> 96 FERC   61, 348

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Pat Wood, III, Chairman;

William L. Massey, Linda Breathitt,

and Nora Mead Brownell.

Western Systems Coordinating Council, Docket Nos. EL01-74-000

Western Regional Transmission Association, and and ER01-2058-000

Southwest Regional Transmission Association

ORDER GRANTING REQUEST TO TRANSFER

PROGRAMS AND DIRECTING ADDITIONAL FILINGS

(Issued September 27, 2001)

On May 3, 2001, the Western Systems Coordinating Council (WSCC), the
Western Regional Transmission Association (WRTA) and the Southwest
Regional Transmission Association (SWRTA) (collectively, Applicants)
filed a joint petition for a declaratory order requesting the
Commission: (1) find that no Commission action is required for
Applicants to voluntarily merge into a single successor organization,
the Western Electricity Coordinating Council (WECC); or alternatively,
(2) issue an order authorizing the transfer to the WECC of certain
functions currently performed by WSCC, WRTA and SWRTA.

In this order, we (1) grant Applicants\' alternative request to approve
the transfer to the WECC certain programs currently administered by
Applicants, (2) find the governance proposal for the WECC, subject to
certain modifications, to be reasonable, and (3) direct Applicants to
submit various filings, under section 205 of the FPA, to implement the
transfer of programs to the WECC. We also deny Applicants\' petition for
exemption from filing fees.

Currently all three of the Applicants are involved in the coordination
of transmission access and transmission planning, and all three have a
similar membership base. The formation of the WECC will decrease the
overlap of activities and the duplication of efforts. The public
interest is further served because the formation of the WECC will
improve regional coordination efforts.

[Background]{.underline}

WSCC is a voluntary organization, established in 1967 as a reliability
council, which provides a forum for cooperatively addressing regional
electric system reliability issues within the Western Interconnection.
WSCC promotes regional planning and the reliable operation of the bulk
power system through the coordination of planning and the operation of
generating and interconnected transmission facilities. Previously WSCC
sought, and the Commission granted, approval for WSCC to administer
certain discrete programs in the WSCC region.[^1]

WRTA and SWRTA are Regional Transmission Groups (RTGs) as described in
the Commission\'s Policy Statement on RTGs.[^2] WRTA and SWRTA were
established in 1995 to, among other things, promote the efficient use of
existing transmission facilities, coordinate the planning of future
facilities, and resolve disputes over transmission access. Applicants
note that WRTA and SWRTA operate as self-governing organizations,
subject to the Commission\'s reserved right to review changes to the
governing agreements of those organizations, including termination of
the agreements.[^3] The governing agreements of WRTA and SWRTA also
obligate their respective members to provide open access transmission
services.

[Petition for Declaratory Order]{.underline}

Applicants request that the Commission issue a declaratory order
clarifying that the integration of the existing WSCC, WRTA and SWRTA
into the WECC does not require review or approval by the Commission.
Applicants indicate that what they propose to accomplish is essentially
a structural reorganization of the three existing organizations into
one. To the extent the organizations are not regulated by the
Commission, Applicants claim that there is no need for Commission
approval as a prerequisite to their merger. Applicants note that WSCC is
a reliability council and, as such, is a voluntary forum for
cooperatively addressing regional electric system reliability issues.
Furthermore, WSCC operates outside the Commission\'s jurisdiction, with
the exception that WSCC administers the RMS and UFMP on behalf of WSCC
members. Applicants note that WRTA and SWRTA were established pursuant
to the Commission\'s Policy Statement encouraging the development of
regional transmission groups. Applicants indicate that, although the
Commission required compliance filings demonstrating that RTGs would
comply with Commission policies, there is no suggestion that the
Commission intended to regulate RTGs on an ongoing basis.

Applicants note that, in the same manner as its predecessor
organizations, the WECC will not be an electric utility or a
transmitting utility under the FPA. In addition, the WECC will not own
or operate transmission facilities or sell energy in the wholesale
market. Rather, the WECC will function as an electric coordinating
council whose scope of authority and activities will be consistent with
those of the existing WSCC, and augmented by the additional scope of
authority and activities of WRTA and SWRTA. Applicants note that the
Commission has previously reviewed and approved certain functions
administered by them. However, they claim that there is no change in the
scope of authority or in the substance of jurisdictional programs with
the formation of the WECC.

