Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Rules and Regulations 10489 

ft.3 in interior volume are not addressed 

by this special condition. The in-flight 

accessibility of very large, enclosed, 

stowage compartments and the 

subsequent impact on the 

crewmembers’ ability to effectively 

reach any part of the compartment with 

the contents of a hand-held fireextinguishing system will require 

additional fire-protection considerations 

similar to those required for inaccessible 

compartments such as Class C cargo 

compartments. 

DESIGN CRITERIA FOR ENCLOSED STOWAGE COMPARTMENTS NOT LIMITED TO STOWAGE OF EMERGENCY OR AIRPLANESUPPLIED EQUIPMENT

Fire protection features 

Applicability of fire protection requirements by interior volume 

Less than 25 cubic feet 25 cubic feet to less than 

57 cubic feet 57 cubic feet to 200 cubic feet 

Compliant Materials of Construction 1.Yes ................................................ Yes ................................................ Yes. 

Smoke or Fire Detectors 2 ............. No ................................................. Yes ................................................ Yes. 

Liner 3 ............................................ No ................................................. Conditional .................................... Yes. 

Fire Location Detector 4 ................ No ................................................. Yes ................................................ Yes. 

1 Compliant Materials of Construction: The material used in constructing each enclosed stowage compartment must at least be fire resistant 

and must meet the flammability standards established for interior components (i.e., 14 CFR part 25 Appendix F, Parts I, IV, and V) per the requirements of § 25.853. For compartments less than 25 ft.3 in interior volume, the design must ensure the ability to contain a fire likely to occur 

within the compartment under normal use. 2Smoke or Fire Detectors: Enclosed stowage compartments equal to or exceeding 25 ft.3 in interior volume must be provided with a smoke- or 

fire-detection system to ensure that a fire can be detected within a one-minute detection time. Flight tests must be conducted to show compliance with this requirement. Each system (or systems) must provide: 

(a) A visual indication in the flight deck within one minute after the start of a fire. 

(b) An aural warning in the OFCR compartment. 

(c) A warning in the main passenger cabin. This warning must be readily detectable by a flight attendant, taking into consideration the locations of flight attendants throughout the main passenger compartment during various phases of flight. 3 Liner: If material used in constructing the stowage compartment can be shown to meet the flammability requirements of a liner for a Class B 

cargo compartment (i.e., § 25.855 at Amendment 25–116, and Appendix F, part I, paragraph (a)(2)(ii)), then no liner would be required for enclosed stowage compartments equal to or greater than 25 ft.3 but less than 57 ft.3 in interior volume. For all enclosed stowage compartments 

equal to or greater than 57 ft.3 in interior volume but less than or equal to 200 ft.3, a liner must be provided that meets the requirements of 

§ 25.855 for a Class B cargo compartment. 4Fire Location Detector: If an OFCR compartment has enclosed stowage compartments exceeding 25 ft.3 interior volume that are located separately from the other stowage compartments (located, for example, away from one central location, such as the entry to the OFCR compartment 

or a common area within the OFCR compartment, where the other stowage compartments are), that OFCR compartment would require additional fire-protection features and/or devices to assist the firefighter in determining the location of a fire. 

Issued in Renton, Washington, on February 

15, 2011. 

K.C. Yanamura, 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2011–4228 Filed 2–24–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 27 

[Docket No. SW025; Special Conditions No. 

27–025–SC] 

Special Conditions: Bell Helicopter 

Textron Canada Limited Model 407 

Helicopter, Installation of a Hoh 

Aeronautics, Inc. Autopilot/ 

Stabilization Augmentation System 

(AP/SAS) 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions; request 

for comments. 

SUMMARY: These special conditions are 

issued for the modification of the Bell 

Helicopter Textron Canada Limited 

(Bell) model 407 helicopter. This model 

helicopter will have novel or unusual 

design features when modified by 

installing the Hoh Aeronautics, Inc. 

(Hoh) complex Autopilot/Stabilization 

Augmentation System (AP/SAS) that 

has potential failure conditions with 

more severe adverse consequences than 

those envisioned by the existing 

applicable airworthiness regulations. 

These special conditions contain the 

added safety standards the 

Administrator considers necessary to 

ensure the failures and their effects are 

sufficiently analyzed and contained. 

DATES: The effective date of these 

special conditions is February 14, 2011. 

We must receive your comments by 

April 26, 2011. 

ADDRESSES: You must mail your 

comments to: Federal Aviation 

Administration, Rotorcraft Directorate, 

Attn: Rules Docket (ASW–111), Docket 

No. SW025, 2601 Meacham Blvd., Fort 

Worth, Texas 76137. You may deliver 

your comments to the Rotorcraft 

Directorate at the indicated address. 

You must mark your comments: Docket 

No. SW025. You can inspect comments 

in the Rules Docket weekdays, except 

Federal holidays, between 8:30 a.m. and 

4 p.m., in the Rotorcraft Directorate. 

FOR FURTHER INFORMATION CONTACT: 

Mark Wiley, Aviation Safety Engineer, 

FAA, Rotorcraft Directorate, Regulations 

and Policy Group (ASW–111), 2601 

Meacham Blvd., Fort Worth, Texas 

76137; telephone (817) 222–5134; 

facsimile (817) 222–5961. 

SUPPLEMENTARY INFORMATION: 

The FAA has determined that notice 

and opportunity for prior public 

comment hereon are impracticable 

because these procedures would 

significantly delay issuance of the 

design approval and thus delivery of the 

affected aircraft. In addition, the 

substance of these special conditions 

has been subject to the public comment 

process previously with no substantive 

comments received. The FAA therefore 

finds that good cause exists for making 

these special conditions effective on 

issuance. 

