UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Joseph T. Kelliher, Chairman;

Nora Mead Brownell, and Suedeen G. Kelly.

+--------------------------------------------+----------+-------------+
| Cargill Power Markets, LLC                 | Docket   | EL05-66-001 |
|                                            | No.      |             |
| Conectiv Energy Supply, Inc.               |          |             |
|                                            |          |             |
| DTE Energy Trading, Inc.                   |          |             |
|                                            |          |             |
| PSEG Energy Resources & Trade LLC          |          |             |
|                                            |          |             |
| TransAlta Energy Marketing (US) Inc.       |          |             |
|                                            |          |             |
| Tenaska Power Services Co.                 |          |             |
|                                            |          |             |
| Ontario Power Generation Inc.              |          |             |
|                                            |          |             |
| v\.                                        |          |             |
|                                            |          |             |
| Midwest Independent Transmission System    |          |             |
| Operator, Inc.                             |          |             |
+--------------------------------------------+----------+-------------+

ORDER DENYING REHEARING

(Issued December 2, 2005)

**[Introduction]{.underline}**

1.  On August 4, 2005, the Coalition Members[^1] and DTE Energy Trading,
    Inc. (DTE Energy) filed requests for rehearing of the Commission's
    decision in *Cargill Power Markets, LLC, et al.*, 112 FERC ¶
    61,025 (2005) (July 5 Order). In this order, we deny the rehearing
    requests of the July 5 Order.

    **[Background]{.underline}**

2.  On July 1, 2002, on its Open Access, Same-Time Information System
    (OASIS),[^2] Midwest Independent Transmission System Operator, Inc.
    (Midwest ISO) offered a discount with respect to its Through-and-Out
    Service (T&O Service) rate for reservations sinking at the
    Michigan-Ontario Independent Electricity Market Operator interface
    (Michigan-Ontario Interface).[^3] Coalition Members confirmed
    long-term firm T&O Service to the Michigan-Ontario interface. This
    interface later became fully subscribed. On January 28, 2004,
    Midwest ISO posted notice on its OASIS discontinuing the discount
    for this service on February 1, 2005.

3.  The Coalition Members filed a complaint challenging Midwest ISO's
    discontinuation of the discount. The July 5 Order denied Coalition
    Members' complaint and held that Midwest ISO followed the terms of
    its OATT and the Service Agreements when it offered and when it
    discontinued the discount rate for T&O Service reservations sinking
    at the Michigan-Ontario Interface.

4.  The Coalition Members filed a joint request for rehearing asserting
    that Midwest ISO must make a filing with the Commission pursuant to
    section 205 of the Federal Power Act (FPA)[^4] in order to rescind
    the discount posted on its OASIS. Coalition Members contend that the
    Commission should have found that Commission precedent binds Midwest
    ISO to the discounted rate for the full term of the confirmed
    reservations. Further, they argue that the Commission erred when it
    did not admonish Midwest ISO for possible 'bait and switch' tactics
    used to fully subscribe the Michigan-Ontario Interface.[^5]

5.  DTE Energy Trading, Inc. (DTE Energy), a signatory to the Coalition
    Members request for rehearing, filed a separate request for
    rehearing. The DTE Energy rehearing request concentrates on Midwest
    ISO's decision to remove the rate discount, because "the timing of
    MISO's notice to affected customers calls into serious question the
    transparency and true independence of MISO's decision-making
    process."[^6] DTE Energy is concerned that Midwest ISO's fiduciary
    obligation to its transmission owners may interfere with its ability
    to serve fairly and effectively as tariff administrator.[^7]

    [**Discussion**]{.underline}

6.  We will deny the rehearing requests for the reasons discussed below.

    ***Section 9 of the Midwest ISO OATT and Section 205 of the FPA***

7.  On rehearing, Coalition Members argue that Midwest ISO can only
    remove the discount if it makes a section 205 filing with the
    Commission. They rely on section 9 of the Midwest ISO OATT,[^8]
    maintaining that while Midwest ISO has a unilateral right to change
    the rate it must make this rate change -- via a rate change filing
    with the Commission. We disagree. Section 9 of Midwest ISO's OATT
    does not address rate discounts posted on or removed from a
    transmission provider's OASIS. Section 9 tracks

    the language of the corresponding section 9 in the *pro forma* OATT
    adopted in Order No. 888 [^9] In Order No. 888-A the Commission
    said:

