I .A ; ,- , ;.,.
_S E C T
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1 RATES AND CHARCES Section No. II !
). _
Sheet No . _ _
, Ettective Date I
AP P t ICA B It,I;y Revision No.__ .
I -
l ALL AREA.S SERVED *I' CI '
i
)
(2) Energy Cha ve May through October .070237 per KWH
)
November through April: .055500 per KWH D. Minimura Charge.
Each billing period the Member shall be obligated to
) pay the following charges as a minimum, whether or not any energy is actually used:
(1) The customer charge plus $1.00 per KVA of
) installed transformer capacity in excess of 10 XVA; or l
(2) The amount stated in any agreement with the I i
) Member, whichever is greater.
1 E. Billine Adjustments. i l
This rate is subject to all applicable billing adjustments.
)
) PUSUC Uitu1Y COMMIS$10N OF TDAS APPROVED i SEP2 '86 oocxt 6778 '
BY TARifrP' CLERK
) EXHIBIT 1 L*.'_ l._.._ - . :. -=
= = . ..
o
O O
O I
lo
'O O
EXHIBIT 2 O
O O
O O aus e
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. ;s,:s gtCT104 T3712: ,
I
)
Section No. !!
RATES AND CHARCES Sheet No. 2
) Effective Date_ i APPLIC A31 LITY: '
ALL AAIAS SERVED I' '
)
202. Rate Schedules.
202.1 Cenersl Service Rate Codes 10 and 15
^
)
A. Ava!! ability. l Ceneral service Single Phase is available to Members {
l having 50 kVA or less of installed transformer capacity in accordance with the Cooperative's Se rvice Rules and {
Regulations for all domestic, farming, ranching, and public uses other than crop irrigation, and commercial uses.
S. Tyve o f Se rvic e . !
l Single or Three Phase Service at the Cooperative's standerd distribution voltages, where available.
C. Monthly Rate.
)
Each billing period the following charges: the Member shall be obligated to pay i
(1) Customer Charte $8.50 per seter I
This charge is an availability charge for providing ,
) electric kWh; and distribution service. It does not include any (2) Enerry Charge May through October: $0.071 per kVh November through April:
First 600 kWh $0.071 per kVh N
) Over 600 kVh $0.044 per kVh.
s
)
EXHIBIT 2
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Section No. !!
RATES AND OMRCES Sheet No. 3
) Effective Date g, Revision No. 1 ALL AAEAS SERVED I*I' 'I
)
D. Minimus Charme.
)
Each biling period the Member shall be obligated to pay the folloivng charges as a mintaus, whether or not any energy i is actually used: {
j (1) ne customer charge plus $1.00 per kVA of installed transformer capacity in excess of 10 kVA; or
) {
(2) The amount stated in any agressant with the Member, whichever is greater.
E. 31111na Adiusements. .
This rate is subject to all appitcable billing adjustments. ~
l.
3
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4
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EXHIBIT 2
- . . ... . .. - . - . . page 2 . '
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)
SeeLle A.2, TUEC RESIDENTIAL SUMMER !
) Firste*eeeeee kWh/ Month es 041300/nwh !
1 Manimumes Customer Charge 6.00. Includes 00 kWh s 4 00 { '
) CAP '1 ROCX EXISTINO CEN SERVICE SUMMER .
Firsteeeeeee* kWh/ Month ts 070237/kWh Minimumes 8. 50, Includes Customer Charge .00 kWh s e 50
)
. . {
COMPARISON OF RATE SCHEDULES kWh TUEC USACE CAP ROCK s s INCREASE
> - s %
50 9.27 12.02 2.75 i 29.67 1 100 12.53 15.54 3.01 24.02 200 19.06 22.59 3.53
) 18. 52 i 400 32.12 1 36.66 4. 54 14.13 600 45.18 30.75 5. 57 12.33 a0o 5s.24
- 64. e3 6.59 11.3r '{
)
1000 j 71.30 78.92 7.62 10.69 I 2000 136.60 I 149.33 12.73 '9.32 I 3000 201.90 219.75 17. s3 s. e4
)
5000 332.50 360.58 28. 08 8.45 Puel/PCA .0238000 .0001790 . s/kWh
)
) l l
EXHIBIT 2
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page 3
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TUEC RESIDENTIAL WINTER
)= First Over 600 kWh/ Month tt 041$00/tw-600 kWh/ Month as 014300/kwn Minimum =$ 6.00.
Customer Charge Includes .00 kWh s 6.00
)
CAP ROCK EXIST!No OEN SERVICE WINTtR First******** kWh/ Month SS
.035500/kWh Minimum =s
) Customer Charge 8. 50. Includes 00 kWh s 8. 30 kWh COMPARISON OF TUEC RATE SCHEDULES
)- .USACE CAP ROCK s s INCREASE a %
So 9.27 11.23 1.96 100 21.14 12.33 13.93 1.40
) 200
- 11.17 19.06 19,36 0.30 1. 57 400 32.12 30.20 -1.92 600 -S.98
- 45.19 41.05 -4.13 -9.14 800 S2. SO St.90 -0.90 ~ 1. 70 1000 60.42 62.75 2.33 2000 3.86
- 99. S2 l ie. 98 19.46 19.74
) 3000 136.62 171.22 34.60 25.33 S000 212.92 279.69 66.87 Fuel /PCA 31.42
.0239000 .0012635 , s/kWh 1
)
4 I
) i EXHIBIT 2
. \
page 4
) ,
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)-
S d.ed.:e 1.:,0 TUEC RESIDENTI AL SunMER
) First**eeeeee twh/ Month tt
.041500/kWn Minimumas 6.00, Customer Charge Includes .00 kWh t 6 00 ,
j CAP MOCK PROPOSED CEN SERVICE SUMMER" i Firsteeeeeese kWh/ Month S S .
i
.071000/kWh Minimum =s Customer Charge
- 3. 50. Includes . 00 k Wh :
s (
S 50
)
- l COMPARISON OF RATE SCHEDULES kWh TUEC CAP ROCK
. USAGE s INCREASE
).
s s ;
50 9.27 32.06 2.79 30.10 100 12.33 15,62 3.09 24.46 200 19.06 22.74 3.68
) 19.31 500 38.65 44.09 5.44 14.08 !
600 45.18 51.21 6.03 13.35 000 38.24 65.44 7.20
) ,
12.36 1000 71.30 79.68 S.38 11.75 2000 136.60 150.84 14.26 10.44 3000 201.90 222.04 20.14 9. 98 -
)
5000 332.50 364.40 31.90 9.59 Fuel /PCA .0239000 .0001790 . s/kWh
)
)
EXHIBIT 2 page 5
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. . . . . = . = = .=. --
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see ble a.: 3 TUEC RESIDENTIAL WINTER First \
). Over 600 kWh/ Month tS 041300/kWh 600 kWh/ Month ts 014300/kWh Minimum =8 _!
6.00, Customer Charge Includes. 00 kWh l s 6.00 }
1 i
) CAP ROCK l PROPOSED QEN SERVICE WINTER
- First 600 kWh/ Month tS ,
Over .071000/kWh l 600 kWh/ Month ts .044000/kWh j Minsmum=S
)- Customer Charge 8. 50. Includes 00 kWh
$ S. 50 't
{
COMPAR! SON OF \
. Wh TUEC RATE SCHEDULES !
CAP ROCK {
INCREASE SC 9.27 12.00 2.73 29.45 100 12.53 IS de 2.95
) 23 S4 200 19.06 {
22.46 3.40 .)
17.94 400 32.12 l 36.40 4.28 13,33 {
600 45.18 SO. 3S S.17 11.44
) SCO ,
s2.30 SS. 90 i 6.10 11.SS 1000 60.42 67.45 7.03 11. 64 2000 98. 52 )
110.18 11.66 11.84 *
) 3000 136.62 1S2.92 36 30 11,93 5000 212.82 238.39 25.37 12.01 Fuel /PCA .0239000 .001263S , S/kWh
)
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EXHIBIT 2 l page 6 \
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,,m_e._e en w ecemo4 M6 = .. game-e em m W e* M -
1 I
s ee n:e 3 2,3 CAP !
ROCK Ex t STINC CEN 3CRv1CE Synngq First'e****** $
kWh/ Month ts 070237/kw5
)
Mantmum=S 8.50. Includes Customer Charge s .00 kWh !
G. 50
> CAP ROCK PROPOSED CEN SERVICE SUMMER- - i First**es**** kWh/ Month eo .071000/kWh \
Minimum =s 8. 50, !ncludes Customer Charge s 00 kWh l S. 50
. i
- \
kWh COMPARISON OF l EXISTiNO RATE SCHEDULES \
USACE S PROPOSED i S INCREASE S i
) 50 12.02 I 12.06 0.04 0.33 100 15. 54 15.62 0.08 0. 51 $
200 22.59 22.74 0.15 1 400 0.66 !
) 36.66 36.97 0. 31 c 85 400 50.75 ;
51.21
- 0.46 0.91 800 64.83 65.44 0. 61 i 0.94
) 1000 78.92
, 1 79.68 0. 76 0.96 2000 149.33 150.96 1. 53 1.02 3000 219.75 222.04 2.29 1.04 .
)
5000 360.58 364.40 3.82 1.06 Fuel /PCA .0001790 .0001790 , s/kWh
~
)
)
EXHIBIT 2
~
page 9 -
. . _ . . . . , .' ..k. - = - - - ~~ ~~*~' ~
)- .
Schekje 0 7.o 1 CAP ROCK
' Ex!STINC CEN SERV 1CE wlNTCR First******e* kWh/ Month es OS$500/kwh Mansmum=S 8 50, includes Customer Charge s
.00 kwh 8.50 CAP First ROCK PROPOSED CEN SCRv!CE WINTC# .
Over 600 kWh/ Month eS . 0710CO/ k wh 600 kWh/ Month e t .044000/kwh Minimum =8 8.50, Includes
) Customer Charge s
.00 kWh 8.50 kWh COMPARISON OF EXISTING RATE SCHEDULES
) USACE CAP ROCK S S INCREASE S
SO 11.23 12.00 0.77 100 6. 86 13.93 15'.48 1.55 11.13
) 200 19.36 22.46 3.10 400 16.01 30.20 36.40 6.20 20.53 400 4't . 05 S0. 3S - 9.30
) 800 22.66 St. 90 55.90 7.00 -
13.49 1000 62.75 67.43 4.70 2000 7.49 116.99 110.18 -6.80 -S.81
) 3000 171.32 132.92 ~
5000
-18.30 -10.69 '
279.69 238.39 -41.30 -14.77 Fuel /PCA .0012635 a.0012635 , s/tWh
)
)
EXHIBIT 2 page 10
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DIRECT TESTIMONY r ' "'
-)
OF
- .i 1 , ',, ,,
)
DAVID PRUITT -
- 1 Q Please state your name, business address and position with Cap Rock Electric Cooperative, Inc. (the " Cooper-
) ative").
A My namo is David Pruitt and my business address is High-way 80 west, stanton, Texas.
I hold the position of
) General Manager.
- 2 Q What arte your responsibilities as General Manager?
. A I am the chief executiv= -ffi;;.-of the Cooperative. In this capacity I am responsible for the overall operatien 1 of the cooperative within the policy parameters estab- i lished by the Board of Directors.
- 3 Q Describe your experiencat
) in electric utility management. !
I A
~
I received a Bachelor of Science degree in Agricultural )
t Economics from Texas A&M University and a Master of
)
science degree in Agricultural Economics from Texas Tech University.
I have also completed numerous management, engineering, member relations, and financial training seminars. I began employment in the electric utility
)
business with Deaf Smith Electric Cooperative, Inc. in Hereford, Texas in 1971 as Area Development Manager. I remained in that position until the end of 1977. In i
)
Jan,uary of 1978 I assumed the position of censral
. . . . . . . l
, . . . i u.y. _ ~._?.'.'.'.2*?_~.'_.'.'.'.,....
1 I
) f Manager of Greenbelt Electric Cooperative, Inc. in )
Wellington, Texas. In early 1985 I assumed the duties 1
)
of Assistant General Manager of Cap Rock Electric Coop-erative, Inc.
{
I became General Manager of Cap Rock Electric Cooperative, Inc. in May of 1987. _
- 4 Q
) what is the purpose of your testimony in this proceed-ing?
A The purpose of my testimony is to explain the considera-3
) tions which underlie the decision of the Cooperative to j l
modify its General Service rate. j 45 Q Please describe briefly the nature of the Cooperative 1 and its operations.
)
A Cap Rock Electric Cooperative, Inc. provides service to approximately 10,000 square miles in 13 counties in west Texas. Service is provided to consumers through 16,300
) '
meters with almost 5,000 miles of transmission and dis-tribution line. More than half of the energy sold by Cap Rock Electric Cooperative,,,Inc. is Provided to
)
petroleum production loads in the Permian Basin. Almost all of the remaining energy sold by the Cooperative is consumed by residential customers, with less than 2%
)
being provided to agricultural and irrigation loads.
i Residential service is provided pursuant to the General i Service tariff classification.
)
. :3. .. . _ . . .. . : _. . --
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The Cooperative currently purchases all of its wholesale power requirements from Texas Utilities Elec_
) tric Company ("TUEC") through the Texas Electric service Company Division. TUEC is also Cap Rock 's principal competitor for retail loads.
More than half of Cap Rock's service territory is dually certified for service by both TUEC and Cap Rock Electric Cooperative.
46 Q What considerations prompted the Cooperative to seek a
)
modification of its General Service rate?
A TUEC, the competing supplier, can and has set prices in a manner which adversely affects Cap Rock's ability to compete; that is, in a manner which creates a price
)
squeeze. The price squeeze occurs, in part, because of the different rate designs employed by TUEC in its wholesale and retail tariffs. TUEC's residential retail tariff reflects a seasonal differential; the rates are much lower in the winter than they are in the summer.
There is no such seasonal differential in TUEC's whole-
> sale tariff.
For example, Cap Rock takes service under TUEC's Tariff WP. This tariff contains a ratchet that is based upon the preceding twelve calendar months. In other words, TUEC's wholesale customers' rates in the winter are ratcheted at a level set at the highest sumer peak demand experienced during the preceding twelve calendar
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1 months, simply put, TUEC_ charges lower rates to its 1 1.
retail- customers in the winter than in the summer, . but
) charges one rate to its wholesale customers all . year round. >
The effect of this rate design difference is openly acknowledged by TUEC. Denton County Electric Coopera -
}
h Inc. ("Denton County") recently ytitioned t'he Public Utility Commission for a rulemaking that would
)'
limit dual certification of service territories 'where -
the result is wasteful duplication of facilities. The i petition was occasioned by TUEC's recent aggressive construction of retail distribution facilities in the
)
service . territory of Denton County and TUEC's represen-tations to Denton County that it was embarking on a
{
campaign of active solicitation of retail customers. i
)
During the course of the argument on Denton County's petition, the following exchange took place between counsel for TURC and Commissioner Campbell of the Public I
) Utility Commission:
MR.
things SCHANNAM (counsel for TURC):
that provoked One of the this (petition] is because tising campaign TUEC Electric entered into an adver-and basically around the
) metroplex type area, advertising its rates.
The result of that has been (that] two of the four co-ops affected have filed petitions with this Commission seeking to reduce their rates.
COMMISSIONER CAMPSELL: But that's because of
)
the winter / summer differential, isn't it, Mr.
Bohannan? Let's be honest about it. .
4 4.-- -- -
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i HR. BOKANNAN: It's because of the differen-tial.
appreciably cheaperthat It's because thanour winter winterrate is '
their rate.
) It's the competitive nature. It's not because of the They rate were structure reducing of their rates at all.
the revenues.
COMMISSIONER CAMPBELL: Butisn't it's it?
because of the structure of your rate j
) HR. SOMANNAN: That's right. It's caused (them) to be more competitive with our rates.
TUEC is openly engaged in a price squeeze that it
)
acknowledges places its wholesale customers in a com-petitive disadvantage in their competition with TUEC at retail.
The tariff which Cap Rock proposed in Docket No.
)
6778 contained a summer / winter differential for the General Service class. Cap Rock. proposed an energy charge of 80.0757 per kilowatt hour for the months of 7
May through October and a rate of $0.0600 per kilowatt hour for the months of November through April. This differential has not been sufficient to ameliorate
)
problems regarding residential service in the winter.
TUEC's residential winter base energy rate is $.041500 per kilowatt hour (plus fuel) for the first 600 kilowatt hours and $0.01430 per kilowatt hour (plus fuel) for all kilowatt hours over 600. We are proposing to revise the {
rate as requested to oddress this competitive problem.
) The modification proposed in this filing would result in a rate design for Cap Rock's General Service rate iden-a -Ant # w . _
_. , m --
)
)
tical to the design of TUEC's residential rate insofar as the summer / winter design aspect is concerned.
97 0 What
) is the nature of residential service by the Coop-erative?
A I Most of the tesidences served by the Cooperative are n:t
)
located in areas served by gas distribution systems with the result that over 80% of the residences served by the cooperative are all electric homes. A typical all elec-tric home averages 3500 kilowatt hours of usage per
)
month in the winter months.
68 Q What is the nature of the service in the General Service class at low usage levels?
) A The General Service class includes service to water wells, fence chargers, and other such non-residential leads which constitute the lion's share (over 85%) of
)
the meters served at usage levels below 600 kilowatt hours per month. I.ow usage levels would also include short months for residential service locations where a I
) disconnection on new conr.ection occurs during the month.
{
- 9 Q Does this conclude your profiled written direct testi-stony?
A Yes, it does.
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. 1 asm e e* e eu, DOCKET NO. 8283
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DIRECT TESTIMONY . ..
P.. . . .
f . . . ':. " * . . ' .
CARL N. STOVER. JR.
C. M. CUERNSEY & COMPANY OKLAHOMA CITY, OKLAHOMA .
)
ON SEMA11 0F l
CAF ROCK ELECTRIC COOPERATIVE INC.
1 Q. Please state your name and business address.
3 2 A. My name in Carl N. Stever, Jr. My business address is 3555 N.V.
3 58th Street Oklahoma City, Oklahoma 73112.
4 Q. By whom are you employed?
) A.
5 I as employed by C. H. Cuernsey & Ceepany, Consultin5 Engineers 6' and Architects, Oklahoma City, Oklabosa.
7 Q. Whos do you represent in this proceeding? '
) 8 A.
I an appearing on behalf of Cap Rock Electric Cooperative.
9 Inc. (* Cap Rock' or the ' Cooperative").
~
10 Q. What is the purpose of your testimony?
) 11 A. In the Order of Suspension and Notice of Frehearing Conference, dated 12 August 18, 1988, reference was made to several factors that the 13 Commission considers in determinin5 whether a rate filiDg nackame 14
) is reguired er not required for a given proposal. The purpose of 15 sy testimony la to address those facters. It is cap Rock's 16 positten that if these factors are considered that a rate filing 17
) package is not required in support of the proposed rate change.
18 Q. Were you involved in the development of the proposed rate change?
19 A. Yes. I was directly involved in the analysis and in the
)
' ~ ~ '
>_ .. ..'.~..'._........'..'....
1 CARI. N. STOVER. JR.
1 development of the preposed rate.
)
2 Q.
Could you please describe the proposed race change?
3 A. Yes.
Attached as Schedule A 1.0 of Exhibit (CNS-1) is a copy 4
of the existing Cap Rock Ceneral Service rate. Attached sa
)
5 Schedule A 2.0 is a copy of the proposed change. The proposed 6
c_hange deals only with the energy charme provision _ in the race.
7 The change is identified as "N" on the tariff.
)
8 Q. Could you please address the factors that are identified in the 9 Order of Suspension and Notice.
10 A. The factors are:
) 11 g What is the nature of the proposal, and would the effect on 12 customers be adverse?
13 The proposal changes the energy charge applicable to
) 14 the ceneral Service customers. The change is proposed 15 because the Cap Rock rate is not competitive with the WE0
^~ ~
16 rata applicable to residential customers. Schedules 8 1.0
) 17 and 3 2.0 are a comparison of the existing TU and Cap Rock' 18 races. The comparison shows that during the winter month:
19 the existing residential rate is not competitive for usage 20
) above 1000 kWh. schedules C -1.0 and C2.0 show that under 21 the proposed rate the differences between TU and cap Rock 22 billing are reduced and that cap Rock is able to be 23
) sempetitive during the winter months for usage in excess of 24 1000 kWh.
25 The proposed change in rates is revenue neutral.
)
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CARL N. STOVER, JR.
)
1 Schedules C.1.0 and C.2.0 compare billing under the ng existi 2
and proposed races.
Tvc different usage periods were used.
3 )
Schedule D-1.0 uses the twelve me--hs ending June 1985 and
) 4 ,
is consistent with data presented in Docket 6778.
5 In that proceeding the total revenue under the Finst Order rates was
$7,118,020; this compares with total revenue under the
) 7 proposed rates of $7,113,991. When the PCRT that is corneon 8
to both is subtracted, the base rate revenue under the Finsi 9
Order rate in Docket 6778 was $7,170,579; this compares to 3 1
) 10 base rate revenue under the proposed rate of $7,166,550. In
.l 11 {
either casa che difference is a reduction in revenue of 12 approximately $4,029. Schedule D 2.0 is a proof of revenue 13 i
)
using data for the twelve months ending April 30, 1988.
la This analysis was performed to decernine whether er not any 15
~
major shif ts in revenue occurred because of changes in 16 ~ usage.
) Billing under the proposed rat is $9,338 less than 17 .
actual billing under the existing race.
18
.As a class, the proposed change has no effect on the 19
) existing customers. There vill be changes in billing at 20 different usage levels. Schedules E 1.0 and E.2.0 provide a 21 comparisen of the existing and proposed cap Rock races.
22 During the summer sonths, the difference in billing is 23 generally in the range of one percent. During the winter 24 months, the change vill be greater depending upon the usage 25 level. This is to be expected however, given the fact that
) ;
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. 1 CARL N. STOVER, JR.
l
) I the overall rate is revenue neutral.
2 2.b.
Is the overall revenue impact positive or negative, and what 3
is its ma5nitude?
) !
Billing under the proposed rate is revenue neutral.
5 2.c.
What are the costs and relative benefits of allowing the 6
proposal te proceed without a full rate package, as compared 7 f
> to requiring a full race application? 1 8 {
The primary benefit is the reduced cost associated with 9 l implementing the rate change. Cap Rock is a rural electric \
I 10 cooperative and any costs incurred will eventually have to 11 be paid by the member customers.
Any reduction in eperating 12 costs will accrue to the direct benefit of the sembers. It 13
) is escinated that the preparation of a complete rate package 14 cad a full hearing before the Commission could cost as such 15
, as $20,000 $25,000.
16 Another consideration is that, if the Commission 17 requires Cap Rock to prepara a full rate application, then 18 it would be impossible to realize effective rates for the !
j 19
) winter of 1988 ft. The benefits associated with reduced 20 energy easts would not be realized by the customers in a 21 timely fashies.
22 2.d.
Mas the Ceemission set the rates for the applicant in a full
) 23 rate case?
24 The last Cap Rock rate filing was Docket 6778, which 25 was based on a test year of 6/30/85.
)
4
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CARI. N. STOVER. JR.
l J
) 1 2.e.
Is there a danger that approval of the tariff proposal would 2
result in recovery of costs already being recovered'in rates 3
which would not be changed under the proposa17 4
) No.
The proposed rate is revenue neutral. i 5 2.f. j Has the utility or another party done a costing analysis 4 6
that is reasonable in the context?
7
) The primary objective is to allow Cap Rock to realize a 8
competitive position with Texas Utilities. Cap Rock has not 9
prepared a detailed costing analysis in support of the 10
) proposed rate change.
11 2.g.
Does the utility.have a pending or incipient race case that 12 could reasonably serve se a vehicle for the proposal?
13 No.
)
14 2.h.
What are the procedural and factual circumstances in which 15 the sufficiency of a tariff filing vaa challenged?
16 No resp'onse.
)
17 2.1.
To what ext.?nt would the information in a full rate filing 18 package aid the Commission in setting a fair rate for the 19 services which are the subject of a tariff proposal?
) 20 The preparation of a full rate filing would not aid the 21 Ceemission in setting fair rates for service. The basis for 22 the propeaed change is in response to competitive
) 23 considerations. In order to resolve the competitive 24 )
i considerations on a cost basis it would be.netaAAAry fer the 25 commission to reconsider the TU rate design.
)
5
,_ .~~~~ . .. : .. ~.;.T -.*-- -
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)
.WD a.a C ON - '
I.
CAAL N. StovgA. JR.
' 1 '- Q.
). Does this conclude your testimony?
2 A. Yes. it does.
1 i
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) i 1
ATTIDAVIT l
) -
1 STATE OT OKIAHOMA )
) 35. 1 COUNTY OT OKIAHOMA )
f
) I i
Before se, the undersigned Notary Public, personally appeared CARI. N. STOVER, JR. , who being duly sworn on oath deposes and says
) that l the foregoing prepared direct testimony and statement of fact contained therein are true and correct to the best of his knowledge, information and belief. .
)
l (w//fE - /.
Carl N. stoirer, Jr. /
) -
Subscribed and sworn to before as this 30th day of August, 1988.
) !
k&Akm)
Nota g Public I
)
Ny Ceemission empires:
December 31, 1989 I
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DOCKET NO. 4283 CAP ROCK ELECTRIC COOPERATIVE, INC.
)
I
)
SUPPORTING EXHISITS OF CARL N. STOVER, JR.
)
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Sc.a.edule A. .- 1 Sect ion No .**5* [z ;! 2 '
RA*ES AND CnAActs ~~ ~
) l 1
2 Sheet No.
j
~
Effective Date !
{
APPLICA8ILITY: _
AI.f. AAEAS SERVED Page og _ l
. I.
- 02. Rate Schedules.
202.1 Ceneral service - Rate codes 10 and 15.
}
A. Availability.
~ " ~ ~
Censral Service - Single Phase is available to Members having 50 KVA er less of' installed transformer capa-
)
city in accordance with the Cooperative's service Rules and Regulations for all domestic, farming, ranching, and public uses other than crop irrigation, and commercial uses.
) .
- 5. Tyne of Service.
~ ~ '
Single or Three Phase Service at the Cooperative's
, standard distribution voltages, where available.
)
C. Monthiv Rate.
Each billing period the Member shall be obligated to pay"The following charges:
)
(1) Customer Charee $4.50 per meter This charge is an availability charge for pro-viding electric distribution service. It does
) not include any XWM; = ad PU$UC Uiluff COMMi$$30N of TDAS APPROVED
. 92 '86 noce 6778
~ Of
)
TARtFF C1.ERK
y -4 A::A t t: a: C C : 7 t.:x ; . r ,
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Page 2 of 2 RA?ts AND CHARCES Section No._ !! I l
).
3 l l Sheet No. '
i.i Effective Date_ , , _
j j
)I A.P P t.ICA s t t.I;y: * " * ~
o' l 0
ALL AREAS SCRVCD '*I' *' '
I
) l (2) Energy charge May through October: .070237 per KWH November through April: .055500 per KWH D. Minimum Charce.
Each billing period the Member shall be obligated to
)
pay the following charges as a minisua, whether or not a.ny energy is actually used (1) The customer charge plus $1.00 per KVA of
)
installed transformer capacity in excess of 10 KVA; or (2) The amount stated in any agreement with the Member, whichever is greater.
) '
E. 31111ne Adjustments.
Th)& rate is subject to all applicable billing adjustments.
)
evouc unun couwmoN of IWS I
) APPROVED SD2 '86 occast 5778
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).P RCCX ELEC R2C COCPERA7?vE,1] Schedal, 4,7,q j P. Ale 1 of 2 }
l SECT!0N TIT 1.E:
)
RATES... AND CHAAC, , ' ES Section No. II l Sheet No. 2 i
) Effective Date i
g, Revision No. 1 ALL AAEAS SERVED '8' '
)
202. Rate Scheduleo. . _ . . _ _
202.1 Ceneral Service - Rate codes 10 and 15.
A. Availabilftv.
. General service - Single Phase is available to Members having 50 kVA er less of installed transformer capacity in accordance with the Cooperative's Service Rules and
)
Regulations for all domestic, farming, ranching, and public uses other than crop irrigation, and commercial uses.
- 3. Tyve of Service.
Single or Three Phase Service at the Cooperative's standard distribution voltages, where available.
) C. Monthly Race.
- Each billing period the Moaber shall be obligated to pay the following charges:
- (1) Customer Charse -
$4.50 per meter This charge is an availability charge for providing
) electric idth; and distribution sarrice. It does not include any (2) Enerzy Charse .
May through October; *
$0.071 per kWh November through April:
)
First 600 kWh $0.071 per kWh N Over 600 kWh $0.044 per kWh.
)
. . . . . . . . . ~ - _ . . . . . .-..' ~ --- - . .. -- - -
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)
RATES AND OMACES Section No. II 1
Sheet No. 3
) --
Effective Date I
3 APPL 1CA3fLITY: Revision No._ 1 '
ALL AAEAS SERVED 2 Page of 2
) l i
4 1
D. Minitsum Charme.
)-
Each biling period the Member shall be obligated to pay the folloivns charges as a minimum, whether er noe any energy is actually used: *
(1) The customer charge plus $1.00 per kVAk et installed transformer capacity in excess of 10 kVA; or
)
(2) The amount stated in any agreement with the Me=ber, whichever is greater.
E. Sillina Adiusements.
This rate is subject to all applicable billing adjusr=enes.
)
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TUEC RESIDENTIAL SUliMER
) Firste+++++++ kWh/ Month ts \
.041500/kwh '
Minimumes 6.00, Customer Charge Includes .00 kWh s 6.00 3
)
CAP ROCK EXISTINO CEN SERVICE SUMMER .
First********
kWh/ Month 8 s .070237/kWh Minimum =s 8. 50, Includes Customer Charge .00 kWh s 8. 50
)- ,
1 COMPARISON OF RATE SCHEDULES
.kWh TUEC USAGE CAP ROCK INCREASE s s e
) %
50 9.27 12.02 2.75 29. 67 100 12.53 '
. 15.34 3. 01, 24.02 200 19.06 22.59
)
- 3. 53 1 8.- 5 2 400 32.12 36.66 4. 54 14.13 600 45.18 50.75
. 5. 57 12.33 800 SS.24 64.83 ,
- 6. 59 11.32
)
1000 71.30 78.92 7.62 10.69 2000 136.60 149.33 12.73 9.32 3000 201.90 219.75 17.85 8.84
) 3000 332. 50 360.SS 29. OS 8.45 .
Fuel /PCA .0238000 .0001790 . s/kWh
(
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1-Sche hle 0-2.3
)
TUEC RESIDENTIAL WINTER First over 600 kWh/ Month 8 8 041300/kWh 600 kWh/ Month S s 4 014300/kwh Minimum =s 6.00, Customer Charge Includas .00 kNa
) <
2 6.00. .
CAP ROCK EXISTING CEN SERVICE WINTER First******** kWh/ Month S S
.055500/kWh
} Minimum =s 8. 50, Intludes Customer Charge .00 kWh s S. 50
) COMPARISCN OF RATE SCHEDULES kWh TUEC USAGE CAP ROCK INCREAEE s a s %
50 9.27 11.23 1.96 21.14 100 12.53
) 13.93 1. 4d 11.17 200 19.06 19.36 0.30 1. 57 400 32.12 30.20 -1.92 -5.98 600 45.18
) 41.05 -4.13 -9.14 S00 52. 80 *
- 51. 90 -0.90 -1.70
. 1000 60.42 62.75 2. 33 3.86 2000 98. 52
)
116.98 .. 18.46 18.74 3000 136.62 171.22 34.60 25.33 5000 212.82 279.69 66. 87 31.42 Fuel /PCA .0238000 .0012635 . s/kWh
)
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TUEC RESIDENTIAL SUMMER l First********
> kWh/ Month a s .041Sc./nwa Minimum =s 6.00.
Customer Charge Includes .00 kW'h s 6.00
) CAP ROCK PRCPOSED GEN SERVICE SUMMER. '
First********
kWh/ Month tS .071000/kWh Minimum =$
Customer Charge S. 50. Includes .00 kWh s 3. 50 L ;
1 COMPARISON OF RATE SCHEDULES kWh TUEC USAGE CAP ROCK
- s. S INCREASE
) 50 9.27 12.04 2. 79 30.10 j 100 12.53
- 15.42 3.09, 24.66
)
l 200 19.06 4 22.74 3.68 19,31 l
) 400 )
32.12 36. 97 4.05 I 15.10 (
600 45.10- 31. 21, i 6.03 13.35 800 55.24 45.44 7.20
, 12.36
) 1000 71.30 79.68 S.38 11.75 2000 136.60 150.86 14.26 10.44
- i 3000 201.90 222.04 l
20.14 9. 9e !
5000 332.50
) 364.40 31.90 9.59 l
Fuel /PCA .0238000 .0001790 , s/kWh l
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) I Schedule C-;.0 i TUEC RESIDENTIAL. WINTER
) First )
Over 600 kWh/ Month tt .041500/kWh 600 kWh/ Month ts .014300/kWh I Minimum =s-Customer Charge 6.00. Includes .00 kWh e 6.00 .
\
) !
CAP MOCK PRCPOSED GEN SERVICE WINTER '
First over 400 kWh/ Month e S .071000/kWh 600 kWh/ Month e s .044000/kWh l Minimum =s I
).
Customer Charge
- 8. 50. Includes .00 kWh i I
$ O. 50
{
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) COMPARISON OF RATE SCHEDUi.ES i kWh TUEC CAP ROCK (
USAct s a INCREASE s %
50 9.27 12.00 2.73 , 29.45 100 12.53
)
15 48 2.93 23.54 200 19.04 22.46 3.40 17.84 400 32.12 36.40 4.28 13.33 600 45.18 30.35 . 5.17 11.44
)
800 52.80 St.90 4.10 11. 55 1000 60.42 67.43 7.03 11.44 2000 98. 52 110.13 11.66 11.84
)
3000 136.62 1 St. 92 16.30 11.93 5000 212.82 238.39 ,
25.57 12.01 Fuel /PCA .0238000 .0012635 , s/kWh
).
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's' Schedule E-2.0
)
CAP ROCK EXISTINO CEN SERVICE WINTgR First******** kWh/ Month'4 5
.055500/kWh Minimum =s S.30, Customer Charge includes .00 kWh 8 S. 50
) .
CAP ROCK PROPOSED ' OEN SERVICE WINTER First Over 600 kWh/ Month e S .071000/kWh 600 kWh/ Month e s .044000/kWh i
)
Minimum =s
- 8. 50. Includes . 00 tHh Customer Charge s 3, 30
)
COMPARISON OF RATE SCHEDULES kWh EXISTING CAP ROCK INCREASE USAGE s s j e %
SC 11.23 12.00 C. 77 -
6.86 !
) 100 .13. 93 15.49 ~1. SS 11.13 200 19.36 22.46 3.10 16.01 400 30.20 36.40 6.20 20.53
) 400 41.OS 50,35 9.30 22.66 500 St.90 SS.90
~
7.00 13.49 1000 62.75 67.45 4.70 7.49
)
2000 116. 98 110,18 ~6. 30 ~ 5. E l 3000 171.22 152.92 -18.30 -10.49 9000 279.69 238.39
-41.30 -14.77 Fuel /PCA .0012435 .0012635', s/kWh
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, _ _ . - _ . ... n -. -o - _ l
I y.
. . . Cia. Public Utility Commission of Texas
[ '. N:.. S'.
u.n, ucen l 7800 Shnei Creen Bouievero Smte 400N- .
h* $[ff Austin. Texas ~8757 312 458 0100 p ,
-j Jo Camnoeu
- , . . , . c-r l
)
\I.d'.Y i
Bill Cassin t vamasuoner l
l January !!, :989 I"
);
TO: All parties of record 1 I
i RE: Docket .No. 3283.. oolication of Cao Rock Electric Cooperative. :nc. 'or '1 1
) Author 1ty to Change Rates Lacies ano Gentlemen:
Enclosee clease 'ino a c::cy cf my Examiner's Report ano Precoseo Oroer m..
tnis cocxet.
The Comission will consloer this . case at an ocen meeting
) seneoulea to begin at 9:00 a.m. on Tuesoay, February 7 1989, at its offices at' 7800 Shoal Creex Boulevaro. Austin, Texas.
meeting but are n'ot recu1 red to ao so. A copyYou are welcome to atteno the of the signed Final Order. will be sent to you shortly thereafter.
Exceptions, if any, to the Examiner's Report must be filed :n writing no
}. later than 4:00 p.m. on Tuesoay, January 24, 1989. Replies to excections must be filed in writing no later than 4:00 p.m. on Wednescay, February !. 1989.
Concerning both exceptions and replies to exceptions, an original ano ten copies must be filed.
Cao Rock Electric Cooperative, Inc. (Cap Rock) reouests the Comission's
). approval of proposeo changes to Cao Rock general service rates. Cap Rock asserts that the sole Justification for the proposed changes is tne nevo to set rates that Company (TUEC).
are more competitive with the rates of Texas Utilities Electric Ninety percent of Cap Rock's customers live in cually certificated areas that are served by TUEC.
) The sole intervenor in the case, Office of Public Utility Counsel and the Commission's general counsel both oppose the application. The examiner recomenos that the Comission deny the application Decause the proposto rates are not necessary to maintain a competitive position. Further, the proposeo rates are not just and reasonsole.
)
Sincerely, ' '
/
[
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s Richard S. O'Connell
) Hearings Examiner
(
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k O
DOCKET No. 8283 O APPLICATION OF CAP ROCX ELECTRIC g COOPERAT!YE. INC. FOR AUTHORITY PUBLIC UTILITY COMMISSION 5
TO CHANGE RATES g
0F TEXAS EXAMINER'S REPORT O
I. Procedural History G On July 29, 1988, Cao Rock Electric Cooperative, Inc. (Cao Rock or tne aoplicant) filed an application recuesting Commission approval cf two proposec amended tariff sheets. The new tariff sheets would cnange general ates. :ervice O
Cao Rock successfully comoleted notice in this case.
The examiner aamittec into evidence at the October 20, November 14, 1988, prehearing conference and at the 1988, hearing on the merits, affidavits that establish that cirect O notice to Cap Rock members, and published notice had been completec. The examiner admitted into evidence at the October 20, 1988. prehearing c:nference evidence that established that the commissioner's court of each affected county had received notice.
O The effective date of the proposed rate change is 25 cays after tne applicant files its application wii.n the Commission, in this case Septemoer 2, 1988.
Public Utility Regulatory Act (PURA), Tex. Rev. Civ. Stat. Ann. art.
O 1446c, Section 43(a) (Vernon Supp. 1988).
The examiner in his Order No. '
suspended 31, 1989. implementation of the proposed schedules for 150 days, until January Section 43(d) of the PURA.