[Alternative Request for Approval of Transfer of Certain
Activities]{.underline}

Notwithstanding their arguments, Applicants, in the alternative, request
that the Commission approve the transfer of those activities to the WECC
that the Commission has previously exercised jurisdiction in the past
with respect to Applicants\' organizations. Because they are not
requesting any change to any of the previously approved programs,
Applicants claim that the transfer of those activities to the WECC will
not affect the subject matter and methods for administering these
programs. In essence, the administration of the programs will be
performed by the WECC instead of WSCC, WRTA or SWRTA.

[Formation of the WECC]{.underline}

Pursuant to the terms of a Merger Agreement dated April 30, 2001, among
the Applicants, WSCC will adopt new bylaws and change its name to the
WECC. Subsequently, WRTA and SWRTA will terminate their Governing
Agreements and will merge into the WECC. According to the application,
the transactions are designed to consolidate the operations of WSCC,
WRTA and SWRTA under a single organization and to decrease existing
overlap and duplicated efforts of the existing organizations. In
addition, Applicants claim that, as a single organization, the WECC will
improve regional coordination within the Western Interconnection.

Applicants state that, upon the establishment of the WECC, the RMS and
the UFMP, which have been administered by WSCC, will be administered by
the WECC. The WECC will take over certain transmission planning
functions from WRTA and SWRTA. In addition, the current obligation of
members of WRTA and SWRTA to provide open access transmission services
will be transferred to the WECC ([i.e.]{.underline}, open access will be
a member obligation under the WECC).

According to the application, the fundamental mission of the WECC will
be to maintain a reliable electric power system that will support
efficient competitive power markets within the Western Interconnection,
and to provide a forum for resolving transmission access disputes that
may arise among its members. To accomplish this mission, the WECC will
perform the following functions: regional coordination; establishing
reliability standards; certifying grid operating entities; reliability
assessments; administering the WECC (formerly WSCC) Reliability
Management System; other reliability compliance activities, as
determined pursuant to national legislative initiatives or determined to
be within the scope of WECC authority; developing and assessing
coordinated planning policies and procedures; coordinating planning
studies performed by regional entities; developing, coordinating and
promoting consistent interregional operating policies and procedures
consistent with applicable standards; facilitating development of
compatible, efficient market interface practices; facilitating
resolution of market interface issues; facilitating alternative dispute
resolution and requiring non-discriminatory transmission access between
members.[^4]

[Notices, Interventions, and Protests]{.underline}

Notice of the petition was published in the Federal Register, 93 Fed.
Reg. 24362 (May 14, 2001), with comments, protests, and interventions
due on or before June 4, 2001. On June 4, 2001, the California Public
Utilities Commission filed a notice of intervention. Timely motions to
intervene were filed by the Transmission Agency of Northern California
(TANC), Cities of Redding, Santa Clara, and Palo Alto, California and
the M-S-R Public Power Agency (collectively, Cities); M-S-R Public Power
Agency (MSR), California Independent System Operator Corporation
(California ISO), Committee on Regional Electric Power Cooperation
(CREPC), Electrical District No. 3, Pinal County, Electrical District
No. 7, Maricopa County, and Maricopa County Municipal Water Conservation
District No. 1 (Three Arizona Districts), Imperial Irrigation District
(Imperial), Turlock Irrigation District (Turlock), Puget Sound Energy,
Inc. (Puget), Bonneville Power Administration (Bonneville), Dynegy Power
Marketing, Inc. (Dynegy), and the City of Seattle, (Seattle). Western
Area Power Administration (Western) filed a timely motion to intervene
in support of Applicants\' filing. Avista Corporation, Sierra Pacific
Power Company, Nevada Power Company, and Portland General Electric
Company (collectively, the Avista Intervenors) jointly filed a motion to
intervene and protest. Portland General Electric Company (PGE) also
filed a separate motion to intervene and protest.

