165 FERC ¶ 61,034 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Cheryl A. LaFleur, Neil Chatterjee, and Richard Glick. Central Maine Power Company Docket Nos. ER18-2256-000 ER18-2257-000 ER18-2258-000 ER18-2259-000 ER18-2260-000 ER18-2261-000 ER18-2262-000 ORDER ACCEPTING TRANSMISSION SERVICE AGREEMENTS (Issued October 19, 2018) 1. On August 20 and 21, 2018, pursuant to sections 205 and 219 of the Federal Power Act, 1 Central Maine Power Company (Central Maine Power) submitted seven bilateral, cost-based transmission service agreements (TSA) that it executed with NSTAR Electric Company, Massachusetts Electric Company and Nantucket Electric Company, Fitchburg Gas and Electric Light Company, and H.Q. Energy Services Inc. (Hydro Québec US) for service over its 1,200 MW New England Clean Energy Connect transmission line (NECEC Project). 2 Central Maine Power also submitted a request for transmission incentives. We accept the Central Maine Power TSAs, to become effective October 20, 2018, and dismiss as moot the requests for transmission incentives, as discussed below. 1 2 16 U.S.C. §§ 824d, 824s (2012). Central Maine Power submitted two of the TSAs shortly after 5:00 p.m., which resulted in these two being assigned an August 21, 2018 filing date. Central Maine Power requests waiver of the 60-day prior notice requirement for those two TSAs. Docket No. ER18-2256-000, et al. I. -2- Background 2. Central Maine Power is a public utility primarily engaged in transmitting and distributing electricity generated by others to retail customers in central and southern Maine. Central Maine Power provides electric transmission service pursuant to the rates, terms, and conditions of the ISO New England Inc. (ISO-NE) Open Access Transmission Tariff (Tariff). 3 3. Eversource is a public utility holding company primarily engaged in the energy delivery business through its wholly-owned regulated utility subsidiaries. Its subsidiary, NSTAR Electric Company, engages in the purchase, transmission, delivery, and sale of electricity to residential, commercial, and industrial customers in Massachusetts. NSTAR Electric Company is a transmission owner and member of ISO-NE with marketbased rate authority from the Commission. 4 4. National Grid is an indirect, wholly-owned subsidiary of National Grid PLC, a company incorporated in England and Wales. National Grid’s subsidiary, Massachusetts Electric Company, provides electricity distribution services to customers located in portions of Massachusetts and has obtained market-based rate authority from the Commission. Nantucket Electric Company, another public utility subsidiary, provides retail electric service to customers on Nantucket Island, Massachusetts. 5 5. Unitil Corporation is a public utility holding company with its principal business in the local distribution of electricity and natural gas in New Hampshire, Massachusetts, and Maine. One of its wholly-owned distribution utilities, Fitchburg Gas and Electric Light Company, provides both electric and natural gas service in north central Massachusetts. Fitchburg Gas and Electric Light Company is a transmission owner and member of ISO-NE with market-based rate authority from the Commission. 6 3 Transmittal at 4 (Central Maine Power submitted a single transmittal letter for all seven of its filings). 4 Id. at 5. For the remainder of this order, we refer to NSTAR Electric Company as Eversource. 5 Id. For the remainder of this order, we refer to Massachusetts Electric Company and Nantucket Electric Company together as National Grid. 6 Id. For the remainder of this order, we refer to Fitchburg Gas and Electric Light Company as Unitil. Docket No. ER18-2256-000, et al. -3- 6. Hydro Québec US is an energy marketer and a wholly owned subsidiary of Hydro Québec. Hydro Québec US is engaged in the business of buying and selling electricity for its own account and brokering electricity for others, transmission services, and related activities. Hydro Québec US has obtained market-based rate authority from the Commission. 