O The applicant is, of course, required to complete notice prior to the effective date. Section 43(a) of the PURA. Cap Rock's Exhibit No. I at the hearing on the merits shows, however, that published notice was not completec in four counties (Howard, Borden, Glassock, and Martin) in the applicant's O service area before the Septemoer 2, 1988, effective date.
completea until October 7,1988. Notice was not The examiner therefore issued his Order No. 7 O
)
DOCKET NO. 5283 EXAMINER'S REPORT
)
PAGE 2
-nicn recesignates October '. :988. as the effective cate. ~he Croer a;so tuscencec the implementation of the croposeo scheoules for 150 cays ceyond ne
) effective cate. until Marcn 6. :989.
Three prehearing conferences were held. The Office of Public Utility Counsel (OPC) was granted intervenor status at the first prehearing conference.
At the second prehearing conference the parties discussea and offereo evicence concerning wnether *ne aoplicant snould prepare a full rate-filine
- ackage. P.U.C. 740C. ?. ::.69(a).
Eacn ; arty asserted that good cause
)
existeo to walve the rate-filing package requirement. P.U.C. PROC. R.
21.5g(d). Based upon the testimony taken and Commission precedent, t9 examiner in his Order No. 3 waived the rate-filing package requirement.
Acelication of General 'elechene Company of the Southwest, Docket No. 6387
)
(Maren 5. 1987).
A third prehearing conference was held on October 20, 1988, for the purpose of taking evidence on Cap Rock's motion seeking interim rate approval. All
)
three parties introduced evidence. After the prehearing conference the parties submitted closing statements; OPC and general counsel both opposed granting the rate changes on an interim or permanent basis.
)
The applicant's motion for interim rates was denied in Examiner's Order No.
5.
The implied urgent need to immediately put into effect the proposed rates was_.ILqt supported by the evidence introduced at the prehearing conference. The crocosed rate chances are revenue neutral: Cao Rock did not have a financial
)
need for interim rate approval. The proposed rate cnanges would cause some members' electric bills to go up; this application does not create a situation where "everybody wins" as soon as the Commission approves the proposed rate
)
)
y 00CXET NO. 8283
)_ EXAMINER'S REPORT PAGE 3 changes.
Further. an expecited procedural schedule was set in nis case 'a resconse to Cao Rock's recuest.
) Ne evidence was introducea to snow inat t9e expecitea senedule will not acequately protect the interests of Cao Rock ano its memoers.
During the prehearing conference to consider the motion
) approval the parties raised all for inter 1m rate application. issues ;:ertinent to the merits cf .ne
~he parties were therefore recuired to file a notice by a certain ceaaline !f they wanted to retain their r1gnt to a hearing on the merits.
90
)
carty fileo a notice tnen tne examiner's evaluation of the merits of t .e application would be based on the pleadings and evidence alreaoy ine record. No party filed notice.
The hearing on the merits was, however, convened on Novemoer 14, ,1988, but only for purposes of taking evloence concerning whether Cao Rock had completed notice.
}
The Sterling County Commissioner's Court filed a protest :tatement :n October 25, 1988, that stated its opposition to the proposed rate enanges.
)
II. Description of Utility and Proposed Rate Changes
) Cao Rock purchases all of its electric power from Texas Utilities Electric Company (TVEC) and distributes the power to Cap Rock's members located in a county area in west Texas.
More than half of Cap Rock's service area is dually-certificated to TUEC.
Applicant's Exhibit No. I at 3. (All exnibit cites j
) refer to the evidence taken at the October 20, 1988, prehearing conference.)
Ninety per cent of Cap Rock's customers who are served under the general service rates live in the dually-certificated areas. Applicant's Exhibit No. 2 at 3.
)
Cao Rock's rates were last reviewed by the Commis.sj,on 4n 01cAet No. 6778.
Septemoer 2, On 1986, the Comission signed a Final Order that adoptea a settlement prepared by Cap Rock and the Comission staff. Cao Rock's
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DOCKET No. 2283 i EXAMINER'S REPORT i'
) PAGE 4 application requesteo a 5.2 percent :ncrease in revenues. The settlement,
,owever, ecuteo :ap Rock's total revenue requirement by $150.730 or .i j
). ;ercent, :omoarea to test ear revenues. The test year enoea June 30, ;985.
f i
Cao Rock's tariff has four rate schedules: general service. Irrigation, commerc1al service, and industrial service.
The application proposes changes )
) only to the general service scheoule. The proposed changes are as. follows: '
Current Procosed i '
_Rgit Rate Customer Charge $8.50
). 58.50 Energy Charge t
Summer ,
50.070237 50.071000 i
)
-Winter (Novemoer-April) up to 600 kwh 30.055500 50.071000 i
above 600 kwh 50.055500 50.044000
) The principal change concerns the winter rate: the existing rate 's j 50.0555 for each kilowatt hour (kwh) used, but the application proooses a !
higher rate for the first 600 kwh used in a month and a lower rate -for kwh useo in excess of 600 kwn.
)
Mr. David Pruitt, the general manager of Cap Rock, testified that the " sole purpose" of the application was to " parallel the design of [TUEC's) rate (s]."
Applicant's Exhibit 2 at 7.
Cap Rock asserts that the proposed changes are
).
necessary so that Cap Rock can compete with TUEC.
I Cao Rock intenced that the proposed rates should be revenue neutral. Cao Rock submitted schedules showing that the proposed rates, if applied to the
)
twelve month period ending April 30, 1988, would cause a small reduction in revenues of 59,338.
As explained below, there will, however, be changes in billing at different monthly kwh usage leveis. Generally, customers wne use smaller amounts of energy would pay more and customers who use larger amounts
) of energy would pay less. Applicant's Exhibit No. 9 at 3.
O 00CXET NO. S283 I C EXMINER'S REPORT PAGE 5 Ill. Examiner's Recommendations O. A. Introduction As previously noted, a full rate filing package was not suomitteo in this case.
The proposed rates were not evaluated on the basis of the cost of O
service to the various customers, or other factors typically consicered in a major rate case.
Cap Rock asserted that the sole justification for the
- rocoseo rates was the need to maintain rates that are competitive with NEC':.
The examiner, however, concludes that the proposeo r;.tes are r.o t O necessary to maintain a competitive position. Further, the proposed rates are not just and reasonable.
l Both the general counsel and the Office of Public Utility Counsel in their O
cost-hearing briefs argued that the application should be denied because_Cao !
Rock did not _. assert nor establish a cost of service basis for the proposeo rates.
The applicant's July 29, 1988, pleading, however, clearly stated "that the justification is based solely on competitive considerations." Prior to the O
hearing, general counsel and OPC never asserted that competitive considerations was an insufficient basis to change rates. At the second prehearing conference general counsel and OPC agreed that a rate-filing package, which would contain cost of service information, was not needed.
O They did not suggest that some other form of cost of service information should be prepared by Cao Rock. The eaaminer therefore concludes that it would constitute an unfair surprise to weigh against the application the fact that the proposed rates are not justified on a cost of-service basis.
O B. Competitive Considerations O
Examiner's Attachments A through 0 compare the general service winter and summer rates of TVEC and Cap Rock.
(The Attachments are schedules found in
- clicant's Exhibit No. 9.)
O
T I 4
DOCKET NO. 3283
) EXAMINER'S REPORT PAGE 6
- comparison of the existing Summer rates snows that Cao Rock's ates are 5 c 20 :ercent higner than TUEC's, depenoing upon the monthly kwn consumeo.'ne
)
nignest monthly wwn usage per month category, 5.000 kwh. nas the smallest
- 1sparity oetween rates. 3.45 percent.
Cap Rock customers uno .se progressively less kwh per month pay progressively more, compareo to 7UEC Customers.
)
The proposeo summer rate for Cap Rock would cause the disparity between Cao ROCK's rate and the lower TUEC rate to actually increase.
) !
Turning to the winter rates (Novemoer througn April),
a comoarlson of Cao Rock's ano TUEC's existing rates shows that for customers who use 1.000 kwh cer month or less Cao Rock's r,ates are comparable or even less expensive. But Cao
)
Rock customers wno consume 2.000 to 5,000 kwh per month pay 18 to 31 percent more.
i The proposed winter rates would cause Cap Rock customers who use less than
)
s 1,000 kwh per month to pay higher total monthly bills that would be 11 to 29 percent higher than TUEC's. l The Cap Rock customers who use from 2.000 to 5.000 !
kwn per month would benefit from the rate change. They would pay only 11 to 12 {
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percent more than TUEC customers.
)
Obviously, Cap Rock's general service rates are higher than TUEC's, both accorcing to the existing and the proposed rates. i The crocesed rates are more
" competitiveonly ,if the focus is on winter rates and the highest monthly kwh {
cateoories.
) The proposeo rates otherwise actually increase the disparity i between Cao Rock's rates and the lower TUEC rates.
Cao Rock, of course, coes focus on the winter rates for the hignest monthly kwh categories.
} Cao Rock asserts that the average monthly consumption for customers unaer the general service rate is 2,000 kwh: if the monthly bill of these customers is not adjusted downward to be more competitive with TUEC, then !
?.e customers -til switen over to TUEC. :oplicant's Closing Statement at 1.
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DOCKET NO. 8283 y
EXAMINER'S REPORT PAGE 7
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The record coes not \
case. support Cao Rock's fear that it will lose its customer l Cao Rock *'s not i lost one existing customer to TUEC since January 1986.
) There is no ir a January 1986. ~ . ion in the record concerning customer switch overs prior to l
dually-certificatedneareas.
greatest growth in the potential customer base is in the In those areas approximately 30 percent of the new connects have gone to Cap Rock. Applicant's Exhibit No. 2 at 2.
). j Cap Rock's tariff includes a $196.37 switch over fee. {
A Cap Rock customer
- no uses 2.000 kwn cer montn in the winter months is currently paying $18 per month more than :f ne were served by TUEC.
) He could switch over to service with TUEC and recover his swit:h-over fee in about 10 months. Under the proposed rates, the customer wculd be paying only 512 more per month;it would take 16 months to recover the switch.over fee if he chose to sw with TUEC.
}
General Counsel's Exhibit No. I at 6.
The examiner finds that Cap Rock's assertion that the proposed rates are necessary to maintain its competitive position is unjustified. The proposec Cap
) Rock rates would cause the disparity with TUEC rates to increase for some custemers and to decrease for others. The average customer, one who uses 2000 kwh per month, would still pay 512 more per month. If the average customer elected to switch to service with TUEC, the fees incurred because of the
) switch over could be recovered in a period a few months longer than under the existing rates.
Finally, Cap Rock has not produced sufficient evidence that its customer base is actually deteriorating.
)
C.
Discrimination Oetween Members of General Service Class The proposed rates raise the question of unreasonably discriminatory rates. PURA Section 45.
) The recoro, however, shows that the question of who the burcen of proof lies with on the issue was neither adequately pleaded nor discussed in the record.
The examiner concludes that it is not necessary to
)
h' _
00CKET NO. 3283 EXAMINER'S REPORT
) PAGE 8 eacn the issue because, as c1scussec below, t..e proposed rates are not ..st
.anc ano reasonaole.
D.
Drecosed Dates and the Just and Reasonable Standarc
)
The examiner reviewec the record to determine whether the effect o
- rocesea rates on customers at various kwh per month categor1es would be just anc reasonaole. PURA Sect 1:ns 23. 40.
) Concerning the winter rates, the reader may wish to immediately reytew Examiner's Attachment E.
( Applicant's Exhibit No. 9 at Schedule E 2.0.) The schecule illustrates the effect of the proposed rates on the various monthly kwh usage per month categor'1es.
It shows, for example, that if the proposec rates were put
)
into effect customers who use 2.000 kwh per month would receive a 5.81 percent decrease to their monthly bill, and customers who use 1,000 kwn per month would receive a 4.70 percent increase to their monthly bill.
)
Cap Rock provided the following information concerning the distribution of the numoer of meters in the various monthly kwh usage per month categories:
Monthly kwh Number
)
Usaae of 25-75 Meters 216 76-150 117
)
151 300 223 302-500 231 501-700 544
) 701-900 621 901-1500 1,181 1501-2500 1,983
)
00CKET NO. 8283
> EXAMINER'S REPORT PAGE 9 2501 4000 1,957 4001 above 723 Applicant's Exhibit No. 2 at 1.
This was the "best information" that the applicant could provice. The information, of course, makes 1t difficult to
)
evaluate the effects of the proposed rates on a particular kwh category and the numoer of customers that are in the category. The evaluation would have been
-tucn simpler if Cao Ro_k nac prepared the above information accorcing to the
.*n categories listeo in Examiner's Attacnment E, nich is a copy of a occument
) preparea by Cap Rock.
Further, the above information does not necessarily pertain to the winter montns. The chart presumably lists the annual average numoer of meters within each c at egory.
' Mr. Pruitt asserted that the distribution of neers at various usage levels "does not change significantly
> from season to season." Applicant's Exhibit No. 2 at 1.
Notwithstanding the difficulties of evaluating the information, some clarifying observations can be made. First, referring to Examiner's Attachment E the point where the monthly kwh coni sed indicates that a customer's monthly D111 would remain the same if the proposed rates are put into effect, lies somewnere eetween 1,000 kwh and 2,000 kwh.
Because no better information was suomitted, the examiner concludes on this basis that the mid-po3nt of these
)
numbers,1,500 kwh, separates the customers whose monthly bills would increase from those whose monthly bills would decrease if the proposed rates were put into effect. Referring to the above chart, this means that 3,133 meters, or 40 percent of the meters charged on the general se/W e rate would suffer an
)
increase in their monthly bill if the proposed ratr; were put into effect.
This 40 percent refers, of course, to the meters that consume 1.500 kwh per month or less.
Cao Rock understands the croposed rates appear unfair, but a s s e_rt_s_ they would be fair in qn ct. ice. The applicant asserts that 80 percent of the esidences served uncer Me general :ervice rate co not have gas nook ups. r
)
i DOCKET NO. 3283 y EXAMINER'S REPORT PAGE 10 i
'n otner woros. are "all-eiectric nomes;" these nomes average L.500 t' .n :er \
-onin n :ne winter months. j
'opilcant's Exntelt No. I at 5. ne meters no
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) -ould :sffer en :ncrease n ine1r onthly 0111 -ould therefore :e :tner, l non restcential. users of electricity. *ccording to Mr. Fruttt.
. j of the low usage meters are for .trtuali f all -!
carns.
service to water wells, fence chargers. anc Many times the large usage total electric home residential customers
)
[who would receive the benefits of the proposed rates} are also the same i
customers with very small usage at etner meters such as water wells for their t nomes or orcnaros." Aoplicant': Exnioit No. 2 at 2. { '
)
Mr. Pruitt's statement does not offer any information about the rematning 20 percent of residences that are not all electric. There is nothing in tne recore to indicate how many residences this represents and the effect of the proposed rates on them. Further, as the reader may have noticec
). the above
- nformation refers to " meters" served under the general service rates.
'here is little evidence to suoport Mr. Pruitt's assertion that tne customers -no would benefit from the proposed rates are the same customers whose metars for
)
their water wells would suffer the rate increases. Mr. Carl N. Stover, a consultant for Cao Rock, admitted that, based on customer names. Cao Rock coula nave reviewea its recoras to determine the numoer of low usage meters that are associa'ted with high usage meters, but did not do so.
October 20, '988.
prehearing conference transcript tape 3 at 1495. .
3 Commission staff member Ms. Christina Vanderhoof admitted in her testimony that Cap Rock's customers could be harmed if Cap Rock did not remain competitive.
) It is true that if Cap Rock does not remain competitive it will lose customers.
The remaining customers would then pay higher rates to cover the fixea costs incurred by Cao Rock. But, as previously discussed, there is little evicence that Cap Rock's customer base is erocing. On the contrary, the evidence indicates that 30 percent
) of the new customers in the dually-certificated areas obtain service from Cao Rock.
)
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)
DOCKET NO. 8283 EIAMINER'S REPORT
)_
PAGE 11 The examiner concludes that the proposed rates are not ;ust ano reasonaole. The proposec rates are revenue neutral.
But this " neutrality" ;s
) 00tained by charging small power consumers more so that large power consumers can enjoy a rate decrease.
There is no convincing evidence that the rates are in practice equitable or that the rates are necessary to maintain Cao Rock's competitive position.
The examiner therefore recommends that the Commission
) deny Cao Rock's application.
IV. Tinoings of Fact and Conclusions of Law
)
The examiner recommends that the Commission adopt the following findings of fact and conclusions of law: .
)
A. Findinos of Fact 1.
Cap Rock is an electric cooperative utility operating under certificate of convenience and necessity No 30026.
)
2.
Cao Rock filed an application to change rates on July 29. 1988. The application seeks approval of two amended tariff sheets pertaining to the general service rates.
)
3.
Cap Rock gave direct notice of this proceeding to its memoers and published notice for four consecutive weeks. Notice was given to the commissioner's court of each affected county. Notice was completed on October
)
7, 1988.
4 The examiner suspended the operation of the proposed rates 150 days
)
beyono the October 7, 1988, effective date, until March 6, 1989.
5.
Although the Cosumission requires an applicant seeking to change its
-ates
- submit a rate filing pacxagt, g000 cause ex1sted in this instance t:
waive the requirement.
) The financial costs of preparing the rate filing package would have far exceeded its usefulness.
__r__--__--_-_-_--
)
DOCKET NO. 8283
> EXAMINER'S REPORT PAGE 12 6.
The reauest for interim approval of the proposec rates -as ceniec.
The reouest .as coposed by the other parties. There was no urgent financ:ai neec for interim approval because the proposed rates are revenue neutral.
7.
A third prenearing conference was held on October 20 1988. Eacn
)
party introcuced evidence concerning the merits of both the interim recuest for approval of rates and the final approval of the application. After *he .
prenearing conference the parties waived their right to a hear 1ng on the erits.
)
8.
The nearing on the merits was convened on Novemoer 14 1988, out cnly for purposes of taking evidence concerning whether Cap Rock had completec notice.
The examiner's ev,cluation of the merits of the application is basec upon the evidence received at the third prehearing conference and at tne I
hearing on the merits.
- 9. The sole intervenor in this case, the Office of Public Utility
)
Counsel, and the Commission's general counsel both oppose the application. The Sterling County Commissioner's Court filed a protest statement that opposea :ne proposea rate changes.
10.
) Cap Rock purchases all of its electric power from TUEC and distributes it in a 13 county area in west Texas. More than 90 percent of Cap Rock's customers under the general service rate live in dually-certificated areas served by TUEC.
11.
The proposed rate changes pertain only to the general service rate.
Cao Rock proposes a highe' summer rate per kwh. The existing rate is 50.070237 per kwh The proposed rate is 50.071000 per kwh.
12.
The existing winter rate (NovemDer-April) is 50.055500 per kwh. The application proposes a higher rate (50.071000) for the first 600 kwh used in a onth, a.
a lower rate (50.C?a000) for Kwn usec in excess of 600 kwn.
)
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l DOCKET NO. 5283 }
) EXAMINER'S REPORT (
PAGE 13 '
- 13. l Cap Rock asserted that the sole purpose cehind the proposeo rates -as the implementation of rates that are more competitive with TUEC's.
)
14.
Concerning winter rates for customers who . consume less tran ' 500 inn per month, and 'the summer rates, the proposed rates would increase tne disparity between Cap Rock's rates and the lower TUEC rates.
)
15.
Concerning winter rates. Cap Rock customers who use from 1500 kwh to 5000 kwn oer month would benefit from the approval of the proposeo rates, the
- 1soarity oetween Cao Rock's rates ano the lower TUEC rates would cecrease.
)
- 16. Cao Rock has not lost 1986.
one existing customer to TUEC since January In the dually-certificated areas, 30 percent of the new connects have gone to Cap Rock.
)
17.
Compared to TUEC's rates, Cap Rock's propos'ed rates are not necessary to maintain a competitive position.
The proposed rates would increase the monthly bills of some Cap Rock customers and decrease the bills of others. Cao
)
Rock's rates would still be higher than TUEC's if the proposeo rates were acopted.
Cap Rock's customer base is not actually deteriorating.
18.
)
Concerning the proposed winter rates, 40 percent of the meters serveo under the general service rate would suffer an increase in their monthly bill.
This 40 percent consists of the meters that consume 1,500 kwh per month or less.
)
19.
The record does not include sufficient information to make conclusions concerning the nature of Cap Rock's customers that consume less than 1,500 kwh per month in the winter months. Such customers may only incluoe
)
non-residential uses, for example, water wells, fence chargers, and barns. But the record is not clear on this question. Cap Rock could have submittec evidence on this question.
)
_2-______-- -_ -
)
DOCKET NO. 2283 EXAMINER'S REPORT PAGE 14
- . ~he crocoseo rates are r.ct ;ust anc reasonaole. Email :cwer censumer are :.arge: . ore :: that 'arge ::wer censumers can en3oy a rate cecrease.
'here is c c:nvincir.g evicence that the rates are :n practice e:uitaole :-
that e rates are necessary to maintain Cap Rock's compet1tive ::cstt:en.
B. Conclusions of Law l
Cao Rocx :s a paclic utility as cefined in Section 3(c)(1) of tne PURA.
)
- . ~he
- mmission nas ;urisciction over the matters raisea merein pursuant to Sections 16(a), 17(e), and 37 of the PURA.
- 3. For gooc cause. ' Cap Rock as not required to file a rate filing
) package. P.U.C. PROC. R. 21.69(d).
4 The operation of the proposed rates was suspenced in accorcance with Secti:ns 43(a) and 43(d) of the PURA.
)
5.
-recer notice was given to all affected persons in compliance with Sect 1:n 43(a) of the PURA.
) 5.
Cap Rock has not met its burden of proof to show that tne proposec rates are just and reasonable. Section 40 of PURA.
Respectfully submitted,
$0 l -
RICHARD 5. O'CONNELL HEARINGS EXAMINER
) APPROVED on this daythe of1/M/ 2x d- o w 1989.
'm , j f Q/ '
HIL ;; . . h0L;ER DIRECTOR Of HEARINGS
)
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)
, .":he:ule 2.;,
TUEC RES 3ENTIAL E '.'MM E R First***++ -* kWh/ Month Cs
)- 0415CC/kWh
' Min 1 mum =$ 6.00, Inc!unes Custcmer Charge 00 hWh s 6. CO CAP
) ROCX r.XI37ING GEN EERVICE SUF.MER Firste+++++++ kWh/ Month e.s 070237/kWh Minimum =s 8. " O , Includes CO kWh Customer Charge s G. "O
)
COMPARISCN OF RATE SCHEDULES kWh TUEC CAP ROCK NCREASE
) USAGE s s s 7.
SO 9.27 12.02 2.75 29.67 100 12."3 15."4
, 3.01 24.02
) 200 19.06 22."9 3.53 18."2 400 32.12 36.66 4.54 14.13 600 45.18 50.75 3.57 12.33
) 800 "8.24 64.63 6.*9 11.32 1000 71.30 78.92 7.62 10.69 2000 136.60 149.23 12.73 9.32
)~ 3000 201.90 219.75 17.85 8. 84 5000 332."O 360."3 28.08 8.45 Fuel /PCA .0238000 0001790 , s/kWh
)
)
l
)
E.UN11'!E.D.' S ATTACH"E*ii
___r___-__---_-_______ _-_ _ _
)
- 9.eculo ..:,;
TUEC FE5! ENT!AL W'NTER First Over 600 kWh/Menth es 041 CO/<'Wn
)
600 kWh/Menth 0s 014300/kWh M2nimum=s 6. CO,
- ncluces CO kWn Custemer Charge s 6. CO
) CAP ROCK EXISTING GEN SERVICE WINTER Firste**+++ee kWh/Menth es 0555CO/kWh Minimumas 8. 50. Includes Customer Charge 00 kWh
) s 9.50 CCMPARISCN CF : ATE $0HE;ULES kWh
)
TUEC CAP ROCK USAGE s ;NCREAEE s s %
50 9.27 11.23 1.96 21.14 100 '12.50 13.93 1.40
) 11.17 200 19.06 19.36 0.30 1. 57 400 32.12 30.20 -1.92 -5.98 600 45.18 41.05 -4.13 -9,14
)
200 52.00 51.90 -0.90 -1.70 1000 60.42 62.75 2.33 3. E6
. 2000 98.52
)
116.92 18.46 18.74 3000 136.62 171.22 34.60 25.33 5000 212.82 279.69 66.87 31.42 Fuel /PCA 0239000
) .0012635 . 5/kWh
)
7vy I.:g:*5 :.T 1:4":~ :
)
_--,----- " ~ ~ ~ ~ _ _ _ _ _ _ __ - - - - - - - - - - - - - - - -
) :n.ecu;e C-1.3 TUEC A E5 2 0EN TI AL SUI'.MER Firste+++++++ kWh/ Month Gs
)
C41500/6Wh Minimum =5 6.00, :ncluces 00 kWn Customer Charge s 6. CO CAP ROCX
> PRC?OSED GEN SERVICE SUhMER First****++++ kWh/ Month eS 0710CO/hWh Minimum =$ 8. 50. Includes Custcmer Charge 00 kWh s 8. 50
)
COMPARISON CF bWh TUEC RATE SCHEDULES USAGE CAA SOCK 5 5 NCREASE
) 5 7.
50 9.27 12.06 2.79 30.10 100 12.53 15.62 3.09
. 24.66 200 19.06
) 22.74 3.68 19.31 400 32.12 36.97 4. 85 15.10 600 45.18 31. 21 6.03 13.25 800 58.24
) 65.44 7.20 12.36 1000 71.30 79.68 8.39 11.75 2000 136.60 150.86 14.26 10.44 3000 201.90
) 222.04 20.14 9. 98 5000 332.00 364.40 31.90 9. 59 Fuel /PCA 0238000 .0001790 , s/kWh
)
XAM!*:ES ' S CTTACH"I*'I :
_ _ - - - . - - - ~ ' - ' ^ ^ ' _ __ - _ _ - - - . _ .-
1 i
h I:hecu.o :. . ' !
TUEC RESIDENTIAL WINTER !~
First Cver 600 hWh/Menth eS 0415CO/kWh
) COO k Wh / lie n t h t5 01430C/'iWh Nin2 mum =5 6.00. :ncluces 00 kWh Customer Charge S 6.00 i
I
) CAP 5 ROCK PRCPOSED OEN SERVICE WINTER First Over 600 hWh/ Month e5 071000/kWh 4
600 kWh/ Month eS 044000/kWh Minimumas Customer Charge
- 8.
- 0, Includes 00 kWh s S.
- O
)
COMPARISCN OF RATE ECHEOULES kWh TUEC USAGE CAP ROCK 5 s INCEEAEE s "
50 9,.27 12.00 2.73 , 59. 45 100 12.53
) 15 48 2.95 23."4 200 19.06 22.46 3.40 17.64 400 32.12 36. 40 4.28 13.33 600 45.18
) 50.35 "
.17 11.44 EOO "2.60 "S.90 6.10 11.*5 1000 60.42 67.45 7.03 11.64
)
2000 99. "2 110.18 11.66 11.84 3000 136.62 152.92 16.30 11.93 5000 212.E2 233.39 25.*7 12.01
) Fuel /PCA 0239000 .0012635 , s/kWh
)
).
EU" :Ee 's : T:s ."E* - -
) -
hhecu;e E.2.3 CAP ROCK EXIST!NG CEN SERVICE WINTdR Firsts *******
kWh/ Month as 05:500/kWh
)- Minimum =s 8. 50, !
includes .00 kWh Custcmer Charge s 8. " O CAP ROCK PROPOSED CEN SERVICE WINTER-
) First Over 600 kWh/Menth as 071000/kWh 600 kWh/ Month e.s 044000/kWh Minimum =s 8.50. Includes .00 kWh Customer Charge s 8. 50
)-
COMPARISON CF RATE SCHEDULES kWh EXISTING CAP ROCK USAGE s INCREASE
) s s %
50 11.C3 12.00 0.77 6. 36 100 13.93 '
15.49 1.55 11.13
)
000 19.36 22.46 3.10 16.01 400 30.20 36.40 6.20 20."3 600 41.05 50. 35 9.30 22.66
) 800 "1.90 "S.90 7.00 13.49 1000 62.75 67.45 4.70 7.49 2000 116.98 110.18 -6.80 -5.81
) 3000 171.22 152.92 -18.30 -10.69 5000 279.69 238.39 -41.30 -14.77 Fuel /PCA .0012635 ,0012635 , s/kWh
) 1 1
)
e.1ain'En*e n-~fCH"r"'
e
^ ^ '
DOCKET 10".1287 ' q -
~
) APPt! CATION OF CAP ROCK ELECTRIC c-' e.
-augguTILITY COMMIS$10N COOPERATIVE, INC. FOR AUTHORITY TO CHANGE RATES
" ' '*T3 '
l- - 0F TEXAS ORDER
)
i In puoli: meeting at its offices in Austin, Texas, the Public Utility l Cossnission of Texas finds that the application in this case was processed by a hearings examiner in accordance with Comunission rules and applicable statutes.
)
An Examiner'r, Report containing Findings of Fact and Conclusions of Law was submitted, which report is hereby ADOPTED and made a part hereof. The Commission further issues the following Order:
) 1.
The application of Cap Rock Electric Cooperative, Inc. seeking i approval of two revised tariff sheets concerning general service rates, is DENIED. .
) 2.
All motions, applications, and requests for entry of specific Fincings of Fact and Conclusions of Law and any other requests for relief, general or specific, if not expressly granted herein are DEN!ED for want of merit.
)
SIGNED AT AUSTIN, TEXAS on the day of [ -
1989.
f PUBLIC UTILITY COPMISSION OF TEXAS l
)
r i SIGNED: M a pO MARTA GREYTOK
(/ ,
) SIGNED: 3 u J) CA MP8 ELL' O SIGNED: Me WILLIAM 8. CASSIN ATTEST
)
- filLLI
.bD k. Y
> W. HOLDER SECRETARY OF THE COPMISSION i
)
> t -
n
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ASIB4DT 7m ptmCIAss W PCWER PWat TEXA8 322c".RIC mv2C3 cCupAn 7tmREsA3 M S&P toCE ElaC1EJC escrakArm, 3.
PLM ies 1.
TEIS AGLEBtER anda and entered into this "> day of I ,
)
1963, by and between TIlKAS E!2C2IC SENICE CCMPARY, hereinatte ferred to as "Courpany," a corporation organised and existing undar and by virtue at the laws of the State of Texas, and SAP tm BacWl2C WWWWLE2TE, M.
)
heretnatter referred to as " Consumer," a corporation organised and existias under and by virtue of the 2avs of the State of Texas.
j Terms VIT5ESSETE:
2.at in consideration of the mutual covenants and agreenest hereia conta!.ned, the parties hereto contract and agree with each other as fol.1mve:
)
Maae17,
- 2. Company agrees to es11 and deliver to Censumer, and Consumer agrees
)
to yurthaset.and reestwo.tres Campany, all the elastric power act energy that Consumer asMuire turing the ters of this agreement for the operation of those port!M of its eWrie ersten ht are er shall he eennected to the
)
potate of delivery provided for herein. Consumer further agrees h t none of said power and energy delivered by Campany shall be soM to othere for resale without express written consent at Campany.
)
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r =
)
____1____-__------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
..i-_ _
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Phee 3 r Potats of an11eerr b
3 Se electric power and energy to be supplied by Campany hereunder shall be alternating current of approximately si.rty (60) eyeles per second
)
and shall be delivered at the Points of Delivery shavn in hitit A" attached hereto and anda a part of this agressent.
It is understood and (greed by the parties hereto that this agreement contemplates supplyias a continuing service, and not the sale of a product i or commodity.
Physical Separation of Facilities
)
- k. Consumer agrees that it vill operate its systen so that no portian of its system being supplied through any particular connection vill at any t'as te electrica21w interconnected or operated La parallel with any part 1
or parts of its distribution sy= tan being supplied through other connecticas 1 with C apany or any other supplier of alsetric energr.
) Ecuimment
$ '. Consumer shall own and maintain the necessary switching and protective equi; ment which any be reasonably necessary to enable Consuser
) to take and use the elsetric power and energy hereunder and to protect the system of Cagaar. Campany shall install, own and asintain the necessary meters ,and metering equipment and make all final connections to its system
) at the Points of Delivery. Consunar agrees to construct its distribution lines la accordance with specifications at least egual to those providad by the National Electric Safety Code of the United States Bureau of Standards.
) A suitable location for asters and meterias equipaant shall be provided by
- Consumer at the Points of Metering.
- D J
i 1
. . _ - ?
1 - __
(
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Phge 3 Payment of sins
) i
- 6. l Coaseer hereby agrees to par Campaar monthly, for esta month W .as '
the tem of' this agreement and every reaeval themot, for electric power and enercr delivered to Conamer by Campany at 'the rates and under the terms and conditions set forth La the schedule attached hereto, marked *1ahibit 3" and ande a part of this agreement by such attachment and this reference therste. 1 Each potat of Delivery v'tu be astered and bined separately.
) l C apany any requi.re, as security to guarantee the faithful performance 1
{
by consmer of all its obligations hereunder, and persicularly the payment of au bins for electric power and energy delivered pursuant to the tems 1
)
hereof, a deposit ia an amount oguivalent to Campany's estimate of two (2) acnths' bills, except that such deposit shall not be roguested unless and until Consumer shan have first defaulted La payment of a bin.
).
b Metertas of 8erstce 7 Meters aMM be read by a representative of Campany at regular i
) acnthly tatervals and as nearly as practical on the last day of each calendar acath, and bins for electric power est energy fumished hereunder shall be rendered by capany to Coasmer monthly. Payment for all electric power and
) energy which shall be delivered under the provistans of this agreement shall be ande at the office of Campany 1a Fort Worth, State of Taans, withia fifteen (15) dars after the b111 therefor shall have been entiet to Commmer.
) If such due date falls on a Sunday or holiday, the bin shall be due on the next day following such Sunday or holiday.
':'he electric power (Contract Ew) shall be determined by curve-drawing
) vsttmeters or other type of recordias vastasters acceptable to both parties D hereto, and the amount of electric energy supplied to Cons mer sha n be 4eterni.ned by means of insegnting vatthour asters of standard aFProved type,
. .. .. . . . ......s. ..... .. .s. p,. .. , , w . .
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ __ _ _ l
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hos k pg fm e== Terms of Agreement -
- 8. WheneverCoasmerinaaviolatedanyofthetermsofthisagreement or has failed to pay any bill accruing under Dis agreement on or be/ ore j 2-the ti.fteenth day after the due date of such billing, Company any discontiave
- i i
the supply of electric power sad energy, provided at least fifteen daye' vritten notice has been given of such iatention to 4 discontinue the services, unless Consumer shall correct such violation or shall pay such bill before
)
the orpiration of such fifteen days' notice.
kring any such default, and after ninety (90) days' notice, Company
)
any, at its option, by written notice to Coasmer, terminate, its obligations hereundar, unless during such ninety (90) day period Consmar shan have cured such default or defaults.
) , Mater Ad'ustments
- U 9 Each aster used in determining the Contract Br, or amount of electric energy supplied hereudder shall, by comparison with accurate standards, be
)
sosted and calibrated by Compaar at intervals of not to escoed twelve (12) acnths. If a aster shan be found incorrect or inaccurste, it shall be restored to an accurate condition or a new meter shall be substituted.
) Consmar shall have the 'right to reguast that a special aster test be anda at any time. If any test anda at Consumer's roguast discloses that the aster tested is registering correctly, or withia 2$ of normal, Consumer shau
)
bear the expense of such test. The azpense of all other tests shall be borne by Campany. '
':he result of all such tests and calibrations shall be open to saaminati:n
)
by Censumer, and a report of every test shall be furnished promptly to Consmar.
Any mater tested and found to be not aiore than' 2% above or below normal shall be cons 14ared to be correct and accurate insofar as correction of b111184
- 8
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4
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1 Page 5
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) r= soncerned. Ia De event that any mutiae er special test of any Ccapany i D l aster shows average registration of such aster to be in error by son than )
the limit set fo nh above, then all bins affected by such error of regia-t
) tration and which were rendared for service supplied during the previous thne months win be suitably adyusted, providad, however, that such ad'ustment shal.1 not be carried back for more than one-ha2.f of the slapset time since the last
) test.
For any period that a meter is found to have failed to register, it shall be assumed 1. hat the Contract Dr established, or electric energy delivered, as
) the case may be, during said period is the same as that for a period of like operation, to be agreed upon by the parties hereto, during which such aster was in servics and operating.
)
Aisht of Access
- 10. Each party vin give all necessary permission to the other to enable the agents of the other party to carry out this egnament, and vill give the j
)
other the right of their duly sartherised agents and employees to enter the premises of the other at all reasonable times for the purposes of reading or check.a.ng meters; for Laspecting, testing, repairing, renewing or exchangi.:4
)
any or an of its aguipment which any be located on the ymperty of the other; or perforsLing any other work incident to rendartag the service hereby contracted for.
)
It is agreed, however, that neither party hereto narunes the duty of 1.aspecting the viring or apparatus of the other and shan act be napobible thenfor.
)
g Centinuity of Service V M. In the event Campaar is delayed La the delivery of electric power
.................A #me hw 4 = 4 e . . .e d .. yeon. .e.. 4ewedioS. f1M e
)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ . - - 3
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Pese 6
) L I beyond its control, the tune fixed for the naamencenat of delivery of electric !
power and energy hereunder shall be correspondia61y extended. Capaay shall not be liable to consJaar hereundar, nor shall Consmer be liable to Campany
)
hereunder, by reason of failure of Campany to deliver, or consumer to receive, electric power and energy as the result of fire, strika, riot, explosion, flood, accident, breakdown, act of God or the public enemy, or any other acts
).
beyond the control of the party affected, it being the intention of each party to relieve the other of the obligatica to supply electric power and energy or to receive or pay for electric power and energy when, as a result of any of the
)
above sentioned causes, either party any be unable to deliver, or use in whole or 1: ; art the electric power and energy hernia contracted to be delivered or received.
Both parties shall be prcurpt and diligent in removing and over.
) '.
%,,/
emus the cause or causes of said interruption, but nothing hernia contaiand 1 i
shall be constnad as permittfag Carpasy to refuse to deliver, or Consumer to refuse to receive, electric power and energy after the cause of interruption
) has been removed.
Company does not guarantee that the supply of electric power and energy bereundar vill be free fras Laterruption, and it is agreed that internrption
)
of Campany's service, occasioned by any of the causes mentioned La the fore.
goizg paragraph, shall amt constitute a breach of this agreement on the part of Campacy, and Company shall aos be liable to Consmer or to a r of Consumer's
)
customers for damages resulting therefran. I.a the event of interruption to sorvice, Capany will restore the service as soon as it can r6asonably do so, and vill at all tians ezers' itself toward the e'ad of supplytag as nearly
) canatant service as is reasonably practicable. Ia case of impaired or defective Y corvice Consumer shan imbadiately give notice to the nearest office of Cam;4cy by telephone, confirming such notice in writiag.