Nevada Independent Energy Coalition (Nevada Coalition),[^5] Cogeneration
Coalition of Washington (Washington Cogen),[^6] Cogeneration Association
of California (California Cogen),[^7] Metropolitan Water District of
Southern California (Metropolitan), and Public Service Company of
Colorado (PSColorado) filed motions to intervene out of time.

On July 3, 2001 Applicants filed a request for leave to file answer and
answer.

[Discussion]{.underline}

Pursuant to Rule 214 of the Commission\'s Rules of Practice and
Procedures, the notice of intervention of the California Public
Utilities Commission and the timely, unopposed motions to intervene of
TANC, Cities, M-S-R, California ISO, CREPC, Western, Three Arizona
Districts, Imperial, Turlock, Avista, Sierra Pacific, Nevada Power, PGE,
Puget, Bonneville, Dynegy, and Seattle serve to make them parties to
this proceeding. Given the stage of this proceeding, and absence of
undue prejudice or delay, we find good cause to grant the untimely,
unopposed motions to intervene of Nevada Coalition, Washington Cogen,
California Cogen, Metropolitan, and PSColorado. We also grant Puget\'s
motion to amend its protest.

Rule 213(a) of the Commission\'s Rules of Practice and Procedure [^8]
prohibits an answer to a protest unless otherwise permitted by the
decisional authority. We will accept the answer filed by Applicants
because the answer aids in clarifying certain issues, as discussed
below.

Applicants filed a petition for exemption from filing fees, seeking an
exemption from the obligation to pay a filing fee for submission of a
petition for declaratory order. Applicants state that WSCC, WRTA and
SWRTA are voluntary, non-profit public interest organizations whose sole
purpose is to benefit the general public. We find that petitioners are
not one of the defined entities eligible for exemption from filing fees
under section 381.108. Therefore, we deny their request. [^9]

Applicants seek a declaratory order finding that the consolidation of
WSCC, WRTA and SWRTA into a single successor organization, the WECC,
does not require review or approval by the Commission. In the
alternative, they seek an order from the Commission approving the
transfer to the WECC of those programs administered by WSCC, WRTA and
SWRTA under rate schedules on file with the Commission. Applicants
contend that they are regional organizations which are not public
utilities or transmitting utilities subject to the Commission\'s
jurisdiction. However, they acknowledge that they have sought and
received approval by the Commission to administer discrete programs on
behalf of entities in the Western Interconnection that are
jurisdictional public utilities under the Commission\'s regulations.
Although the organizations do not own or control any physical facilities
subject to Commission jurisdiction or sell or transmit power at
wholesale, the proposed restructuring of the organizations to form the
WECC involves the disposition of control over activities affecting
service by public utilities to a new entity (i.e., from Applicants to
the WECC).

The WECC will assume the functions currently performed by WRTA and
SWRTA. At the time the Commission approved the formation of those
organizations as RTGs, we required WRTA and SWRTA to file their
governing agreements under section 205(c) of the FPA because they were
contracts affecting or relating to transmission services provided by
public utilities. The Commission also required any changes to those
agreements, including termination, to be filed under section 205.[^10]
Similarly, the Commission approved the administration of the RMS and
UFMP by WSCC, with such arrangements reflected in rate schedules on file
with the Commission. Consequently, the transfer of such functions, which
are reflected in agreements on file with the Commission, represents a
change in the party responsible for carrying out such activities.
However, because Applicants have alternatively requested that the
Commission approve the transfer and, as discussed below, we grant such
request, it is unnecessary to address Applicants\' petition.

Furthermore, because the Bylaws of the WECC will affect or relate to
transmission services provided by public utilities, consistent with our
action in [WRTA]{.underline} and [SWRTA]{.underline}, we will review the
reasonableness of the Bylaws of the WECC under section 205 and require
WECC to timely file any changes to that agreement for Commission
approval. As discussed in more detail below, we find the governance
structure of the WECC, as amended by the conditions set forth below, is
reasonable and will not provide opportunity for undue influence on WECC
decisions by market participants. However, because the WECC Bylaws may
affect transmission service provided by jurisdictional public utilities,
we will require the Bylaws, as amended by the conditions in this order,
to be filed with the Commission. Any proposed changes to the Bylaws also
must be timely filed with the Commission for review and approval under
section 205 of the FPA.