7 7. Central Maine Power is developing the NECEC Project, which is a 145.3 mile 320 kV overhead high-voltage direct current (HVDC) transmission line that will run between Hydro Québec TransEnergie’s transmission system at the Quebec-Maine border and the existing Larrabee Road substation in Lewiston, Maine, a part of ISO New England Inc.’s (ISO-NE) transmission system. Central Maine Power expects to place the NECEC Project into service on or before December 13, 2022. Central Maine Power estimates that the NECEC Project will cost approximately $1.1 billion. Central Maine Power states that it has submitted an interconnection request to ISO-NE for the NECEC Project to be studied as an Elective Transmission Upgrade. 8 Additionally, Central Maine Power commits to turn over operational control of the project to ISO-NE. 9 8. According to Central Maine Power, the NECEC Project is the result of a statemandated solicitation for clean energy generation delivered into ISO-NE for ultimate use in Massachusetts. Specifically, on August 8, 2016, as part of its Act to Promote Energy Diversity, the Commonwealth of Massachusetts directed certain electric distribution companies (EDCs) 10 to jointly solicit proposals for clean energy generation equal to 9,450,000 MWh by December 31, 2022. Consequently, the EDCs issued the Request for 7 Id. at 4-5 8 The ISO-NE Tariff defines “Elective Transmission Upgrade” as a Pool Transmission Facility, Merchant Transmission Facility or Other Transmission Facility that is interconnecting to the [ISO-NE] Transmission System…for which the Interconnection Customer has agreed to pay all of the costs of said Elective Transmission Upgrade …. An Elective Transmission Upgrade is not a Generator Interconnection Related Upgrade, a Regional Transmission Upgrade, or a Market Efficiency Transmission Upgrade. ISO-NE Tariff, Schedule 25 § 1. 9 Transmittal at 20. 10 The EDCs are Eversource, National Grid, and Unitil. Docket No. ER18-2256-000, et al. -4- Proposals for Long-Term Contracts for Clean Energy Projects (RFP) on March 31, 2017. The RFP garnered 46 bids, which were assessed by a committee comprised of the EDCs, the Massachusetts Department of Energy Resources, and an independent evaluator (the RFP committee). Bidders submitted 46 separate bids in response to the RFP. 11 As relevant to the instant filings, Central Maine Power and Hydro Québec US submitted a joint bid that included the NECEC Project and 1,090 MW of hydroelectric energy provided by Hydro Québec US for a term of 20 years. 9. The RFP committee ultimately selected the NECEC Project. After the NECEC Project was selected, the EDCs conducted extensive negotiations with Central Maine Power over the terms and conditions that would apply to the NECEC Project’s TSAs. Central Maine Power notes that representatives of the Commonwealth of Massachusetts oversaw these negotiations. 12 II. TSA Filings 10. In its proposal, Central Maine Power agrees to provide long-term, firm point-topoint transmission service over the NECEC Project to the EDCs and Hydro Québec US. To implement this proposal, Central Maine Power has filed seven separate TSAs to govern its provision of transmission service over the NECEC Project from Canada to ISO-NE. Three TSAs, one with each of the three EDCs, require Central Maine Power to provide a total of 1,090 MW of firm transmission service over the NECEC Project for the first 20 years of the project’s life. 13 Three separate TSAs, each between Hydro Québec US and Central Maine Power, require Central Maine Power to provide transmission service to Hydro Québec US over the NECEC Project using that same 1,090 MW of capacity for years 21 through 40 of the project’s life. Finally, Central Maine Power has entered into a seventh TSA with Hydro Québec US to provide Hydro Québec US with 110 MW of firm point-to-point transmission service (the remaining balance of the usable capacity of the NECEC Project) over the entire 40 year period. 11. Concurrently with the execution of the TSAs, Hydro Québec US entered into a power purchase agreement (PPA) with each of the three EDCs to sell an aggregate of 11 Transmittal at 6, 12. 12 Id. at 13. 