FERC has approved Southwest Power Pool, Inc.'s notice of termination of the transmission-to-transmission interconnection agreement between Tres Amigas LLC (Tres Amigas) and Southwestern Public Service Company (SPS), with SPP as signatory

According to SPP, on May 12, 2015, SPS provided notice to Tres Amigas that it was terminating the Agreement due to default by Tres Amigas.

The interconnection agreement, which encompasses the first phase of the Tres Amigas project, contemplates the interconnection of a 73-mile, 345 kV Tres Amigas-owned transmission line providing a 750 MW two-node intertie between the SPS transmission system in the Eastern Interconnection and the Public Service Company of New Mexico transmission system in the Western Interconnection.

Xcel (SPS's parent) asserted that Tres Amigas has consistently failed to comply with milestone requirements in Exhibit C of the agreement. Xcel stated that SPS voluntarily extended the deadlines for compliance with milestones contained in the agreement four times, thereby delaying the Commercial Operation Date in the agreement by nearly two years. According to Xcel, SPS also agreed to decrease the initial payment amount owed by Tres Amigas from $7.5 million to $1.4 million, but that Tres Amigas has failed to make milestone payments.

Tres Amigas asked FERC to reject the filing.

However, FERC agreed that Tres Amigas is in default of the Exhibit C milestone requirements in the interconnection agreement. "Based on the detailed timeline outlined by Xcel [SPS], we conclude that SPS made good faith efforts to negotiate the extension of milestone requirements on numerous occasions, consistent with Article 3.2 of the Agreement. SPS extended the first payment milestone and Commercial Operation Date four times and agreed to reduce significantly the amount of Tres Amigas’s initial payment. Contrary to Tres Amigas’s assertions that SPS failed to negotiate and act in good faith by demanding immediate payment in late 2014, Xcel explains that SPS offered a fourth payment extension to March 15, 2015, as well as a 30-day cure period when Tres Amigas did not meet this new payment milestone. Moreover, Tres Amigas has made no attempts to cure its default and admits that it has been unable to secure funding. We do not view the requirement that SPS negotiate in good faith as requiring SPS to extend required milestone payments ad infinitim. Further, we find that project novelty does not excuse breach of contract and failure to cure that breach," FERC said Tres Amigas, Transmission, SPP, Southwest Power Pool, Texas

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Tres Amigas   Transmission   SPP   Southwest Power Pool  

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