Applicants request that the Commission authorize the transfer of
administration of certain programs over which the Commission has
previously exercised jurisdiction. Applicants indicate that after their
proposed reorganization the programs will be unchanged, the only
difference being that one organization, the WECC, will administer them
rather than WSCC, WRTA and SWRTA. Moreover, the formation of the WECC
will decrease the overlap of activities and the duplication of efforts.
Furthermore, the express intent of the formation of the WECC is to
improve regional coordination efforts. Consequently, we find that the
transfer to, and performance by, the WECC of the administration of these
programs and functions to be reasonable and approve such transfer upon
completion of the Applicants\' reorganization.[^11]

[Issues Identified by Intervenors]{.underline}

Four intervenors, PGE, the Avista Intervenors, Puget, and Bonneville,
raise issues with respect to various aspects of the reorganization of
the Applicants into the WECC and the proposed Bylaws of the WECC. The
issues include: (1) concern regarding the use of a stakeholder board for
the WECC; (2) alleged conflict between liability provisions under the
WECC Bylaws and liability provisions under the Agreement Limiting
Liability Among Western Interconnected Systems (WIS Agreement); (3) a
change from voluntary compliance (under WSCC operation) to mandatory
compliance with WECC standards and decisions; (4) alleged conflicts
between WECC practices, including Good Utility Practice and arbitration,
and the requirements of other organizations such as an RTO and the WIS
Agreement, and (5) alleged overlap in functions between the WECC and an
RTO.

1\. [WECC Governance Structure]{.underline}

The WECC proposes to be governed by a hybrid stakeholder board
consisting of 27 directors. Twenty of these directors will be elected
from five separate classes with each class electing four directors.[^12]
The classes will represent those who (1) own or control more than 1000
circuit miles of 115 kV and higher voltages, (2) own or control less
than 1000 circuit miles of 115 kV and higher voltages, (3) are other
electric business entities including generators, marketers, power
exchanges and load serving entities that own no transmission or
distribution lines, (4) are end users such as industrial, commercial,
residential and agricultural users, and (5) are state and provincial
representatives in the Western Interconnection.[^13] The remaining seven
directors will be non-affiliated, [i.e.]{.underline}, no affiliation
with any entity that is (i) a member of the WECC or (ii) eligible for
membership in classes (1),(2) or (3), who will be elected by the
membership at large. According to the Bylaws,[^14] a candidate will be
considered an affiliate if the candidate, his or her spouse or child,
derives more than five percent of his or her annual income from a Member
of WECC or a bulk power user of the Western Interconnection. A Steering
Committee will select the initial candidates using a search firm to
provide a list of candidates.[^15] The steering committee will select a
number of candidates, not less than twice the number of vacancies and
the Members will select the directors at the first membership meeting.
Applicants state that the governance structure is designed to ensure
independence and fair representation.

PGE argues that the proposed hybrid governance structure of the WECC,
with 20 stakeholder directors on a board of 27, is incompatible with the
RTO West governance structure, which is independent of stakeholders. PGE
contends that WECC\'s proposal would give a stakeholder-controlled
organization the responsibility for implementing mechanisms that should
be exclusively controlled by an independent board. Puget argues that,
because the Board of Directors is comprised of a subset of competitors
in the Western Interconnection, standards and criteria adopted by the
WECC will be subject to potential manipulation for competitive
advantage.[^16]

Applicants state that the WECC governance structure is consistent with
the principles established in Order No. 2000. Given its key
responsibility to establish regional reliability standards, Applicants
state that participation by a wide variety of stakeholders will be of
particular benefit. Applicants also note that the WECC Bylaws
specifically provide for a periodic review of the organization\'s
governance structure to ensure that the organization continues to
fulfill its purpose.[^17] The review will include, among other things,
an evaluation of the Board composition, member class structure and
committee structure.

In response to Puget\'s claim, Applicants also point out that the
majority (15) of seats (four representatives from each of the end-users
and state and provincial representative classes plus seven
non-affiliated representatives) will be held by persons who are not
competitors in the market. In addition, Applicants state that the board
structure prevents any class or coalition of classes to act in
self-interest.

