Energy Law Alert: FERC Directs NERC To Deregister South Louisiana Electric Cooperative As Distribution Provider And Load Serving Entity

more+
less-

On Thursday, the Federal Energy Regulatory Commission resolved a two-year-old dispute concerning whether South Louisiana Electric Cooperative was appropriately listed on the NERC Compliance Registry and therefore subject to compliance with certain NERC Reliability Standards.

In an order highly qualified by the facts of the particular interconnection that South Louisiana had to higher voltage facilities owned by another entity, the Commission granted South Louisiana's appeal of the NERC determination, and directed NERC to remove South Louisiana as both a Distribution Provider and a Load Serving Entity registrant. The order provides guidance on how to apply NERC's Statement of Compliance Registry Criteria and could result in some entities with similar interconnection characteristics as South Louisiana having colorable claims to deregister as well.

While NERC jurisdiction vested though Section 215 of the Federal Power Act does permit registration of entities that simply use the bulk electric system (and do not own or operate any facilities of their own that qualify as bulk electric system assets), there are important limitations tested in this case. At the center of FERC's ruling was the fact that in the Statement of Compliance Registry Criteria, to be registered as a Distribution Provider or a Load Serving Entity, an entity must have greater than 25 MW of peak load AND be directly connected to the Bulk Power System (>100kV). South Louisiana prevailed with the use of detailed interconnection diagrams and explanation that showed no such direct interconnection existed.

Specifically, the Commission was persuaded by several facts that demonstrated a radial, unidirectional power flow. First, while two 230-115kV transformers existed at the point of interconnection, a normally open switch on the third parties' 115 kV bus prevents power from flowing over one transformer. Second, NERC failed to show that the interconnection configuration could deliver power from South Louisiana to the bulk electric system or experience network (looped) flow though the interconnection. And finally, FERC rejected NERC's contentions that the presence of protection schemes on South Louisiana's 115 kV circuit switches that are designed to protect their own radial facilities necessitates that the entity maintain a registration.

South Louisiana had to endure a long path of challenge, first through the SERC regional entity, then through unsuccessful appeal to the NERC Board of Trustees Compliance Committee, and finally to the FERC. Hopefully, this guidance by FERC will enable other similarly situated entities to present comparable evidence to the regional entity in support of a request to deregister, and that request will be accommodated moving forward. To date, only a few entities have successfully deregistered – in whole or in part – based on a technical demonstration of specific facts.

While South Louisiana raised the broader issue concerning whether an entity that owns only local distribution facilities can be required to comply with NERC Reliability Standards, the Commission declined to base its determination on that argument. It should be noted, however, that requests for rehearing of the Commission's order on the definition of the bulk electric system are pending in another docket, and a substantial record regarding the local distribution jurisdiction argument has been established in that case. It is unlikely that the Commission will reverse its prior determinations, but if not, the issue is squarely framed for an appeal.

Go here for a copy of the South Louisiana order.