> \[W\]e are making three significant changes to the discounting
> requirements to better permit the ready identification of
> discriminatory discounting practices while also providing greater
> discount flexibility.
>
> First, any discount offered on transmission services (including
> supporting ancillary services) by a transmission provider or requested
> by any customer must now be made *only* over the OASIS. With this
> change, all will have the same, timely access to discounted services.
> In making this change, we clarify that a transmission provider may
> limit its discounted service to particular time periods. . . . .
>
> Originally, in Order No. 888, we required that when a discount was
> offered over one path, the transmission provider would have to provide
> that discount over all other unconstrained paths on its system. We
> will no longer require this. *Instead, the discount will be limited to
> those unconstrained paths that go to the same point(s) of delivery as
> the discounted service being provided on the transmission provider\'s
> system. The discount will extend for the same time period and must be
> offered to all transmission service customers.*

Order No. 888-A at 30,180 (emphasis added).

8.  Order No. 888 contains no requirement that discounts, posted on
    OASIS, be filed pursuant to section 205 of the FPA in order to be
    effective. The only requirements that must be followed when
    discounts are posted on OASIS are that the discount: (1) is

    limited to unconstrained paths; (2) extends for the same period for
    all customers taking the discounted service; and (3) is offered to
    all transmission customers. Order No. 888 does not state the
    requirements for removing a discount posted on OASIS. Accordingly,
    we find that there is no requirement for a section 205 filing to
    post a discount, and thus there is no requirement for a section 205
    filing to remove a posted discount. Thus we find that Midwest ISO's
    decision to rescind the discount meets the requirements of Order No.
    888-A and does not conflict with section 9 of its OATT.

    ***Midwest ISO's Business Practices and Order No. 2004***

9.  The Coalition Members assert that they submitted transmission
    service reservations (TSRs) for T&O service over the
    Michigan-Ontario Interface that referenced the posted discount price
    applicable at the time. According to the Coalition Members, Midwest
    ISO's confirmation of these TSRs created a contractual obligation to
    supply this service at the posted discount price. They argue that
    Order No. 638[^10] established *pro forma* business practices
    adopted in, among other places, section 6.7 of Midwest ISO's
    business practices. Section 6.7, they argue, makes their confirmed
    TSRs at the discount price that was posted on the OASIS at the time
    of confirmation, contractually binding on Midwest ISO. Coalition
    Members further assert that Order No. 2004 [^11] specifically
    recognizes the contractual enforceability of discounts posted on
    OASIS.[^12]

10. The Coalition Members continue to mischaracterize the nature of the
    relationship between confirmed TSRs and discounts posted on the
    OASIS. The discount price posted on OASIS during the confirmation of
    the TSR does not constitute the price fixed for the duration of the
    confirmed TSR and thus, is not contractually binding. The filed rate
    charged by Midwest ISO for T&O Service for reservations sinking at
    the Michigan --

    Ontario Interface is determined by Attachment O to Midwest ISO OATT,
    not the TSR. Attachment O is Midwest ISO's formula rate for T&O
    Service which calculates the maximum price that can be charged for
    the service. More importantly, Midwest ISO's Attachment O includes a
    discount component that may be in effect during the requested
    service period.[^13]

    ***Equitable Relief***

11. The Coalition Members renew their assertions that they are entitled
    to the discounted rate for the term of confirmed TSRs as a matter of
    equitable relief. Coalition Members accuse Midwest ISO of engaging
    in a "bait and switch" maneuver so that the Michigan-Ontario
    Interface would be fully subscribed. They assert that Midwest ISO
    should have known that it was Coalition Members' intention, by
    confirmation of the TSRs, with the discount posted on OASIS, meant
    that the posted discount would apply for the full term of the
    transmission reservations.[^14] The Coalition Members also argue
    that if Midwest ISO wanted to limit the duration of the discount, it
    should have counter-offered all TSRs with the full tariff price and
    indicated that Midwest ISO could not guarantee the length of time
    that the discount would be in effect.[^15] DTE Energy argues that
    Midwest ISO's actions call into question the transparency and
    independence of its decision-making process.[^16] DTE Energy
    maintains that Midwest ISO's true independence and a transparent
    decision-making process are essential to ensuring stakeholder
    confidence.