13 The TSA with Eversource is for 579.355 MW of firm transmission service; the TSA with National Grid is for 498.348 MW of firm transmission service; and the TSA with Unitil is for 12.317 MW of firm transmission service. The allocation of capacity reflects each EDC’s procurement obligations pursuant to the Act. An Act to Promote Energy Diversity, 2016 Mass. Acts, ch. 188, sec. 12. Docket No. ER18-2256-000, et al. -5- 1,090 MW of hydroelectric energy for 20 years at market-based rates. Pursuant to the terms of the PPAs, the EDCs indicate that they will assign to Hydro Québec US the 1,090 MW of transmission capacity rights over the NECEC Project to which they are entitled under their TSAs. Central Maine Power states that, in turn, Hydro Québec US will use the 1,090 MW of transmission capacity rights to provide service over the NECEC Project to effectuate the delivery of the 1,090 MW to the EDCs in accordance with the PPAs. 14 Central Maine Power states that the PPAs, including the rates, terms, and conditions contained therein, are subject to state commission approval. 15 12. Central Maine Power requests that the Commission approve the TSAs in their entirety as Mobile-Sierra contracts consistent with the Supreme Court’s instruction that the Commission “must presume that the rate set out in a freely negotiated . . . contract meets the ‘just and reasonable’ requirement imposed by law.” 16 Central Maine Power supports its request by arguing that all seven TSAs are bilateral, cost-based transmission service agreements wherein each counterparty to the TSAs agrees to pay Central Maine Power’s costs, as determined in accordance with the NECEC rates reflected in the TSAs. 17 Central Maine Power also notes that the EDCs and Hydro Québec US are sophisticated parties in the subject matter of the contracts. It states that the EDCs have substantial knowledge of cost-of-service ratemaking due to each EDC having cost-ofservice transmission and distribution service rates on file at the Commission and with their respective state regulators. Additionally, Central Maine Power explains that Hydro Québec US has extensive experience in the subject matter of the TSAs and has operated as a regulated power marketer for over two decades. 18 14 Transmittal at 11-12. 15 Central Maine Power states that the EDCs filed the PPAs with the Massachusetts Department of Public Utilities on July 23, 2018. Transmittal at 12. 16 Id. at 3 (citing Morgan Stanley Capital Group Inc. v. Pub. Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, 530 (2008) (Morgan Stanley)); see Morgan Stanley, 554 U.S. at 530 (“Under the Mobile–Sierra doctrine, the Federal Energy Regulatory Commission . . . must presume that the rate set out in a freely negotiated wholesaleenergy contract meets the ‘just and reasonable’ requirement imposed by law.”). 17 Id. at 12. 18 Id. at 13. Docket No. ER18-2256-000, et al. -6- 13. Alternatively, should the Commission not accept the TSAs as Mobile-Sierra contracts, Central Maine Power requests that the Commission find that the TSAs are just and reasonable under its traditional analysis of cost-based contracts. 19 III. Request for Transmission Incentives 14. Central Maine Power asserts that its investment in the NECEC Project qualifies for incentive rate treatment and, thus, requests two transmission incentives. Specifically, Central Maine Power requests recovery of all prudently-incurred costs in the event of the abandonment of the NECEC Project due to certain limited circumstances beyond Central Maine Power’s control, as described in the TSAs (abandonment incentive). 20 Central Maine Power also requests a conditional regional transmission organization participation adder. Central Maine Power states that it is entitled to receive the effective base return on equity (ROE) of the New England Transmission Owners (currently 10.57 percent) that the Commission approved for both regional and local service under the ISO-NE Tariff. To the extent that the Commission modifies the 10.57 percent ROE reflected in the TSAs, Central Maine Power requests that the Commission consider Central Maine Power’s eligibility to receive a 50 basis-point ROE adder based on its participation in ISO-NE in support of the fixed, stated rates established in the TSAs. 21 IV. Notice of Filing and Responsive Pleadings 15. Notice of the filing was published in the Federal Register, 83 Fed. Reg. 43,673 (2018), with interventions and protests due on or before September 10, 2018. National Grid and NSTAR Electric Company submitted timely motions to intervene. Hydro Québec US submitted an out-of-time motion to intervene. 19 Id. at 17-22. 20 Id. at 28. Specifically, the TSAs permit Central Maine Power to request from the Commission recovery of abandoned plant costs in the event that, inter alia, changes to Massachusetts law or regulations result in cancellation, termination, or abandonment of the NECEC Project. NSTAR Electric Company Transmission Service Agreement, § 14.5. 