)
( -
( .
Pass 7
. zaterstate casseroe
) .
s .2. 1ba parties herste agree that no power or emerer treamitted, purchased, sold, delivered or received hereundar by either party hereto, is to be tres=.itted, purchased, sold, delivered or received is interstate -
)
- casmarce and t.he partiss hereto agree at any time, and from t!ae to time, to J open all the line connections and switches ascessary to prevent such trans.
mission or delivery by either party to the other la interstate commerce. The j
) '
parties further agree that no power or energr vill be delivered by either of than to sne other under this agreement except power and energy generated withis the State of Tazas, and that neither party will transmit any power
)
or energy delivered to it hereunder beyond the liaLits of the State of Texas or sell any such power or energy for transmission or consumption beyond the '
limits of the state.
- Provided, however, that ta the event the Fedarsi power Cammission grants an examption *.o the parties hereto from the applicatica of the Federsi Power Act urder the rules and regulation of said Commission, than and in auch event
)
the provisions of this Section 12 shall not apply during the period of such esemptics to the extent that such exasption applies.
) Liability for Demaae 13 Se e3eetric power and energy supplied under this agressant ta supplied upon the espress esadition that after it passes the astering
) oguijnsent of Capany, or other Potat of Delivery, it becues the responsi-bility of Consumer, and Campany shall not, la any event, be liab3a for loss or damage to any person'or property whatsoever resulting dire,ctly or indi.
) rectly from the use, misuse, or presence of the said electric power and
/~
D . energy on Consumer's premises, or elsewhere, after it passes the potat of Delivery to Consumer, except where such lass or damage shall be shown to
) have been acenataned by the nealimence c/ Caumaar,, -
s
) I 1 m pnee 6 ,
Tore of Aareament '
i I
) Ik, This agreement shall become effective at each point of Delivery on t.he first regutar. non%1y ester reading date after approval by the Administrate.cr of the Rural Eivstrificat,1on Adaialstration of the United States of America, and suNeet to the provisions of Section 15. hereof shall sentinue in effect.for a period of 5 years thereafter. (Unlass written notice is given by either par:y h' hereto t::
the other net 3ess than one year before the expiratica of this agree. /2 ,
ases, it shall be continued thersra fter until cancelled by either party hereto
)
givtag to the i4hur one (1) year's cancellation mottee sa voittagh A;;roval 15 nie agreement will act be biading on either party unless it is ay;rovee
)
by t.he Adatais;rator of the Rural Electrificatica Administration within three acnths after July la , 1963, It is further understood and agreed that no promises, representations, or
,/
agreements made by Company's, officials or agents shall be binding on Ccapacy, except as the same may be set forth hereia, and the terms of this agreene:t shall bind and inure to the benefits of the successors or assigns of the ;arties hereto, but neither Coasmer nor Consmer's assigns shall assign their rig,it
) hereunder without the writ, ten consent of Campany, except that Consumer may assign to the United States Goverusent. No modification of any provision of this agreement shall be bindias unless reduced to writing and signed by the parties herst.o, and modification of any one or more provisions of this agree.
aent by autual senseat at the parties hereto shall not affect any of the renaisias previsions hereof not so modified.
If any portion of this agreement is changed or invalidated by any cou.rt or
) other governmental body having competent jurisdiction, any such change or invaltiati so ordered shall affect, only that portica of this agreensat specifically ordered to be changed or invalidated, all other portions remaiaiag ta full force and effect.
)
s/
1a Qe event, however, the e fr i:tri; ,;;;;m ;-edad +v s
herei.n in * - . . e s py ne actica of may court or otW,. ... .c -d a' b_ody
) "
-n ... . . .
- y. ,
t ( * ,
Past 9 vtas Juris41stian la the praises, eyy vs.u give ca r _. 71 sten act. ice withis s fram the date Company a advised of such action and Censumer shau have the - teraisate this agressent by giving Compa y written na* withia 30 days from the date of C R y . 2 r r * ' qo -
d e,.
I.N WT"' NESS VIIREOF, the parties hereto have caused this instrument to be
)
executed by their respective authorised officials.
4AP 30EI B acW K 000PEner m , Ot.
Attest? '.' By /. . [ 7 9. 7) //<* '
I T4' ( d Title [w M.#
5ecretary 7
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- v. .
tzxAs succ2Ic snwIcz coeAnr
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Attest: - . - ' - -
d
- h. W. [! A --
Prestyns_
g s.5ecretary
)
Aerwes As to sw.e
> CANTD,Manggt ArtR3 4 SCAAt:scy:n 8r- _.
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. 1 tuas Martesa aarrsas assommy 80 N e M u farr e ar.ac u m m yy n;g !
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) W AJG E&BC5JC anytte, 33;,
_ tems er serviec I Patet of Deliver. Appresammte t hr.J a m b -
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M __ hiu er h he Is.;tc. midland Potat la the G 1/4 of Gettico M, Most 3, T &P K. C. . R :s c ., 1 Y P 4 0 ,
Es.lat4 Ca=t; , Teses 3 u,hM f)CD
) The CLwe. amic AW hLat la
- tac F.: 1.1 of r.ectia:a hC, ELace ) , Thl' K", Ca. St m y, D 1 1.~.1: Alar ! County, Suzas 3 12,b7ll; 8500
- h h *hes *. C A. land hint L.
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) tJK E 1 4 c. Seestac sh, l
,' ELocr. 39, TtP M Co. surwy, .
E?P 1 C, 1141and,caus v , temas 3 u,h70 2 00 he serh ctantac Poist la
' the G 1/k of Section FT,
). tLacu 3G, far W. Co. SS-ver, 2.? 14, nn.rtin County, Saans 3 u,hM 4300 the 5.sM. t'1Actx. NLat An the
' n. lik a ter.h.. E, Alast 5, tw W. M.1%:wy, nk 1.C,
) Ibetta W ty, tsaas 3 u ,470 6500 the northwest Stannaa Poist la tame E L'h et asestas 3 , ,
Elses 3L, MP R Co. sarway, EVP 1-4, mm.1.1a Gousy, Sanna 31,600 3 6000 f the Secb Asherly Petst la J the W 1/6 of testiam 13.
ataca 3h, Tar a Co. ammer, TV3 34, mm.41n Centr, Senas 3 u,b7s 3300 l the Cauhla School Potat in the SW 1/k or seestan 7, 31ast 33, TtP Ak Co. taasey, 2714, f E.mm.-t cacity, To.as '
3 M ,b7g V 250 n
- 3. .
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) U m ee w earvsme h int or Deltve -' h assamus er h Valts gh.
} Ec 1mmen. M n;r > stat &s
- 14. 5 L 4 e' soc 1. tan M,
) 32.xt 33, Tnr NR Go. au., ey, 1%7 1.G, Revert Causv , Snaec 3 M,hM 1900
/ ftw tan. hprings hast &m th. E 1/k er asettan 45, alas: 31, ter as so. eurwy,
) tvP 14, Euw11 Osuey, tums 3 M,43 3000 Ik K;c.'.r: heist ir. the
/ E 1/k or sesttac 1*;, Sheet Jr, far kh Cs. turvur, M S4, Wte. Cut; , Sr.as 3 12,4M {
) 9500 j '
ttr. Ur.sr. Co.::t. bLa. Sa the r ' r 1: k a: Sec t Lx. k, L . L. 6 u su ,er, U fts.. Cauctr, Team, 1 7,allC 12 40w Om:1hr.: City Point la the
) N Sousa 1/h o." asetam 2 , & lank 3b, V tWP 4 South, ftP an Co. krw y, c asacock. County, tuans 3 M,4M 8500 Ebc teeth est 81141and meist la the t 8' 1/h of tectian 27, && sea 40,
) j 14 -1.!, T&T RE Cs. Itarwy, '
Ratland County, Tsias 3 12,4M 1500 G W :c xt Coxrt/ Potat &a the 12.1,'k of ettar. Ak, &&as.k 36, T 5 < ThP M Co. Survig, G emeesch k
) Cou:rty, Taaes j 3 18,4M M the an.. nan Pelas ta the samur er 1Lhc m 34se et asettan B, !
11ock 37, T4 Sarth, M8a C marty, T6 mas m ,000 3 3000
) )
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m s-SEAS ElaC"JLIC WICE CCMPA3f
('"
y RAS IJtC VE12SA13 BRVIC3 TO BON.FRQFIT RURAI, C00PEllA. RIVE ASSOCIATICES AFF".20A"' 0N
) Applicable to electric service for redistribution and resale by Rural Cooperative Associations to their ultimate consumers.
Service at each point of delivery is astered and billed separately.
Not applicable to auxiliary, standby or breakdown service.
) Service is single or three phase, approximately 60 cyths, and at any one of Capany's standard primary voltages.
MCN"T.,Y RA2 4137 50 for first 50 Contract rv, or less, 42 73 per kw for all additional Contract W,
) 8 5 mills per kvh for di inth Minia.as Bill: Se Contract kw charge but not less than $137 50.
Plus or a1.=us an amount equivalent to 0.0033( per kwh for each 0.25d by vbich the average cost of fuel used, delivered at Courpany's generating
)
stations, during the calendar month nepet wholly preceding the curTent billing period, shall have exceeded 26.0( or shall have been less than O 19.C( per 1,000,000 Stu; plus an enount equivalent to the propor-tonate part of any new tax, or increased rate of tax, or governmental imposi-tien or c.harge (except state, county, city and special district ad valores taxes and any taxes on met income) levied or assessed against
)
the capany or upon its electric business, as the result of any new or amendad laws or ordinances, after January 1,1963 c e v at its option any forego the application of any adjustment if such addustaent vould result in en inersase is the not monthly bill; however, failure of Company to apply any adjustment shall not constitute a vaiver of Capany's right, from tias to time or at any tias, to make any aAjcat,.
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ment in whole or in part, in any subsequent current not monthly bill that may be applicable to such till under the provisions of the fore-goit4 adjustaants.
CCYJLACT 101 Se average kw supplied during the 15 einute period of anxisua use during
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the month but not less than 50 kv.
PA%NENT 3111s are due vben rendated, and become past due i.f not paid within 15 days from date of bill. When service is discontinued on account of non. payment of b.,
) an additional charge of $5,00 vill be ms.da tsfors servlee is restored. ne Onnpany may refuse to serve anyone who is in debt to the Company.
r*
- Q NCfil:2 his established rate is subject to any change authorized by law.
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( TzzAs ELacTa2c. SEnvlos 0031PANY PostT Wonva, Taccus lue:, E ,14* ,
Cas nac.. Lisc..-i. Go ;mmtivt, Itac .
Outstan, Staac
)
Gentlemen:
This letter, executed staultaneously with that certain agreement with yeu, dated 72 ,1963, covering electric service for resale is to supplement and mod:.fy said agressent to t.he extent hereinafter set forth.
)
- 1. As an immediate aid to the extension of the benefits of electric service to those rural and fans arena not yet receivtag such service, but including those being served at the time of the execution of this agressent, we agree to allow you each month during the ters of this agreement a discount of 55% on each monthly will exclusive of cal
)
and tax adjustamats. -
- 2. It is_ understood and agreed that the Campany vill asta.
tain the same valtage reguistion with aspect to the service rendend under this agreement as it does for service rendered to other similar vbolesale customers
) and substantially in accordance with ,systen voltage regulattoa.
If this is in accordanee with your understanding and is acceptable to you, please so indicate as provided below and thus make it effective.
) Yory truly yours, TEXA8 EIEC':RIC SERVICI C30'A.Tf Accepted: -
)
bV , 1963 3r -
rresurent CAP MEX ElactRIC CCORBAT!TE, IEC.
as a e tetem Iy _ * ?12 , :
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it!A2 Y ELECTRIC SECUICE
. com m r
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...................... December 5, 1972
)
Cao Rock Electric Cooperative. Inc.
Box 153 Stanton. Texas 79722
) Gentlemen:
This letter refers to our agreement with you dated July 2.1963, as amended.
Effective July 1.1973, it is agreed that the following sections of
) said agreement will be modified as follows: ,
Section 6 - !s modified to read:
- 6. Consumer agrees to pay Coerany monthly according to Rata LRC, attached hereto and made a part hereof, for each month during the tem
) of this agreement, and each renewal thereof, for electric pcwer ard energy delivered to Consumer by Company. Each Point of Delivery will h be metered and billed separately. !
Consumer understands and agrees that said Rate LRC is subject to change from time to time by regulatory authorities having jurisdiction
) thereof, or by Company, to such rate as may in the future be established for application to the class of service provided under this agreement.
Company agrees that any future change in said Rate LRC will not beccee effective under this agreement until it has become effective under all similar agreements with the class of service provided hereunder. (
)
If any regulatory authority or other governmental body having jurisdiction changes Rate LAC. Company agrees to give Consumer written notice within 30 days from the date Comoany has been advised of such action and Consumer may cancel this agreement by giving to Company written l notice of the desired cancellation date, such cancellation date to be no
)
later than three years from the effective date of such rate change, and 1 such written notice to be given to company within 120 days after the effective date of such rate change. !
If Company changes Rate LRC as provided herein. Company agrees to give Consumer not less than 180 days' written notice of the effective case {
of such change. In the event of a change by Company in Rate LRC at any
)
time or times during the term of this agreement. Consumer may cancel this j agreement by giving to Company written notice of the desired cancellation date, such cancellation date to be no later than three years free tne
.y effective date of such rate change, and such written notice to be fiven t:
Coe;:any within 120 days after the effective date of such rate change. i
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Company any require, as security to guarantee the faithfui performance by Consumer of all its obligations bereunder. and parti-cularly the payment of all bills for electric power and energy delivered pursuant to the terms hereof, a deposit in an assunt ecuivalent to Company's estimate of two (2) months' bills, except. ,
) that suen shall havede:osit shall not be first defaulted in recuested parent of unless a bill. and until Consumer Section 14 - The second sentence is modified to read:
Unless written notice is given by either party hereto to the
) other not less than three years before the expiration of this agreement, it shall be continued thereafter until cancelled by either party herete giving to the other three (3) years' cancellation notice in writing.
Section 15 - Renains the same except that the following paragraph is removed:
) In the event, however, the price for electric service provided for herein is increased by the action of any court or other governmental body having jurisdiction in the premises. Company will give Consumer written notice within 30 days from the date Company has been advised of such action and Consumer shall have the right to terminate this agreement by giving Company written notice within 30 days from the date of Com:any's
)
written notice to Consumer. ,
O A11 other terms and conditions of the above mentioned agreement and supplements thereto remain letter. in full force and effect except as expressly mocified in this supplemental i
) If this is in accordance with your understanding and is acceptable to you, please so indicate in the space provided below.
l Very truly yours.
TEXA5 ELECTRIC SERVICE CCMPANY ,
)
Accepted: By ~~
S C
.- - - vice Pres gent - Opera nens
. 1972
)
CAP ROCX ELECTRIC COOPERATIVE. INC.
- -$ h By .. ' ' -
(*
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Title ! ,
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Y' O CAP ROCK ELECTRIC COOPERATIVE. INC.
Po 808 700 wtST *Gwwar 80 StaNicN TEtas ?g?s2 . tf LE*woNf 9'$'?$63381' wiot.AND oCf 5SA 9'5563 '943 sie s'a'Nc si s w3 see' !
May 5, 1988
)
Mr. Dale Scarth -
Texas Utilities Electric Company
)
400 H. Olive St.
Dallas. TX 75201
SUBJECT:
Cap Rock Electric Cooperative HL&P Economy Energy Purchase
Dear Dale:
We appreciate r your willingness to readjust your schedule
(,;f travel to Midland Texas to meet with us last Thursday. and 1988. We respect your April 28.
considering frankness and professionalism in our reques t for you to facilitate an economy energy
) purchase with HL&P, and we appreciate your prompt response.
However.
this We do sincerely regret your decision to refu e to allow understandtransaction
'that to proceed under any terms and concitions. We decision by TUEC your refusal is based on a carefully considered
's upper management pos s i bility that it would set an and is based on the
) would undesirable precedent which allow other wholesale customers to participate in similar transactions.
policy.
While we understand the motivation fer th:s we do not understand why our refused if it offers any economic benefit to you. transaction should be is desirable for HL&P and for Cap Rock, It certainly some economie advantage to TUEC. and would appear to offer
) Thursday We repeat eur offer of last TUEC, to share a portion of the economy energy savings with did in addition to paying all of the demand related Bayburn Country. costs es to As you will recall, cur initial offer was Cap split Rock the econemy energy savings on a 75%/25% basis betw*en and TUEC. respectively. We would be open to consideration other terms of an alternative split of the energy savings or to
)
this transaction. and conditions that would allow you to facilitate this We urge you to reconsider your position in matter, and to change your policy to allow Cap Rock to Fo through with the HL&P economy energy transaction.
s I would emphasize to you that my Board of Directors and my
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Mr. Dale Scarth Taxas Page 2 Utilities Electric Company
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cena nmer membars have made it clear that thay want cep Peek to r=
precarl*/ pcsitioned for the future with regard e-anamy ef its power suppJy. We do not baliavatothat msximi-ing this can th=
achiaved by simply remaining an all-requirement? custemer of THE' wi+bemt any opportunity to participate in platning. Haairj^n-ac^nomies of 'r intrastate and /or interstata pr.iv a r purcha
- transactions.
While your service to es in tha past has been gead and wa wnuld expect it to continue to ba enparint with reeard ?^
re li a bilit y in the future, we are uncomfortable wi t h the pror pe-
- of paying a disproportionate share of Comancha Peaks fixad costs through the tha inefficiencies of the wholesale rata structure and resulting difficulties for us with I
) aggressiva, rarard to your naw duly competitive posture with regard to retail leads in earnest certiflad services territories. As a ra nit, wa must siva consideration to any other options which may exist to enhance our flexibility for power supply ecenamy in the future.
I would repest our request of last week that you provide us.
g quickly as as
) possible, with information on the pouar purchase rates
(_j and contract terms and conditions that would wpply if we ,were to terminate our all-requirements contracts for ana or more delivary points and begin to take power from TUFC on a partial-ra c o i re ma n t s basis. We ara also interettad in pouar purch* -
rates and contract terms and condition? f^r etandbv end
) maintenance power es would apply in the event that we installed or purchased unit power from a generation project.
We leak look forward to your early response to our requestr .
ferward to working with you on t hes e m=t tars in and vu futura. tha na -
I
) Sine-raly, 3
CAF FOCK ELECTRIC COOPERATIVE. INC. !
i David W. Pruitt, General Manager I DWP la i
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l CAP ROCK ELECTRIC l l
May 1989 HI-LINES
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A Publication for Members of Cap Rock Electric Cooperative, Inc.
Service Area Farmers Line Construction Completed
) Testing Pima Cotton For Chaparral Pipeline Pima cotton. a long-staple cotton that requires picking and must Chaparral Pipehne Company has a papeline that runs from the be ginned by a roller gin, is being tested on extra acres this year Midland-Odessa area to Houston. To gain more pumping capaci.
by several farmers in Cap Rock's service area. ty. the company moved from the old Santa Fe Substation east or !
Though these factors make the Pima cotton more difficult and Knott to a location about four miles west. on Highway 87.
) expensive to harvest, the strain fetches a premium pnce in the in essence, the company built its o'.vn 69 KV transmission line marketplace - about twice what short staple cotton is bnnging. and substation. Cap Rock will supply their power on an interrupti-3 The crop has been grown in El Paso for some time, then was ble, high-voltage rate. They will receive the power from the {
planteo in the Uvalde area. It was grown last year in the Pecos-Fort Cooperative at the raw voltage and their substation will stendown Stockton area. The St. Lawrence area this year is planting several the power to the correct voltage.
hundred acres and Martin County plans a test plot. This load, located in a dually <emfied area. could serv eas.lv nase
) Pima has a longer season by two weeks than does Acala 90. It gone to Cap Rock's competitor. This would have meant a loss or also requires more water. more fertihzer, and more heat units. The 5200.000 to 5400.000 in sales annually. It was important that the nearest roher gin is in Coyanosa. so farmers will have to haul the Cooperative reta.n service of this load.
cotton farther for ginning. K & C Electnc Company employees, who built the kne. and Cao Though there are many disadvantages inherent in growing Pima Rock employees celebrated completion of the project with baroecue cotton. t will be interesting to note if area farmers can overcome sandwiches in the co.op pole yard,
) these disadvantages and introduce a new. more profitable cotton to Cap Rock's area of West Texas.
) .
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,.~w< t Crews of K & C Electruc line contractors Wayne lansa. St. Lawrence farmer. loads his planter rarse a pole for the new transmission Inn, wrth Puma cotton seeds. to serve Chaparral Pipeline Company.
)
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4 43 C COOPERATIVES C'1{ embers' {arket BUILDING A BETTER AMERICA Any member wishmg to place an ad free of charge m this sec-tron should send the ad to Cap Rock Electnc Cooperative. Inc., P.O.
Box 700. Stanton, Texas. 79782.
Power Supply Problem For Sale: Ford 6N tractor, completely rebuilt. excellent condi-
) tion. Jim Cahill. Big Sonng, 2631817, after 5:00 P.M. Steve Collier, of the C. H. Cuemsey Company, a nationally.
For Sale: 1973 Mercury Capn,1.000 miles on new engine. 52.000 recognaed engineenns consultmg firm of Oklahoma City, is work- !
or best order. Johnny or Patncia Banks, Midland. 683-5748 afer 6:00 ing cl 54 we ap R ek's board and management in furtner j P.M* studies of possible wholesale power supply options.
For & 3 bedroom,1 1/2 bath house on 5 or 80 acres of g od At the present time. Cao Rock is purchasmg 100 percent of its i wholesale power from TU Electnc. its competitor. That company {
pasture land. Lots of shade and fruit trees, outbuildings, two good waer is putung the first unit of their Comanche Peak Nuclear Power Plant
) wells, pecan orchard and 2 mobile home hook ups. Off Hwy.137 on hne and has announced rate increases for their retail customers.
in Reagan County, m the St. Lawrence area. Pnced very reasonable. Cap Rock, as a wholesale cusemer of TU, expects an mcruese m i W. F. Hale. St. Lawretxe, 397-2468, or Robert Keith. Coahoma, whaammale prtens possably as high as 50 percent 394-4991' The Cooperative board and management have been discussmg For Sale:Agn Power 5000 Ford Tractor,138 worians hours, power the possibthty of alemam power supply smce 1985. Bills have been steenng, hydraubc hft control, canegory 3 pomt his:h, 46 hp. can handle fairly stable for the last 3 to 5 years. but unless somethms is done 3 to soften the future rate snock, Cao Rock members can expect a 4 row equipment. Also several types of 2 row equipment. Would take ]j
) hefty increase m rates. Alternative power supply appears to be the some trade. .hm Estes. Midland. 684 7104. only way to soften the future rate shock.
l Horse Boarding: Double B Stables. mdoor box stalls. pnvate run David Pruitt. Cap Rock general manager and CEO. Says. "the utik-or pasture sheds with large run. Two arenas, round pen. tack room ty industry is changmg, and the future of this changmg moustry and feed room. restroom and telephone. You feed or we feed. belongs to those peocle who are wilhng to demonstrate tr err m.
reasonacie rates. W. E. Balkum. Midland. 687 5333. Leave message iative and creativity, who are willing to make decisions. to taxe pru-it no answer, dent nsks to accomphsh great things. The challenge is there to maxe I things better. We can no longer operate by tradition *e must {
For Sale: 14' X 64* 2 br 2 full bath mobile home in Ruidoso. N. operate with mnovation." Pruitt states that if the co op s power cost W Fully furnished we all apphances. Must sell. 53.500. Also 1977 could be cut lust one-tenth of one cent, it would mean a savmss Oldsmobile Cutlass Ston. Ioaoed. black with moon roof. all highway of half a million dollars annually for Cap Rock's memoer! owners.
mileage. vust sell. 51.000. John Choae, Mdland. 682 8559 after 5:30 Cao Rock's board and management have oevoted many hours py of study and discussion to the Question. Steve Colher is one of the For Sale: 16' V bottom boat w/ canopy, 50 hp Evmrude motor, new consultants who have helped the co op leaders gam knowledge n
) the area of power supply choice. He, the board, and the manage-batterv trailer w/3 new tires. buddy beanngs, lake ready, real nice.
ment staff of the co op continue to search for a feasible, workable Gordon Simmons. Greenwooi 685-3604 aher 5:00 or on weekends answer to the problem.
For W Femaie AKC registefed Insh Serier. Beaunful and playful, needs room to run. Cary Sturm. Big Sonng, 267 8832.
For W Six+ded outdoor bird pen for gamebirds. Made of wood, chickenwire, and aviary netung, Cost owr $300 to build, will sell for
) 550. you haul. Lynn Henson, Midland, 563-5686.
For Sale: Waemont lot omriookang Casde Canyon on Lake Amistad. - 8' 1.18 acre located m Gualia Bay Addroon, Hwy. 90 west. Reasonable Cave Bowkn. Stanton. 756 3357, ask for Del.
For W 12' X 68' mobile home. 2 br,1 1/2 baths, refngerator, built in oven and cooktop. central heat, new air <ondiconer. To be -
) moved. 53.900. James Bilhngsley, Tarzan, 459 2259.
For Sale: Cotton plancos seed. 55 a bag. WiltMamer 571 and Cascot .
- 82. I am no longer farming due to a disabihty. Jerome H. Hoelscher, Mdkiff, 535-2300.
For Sale: 1986 Ford LTD Crown Viciona. V 8. AMTM cassene radio, new tires and battery, ett steenng, rechning front seats, vanable speed
) wipers, good mechanical conditon. 76,000 highway miles. Whee 3 w/naw insenor, ensed w ndows. Clean. 55.495. Dale Soce, Midland, 694 8015 aher 5:00 or weekends.
For W Cordon Irving room tabies - 1 sofa table and 3 end tables Steve Collier, Engmeering Consultant.
wood & glaas car.vnnacon. 5250. Deborah Ausen. Mdiard. 687 3842. meets with Cap Rock board and management
)
ROV B":dORSHAg g g j 'dHE ,6-2{-jj,,,;,4jMPNJ,,,,,
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cap Rock Electric Cooperative, Inc. has asked the Nuclear Regulatory Commission to order TU Electric to c44po viciating terms
)
of the comanche Peak licensa. These licensa conditions require TU Elsetrie to allow utilities such as Cap Rock Electric eccess to power sources other than TU Electric.
The lioones conditions were imposed because TU Electric has
)
a monopoly over electrie transmission linas and facilities essential for small utilities to cbtain power from sources other i than TO Electrio. According to Cap Rock officials, TU Electric is
) now refusing to comply with the osamitments that were made to the NRC when the Comanche Peak nuclear plant was first licensed.
"We do not oppose nuclear power, or even the comanche Paak
) Nuclear Power Plant. But the NRc granted a license for the plant only after TU Electric promised to provide utilities like Cap Rock Electric access to other power supply resources," said cap Rock j spokeepsroon steve collier. acheaper power is available, but To Electric controls the necessary transmission and support services.
TU Electric can compete directly for most of Cap Ronk's retail service, and et the same time prevent cap Rock Electric from taking advantage of more competitive power supply sources.
t
"...isying Aasdat to saws you Ostist...
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1 RCv Sv;e065 g [0f5 Q E ,,, ,;,6-23,- g ,; go,9fM,4 ,,, , 214 812 4076* 0,A,LLAS,. EXA5:s 3 i
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Collier further explained that cap Rock Electric currently must purchase all its power from TU Electric and tht '"IU Electric rates favor their own retail customers at the exper.w a of retail
) oustomers of captive utilities such as cap Rock Electric. We fully !
l owpect that this inequity will increase in the future as TU j 31eetrie atheaphs to recover the much higher costs of the Comanche
)
Peak Nuclear Power Plant."
cap Rock Electric, a public utility serving 10,000 square miles in the Formian Basin area of west Texas, has contracted for cheaper power from Houston Lighting & Power Company and Panda
)
Energy Corporation but, Collier says, "TU Electric has prevented that power from being delivered. We cannot take advantage of these or other power supply resources unless TU Electric fulfills the
) Comanche PeaX license conditions."
Cap Rock Electric had previously filed comments with the NRC during the licensing anti-trust review process describing TU
) Electric's violation of Ehe license conditions. This most recent petition to the NRC setXs enforcement of the license conditions granting Cap Rock Electric access to other power supply resources.
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_ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ __ _ I
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UNITED STATES OF AMERICA f BEFORE THE
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NUCLEAR REGUIATORY COMMISSION <
j
) Texas Utilities Electric )
Company, .31 AL, .
) Docket Nos. 50-445A,
-Comanche Peak Steam Electric ) 50-446A Station, Units 1 and 2 )
) COMMENTS OF CAP ROCK ELECTRIC COOPERATIVE, INC. j CONCERNING SIGNIFICANT CHANGES IN LICENSEE'S ACTIVITY THAT WARRANT AN I ANTITxUST REVIEW AT THE OPERATING LICENSE STAGE {
Cap Rock Electric Cooperative, Inc. (" Cap Rock"), a full requirements customer of Texas Utilities Electric Company ("TUIC" ] 1 or " Licensee"), hereby submits comments on significant changes in )
) J the activities of TUIC that are relevant to whether an antitrust i review is required at the JEper$Eing license stage. The
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activities and conduct here discussed are recent and ongoing,
)
having occurred since the submission of information and comments by.TUEC and its co-licenses in 1986 and 1987. Cap Rock submits [
that TUIC's current activities create and maintain a situation .
)
Artconsistant with the antitrust laws and warrant the institution l
of an antitrust review and hearing by this Commission.
(
The antitrust license conditions to TUEC's construction
) -
license were intended to prevent the exercise by TUEC of its i
monopoly power in relevant markets to disadvantage.its TUEC's efforts to bring to a close this l competitors.
1 Commission's licensing process is predicated, in part, on TUEC's contention that the current antitrust license conditions are
. 4 )
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adequate to achieve that goal. TUEC maintains that there have-been no challenges to the adequacy of the antitrust license
)'
conditions. For example, although TUIC has been engaged in protracted disputes with its co-licensees, particularly Tex-La Electric Cooperative of Texas, Inc. (" Tex-La") and Brazos
)
Electric Power Cooperative,Inc. ("Brazos") , concerning which TUIC, Tex-La and Brazos filed extensive comments in response to the Commission's Planning and Program Analysis Staff (" Staff")
)
lett'ars of May 19, 1986, TUIC contends that those disputes do not raise questions about the adequacy of the antitrust license conditions.1/
B'EPC [Brazos) and Tex-La make no allegations, however, of specific antitrust activity or actions on the part of TUIC, or of any violation of anygLicartse Condition by TUEC.
Clearly, there are ne such incidents or violations.
)
Even assuming TUEC were correct in that characterization,2/ TUIC is now clearly engaged in activities that are inconsistent with the antitrust laws.
)
Recent estimates place the total cost of the Comanche Peak nuclear project at more than ten billion dellars. The inclusion of that investment in rates (to the extent allowed by the Public
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Utilities commission of Texas ("PUCT")) will dramatically 1/ Comments of Texas Utilities Electric Company, Docket Nos.
50-445A and 50-446A, dated December 22, 1986, p. 2 ("TUEC
)
Comments").
2/ Cap Rock takes no position on TUIC's characterization of its disputes with Tex-La and Brazos.
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increase the power. supply costs of Cap Rock and TUIC's other who3esale full requirements customers. Cap Rock is in the
)
process, therefore, of diversifying its power supply sources and changing its status from that of a full requirements customer to a partial requirements customer of TUIC. Just as Cap Rock's
)
business interests lie in reducing its dependence on TUEC, TUEC's interests lie in denying Cap Rock access to alternate power supply sources and retaining Cap Rock as a full requirements
)
customer. TUIC is currently exercising its monopoly power over transmission and coordination services to deny Cap Rock access to alternate sources of bulk power to make Cap Rock less competitive
)
by forcing it to buy higher priced TUIC full requirements power.
The effects of TUEC actions are not only to hinder cap Rock's y s-entry as a participant in the hulk power market but also to
)
substantially disadvantage Cap Rock in the highly competitive retail market.
Cap Rock and other cooperative wholesale customers of TUEC are currently engaged in head-to-head competition with TUEC at retail. Legitimate competition is not the issue; Cap Rock has long been la retail competition with TUEC and asks no protection from it. In recent months, however, TUIC has greatly accelerated its retail competition while at the same time exercising its monopoly power over transmission and coordination service to
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hinder the ability of Cap Rock to compete with TUEC on an equal footing.
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) l TUEC is currently exercising its monopoly power over i transmission to deny Cap Rock the opportunity to reduce its power
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supply costs by more than $100,000 per month. TUIC has refused f
to transmit and to schedula Cap Rock's purchase of economy energy from Houston Lighting and Power Company ("HLP").under a centract l
)
dated Aeril 18, 1988, even though TUIC is able to facilitate such. ]
transaction, as evidenced by the economy energy purchases from HLP by Rayburn Country Electric Cooperative, Tex-La and possibly
)
other TUIC full requirements wholesale customers. Cap Rock fully supports the Rayburn Country and Tex-La purchases and believes that they represent the kind of efficient operation of a
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competitive' hulk power market that the antitrust license conditions envision. TUIC's veto of Cap Rock's economy energy m 6=
purchase, however, represents an impermissible exercise by TUIC
)
of monopoly power to frustrate cap Rock as a competitor.
TUEC has also refused to identify the terms and conditions under which, or even whether, it will sell partial requirements a
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power and back up -
services to Cap Rock associated with Cap Rock's !
purchase of thirty-five megawatts of cogenerated power. All that TUIC has been willing to do is to offer to accommodate partially i
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the cogention purchase within the constraints of Cap Rock's all requirements relationship. TUIC will not address the terms needed for Cap Rock to achieve partial requirements status.
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Each of these refusals is in direct violation of the current antitrust license conditions 2/ and clearly contrary to the
) antitrust laws and the policies that underlie them.
TUIC's commentsd/ do not accurately depict TUEC's new aggressive competition posture at retail. In recent months, TUIC
) has undertaken a multi-faceted attack on existing and future retail customers, building duplicative transmission and distribution facilities into areas already served by cooperative
) electric utilities, engaging in detailed planning to duplicate cooperative facilities in other areas, and seeking to lure away existing retail customers. At the same time, TUIC, hv its own
) admission, is subjecting its own wholesale customers to a price s gu'eeze . Cap Rock believes that a full investigation of TUIC's current activities at retafl WIT 1 reveal a pattern of activity
)
inconsistent with TUIC's characterization of activity in its Information and comments filed with Staff.
As discussed in detail below, TUEC is engaged in the
) following anticompetitive practices:
- 1. TUIC is currently exercising its monopoly power over transmission to prevent the purchase by Cap Rock of economy energy from Houston Lighting & Power Company ("HLP").
)
Cap Rock has a fully executed agreement with HLP, but is entirely dependent upon TUIC to schedule and to transmit the economy energy.
On April 28, 1988, TUIC refused Cap Rock's
) 2/ Paragraphs 3.D. (2) (c) , (d), (k) and (1).
1/ Information for Antitrust Review of operating License Application, Docket Nos. 50-445A and 50-446A, dated September 2, 1986 ("TUIC Information").
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request.to schedule this economy energy solely because TUEC's management believes
); that to do so would set an undesirable precedent which would allow other wholesale customers to participate in similar' transactions.W TUEC expressly stated that there are no immediate engineering or reasons other than its policy reasons for refusing to permit this transaction. Moreover, TUEC
)
refuses to permit this tt*ansaction notwithstanding Cap Rock's repeated offer to split the economy energy savings between cap Rock and TUEC.
)
TUEC is clearly able to s'chedule and to transmit economy. energy for Cap Rock, as ~
evidenced by the economy energy purchases by '
Tex-la Electric Cooperative, Inc. (" Tex-la")
and Rayburn Country Electric Cooperative
("Rayburn Country"), each of which'was a full requirements customer of TUIC at the time of
)
its request for service. Each purchased economy energy from HLP under substantially the same terms as the HLP/ Cap Rock contract.1/ '
.at TUIC is using its' monopoly power over
)
transmission and coordination services to disadvantage competitors such as cap Rock. l Such actions are clearly inconsistent with the antitrust laws, and in. direct violation of Paragraph 3.D(2) (1) of the CPSES antitrust
)
license conditions.
- 2. TUIC has refused repeated requests 2/ to provide cap Rock with the terms and conditions under which TUEC will make available partial requirements, coordination j and backup services to Cap Rock. Cap Rock
)' recently executed a contract under which it will purchase thirty-five megawatts of capacity and energy from a qualifying-facility ("QF") pursuant to the terms of the l
1/ Egg Attachment A. f i
1/ The HLP/ Cap Rock (Attachment B) and HLP/Rayburn Country contracts (Attachment C.1) are virtually identical.
2/ 111, rag Attachments A and D.
)
l i
a _ - l
() - . . . . . . . . . . . . . . . . . . . . . . . - . . .
I e Public Utilities Regulatory Policies Act of 1978. TUIC has provided no explanation of C) the rates, terms and conditions under which ,
it would sell Cap Rock partial requirements service, and has stated that it will not provide such information until it files to change its tariffs as part of its next rate increans filing. TUIC currentl
() partial requirements tariff.1/ y has no TUIC All that has been willing to do is to offer to alter somewhat Cap Rock's all requirements relationships; but TUIC insists that Cap Rock remain an all requirements customer.
C) TUEC's refusal to provide the terms and conditions for partial requirements service, or even identify when it would be willing to provide those terms, violates Paragraphs 3.D. (2) (c) , (d) and (k) of the CPSES antitrust license conditions.
O TUIC has instituted and maintains a price 3.
squeeze that significantly harms its wholesale customers in their competition with TUEC at retail. ,CapcBock would have to reduce its retait refenues by S800,000 in O order to match TUIC'e retail rate. TUEC has expressly acknowledged before the Public Utility Commission of Texas ("PUCT") that its rate structure creates a price squeeze.2/
TUIC has also publicly announced that, when
() CPSES Units 1 and 2 go into commercial operation, it will hold its retail rate increase requests to a ten percent rate ,,
increase for each unit. TUEC has made no such commitment with respect to its wholesale rates. TUIC's price squeeze activities are c) particularly significant given the highly The competitive nature of the retail market.
PUCT permits dual certification of retail-service territories. Almost 60% of Cap Rock's service territories are dually-certified with TUEC.
O 3/ Sag Attachment E.
2/ 3,33 Attachment F.
O
k _ . _ ... . . _ . . . . . .
)
-e.
- 4. TUIC has recently begun a determined campaign of head-to-head retail competition with
) cooperative electric utilities in its service territory. TUEC has begun building duplicative distribution facilities into areas either already served by cooperative electric utilities, or that are expected to be developed in the foreseeable future.