We believe it is important that WECC\'s board be independent in both
perception and reality because the WECC not only will set reliability
standards for RTO organizations carrying on commercial operations in the
Western Interconnection, it also proposes to share or complement certain
functions performed by RTOs in the Western region. As a result, we must
ensure that the WECC governance structure is reasonable and will not
provide opportunity for undue influence by any market participant.
Although the WECC will not be an RTO and Order No. 2000 does not
specifically apply to the formation of the WECC, we find that the WECC
board, similar to boards that govern RTOs, should be established such
that no one class would be allowed to veto a decision that is reached by
the rest of the board and that no two classes could force through a
decision that is opposed by the rest of the board. The hybrid governance
structure proposed for the WECC meets this criterion. As currently
proposed (20 board members from 5 separate stakeholder classes and 7
non-affiliated board members), no one class (with a total of four votes)
can veto a decision, nor can two classes (with a total of eight votes),
force a decision forward over the objections of remaining board members.
We find that, as proposed, the WECC decisionmaking process is reasonable
in that it allows for the expertise of board members of various
stakeholder classes and non-affiliated interests to inform the process,
but at the same time prevent the exercise of undue influence over
decisions of the board by individual market participants. To ensure the
continued reasonableness of the WECC governance structure, we will
require the WECC Bylaws to be on file with the Commission and WECC to
file any changes to the Bylaws under section 205 of the FPA, consistent
with our prior determination in [WRTA]{.underline} and
[SWRTA]{.underline}.

We will, however, require a change in the proposed Bylaws. Applicants
propose that the seven, non-affiliated directors may derive up to five
percent of their annual income from a Member of the WECC or from a bulk
power user of the Western Interconnection.[^18] The Commission has
previously determined that board members that are intended to be
non-affiliated (i.e., independent of market participants) must not have
any financial interests in any market participants.[^19] We will
therefore require the WECC to remove any provisions in the Bylaws that
allow an non-affiliated, non-stakeholder director to hold any financial
interest in a member of the WECC or any bulk power user in the Western
Interconnection.

> 2 [Liability Issues]{.underline}

The Avista Intervenors argue that under the WIS Agreement, utilities
release all claims against other WIS participants except for those
arising out of willful misconduct. Under section 15.1 of the WECC
Bylaws, members release all claims against each other without condition.
Bonneville states that, unlike the WECC, the WIS Agreement provides a
means to impose liability upon a party for failure to comply with
accepted standards. Bonneville is concerned that the difference between
the liability provisions may cause confusion among entities that are
members of both organizations over which agreement will prevail, or may
be construed to waive the liability incentive agreed upon by parties to
the WIS Agreement. Bonneville requests that the Commission order a
revision to the WECC bylaws to allow WECC members to retain or negotiate
separate agreements which impose liability for failure to comply with
specified utility standards.

The Avista Intervenors also note that the WECC members would be subject
to increased liability exposure because the WECC Bylaws require that
members adhere to the standards and other obligations set forth by the
WECC, thereby facilitating \"proof of negligence\" by third parties for
service interruptions. The WIS agreement, on the other hand, requires
that members adhere to \"Accepted Electric Utility Practice\" in their
operation. Puget raises similar arguments and requests that the WECC
Bylaws be changed to clearly state they do not create a duty and a
standard of care for members to third parties.

In their answer, Applicants state that claims of increased liability
exposure are speculative and are based on the assumption that Article
XI, Section 2 of the WSCC Agreement served to insulate WSCC members from
third party liability claims in the past. Applicants argue that the
protests fail to (i) discuss or compare the WSCC language to section 4.7
of the WECC Bylaws, which contains more specific reservation of rights
or (ii) explain why having standards that are enforceable by suspension
or termination leads to higher risk of third party liability than
standards currently established by WSCC. [^20]

Applicants argue that Section 15.1 is limited to damages that \"may
occur or result from performance or nonperformance of these Bylaws.\"
Therefore Section 15.1 should not be interpreted as waiving or otherwise
affecting liabilities that may arise between members under the WIS
Agreement. However, Applicants indicate that they are willing to add
language to Section 15.1 of the WECC Bylaws to provide further
clarification of its intended scope.[^21] Therefore, Applicants agree to
add the following clarifying language proposed by intervenors at the end
of Section 15.1:

> This section 15.1 of the bylaws applies to such liability as might
> arise between Members under these Bylaws. This Section 15.1 does not
> apply to parties to the Agreement Limiting Liability Among Western
> Interconnected Systems (\"WIS Agreement\") with respect to matters
> covered by the WIS Agreement and does not apply to any liability
> provision in any other agreement.