12. We find that the Coalition Members are not entitled to equitable
    relief for the reasons stated in the July 5 Order. In addition, we
    do not agree with DTE Energy's assertion that Midwest ISO's actions
    indicate that it favors one stakeholder group over another. As DTE
    Energy correctly points out, the Commission stressed that efficient
    and competitive markets will develop only if market participants
    have confidence that the

    system is administered fairly.[^17] As was discussed in the July 5
    Order, provisions of Midwest ISO's OATT, Order Nos. 888 and 888-A,
    and OASIS set forth the rules transmission providers are required to
    follow when administering discounts. Our analysis indicates that
    Midwest ISO adhered to those rules and thus acted fairly when it
    discontinued the discount to the Michigan-Ontario Interface.
    Furthermore, we view DTE Energy's contention that the "fiduciary"
    obligation that Midwest ISO owes to transmission owning members
    conflicts with the duty that it owes to non-transmission owning
    members as an impermissible collateral attack on *Midwest
    Independent Transmission System Operator, Inc.*, 84 FERC ¶ 61,231,
    *order on reconsideration*, 85 FERC ¶61,250 (1998) (*Midwest ISO
    Formation*).[^18]

    ***Commission Discount Policy***

13. The Coalition Members renew their assertion that Midwest ISO's
    revocation of the discount is inconsistent with Commission policy
    because Midwest ISO's approach discourages long-term transmission
    reservations. They reiterate that this practice would remove the
    incentive for transmission customers to request service for more
    than one year, thereby jeopardizing the ability to engage in
    long-term planning. The Coalition Members argue that but for the
    discount, the Michigan-Ontario Interface would not be constrained
    and discounts would continue to be appropriate.

14. We reiterate here that the sole purpose of transmission rate
    discounting is to increase throughput.[^19] Coalition Members'
    assertion that the Michigan-Ontario Interface would not be
    constrained absent a discount is unpersuasive. In addition, we note
    that if Coalition Members were to retain the discounted rate (in
    some instances until 2012) on what they now recognize as a
    constrained interface, but Midwest ISO denies the discount to new
    customers, then the reason for our discount policy would be
    nullified. A key tenet of the Commission's discount policy is that
    if the transmission provider offers a discount on a particular path
    it must offer the same discount for the same time period on all
    unconstrained paths that go through to the same point(s) of delivery
    on the transmission provider's system. Thus, we find that providing
    the relief requested would result in Midwest ISO discounting service
    to some customers, but not to others, on the same transmission
    path - a clear violation of Commission policy.[^20]

15. For the reasons discussed above and in the July 5 Order, we deny the
    requests for rehearing.

[The Commission orders]{.underline}:

The Coalition Members' and DTE Energy's requests for rehearing are
hereby denied for the reasons stated herein.

By the Commission.

( S E A L )

Magalie R. Salas,

Secretary.

[^1]: **^?^** The Coalition Members are Cargill Power Markets, LLC,
    Conectiv Energy Supply, Inc., DTE Energy Trading, Inc., PSEG Energy
    Resources & Trade LLC, Tenaska Power Services Co., TransAlta Energy
    Marketing (US) Inc., and Ontario Power Generation Inc.

[^2]: OASIS is an accessible electronic, real time way for a
    transmission provider to post transmission service and ancillary
    service Information. More specifically, the transmission provider
    posts: (a) Available Transmission Capability (ATC) and total
    transmission capability (TTC) -- as well as how and when this
    information is to be updated; (b) transmission service products,
    including resold capacity, as well as their prices; (c) ancillary
    service offerings and their pricing; (d) requirements for posting
    transmission service requests and responses including service
    denials and curtailment or interruption of transmission; (e)
    requirements for posting transmission service schedules; (f) other
    transmission-related communications; and (g) auditing information.

[^3]: The July 2002 Posting states in pertinent part:

    > **July 1, 2002:** The Midwest ISO has discounted the firm rates
    > for through and out service to the rates indicated in the above
    > spreadsheet. The Midwest ISO commits to post rates no higher than
    > these rates for a period of 18 months.

    (July 2002 Posting).

[^4]: 16 U.S.C. § 824d (2000).

