On July 26, 2018, FERC approved AEP Energy Partners, Inc.’s (“AEP Energy”) request that Sharyland Utilities, L.P., AEP Texas, Inc., and Electric Transmission Texas, LLC (collectively, “Tie Owners”) provide AEP Energy with transmission service across interconnections between the Electric Reliability Council of Texas (“ERCOT”) and the Mexcian Comisión Federal de Electricidad (“CFE”) transmission system.  In issuing that ruling, FERC seemingly went out of its way to suggest that if two proposed transmission projects – unrelated to AEP Energy’s request – are completed, the interconnections between ERCOT and the CFE system could result in interstate power flows in ERCOT.  While the Commission did not go any further other than to point out this fact, if FERC finds that such interstate power flows exist, FERC could potentially subject utilities in ERCOT to FERC’s plenary Federal Power Act (“FPA”) jurisdiction.

On March 28, 2018, AEP Energy, on behalf of the Tie Owners, filed an application asking FERC to direct the Tie Owners to provide AEP Energy with transmission service over the Sharyland DC Tie, Eagle Pass DC Tie, and Laredo VFT Tie between ERCOT and the CFE transmission system in Mexico.  AEP Energy also requested that FERC confirm that providing transmission service over the Ties would not cause ERCOT or ERCOT market participants to become “public utilities” under the FPA.  Additionally, AEP Energy asked FERC to approve the Offer of Settlement containing the terms and conditions of transmission service among AEP Energy and the Tie Operators.

In approving the request, FERC first found that it has jurisdiction under FPA sections 201 and 211 to require the Tie Operators to provide transmission over the interconnections between ERCOT and the CFE grid, but that exercising this jurisdiction will not cause any ERCOT utility to become a public utility under the FPA.  In addition, FERC found that because there is not yet interstate commerce over the Ties (except as a result of prior FPA section 210 and 211 orders requiring transmission service), and because the Ties are already operational, there was no need for a separate order under FPA section 210.

FERC also noted that there are two proposed transmission projects between ERCOT and the CFE grid—the Nogales Project between Nogales, Arizona and the CFE grid and an interconnection proposed by the Mexican government between the CFE national grid and the CFE Baja California system—that could result in interstate power flows in ERCOT.  Specifically, FERC stated that as a result of these projects, “ without any changes to the current ERCOT-CFE Ties, either the Nogales Project or the CFE interconnection could separately result in interstate power flows (via power generated in the United States flowing into the CFE system, comingling with power generated in Mexico, and then flowing back into the United States) between either Arizona or California and ERCOT.”  This passage, while arguably dicta, seemed to warn the applicants and other ERCOT market participants that jurisdictional lines could soon be changing.

A copy of the order is available here.