With agreement among the parties to this clarification, we conclude that
this issue is resolved. We direct Applicants to include the modification
to section 15.1 in their compliance filing. In addition, we note that
Puget\'s request that the Bylaws be revised to state that they do not
create a duty of care to third parties is unnecessary because section
15.3 of the Bylaws already contains such a provision.

> 3\. [Mandatory Compliance with WECC Standards]{.underline}

Puget argues that the WECC will be fundamentally different from WSCC
because WSCC does not have the authority to set or enforce mandatory
reliability criteria, except where member utilities have voluntarily
contracted with WSCC under the RMS program. Because Puget and others are
not participants to the RMS, WSCC does not have authority to set or
enforce mandatory industry standards for them. Puget further notes that
Article IX, Section 2 of the WSCC Agreement states:

> Each Member shall retain sole control of its own facilities and the
> use thereof, and nothing in this Agreement shall require a Members to
> construct or dedicate facilities for the benefit of any other Member
> or be deemed to impair its ability to take such actions as it deems
> necessary to maintain reliable service to its own customers or to
> fulfill its obligations to others.

Puget states that the WECC Bylaws do not contain a similar provision
and, in fact, creates an organization that sets mandatory reliability
criteria with the power to enforce the criteria. Puget notes that
section 4.6.9 requires members to abide by the Bylaws, and all standards
and decisions of the WECC, and grants the WECC (section 4.8 of the
Bylaws) the power to suspend or terminate the membership of any member
who does not comply. Puget is concerned that, under the WECC\'s
\"Backstop Authority\" contained in section 3.4 (which gives the WECC
the ability to address an issue when the regional entity with primary
authority for the issue has not acted), the WECC may prevent access to
the transmission grid.

We find Puget\'s concerns unfounded. While compliance with the WECC\'s
Bylaws and standards may be mandatory, membership in the organization is
voluntary. Furthermore, section 4.7 of the Bylaws specifically prohibits
the WECC from requiring any action by a member that would create a risk
to its system or to public health and safety, or to violate any law,
regulation, rule or order. Moreover, we have required the Bylaws, and
any changes, to be filed with this Commission. We also note that section
11 and Appendix C of the Bylaws provide that any arbitration decisions
that affect the provision of Commission jurisdictional service may be
appealed to the Commission. With these protections in place, we do not
believe that the WECC can summarily or unfairly terminate a member\'s
membership. Further, we see nothing in the WECC\'s \"Backstop
Authority\" that would allow it to prevent a member from accessing the
transmission grid.

> 4\. [Conflict Between the WECC and Other Organizations]{.underline}

Puget argues that the WECC Bylaws duplicate and are potentially
inconsistent with expected functions of RTO West. For example, Puget
notes that both organizations are likely to have arbitration or dispute
resolution requirements, and some provision should be made to clarify
which organization\'s requirements should be followed, or in the event
of inconsistent results, which organization\'s decision should be
followed. The Avista Intervenors raise the same issue with respect to
the arbitration provisions in the WIS Agreement.

We find Puget and Avista Intervenors\' concerns unnecessary. The WECC
Bylaws already provide for a resolution of any conflict between the WECC
and an RTO. The WECC Bylaws provide that requests for transmission
service between WECC members who are also members of a RTO will follow
the procedures and tariffs of the RTO, and will also resolve any
disputes using the RTO\'s tariff or governing documents. [^22]

> 5\. [Duplication of Functions]{.underline}

As noted above, the WECC will, among other things, act as coordinating
entity for Western Interconnection for activities of regional
organizations that are responsible for reliability and market functions;
develop and adopt reliability, operating and planning standards,
facilitate reliability assessments among regional entities; develop
coordinated planning policies and procedures for the Western
Interconnection; review and assess regional entity planning processes;
facilitate development of compatible and efficient market interface
practices across the Western Interconnection; provide dispute resolution
between members and will require members to provide non-discriminatory
transmission access.