) :
I.
FACTUAL BACKGROUND :
) A. QLP ROCK ELEC*rRIC COOPERATIVE. INC.
Cap Rock Electric Cooperative, Inc. is a distribution cooperative incorporated under the laws of the state of Texas,
) with its headquarters in Stanton, Texas. Cap Rock was organized in 1939 to serve in the counties of Howard, Martin, Midland, and' Glasscock, and now provides service in those counties and eight
- t.
) additional counties in NorEhernsTexas.12/ Cap Rock serves an area that is approximately 120 miles long and 80 miles wide l located in the Permian Basin area of Texas. Cap Rock has a peak
).
. load demand of approximately 90 megawatts and serves the glectric utility needs of more than 24,000 residential, irrigation, commercial and large industrial customers. Located in or near
).
Cap Rock's service territory are two cities of approximately 90,000 to 120,00 popu)Ation, one town of approximately 35,000 population, and two towns of 2,000 to 3,000 population. Cap Rock l
)
12/ Cap Rock also provides service in Borden, Dawson, Ector, Upton, Reagan, Irion, Tom Green, and Sterling. counties. All but Irion County are included as part of the " North Texas Area" as defined in Paragraph 3.D. (1) (b) of the antitrust
)
license conditions.
) ... . . _ . _ . . . .
)
does not serve any of these municipalities, but has existing
) facilities around and near their corporate limits and has experienced considerable residential growth around municipalities such as the City of Midland, Texas.11/
) Cap Rock currently meets its capacity and energy y requirements through a full requirements contract with TUEC, dated July 7, 1963,12/ which is subject to PUCT regulation. Cap ,
) Rock's contract with TUIC is subject to termination by either party on three years' written notics, pursuant to the December 5, 1972 Emendment to the contract.12/ In addition, TUEC is
) obligated to provide Cap Rock no less than 180 days' written notice of the effective date of any rate change. In the event of such change, Cap Rock may cancel the agreement effective no later p 4=
) than three years from the effective date of the rate change, by giving written notice no later than 120 days from the effective date of the rate change. In addition, if a regulatory authority
) or other governmental body having jurisdiction changes the rate l by which TUEC provides service to Cap Rock, TUIC must give Cap Rock written notice within 30 days from the date TUEC has been
)
advised of such action, and Cap Rock may cancel the agreement l l
11/ Cap Rock's large industrial load consist almost entirely of oil field pumps and cotton gins.
) 12/ Eis Attachment G.1. There have been several amendments to the original contract, which was executed by cap Rock and l Texas Electric Service Company ("TESCO"). TESCO, Dallas j' Power & Light Company and Texas Power & Light Company merged to form TUIC on January 1, 1984.
) 12/ ERA Attachment G.2.
O
(
~10-
] I o
within 120 days of the effective date of the rate change, the cancellation date to be no later than three years from the g effective date of such a rate change.11/ In other words, in the event of a change in TUEC rates, Cap Rock may cancel its contract with TUEC immediately upon TUEC's receipt of Cap Rock's notice of termination.
O B. CAP ROCK IS IN DIRECT COMPmTION WITH TCTEC.
Cap Rock competes directly with TUEC at retail. Cap Rock's ;
O service territory is surrounded by the TUEC service territory.
The Public Utility Commission of Texas permits dual and sometimes triple certification of service territories. In other words, two O
or more electric utilities may be authorized to compete to serve the electrical needs of customers within a single service 4 "
territory. Approximately, 30-25 percent of the service O
territories in the state are dually or triply certified. Between 50 and 60 percent of Cap Rock's service territory is at least dua y-ce fled vi h M C. W In other words, Cap Rock is in O
direct retail competition with TUEC in more than half of the ,
territory in which Cap Rock is authorized to serve. The service territory maps appended hereto as Attachment H, which are O
published by the PUCT, graphically depict the extensive areas in which Cap Rock is subject to direct retail competition from TUEC.
O li/ 2.13 Attachment G 2.
15/ Some of Cap Rock's service territory is triply certified.
O
Cap Rock has recently entered into competition with TUEC in
) the bulk power market. On April 18, 1988, Cap Rock executed an agreement with HLP by which Cap Rock may purchase, at HLP's cption, economy energy up to a maximum instantaneous rate of 75 J' megawatts per month.11/ The purchase would save cap Rock more I
than $100,000-per month, with substantially greater savings in the summer months. Cap Rock has also recently executed an
) agreement with a cogenerator to purchase thirty-five megawatts of .
I capacity and energy beginning in 1991 from a qualifying facility currently planned to be located in Sherman, Texas. Each .!
) transaction requires the use of TUEC's transmission facilities and the provision by TUIC of scheduling and coordination services in order to be effectuated. TUEC is currently exercising its s.
~s.
)- monopolypoweroverthesetsse{Elalservicestopreventthese transactions from occurring.
II.
)
LEGAL STANDARDS A. STANDARDS APPLICABLE TO A "SIGNIFICANT CHANGES" DETERMINATION.
)
An antitrust review at the operating license stage is warranted if:
the Commission determines such a review is advisable on the ground that significant
)
changes in the licensees' activities or proposed activities have occurred subsequent to the previous review by the Attorney
).
11/ 133 Attachment B, Art.2.1.
)
, _, - -- - -- - - " - ' * ~ ~ ' ~ ~
t General and the Commission under this
)
subsection in connection with the construction permit for the facility.
42 U.S.C. 52135(c)(2). "Significant changes" within the meaning l of this provision have been defined by the Commission to mean:
)
- 1. Changes that have occurred since the previous antitrust review of the licensee;
- 2. Changes that are reasonably attributable to the licensee in the sense that the licensee has sufficient causal relationship to the
)
change that it would not be unfair to permit it to trigger a second antitrust review; and
- 3. Changes that are "significant" in the sense that the change has antitrust implications that would likely warrant commission ramedy.
)
South Carolina Elaetrie & Gas comeanv. et al. (Virgil C. Summer Nuclear Station, Unit No. 1), 13 NRC 862, 871-72 (1981).12/ The
- s. 6-
)
Commission has stated that9the hird criterion requires assessment of whether.the changes would likely warrant Commission remedy and the type of remedy.1I/
As the discussion below makes clear, TUEC's current conduct
).
is inconsistent with the antitrust principles applied by this ccanission and is often in direct violation of TUIC's obligats:n under the existing antitrust license conditions. TUIC's conduct
)
has occurred since the September 15, 1980, antitrust settlement in this docket. Indeed, the TUEC conduct herein discussed has
)
11/ gAA A112, South Carolina Electrie & Cas Comenny (Virgil C.
Summer Nuclear Station, Unit No. 1), 11 NRC 817 (1980);
Central Electric Power Cooperative. Inc. (Virgil C. Summer Nuclear Station, Unit No. 1), 14 NRC 787 (1981).
11/ SCEAG, 13 NRC at 872.
)
}
) _. . . . . . . . . .- . . . . . . . . . ..
occurred since the filing of TUIC's Information and Comments in p the' Fall of 1986. The remedy for TUIC's conduct is well within the Commission's authority. Cap Rock believes that the Commission should enforce the existing license conditions and I
impose additional license conditions that make TUIC's obligation
)
to wheel and to provide coordination and related services explicit and unequivocal.
)
- 5. APPLICABLE AlrrrruuST PRINCIP N .
The antitrust principles to which TUEC's conduct must conform are well established. The decisions of the Atomic Safety
)
and Licensing Appeal Board in the Midland,12/ Davis-Besse,2S/ and Farlev11/ cases present detailed '
analyses of the application of it the antitrust laws to licensees <under the Atomic Energy Act. The
)
following is a brief discussion of those principles most pertinent to TUEC's current conduct.
The antitrust laws embody fundamental national economic
)
12/ Censumers Power Comenny (Midland Plant, Units 1 and 2), 6
) NRC 892 (1977).
22/ The Toledo Edison Comeany and the Cleveland Electric Illuminating Comeany (Davis-Bessa Nuclear Power Station Units 1, 2 & 3), 10 NRC 265 (1979).
22/ Alabama Power Comeany (Joseph M. Farley Nuclear Plant, Units
) I I and 2), 13 NRC 1027 (1981), aff'd Alabama Power Cemeany v.
Nuclear Reculaterv Commission, 692 F.2d 1362 (lith Cir.
1982), cert denied 464 U.S. 816 (1983).
)
)
Y . _ _ _ _
)_ .. ._ ..
q 1
l i
{
. policy.22/ At their most basic level, the antitrust laws seek to l
)
prevent the unreasonable use of market power to gain additional market power;22/ they seek to dissipate the distortion that monopoly power can work on an otherwise competitive market. In t
l
)
its simplest terms, monopoly power is the power to control prices j or to exclude competitors.21/ Violation of the antitrust laws, however, does not require the actual exclusion of competitors .l from a market. Rather,'the antitrust laws proscribe the exercise
)
of monopoly power to disadvantage competitors.15/
This Commission's authority is not limited to redressing
)
actual violations of the antitrust laws or their underlying
)
policies, but rather extends to remedying acts which constitute a reasonable probability of violation of those laws, or the t *~
policies underlying those l'avsv2.ft/ The Commission is empowered
)
to reach and to redress incipient anticompetitive conduct, and to halt anticompetitive conduct well before it violates the antitrust laws. Midland, 6 NRC at 912. .
),
22/ Midland, 6 NRC at 896; Gulf States Utilities Cemeany v. FPC, 411 U.S. 747, 759 (1973); otter Tail Power Comeany v. United States, 410 U.S. 366, 372-75 (1973).
)
22/ Farlav, 13 NRC at 1105.
2.f/ Farley, 13 NRC at 1073; United States v. Grinnell Core., 384 U.S. 563, 571 (1966); United States v. E.I. du Pont de Nemours and Co., 351 U.S. 377, 391 (1956).
I
) 2}f 3.gg, g a ,, United States v. Griffith, 334 U.S. 100, 107-08 (1948).
2,g/ Midland, 6 NRC at 909; 926-27; Farley, 13 NRC at 1103.
l
) I i
l
_i___________________._
1 . .. _ _ , . . . . . .. . _..
) There is no question that TUEC is subject directly.to the
)y antitrust laws 12/ and that those laws, and the policies underlying them, likewise apply to TUEC through the exercise by this. commission if its obligations pursuant to Section 105c of the Atomic Energy Act of 1954, 42 U.S.C. 52135(c). The analytical
)_
questions posed by the' structure and characteristics of'the electric utility industry are now well settled. An analysis of competition in the electric utility industry generally entails
)
inquiry into three discrete product markets: the bulk power, coordination services and retail markets.22/ The relevant j.
geographic market for the coordination and bulk power markets is limited to those ar'eas in which the utility's smaller competitors practically can turn for alternative sm suppliers.22/ The p
geographical limits of the leta41 market are defined by the
)
utility's service territory.19/
Cap Rock's ability to compete with TUEC in the bulk power, !
coordination and retail markets is dominated by one basic fact:
)
TUIC's dominance and control of essential transmission and coordination services. The commission has recognized that the ability to compete effectively in these markets is dependent
)
substantially, if not entirely, upon access to necessary 22/ otter Tail Power comeany v. Uni.ted states, ansIAr canter v. j Detroit Edison cemeanv, 428 U.S. 579, 596 n.35 (1976). ;
1
)
23/ Midland, 6 NRC at p. 945-990; ZAr132, 13 NRC 1046-1068.
12/ 7_a rl av , 13 NRC at 1058.
22/ Midland, 6 NRC at 978-79; Farley, 13 NRC at 1066-67.
)
i_______ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ ]
)
transmission services. In Farlav, the Board found that Alabama
)- Power Company owned and controlled the lion's share of generating capacity in its service territory and osned all transmission lines in the market above 115 KV and all transmission facilities j
) that provided access to utilities outside the market area.21/
The Board concluded that this dominance, particularly the _j dominance over transmission facilities, " places the applicant in
) a unique position to control access to the market for coordination service." Id. In Midland, the Board found that, in ,
order to engage in bulk power and coordination transactions, )
) small utilities within the Consumers Power Company service territory had to_obtain transmission wheeling services from Consumers.22/
_$ k=
) Cap Rock's attempts to become a participant in the bulk t
power market, in addition to making it a competitor of TUIC in that market, are most directly intended to enable cap Rock to compete more effectively with TUEC in the retail market. Such
)
retail competition is entitled to full protection under the ,
antitrust laws and by this commission.22/ In both Midland and
) Farlav, the Board rejected arguments that, because there was :
i little likelihood of head-to-head competition at retail, i competition in the retail market was somehow entitled to less
)
11/ 13 NRC at 1070.
12/ 6 NRC at 998.
22/ Midland, 6 NRC at 988; Farlav, 13 NRC 1064-1066.
\
)
O .. . . .. . . . . . . . . . - - . . . . . . . . ..
l i
i O
~17-l protection. In this case, head-to-head competition is not only O likely, but guaranteed by the dual certification scheme e= ployed in the state of Texas.
Every action taken by TUEC that disadvantages Cap Rock in the bulk power or coordination services market has an inevitable O
and adverse impact en Cap Rock's ability to compete with TUIC in the retail market. The Board acknowledged this fact in Farlev:
O More importantly, applicant's dominance of transmission and generation facilities further bolsters the finding of monopoly power (in the retail market). As the Board below noted, this dominance enables applicant to influence its present and potential o competitors'~ access to the basic imputs necessary for the production and sales of reliable and economical firm bulk power. The dominance of what in essence constitutes certain factors of production in the industry, viewed $1n hunjunction with o applicant's high' market shares and the high economic barriers facing new competitors, would crdinarily compel a finding of monopoly power in the retail market.
13 NRC at 1072-73 (footnote emitted).2S/
O
/
21/ In Farlev, the Board also rejected an argument that the applicant had no monopoly power because it was subject to federal and state regulation, and thus could not control o prices or exclude competitors. The Board held that:
a vertically integrated utility's ability to monopolize a retail market is not dependent on its ability to set its own retail rates.
In Otter Tail, supra, the defendant cut off its retail competitor's supply of wholesale O power. In Mishavaka TI, the defendant threatened to curtail its competitors' supply and additionally charge them excessive rates for the wholesale power it did supply. In both cases, it was the dependence of the retail systens on a vertically-integrated O (continued...)
, w l l
} . . . .. .. . .. . . _ .
t
, i,
)
TUIC's recent actions stand in violation of these
) principles. Moreover, TUIC is making no effort to comply with its antitrust conditions. To the contrary, TUEC appears to be attempting to return to " business as usual," that is, business
}- the way it was conducted before the license conditions were in existence.
) III.
TUEC'S CURRENT ANTICOMPrrihym CONDUCT TOWARDS CAP ROCK TUIC is attempting to make cap Rock less competitive by
). denying Cap Rock access to sources of power that are lower cost 3
than TUIC full requirements serv' ice. In Midland, Davis-Besse and I
Farley, the applicants soughtbto disable smaller utilities.in and
)
around their service territ'ories by denying them access to the benefits of the relatively low cost power to be generated by nuclear projects licensed by this Commission. TUIC has adopted a j
variation on this anticompetitive theme. TUIC is attempting to
)
disadvantage Cap Rock competitively by blocking Cap Rock's {
efforts to purchase lower cost supplies of bulk power, thereby
)
forcing it to buy higher priced energy and capacity that includes l l
the astronomically priced Comanche Peak power. TUEC is exercising its monopoly power, in violation of the antitrust laws I
) {
21/(... continued) competitor for their source of supply that i enabled the integrated utility to monopolize the retail market.
)
2.4 at 1073.
l
) . . ._ .. .. .. . . . . _ . . . . . . . . _ .
). 19 and the existing antitrust license conditions, to force Cap Rock
)
to buy comanche Peak power. There are lower cost sources of bulk power available to Cap Rock to which TUEC is denying' Cap Rock access. This lower cost bulk power will make Cap Rock more competitive with TUEC.
)
As the costs of CPSES continue to escalate, TUEC has arrogated to itself the power to decide which of its competitors
)
may ameliorate the adverse economic effects through purchases of lower cost sources of bulk power and which of its competitors may not. TUEC has allowed certain of its full requirements customers to take advantage of relatively lower cost economy energy sales
)
from HLP, while at the same time denying other of its full requirements customers the ,oppo_rtunity to engage in the very same
.,,, e kinds of transactions. Cab Rodk believes that the economy energy
)
purchases by Tex-La and Rayburn Country are in the public interest and should continue. Cap Rock sees nothing wrong in TUEC permitting the Tex-La and Rayburn Country purchases. But
)
there is something very wrong in TUEC refusing to permit Cap Rock to engage in the kind of transactions that the Tex-La and Rayburn ,
Country purchase have shown to be feasible and beneficial. TUEC
)
is acting as the sole arbiter of which of its competitors benefit and which are harmed. Cap Rock understood that the antitrust license conditions imposed by this Commission were intended to deprive TUIC of such life and death power over its competitors. l This section provides clear examples of TUEC's exercise of monopoly power to harm Cap Rock. Section IV demonstrates that,
)
J j
l O. - -- --- - - - - - -
R
)
at the same time TUIC is hamstringing Cap Rock's ability to compete with TUEC at retail, TUIC is embarked on a new and .
O
) extremely aggressive campaign of retail competition.
l i
A. TUEC HAS ARBITRARILY REFUSED TO PERMIT CAP ROCK TO O PonemAsz ECONOMY ENERGY FROM WT.D.
HLP informally invited Cap Rock to purchase economy energy in telephone conversations with Cap Rock representatives, noting O that other TUEC full requirements customers already were enjoying the benefits of its lower cost economy energy. Cap Rock discussed this question informally with TUEC, and TUEC did not O indicate that such a purchase would be a problem.
HLP formally offered to sell Cap Rock bulk power by letter
+ s. -
dated February 3, 1988. EBP offered to sell Cap Rock wholesale O power through the mid-1990s or longer if requested, and economy energy. As part of the offer, HLP stated: ,
HL&P h u sold economy energy to other TUEC wholesale customers which has resulted in -
O' those custccers saving several million dollars itt 1947. This type of program is '
fairly easy to implement and does not alter .
your contractual payments to TUEC. I see no reason you couldn't implement this program and be saving money for the peak of 1988.
Attachment I. Cap Rock, in light of its informal discussions with TUEC and aware that several of 'ITJEC's full requirements customers were making such purchases from HLP, pursued the economy energy offer and ultimately executed a contract with HLP O
~
)
l 1
)
on April 18, 1988.2E/ The " Agreement For Sale of Economy Energy," between HLP and Cap Rock is substantially identical to l
) the " Agreement For Sale of Economy Energy," dated February 11, f 1987, between'HLP and Rayburn Country Electric Cooperative.25/
In addition, Cap Rock was aware that for some time Tex-La had i 1
) been purchasing economy energy from HLP under substantially similar terms.22/ Although the Tex-La agreements with HLP and TUEC should have been filed with the PUCT, Cap Rock has been
) unable to obtain copies of them at this time.II/ In each case, 25/ 2AR Attachment B.
l 21/ Attachment C.1. A principle difference is that Rayburn
) Country is entitled to purchase, during any calendar month, ,
energy equivalent to a maximum instantaneous rate of delivery of up to 300,pagayatts, while cap Rock may purchase up to no more than 75smeggyatts of energy in any calendar month. Comcare Attachment-C. 1, Article 2.1. and Attachment B, Article 2.1.
)
22/ In its September 2, 1986 Information, TUEC informed the Staff that:
In March, 1986, Tex-La requested the Company to serve as scheduling agent for its purchase
) of economy energy pursuant to an agreement between itself and Houston Lighting & Power Company....Ertensive negotiations and discussions have taken place and Tex-La is now evaluating a draft of a scheduling agency agreement.
}
TUIC Information, p. 18.
11/ Similarly, Cap Rock understands that TUIC is allowing the purchase of HLP economy energy by another of its full requirements customers, Texas-New Mexico Power Company, but
) Cap Rock has been unable to obtain copies of the relevant contracts.
)
)- i 9
)
TUEC agreed to act as scheduling agent for its full requirements customer. W Cap Rock sought TUEC's agreement to provide Cap Rock with
)
the same transmission and scheduling service the TUIC provides 1
i for Rayburn Country and Tex-La for their economy energy purchases {
t from HLP and for their purchases from the Southwest Power
)
Ad. ministration ("SWPA").12/ Cap Rock asked TUIC to act provide I these services at a meeting on Wednesday, April 6, 1988, almost i two weeks before it executed its agreement with HLP. At that time, representatives of TUEC, including TUIC's Division President, told cap Rock that it would have to study the question. That representation proved to be incorrect.
)
At a meeting in Midland, Texas on Thursday, April 28, 1988,
+ u.
representatives of TUEC management told Cap Rock senior management that, under no cireurstances, would TUEC permit the HLP economy purchase by Cap Rock. TUEC made it clear that this decision was not based on any engineering or like considerations, j but rather was:
) i based on a carefully considered decision by I TUIC's upper management and is based on the I
'/, possibility that it would set an undesirable ]
precedent which would allow other wholesale customers to participate in similar
) transactions.[11/) l l
I g is.g, n , Attachment C.2.
) 10/ 11.1 TUEC Information, ms
- p. 24.
11/ Attachment A at 1.
\
- - - _ - - - _ - - - - - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ 3
)
)
TUIC stated that it had ten other cooperative customers in a position to do exactly what Cap Rock sought, and it would not allow any of than to do it. TUEC persisted in this position even
~
)'
when Cap Rock offered to split the savings from the transaction with TUIC. Indeed, Cap Rock stated that it would be willing to
>- agree to "an alternative split of the energy savings or to other terms and conditions that would allow you to facilitate this transaction." Id. TUEC has not responded to this offer.
) Why TUEC has not permitted Cap Rock's economy energy purchase when it obviously can facilitate such a transaction, as evidenced by the economy energy purchases of other TUIC full
)
requirements customers, has not been explained to Cap Rock.12/
The timing of those transactions, **
at approximately the time that at Tex-La, Brazos and TUEC were filing comments before this
)
Commission concerning the Staff's "significant changes" determination, may have affected TUEC's decision. TUEC's desire I with respect to Cap Rock, however, is clear: TUEC seeks to
)
disable Cap Rock competitively.A2/ TUIC is also sending a message to its other cooperative wholesale customers that TUEC will not permit their entrance into the bulk power market.
)
12/ Nor has TUIC explained why it would not permit the purchase when it would result in an economic benefit to TUIC as well as cap Rock.
32/ TUIC's anticompetitive intent is reflected not only in its
) adamant refusal to provide the essential services, but also its refusal to permit a transaction that would have economic benefit for TUEC as well as Cap Rock.
)
e TUEC's refusal to allow Cap Rock's purchase of HLP economy energy is in direct violetion of its antitrust license conditions. TUIC is obligated to:
participate in and facilitate the exchange of bulk power by transmission over the Applicants' transmission facilities between or among two or more Entities in the North Texas Area with which the Applicants are connected, and between any such Entity (ies) and any Entity (iss) outside the North Texas Area between whose facilities the Applicants' transmission line and other transmission lines... form a continuous electrical path....
Paragraph 3.D. (2) (1) .
Cap Rock is an " Entity" as defined in Paragraph 3.D(1) (c) .
Cap Rock is a cooperative, currently owns and operates facilities 1
for the distribution of electric power and energy, and has -
executed a contract by whidh id Vill control 35 MW of cogenerated power beginning in 1991. Cap Rock is located and does business
)
in the " North Texas Area" as defined in Paragraph 3.D. (1) (b) , and l
\
is directly interconnected TUEC. Similarly, HLP is directly l interconnected with TUIC. Cap Rock submits, therefore, that TUEC is expressly obligated to provide the transmission services necessary to facilitate the exchange of bulk power between HLP f and Cap Rock.dd/
) TUIC's obligation to " participate in and facilitate" the j exchange of bulk power over its transmission facilities j h " Bulk Power" is defined as " electric power and/or electric !
aff energy supplied or made available at transmisrien or l i
subtransmission voltages." Paragraph 3.D. (1) (a) . This definition clearly encompasses economy energy sales.
I l
)
- _ - _ _ - - -- - ?
Y y necessarily includes the obligation, where technically feasible,. ,
l to act as scheduling agent to permit precisely the kinds of transactions that TUIC is now denying Cap Rock. If Paragraph 3.D. (2) (1) does not obligate TUIC to provide such scheduling q services, the provision is of little if any value to full {
) requirements customers. By definition, full requirements customers are unlikely to maintain control areas and to be able to handle their own scheduling and related arrangements. A TUIC ;
i
) obligation to provide transmission service without a coincident obligation to provide scheduling services, therefore, is an empty j commitment for those who need it most -- captive full
) requirements customers of TUEC that seek independence by participation in the bulk power market. If one purpose of 1
~$ x: 1 Paragraph 3.D. (2) (i) is to facilitate the entry of new {
} competitors into the bulk power market, TUIC must be obligated to l
provide the essential scheduling service. j l
If the current license conditions do not obligate TUEC to {
) transmit and to schedule Cap Rock's economy energy purchasts from HLP, the license conditions are critically flawed. TUEC is )
engaged in a classic exercise of monopoly power. TUIC is picking l l'
}- and choosing which among its competitors will benefit from economy energy purchases from HLP: l The existence of power to exclude competition when it is desired to do ao is itself a
) violation of $2, provided it is coupled with the purpose or intent to exercise that power, American Tobacco Co. v. United States, 328 U.S. 781, 809, 811, 814. It is indeed
" unreasonable gar as, to foreclose
)
I
)
competitors from any substantial market."
International Salt Co. v. United States, 332 U.S. 392, 396. The antitrust laws are as much violated by the prevention of competition as by its destruction. United It States v. Aluminum Co. of America, supra.
follows, a fertieri, that the use of monopoly power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is y
unlawful.
United States v. Griffith, 334 U.S. 100, 106-07 (194E). An entity with the market dominance of TUEC must " refrain at all times from conduct directed at smothering competition" and may
)
not vield its monopoly power in any manner "to tighten its hold on the market."Al/
A competitor like Cap Rock, which is engaged in strenuous
)
head to head competition with TUEC, and which intends to gk m:
diversify its power supply' sources in order to become less y
dependent upon TUIC, clearly can expect no fair treatment by TUIC. Cap Rock submits that this is precisely the kind of arbitrary action that the license conditions ought to prevent.
If the license conditions do not prevent this abuse, they,should
).
be amended to do so.
The fact that Cap Rock has a full requirements contract with TUIC does not relieve TUIC of the obligation to permit the
)
economy energy purchase to occur. Rayburn Country and Tex-La were full requirements customers of TUIC when TUIC agreed to act as their scheduling agent and to provide transmission service for
)
Eastran Kodak Comeanv, 603 F.2d 263, 11/ Berkev Photo. Inc. v.
275 (2nd Cir. 1979), cert denied, 443 U.S. 1093 (1980).
)
_ _ - _ - _ _ _ _ _ _ _ _ _ -___- _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ . __ _ _ _ _ _ _ _ - _ - - - _ - _ _ _ _ _ _ _ _ _ _ _ = _
l
.r
).
their ecoromy energy-purchases from HLP. TUIC may not use its monopoly power over transmission to disadvantage Amt of its .
(
) competitors. TUEC has monopoly power and is exercising that power in a clearly anticompetitive manner. Aft /
) B. TUEC'S EFFECTIVE REFUSAL TO PROVIDE CAP ROCK STANDBY, BACKUP AND PARTIAL REQUIREMENTS SERVICE ASSOCIATED WITE CAP ROCK'S EEHASE OF POWER FROM A cocENERATOR.
TUEC has been aware for some time that Cap Rock intended to
) reduce its total dependence upon TUEC for its power supply requirements by purchasing power from a qualifying facility. By letter dated October 29, 1987, Cap Rock formally informed TUIC
)
that it had. executed a letter contract with a cogenerator to be-located near the Dallas, Texas area, and informed TUIC of its C E intention to terminate its ful), requirements contract in the near
) future.11/ Cap Rock reiterated that, as early as 1985, and again in the Spring of 1987, Cap Rock discussed with TUEC its plans to purchase cogenerated power and to become a partial requirements
)
customer. By letter dated November 4, 1987, TUEC acknowledged
/
receipt of information concerning Cap Rock's letter of commitment, and expressed a willingness to negotiate the terms by
)
Af/ Moreover,'it is axiomatic that business practices undertaken by those with dominance in the market may not be acceptable even though they might be legitimate if undertaken by those less powerful. Farlav, 13 NRC at 1068; Midland, 6 NRC at 913. Even an otherwise lawful device may be used as a weapon in restraint of trade or in an effort to monopolize a
)
part of trade or commerce. Schine chain Theaters v. United States, 334 U.S. 110, 119 (1948).
12/ Attachment J.
)
)
which such a purchase could be effectuated using the TUEC transmission system.dA/ At the same time, however, TUEC began to
)
express reservations concerning what it contended would be I problems associated with such a purchase. For example, although TUIC acknowledged that the PUCT has a rule that provides for the
)
transmission of cogenerated power by utilities like TUEC, "we are not aware of any applications of this rule where the receiving utility has multiple points of interconnection but does not have
)
a transmission network and integrated not interchange metering Attachment K, p. 2. Without erplaining_why for a control area."
such facts would create a problem, TUIC opined that "this will
)
require extensive study to' determine if a method can be developed I that meets your budget constraints." Ist TUIC offered no l
information concerning the terms under which it would provide
)
partial requirements service.
l By letter dated November 11, 1987, TUEC provided Cap Rock a ,
draft agreement that it contended would " provide for partial requirement purchases and a framework for wheeling and standby
)
services."dA/ A review of the draft agreement, however, demonstrates that no rates for partial requirement service are provided. Instead, the agreement provides that service "will be
)
provided in accordance with terms and conditions of the 11/ Attachment K.
12/ Attachment L.
)
i 1
1
)
'1 I
) _
appropriate rate schedule and/or rider as indicated for each z point of delivery...."EE/
> 1 Since that time, Cap Rock has repeatedly requested that TUIC ]
provide it with the terms and conditions under which TUIC would provide partial requirements, standby and backup services
)
associated with Cap Rock's cogeneration purchase. By letters dated May SEl/ and May 19, 1988, Cap Rock reiterated its request for these rates, terms and conditions from TUEC.E2/
)
By letter dated June 2, 1988, TUIC declined to provide the requested information.11/ While TUIC offered "some of our thinking" on those subjects, it declined to offer any official
)
position.
There are no plans to file any change to our present tariffs b ti[~the next rate request.
Accordingly, it is adch too early to identify
) exactly what, if anything, might be done as such a decision would be made in conjunction 12/ Attachment L, draft " Agreement For Electric Service,"
Paragraph 4.
)
11/ Eis, 34L., Attachment A. In Cap Rock's May 5, 1988, letter to TUIC, Cap Rock repeated its request that TUIC provide it, as quickly as possible, the rates, terms and conditions for partial requirements service from TUEC, and the rates, terms and conditions for standby and maintenance power associated
) with its purchase from the cogeneration project. Idz at p. 2. ;
12/ Attachment D. In addition, Cap Rock noted that the cogeneration project would, in fact, be a benefit to TUEC since TUIC will need additional power in the 1990s and the cogeneration project would eliminate some of TUEC's need for
)
new capacity. Ida at 1. Egg also TUIC's December 22, 1986 Comments, at p. 9, where TUEC states that it has a need for additional generating capacity in the Permian Basin area, in which Cap Rock is located.
11/ Attachment E.
)
L_-_ _-__ _-_ _- _ !
)
)
with the overall tariff structure and not in isolation.
Ist at 1. TUEC has no partial requirements tariff or tariff for standby service to wholesale customers.Ed/
In a meeting in Midland, Taxas on June 24, 1988, TUIC made it clear that it is not interested in facilitating Cap Rock's !
y[ efforts to diversify its power supply and is intent only in retaining Cap Rock as a full requirements customer.EE/ At that meeting, TUIC also stated that it may not be interested in providing control area scheduling and dispatching services associated with the cogeneration purchase. Id at 2.
Most recently, at a meeting in Dallas on August 2, TUEC
)
indicated that, while it would be willing to vary somewhat Cap j Rock's all requirements relati ship to accommodate the cogeneration purchase, TUEC was not prepared to provide rates,
)
terms and conditions for partial requirements and standby service within the time frame necessary for the cogeneration purchase.
j
! TUIC also confirmed its continuing refusal to permit Cap Rock's
)
economy energy purchase from HLP.
TUEC has apparently adopted a strategy of " refusal by negotiation." The rates, terms and conditions by which TUEC
)
would provida partial requirements, standby and other essential services are critical to the viability of Cap Rock's purchase of
) . 14/ Attachment E, p. 2.
11/ This testing is memorialized in a letter from Cap Rock's representative to TUEC's Manager for Marketing Services, dated June 29, 1988. Attachment M.
)
}.
- i p
cogenerated power. The fact that TUEC has not unequivocally stated that it will not provide these services does not change
> the fact that protracted delay in providing the rates, terms and ,
conditions of these services may have the same effect as an unequivocal refusal. Moreover, TUIC's refusal to provide the
) rates, terms and' conditions for partial requirements service is clearly inconsistent with its obligations under the current antitrust license conditions.
) Initially, it is important to note that Cap Rock's status as a full requirements customer does not, indeed cannot, prevent it from purchasing from a QF under PURPA. Cap Rock may, and has
, {
) stated that it wi1L, if necessary, terminate its full requirements contract withAUEC.- More importantly, PURPA does 4
s-not. exempt full requirements customers like Cap Rock from the
) obligations to purchase from QF's under appropriate circumstances. See 18 C.F.R. 5292.303.
TUEC's refusal to identify the rates, terms and conditions [
} under which it would provide Cap Rock with partial requirements service violates the current antitrust license conditions.
Paragraph 3.D.(2)(k) provides that:
) Applicants shall, upon reasonable advance notice, sell full and partial requirements bulk power to requesting Entities in the North Texas area having, on the date of this License, non-aggregated generating capacity of less than 200 MW (including no generating
) capacity) under reasonable terms and conditions....
2 _ - _ - _ _ _ _ _ _ _ .- _
) .. . . .
)
~32-Although TUEC has not unequivocally refused to sell partial
)
requirements service to Cap Rock, its refusal to identify the terms and conditions under which it would sell such service is tantamount to a refusal to sell.lS/ TUEC's statament that it
)
will not file a partial requirements tariff except in the context of an overall rate increase filing before the PUCT is likewise tantamount to a refusal to sell partial requirements service, as
)
TUIC has repeatedly stated publicly that it has no present l intentions to file for such a rate increase in the foreseeable future.
TUIC's refusa112/ to provide coordination and backup
)
services violates Paragraphs 3.D. (2) (c) , (d) and (1), which obligate TUIC to coordinate. resarves, sell or exchange emergency s s.
and/or scheduled maintenance bulk power, and otherwise to
)
facilitate the exchange of bulk power over its transmission i facilities. TUEC's flagrant disregard for its license obligations is a further effort to frustrate, to render less
)
economic, or to kill Cap Rock's purchase of cogeneration power.
TUIC is the only source for such essential coordination and backup services available to Cap Rock, unless TUEC agrees to
)
provide transmission services necessary for Cap Rock to obtain To date, TUIC such essential services from other sources.
) 51/ In Farley, the Board found that the company's unwillingness to say it would share ownership of the unit was equivalent to a refusal to share ownership. 13 NRC at 1083.
12/ Attachment M.
)
)
I
)
appears unwilling to take any action that would facilitate any a
level of competitive independence by Cap Rock. TUEC is
) interested only in retaining Cap Rock as a full requirements I
customer.
Potential entrants to the bulk power market, like cap Rock, q
) should be assured of being able to obtain essential services from )i TUEC on just and reasonable rates, terms and conditions. Cap Rock understood the current license conditions to provide this (l
) assurance. TUEC denies these obligations.
J Cap Rock recognizes that the specific details of backup and coordination services may require some time before they may be
) reduced to writing and filed before the Texas Commission. TUIC's ]1 refusal to date_even to ac3nowledge its obligation to provide {
- . s-such_ services, however, places 7 Cap Rock in the untenable position of not knowing whether it may obtain such services from TUEC, or
)
whether it must look to other sources for such services. The j receipt of such services from other sources, however, would
) obviously depend upon TUEC's provision of necessary transmission services.
)
Cap Rock has stated its agreement to the concept of paying
) reasonably priced demand and energy rates for the standby and partial requirements service that it seeks.11/ Cap Rock needs, however, a firm commitment by TUIC to provide these services.
) Cap Rock believes that the existing antitrust license conditions I 11/ Attachment M, p. 2.
) i y
)
)- .
vare intended to remove this level of uncertainty by unequivocally obligating TUEC to provide these necessary
)
services.32/
IV.
TUEC IS ENGAGED IN NEW AND ANTICOMPETITIVE
)- ACTIONS TO OBTAIN NEW CUSTOMERS AT RETAIL The preceding section demonstrates that TUEC is engaged in determined ef forts. to prevent Cap Rock's entrance into the bulk
) power market and to anticompetitively hinder Cap Rock's ability to compete with TUEC at retail. Even viewtd in isolation, TUEC's conduct warrants a full investigation by the Commission. Cap
) Rock believes, however, that the true impact of TUIC's ,
I anticompetitive activities canamnly e, be understood when viewed in the context of TUIC's current competitive activities at
) retail.5S/
12/ An unreasonable negotiating position can amount to an
). unlawful refusal to deal, notwithstanding a stated willingness to continue discussions. Ess, stat, Town of Massena v. Niacara Mohawk Power Cere., 1980-2 Trade Cases $63,526, p. 76,823-24 (N.D.N.Y. 1980) (a utility cannot assume uncompromising posture if offered reasonable accommodation of its concerns); City of Chanute v. Kansas
) Gas & Electric Cemeanv, 564 F. Supp. 1416, 1419, 1421-22 (D.KS 1983) (determination whether utility effectively refused to wheel depends on reasonableness of its insistence that interconnection contract be revised).
iQ/ An antitrust analysis must be undertaken in the context in
) which the anticompetitive conduct occurred. Midland, 6 NRC at 913; Schine chain Theaters v. United States, 334 U.S. at 119.
)
c
i When comanche Peak is placed in commercial service, TUIC will enjoy an immediate and substantial savings'through accelerated depreciation. In addition, the millions of dollars generated by TUEC's current rates that are currently being poured into its Comanche Peak construction budget will no longer be so committed. Although the cost of the Comanche Peak project is extraordinarily high and would stagger, if not drive under, most utilities in this country, TUIC remains in good financial health.
) Unlike many utilities with major nuclear construction budgets, TUIC has not sought emergency or other rate relief from its retail rate commission. Indeed, TUEC has not filed for a rate
)
increate since 1984.
