A set of longstanding agreements do not obligate Xcel Energy’s Colorado utility subsidiary to provide an electric cooperative with priority firm transmission service to deliver energy from two third-party suppliers, FERC affirmed Thursday (EL20-14-001).

The commission’s ruling on rehearing stemmed from a dispute between Xcel’s Public Service Company of Colorado (PSCo) subsidiary and Glenwood Springs-based Holy Cross Electric Association, a co-op that serves about 55,000 customers in Eagle, Pitkin, Garfield, Mesa and Gunnison counties.

Holy Cross entered into two power purchase agreements with the Arriba (wind) and Hunter (solar) projects and asked PSCo to provide it with firm transmission service to deliver the contracted energy under a grandfathered transmission agreement between the companies — and not under PSCo’s Open Access Transmission Tariff.

In December 2019, PSCo asked FERC to rule that Holy Cross’ requests are not permitted under the companies’ power supply agreement, transmission integration and equalization (TIE) agreement, or operating agreement for economy — or non-firm — energy purchased by the co-op.

The power supply agreement stipulates that Holy Cross will purchase its full requirements from PSCo but that it may purchase economy energy from third-party suppliers. The TIE agreement lays out the terms under which PSCo and Holy Cross have agreed to operate their respective transmission networks as one system, with PSCo serving as the operator. The operating agreement sets out the procedures for scheduling and accounting for economy energy purchased by Holy Cross.

On March 31, FERC ruled that Holy Cross was not entitled to firm transmission service from PSCo under the agreements, concluding that the co-op’s capacity on the integrated system is limited to its load ratio share and that the additional firm service would exceed that share. The commission also pointed out that PSCo is not obligated to treat economy energy purchases as firm deliveries entitled to NERC’s highest curtailment priority.

On April 30, Holy Cross filed a request for rehearing and a conditional request for clarification of the March order. The co-op contended that the TIE agreement is governed by Colorado law, which holds that “written contracts that are complete and free from ambiguity will be found to express the intention of the parties and will be enforced according to their plain language.” Holy Cross added that Colorado legal precedent holds that, in contract disputes, parol evidence (that is, oral evidence from outside the actual contract) is only permitted when a contract is ambiguous, and that “a contract’s silence does not necessarily invite the introduction of parol evidence to clarify intent.”

Holy Cross contended that FERC’s March order provided no evidence that the TIE agreement is ambiguous, and it challenged the commission for using the power supply and operating agreements as parol evidence to interpret the TIE agreement, which it argued is separate from the other two agreements.

The co-op also contended “that the load ratio share capacity entitlement under the TIE agreement cannot reasonably be construed as limited to Holy Cross’ purchases from PSCo because the ‘detailed and unambiguous wording’ of the TIE agreement shows that Holy Cross’ ‘load ratio share capacity rights are a function of its native load and not any specific Holy Cross resource, including the power supply agreement,’” FERC noted.

‘Untenable’

The commission brushed aside that argument, calling it “untenable.” The issue at hand, the commission said, “is whether Holy Cross is entitled to firm transmission service for certain third-party purchases, which requires an analysis of the TIE agreement, power supply agreement and the operating agreement.” The commission had properly considered the rights of both parties under the three agreements without resorting to use of parol evidence, it said.

“In interpreting the term ‘load ratio share’ under the TIE agreement, the commission appropriately cited the definition in section 1.9 of that agreement, which references the method for calculating load ratio share in Appendix A, provision 6, to conclude that Holy Cross’ load ratio share is based on its requirements demands,” FERC wrote. “The commission did not look to any agreement other than the TIE agreement in interpreting the term ‘load ratio share’; nor did the commission look outside the TIE agreement to determine Holy Cross’ transmission capacity entitlement under the TIE agreement.”

While the TIE agreement lays out Holy Cross’ transmission entitlement, it does not address the question of whether the co-op’s request for additional firm service fits within that entitlement, the commission said. To make that determination, FERC examined the power supply agreement, which requires Holy Cross to purchase its full requirements from PSCo with exceptions made for economy energy.

“That Holy Cross is currently required to purchase its full requirements from PSCo is based on Holy Cross’ obligations under the power supply agreement and is not, as Holy Cross contends, an interpretation of the term ‘load ratio share’ under the TIE agreement,” FERC said. “Rather, given that Holy Cross’ load ratio share of the integrated transmission system is based on its requirements demands, and it is currently required by the power supply agreement to purchase its full requirements from PSCo, it necessarily follows that Holy Cross’ firm transmission capacity entitlement is being used to serve the full requirements of Holy Cross’ load, and that ‘for Holy Cross to obtain firm transmission service to receive power from the Arriba and Hunter projects, Holy Cross would require transmission capacity that is in excess of its load ratio share of the capacity of the integrated system.”

The commission additionally rebuffed Holy Cross’ contention that the March order prevents the co-op from using its rights under the TIE agreement on a basis comparable to PSCo. Holy Cross argued that the TIE agreement embodies FERC’s “golden rule” of comparability, which prohibits either party from making “adverse distinctions” about the other party’s use of an integrated transmission network.

“This argument … incorrectly presumes that the TIE agreement is the equivalent of an open access transmission tariff, which it is not,” the commission said. “As PSCo explained in its petition, the TIE agreement is a grandfathered transmission service agreement that predates Order No. 888.”