Puget and PGE contend that the WECC may duplicate functions of RTO West.
PGE states that RTO West will perform many of the same activities
proposed by the WECC including: regional and interregional coordination,
planning, facilitating resolution of market interface issues,
facilitating alternative dispute resolution and requiring
non-discriminatory transmission access. Given this, PGE believes that
the WECC may perpetuate the overlap of functions. PGE further states
that the WECC will carry out many of the same functions as an RTO but
will not be subject to Commission jurisdiction. Puget requests that the
Commission reject the joint petition and direct that any subsequent
proposal to fully address how the WECC proposal would operate with
regard to an RTO.

Applicants state that they fully support the development of RTOs and
have included, in the WECC Bylaws, specific references to RTO functions
and specific allocation of authority between the WECC and RTOs,
consistent with Order No. 2000. Applicants note that, in fact, the WECC
has assumed a general obligation to avoid conflict with RTO functions,
citing section 2.11 of the Bylaws, which provides:

> The WECC will endeavor to carry out the provision of these Bylaws in a
> manner that does not conflict with or duplicate any FERC-approved
> functions of a Regional Transmission Organization including functions
> that may be delegated by the Regional Transmission Organization to any
> Regional Entity.

Applicants also state that the WECC will continue to evaluate its
functions and work with the existing RTOs to ensure that the
organizations work together efficiently and without duplicating efforts.
Applicants note that section 4.9 of the Bylaws provides that the WECC
will conduct regular assessments to ensure that the organization
continues to fulfill its purposes in light of the expected evolution of
the industry. Specifically, the assessment will evaluate the WECC\'s
Board composition, member class structure, committee structure and
activities and staff responsibilities.

We find premature PGE and Puget\'s claim that the WECC will duplicate
functions with RTO West. WECC is intended serve as an
interconnection-wide regional reliability entity that can serve as a
coordinating entity for the entire Western Interconnection for
activities of regional organizations. We believe that these overarching
goals are distinct from those proposed by RTO West. We also believe that
the consolidation of WRTA, SWRTA and WSCC is an appropriate step to
improve regional coordination in the West. We note, however, that
neither RTO West, nor any other organization proposing to become an RTO
in the Western Interconnection have submitted for Commission review, and
the Commission has not reviewed and approved, many of the functions
about which intervenors raise concerns. At the time any such RTO
proposal is filed with the Commission for approval, we will consider
whether changes to the WECC Bylaws are necessary to ensure that an RTO
satisfies the principles and functions set forth in Order No. 2000 and
that the operations of the WECC do not conflict with the authorized
activities of an RTO.

[The Commission orders]{.underline}:

\(A\) Applicants\' request for exemption of the filing fee is denied.

\(B\) Applicants\' request to transfer to the WECC functions performed
by Applicants is hereby granted, as discussed in the body of this order.

\(C\) Applicants shall make appropriate filings under section 205 of the
FPA, as discussed in the body of the order, to implement the
restructuring and modify the WECC Bylaws.

By the Commission.

( S E A L )

David P. Boergers,

Secretary.

[^1]: These programs are the Reliability Management System (RMS) and the
    Unscheduled Flow Mitigation Plan (UFMP) . Under the RMS,
    transmission operators and generators agree, through contracts, to
    make their compliance with certain WSCC reliability criteria,
    subject to sanctions. Under the UFMP, all WSCC members support the
    cost of controllable devices that are used to control loop flow in
    the WSCC region. [See]{.underline} Southern California Edison
    Company, 73 FERC  61,219 (1995) and Western Systems Coordinating
    Council, 87 FERC  61,060 (1999).

[^2]: Policy Statement Regarding Regional Transmission Groups, 58 Fed.
    Reg. 41,626 (Aug. 5, 1993), III FERC Stats. & Regs., Regulations
    Preambles  30,976 (1993) (Policy Statement).