The activities described below appear to presage a new era
- . 6-of aggressive, cut-throat competition by TUIC in the retail
~
)
market. The ability of utilities like Cap Rock to compete effectively with TUEC at retail is dependent, to a great extent, on the effectiveness of the antitrust license conditions attached
} to TUEC's operating license.
A. TUEC IS SUBJECTING ITS WHOLESALE COOPERATIVE CUSTOMERS TO A PRICE SOUEEZE.
)
TUIC's intent to disable Cap Rock and its other wholesale cooperative customers as retail competitors is manifested in the price squeeze to which it currently is subjecting those customers. TUEC has also recently indicated that it may
)
) . . . .
exacerbate that price squeeze when CPSES goes into commercial
) operation.
TUIC is well aware of the current price squeeze and the harm to which it subjects its customers. Indeed, TUEC has publicly
) touted the price squeeze as one of its means of fostering competition at retail. This price squeeze would require that Cap Rock reduce its revenues from just residential retail customers i by more than $800,000 in order to meet TUEC's retail rates. In other words, if Cap Rock were to lower its residential retail rates to be exactly equal to TUIC's general service retail rates,
) it would incur a revenue short fall of almost $800,000.11/
The price squeeze occurs principally because of the different rate designs empkoyed-by TUEC in its wholesale and
.* k-
) retail tariffs. TUEC's residential retail tariff reflects a seasonal differential; the rates are lower in the winter than they are in the summer.52/ There is no such seasonal
) differential in TUEC's wholesale tariff. For example, Cap Rock takes service under TUEC's Tariff WP.12/ This tariff contains a ratchet that is based upon the preceding twelve calendar months.
In other words, TUEC's wholesale customers' rates in the winter are ratcheted at a level set at the highest summer peak demand 41/ The cost to Cap Rock of making all of its retail rates equal
)
to TUIC's retail rates would be significantly more than the
$800,000 short fall for only the residential retail class.
12/ S.g.t, LL., Attachment N, TUEC retail Tarif f R.
f.2/ Attachment O.
)
. . . . . . ~ . . . ... . .. . . . . . . . .
}
)
i experienced during the preceding twelve calendar months. Simply put, TUEC charges lower rates to its retail customers in the
) winter than in the summer, but charges one rate to its wholesale customers all year round.
The effect of this rata design difference is openly
) acknowledged by TUEC. Denton County Electric Cooperative, Inc.
("Denton County") recently petitioned the PUCT for a rulemaking that would limit dual certification of service territories where
) the result is vasteful duplication of facilities. The petition was occasioned by TUIC's recent aggressive construction of retail distribution facilities in the service territory of Denton County
) and TUEC's representations to Denton County that it was embarking l on a campaign of active sokicibation of retail customers.fA/.
.t--
? \
During the course of the argument on Denton County's petition, '
). the following exchange took place between counsel for TUEC and l Commissioner Campbell of the PUCT:
One of the things that provoked this (petition) is because TUEC Electric entered
) into an advertising campaign and basically around the metroplex type area, advertising its rates. The result of that has been ,
[that] two of the four co-ops affected have filed petitions with this Commission seeking to reduce their rates.
11/ These and the other competitive activities of TUEC with ,
respect to Denton County are reflected in the motion for
) interim cease and assist order filed by Denton County before '
the PUCT on December 16, 1987. 333 Attachment P. The motion for a cease and assist order accompanied Denton ,
County's petition for a rulemaking concerning the dual I certification issue. j 1
) I I
- )
)._._..
~ COMMISSIONER CAMPBELL: But that's because of the winter / summer differential, isn't it, Mr.
Behannan? Let's be honest about it.
)
MR. BOMANNAN: It's because of the differential. It's because that our winter rate is appreciably cheaper than their winter rate. It's the competitive nature. It's not because of the rate structure of their rates at all. They were reducing the revenues.
COMMISSIONER CAMPBELL: But it's because of the structure of your rate, isn't it?
MR. B0HANNAN: That's right. It's caused
)
(them) to be more competitive with our rates.
Attachment F, at pp. 54-55. TUEC is openly engaged in a price squeeze that it acknowledges places its wholesale customers in a 3
- competitive disadvantage in their competition with TUEC at retail. Even conduct formally approved by a regulatory agency maybethebasisofanantpruntviolationwhereagencyapproval
)
conveys no exemption from the antitrust laws. Midland, 6 NRC at 1008 n.447; Farlav, 13 NRC at 1041, n.36. This appears to be part of a new competitive strategy by TUEC to acquire new retail
)
load.
TUEC's apparent new retail strategy also appears to include the use of CPSES costs to exacerbate this price squeeze when CPSES Units 1 and 2 go into commercial service. TUEC has
)
publicly stated that it will seek to increase its retail rates by no more than ten percent when each of CPSES Units 1 and 2 go into
)
commercial service.iE/ TUEC has made no such commitments with respect to its wholesale rates. TUEC's wholesale customers are 1}/ 3,1g Attachment Q, 13.1 also Attachments R.1 and R.2.
)
b
)
). ~
i l
therefore faced with the prospect of having the full costs of CPSES included in their rates while TUEC's retail rates will
) increase by no more than ten percent over the current level. The impact of such actions on TUEC's wholesale customers, many of whom are in direct, head-to-head competition with TUEC, would be )
} devastating. As discussed below, TUEC has already begun to lay i
the ground work for such a strategy. j
.i
) B. TDEC HAS COMMENCED A NEW AND AGGRESSIVE RETAIL COMPETITION FOR ADDITIONAL ELECTRIC IfAD.
In conjunction with its price squeeze, TUIC is now actively I engaged in an aggressive program of constructing new distribution
)
facilities into areas dually-certified for service by
+ u )
distribution cooperative (ad TMEC, areas which heretofore were served only by electric distribution cooperatives. TUIC is also
)
actively mapping additional service territories and planning to expand its facilities into those areas.
Attachment S is a brochure published in January, 1988, by
)
the Texas Electric Cooperatives, a statewide organization of cooperative electric utilities. The purpose of this brochure is to apprise the public of TUEC's new and aggressive progran of
)'
constructing distribution facilities that duplicate the existing facilities of electric cooperative utilities. The brochure states that:
)
TUIC representatives have stated that they have targeted the dual areas of four cooperatives at this time. Those cooperatives are Denton County Electric
)
3 -
)_..._,.__...... . - . . . . . . . . . . . . .
)-
Cooperative, Tri-County Electric Cooperative, Johnson County Electric Cooperative and Hill County Electric Cooperative. In these
)
targeted areas TUIC has announced its plans to " build out" the area indicating that they will construct prospective facilities and then wait for load to develop. In the meantime, electric cooperative distribution facilities are available and are adequate to
)
serve.
It is also interesting to note that TUEC's aggressive building campaign is directed only at those cooperatives in the metroplex (the Dallas / Fort Worth area) that do not purchase wholesale power from TUEC. Brazos Electric
). Power Cooperative is the primary wholesale supplier for the cooperatives targeted by TUIC.
Attachment 5 at Section III (emphasis supplied). The brochure
)
provides specific examples of TUEC,'s. construction activities, as well as picture of duplicative lines run by TUEC. Cooperative i
)
si .s -
representatives have seen service territory. naps and construction ]
plans being prepared by TUIC that are intended to facilitate TUEC's complete duplication of cooperative facilities in other service territories.
) The facts presented in Attachment S are confirmed by the !
motion for an interim cease and assist order filed by the Denton County Electric Cooperative, the facts of which are attested as true and correct by its general manager.55/ Denton County's I notion, filed December 16, 1987, details TUEC's recent campaign I to construct retail distribution facilities into areas not i
) heretofore served by TUIC. Denton County represents that:
11/ Attachment P.
)
l.' . .. .-
)'
TUEC has informed the cooperative that TUEC is also embarking upon a campaign of active
); solicitation of retail customers in areas in which it holds a certificate but presently has no service facilities.
Attachment P at 3. TUEC also apparently stated that its
)
extension of facilities into this and other dual certified areas is part of its "new aggressive approach to secure customer base."
& TUEC also stated that it would give no consideration to
)
cooperative applications for service. & At the same time, TUEC has commenced an advertising campaign including extensive rate comparison. &
)
TUEC is engaged in head-to-head competition with electric cooperative utilities for new load.' While this " build out" strategy, to date, has bees lidrited '
to cooperatives that are not M
wholesale customers of TU, there can be no assurance that such
)
efforts will not be extended to customera like cap Rock, particularly where Cap Rock and other wholesale customers of TUIC are already sabject to a price squeeze. TUEC appears settled on
)
a course of aggressive retail competition to acquire as much new load as possible, presumably to help spread the cost of the ,
Comanche Peak Units should they be licensed and permitted in
)
service.
i I
)
l i
)
i
^*
) .<
)
)
v.
RECOMMENDED REMEDY As noted at the outset of this document, Cap Rock does not
)
seek protection from fair competition. Nor does cap Rock ask this commission to address rate or other matters that are within the province of the PUCT. What cap Rock seeks is enforcement by
)-
this Commission of the obligations already imposed on TUEC by the existing antitrust. license conditions. To the extent that there is any question or ambiguity with respect to the right of Cap
)
Rock to obtain the kinds of transmission, coordination and other services identified in these comments under the existing license conditions, Cap Rock asks thatrehe license conditions be i
.* h l
)
clarified to make those obilgations explicit and unequivocal. j t
Cap Rock fully expects that, upon completion of its activities before this Commission, TUEC will turn its full
)
attention to active, aggressive and powerful retail competition with, as its goal, the acquisition of as much existing and prospective retail electric load as possible. The relief here I
i f
) )
1
> l 1
A .____---_____-__D
)
)
sought by Cap Rock is critical to its ability, and the ability of
)
other competitors of TUIC, to compete effectively and fairly with TUIC.
Respectfully submitted,
)
f./
Robert A. O'Neil
/
B' Me '
ohn Michael Adragna
~
Attorneys for Cap Rock Electric Cooperative, Inc.
Miller, Balis & O'Neil, P.C.
1101 Fourteenth Street, N.W.
Suite 1400 , t--
)
Washington, D.C. 20004 .f A-(202) 789-1450 .-
)
August 9, 1988
/
)
)
)
____i_____.___________
]
)
l
. l
)
UNITED STATES OF AMERICA BEFORE THE j
NUCLEAR REGULATORY COMMISSION
) Texas Utilities Electric )
Docket Nos. 50-445A, Company, at AL, ) 'J j
Comanche Peak Steam Electric ) 50-446A Station, Units 1 and 2 )
)
CERTIFICATE OF SERVICE i I hereby certify that a copy.of the foregoing " Comments Of Cap Rock Electric Cooperative, Inc. Concerning Significant Changes In Licensee's Activity That Warrant An Antitrust Review i
At The Operating License Stage" was served by hand delivery to: l Cecil O. Thomas, Jr. William Lambe Office of Nuclear Regulations
} Chief Policy Development Technical U.S. Nuclear Regulatory l
Support Branch Commission -
U.S. Nuclear Regulatory ,
Mail Stop 12E-4 Commission one White Flint North Mail Stop 12E-4 , s_ 11155 Rockville Pike One. White Flint North 'a w Rockville, MD 20852
). '
11155 Rockville Pike -
Rockville, MD 20852 and by first class mail, postage prepaid on the 9th day of
) August, 1988 to: ,
Peter B. Bloch, Esquire Chairman Administrative Judge Atomic Safety and Licensing Atomic Safety and Licensing Appeal Board Panel U.S. Nuclear Regulatory Board
) U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 l
Washington, D.C. 20555 Ellen Ginsberg, Esquire i Dr. Walter H. Jordan Atomic Safety and Licensing Administrative Judge Board Panel U.S. Nuclear Regulatory
) 881 W. Outer Drive Commission l Oak Ridge, TN 37830 Washington, D.C. 20555 j i
)
M 1
3 4
3 Stuart A. Treby, Esq.
Office of the Executive Legal Elizabeth B. Johnson Director Administrative Judge U.S. Nuclear Regulatory Oak Ridge Natural Laboratory Commission P. O. Box X, Building 3500 Washington, D.C. 20555 Oak Ridge, Tennessee 37830 Thomas G. Dignan, Esq.
Chairman William E. Eggeling, Esq.
Atomic Safety and Licensing O Board Panel Ropes & Gray U.S. Nuclear Regulatory 225 Franklin Street Boston, MA 02110 Commission Washington, D.C. 20555 Mr. James E. Cummins Roy P. Lessy, Jr., Esq.
O Resident Inspector Wright & Talisman, P.C.
1050 17th Street, N.W.
Comanche Peak S.E.S Washington, D.C. 20036-5566 c/o U.S. NRC P. O. Box 38 Glen Rose, Texas 76043 Mrs. Juanita Ellis President, CASE O Mr. William L. Clements 1426 S. Polk Street Docketing & Service Branch Dallas, Texas 75224 U.S. Nuclear Regulatory Commission Anthony Z. Roisman, Esq.
Washington, D.C. 20555 e Executive Director Trial Lawyers for Public Nicholas S. Reynolds, Esq. Justice O 2000 P Street, N.W., Suite 611 William A. Horin, Esq.
Bishop, Liberman, Cook, Washington, D.C. 20036 Purcell & Reynolds Billie Pirner Garde, Esq.
1200 17th Street, N.W.
Washington, D.C. 20036 Citizens Clinic Director Government Accountability O Projects Robert A. Wooldridge, Esq.
Worsham, Forsythe, Sampels 1901 Que Street, N.W.
& Wooldridge Washington, D.C. 20009 2001 Bryan Tower Suite 2500 Nancy Williams Dallas, Texas 75201 Cygna Energy Services, Inc.
O 101 California Street Renea Hicks, Esq. Suite 10000 San Francisco, CA 94111 Assistant Attorney General Environmental Protection Div. Mr. Lanny A. Sinkin P. O. Box 12548 Christic Institute O Capitol Station 1234 North capitol Street Austin, Texas 78711 Wastington, D.C. 20002 0
---L_--_____________________ _
)
4 9
)^ j Dr. Kenneth A. McCollom Administrative Judge ;
1107 West Knapp i
)
Stillwater, Oklahoma 74075 /
Geary S. Mizuno, Esq. 1 office of the Executive Legal Director U.S. Nuclear Regulatory
)
Commission Washington, D.C. 20555 Joseph Gallo, Esq. ,
Isham, Lincoln & Beale l 1120 Connecticut Ave., NW {
)
Suite 840 Washington, D.C. 20036 Mr. Robert D. Martin Regional Administrator, i Region IV
) U.S. Nuclear Regulatory i Commission 611 Ryan Plaza Dr., Suite 1000 Arlington, TX 76011 -*
g
)
A John Michael Adragna F Miller, Balis & O'Neil, P.C. 4
) 1101 Fourteenth Street, N.W. l
- Suite 1400 i Washington, D.C. 20005 (202) 789-1450 I i
l
)
)
i l
) l i
I
)
\
) UNITED STATES OF AMERICA l BEFORE TEE NUCLEAR REGULATORY COMMISSION 1 l
Texas Utilities Electric !
)
Company, 11 Alt 'l
) ) Docket Nos. 50-445A Comanche Peak Steam Electric ) 50-446A Station, Units 1 and 2 )
]
1
}
REPLY OP CAF ROCK ELECTRIC COOPERATIVE, INC. I
) TO TEE COMMENTS OF .
TEna UTILITIES ELECTRIC CONDANY Cap Rock Electric Cooperative, Inc. (" Cap Rock") hereby
). submits its reply to Texas Utilities Electric Company's ("TUEC")
responding comments, dated October 21, 1988 1/ TUEC's unsigned response not only concedes that it is violating its license
) conditions, but states unequivocally TUEC's intention to continue to do so.1/ '
The principal facts alleged in Cap Rock's comments are not f
). in dispute. TUEC does not deny that it refuses to provide Cap i i
Rock the rates terms and conditions of partial requirements and other essential services. TUEC contends that it has no j
) obligation to provide such essential information until Cap Rock has. terminated its full requirements contract with TUEC. TUEC does not deny that it will not permit Cap Rock to engage in
) virtually the identical economy energy purchase in which other customers of TUIC are engaged, even though the proposed purchase i
) 1/ TU Electric Response to Comments of Cap Rock Electric Cooperative, Inc., dated October 21, 1988 ("TU Res.").
1/ See Section I, infra.
i
) l 1
)
2
) from Houston Lighting and Power Company ("HLP") would economically benefit TUEC as well as Cap Rock. In TUEC's view, the license conditions do not obligate it to act non-
) discriminatorily with respect to its competitors. TUEC also reiterates its demand that Cap Rock terminate its full requirements contract before TUIC will consider whether Cap Rock
) has any rights under the licenso conditions.2/ Nor does TUEC deny that it is currently subjecting Cap Rock and other cooperative wholesale customers to a price squeeze. Instead TUEC
)
makes the obtuse and inapposite argument that Cap Rock can file to change Cao Rock's rates before the Texas Public Utility Commission ("PUCT") .
)
TUEC's response to Cap Rock is a manufacture of matters that are, at best, irrelevant, and that are mainly incorrect or misleading. Each of TUEC's allegations is addressed in turn,
)
below. The first contention addressed, however, is the fallacious premise of TUEC's comments: that TUEC has no obligation to Cap Rock under the license conditions as long as
)
Cap Rock is a full requirements customer. This supposed restriction on the reach of the license conditions is entirely the Company's fabrication. This Commission approved no such
)
restriction, and no such restriction exists in the license 1/ TUEC's comments do not make it clear whether Cap Rock must
)
merely notice the termination of its contract, or whether the contract actually must be terminated. The contract requires that Cap Rock give TUEC three year's written notice of the termination of the contract.
)
l N ]
1 1
conditions. The guarantees against TUEC's abuse of its monopoly
)
power supposedly provided to future competitors like' Cap Rock by the license conditions are worthless if TUEC can " write in" such
)
restrictions as may be convenient to the Company.each time a potential competitor seeks protection under the license conditions.
) Cap Rock believes that TUEC's on-going anticompetitive conduct warrants the searching scrutiny of a full hearing before an operating license is issued for the comanche Peak nuclear
)
units. Cap Rock (and no doubt TUEC) recognize, however, that a final Staff recommendation concerning the changed circumstances determination is unlikely to be made for several years. The most
) recent information available to Cap Rock indicates that the first Comanche Peak unit will not be placed into commercial service until 1991 at the earliest. Cap Rock intends to pursue an
) immediate determination of TUEC's. existing obligations under the license conditions. Cap Rock will therefore shortly file a petition with the Director of Nuclear Reactor Regulation to
) enforce the antitrust license conditions and to receive a definitive determination of TUEC's obligations.
) I.
TUEC IS OBLIGATED BY TIE LICENSE CONDITIONS TO PROVIDE THE REOUESTED SERVICES TO CAP ROCK TUEC's refusal to provide Cap Rock the rates, terms and
)
conditions of partial requirements and other essential services
)
)
1 it is obligated to provide under the license conditions until cap Rock terminates its full requirements contract is itself a violation of the outstanding antitrust license conditions. Nor
)
is there any legitimate justification for TUEC's refusal to
~
provide the rates, terms and conditions of service; certainly, TUEC has provided none. The obligation of a monopolist to
)
provide service necessarily includes the obligation to tell the potential purchaser the rates, terms and conditions of the requested services before the potential purchaser must execute a
)
contract. The antitrust laws prohibit TUEC from acting in any manner to hinder or to disadvantage competitors.1/ TUEC's position in this matter is a clear attempt to disadvantage and to hinder Cap Rock in its efforts to become a competitor of TUEC in the bulk power market.1/
l A/ See Cap Rock's Comments at 14.
1/ TUIC's demand that Cap Rock terminate its full requirements contract is itself unclear. TUEC states that "when and if I Cap Rock ceases to become [ sic) a full requirements customer
) of TU Electric, TU Electric will treat Cap Rock the same as all other similarly situated entities...." TU Res. at 4. Cap Rock's current contract requires that it give TUEC three years' written notice of the termination of the contract in the absence of a change in the full requirements rate. Does TUEC intend that it will not provide the relevant rates,
). terms and conditions of service until the notice of termination or until the contract itself actually terminates?
Cap Rock does note that in TUEC's reply, the Company, for the first time, acknowledges that it is indeed obligated to
) provide the requested services at some time. Until its comments before this Commission, TUEC had refused formally to acknowledge that it was even obligated to provide the services that Cap Rock has requested.
)
)
I
l i.
l
)
A. .The License Conditions Apply to Full Requirements Customers of TUEC.
TUEC denies that the license conditions impose any F ebligation with respect to Cap Rock as long as Cap Rock is a full requirements customer _of TURC. 1/ This is a threshold question 1 that goes to the heart and the effectiveness of the license :
) conditions.2/ TUEC's position is flatly wrong and indefensible I
under the license conditions and relevant antitrust law, 1/
)
f/ TU Res. at 2. TUEC also contends that neither its license conditions nor the antitrust laws " require TUEC to cancel,
)
change.or otherwise amend cap Rock's power purchase power agreement." Id. at 2. As discussed below, Cap Rock does not contend that its contract with TUEC can or should be modified by the license conditions. Cap Rock fully intends to notice the termination of its full requirements contract when and if the economics dictate the wisdom of such a
)
decision. Cap Rock does contend, however, that TUEC's license conditions obligate the company not to obstruct cap
. Rock's acquisition of bulk power from sources other than TUEC by refusing to provida essential services and the rates, terms and conditions of such service, and that the
. license conditions further obligate TUEC not to favor some
) competitors over others in the provision of essential services like the transmission and scheduling services necessary for an economy energy purchase from HLP.
2/ Cap Rock notes that TUEC has Det said that it will sell essential partial requirements and other services to Cap
) Rock ones Cap Rock's full requirements contract is terminated. TUEC says only that, until the contract is terminated, it has no obligations to Cap Rock under the license conditions.
l 1/ If TUEC's interpretation is considered valid, then the
) license conditions are fatally flawed and should be amended. As demonstrated in cap Rock's August 11, 1988 comments, TUIC is engaged in activities that are I inconsistent with the antitrust laws.
) '
O TUEC's obligations under the license conditions are to O
" Entities," as defined in Paragraphs 3.D. (1) (c) and (d). TUEC does not deny that cap Rock is an " Entity" as defined in those O
p ragraphs. TUEC nevertheless does deny that Cap Rock is entitled to the guarantees afforded an " Entity" by the license i
conditions. In other words, TUEC is knowingly and willingly vi lating its Comanche Peak license conditions. Further, TUEC O
has stated in an unsigned pleading before this commission that it intends to continue to violate those license conditions.
g The criteria by which an " Entity" is determined, and the rights accorded one who meets those criteria, were negotiated and agreed to by TUEC more than eight years ago. Thsre is no C)'
pr vision in the license conditions that exclude from the projections accorded " Entities" full requirements customers of TUEC. Indeed, as sub-paragraphs (c) and (d) and subsequent O paragraphs of the license conditions make clear, the rights here at issue were obviously intended specifically to benefit electric utilities that were, at the time, full requirements customers of g TUEC and other utilities.
Paragraph 3.D. (1) (c) defines an Entity as:
an electric utility ... ownine, oeeratine or contractually controlling, or eremosine in g coed faith to own, oeerate or contractually control. facilities for eeneration of electric cover and enercy, provided, however, that as used in (certain specified J
paragraphs], " Entity" means an electric utility which is a person, a private or o public corporation, a governmental agency or authority, a municipality, a cooperative, or an association ownine or emeratina, or O
)'
) nrecomina in coed faith to own or enerate, facilities for generation, transmission and/or distribution'of electric power and energy. (emphasis supplied)
Sub-paragraph (c) is clearly forward-looking. The license
)
conditions are intended to protect not only the interests of utilities with generation, transmission and/or distribution facilities at the time the license conditions were issued, but
)
also those utilities that subsequently obtained such facilities.
The most obvious, as well as numerous, group of utilities in TUEC's service territory without generation on the date of the
)
issuance of the license conditions were full requirements customers like cap Rock. A full requirements customer that
)
otherwise meets the criteria of an " Entity" is entitled to the services guaranteed an " Entity" once it can demonstrate that it proposes in good faith to own, to operate or contractually to control the requisite facilities.
)
TUEC is explicitly obligated, upon reasonable advance notice, to sell full and martial requirements service to
" requesting Entities in the North Texas Area having, on the date of this license, non-aggregated generating capacity of less than 200 MW (including no generating capacity) under reasonable terms and conditions. . . . " Paragraph 3.D. (2) (k) . Cap Rock, which is an Entity in the North Texas Area, had no generating capacity on the date on which the license conditions were made effective. TUEC
)
therefore must sell partial requirements service to Cap Rock, or be in violation of its license conditions. To imply an exception
)
l i
y' for full requirements customers of TUEC not only does violence to j the literal obligations of the paragraph, but renders the !
provision' entirely ineffective as a means of protecting potential
) entrants into the bulk power market from the improper exercise by TUIC of its monopoly power over partial requirements services.
The obligation to sell partial requirements service to full
) requirements customers likewise, of necessity, includes the obligation to provide the rates, terms and conditions under which such partial requirements service will be provided. TUIC can not
) physically provida partial requirements service to an electric utility that has a good faith intent to acquire, but has not yet acquired, generating facilities. Yet the license conditions do
) not limit TUEC's obligations to "former full requirements customers." To have a.iy meaning at all, the license conditions must require, at a min'num, that TUEC provide the rates, terms
) and conditions of that service and otherwise not attempt to obstruct the acquis". tion of such generating facilities. This is not only the most reasonable interpretation of the language, but
) the only interpretation that fosters the goal of the license
).
)
)
_l y
)- conditions of protecting potential entrants to the bulk power ma'rket.2/
j similar obligations exist with respect to emergency, coordination and transmission services. TUEC must: }
)- j
" connect with, coordinate reserves, and sell,.
purchase or exchange emergency and or/ scheduled maintenance bulk power with any Entities in the North Texas Area;"19/
" participate in and facilitate the exchange !
of bulk power by transmission over (TUEC) transmission facilities between or among two or more Entities in the North Texas Area with.
which (TUEC is] connected;"11/ and
)
"not refuse to provide such transmission service merely because the rates to be charged therefore are the subject of dispute with such Entity."12/
) TUIC.not only is obligated to provide such services to any Entity in the North Texas Area, but it is also obligated to plan its transmission system so as to maintain adequate transmission
)
2/ As discussed below, no legitimate purpose is served by
)' requiring the termination of a full requirements contract before providing the rates, terms and conditions under which l partial requirements service will be sold. Moreover, Cap Rock is fully willing to notice the termination of its full requirements contract once it knows what it is letting itself in for with respect to partial requirements service
). from TUIC.
12/ Paragraph 3.D. (2) (c) (emphasis supplied).
11/ Paragraph 3.D. (2) (i) . This obligation would appear to belie TUEC's contention that it is not obligated to facilitate Cap
) Rock's economy energy purchase from HLP.
12/ Id.
) _.
capacity'to meet the future transmission and partial requirements needs of Entities in the North Texas Area.12/
TUEC has cited no provision of the license conditions that exempt full requirements customers from the projections provided by the license conditions; no such provision exists. To the contrary, TUEC is explicitly obligated to provide the services requested by Cap Rock.
If TUEC now believes that the conditions to which it agreed almost a decade ago are somehow unreasonable, it should seek to amend those conditions before this Commission.
)
In such a proceeding, Cap Rock, and no doubt other beneficiaries of the license conditions, would propose amendments that would prevent the kind of abuse TUEC currently is perpetrating. But
) TUEC cannot unilaterally abandon obligations imposed by its license conditions. As the following discussion makes clear, there is no legitimate reason for TUCC's refusal to provide Cap )
) Rock the rates, terms and conditions under which the Company will I provide the requested services.
i B.
)- No. Legitimate Purpose Is Served By Requiring Cap Rock to Terminate Its Full Requirements Contract With TUEC Before the Company Provides the Rates, Terms and Conditions Un61r Which It Will Sell Partial Requirements and other Essential Services; TUEC's Insistence on such Is a Further Improper Exercise of Its Monocolv Power.
}
TUEC refuses to provide Cap Rock the rates, terms and '
conditions under which the Company will sell the services TUEC is
)
12/ Paragraph 3.D. (2) (j) (a) .
1 I
) I
) committed to provide under the license conditions.- The Company apparently will not consider providing this essential information until Cap Rock terminates if full requirements contract with
} TUIC. TUEC has not attempted to justify this extortionate position. There is no justification for TUEC's obdurate ;
position.
)
TUEC contends that, as the Company's rates are regulated by ;
the PUCT, Cap Rock "is in as good a position as TU Electric in speculating what rates and charges the PUCT may establish in the
)
future."1A/ TUEC's position is preposterous.11/ TUEC, not Cap Rock or the PUCT, must initiate any rate filing with the PUCT.
Although the PUCT has ultimate authority over the rate, rate i design and the terms and conditions of service, TUEC is the sole source of the cost information that must form the basis for any rate and the party that must propose cost allocation and rate design methodologies.11/
) 1A/ TU Res at 3.
12/ TUEC apparently considers providing Cap Rock the rates under which it is willing to sell partial requirements and other essential services to be "the making of economic decisions for Cap Rock," Letter from Darrell Bevelheymer to Steven E.
) Collier, dated October 20, 1988, at 1 ("Bevelhaymer-Letter").
11/ The PUCT would no doubt give serious if not dispositive weight to the rate design proposed by the Company. Indeed, that commission has allowed to stand a summer /vinter rate
) differential for TUEC in the face of its open acknowledge-ment that the rate design imposes a severe price squeeze on wholesale customers like Cap Rock. See Cap Rock's initial comments, pages 35-39.
)
V 3
I The provision of rates, terms and conditions by an electric wholesale supplier prior to actual approval by the relevant regulatory authority is not novel. such a practice is a normal
}
and accepted course of doing business in the electric utility industry. Each side recognizes that, although the rate, terms and conditions are subject to final approval by the relevant
)
regulatory agency, the regulatory agency is likely te approve a j reasonable, nondiscriminatory and cost justified rate, ;
particularly if the customer in question does not oppose the l
company's filing. Each side also recognizes that 'no customer can plan future bulk power transactions without knowledge of the rates, terms and conditions of essential services. !
)
The case before this Commission is even more clear. Here, TUEC has an unequivocal obligation to provide the services in !
question. Cap Rock is unaware of any precedent for the
)
proposition that, although an electric utility must provide service, it does not need to provide the rates, terms and conditions of that service in time to permit the potential
)
customer to decide whether and to what extent it wishes to purchase that service. For example, if a potential customer knew the rates under which a seller would provide coordination and
)
transmission services, the potential customers could well decide that less expensive coordination services could be obtained by purchasing a combin4*. ion of transmission service from that seller
)
and coordination services from another utility. This is how a
)
i:
> truly competitive bulk power market would operate. Without some
. knowledge of the relative costs of the various services from TUEC, such'a decision is impossible.
) TUEC's contention that Cap Rock can "make.its own decision with respect to its future power and' energy resources" on the basis of public information and other rates on file for other
) services is absurd. Would a purchaser decide to buy a car without knowing the sticker price on the basis of an estimate of the costs of steel, plastic and rubber? Cap Rock is entirely
) willing to make'its own economic decisions, but it needs to know i the costs of those decisions; it cannot know the cost without knowing the rates that TUEC will demand.
> The need to know the rates that TUEC intends to charge for essential services is even more critical in this instance. The Company has made it clear to Cap Rock that, if it is compelled to
),
provide the services sought by cap Rock, it may well attempt to impose novel rate schemes that are based on principles other than the cost of providing service. Cap Rock believes that TUEC may 1 well propose rates for these essential services that bear little or no relation to the Company's actual cost of providing the service.12/
T TUEC has not alleged in writing that there is any great burden in providing the rates and other information sought by Cap l
)' 12/ If TUEC indeed makes good on this threat, such rates could themselves be further evidence of TUEC's anticompetitive conduct.
)
1)
)
I
) . Rock.lg/ Indeed, the burden is minimal. In this era of computerization, the calculation of rates for a particular service is a relatively short and inexpensive process. More
) importantly, TUEC is obligated by its license conditions to a
provide certain services. That obligation necessarily includes j the obligation to provide the rates, terms and conditions for
). those services, regardless the cost of preparing those rates. j The Federal Energy. Regulatory Commission ("FERC")-determines the reasonableness of the rates, terms and conditions of service
)
) for numerous electric utilities. The FERC has rejected the contention that the burden and cost of preparing rates justified exempting a utility from the obligation to sell those
) services.12/ In Ooletherne, the FERC rejected the argument that it would be unduly burdensome and costly for a generation and transmission cooperative to prepara rates for back-up and related
) services it was obligated to sell under PURPA.2,Q/
) 4 11/ Cap Rock understands that TUEC may have suggested that the preparation of the requested rates would be an undue burden i in meetings with the Staff of this Commission. The Company's refusal to put such contentions in writing, or to l
)
quantify the purported burden, illustrates the speciousness '
of this contention.
12/ Oclatherte Power Corporation, et. al., 32 FERC 1 61,103 (1985), rehearina denied in relevant eart, Oclatheroa Power Corneration, 35 FERC 1 61,069 (1986), aff'd Greensboro D mher Co. v. FERC, 825 F.2d 518 (D.C. Cir. 1987).
2.Q/ Public Utility Regulatory Policies Act of 1978, 16 U.S.C.
55 824a-3, 796(17-22)(1982).
)
[
{
i
) (D)eveloping retail rates for QFs should not be burdensome for Oglethorpe. It now has a staff which develops rates for purchases from QFs and its wholesale rates to the EMCs.
This staff should certainly have the ;
expertise to develop retail rates. Moreover,
)
oglethorpe has only entered into centracts '
with only a few QFs since the Consission's regulations were promulgated in 1980.
Petitioners' assertion that a whole new retail rata division is necessary to serve a j
)
handful of back-up power customers is not persuasive.
3 32 FERC at pp. 61,286-87. The FERC's decision acknowledges two obvious facts: 1) for most electric utilities, the burden of 1
)
preparing rates is not great, and 2) regardless the burden, the obligation to sell certain services carries with it the obligation to prepara and to provide the rates, terms and
)
conditions under which those services will be provided. TUEC is one of the largest, if not the largest, investor-owned electric utility in the Country. The burden on TUEC of preparing the l 3
rates, terms and conditions under which it will provide the i services it must, under the license conditions, provide can not be considered undue.11/ I
) 1 Cap Rock is attempting to acquire an independent source of !
I generating capacity. Cap Rock cannot complete those negotiations and assemble a new bulk power resources plan without knowing the 3
costs of essential partial requirements, transmission, emergency i 4
11/ Notwithstanding TUEC's obligation to provide such rates,
) Cap Rock would be willing to relieve TUEC of this burden if (
TUEC would provide the necessary cost of service and other information and stipulate that it will accept the results of Cap Rock's cost of service, rate design and other efforts.
)-
I L j 1
\
l and coordination services. No business entity can reasonably be expected to make business decisions, negotiate a multi-million dollar-acquisition of generating capacity, and put into place
)
plans for substantially altering its historical business ,
~
i relationship as a captive customer without knowing the costs of i the commodities essential to its business. Cap Rock believes
)
that the license conditions were intended to prevent precisely I this kind of abuse. '
) C. The Antitrust Laws Prohibit Unreasonable Barriers to Competition Such As TUEC's Refusal to Provide the Rates, Terms and Conditions of Essential Services.
TUIC's refusal to provide the rates, terms and conditions of
}-
service before Cap Rock terminates its full requirements contract is the quintessential and unlawful use of monopoly power to disadvantage actual (in the retail market) and potential (i'n the
)
bulk power market) competitors. The unlawful use of monopoly power has been defined as acts " derived from (the monopolist's]
power in the market or its size ... acts which could only have
)
been performed by one with the requisite power." Teler corn. v.
135, 510 F.2d 894, 926 (10th Cir.), cert. dismissed, 423 U.S. 802 (1975). See Barkav Photo, aggIR, 603 F.2d 275. TUEC's ability
)
successfully to refuse to quote Cap Rock rates for essential services is derived from the Company's unquestioned monopoly power over partial requirements and other essential bulk power
)
services.
)
I l
)
In a truly competitive bulk power market, TUIC would want to quote-the prices at which it would sell partial requirements and ;
other essential services in order to compete effectively with:
)
other potential suppliers. In.the bulk power market as it
. currently exists, TUEC does not have-to compete, relying instead-on its monopoly power to force Cap Rock to deal for such. )
l
).
services, if at all, only with TUEC. TUEC is well aware that-without the rates terms and conditions'for partial. requirements and other essential services, Cap Rock is unable to assemble a i
) bulk power supply package that includes electric utilities other than TUEC. The Sherman'Act " requires that the choice between (alternatives) result from unconstrained competition on the
) merits."22/ ,
I TUEC's position is that it may provide the required services [
at some time (in some as yet unspecified form and at yet
) unspecified rates), but that it is not obligated to provide the rates, terms and conditions under which it will provide such services until, in effect, it is too late for Cap Rock to pursue
) alternative suppliers of bulk power. Such a position is itself a violation of the antitrust laws, an unlawful refusal to deal.
The law is well settled that " agreeing to deal on unreasonable
) ,
i 12/ Fishman v. Estate of Wirtz, 807 F.2d 520, 537 (7th Cir.
1986). In Wirtz, the defendants, through the economic leverage provided by their monopoly of stadium. facilities, succeeded in driving out all coupatition for the ownership
). of a professional basketball franchise. "They used a i monopoly in one market to foreclose competition in another
-- a classic violation of the antitrust laws." Id. at 536.
) l
1
) terms is merely a type of refusal to deal." Fishman v. Estate of Wi rt z , gngra, 807 F.2d at 541.
Nor does the fact that TUEC has j not yet succeeded in excluding Cap Rock from the bulk power i
) market immunize TUEC's anticompetitive conduct. 231, 12g2, Lorain Journal Co. v. United States, 342 U.S. 143, 153-54 (1951),
j Indeed, Section 105 of the Atomic Energy Act was: !
{
) !
designed by Congress to ' nip in the bud any incipient antitrust situation,' albeit via the NRC ;
Creek I, relicensing review process. W211 I suora, 1 NRC at 572 (quoting the (
Joint Committee Recort, p. 14).
) Midland, sucra, 6 NRC at 912. TUEC's refusal to provide the rates, terms and conditions under which it will sell the partial requirements and other essential services that it is obligated to
)
provide under the license conditions is a patently anticompetitive act and, Cap Rock believes, is clearly in violation of the existing license conditions. If the license
)
conditions do not preclude such anticompetitive action, they must be amended to close this obvious gap that permits TUEC to maintain a situation inconsistent with the antitrust laws.
)
II.