21 Transmittal at 28. The requested ROE is reflected in the Transmission Service Payment Calculation in Attachment J of the TSAs. Docket No. ER18-2256-000, et al. V. -7- Procedural Matters 16. Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214 (2018), the timely, unopposed motions to intervene serve to make the entities that filed them parties to this proceeding. 17. Pursuant to Rule 214(d) of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214(d), we grant Hydro Québec US’s late-filed motion to intervene given its interest in the proceeding, the early stage of the proceeding, and the absence of undue prejudice or delay. VI. Substantive Matters 18. As discussed below, we accept the Central Maine Power TSAs, to become effective October 20, 2018, as requested. 19. As noted above, Central Maine Power requests that the Commission accept the TSAs in their entirety based on a finding that the Mobile-Sierra presumption is applicable here. Under Mobile-Sierra, the Commission must presume that certain agreements meet the statutory just and reasonable standard of review. 22 This presumption of justness and reasonableness may be overcome only if the Commission concludes that the agreement “adversely affect[s] the public interest.” 23 20. The Mobile-Sierra presumption applies to an agreement if the agreement exhibits certain characteristics that justify the presumption. In assessing whether these characteristics are present, the Commission must determine whether the agreement at issue embodies either: (1) individualized rates, terms, or conditions that apply only to sophisticated parties who negotiated them freely at arm’s length or (2) rates, terms, or conditions that are generally applicable or that arose in circumstances that do not provide the assurance of justness and reasonableness associated with arm’s-length negotiations. Unlike the latter, the former constitute contract rates, terms, or conditions that necessarily qualify for a Mobile-Sierra presumption. 24 22 See Devon Power LLC, 134 FERC ¶ 61,208, at P 10 (citing Morgan Stanley, 554 U.S. at 530), order on reh’g, 137 FERC ¶ 61,073 (2011), aff’d sub nom. New England Power Generators Ass’n v. FERC, 707 F.3d 364 (D.C. Cir. 2013). 23 Devon Power LLC, 134 FERC ¶ 61,208 at P 10 (internal quotations omitted) (quoting Morgan Stanley, 554 U.S. at 530). 24 See, e.g., ITC Midwest LLC, 144 FERC ¶ 61,241, at P 3 (2013); La. Pub. Serv. Comm’n v. Entergy Corp., 144 FERC ¶ 61,242, at P 4 (2013); Sw. Power Pool, Inc., Docket No. ER18-2256-000, et al. -8- 21. Applying this test, we find that the Mobile-Sierra presumption applies to the TSAs. Specifically, we find that the TSAs are individualized in that they apply only to the parties themselves and are not generally applicable. We also find that Central Maine Power, the EDCs, and Hydro Québec US are sophisticated parties, all of whom have considerable experience with power sales transactions and corresponding negotiations. Finally, we find that those parties negotiated the TSAs freely at arm’s length. 22. In light of our finding that the TSAs are subject to the Mobile-Sierra presumption, we find that Central Maine Power’s request for transmission incentive treatment is moot. Regarding Central Maine Power’s requested conditional ROE adder, we are not granting the adder because our acceptance of the ROE reflected in the TSAs obviates that request. Additionally, with respect to the request for abandonment, we note that the parties have already agreed to the abandonment provisions memorialized in the TSAs. Accordingly, we need not grant Central Maine Power’s request for incentive treatment here. The Commission orders: We hereby accept the TSAs, to become effective October 20, 2018, as requested. By the Commission. Chairman McIntyre is not voting on this order. (SEAL) Nathaniel J. Davis, Sr., Deputy Secretary. 145 FERC ¶ 61,137, at P 8 (2013). In New England Power Generators Association v. FERC,, 707 F.3d 364, 370-71 (D.C. Cir. 2013), however, the D.C. Circuit determined that the Commission is legally authorized to impose a more rigorous application of the “just and reasonable” standard of review on future changes to agreements that fall within the second category described above.