[^5]: Coalition Members Rehearing Request at p 9.

[^6]: DTE Energy Rehearing Request at p 2.

[^7]: *Id.,* at pp 3-4, n2.

[^8]: Section 9 states in pertinent part:

    > Nothing contained in the Tariff or any Service Agreement shall be
    > construed as affecting in any way the right of the Transmission
    > Provider . . . to unilaterally make application to the Commission
    > for a change in rates, terms and conditions, charges . . . under
    > Section 205 of the Federal Power Act . . . .

[^9]: *See generally, Promoting Wholesale Competition Through Open
    Access Non-discriminatory Transmission Services by Public Utilities
    and Recovery of Stranded Costs by Public Utilities and Transmitting
    Utilities*, Order No. 888, 61 Fed. Reg. 21,540 (May 10, 1996), FERC
    Stats. & Regs.¶ 31,036 at 31,812 (1996), *order on reh\'g*, Order
    No. 888-A, 62 Fed. Reg. 12,274 (March 14, 1997), FERC Stats. & Regs.
    ¶ 31,048 (1997), *order on reh'g*, Order No. 888-B, 81 FERC ¶ 61,248
    (1997), *order on reh'g*, Order No. 888-C, 82 FERC & 61,046 (1998),
    *aff'd in part and remanded in part sub nom. Transmission Access
    Policy Study Group, v. FERC*, 225 F.3d 667 (D.C. Cir. 2000), *aff'd
    sub nom., New York v. FERC,* 535 U.S. 1 (2002).

[^10]: *See* *Open Access Same-Time Information System and Standards of
    Conduct*, Order No. 638, February 25, 2000, Docket No. RM95-9-003,
    18 C.F.R. 37, 65 FR 17,370 (Order No. 638).

[^11]: *See*, *Standards of Conduct for Transmission Providers*, Order
    No. 2004, 105 FERC ¶ 61,248, *order on reh'g*, (Order No. 2004-A),
    107 FERC ¶ 61,032, *order on reh'g*, (Order No. 2004-B), 108 FERC ¶
    61,118, *order on reh'g*, (Order No. 2004-C), 109 FERC ¶ 61,325
    (Order No. 2004-D), *order on reh'g*, 110 FERC ¶ 61,320 (2005).

[^12]: *See* Coalition Members Rehearing Request at p 17, fns 30, 31.

[^13]: We do not agree that Order No. 2004 is applicable. RTOs are
    exempt from the requirements adopted in that proceeding. *See* 18
    C.F.R. § 358.1 (2005).

[^14]: *See* Coalition Members Rehearing Request at pp 18-20.

[^15]: *Id.,* pp 19, 26.

[^16]: *See generally* DTE Energy Rehearing Request.

[^17]: *See,* *Regional Transmission Organizations*, Order No. 2000, 65
    Fed. Reg. 809 (Jan. 6, 2000), FERC Statutes and Regulations,
    Regulations Preambles July 1996-December 2000 ¶ 31,089 at 31,017
    (1999), *order on reh\'g*, Order No. 2000-A, 65 Fed. Reg. 12,088
    (Mar. 8, 2000) FERC Statutes and Regulations, July 1996-December
    2000 ¶ 31,092 (2000), *aff\'d sub nom. Public Utility District No. 1
    of Snohomish County, Washington v. FERC*, 272 F.3d 607 (D.C. Cir.
    2001).

[^18]: In *Midwest ISO Formation,* the Commission approved the Agreement
    of Transmission Facilities Owners to Organize Midwest ISO. The
    Commission recognized that this agreement, among other things
    described Midwest ISO's 'custodial trust relationship' to the
    transmission owners in performing its obligations, which included a
    duty to maximize transmission service revenues. *See* *Midwest ISO
    Formation* at 84 FERC at 62,140.

[^19]: *See* Order No. 888-A, FERC Stats & Regs (1996-2000) ¶ 31,048 at
    30,274, ("A transmission provider should discount only if necessary
    to increase throughput on its system.")

[^20]: *See also,* July 5 Order at P 37 where the Commission said:

    > We believe that it is important to note that if Midwest ISO were
    > required to continue the discount for the entire term of the
    > Coalition Members' TSRs, it would constitute undue discrimination.