TURC'8 MANY AND YARIED CONTENTIONS CONCERNING
) THE MOTIVATIONS INDEPENDENT OF TUEC 1REBERIND CAP ROCE'8 EFFORTS TO BECOME MISLMADING, INCORRECT AND IRRELE V ANT _
As previously noted, TUEC has chosen to ignore the issues raised in cap Rock's comments. Virtually all of the facts
)
presented in Cap Rock's comments stand unrebutted. Instead, TUEC
)
)
has presented a laundry list of contentions and allegations that are apparently intended to convince this Commission that cap Rock's desire to become independent of TUEC is misguided and ill-
)
conceived. Cap Rock will address each of the allegations in TUEC's disjointed reply. At the most basic level, however, each of TUEC's allegations is irrelevant. A truly competitive and free market is exemplified by the right of each participant to make its own business decisions and take its own business risks, regardless whether those decisions and risks are perceived to be
)
wise or unwise by its competitors. Cap Rock is confident that the course it has chosen is the correct course. Though TUEC feigns concern that Cap Rock may be mislead in this endeavor, Cap
)
Rock doubts that it is truly Cap Rock's future well-being that TUEC has in mind.
)
A. Cap Rock Does Not Seek Preferential Treatment; It Seeks No More than Its Richts Under the License Conditions.
TUEC's principal defense is that cap Rock's complaint that
) TUEC is refusing to honor its license conditions commitments to provide Cap Rock partial requirements and other essential services is:
) nothing more than an attempt on its part, and on the part of Panda Energy Corporation
(" Panda"), to use this Commission's CPSES licensing proceeding to obtain preferential treatment.
) TU Res. at 1. TUIC's allegations with respect to Panda are discussed below. TUEC's contention that Cap Rock's request for
)
)-
)
the services that TUEC must provide under the license conditions is a request for " preferential treatment" reflects TUEC's lack of concern for, and lack of commitment to honor, its obligations
). under the license conditions. What TUEC calls " preferential treatment" is no more than the rights guaranteed Cap Rock under the license conditions. TUEC contends that Cap Rock is asking
)
this Commission to interfere with the enforcement of Cap Rock's current full requirements contract with TUEC:
by permitting Cap Rock to seek power and
). energy from other sources while continuing to demand the obligation of'providing full requirements service by TU Electric ... or perhaps by seeking the premature termination of'the agreement.
TU Res. at 2.
) This of course is not, and never has been, Cap Rock's position.
Cap Rock's position is that TUEC can not 1
maintain that it is improper for Cap Rock to purchase economy
) energy from HLP while a full requirements customer of TUEC, but it is alright for other TUEC full requirements customers to engage in the very same transactions. As demonstrated in cap
) Rock's initial comments, such conduct is an improper exercise by TUEC of its monopoly power to advantage certain customers and to disadvantage other customers.22/ Although TUEC demands for
) itself this right, the license conditions and the antitrust laws deny it such life and death power over its competitors. *
)
22/ Cap Rock Comments at 24-27.
)
I
y
)- The contention that Cap Rock somehow seeks a " premature termination" of its current contract is flatly wrong.21/ Cap Rock has not requested, nor does it intend to request, that this
) Commission take any action with respect to the termination of its contract; TUIC cites no statament by Cap Rock to the contrary.
Cap Rock will follow the procedures established by that contract
)
when it decides to terminate its contract.
TUEC contends that its refusals to permit Cap Rock's purchase-of economy energy from HLP and capacity and energy from
)
Panda are not subject to this Commission's scrutiny because t
neither the license conditions nor the antitrust laws require TUIC to cancel, to amend or to change its full requirements
) contract with Cap Rock. Under this interpretation, an entire class of electric utilities in the North Texas Area, full requirements customers of TUEC, would be written out of the
)
projections afforded " Entities in the North Texas Area" by the license conditions. As long as TUEC refuses to cooperate with existing full requirements customers, they will be compelled to
)
]
remain captive customers of TUEC. Such a result would do nothing !
i to mitigate the monopoly power of TUIC over essential services or to protect potential new entrants into the bulk power market from
)
TUEC's abuse of that monopoly power, Put another way, this Commission will have done little, if anything, to ensure that TUIC is not maintaining a situation ins nsistent with the
)
2A/ TU Res. at 2.
i
) .
1
)
antitrust laws. There is absolutely no support for this proposition in the language of the license conditions. See Section I.A, aggra. If TUEC's interpretation were accepted as
) correct, this' Commission would be obligated to amend the license conditions to cure TUEC's blatant violation of the antitrust laws.
) TUEC's contention that, by_ seeking to purchase baseload generating capacity from Panda, Cap Rock seeks to " cherry pick" '
is likewise wrong.23/ Cap Rock seeks no more than what it is
) guaranteed under the license conditions and the antitrust laws.
As demonstrated in Section I.A, aggra, the license conditions clearly anticipate that electric utilities without generating
)
facilities at the time of the issuance of the license conditions will acquire generating facilities and that TUEC is obligated to sell such electric utilities the services essential to the acquisition of such facilities.
)
If the license conditions do not impose such obligations on TUEC, they are meaningless. TUEC's statement that it "has no intention of engaging in any such
)
transaction"21/ is a declaration of its refusal to honor the 3 license conditions. )
)
21/ TU Res. at.4 n. 2. Cap Rock notes that it is the prerogative of independent utilities, like TUEC and the other ERCOT members, to seek the most economical sources of power.
)
25/ TU Res. at 4 n. 2.
)
)
) B.
Regulation by the Texas Public Utilities Commission Does Not Render TUEC's Admitted " price Squeeze" Conduct andAs Evidence of TUEC's Anticompetitive Irrelevant Intent.
) TUEC does not deny that it is currently subjecting Cap Rock to a " price squeeze."
Instead, TUEC contends that regulation of the relevant rates by the PUCT renders the existence of the price
) squeeze irrelevant to this Commission's determination of whether the Company is maintaining a situation inconsistent with the antitrust laws.22/ TUEC is wrong.
The Atomic Safety and Licensing Appeal Board
) (" Board") and the courts have repeatedly rejected this contention.2a/ In Farlev,12/ the Board laid to rest TUEC's contention:
)
It is too late in the day for the ar that state and federal regulation - gument even with respect to electric utilities -- bring a form of dispensation from the antitrust laws.
13 NRC at 1040'. Egg also 13 NRC at 1073-74.
Cap Rock does not contend that this Commission should remedy TUEC's price squeeze.
Cap Rock has sought, and will continue to seek, relief from the price squeeze before the PUCT. To date,
)
Cap Rock has been unsuccessful in obtaining relief from that commission, principally because of the prohibitive influence of
)
22/ TU Res. at 2.
23/ Cap Rock Comments at 17 n. 34.
)
12/ Alabama Power Comeany (Joseph M. Farley Nuclcar Plants, Units Connany 1 and
- v. 2), 13 NRC 1027 (1981), aff'd Alatama Power Nuclear Reculatory Ccmmi s s i n.D , 692 2.2d 1362 (lith Cir. 1982), cert der.ied 4 64 U. S . 816 (la33).
)
_ _ _ _ _ _ _ _ - - - - _ - - - - - - - - - - - - - - - - - - - ~ ~ ~
)
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TUEC, notwithstanding the PUCT's recognition of the price squeeze.12/ TUEC's strident efforts to maintain what it ;
acknowledges to be a significant competitive disadvantage to its
)
competitor, Cap Rock, is itself evidence of TUEC's anticompetitive intent and conduct, evidence that this Commission must consider in determining whether changed circumstances exist
)
that warrant a hearing into TUEC's anticompetitive conduct.
Even constitutionally protected actions can be used as evidence of anticompetitive intent. For e 12ple, TUEC's recent
)
efforts to convince the Texas legislature that it should eliminate all service territory certification and permit unrestrained competition to serve any and all loads in Texas may not be directly actionable. Under the well-established Neerr-Pennineten doctrine,11/ however, such conduct would clearly be admissable as evidence of TUEC's anticompetitive conduct. In Farley, the Board found that the applicant had used legal and administrative proceedings to prevent captive customers from
)
installing their own generation. The Board held that such facts were clearly admissible to show the purpose and character of other evidence under scrutiny. 13 NRC at 1079. TUEC's actions
)
before the PUCT, in fighting to maintain and publicly lauding a ,
)
price squeeze that harms its competitors, is clearly admissible
)
29/ See pages 37-38 and Attachment F to Cap Rock's Comments.
11/ Easte rn Railroad Presidents Confe rence v. Noerr Motor Freicht. Inc., 365 U.S. 127 (1961); 'Jnited Mine 'forkers of America v. Pennineton, 381 U.S. oS7 (1965).
) l
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as evidence of the Company's anticompetitive conduct and intent.
Indeed, if this matter proceeds to hearing, Cap Rock intends to show that the price squeeze,-coupled with TUEC's proposed decertification plan and refusal to honor its license conditions ,
are part of the Company's greater plan to extend its monopoly ,
over retail sales through the acquisition of wholesale
. competitors like cap Rock. f 7 !
l l
C.
The Electric Reliability Council of' Texas ("ERCOT")
Does Not Set or Affect TUTC's Rates. {
)- i TUEC states that it will not provide Cap Rock'the rates under which it will sell essential services because such rates are, in part,
)
determined by future electric planning activities within ERCOT that are not within TUEC's control.22/ This statement is both misleading,and irrelevant. ERCOT does not I establish or even suggest rates, nor does it prescribe the l
facilities that an electric utility must construct. ERCOT is a loose planning organization in which its members exchange
)
information about their own plans to add generation and transmission facilities. ERCOT does not purport to prescribe what facilities should be constructed, nor does it have any authority to enforce such an edict if one were issued. Cap Rock is not aware of a single instance in which an ERCOT member has -
1 1
)
22/ TU Res. at 3. l
)
a T
been forced by ERCOT to construct a facility that it did not wish to construct for its own purposes, nor is Cap Rock aware of a single instance in which a utility has foregone construction of a
)
facility that it did wish to construct merely because other ERCOT members may have opposed such construction.
If TUEC were permitted to refuse to provide rates for
)
essential services simply because future actions might affect the overall rate, the company could effectively avoid ever having to provide such rates prior to the time the customer actually is required to sign a contract to purchase such sarvices. Electric utilities routinely quote rates for prospective services with the 4 understanding that major rate base additions in the future could
)
give rise to an application by the seller to increase the rates.
TUIC's efforts to convince this commission that this is somehow an insuperable barrier to the provision of rates before the
)
prospective customer must decide whether to purchase ~the service is no more than an. attempt by the Company to sell this commission a bogus bill of goods.
)
D. TUEC's Panda Gamhit.
TUEC suggests that Panda is somehow the evil force behind
)
Cap Rock's efforts to obtain Independence from the Company.22/
This reflects TUEC's obtuse refusal to acknowledge Cap Rock's oft stated goal of ending its total dependency on the company, a goal
)
12/ See TU Res. at 1, and 5-6.
)
> ]
)
discussed with TUEC long before Panda entered the picture.11/ l l
Moreover, the actions of which TUEC complains show nothing more than the operation of a competitive market in bulk power
)
resources.
TUEC complains that it turned down an offer by Panda to sell capacity and energy because " Panda simply has not been
)
competitive with other offers received by TUEC Electric."21/ j l
TUEC apparently believes that there is something wrong with a supplier that cannot economically sell to the company finding
)
another purchaser for whom the price may he right. If the Panda price ultimately proves not be advantageous to Cap Rock, Cap Rock ,
i will pursue other power supply options. But Cap Rock will not j
)
know what the total cost of the Panda purchase will be, or the total cost of any purchase, until TUEC provides the rates, terms 1 j
and conditions of essential transmission, back-up and other
)
services. The " total cost" would necessarily include the cost of the capacity purchase, the cost of essential transmission service l
to move the power from the plant to Cap Rock's system, and the
)
cost of essential coordination and back-up services. {
l l
I i
)
2f/ See Cap Rock Comments at 27-29.
11/ TU Res. at 6. This statement is entirely unsupported by l 1
) TUEC. Why TUEC may have chosen not to deal with Panda, and j whether TUEC may be paying higher rates to other !
cogenerators than would have been required by Panda, are matters for hearing.
)
_ - _ _ _ _ - _ _ 1
i
)J i i
I
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No one is.asking TUEC to buy anything from Panda. Cap Rock-i is merely asking to be permitted to make its own business f j
decisions without interference from TUEC.
) 1
.i E.
4
.TUEC's Concerns About Cap Rock's Consultants Are H}
Baseless and Irrelevant.
) According to TUEC, the other evil force behind Cap Rock's-efforts to exercise the rights guaranteed'it by the license
)
conditions is Cap Rock's consultants. TUEC, uniquely sensitive I l
)
)- to questions of conflicts of interest before this Commission, l I
" suggests" that Cap Rock may be being ill-served by its f
consultants, who also represent Panda in some matters.2f/
Suffice it to say that Cap Rock was fully informed of its consultants' representation of Panda in some matters before Cap Rock began negotiations with Panda. Cap Rock is entirely satisfied with the ethical and professional standards of its consultants and that its interests are being well-served.
Aside from an unwarranted affront to Cap Rock's consultants, TUEC's insinuations raise an overriding question: what business is it of TUEC's who Cap Rock employs or what advice Cap Rock receives? The antitrust laws do not permit a monopolist to frustrate the competitive efforts of competitor even if the !,
monopolist's motives are well-intentioned. If Cap Rock's business decisions are incorrect, its competitors, principally I b :
I 11/ TU Res. at 5 n.4.
)
1
J
),
I 1
)
I TUEC, will benefit.
If Cap Rock's business decisions are, as it believes,. correct, Cap Rock will benefit. Such risks and benefits are the substance of truly competitive market.12/ i J
)
F. TUEC's Sundrv Other Alleantions. !
In response to Cap Rock's demonstration that TUEC is
)
subjecting Cap' Rock to a price squeeze,. TUEC states: I 1
The claim made is that the primary cause of the " squeeze" is the impact of the summer-winter differentiated rates-for TU Electric's t
{
) retail customers which are not also available {
to wholesale customers. Aside from the fact !
that this is not true,the clear implication of Cap Rock's comments is that TU Electric is !
free to discriminate in pricing and the application of pricing to customer classes.
)
TU Res. at 9. TUEC does not deny the existance of the price -,
1 squeeze. All that TUEC apparently denies is Cap Rock's assertion that the summer / winter differentiated rates are not offered to
)
wholesale customers. Cap Rock reiterates that no such differentiated rates are offered to it or to any other TUIC
~I
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22/ The october 20, 1988 letter from TUEC's Mr. Bevelhaymer to cap Rock's consultant, Mr. Steven E. Collier is a transparent document. Although Mr. Bevelheymer feigns outrage at Mr. Collier's memorialization of their discussions on August 2, 1988, his outrage did not move him
> to answer Mr. Collier's letter until more than two months after the fact..,Not surprisingly, Mr. Bevelheymer's reply integrates well with the allegations made by the Company in its comments before this Commission. Cap Rock stands behind Mr. Collier's contemporaneous account of the August 2, 1988 meeting in Dallas.
)
Mr. Collier's response to the Bevelheymer letter, dated January 19, 1989, has previously been submitted to this Commission.
)
)
)
wholesale customer of which it is aware. TUEC has presented no evidence that such differentiated rates are available. Moreover, the apparent assertion that summer / winter differentiated rates
)
are available to Cap Rock is not credible unless this Commission is to believe that Cap Rock is intentionally placing itself in a price squeeze.
)
Regardless whether TUEC is " free" to subject Cap Rock to a price squeeze, the unrebutted facts are that TUEC is subjecting Cap Rock to a price squeeze, TUEC recognizes that it is l
)
subjecting Cap Rock to a price squeeze, and, rather than seeking to eliminate that price squeeze, TUEC is doing everything in its
)
power to perpetuate the price squeeze. This is clear evidence of on-going anticompetitive conduct by TUEC which, when coupled with TUEC's refusals to provide essential services by which Cap Rock may lessen its total dependence upon TUEC for its bulk power
)
needs, creates a situation inconsistent with the antitrust laws and the existing license conditions.11/
TUEC's most puzzling contention is that there can be no
)
price squeeze because Cap Rock can, and has, filed to change 212 Rock's rate design.12/ Cap Rock will stipulate that it is able
)
11/ City of Mishawaka v. American Electric Power Comeany, Inst, 616 F.2d 976, 983 (7th Cir. 1980).
12/ TU Res. at 9-10. By recent order, a PUCT hearing examiner
)
danied Cap Rock's application to change its rata design in Order to mitigate the price squeeze caused by TUIC st.:mer/ winter differentiated rates. The price squeeze, tiarefore, continues unabated.
)
h
)
to file a ' request with the PUCT to change its rate design and to reduce further its operating margin in order to avoid losing customers to TUEC.
Any customer subjected to a price squeeze can
)
continue to reduce its operating margin until it is driven out of business; that is not the point. The point is that TUEC is admittedly maintaining a price squeeze that is seriously harming
)
Cap Rock's ability to compete with TUEC. As an entity with monopoly power, TUEC is proscribed by Section 2 of the Sherman Act from using even lawfully acquired monopoly power "to
)
foreclose competition, to gain a competitive advantage or to ,
destroy a competitor...." United States v. Griffith, 334 U.S.
100, 107 (1948).12/
)
The final TUEC contention that bears comment is the statement that, by demonstrating that TUEC is engaged in a systematic program of cutthroat retail competition, Cap Rock is
)
contending that "TU Electric should decline to serve new customers in dually certified areas or at least agree not to advertise its services."fi/ Retail competition should not be
)
stoked by anticompetitive advantages at wholesale. Moreover, the existence of this new campaign of virulent head-to-head retail competition is clearly relevant to this Commission determination
)
whether changed circumstances exist that warrant an investigation AS/ EAS 1112 Ragjgev Photo. Inc. v.
Eam han Kodak Connanv, 603
) F.2d 263, 275 (2d Cir. 1979), cart denied, 443 U.S.
(1980). 1093 11/ TU Res. at 10.
)
1
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to determine if TUEC is currently maintaining a situation inconsistent with the antitrust laws. Similarly, TUEC is i entitled to advertise its services, but false or misleading
)
advertisements that are apparently intended to harm TUEC's i
competitors are likewise relevant to the Commission's changed circumstances determination.12/
)
III.
CONCLUSION
)
Cap Rock's comments raised several allegations concerning TUEC's conduct that demonstrate on going violations of TUEC's Comanche Peak license conditions. Those allegations stand
)
unrebutted. Indeed, TUEC's response itself constitutes evidence J of anticompetitive intent. l Cap Rock reiterates its belief that j
the existing license conditions proscribe precisely the kind of j 1
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anticompetitive conduct in which TUEC is currently engaged. If l the license conditions permit this kind of conduct, Cap Rock submits that they are entirely ineffective to remedy the situation inconsistent with the antitrust laws that TUEC is currently perpetuating and no operating license should be issued 12/ A monopolist is not forbidden to publicize its product unless the extent of this action is so unwarranted by i
)
competitive exigencies as to constitute an entry barrier.
Berkey Photo, In. v. Eastman Kodak Co., 603 F.2d 263, 287
{
(2d Cir. 1979), ce rt . denied, 444 U.S, 1093 (1980).
)
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y
~33-
)
TU3C until new license conditions are issued that effectively redress TUEC's anticompetitive conduct.
)
Respectfully submitted, By: /
Robert A. O'Neil By: I ch ofin Michael A~dragnF Attorneys For Cap Rock Electric
) Cooperative, Inc.
)
Miller, Balis & O'Neil, P.C.
)- 1101 Fourteenth Street, N.W.
Suite 1400 Washington, D.C. 20005 (202) 789-1450
)
February 10, 1989
)
)
)
O O UNITED STATES OF AMERICA BEFORE TIE NUCLEAR REGULATORY COMMISSION Texas Utilities Electric )
O Company, st i ) Docket Nos. 50-445A Comanche Peak Steam Electric ) 50-446A Station, Units 1 and 2 )
O CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing " Reply of Cap Rock Electric Cooperative, Inc. to the Comments of Texas Utilities Electric Company" was served by hand delivery to:
O Cecil O. Thomas, Jr. William Lambe Chief Office of Nuclear Regulations Policy Development Technical U.S. Nuclear Regulatory support Branch Cc.uission Main Stop 12-3 One White Flint North one White Flint North 111F Rockville Pike g 11155 Rockville Pike Rockville, MD 20852 Rockville, MD 20852 and by first class mail, postage prepaid on the loth day of February, 1989 to:
O Peter B. Block, Esquire Chairman Administrative Judge Atomic Safety and Licensing Atomic Safety and Licensing Appeal Board Panel Board U. S. Nuclear Regulatory U. S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 lO Washington, D.C. 20555 Dr. Walter H. Jordan Ell *.n Gir erg, Esquire Adr.wistrative Judge Atomic Sa :ty and Licensing 881 W. Outer Drive Board Panel Oak Ridge, TN 37830 U.S. Nuclear 7.egulatory Q Commissicr.
Washingt : D.C. 20555
'O
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Elizabeth B. Johnson Stuart A. Treby,' Esquire Administrative Judge Office of the Executive Legal Oak Ridge Natural Laboratory U.S. Nuclear Regulatory P. O. Box X, Building 3500 Commission Oak Ridge, TN 37830 j Washington, D.C. 20555
)
Chairman Thomas G. Dignan, Esquire Atomic Safety and Licensing William E. Eggeling, Esquire Board Panel Ropes & Gray U.S. Nuclear Regulatory -
225 Franklin Street Commission Boston, MA 02110
) Washington, D.C. 20555 Mr. James E. Cummins Roy P. Lessy, Jr. , Esquire Resident Inspector Wright & Talisman, P.C. )
Comanche Peak S.E.S. 1050 17th Street, N.W.
P. O. Box 38 Washington, D.C. 20036-5566
) Glen Rose, Texas 76043 Mr. William L. Clements Mrs. Juanita Ellis !
Docketing & Service Branch President, CASE U.S. Nuclear Regulatory 1426 S. Folk Street '
Commission Dallas, Texas 75224
) Washington, D.C. 20555 Nicholas S. Reynolds, Esquire Anthony Z. Roisman, Esquire Wiliam A. Horin, Esquire Executive Director Bishop, Liberman, Cook, Trial Lawyers for Public Purcell & Reynolds Justice
) 1200 17th Street, N.W. 2000 P Street, N.W., Suite Washington, D.C. 20036 611 Washington, D.C. 20036 Robert A. Wooldridge, Esquire Billie Pirner Garde, Esquire Worsham, Forsyths, Sampels Citizens Clinic Director
& Wooldridge Government Accountability
) 2001 Bryan Tower Projects Suite 2500 1901 Que Street, N.W.
Dallas, Texas 75201 Washington, D.C. 20009 Renea Hicks, Esquire Nancy Williams Assistant Attorney Gensral Cygna Energy Services, Inc.
)
Environmental Protection Div. 101 California Street P. O. Box 12548 Suite 10000 Capitol Station San Francisco, CA 94111 -
Austin, Texas 78711
)
)
)
) Mr. Lanny A. Sinkin Christic Institute 1234 North Capitol Street Washington, D.C. 20002 i
Mr. Kenneth A. McCollom
) Administrative Judge 1107 West Knapp stillwater, OK 74075 ;
l Geary S. Mizuno, Esquire f Office of the Executive
) Legal Director U. S. Nuclear Regulatory Commission Washington, D.C. 20555 ;
Joseph Gallo, Esquire
) Isham, Lincoln & Beale 1120 Connecticut Avenue, N.W.
Suite 840 Washington, D.C. 20036 Mr. Robert D. Martin
) Regional Administrator, Region IV U.S. Nuclear Regulatory Commission 611 Ryan Plaza Dr., Suite 1000 Arlington, TX 76011 AfAe
- John ' Michael Adragna "
) # Miller, Balls & 0'Neil, P.C.
1101 Fourteenth Street, N.W.
Suite 1400 Washington, D.C. 20005 (202) 789-1450
) i i
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_ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ l
1 b.
UNITED STATES OF AMERICA
) BEFORE THE NUCLEAR REGULATORY COMMISSION Texas Utilities Electric )
Company, at alz ) Docket Nos. 50-445A Comanche Peak Steam Electric ) 50-446A Station, Units 1 and 2 )
SUPPLEMENT TO COMMENTS AND REPLY COMMENTS OF CAP ROCK ELECTRIC COOPERATIVE, INC.
)
Cap Rock Electric Cooperative, Inc. (" Cap Rock") hereby supplements its comments 1/ and reply comments 2/ concerning the
) ongoing anticompetitive activities of Texas Utilities Electric Company ("TUEC") as they pertain to the need for an antitrust review at the operating license stage.
) Cap Rock has demonstrated that, while TUEC is permitting and facilitating economy energy purchases by two of its wholesale customers from Houston Lighting & Power Company ("HL&P"), it is
) at the same time refusing to permit Cap Rock to make the identical kind of economy energy purchase from HL&P.2/ Cap Rock has also demonstrated that TUEC is preventing Cap Rock from
) obtaining generating resources from Panda Energy Corporation
(" Panda") and other potential cogenerators by refusing to provide
)
1/ Comments of Cap Rock Electric Cooperative, Inc. Concerning Significant Changes In Licensee's Activity That Warrant An Antitrust Review At The Operating License Stage, dated August 9, 1988 (Comments").
2/ Reply Of Cap Rock Electric Cooperative, Inc. To Comments Of Texas Utilities Electric Company, dated February 10_, 1989
) (" Reply Comments").
2/ Comments at 20-27; Reply Comments at 19-22.
)
)-
) .-
Cap Rock and Panda the rates, terms and conditions of partial requirements, back-up, transmission and other essential services,
)
thereby effectively refusing to provide those services in violation of TUEC's existing antitrust license conditions.A/
Appended hereto are the reports of two hearing examiners of the Public Utilities Commission of Texas ("PUCT"), one approved by
)
the full PUCT and one still pending before that commission, and a letter from Panda that confirm and directly support the allegations that Cap Rock has raised before this Commission. The substance,of those documents are summarized below.
I.
. HEARING EXAMINER'8 REPORT APPROVING TER ECONOMY ENERGY SALES AGREEMENTS BETWEEN EL&P AND CAP ROCK AND THE
) OTHER TWO COOPERATIVE CUSTOMERS OF TUEC.
On January 30, 1989, a PUCT hearing examiner issued a report and proposed order that recommended approval of the HL&P economy energy sales agreements with Cap Rock, Rayburn Country Electric Cooperative, Inc. ("Rayburn Country"), and Tex-La Electric Cooperative, Inc. (" Tex-La").1/ The hearing examiner's report,
)
which is appended hereto as Attachment A, was approved by the PUCT on February 22, 1989.
The hearing examiner's report confirms and directly supports
)
the representations made by Cap Rock concerning the economy A/ Comments at 27-34; Reply Comments at 26-28.
5/ HL&P filed the three economy energy agreements with the PUCT
)
pursuant to Section 32 of the Public Utility Regulatory Act
("PURA"), Tex. Rev. Civ. Stat. Ann, art. 1446c (Vernon Supp.
1988) on June 21, 1988.
)
I
)
)
energy purchase agreement with HL&P. The hearing examiner stated that (emphasis supplied):
)
The terms of the three agreements are almost l identical, although the maximum level of MWH delivery that HL&P will offer monthly differs for the three cooperatives . . . .. The i Cooperatives are responsible for maintaining wheeling arrangements for the transfer of the energy from HL&P's system to their own.
) Additionally, the cooperatives are responsible for retaining scheduling agreements with Texas Utilities Electric Company which maintains the control area for each of the coceeratives.
) Attachment A at 5. The hearing examiner further concluded that:
The evidence shows that past economy energy sales to the Rayburn Country and to Tex-La has been economically efficient. HL&P has received marginal revenues from the sales
) that have been well above its marginal costs.
Rayburn Country was the only one of the three cooperatives that presented evidence of its savings resulting from the purchase of economy energy from HL&P . . . . Although there is no direct evidence of the savings
) experienced by the other two cooperatives, if one merely assumes that Tex-La and Cap Rock ,
have behaved rationally in making their {
purchase decisions (that is, they purchased j energy from HL&P only when the price was !
-lower than that of the next source available l'
) to them), it follows that they too were able to reduce their purchased power expense by buying economy energy from HL&P.
{
Id. The conclusion is erroneous in only one respect: it assumes )
i
)
that Cap Rock has been able to purchase economy energy from HL&P.
Cap Rock has not been able to purchase any economy energy from HL&P because TUEC has refused to provide Cap Rock the same
)
scheduling and related services that the company is provided to the other two cooperatives.
)
).
-4
) .-
The hearing. examiner recommended approval of each of HL&P's economy anergy agreements, concluding that "the agreements are in the best interest of all four utilities and their ratepayers."
Idt at 20. In addition, the hearing examiner specifically found' that the economy energy market in Texas is competitive'(Liu at 25, Finding 27) and that each of the economy energy agreements was reasonable and in the public interest (Ist at 27, Finding 43). The hearing examiner also concluded that, as a matter of
)
law, the implementation of the economy energy sales ~ agreements between HL&P and its three cooperative wholesale purchasers "will not constitute the grant of an unreasonable preference or advantage . . .
nor will it subject any corporation or person
)
within any classificai; ion to any unreasonable prejudice or advantage." Id at 28, Conclusion 6.
j i
i II. THE FEERUARY 23, 1989 SUPPLEMENTAL EE& RING EIANINER'S REPORT CONCERMING R&YEURN COUNTRY ELECTRIC COOPERATIVE, 1 INC.
I On February 23, 1989, a PUCT hearing examiner issued a
)
supplemental report concerning Rayburn Country's status under Texas law as a public utility and the reasonableness of Rayburn
)-
)
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!1
)
h ,
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1
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) !
Country's filed rates.1/ The. hearing examiner's report, appended hereto as Attachment B,Jprovides further support for the ,
) allegations raised.in Cap Rock's Comments and Reply Comments. 'l Cap Rock demonstrated that TUEC has facilitated economy energy purchases from HL&P.2/ The hearing examiner explained how TUEC facilitates this and other economy energy purchases by Rayburn Country.
I Rayburn Country has negotiated agreements with TU Electric, HL&P, and West *
{
Texas Utilities Company-("WTU") that enable
) it to purchase economy energy from HL&P or WTU if the energy is offered at a rate lower ,j than TU Electric energy charges. Under the j arrangements,.Rayburn Country pays TU j Electric the full demand charge under the
);
. wholesale rate for all energy that is l delivered to the customer cooperatives [of Rayburn Country).
Each month, HL&P.and WTU submit offers to sell economy energy to Rayburn Country for the calendar month. If Rayburn Country
) accepts an offer,.it provides a schedule to TU Electric showing the amounts and timing of the economy energy to be purchased. TU Electric acts as Rayburn Country's agent and schedules the delivery of the power from the supplying utility to Rayburn Country.
) Rayburn Country receives a monthly credit from TU Electric chat reduces its power costs I
g/ An October 28, 1988 hearing examiner's report had
)
recommended denying Rayburn Country public utility status and denying approval of Rayburn Country's rates. At a Commission meeting on November-22, 1988 the PUCT declined to adopt the hearing examiner's recommen,dations and remanded the matter with direction that the hearing examiner issue
)
findings of fact and conclusions of law that would support approval of Rayburn Country's rates.
2/ Comments at 2C-27.
)
p y
by an amount equal to the. differen.:e between the cost that would~have been incurred under TU Electric's wholesale rate.
)- According to Rayburn Country having alternative economy energy arrange,ments creates competition among the power suppliers and provides alternative sources of power in the event of curtailments because of transmission limitations or other. reasons.
Unfortunatalv. Ravburn Country will orobably
)
not be able to nanotiate additional economy gparav arranamments, becauaa TU Electric has refused to anter into any more schedulina-acant aareaments for economy anarav.
Attachment B at 8-9 (emphasis. supplied).
)
TUEC's arrangements with Rayburn Country (and Tex-La)'make
'it clear that there is no real impediment to TUEC permitting' Cap
' Rock to purchase economy energy from HL&P. The cooperation
)
required of TUEC is minimal. With the exception of Rayburn Country's small allocation of preference power from the ;
i Southwestern Power Administration ("SWPA"),B/ the characteristics of Rayburn Country and Cap Rock as customers of TUEC are
-virtually identical. Both purchase power from TUEC under that company's full requirements rate (Cap Rock under contract and j
)
Rayburn Country, whose full requirements contract with TUEC lapsed in 1987, under TUEC's full requirements tariff) and neither has generation of its own at this time. Yet TUEC has
}
denied Cap Rock the savings and competitive advantages of lower l
S/ SWPA is a federal power marketing agency. The SWPA power is
): delivered to TUEC, which in turn provides a similar amount of j power to Rayburn Country under rates that purportedly reflect the economic benefit of the SWPA power. ,
i l
)
)
cost economy energy from HL&P and others, even though the Rayburn-Country economy energy transaction.shows that such mutually beneficial transactions can readily be facilitated and are in the i overall public interest. i Now it appears that TUEC is increasing )
its anticompetitive conduct by refusing to permit Rayburn Country
)
to engage in further economy energy purchase.
III. THE MARCH 2. 1989 LETTER PROM PANDA.
Cap Rock has sought for some time to conclude the purchase
)
of electric generating capacity from Panda. Such a purchase is dependent upon Panda being provided appropriate transmission and coordination services by TUEC if the generating plant is located
)
outside Cap Rock's service territory and is, regardless of the location of the generating plant, dependent upon cap Rock obtaining reasonable partial requirements and back-up services from TUEC. Cap Rock demonstrated that TUEC has refused to provide Cap Rock with tho rates, terms and conditions under which !
the company would sell Cap Rock the services essential to such a
)
capacity purchase by Cap Rock, thus effectively preventing Cap Rock from negotiating such a purchase from Panda or any other seller. Recent correspondence from Panda makes it clear that
)
TUEC's refusal provide the rates, terms and conditions of these l services has made it impossible for Panda to proceed with the cogeneration project.
)
)
1
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By letter dated March 2, 1989, Panda informed Cap Rock of the problems it has encountered in attempting.to negotiate with TUEC for the services necessary to make a sale to Cap Rock.2/
Panda had a willing supplier of the steam necessary for electric power generation and intended to construct a generating facility
)
that would constitute a Qualifying Facility under the Public Utility-Policies Act of 1978 ("PURPA") near Sherman,' Texas. Idu at 1.
There are more than adequate TUEC transmission facilities between that site and cap Rock's service territory. At the time,
)
Panda did not feel it was essential to find a steam supplier in the. Cap Rock service territory because Panda " felt that necessary arrangements could'be made with TU Electric on a sufficiently expeditious basis." Id. Subsequent TUEC conduct, however, led Panda to conclude that it can expect no cooperation from TUEC
( & ):
}
our perception stems from delays which we have encountered (and which we anticipate) and from the extremely hostile attitude which TU Electric has evidenced toward Panda.
)- For examnia, it took a period of some months to obtain an initial response to our first inquiry regarding coordination services - a longer period than we thought necessary. and when given, it showed absolutely no intent to furnish or even to negotiate any arrangements
)
beyond those clearly required by law or regulation (i.e., wheeling). Further, by letter of October 20, 1988 (from TU Electric !
to C. H. Guernsey & Company), TU Electric indicated (in view of~the NRC complaint filed by Cap Rock) that "further discussions
)
between us at this time will not be 2/ Attachment C.
)-
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fruitful." obviously, there is no possibility of resolving the coordination )
services dilema.(sic) with TU Electric at the present time.
'l Panda Chairman Robert W. Carter concluded that, in light of those events and the extreme animus toward Panda exhibited by TUEC in-its answer before this Commission, "there is simply no realistic j
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chance of dealing with TU Electric." IsL. at 2.
TUEC's strategy with respect to Panda has been to agree to j provide wheeling service (which it is obligated to provide a
)_ Qualifying Facility under PUCT regulations), but to refuse to l provide the rates, terms and conditions of essential coordination-services. Transmission and coordination services are equally
) essential to the viability of the transaction; the absence of either service will kill the deal. TUEC is well' aware'of this obvious fact and has apparently exercised its monopoly power over
) coordination services to frustrate Panda's sale to Cap Rock, while at the same time it is exercising.its monopoly power over partial requirements and back-up services to prevent Cap Rock
) from moving forward with its efforts to acquire generation resources. TUEC is more than able to provide the services requested by Cap Rock. TUEC has not suggested that it can not
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provide these services, only that it will not do so. !
IV. CONCLU8 ION The attached hearing examinar reports and correspondence provide further support for the relief sought by Cap Rock. For
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that reason, Cap Rock asks that the Commission accept this supplement to Cap Rock's Commento and Reply Comments, and that it be made a part of the record in this docket.
Respectfully submitted, By: / -u
' Robert A. O'Neil " '
7; John Michael Adragna Attorneys For Cap Rock Electric
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Cooperative, Inc.
>- Miller, Balis & O'Neil, P.C.
1101 Fourteenth Street, N.W.
Suite 1400 Washington, D.C. 20005 (202) 789-1450
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March 10, 1989
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- 843 clo
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10020 10047 clo WEMCTRIC pef, , 10CFR50.33a wim.. c. couani October 21, 1988 tww, v,ca nue,n
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U. 5. Nuclear Regulatory Commission Attn: Document Control Desk Washington, D. C. 20555
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SUBJECT:
COMANCHE PEAK STEAM ELECTRIC STATION (CPSES) UNITS 1 AND 2 DOCKET N05. 50-445A AND 50-446A ANTITRUST OPERATING LICENSE REVIEW TV ELECTRIC RESPONSE TO COMMENTS OF CAP ROCK ELECTRIC COOPERATIVE. INC. (CAP ROCK)
) REF: Filing of August 9, 1988, titled " Comments of Cap Rock Electric Cooperative, Inc. Concerning Significant Changes in Licenset's Activity That Warrant Antitrust Review at the Operating License Stage" M Gentlemen:
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Enclosed are comments of TV Electric in response to referenced filing.
Very truly yours, W.G. W W. G. Counsil
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By:
- 3. R. Woodlan '
Occket Licensing Manager
) WJH/mlh Enclosure c-Mr. W. M. Lambe, NRR - Planning and Program Analysis Staff Mr. R. O. Martin, Region IV Resident Inspectors, CPSES (3)
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400 Nonk Olin Ssrert LB BI Dellas. Taxa 13201
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Enclosure ta ~u-88751
) October 2L 1988 UNITED STATES OF AMERICA i
) BEFORE THE NUCLEAR REGULATORY COMMISSION TEXAS UTILITIES ELECTRIC )
Company, ej. al. ) Docket 30-445 A
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Comanche Peak Steam Electric )
Station, Units I and 2 )
TU Electric Response to
) Comments of Cap Rock Electric Cooperative, Inc.
In Augtst,1988 Cap Rock Electric Cooperative Inc. (Cap Rock) filed
) comments with this Commission in which it claimed that there have been "significant changes in the activities of TUEC"(TU Electric)"which are relevant to whether antitrust review is required at the licensing stage."