[^3]: [See]{.underline} Western Regional Transmission Association
    ([WRTA]{.underline}), 71 FERC  61,158 (1995) and Southwest Regional
    Transmission Association ([SWRTA]{.underline}), 73 FERC  61,147
    (1995). To comply with the condition contained in the orders
    approving the establishment of WRTA and SWRTA that termination of
    the Governing Agreements be filed with the Commission, Applicants
    request that the instant petition serve as notice under section 205
    of the FPA that the agreements will terminate upon completion of the
    reorganization.

[^4]: [See]{.underline} WECC Bylaws, Sections 2.1, 2.2 and 2.3, Exh. B
    at 1-3.

[^5]: Nevada Coalition represents the interests of Nevada Cogeneration
    Associates Nos. 1 and 2, and Saguaro Power Company.

[^6]: Washington Cogen is an ad hoc association representing the
    interests of March Point Cogeneration Company, Sumas Electric
    Cogeneration Co., LP, and Tenaska, Inc.

[^7]: California Cogen is an ad hoc association representing the power
    generation, power marketing and cogeneration operation interests of:
    Coalinga Cogeneration Company, Mid-Set Cogeneration Company, Kern
    River Cogeneration Company, Sycamore Cogeneration Company, Texaco
    Kern Field Projects, Sargent Canyon Cogeneration Company, Salinas
    River Cogeneration Company, Texaco North Midway Cogeneration
    Project, Texaco McKittrick Cogeneration Project, and Midway Sunset
    Cogeneration Company.

[^8]: 18 C.F.R.  385.213(a)(2)(2001).

[^9]: Section 381.108 states that, \"States, municipalities and anyone
    who is engaged in the official business of the Federal government
    are exempt from the fees required by this part and may file a
    petition for exemption in lieu of the applicable fee.\"

[^10]: [See]{.underline} 69 FERC at 61,385 (WRTA) and 69 FERC at 61,406
    (SWRTA).

[^11]: We direct the WECC to file, pursuant to section 205 of the FPA, a
    notice of succession for those contracts administered by WSCC under
    the RMS and the UFMP.

[^12]: Class membership is mutually exclusive.

[^13]: Sections 6.2.1 and 6.2.2 of the Bylaws provide that the Board may
    be expanded to include a director to represent Canadian and Mexican
    interests, respectively. Exh. B at 14.

[^14]: [See]{.underline} Exh. B at 16.

[^15]: Section 6.5.2.3 of the Bylaws states that candidates for
    non-affiliated director will provide to the Steering Committee, and
    if nominated, the Members, a disclosure statement which, among other
    things, discloses present and past affiliations, and any substantial
    economic interest in any member of the WECC or any entity eligible
    for membership in Classes 1 through 3 held by themselves, their
    spouses or their children as well as any interest know by the
    candidate to be held by the candidate\'s parents, siblings, aunts,
    uncles, or first cousins. A \"substantial economic interest\" is
    defined as deriving more than 5 percent of a person\'s annual income
    from salary, wages, dividends, benefits or stock holdings of a
    Member.

[^16]: Puget cites as an example the potential to manipulate
    transmission path ratings to advantage one member to the detriment
    of another.

[^17]: Section 4.9 of the Bylaws requires an initial review within (1)
    one year or after at least one half of the load in the Western
    Interconnection is covered by Commission-approved RTOs carrying on
    commercial operations in the Western Interconnection, or (2) within
    four years after the initial organizational meeting of the WECC.
    Subsequent reviews are to held not later than each five years
    thereafter. Exh. B at 12.

[^18]: [See]{.underline} Sections 6.5.1 and 6.5.2 of the WECC Bylaws.
    Exhibit B at 16-18.

[^19]: [See]{.underline} [e.g]{.underline}., Midwest Independent
    Transmission System Operator, Inc., et al., 84 FERC  61,231, (1998)
    and Midwest Independent Transmission System Operator, Inc., et al.,
    85 FERC  61,250 (1998).

[^20]: Applicants\' Answer at 4.

[^21]: Applicants\' Answer at 6.

[^22]: See sections 10.1.1, 10.4, and 10.5.2 of the WECC Bylaws. Exhibit
    B at 29-31.