New Merchant Transmission Line Approved in Arizona

At its February 7, 2017 Open Meeting, the Arizona Corporation Commission (“Commission”) approved a Certificate of Environmental Compatibility (“CEC”) for the Southline Transmission Project (“Project”).  Docket No. L-00000AAA-16-0370-000173.  The Commission adopted the CEC approved on December 22, 2016 by the Arizona Power Plant and Transmission Line Siting Committee (“Committee”). The Commission added a new condition regarding potential lessees and contractors in response to the Committee Chairman’s Concurrence discussed below.

The Project includes the construction and operation of an approximately 370-mile electric transmission line and associated facilities in southern New Mexico and Arizona.  It includes two sections: (i) a new approximately 249-mile double-circuit 345-kilovolt (“kV”) transmission line and associated facilities beginning in Doña Ana County, New Mexico and traveling west into Cochise County, Arizona; and (ii) the upgrade of approximately 121 miles of two existing Western Area Power Administration (“WAPA”) 115-kV line segments to double-circuit 230-kV line segments located in Cochise, Pima, and Pinal counties, and the City of Tucson, Arizona, and short segments of new transmission lines and associated facilities needed to interconnect the upgraded WAPA lines to existing substations.  Of the 370 miles, approximately 72 miles of the Arizona portion of the Project was before the Committee.  The remaining Arizona segment is owned by the Western Area Power Administration (“WAPA”) and is not subject to Commission jurisdiction.  However, the Committee specifically conditioned the CEC on WAPA’s continued  ownership and operation of this remaining portion of the Project. More importantly, the Commission also added a condition that the Project applicant  reach agreement with WAPA as to structure type on a particular portion of the WAPA portion of the route  that is acceptable to a  residential community.

The CEC as approved by the Committee contained 33 conditions.  Most of those conditions are “standard” and similar to other transmission project CEC’s granted by the Commission.  However, a unique feature are two conditions requiring the applicant to execute a Memorandum of Agreement with the Arizona Game and Fish Department (“AGFD”) and to measure certain groundwater withdrawals.  Specifically, the CEC requires:

  • Applicant shall execute the Memorandum of Agreement with AGFD relating to the relocation and improvement of the Crane Lake facilities on Kansas Settlement Road . . ., including a Work Plan approved by AGFD, and comply with all of its contractual obligations set forth therein.
  • Applicant shall request that AGFD measure annual groundwater withdrawals from any AGFD-owned wells serving Crane Lake using an approved water measuring device or method as described by A.A.C. R-12-15-903. Applicant shall report any such withdrawals to the Commission Staff and the Arizona Department of Water Resources Statewide Planning Section and file it with Docket Control as part of Applicant’s annual compliance-certification letter.

Another relatively unusual feature of this case was a Concurrence filed by Committee Chair Chenal.  He wrote that:

I agree with the decision to grant the CEC but believe the ACC should consider adding a condition requiring Southline to include in any lease of its ownership interests and associated capacity rights in the Southline project a provision that the lessee agree to comply with the requirements of the CEC and its conditions.

He proposes the additional conditions because, “The pleadings and the evidence presented at the hearing make it clear that after construction of the project, Southline will execute a long-term lease of all of its ownership interests and associated capacity rights in the Project to SU FERC, LLC (“SU FERC”).”

He notes that, “Condition 29 of the CEC provides that any transfer or assignment of this Certificate shall require the assignee or successor to assume in writing all responsibilities of Applicant listed in the Certificate and its conditions.  While this condition is applicable in cases where the CEC is assigned and transferred, it is not clear that such condition will apply to a lease.”

He concludes that, “[G]iven the impact of this project and the certainty that the long term operation and maintenance of the Project including regulatory and reliability requirement will be the responsibility of SU FERC, while Southline will adopt the role of passive investor, and given the substantial legal uncertainty whether Condition 29 regarding transfers or assignments of the CEC would apply to a lease so as to require SU FERC to comply with all conditions of the CEC, I believe it is appropriate for the Commission to consider adding a new condition to the CEC.  Such condition would require Southline to include in any lease of its ownership interests and associated capacity rights in the Southline project a provision that the lessee agree to comply with the requirements of the CEC and its conditions.  It may be appropriate that such provisions apply to all contractors as well . . . .”

Future line siting applicants in Arizona should be prepared to respond to Committee inquiries about future lessees or users of their proposed projects and whether the CEC will bind those future lessees or users. In addition, the new WAPA condition raises an issue as to how far the Commission will go to require that private applicants reach certain agreements with WAPA.

Image Courtesy of: Dustin Blakey  used under Creative Commons License.