Even if taken as true, which they are not, Cap Rock's comments raise no
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antitrust issue and constitute, at best, a dissatisfaction with what it perceives may be TU Electric's wholesale rate (an issue which is of no concern to tras l Commission) after the licensing of Comanche Peak Steam Electric Station
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(CPSES). Cap Rock's claim that TU Electric has denied it access to less costly bulk ;
power sources, while at the same time insisting that Cap Rock purchase an of its requirements from TU Electric, that TU Electric has instituted and maintains a
" price squeese" significantly harmingits wholesale customers, and that TU Electric has somehow violated the CPSES License Canditions (License Conditions) by its [
action in seeking or accepting new retail load in certain daally certilled service
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areas, constitutes nothing more than an attempt on its part, and on the part of Panda Energy Corporation (Panda), to use this Commisson's CPSES licenang l
proceeding to obtain preferential treatment. ;l
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Cap Rock 4 a full re@irements customer of TU Electric. Cap !Rock's, contract with TU Electric (Attachment 1) provides that
. . . Company .[TU Electric]. . . agrees to sell and deliver to
-Consumer [ Cap Rock], and Consumer agrees to purchase and receive fmm Company, all the electric power and energy that .
Consumer may require during the term of this agreement for the operation of those portions of its electric system that are I. or shall be connected to the points of delivery provided for herein. Consumer further agrees that.none 'of said power and energy delivered by Company shall be sold to others for resale without express written consent of Company.
The expiration date of the Cap Rock contract is three years fmm the time Cap.
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)' Rock gives the required notice, which to this point in time it has declined to do.
Cap Rock asks this Co& mission to interfere with the enforcement of this valid contract by permitting Cap Rock to seek power and energy from other
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sources while continuing to demand the obligation.of providing full retirements service by TU Electric under the power purchase agreement, or perhaps by seeking the premature termination of that agreement. Neither the License Conditions nor
). the antitrust laws mquire TU Electric to cancel, change or otherwise amend Cap ;
Rock's power purchase agreement. Thus, all of the complaints regarding Cap I
Rock's inability to purchase power or energy from other sources, including firm.
). capacity fmm Panda and economy energy fmm Houston Lighting & Power
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Company, in violation of that agreement are without any merit. Moreover, since
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all of the rates complained of by Cap Rock are set by a single regulatory authority, j l
)- namely, the Public Utility Commission of Texu (PUCT), its " price squeeze" argument must also f all. Cap Rock is free at any time to seek to change any rate l
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or rate design previously approved by the PUCT.1# '
Cap Rock is also demanding to know the level of rates and charges which may be imposed in the future for electric service offered by TU Electric to its wholesale customers and the result of future electric planning activities within the Electric Reliability Council of Texas (ERCOT), neither of which is under TU !
Electric's control. -TU Electric ir, tens to offer electric service to all of its customers at retail or at wholesale in accordance with the rates and charges
) established by the PUCT and to engage in utility planning activities through ERCOT on a non-discriminatory basis. Cap Rock is in as good a position as TU l Electric in speculating what rates and enarges the PUCT may establish in the
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future, and, as a member of ERCOT, Cap Rock has access to its planning
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inform ation. This, together with the data already on file at the PUCT and the i Federal Energy Regulatory Commission and that furnished to Cap Rock by TU Electrie, should enable Cap Rock to make its own decision with respect to its future power and energy resources. TU Electric does not intend to make economic d(cisions for Cap Rock, plan its future energy resources, provide energy banking or similar services demanded by Cap Rock or to render any electric service which
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imposes a disproportionate share of TU Electric's costs on its customers for the
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1/ Indeed, on July 29,1988, even prior to the filing of its comments with this
) Commission (but without advising it of having done so), Cap Rock filed an application with the PUCT for a change in its rates (Attachment 2). TU Electric has no intention of opposing any change in Cap Rock's rates or rate structure.
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benefit of Panda and Cap Rock. As indicated, when and if Cap Rock ceases to become a full requirements customer of TU Electric, TU Electric will treat Cap
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Rock the same as all other similarly situated entities and, to the extent then being offered, will schedule short-term economy energy from third-party suppliers on Cap Rock's behalf under terms which will fully compensate TU Electric for its
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costs plus a reasonable return on its investment.E 2/ Since Cap Rock does not want to install the necessary telemetry equipment
) at its various points of delivery in order to permit it to take delivery of wheeled power or to acquire the capability to dispatch such power,it would have TU Electric purchase power and energy generated by trird parties (by crediting such power and energy to its account) to serve a part of its load, while serving the remainder of its load with power and energy supplied by TU Electric on demand. Thus, Cap Rock is insisting that it is entitled to
) " cherry pick" at random for a part of its load requirement while relying on TU Electric to serve the balance of Jts load on demand. In this specific instance, it would have Panda supply its base load requirements while seeking to require TU Electric to supply all or a part of its peaking power at the wholesale rate. In this manner, Cap Rock would stratify its load by recpiring TU Electric to supply Cap Rock's incremental energy needs (whatever that might be) at TU Electric's average fuel cost. TU Electric
) has no intention of engaging in any such transaction even if it were to assume that Cap Rock's full requirements contract had come to an end.
Upon termination of its power purchase agreement with TU Electric, Cap Rock can purchase part of its total reqdrements (both at peak and off-peak) from TU Electric at rates established by the PUCT and part of its total requirements (both at peak and off-peak) from others at whatever prices it
) can obtain; however, Cap Rock is not entitled to " cherry pick" its sources by arbitrarily determining the time of day and the extent to which it wishes to buy its requirements from TU Electric and the time of day and the extent to which it wishes to buy its reqdrements from others. To do otherwise would impose a disproportionate share of TU Electric's fuel costs on TU Electric's customers. TU Electric is not reqdred to subsidize Cap Rock or Panda. On l
) the other hand, should Cap Rock feel otherwise, it is the PUCT, not the '
NRC, where it should vent its complaint. Upon termination of the Cap Rock power s@ ply agreement, TU Electric will continue to render non-discriminatory service to Cap Rock in accordance with the requirements of the PUCT and the License Canditions. See also letter, dated October 20, i 1988, from Darrell Bevelhymer of TU Electric to Steven E. Collier of C. H. i
) Guernsey & Company (Attachment 3). I
- 3) TU Electric is currently scheduling short-term economy energy for Tex-La l Electric Cooperative of Texas, Inc. and Rayburn Country Electric Cooperative, Inc. pursuant to an agreement cancellable by TU Electric on 30
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days' notice. Neither of these cooperatives is an all requirements customer ,
of TU Electric, a 20-year power purchase agreement with each having l expired in 1987.
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A more meaningful discussion of Cap Rock's commentsd regarding its effort to purchase power and energy from Panda requires a pempective not apparent on the face of its comments. TU Electricis one of the largest purchasers l
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of cogenerated power and energy in the country and the largest purchaser of cogeneration in Texas by a sizable f actor. TU Electric has firm contracts with cogenerators for 2,000 MW. In 1987, cogeneration provided for approximately 10%
) of TU Electric's load during its summer peak demand. Panda, being noncompetitive with other cogenerators and having been uruuccessfulin its efforts to sell capacity to TU Electric, is merely attempting to use Cap Rock to force TU Electric to do
) indirectly what it could not do directly. Panda's strategy was discussed in a recent 1
issue of the Dallas Business Journal:
Panda's inability to sell power to the most likely buyer, TU Electric, forced [ Bob] Carter [ Chief Executive Officer of ;
) Panda] to try a new strategy, one that may pay big dividends. ;
In May of 1988, Panda announced a 15-year agreement to sell '
strplus power from the Osce,r Mayer facility to Cap Rock Electric Cooperative. * *
- A Panda spokesman said Cap Rock is the first rural electric coop. . . In Texas, and perhaps in the nation to buy power directly from a cogenerator.
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1/ Cap Rock and Panda are represented by the same consultant, despite the conflict inherent in such representation. Mr. Steven Collier is Cap Rock's
) consultant in negotiating the Panda agreement. M r. Collier is also a ,
partner of C. H. Guernsey & Company. Mr. Collier has also been identified '
by Panda as its agent in all c generation proposals which Panda has made to TU Electric since 1985. These facts give rise to the question of whose interests are sought to be protected -- Panda's or Cap Rock's? In any case, neither raises any antitrust concerns.
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) 1 See " Panda Energy Looks to Cogeneration to Fuel Futre Growth," Dallas Business Journal, September 26,1988 (Attachment 4). See also letter, dated March 2,1987,
) from Panda to TU Electric (Attachment 5). Thus, the real issue here is whether !
the Nuclear Regulatory Commission can be used to aid in achieving the profit-centered goals of Panda. Obviously, the answer to that question is no. ~
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) In Texas, utilities, subject to PUCT oversight, are permitted to negotiate both price and non-price factors with cogenerators and other Qualifying Facilities I j
(QF's) to obtain the most favorable proposals available in the marketplace in the l
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interest of the utilities' customers. Utilities are not reg 11 red to contract with a i
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(l particular QF for capacity purchases if capacity is not needed or if needed I l
capacity can be obtained from another QF at lower costs or upon more favorable I terms. TU Electric has, over a period of several years, negotiated with Panda on
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several cogeneration options. Panda simply has not been competitive with other offers received by TU Electrie. (See Attachments 5, 6, and 7.) Af ter having been turned down the last time, Panda filed a petition with the PUCT in which it asked j
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the PUCT to order TU Electric to purchase cogeneration from Panda's Rock-Tenn j
project. The PUCT dismissed the petition (Attachment 8). After that loss, TU Electric was informed of Panda's intent to seek the aid of this Commission and .
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anyone else who it perceived might presswe Tt' Slectric into a preferential power purchase arrangement for the prpose of gaining an unfair advantage in the sale of its power.
For example, see Cap Rock's testimony (written and presented by
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Panda's Steve Collier) filed en August 8,1988, with the Select Committee on a Statewide Energy Plan (Attachment 9). One need not look far to see that such comments are a near mirror image of its comments here and expose Panda as the
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real force benind Cap Rock's effort to avoid its contractual obligations in order to force the sale of otherwise noncompetitive cog (nerated power.
TU Electric has treated Cap Rock eminently f air. A brief summary of the
) material developments of TU Electric's discussions with Cap Rock may be helpful:
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On February 27,1987, Cap Rock wrote TU Electric (Attachment 10) requestinginformation related to wheeling of power and energy from T
cogeneration facilities in the Dallas and Stanton, Texas, areas. TU Electric responded on March 27,1987 (Attachment 11), describing the need for additional information and pointing out that the current
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wholesale power purchase agreement does not permit the transaction Cap Rock was considering. A draf t agreement similar to that already l executed with Texas-New Mexico Power Company (TNP) was for- !
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warded as a possible framework for a successor agreement. A copy of the appmpriate wheeling tariff was also supplied and certain technicalissues were discussed with possible solutions noted.
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On April 15,1987, a meeting was held between TU Electric and Cap !
i Rock to further discuss facilitating wheeling of the cogeneration ~
supply. At that time Cap Rock noted that such stpply was being
) pmposed by Panda. TU Electric again pointed out that Cap Rock's full requirements contract would have to be replaced (Attachment 12).
On May 26,1987 (Attachment 13), Cap Rock noted in a conversation with TU Electric that Cap Rock was "in the process of crunching some more numbers" on the cogeneration options and would probably I be coming back in the near future to discuss wheeling. The attachment also notes that the Cap Rock Manager had resigned.
On October 29, 1987, Mr. David Pruitt, Cap Rock's new General
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Manager, in a letter to Mr. Jerry Farrington, Chairman and Chief Executive of Texas Utilities Company (Attachment 14), noted that "only recently" had Cap Rock entered into a letter contract with a I l
cogenerator utilizing a Dallas area host, presumably the Panda '
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Rock-Tenn f acility. He also noted that Cap Rock would formally in I
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the near futtxe give notice of termination of its wholesale power contract. No such notice has yet been given. !
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By letter dated November 11,1987 (Attachment - 15), TU Electric !
' forwarded to Cap Rock, pursuant to Mr. Pruitt's mquest, the same '
information that had been f trnished on March 27,1987 to Cap Rock's-
) former General Manager. In that letter TU Electric acknowledged Cap Rock's stated intent to Mr. Farrington to formally terminate its }
current contract as a full mquirements customer and also agreed to a I y meetingon Cap Rock's cogeneration plan.
By the spring of 1988, the cooperative and businesslike process between Cap Rock and TU Electric turned into an adversarial, posturing attitude on the part of Cap Rock. By letter dated April 8,
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1988 (Attachment 16), Mr. David Pruitt, General Manager of Cap Rock, began to ignore the provisions of Cap Rock's contract with TU Electric and TU Electric's offer to renegotiate that contract to convert Cap' Rock to a partial requirements status. Without any ,
I mention of the provisions and effect of Cap Rock's current contract '
with TU Electric, he esserted, among other things, Cap Rock's
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" rights" to " generate, manufacture, purchase, acquire, transmit, j I
distribute, furnish, sell and dispose of such electricity." 1 A meeting was held on Augtst 2,1988, between TU Electric and Cap
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Rock,includng Steven Collier of C. H. Guernsey & Company. In this meeting, as in a meeting following the April 8 letter, Cap Rock demanded proposals and projections for future rates and charges.
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Two days af ter the foregoing meeting an inaccurate posturing lette (Attachment 17) was delivered to TU Electric and three days later,
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l without waiting for a reply, Cap Rock filed its comments with tMs Commission.
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Contemporaneously with the filing of this reply, TU Electrie.
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responded to Cap Rock's letter of August 4,1988 (Attachment 3).
Cap Rock's complaints do not relate to the satisfaction of Cap Rock's future.
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energy needs; the real laue is Panda. Having failed to compete in the market for sale of cogeneration to TU Electric, Panda, as previously noted, has turned its attention to a TU Electric eustomer who not only is unable to take delivery of the l
) power, but is prohibited fmm cbing so by a valid contract.
Then, Cap Rock alleges that TU Electric is subjecting its own wholesale cooperative customers, including Cap Rock, to a " price sgaceae." The claim rnade
) is that the primary cause of this " squeeze" is the impact of summer-winter diff erentiated rates for TU Electric's retail customers which are not also available to wholesale customers. Aside from the fact that this is not true, the dear
) implication of Cap Rock's comments is that TU Electric is free to discriminate in pricing and the application of pricing to customer classes. In filing for any rate i changes, TU Electric -- as well as all other Texas jurisdictional utilities -- rnust
) follow very precise and regulated proceses. All aspects of rate application, i.e.,
rate levels, rate classes, cost of service studies, rate designs, etc., are reviewed by the PUCT staff and interveners, are subjected to extensive and intensive public hearing and are ultimately determined by the PUCT. Interested parties are i provided f ul1 opportunity to intervene and participate in the hearing process and, if dissatisfied with the PUCT's determination, may appeal to the state courts or institute a separate proceeding at a later date. Both Cap Rock's rates and TU
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Electric's rates are set by a single regulatory agency, thus making the traditional
" price squeeze" cases inapplicable. As indicated earlier, Cap Rock now seeks, in
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the proper forum, to change its rate deign.E Cap Rock's application and the response (Attachment 18) should be sufficient to lay to rest completely this' price
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squeeze " straw man" invented by Cap Rock and Panda.
Cap Rock also complains to this Commission about TU Electric's advertising
'in certain' dually certified areas of its service territory (which, at this time, does
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not include any Cap Rock certified area). While Cap Rock claims that it does not
-seek protection from such action by TU Electric or allege that any such action or the acceptance of any new load by TU Electrie is unfair, the clear implication is
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that TU Electric should decline to serve new customers in dually certified areas or
. at least agree not to advertise its services. To refuse such service would violate the law and to agree (directly or indirectly) not to seekload in such areas would be
) of more than passing interest to others, including any affected retail customer and this Com mission.
In summary, there clearly is no issue in Cap Rock's complaint of jtris-
) dictional interest to this Commission. Cap Rock seeks exactly what it denies seeking -- special treatment; i.e., revision or. termination of a lawful contract, obtaining some sort of rate advantage and the elimination of any choice electric i i
) customers may have to take service from TU Electric in areas dually certified to j
lt, capped off by a demand to permit this cooperative to " cherry piek" for its .
energy requirements, the resulting cost for which is passed on to other TU Electric customers.
TU Electric believes it has repeatedly demonstrated full compliance with the License Conditions and has further demonstrated that Cap Rock's comments, when put into pmper perspective, add stpport, rather than g2estion, to its 5/ See Petition of Cap Rock Electric Cooperative, Inc. to Change General 3 Service Rate. Statement of Intent and Direct Testimonies of David Pruitt i and Carl N. Stover, Jr., filed September 6,1988, with the Public Utility )
) Commission of Texas, Docket No. 8283 (Attachment 2). (
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treatment of that customer.
Therefore, TU Electric asks this Commission to reject Cap Rock's com-
)- plaints and, by considering its long history of comphance to both the letter and spirit of the CPSES License Conditions, to cicae the current incpiry.
Dated: October 21, 1988
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DRAFT 1 1
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RELIABILITY CONSIDERATIONS
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FOR WHEELING AND OTHER ELECTRICITY TRANSFERS ON THE BULK ELECTRIC SYSTEMS
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l North American Electric Reliability Counc!)
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TABLE OF CONTENTS
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EXECUTIVE
SUMMARY
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 I. . INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Purpose and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Obligation for Reliable Service . . . . . . . . . . . . . . . . . . . . . . . . ...5
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II. HOW THE TRANSMISSION SYSTEM WORKS . . . . . . . . . . . 6 Transmission for Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Transmission for Economy Interchange . . . . . . . . . . . . . . . . . . . . . . . . 7 Phnning the Transmission System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Operating the Transmission System . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
) How Electricity is Bought and Sold on the Transmission Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Electricity Interchange is Scheduled . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Control Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Many Paths to Follow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Transmission Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
) Need for Coordination and Control . . . . . . . . . . . . . . . . . . . . . . . . . . 11
' III. WHAT IS WHEELING? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Transmission Agreements . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 12 The Essentials of Reliable Interchange .......................12 Access by Wholesale Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
) How Small is Small -- How Many is a Few? . . . . . . . . . . . . . . . . . . . 14 How Reliable is Reliable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Economy vs. Reliability -. Access vs. Reliability . . . . . . . . . . . . . . . . . 15 I' IV. THE NEED FOR COMMON PLANNING AND OPERATING GUIDELINES . . . . . . . . . . . . . . . . . . . . . 16
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V. TRANSMISSION OPERATING RELIABILITY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Syst e m Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 i Syst em Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Emergency Operations .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 {
) Operating Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Operations Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 VI. TRANSMISSION PLANNING RELIABILITY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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Reliability Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Accommodating Generation and Imad Patterns . . . . . . . . . . . . . . . . . 24 Transfer Capability . . . . . . . . . . . . . . . . . . . . . . . .............24 Pla n n m g Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Information and Data Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 l l
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VII. APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 -
Disemmion of Regulatory Positions on Electricity Wheehas and Other Electricity Transfers . . . . . . .. . . . . . . . . . . . . . . 28
' Requirements Whhin the Federal Power Act FPA and
) the Public Utility Regulatory Pohcies Act for Electricity Wheeling . . . . . . . . . . . . .(PURPA) -
....................29 Related References . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 G lossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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2 May 17,1989
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l EXECUTIVE
SUMMARY
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l 4 The purpose of this reference document is to explain how the l transmission system works and to identify the planning and operating l 6 considerations that all transmission system users t.nd electricity suppliers
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must follow to assure the bulk electric system remains reliable and safe.
8 This document is intended for all users of the transmission system, 10 and for the state, provincial, federal, and other regulatory agencies involved in aspects of electric utility transmission system use. The reliability 12 considerations that are & ei in the document should be addressed by all parties before prepw. .g e it interconnection and transmission service
) 14 agreements, and fouowed for as long as the parties remain interconnected.
16 There are several issues discussed in this document:
18 1. The ultimate responsibility for the safe and reliable operation of the electric transmission system resides with the utilities that own j 20 and operate that system. This points to one major issue of transmission system access, that of system control.
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- 2. Increased wheeling, fostered by increased competition, will increase 24 the number of " players" on the transmission system as well as the inter and intra-control area transactions to be managed. This will 26 increase the complexity and challenges of properly controlling the
) bulk electric system, especially during system emergencies.
28 Operational and long-term planning functions, essential to the continued reliability of the transmission system, will also become 30 much more complicated.
32 3. To use the transmission system to its fullest capacity, the operating
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utility or control area must be able to interrupt or reduce a number 34 of ongoing transactions (by redispatching generation) to respond to generation or transm.ssion system emergencies.
36 4 Electricity transfers follow the " path of least resistance," governed 38 by the laws of physics, not contract hw. Consequently, scheduled electricity transfers flow on all parts of the transmission system. As
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40 electricity transfers for wheeling increases, this may erode the transfer capability of already heavily loaded portions of the 42 network, use up system capebility planned for future Joad grovth, and, in the extreme, overload critical facilities.
44
- 5. . Increased competition may han.oer the exchange ofinformation 46 and technical data which is es:en'ial to coordination of system
) pf anning and operation. Without thet coordination, the long term 48 reliability of the bulk electric system may be severelyjeopardized. ,
50 6. The transmission system is not a switched network Pse 'he gas pipeline network, and even less like the telephone W.
52 Electricity is used virtuauy at the instant it is generateo. Therefore,
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the transmission system must always be able to respond instantly to 54 constantly changing operating conditions including contingencies, and to the needs of the customers.
e
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3 May 17,1989
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L INTRODUCTION 2-4 The electnc transminaian system is becoming the focus of attention
) 6 for a number of reasons. Among them are:
8 1.
Production cost differentials between electric utilities are making capacity and energy enchanges desirable.
10
- 2. A reluctance to build asw generating facilities because of 12 uncertain load growth and regulatoiy treatment of capital
)-
expenditures is another factor in making capacity and 14 energy exchanges.
16 3. Non-stility generators have entered the electricity sales market since the promulgation of the Public Utility 18 Regulatory Policies Act (PURPA) of 1978.
). 20 4. Federal Emergy Regulatory Commission (FERC) proposals may change the regulados of the U.S. electric 22 utility industry to encourage more competition among utility and other electric power suppliers.
24 Because each of these directly affects the economics of electricity f 26 production, each may foster additional transfers of electricity over the transmission system. However, these transfers can adversely affect the 28 reliabuity of the bulk electric system if guidelines that the electric utilities have established for interconnected systems operation are not followed.
30 The transmission network connects the generating plants to the 32 distribution system thus supplyicg th paths from electricity suppliers to
)
customers. However, the electric transmission system does not readily lend 34 itself to use by multiple suppliers and customers at the s;me time without careful coordination and control. Unlike the telephone network, which can 36 route signals from point to point, the electric transmission network cannot readily route electricity over s ' ci paths. Instead, electric current follows 38 physical laws that cause it to over all avadable paths, to varying
) degrees, that connect the suppliers to the purchasers. This phenomenon
. 40 can sometimes result in overloadmg transmission facahties that are not a part of the " contract" path.
42 Since the early 1920s when the first interconnections were installed, 44 the electric udlities have been developing guidelines which they follow to ensure the transmission system is designed and operated properly. These
) 46 guidelines enable the trama=inalon system to be operated reliably and safely, even with a number of simultaneous transactions, despite the 48 inability to route electne power over specific paths. It is important to recosmze that any tr====i== ion system user must follow the:e same 50 g4Mw Otherwise, the transmission system could becosse loaded to the point that the reliability of 'he bulk electric system becomes jeopardized.
53
)- Today the electric utilities strive to maximize ecocomic transactions 54 among themselves and acammodate non-utility generators according to the rules of PURPA. Adding a more competitive environment - a current ,
56 !
objectim of FERC -- may stress the transmission system further, especially '
if electric utilities and wholesale customers seek lower-cost electricity 58 supplies located farther away. Added competition among electric utilities
}. may hinder inter-utility cooperation and coordination to avoid reveahng 60 information that could reduce their advaatage in an open market. Finally, 4 May 17,1989 i
)' a I
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with added competition, more " players" will be added to the transmission 2
system, raising the concern of coordinated control of the system during emergencies; the more players, the more difficult the control and 1 4 (
cooperation task will be. However, it is the coordination and cooperation j between utilities that is so necessary for maintaining the reliability of the 6 transmission system. )
> j 8 Purpose and Scope i
10 The purpose of this reference document is to explain how the transmission system works and to identify the phaning and operating 12 considerations that all transmission system users and electricity suppliers i
) must follow to assure the bulk electric system remains reliable and safe.
14 This document is intended for all users of the transmission system, 16 and for the state, provincial, federal, and other regulatory agencies involved 4 J
in aspects of electric utility transmission system use. He reliability I 18 considerations that are discussed in the document should be addressed by I all parties before preparing their interconnection and transmission service I
) 20 agreements, and followed for as long as the parties remain interconnected.
)
22 Obilgation for Reliable Service j
24 l The mission of the North American Electric Reliability Council is to promote the reliability of the bulk electric system. He bulk electric 26 system consists of the generating plants, the transmission network, and the
) j substations that connect the transmission network to the distribution 4 28 system. Electric utilities have the ultimate public service obligation to maintain the reliability of the bulk electric system regardless of the location 30 or ownership of the electricity supply.
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5- May 17,1989 i
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, II. HOW THE TRANSMISSION SYSTEM WORKS 'i 2
4 Traan=ianiaa systems are developed for two reasons:
6
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- 1. To reliably deliver generation to the di t.L ion system, and 8 j
- 2. To connect utadica together for either reliability or economy; 10 transactions.
12 -
- Transmission systems are very complex networks that provide
} 14 electrical paths from a utility's generators ta its customers and to other );
utility systems. Typically, a utility will generate elecst: city at more than one plant and connect its plants with transmission lines that deliver the j 16 !
. electricity to key substations in its service territory. These substations i
connect to the distribution systems that fan out to serve downtowns, :
18 neighborhoods, and commercial areas. By connectag the plants together along with the distribution system, the utility can:
20.
1' . 1 Select which generating units should be on and off line (called 22
" unit commitment")
24 =
Optimize the economic mix of generation among all plants (called
" economic dispatch")
26
=
)_ Help maintain Interconnection frequency, and 28 Quickly replace lost power due to sudden generator breakdowns.
30
- The generators are controlled koin a central point called a control
' 32 center where highly-skilled personnel make decisions assisted by computers that collect data and control generation levels and major elements of the
) 34 transmission system according to predetermined safety, reliability, and economic criteris. Safety and reliability criteria are always satisfiedprst, and 36 have priority over economic considerations. -
38 Transmission for Reliability CD
) .While economy interchange is an integral part of day-to-day operations, it is over?id. in importance by the primary reason the 42 transmission network exists: reliability. Electric utilities have interconnected to improve their reliability and reduce installed capacity 44 requirements for operating reserve and minimize the consequences of transmission outages.
46
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Each day, it is not unusual for some of the thousands of generating 48 units on line to break down. Or a transmission line could develop a short circuit and necil to be hamed. It is abo common for several 50 transminaina lines or generating units to be out of service for maintenance.
Whatever the case, seldom do the lights go out. It's the transmission 52 - j system, with its network configuration, operating margin, and the ability of l the system or pool operato to control and coordinate generation dispatch !
54 during system emergencies, that keeps customers' electric service reliable.
When one utility runs short of generating capacity, emergency interchange 56- from other systems quickly comes to the rescue. In other words, any time a generating unit suddenly malfunctions, all utilities in the laterconnection 58 automatically supply the lost capacity from their generating reserve over the network until the affected utility can replace it. When a traramission line is
)~ 60 disconnected because of a short circuit or other problem, the power flows
-6 May 17,1989 j i
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k . over other parallel paths and insemanly finds its way to the distribution 2:
system. The transmission system has been planacd to take advantage of these physicallaws which is one of the keys to reliable service. f 4
Transmission for Economy Interchange 6
)
. Utihties also use the transmission system to buy, sell, and deliver i 8
electricity from and to other utilities in the short-term or spot market.
These tranaartians are scheduled bourly, daily, weekly, or longer and are 10 generally called " economy interchange" because they are based on i economics. For example, at any given time, one utility may be able to 12 generate electricity at a lower cost than its neighbor, perhaps because one
) - is burning coal and another oil, or one utility is about to start a combustion 14 i turbine, which uses expensive diandlate fuels, and can purchase electricity !
cheaper. By turmag to neighboring systems, nadielas buy and sell electric 16 energy in the short term market to reduce their production costs. In most cases,.these savings are passed on to the electrie costomers.
18
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In addition to the short-term market, there are also long term .
) 20 electric energy and capacity interchange arrangements. These are 22 schedaled to last for months or years and include unit power sales, jointly. j owned generation, and firm purchases from other nedit-a These are also -
economically-based transactions and serve to optimize or defer plant 24 construction among several utshties and further reduce or stabilize prices to the customers.
26
). Planning the Transmission System 28 Transmission systems are planned using carefully developed 30 planning guidelines to assure orderly development for the reliability of the bulk electric system. Keeping in mind that transmission is needed to i 32
. connect the generators to the distribution system anel to interchange j
) emergency and economy elec . ricity with other utilities, how do utilities plan 34 the transmission system? What are the criteria? What are the constraints?
' 36 Fast, the transmission system must dependably connect the generating plants to the distribution system so the utility can serve its _
38 customers safely and reliably. It must also dependably connect the utility with neighboring utilities. The inter utility tie lines are a key element of
) t.0 our highly reliable electric system. The utility considers how to handle all reasonable bulk electric system component failures - called " contingencies" 42- -- when it develops its trana-lacian expansion plan and determines the amount of transmission margin required.- It also evaluates how the system 44 will perform following less probable but more serious contingencies. It is important that the system have enough margin and flexibility to withstand 46
) even these more unusual contingencies without suffering widespread, casemhng blackouts.
48 )
Second, the transmission system should allow a utility to dispatch i 50 its generators in the most economic manner. This involves proper generating unit selection and the economic dispatch of Gose units.
52
) Third the' tr====lealon system should accommodate all known or 54 ' planned long-term interchange contracts with neighbonag utilities. It takes sewral years - perhaps eight or more - to plan and install major 56 transmission lines. Therefore a utility can consider interchange with another utility only if it knows about the interchange contract when the 58 lines are being planned. There is no way a utility can plan its transmission
- system to accommodate the myriad of possible interchange opportunities
): 60 that could arise aAer the lines are in service. Economy interchange
-7 May 17,1989
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1 opportunities that become available after the transmission system is 2 committed and built can be accommodated only on a space (capacity)-
available basis - after the first considerations of safety and reliability are 4 satisfied.
6 I~mally, the transmission system should meet all these s
- considerations in an economical manner and with minimrj adverse impact 8 on the environment.
10 As long as reliability and economics are constraints, this is how utilities will plan acd operate their transmission systems. The transmission 12 network is planned as a system, and any element planned for a specific purpose often finds its role altered as the transmission system evolves over
) 14 time.
16 Opersting the Transmission System 18 Electric transmission systems are coritinuously connected networks to prr, vide for reliability and instant service. Electric networks are not like 20 pipeline networks, and even less like telephone networks.
)
22 Pipeline networks can be " switched" using valves to route the products they carry to various terminals. In fact, every other service or 24 commodity, from corn to gasoline to telecommunications, travels from supplier to customer by way of a transmission system where the product or i 26 service can be routed or switched over a selected path to a selected 3
' destination. Because the electric transmission network must be 28 continuously connected, in effect every generator is connected to every load .
on the system. Ther4 ore, all the electricity entering the transmission !
30 system is co. mingled, regardless of source or destination.
32 The telephone system is the ultimate in " switched" networks.
Each telephone can be connected to any other telephone over a unique
) 34 path. It is the very antithesis of the electric transmission system in which every generating plant and substation must be connected to the 36 transmission system all the time. The electric transmission system must be used continuously and in its entirety. Unlike the telephone system that 38 takes several seconds to select a path for your call, and that gives you a
" trunk busy" signal when it becomes overloaded, the electric system has no G such option. If a light is turned on, if the school cpens its doors, if the
)
steel mill fires up its arc furnace, the electric system responds, instantly.
43 No waiting. No busy signal. It can only do this if the transmission system is there ready for use all the time.
44 A fundamental concept to understand is that there is no practical way 46 to provide a specific, unique transmission path from the electricity supplier to
) purchaser unless a radial transmission line is built just for that purpose.
Althou6 hthere are switches on the transmission networks, they are 50 used to disconnect lines or other equipment for protection, repair, or preventive maintenance. This actually leaves the network more vulnerable 52 to contingencies until the transmission components are returned to service.
) 54 liow Electricity is Bought and Sold on the Transmission Network 56 Electricity has some very unique properties. It "looks" the same no matter which utility generates it, it cannot be stored (for all intents and 58 purposes), and it flows from producer to user at the speed of light. The ,
utilities buy and sell electricity over a non-switchable network without 60 !
) jeopardizing the reliability of the system by following the same rules I
8 May 17,1989 !
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in'dustry. wide. 'It b theoreticaDy possible is sell electricity from Ontano ts 2 Florida, from British Columbia to California, and from Minnemata to Mississippi. But it will only work if all traann'mina system users follow the 4 same yr. rating rules. Here's how it's done:
6 Electricity Interchange is Scheduled
}
8 When utility A wants to seu electricity to utility B and the systems are directly connected, they Grst agree on the amount, the time, and the .
10 pn'ce. I.et's say B wants to buy 100 megawatts (MW from A for the next hour at $20/MWh, for a total of $2,000. In wry simp)lified terms, the 12 procedure works like this: First, the two utilities agree on a time to start the transaction and a time to stop. Suppose the transaction is to occur
) 14 from 4 to 5 p.m. At 4 p.m., utility A begins generating 100 MW more than needed and utility B 100 MW less than needed to supply their respective 10 demand; 100 MW will then Gow from utility A to utility B via the transmission system. At 5 p.m., utility A begins generating 100 MW less, 18 and utility B 100 MW more, and the transaction ends - everything was as before. This is called " scheduling." Utility A and B agreed to the amount, 20 the price, the time, and duration before the transaction occurred. The
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actual procedures are much more complicated, involvmg factors such as 22 system ramp times, Interconnection frequency, and inadvertent interchange accounting and balancing.
24 in other words, because the netmwk cannot be snitched, the consol 26 of the aansaction is relegated to the supplypoints - the pnerating units. In
) reality, system openstars schedule the pneration fnun the powrplants to 28 achieve the interchang. & supplying utility raises its pneranon, and the purchasing utility louers its pneration. hre is no aansmission smtching. ,
30 Control Assas -
32
) Not all electric utilities can schedule. To be capable of scheduling, 34 the utility must:
36 Have generating units of sufficient size and number in relation to its load, 38 Be able to monitor actual interchange flowing over its tie
) (3 lines to other systems, and 42 Be able to control a sufficient number of its generatiag units so its actual interchange equals its scheduled 44 interchange. (Doing so will ensure its customers' loads are being met.)
46
) A utility or group of 18ildies that can do these three thing is called a 48 " control area." Concol areas must be invoked in allinterchang scheduling.
Utilities or oder elecatcsty supphers that are not conool areas may sche &de 50 only if they makeformal arranyments to participate in the conavl area of which they are a part.
52
)- Au ccatrol areas schedule electricity between each other in the 54 same way. These procedures are enumerated in NERC's Operating Guides which are observed by every control area in North America.
56 Many Paths to Follow.
58 Scheduling would be a fairly simple procedure if there were only
) 60 two control areas in the world. But there aren't. In F'qure 1, control areas 9 May 17,1989
)
) I A and B are in r:ality connected ts C, D, and E. In the U.S. and Canada i 2 combined, there are some 150 control areas which control nearly 100% of the electricity generated.
15 -
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ao
/20 D !
E% A e
1 i 50 l
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45 C
y FLgurt 1 Parallelpath flow resultingfrom 100 MWinterchangefrom control area A to controlarea B.
4 While all electric utility systems in each Interconnection are 6 connected indirectly, most systems have direct connections only with
) neighboring systems. It is possible to trace a path from any one control 8 area to another, although doing so may pass through many others. If i control areas A and B are not directly connected to each other, the 100 10 MW they exchange will flow tlaough the transmission systems owned by utilities in other control areas. In fact, even if A and B are directly 12 connected, part of the ;00 MW will likely flow through the transmission systems of utilities that surround them. And because de transmission
) 14 system is not a switched" network, that 100 MW transaction will use all the paths available to get from supplier to purchaser. (See Figure 1. This 16 is called parallel flow.) Electricityfollows allpathsfrom source to destination based on the laws ofphysics. Specipcally, itsflows are inversely 18 proportional to the impedances of all the transmission lines betwen the generation and distribution system.
20
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Transinission Limitations 22 Transmission systems do have limits, however, and it is the utilities' 24 responsibility to see that these limits are not exceeded. Doing so can cause a transmission line to sag or even burn down -- it can melt. When this 26 happens, the electricity that was flowing over it will simply find other paths
) to take. That means that other lines could overload and open if the 28 increased flow of electricity exceeds their limits, and one by one, the transmission system could begin to break down in an uncontrolled, 30 cascading fashion like falling dominoes.
32 There have been notable case.s ofloss of transmission network integrity in both the United States and Canada. Similar problems have
) 34 occurred in major electric interconnections elsewhere in the world. In most
-10 May 17,1989
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cases, blackouts are caused wheQ the trapaminaiaa systGa becomes stressed 2 to the point that major elements are automatiedy removed from the network.' This is done either as a protective measure to prevent m4or and 4
unca=# roped equipment damage, or to prevent the loss of generator synchronism and network stability. Major blackouts have affected millions 6 of people and restoration from these events can take hours, especially if
). generating units have tripped off line.
8 Because as outage can occur at any time, electric utilities mmt 10 operate so that the loss of any single facility will not result in any other facility exceeding its rating. Thus, transmission lines are normally loaded 12 below their maximum ratings. ' Again, this is accomplished by controlling generation levels throughout the system, not by switching transmission.
) 14 I
Altering generation levels to control transmission flows may depart from optimum economic dispatch, but reliseshty almryr takes precedence owr '
16 economics.
18 Transmission systems are not only restricted by equipment limits.
Besides the thermal or curr Arrymg capacity of individual transminaion 20 lines, there are other limit: ' , transmission system loading. These include
)
power flow patterns, vokage r d reactive power supply adequacy and 22 location, system dynamic respwse (electrical stabihty, power plant response j
characteristics, etc.), and other system operating limits =erenaary to 24 maiarain the reliability and integrity of the network. Determining just how much electricity can be transferred from one point in a network to another 4
.26 involves careful evaluation of all these complex technical factors by highly
) qualified and experienced power system engineers and operators.
28 Need for Coordination and Contml 30 i There is another element needed to assure the transmission system 32 runs smoothly and effectively. The continuously-connected network
)- structure requires strict adherence to prescribed scheduling procedures so 34 buyers and sellers can successfully consummate their interchange transactions simultaneously. There could be hundreds of transactions 36 taking place among the 150 control areas at the same time.
'38 How can a utility be assured that its transmission system won't be overloaded by transactions between utilities elsewhere in the network?
) CD And if that happens, how does it get relief? The answer is coordinanon and conaut. There mut be coordination of all interchange schedules on a 42 continuing basis. Control centers coordinate the reduction or interruption of short term or spot market transactions between allinvolved utilities 44 when necessary to maintain reliable operating conditions and to reduce overloads.
46
)
la the case of a system like the Pennsylvania New Jersey-Maryland 48 Interconnection (PJM), the pool operating center knows which utilities are trading electricity with others and can monitor the transmission system 50 within the pool. Some NERC Regions,like the Mid-Continent Area Power Pool (MAPP), keep track of interchange within the Region, and can step in 52 to order reductions of interchange when one or more utilities find
) themselves in trouble. In the WSCC, various pools and utility groups 54 coordinate and control schedules, while in ERCOT, all transactions are monitored and controlled by the two Security Centers. l 56 L
)
-11 May 17,19E9 ;
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III. WHAT IS WHEELING?
-2 Whee ' may meas diferent things to different people. For this 4 document, whee occurs when there is a buyer, a seuer, and one or more utilmies in between which deliver - or wheel- the electriaty. Wheeling
'6 requires a contractual agreescot or tariff to provide access to the
) transmission fanleien of one party to transmit electric power or coergy 8 from the buyer to the seller.
10 Transmission Agreements - Wheeling 12 Despite the many paths between buyer and seuer,if two control
) . areas want to schedule interchange and are not directly connected, they.
14 must secure the use of adequate transmission capacity in the transmission systems from the utilities in between the " wheeling" utilities. There are 16 two ways to do this:
18 .
In one approach, the buyer or the seller sign a contract with the wheeling utility (ies) for transmission service. These agreements derme
)' '20 specific available " contract path" over which the interchange is deemed to
~ take place, and usually include provismos for eimbursing the wheeling 22 utility for use of its facilities (capital investment and other costs) and electrical losses (energy). Enn though utilities secwe a specifEc conanct path, 24 the interchange stillflows our all available elecaicalpathspom seller to
~
buyer.
26
) Most scheduling is accomplished through a series of two-party 28 - transactions. For example, if utility A wanted to seu to utility D, and the
" contra-t path" involwd utilities B and C, three transactions would actually 30 occur: A schedules 100 MW to B, B schedules 100 MW to C, and C schedules 100 MW to D. ' In actual practice, transmission losses must be 32 factored into these transactions and could add two more schedules to bc controUed and accounted for.
)
' A second approach is when the buyer, seller, and wheeling utilities 36 are part of a pool or other coordinated group where there may be a multilateral agreement between the utilities that allows transmission use 38 without separate transmission use agreements. In this case, utility A, even if not directly connected to utility D, could schedule directly with D using a
). 40 prearranged security, control, and accounting procedure.
42 The wheeling charge or tariff can also influence system reliability.
A utility offering a lower wheeling charge to encourage the tise of its 44 transmission reserve can increase economic electricity transfers on the system which, by its network nature, impacts other utilities.
46
) The Essentials of Reliable Interchange 48-To recap the six essential elements of electricity interchange, there 50 must be:
-32
- An interchange agreement between the seuer and purchaser
)
- 54 An agreement on the times, prices, and amounts of electricity to be boui;bt and sold for the particular interchange schedule 56 The ability to control the generation to cause the transaction to 58 occur 60 *
) Transmission agreements with any wheeling utilities 12 May 17,1989
)
1 s- 'T'-
2 * .,
Adequate transmission system capacity to ace ===odate the interchange and provide margins to handle contagencies 4- ,
=
Control of the traamar+ians on the network to maiarain reliability 6
)
From a purely tachaical perspective, all generators look the same '
8 to the transmission network and must follow the same operating guidelines to maintais the integrity and reliability of the system. Both utilities and
'10 non utility generators shke must be able to operate in such a way that the elements of reliable interchange are accommodated. This issue is discussed !
.12 ' in the April 1987 NERC reference docenent," Reliability Considerations for Integrating Non-utility Generating Facilities with the Bulk Electric
) 14 - Systems."
16 Access by Wholesale Custossers 1
18 .
In this discussion, a wholesale customer is a utility engaged in sales for resale to its ultimate customers. Can these wholesale customers access ,!
). 20 ' the transmission system and engage in economy laterchange - in this case '
a purchase - from a utility other than the one to which they are ;
22 connected? ' Whde doing so may be technically possible - and then only to ~l a limited degree - it usually violates one of the essential elements of 24 !
reliable interconnected systems operation and complicates the operation and planning of the bulk electric system. y 26 1 '
) Recall there are six steps to interchange. Suppose the ' wholesale 28 customer is connected to utility A and would like to buy from utility D (see Figure 2). First, there needs to be an interchange contract. 'I)e customer 1 30 can establish a contract with D, the selling udlity. Assume there is !
adequate transmission 32 capability, and the customer )
can acquire the necessary
)' 34L ~
transmission access through I
wheeling contracts with 8 C
36 utilities A, B, and C. m 38 Now it is time to O
) CD schedule. But a wholesale customer has no gene.ation -- A N 42 nothing to control - a critical element in the interchange D
process is missing. There is a 44 way to handle this situation, but it is complex and costly.
46 A short-term transania= or Figm 2 Moksak customer conntected
). even a small iong term to utility A buyingfmm utility D.
48 transaction may not justify the cost. :By telemetering the wholesale customer's demand to utility A, the 50 utility to which it is connected, and utility D, the utility from which it is purchasin6 its electncity, a continuously-varying schedule that duplicates the 52 wholesale customer's varying demand is in effect created between the two 1 utilities involwd. D will deliver to C who will deliver to B who will deliver 54 to A who delivers the electncity to the customer as it had before. Now D bills the customer instead of A for the energy the customer used. Of 56 course, the customer would also have to make arrangements with A, B, and C so they can schedule their wheeling service. And, the custotact would 58 have to contract for reserve energy to avoid blackouts if his generation source failed or transmission outage occurred.
) M 13 to old lac uts f h ge rat n
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can askedule their 46t. cling service. And, the cuatrweer womis 2- contMct f4r resedre eastgf16 avoid blacingts if 141caesarion or tramadiissigsautage adstrod.
L4 Now the wholesale customer is accommodated - but it has taken 6 five arrangements to do it: One from D to A, plus wheeling through A, B,
)- and C and one for backup service.
8 Finally, there is the last element of interchange - control Who 10 controls this transaction? At this point, utilities A, B, C and D have no control of the interchange between them imposed by the whoiesale
- 12. customer. Instead, the wholesale customer's demand controls the -
j y' , interchange. Here lies the predicament: The customer has been given 14 access to the network while leaving the utilities without the ability to J control the system power flows caused by that access. Yet, the utilities still -
16 have the obliguriori for maintaining the reliability of the bulk electric ;
system.
18 l How Small is Sanall - How Many is a Few?
j 20 .,
l How many non-utility generators or wholesale customers seeking
.22 transmission access does it take to make an impact on the reliabil'ty of the network? There is no certain number. The crux of the problem is that i 24 providing transmission access to non-utility generators who do not follow NERC Operating Guides, and wholesale customers whose demands control 26 utilities' generation, sedously complicates control of the network. i
)- .l 28 - The electric utilities themselves are faced with a complicated myriad of interchange schedules. Increasing the number of " players" on ;
30 the transmission systems could develop into a chaotic situation on the network that would be impossible to manage if an emergency developed.
32 i There would be no feasible way to track the transactions which would be i
)- constantly changing as customers' demands rose and fell. Therefore, the i 34 issue of transmission access is one of corIDol. There must be a way for !
utilities to monitor and control the transactions.
36 How Reliable is Reliable?
38 From the customer's point of view, transmission reliability is
) C3 measured by whether the lights are on or not. It has been difficult for utilities to prove the case that transmission system integrity is sometimes on 43 the verge of being jeopardized because the system appears to be so reliable to the customers. He lights are almost always on.
.44 In fact, utilities can and do see problems on their transmission 46 systems which they have usually been able to correct before complete
)
system failure occurs. Through the use of telemetry and their control 48 computers, the system or pool operators monitor the power flows on critical transmission lines, transformers, or sections of the system, and 50 voltages at key substations. The monitored data are processed by the control computers that alert the operators if flows or voltages approach or 53 exceed acceptable limits. The elements to be monitored, and their
> respective limiting values, are determined through operational planning and 54 contingency analysis studies. This monitoring allows the operator to see potential problems as they develop, and alerts him immediately if a 56 problem develops suddenly.
58 The key to averti8g system failure is coordination and control. The utilities can control the current situation, but only through extensive
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14- May 17,1989
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h communications with other utilities and established monitoring systems, and 2' ,< the ability to control and redispatch generators. '
4' All additional scheduled transactions must remain coordinated and Controlled by the system or pool operators to =mintain reliabihty, especially .>
6 .. during system emergencies. His continually grows more diffievlt as the j
) number of transactions and " players" increases on the transmission system. t 8
Economy Versus Reliability - Access Versus Reliability A major issue is "what 12 busy signal is an inconvenience. price reliability?" To the telephone user, a To the electrici:y user, an interruption in ]j electric service can mean loss of business or even be life threatening. To l
) 14 NERC - to the electric utilities - reliability is the watchword.
]
16 The electric utilities have problems today coping with the many interchange schedules now accommodated on the transmission networks.
18 -j ney are anxious to wring every megawatt of capacity from their j transmission networks to minimae costs. It is only the utilities' adherence
' N) !
) to the planning and operating reliability criteria and guides that have kept j the North American bulk electne system so reliable. '
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1 15 May 17,1989 l
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fV. THE NEED FOR COMMON PIANNING AND OPERATING GUIDES -
4 Why are common planning and operating guides needed? The reason lies in how the bulk electric supply in North America works and 6
how the 3,000 utilities that make up that supply are connected together.
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' 'I)e first electric systems, built in the 1800's, were electrically " isolated."
8 That is, they were not connected to any other electric systems. It soon became obvious that if two electric utilities connected themselves together, 10 each could help the other if either had an operational problem with their power supply.
12 Over the years. as the utilities developed, these connections grew,
). 14-forming networks of electric systems that covered many states and provinces. Toua 16 laterconnections.y, They there are: are four major networks, called the four 18 1. Eastern laterconnection - the largest Interconnection. It covers an area from Nova Scotia to Florida and from eastern New Mexico
- j. 20 to Saskatchewan.
22 2.
Westere laterconnection - second largest in size and extending from Alberta and British Columbia in the north to Baja California, 24 Arizona, and New Mexico in the south. It has several direct curretit (de) interconnections to the Eastern Interconnection. i 26
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- 3. Hydro-Quebec Interconnection --. Quebec's main grid is operated 28 as an isolated area for physical reasons, but has de connections to the Eastern Interconnection.
30 4 Electric Reliability Council of Texas - includes most of the 32 3 utilities in Texas. It has a de connection to the Eastern Interconnection. 1
) 34 Each Interconnection instantly responds as a single, very lane 36 utility to any significant operating problem, mechanical failure, or
" disturbance" occurring anywhere within the Interconnection. Certain 38 actions by one utility affect all other utilities to some degree. Thus, all parties within the Interconnection must function rmder a common set of y
40 operating guides.
43 The electric utilities in North America have followed a common set of operating guides since 1964 when the North American Power Systems 44 Interconnection Committee (NAPSIC) developed its first guides for interconnected systems operation. In 1980, NAPSIC merged with the .
46 North American Electric Reliability Council (NERC) and became the
) NERC Operating Committee whose utility members have continued to 48 revise, epdate, expand, and strengthen the original operating guides.
Today, the NERC Operating Guides, as well as the policy on which they 50 are based - the " Reliability Criteria for Interconnected Systems Operation"
- form the basic tenets of reliable interconnected systems operation. In 52 addition, the Regmaal Councds that comprise NERC, and the utilities themselves, follow planamg and operating guides that are no less stringent 54 than the NERC Guides. They also follow more detailed guides tailored to their particular regional situations.
56 This document contains considerations and guides which are an 58 integral part of assuring the transmission system's continued reliability and safe operation. Most of these considerations were extracted from the y 60 NERC Operating Guides, NERC reference documents on planning and May 17,1989
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d other Regional Council planning and operating guides and 2 e utility mdustry practice.
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2 V. TRANSMISSION OPERATING RELIABILITY CONSIDERATIONS 1 Systems Control 4;
System control includes the guidelines for normal interconnected 6 systems operation.
8 1.1 Control area - A control area is a utility or group of utilities (such as a power pool) capable of adjusting its 10 generation to meet its constantly changing demand, maintain scheduled frequency, and meet its interchange 12 schedule with other utilities. The difference between
)' 14 scheduled and actual interchange causes inadvertent interchange that the control area utility must account for and, ultimately, pay back to or take from the
-16 laterconnection. Every generator must operate as part of a control area. Non utility generators must make 18 arrangements with a utility to operate within that utility's control area.
) -. 20 1.2 22 Generation control - All control areas must be able to match changes in their load and scheduled interchange, and provide their obligation to maintain scheduled
' 24 frequency on the Interconnection.
26 1.3 Operating reserve -- Utilities must ham adequate rescrie
) j capacity to allow for continued service to customer load 28 -
during times when generation or interchange resources become unavailable. Utilities must consider sudden, 30 - unexpected loss of generation in their control area when .
calculating operating reserve requirements. Non utility 32 generators must also provide for operating reserve, either y from their own system, or by an agreement with a utility.
1.4 Interchange schedallag '-- Interchange may be scheduled 36 only between parties having directly connecting facilities in service unless there is a contract or mutual agreement with 38 the intervening utility (ies) to provide connecting facilities.
The interchange schedules must also be coordinated with
)- CD and agreed to by the involved control areas. -
42 1.5 Interchange contracts - When transactions are made between parties, the contractual provisions of the 44 laterchange must indicate the responsibility for reserves and other obbgations of the buyer and seller. These 46 provisions must identify the rights, obligations, and
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limitations of all parties, including those providing 48' transmission service.
50 1.6 Control performance criteria - Control performance is the degree to which a control area matches its generation 52 to its demand plus scheduled interchange, taking into account the effects of Interconnection frequency. The 54 NERC Operating Committee has established Control Performance Criteria which includes standards of 15 acceptable control area performance for control areas.
. 58 1.7 Energy accounting - All parties must provide for an '
energy accounting system to ensure that scheduled
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18- May 17,1989
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laterchange, actual interchange, and inadvertent 2 laterchange are properly accounted for.
4 2 Systeam Security 6 System security refers to the system's ability to respond to external
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disturbances without prompting cascading outages. These might 8 include single and multiple transmission system contingencies (Refer to PImaning Considerations I.A. and I.B.), sudden loss of 10 generation, or load changes.
12 2.1 Generation reserve (general) - To accommodate
) electricity transfers on the transmission system, all parties 14 must know and agree upon the responsibility for providing reserves. When a utility is purchasing energy from 16 another supplier, all involved parties must agree on the sources of generation reserves.
18 2.2 Generation reserve (backup for laterchaage) - A utility
) 20 purchasing from another supplier must have either Grm reserves included as a part of its purchase or it must have 22 the ability to provide its share of reserves from its own generation, reserve sharing agreements, or load 24 curtailment.
26 2.3 Transmission loading - Utilities constantly monitor their
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transmission system to assure that line loadings are kept 28 within proper limits. There must be sufficient reserw transfusion network capability to allow for probable 30 contingencies.
32 2.4 Transmission operation - System security is also affected i
) by the status of transmission facilities. Utilities coordinate j 34 transmission switching and maintenance to provide for continuous service of customer load.
36 2.5 Switching and clearance procedures - Utilities establish 38 transmission switching rad clearance (meaaaming a line from service) procedures to ensure the safety of their
) 40 customers and personnel. These procedures mest be followed precisely.
42 2.6 Moeltoring latercomoection parasseters - As part of their 44 normal operating procedures, utilities continuously monitor interconnection parameters inc?uding transmission 46 line status, voltages, and real and reactive Dows. This
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information is usually telemetered to both interconnected 48 control areas simultaneously.
50 3 Emergency Operations 53 The operation of the electric systems during emergency conditions
). requires coordination and commitment to make timely operating 54 decisions that directly aifect the electric supply to all customers.
Depending on the season and other circumstances, an interruption 56 in service may be only an inconvenience to a few of the utility's customers, or it may be life-threatening and involve thousands of ,
58 people. All utilities have developed operating procedures to deal l with system emergencies with the goal being safe and rapid service
) 60 restoration.
May 17,1989
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2 If there is a generation h%, the utility will first call on its own operating reserve, then begin purchasing ese 4 from its neighboring systems. If the generation debacy ecy stillpower I
' exists after purchaseg all avadable power, the utility may 6 implement a voltage reduction, shed its interruptible customers, or
)- issue public appeals to decrease use. Only after these and other 8- measures fail to mitigate the emergency will the utility turn to sheddag firm load.
10 If transmission line loadings need to be reduced to protect the line 12 from damage or the entire network from cascading outages,
) generation or interchange schedules must be adjusted to maintain l 14 the loadings within applicable haits.
16 All who operate generators are expected to follow utility emergency operating procedures.
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) 20 3.1 Alternate generation - In order to provide for the l reliability of the Interconnection, utilities must be prepared 22 to operate alternative resources. l 1
- 24 3.2 Schednie priodtizatles - Utilities assign priorities to their interchange schedules to determine which schedules should 26 .J
' be reduced or curtailed when required due to system )
)- problems. For example, a " firm" transaction with reserve 28 i backup will have a higher priority than an " economy" 1 transaction without backup. Scheduled interchange from .i 30 and for whechng customers must be included on the priority list and may be altered or curtailed in an 32 cmergency.
34 3.3 Schedule coordlaation - All control areas must have a
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36 procedure to coordinate schedules and schedule priorities.
This may involve joint operating committees or other 38 - negotiated procedures. A system operator or pool operator must be able to order schedule adjustments,
) (3 reducing or curtailing scheduled interchange as necessary, based on the pre. established schedule priorities, should the 42 reliability of the laterconnection be jeopardized by scheduled electricity transfers. Transfer adjustments can 44 include generation changes and reassignments of delivery to purchasers.
} 3.4 Tramassinales rights - When purchasing from a remote 48 resource, there must be a recognition of the degree of dependence upon the transmission facilities in the area. A
' 50 wheeling transaction may have to be interrupted to maintain tri umission system reliability to customers 52 served by the utility which owns the transmission system.
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54 4 Operating Personnel
$6 4.1 Stamns - Maintauung an adequate staff to operate generation and transmission systems during periods of 58 normal and emergency conditions is a requirement for providing electric system reliability.
)! 60 20- May 17,1989
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4.2 Trainlag - Tbc litercaaaec'ian's con 5guration, operating 2.
conditions, equipment, and operating techniques are canetaatly changing. Therefore, operator trening is an 4 ongoing process. This training includes f==diarization with normal and emerpacy interconnected operatin 6 procedures of the connecting utility, pool, Region, g
).- Interea=aac'ina, and NERC.
8 5 Operations Planning 10 5.1 System stadies - Utilities regularly study their system by 12 using computer models. nese models allow the utility to study how the system will react to various single and L 14 multiple contingencies. Dese studies include dynamie
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stability analysis, power flow analysis, transmission transfer 16 ;
capability, emergency operations, and others. Adjacent i systems are expected to exchange information on existing '
18 and forecast loads and resources in order to adequately model and analyze system performance. Additional 20
) system studies are sometimes performed to assess system performance during planned generation and treammianiaa 22 line maintenance.
'24 5.2 Generating plant malatemance - Utilities develop !
coordinated generating plant maintenance schedules, for i 26 up to five years in advance. Maintenance is usually
) scheduled during the months when the peak demand for 28 electricity is the lowest. For many nailities, this is the 1
spring and fall. As the time nears for a particular i 30 generator to be removed from service for maintenance, the utility naarsars the remaining capacity, taking into account 32 scheduled interchange and scheduled and forced generator l
outeges, and adjusts the maintenance schedule if '
) 34 insufficient generation or traanmaanian capacity seems likely. The non utility generation is included in that 36 aurument, and therefore the non-utility generator and utility must coordinate their scheduled maintenance.
38 Depending on the location of the generator under .I maintenance, transmianian system contingency analyses y c may be warranted to assess system performance during the ,
outage.
42 I 5.3 Transmiselon malatenance - Transmission maintenance 44 sometimes requires that one or more lines be removed from service. It is important for all transmission system i 46 users, including non-utility generators, to know which lines
) are scheduled for planned maintenance, when the 48 maintenance is expected to begin, and for how long the lines will be out of service. Contingency analyses are 50 performed to simulate the operation of the utility system with various expected generation and transmission 52 coangurations during the line maintenance. These
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analyses provide the system or pool operator with an 54 appraisal of system behavior without the outaged transmission element. This allows laim to foresee potential 56 threats to reliable operation and control the system accordingly.
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21 May 17,1989
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y 6 Communications 4'
~ A certain amount of data is aaranaary to a utility system operator in order to operate system facilities so as to provide for the reliable 6- and economic operation of the electric system. This data includes ji load data, transmission interchange data, schedule data, voltage 8 data as well as the status of system equipment. In addition, voice communications between the operator aad other systenas is a 1 10 necessary part of assimilating e#iaas and respooding to them.
12 6.1 Communlentless equipment - Communications between utilities must be adequate and reliable. There must be
)' 14 su!ficient, dependable channels to Undle voice and 3l j
telemetering communications. Frequently, critical raw -
16 data is shared (via telemetry) between control centers, l sometimes through coinputer to-computer data links.
18 Since the system operators oAen need processed information more than raw data, most data are proce==ed 20 by the control center computers for clear and useful
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presentation to the operstors. The non utility generator 22 must provide an acceptable level of communication 1 facdities as agreed to with the eaadag and purchening i 24 utilities.
26 6.2 Operstless reporting - Just as utility accountants and
). bookkeepers manage and post financial transactions, the 28 system operators account for the utility's actual
' interchange, generation, inadvertent interchange, and 30 energy transactions for billing purposes, including all purchases and sales, transaction cost and price. All 32 electricity sellers and buyers must likewise keep reports on hourly transactions purchased and sold and furm,sh this
)- 34 information to the control area. Operations reportir4 should include all these areas of energy accounting.
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VI. TRANSMISSION PLANNING RELIABILITY CONSIDERATIONS 2
4 1 Rellatlllty Standards 6
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Tranuninion systems must be designed and operated to satisfy 8 several reliability criteria. Included among these are:
10 1.1 Recovery fkoen mon probable contingencies - A "more probable" contingency is one that is likely to occur. The 12 sudden loss of a generator, transmission line, or other
) system component are examples of probable contingencies.
14 They are usually single events, and utilities handle them through standard design and operating procedures. The 16 utility should be able to recover from more probable contingencies without significant adverse effects on 18 customer service. In other words, customers will seldom know these events happened.
) 20 1.2 Recovery from more severe,less probable costlngeocles --
22 la this category are multiple contingencies (component failures) that are potentially more severe. These are less 24 likely, but still possible, events. Examples are the simultaneous shutdown of all generators at a power plant, 26 the simultancoas or sequential trip of two or more
) transmission lines, or perhaps the tripping of all lines at a 28 substatica. Utilities have procedures to deal with these contingencies in orde.r to keep the bulk electric system 30 intact. These less probable contingencies should not result in the loss of synchronous operation, cascading outages, or 32 the unintentional interruption of a large amount of customer load. The final line of defense against total
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34 system collapse often includes automatic shedding of selected loads.
36 1.3 Maintenance or other planned facility outsges - Utilities 38 coordinate generation and transmission maintenance schedules to assure that adequate generating capacity and
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40 system transmission capability are maintained while equipment is out of service. Also, tic line maintenance 42 must be coordmated by the two utilities or by the utility and the non utility generator which the line connects.
44 1.4 Reactive supply - Reactive power is needed to support 46 system voltage. The reactive power used by customers is
) difficult to transfer over distances because transmission 48 lines and power transformers also consume re ctive power.
Reactive sources include generators, capacitors, and 50 synchronous condensers. The farther the reactive power h transmitted, the higher the reactive power consumed by 52 the transmission system. Consequently, there must be an
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adequate supply of reactive power properly located 54 throughout the transmission system. This is possible only when there is proper application and coordination of 56 reactive sources to assure that all facilities can be operated whhin acceptable voltage limits.
58 j Switching arrangements - short circuit isolation - Short
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60 circuits can cause system instability and other severe 23 May 17,1989
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1 problems such as equipment damage if not quickly cleared.
2 Utihties use protective relays to detect short circuit coaddiana and open circuit breakers to -ik r the .
4 transmission line or substation equipment on which the short circuit occurred. Switching arrangements must be 6- capable of automatically isolating short circuits.1
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8 1.6 System restoration - System restoration, critical to service continuity, is usually accomplished by remote control and 10 service crews avadable 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day. Restoration procedures may need to be coordinated with neighboring 12 utiEties.
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14 2 Accommodating Gernration and Imad Patterns 16 - 2.1 Normal System Disputek - Utility generating units are scheduled and their output is adjusted to minimize 18 production costs in servmg continually changing customer
)- 20 demand. A @Wated mathematical modelis used to determine the output of each generator so that the production cost for the entire system is minimized. His is 22 called " economic dispatch." Tbc transmission syatem must be capable of accommodating the varying generation .
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patterns that result. If not, the traan=iamina limits must be used in the computer dispatch model as constraints, which 26 ;
) will cause a deviation from the " pure" econonde dispatch. '
28 3 Transfer Capability 30 3.1 Essergency and economic transfers -- The !
interconnections with adjacent utilities, non-utilities, as 32 well as the supporting internal utility transmission system,
) must reliably accommodate both routine and emergency 34 transfers of energy among utilities. Sufficient transmission capacity must be provided to allow for the probable loss of 36 generating capacity and to maintain reliable customer service.
38 3.2 Reliance on a single path - There must be sufficient
) G rednadaan of transmission lines such that no single traan= lamina path will be depended upon to carry a 42 disproportionate share of power transmitted within or between utihties.
44 3.3 Parnuel Hows - Because the Interconnection consists of a 46 network of transmission _ lines, the electricity transfers will
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Dow over various paths trom utility to utility. Often, these 48 paths are through utilities that are not panies to the contraded electricity transfer and there is the possibility 50 that the transaction could overload a part of these systems, or impose operating constraints. Herefore, when a 53 utility's energy is being delivered to a purdusing utility not
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8 Switching is performed to remove transmission system components
$4 from scryice, not to route eledricity.
24 May 17,1989
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- directly connected, the actual path, as well as the contract 4 2 q path, must be planned for, continually studied, monitored, :
and evaluated to assure that the electricity I 4 jeopardize the Interconnection's reliability., transfer will not
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6 4 Planing Studies 8 Plannmg studies simulate various bulk electric system conditions and configurations and are a standard part of utility ;Jaa-:ai All 10 utilities must perform reliability studies to determine how power y flow will impact the transmission systems of the Interconnection.
12 These studies generally take into account projected load and :
generation patterns, transmission capacity limits, voltage and 14 . reactive power profiles, system stability limits, the impact of parallel path flows, the effect of generator shutdowns, transmission 16 equipment outages, and avadable techniques te maintain and unprove where necessary the reliability of the transmission system.
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4.1 Transmission planalag studies - Planning an adequate 20 and reliable transmission system requires reasonable predictability of the location, magnitude, and 22 characteristics of the loads to be served and the resources to serve these loads. Utilities conduct transmissica 24 planning studies to determine when and where
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transmission system additions or changes are needed.
26 These include transfer capability studies that use computer modeling techniques to determine bow much electricity 28 can be transferred within or among control areas. These studies must include a detailed representation cf all 30 facilities along with any wheeling arrangements to assure
). that these facilities can be reliably integrated into the 32 Interconnection. A thorough transmission study must be conducted whenever generation (utility or non utility) is 34 added to the system and when a significant change in electricity transfers is contemplated.
M 4.2 tong-terin power supply plaaning - Long-term power
)- 38 supply planning involves utility load forecasting, the addition of new capacity sources including both utility and C3 non-utility generating facilities, implementation of load management options, and reinforcement of the 42 transmianum system. The addition of generating facilities must be timed to maintain adequate capacity margins and 44 transminamn tapability on the interconnected system.
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Plannmg an adequate and reliable transmission system J 46 requires reasonable predictability of the location, magnitude, and characteristics of the loads to be served 48 and the resources to serve those loads. Utilities and non-utility generators and parties providing wheeling services 50 must be wdling to participate in the solution of problems
) associated with long term power supply. La:g-term s 52 planning is required because of the long lerd-tixe in i rit is possible to plan for long term interchange known well in advrnce. !
$4 Short term interchange is accommodated on a space available basis only.
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) L planning, licensing, and buikhng generation and 2 transminaina facilities.
4 4.3 land-time requirements - Major transmission facilities often take eight or more years to plan, obtain permits, and
) 6 build. The facilities must be planned, right-of-way acquired, and permits and regulatory approvals obtained 8
before construction begins. There may also be delays from litigatica. Therefore, information and data necessary 10 to conduct the initial planning studies must be provided 12 well in advance of the intended in service date to allow for ti: 2ely completion.
14 4.4 Planslag coordlantice - Fundamental to the economic and orderly development of a reliable bulk electric system 16 is coordination of p!ans among non-utilities, utilities, power pools, groups, and Regions. This requires an open 18 enbaga of information among all parties intending to use
) the transmission system. The current level of coordination 20 has required intense dedication by knowledgeable planning and operating personnel working with full support of 22 industry leadership. In a climate of competition for power supply, transmission system users may be reluctant to fully 24 exchange this information. Without such coordination, reliability of the bulk electric system may in the long term,
) 26 be severely jeopardized.
28 5 Information and Data Exchange 30 5.1 Critical Informatloa and data - Utilities routinely share certain information and data essential to system planning 32
} and operations. This criticalinformation must be provided r
to utilities by all users of the transmission system and '
34 includes, but is not limited to:
36 5.1.1 Operating characteristics of existing and future utility and non-utility generating equipment 38 including planned maintenance schedules, forced
) outage rates, and -bdal:a information.
5.1.2 Existing and planned electricity transfers, 43 !
including all buprs, all se!)ers, -bdulia:
characteristics, and contract periods.
44 1
5.2 Cosammencations equipement - Telecommunications are
) 46 absolutely essential to reliable utility operations.
Communications between all users of the transmission 48 system must be both adequate and reliable. There must be sufficient, dependable channels to handle voice and 50 telemetering communications at all times. Backup channels should be considered for critical circuits.
52
) Communication systems must be included in the planning process because they may also have long lead-times to 54 plan and install.
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1 53 Meterlag and Telemetering - Meten'ng and telemetering 2
specifications must le included in the facilities plan for any new generating facdities or interchange points between 4 system users.
6 5.4 - Reporties regelmanents - Utilities continuously gather large amounts of information about their syctem as part of 8 their operations control scheme, and for planning purposes. Similarly, data is needed frcm any non-utility 10 generators connected to a utility's transmission system.
) Routine reporting requirements for operating parameters
'12 such as voltage, real and reactive power, current t1ow, etc.,
should be established before establishing wheeling 14 arrangements and before the non-utility generating plant begins production. Special system data acquisition '
16 equipment may also be needed in some cases.
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VH. APPENDfX )
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4 DISCUSSION OF REGUIATORY POSITIONS ON ELECTRICITY
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WHEELING AND OTHER ELECTRICITY TRANSFERS ;
6 8- Electricity transfers and wheeling of eledricity for many years has j been a taatter of discussion between utilities and the Federal Energy 10 1 Regulatory Commission (FERC) and before that, the Federal Power
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) Commission (FPC). Electric utilities and their regulators generally agree 12 !
that the main goal of transmission network operation is for the reliability of electric service. Some lines have also been built specifically to bandle lon -)j 14 term economy transfers between utilities or remote generating facilities. g- '
- However, hourly economy interchange can be accommodated on a space-16 available basis only.
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). 18 In 1985, FERC issued a notice of inquiry regarding regulation of electricity sales for resale and transmission service. In that inquiry, they 20 sought a wide range ofinformation regarding regulation of transmission i service with emphasis on pncmg and access to transmission systems.
22 in June 1987, the chairman of FERC proposed that electric 24 utilities' future generation may be supplied by non-utility generators.
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26 In March 1988, FERC issued three Notices of Proposed Rulemaking:
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- 1. Proposed rule to reaffirm the avoided cost standard as the 30 appropriate basis for determining rates for purchases fron:
) qualifying cogeneration and small power production 32 facilities (OFs). I 34 2. Proposed rule to affirm bidding as a procedure for determining rates the utility pays for purchases from OFs.
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- 3. Proposed rule to streamline rate and corporate regulation
)- 38 of a class of non-OF power suppliers called independent power producers (IPPs).
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)i REQUIREMENTS WITHIN THE FEDERAL POWER ACT (FPA) 2 .
AND THE PUBLIC UTILITY REGUIATORY POLICIES ACT (PURPA) y 4 FOR ELECTRICITY WHEELING 6
Part II of the FPA grants FERC the jurisdiction over transfers of 8 . clectric energy in interstate comaierce. This power granted to FERC in the Act as initially envisioned by Congress was further defined by the 10 United States Supreme Court in the Otter Tail Power case.
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... .As onginally conceived, Part II (of the FPA) would have. . . empowered the Federal Power Commission to j 14 order wheeling if it found such action to be 'necessary or desirable in the public interest. These provisions were 16 eliminated to preserve the voluntary action of the s utilities'." !
1 18 The second Circuit Court supported Cong-ess' intent to continue j
- 20 safeguarding voluntary wheeling and not provide for mandatory wheeling in its decision in New York State Electric and Gas Corporation versus FERC.
22 Congress did not intend, within the Act, to grant the Federal Power )
Commission (FPC), now FERC, the power to order wheeling. Part II of 24 the FPC was amended by PURPA in 1978 by Sections 202,203, and 204
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and now gives FERC a limited authority to order interconnections and
-26 wheeling. PURPA Section 203 again provides for a narrow limit under which FERC can order wheeling and three conditions must be met:
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- 1. Only certain parties may apply for an order to wheel.
30 These parties must be an electric utility or a federal power
) marketing agency.
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- 2. The general public must be provided a time and 34 opportunity to be heard.
36 3. A wheeling order issued by FERC must be in the public interest. Public interest has been broadly defined as
) 38 something from which the community at large will receive a monetary benefit. The order must result in either the 40 conservation of energy, improvements in the efficient use of facilities and resources, or improvements in the 42 reliability of an electric utility system.
44 Section 204 of PURPA includes five additional requirements, all of
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which must be met as they apply to an electric utility, cogenerator, or small 46 power producer before an order mandating wheeling can be issued under Section 2(13. FERC must find that its order will not:
48
- 1. Result in an uncompensated economic loc, 50
). 2. Place an undue burden on the affected party. This 52 provision is not totally clear within the Act and at some time will probably be further defined by the courts, 54
- 3. Unreasonably impair electric reliability, and 56 4 Impair the ability to render adequate service.
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REIATED REFERENCES 2
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4 %e issue of bulk electric system reliability is complex and multi-faceted. The preceding comments provide only a brief introduction to this 6 important subject. NERC has produced s:veral other reference documents that expand on this discussion and help explain in more detail some of the 8 fundamental concepts involved. To obtain a copy, contact the NERC staff at:
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> 101 College Road East 12 Princeton, New Jersey 08 4 0-6601 (609) 452 8060 14 7tansfer Capability" -- Explains the basic principles used in 16 determining electricity transfer capability, definitions, and system study techniques.
" Reliability Concepts
- Summarizes the considerations and 20 methods used by electric utilities in North America in providing reliable bulk electric systems.
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" Reliability Considerations for Integrating Non-Utility Generating
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24 Facilities With the Bulk Electric Systems'
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GLOSSARY 2
i 4 Contingency
) The unexpected outage of a system component.
6 Control Area An eledric system capable of regulating its generation in order to maintain its interchange schedule with other " stems and to 8 contribute its obligation to help maintain Imerconnection freque.ncy.
10
) Demand or 1. cad The rate at which energy is being used by the customer (s).
Electric utility Any entity owumg and operating an electric system for the 14 purposes of sale or resale to the end users.
l 16 Energy (electrical) The integrated generation or use of power by a device over a.
period of time, usually expressed in watt hours, kilowatt hours 1
) 18 (kWh), megawatt hours (MWh), or gigawatt hours (GWh).
20 Interchange Electric energy that flows from one system to another.
22 Actual Interchange Metered electric energy that flows from one control area to another.
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Scheduled Interchange Electric energy scheduled to flow between utilities or control areas, 26 usually the net of all sales, purchases, and wheeling transactions between those parties at a given time.
38 Inadvertent Interchange The difference between a control area's net actual interchange and 30 net scheduled interchange. *
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33 Interconnection When capitalized (Interconnection), any one of the four bulk electric system networks in North America: Eastern, Western, 34 ERCOT, and Hydro-Quebec. When not capitalized (interconnection), the l'acilities that connect two systems or control 36 areas.
) 33 Land Shadding Disconnecting customer load by the utility, usually to mitigate the effects of generation deficiencies or transmission limitations.
40 Non-Utility Generator Facility for generating electricity which is not exclusively owned by 42 an electric utility but which operates connected T.o an electric utility system.
)
Parallel Flow Flow on a utility's transmission system resultinFfrom power flows 46 scheduled on any other system. Electricity flows on all parallel paths in amounts inversely proportional to each path's impedance.
48 Party A buyer, producer, or wheeler of electricity in an interchange 50 agreement or contract.
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52 Purchasing Utility The utility whica' is purchasing the non-utility generator's energy and/or capacity.
Se Reactive power The power involved in the stored inductive and capacitive elements 56 in power system.
) 58 System An integrated combination of generation, transmission, and distribution components comprising an electric utility.
32 May 17,1989
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2 Transm'a System A network of transmission lines and the substations to which the lines connect.
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)' Trip To dhconned a system component by opening the circuit 6- breaker (s) or other switches that connect it to the system, usually to isolate or dismonect a faulted system element to protect if from 8 damage.
10 Voltage Reduction A means to reduce the demand on a utility by lowering the voltage, usually on the distribution or subtransmission system.
) 12 Wheeling The use of the transmini'.n system facilities of one or more parties i 14 to transmit electric power or energy of and for another party '
where the producer and purchaser are not directly connected.
16 Wheeling Customer Any party contracting with a utility for whccling service on that 18
) utility's transmission system. The party may either be the producer or purchaser of the power being wt.eeled. !
20 Wheeling Utility A utility providing transmission service for another party's energy 22 or capac4ty.
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33- May 17,1989
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