Comments Invited 

While we did not precede this with a 

notice of proposed special conditions, 

we invite interested people to take part 

in this action by sending written 

comments, data, or views. The most 

helpful comments reference a specific 

portion of the special conditions, 

explain the reason for any 


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10490 Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Rules and Regulations 

recommended change, and include 

supporting data. 

We will file in the special conditions 

docket all comments we receive, as well 

as a report summarizing each 

substantive public contact with FAA 

personnel about these special 

conditions. You can inspect the docket 

before and after the comment closing 

date. If you wish to review the docket 

in person, go to the address in the 

ADDRESSES section of this document 

between 8:30 a.m. and 4 p.m., Monday 

through Friday, except Federal holidays. 

We will consider all comments we 

receive by the closing date for 

comments. We will consider comments 

filed late if it is possible to do so 

without incurring expense or delay. We 

may change these special conditions 

based on the comments we receive. 

If you want us to let you know we 

received your mailed comments on 

these special conditions, send us a preaddressed, stamped postcard on which 

the docket number appears. We will 

stamp the date on the postcard and mail 

it back to you. 

Background 

On July 16, 2009, Hoh submitted an 

application to the FAA’s Los Angeles 

Aircraft Certification Office (LA ACO) 

for a supplemental type certification 

(STC) to install an AP/SAS on a Bell 

model 407 helicopter. The Bell model 

407 helicopter is a 14 CFR part 27 

Normal category, single turbine engine, 

conventional helicopter designed for 

civil operation. This helicopter model is 

capable of carrying six passengers with 

one pilot, and has a maximum gross 

weight of approximately 5,250 pounds, 

depending on the configuration. The 

major design features include a 4-blade, 

soft-in-plane main rotor, a 2-blade antitorque tail rotor, a skid landing gear, 

and a visual flight rule (VFR) basic 

avionics configuration. Hoh proposes to 

modify a model 407 Bell helicopter by 

installing a two-axis AP/SAS. 

Type Certification Basis 

Under 14 CFR 21.115, Hoh must show 

that the Bell model 407 helicopter, as 

modified by the installed AP/SAS, 

continues to meet the 14 CFR 21.101 

standards. The baseline of the 

certification basis for the unmodified 

Bell model 407 helicopter is listed in 

Type Certificate Number H2SW. 

Additionally, compliance must be 

shown to any applicable equivalent 

level of safety findings, exemptions, and 

special conditions, prescribed by the 

Administrator as part of the certification 

basis. 

If the Administrator finds the 

applicable airworthiness regulations 

(that is, 14 CFR part 27), as they pertain 

to this STC, do not contain adequate or 

appropriate safety standards for the Bell 

model 407 helicopter because of a novel 

or unusual design feature, special 

conditions are prescribed under 

§ 21.101(d). 

In addition to the applicable 

airworthiness regulations and special 

conditions, Hoh must show compliance 

of the AP/SAS STC-altered Bell model 

407 helicopter with the noise 

certification requirements of 14 CFR 

part 36. 

The FAA issues special conditions, as 

defined in § 11.19, under § 11.38 and 

they become part of the type 

certification basis under § 21.101. 

Novel or Unusual Design Features 

The Hoh AP/SAS incorporates novel 

or unusual design features, for 

installation in a Bell model 407 

helicopter, Type Certificate Number 

H2SW. This AP/SAS performs noncritical control functions, since this 

model helicopter has been certificated 

to meet the applicable requirements 

independent of this system. However, 

the possible failure conditions for this 

system, and their effect on continued 

safe flight and landing of the helicopter, 

are more severe than those envisioned 

by the present rules. 

Discussion 

The effect on safety is not adequately 

covered under § 27.1309 for the 

application of new technology and new 

application of standard technology. 

Specifically, the present provisions of 

§ 27.1309(c) do not adequately address 

the safety requirements for systems 

whose failures could result in 

catastrophic or hazardous/severe-major 

failure conditions, or for complex 

systems whose failures could result in 

major failure conditions. 

To comply with the provisions of the 

special conditions, we require that Hoh 

provide the FAA with a systems safety 

assessment (SSA) for the final AP/SAS 

installation configuration that will 

adequately address the safety objectives 

established by the functional hazard 

assessment (FHA) and the preliminary 

system safety assessment (PSSA), 

including the fault tree analysis (FTA). 

This must ensure that all failure 

conditions and their resulting effects are 

adequately addressed for the installed 

AP/SAS. The SSA process, FHA, PSSA, 

and FTA are all parts of the overall 

safety assessment (SA) process 

discussed in FAA Advisory Circular 

(AC) 27–1B (Certification of Normal 

Category Rotorcraft) and Society of 

Automotive Engineers (SAE) document 

Aerospace Recommended Practice 

(ARP) 4761 (Guidelines and Methods for 

Conducting the Safety Assessment 

Process on Civil Airborne Systems and 

Equipment). 

These special conditions require that 

the AP/SAS installed on a Bell model 

407 helicopter meet the requirements to 

adequately address the failure effects 

identified by the FHA, and subsequently 

verified by the SSA, within the defined 

design integrity requirements. 

Applicability 

These special conditions are 

applicable to the Hoh AP/SAS installed 

as an STC approval, in Bell model 407 

helicopter, Type Certificate Number 

H2SW. 

Conclusion 

This action affects only certain novel 

or unusual design features for a Hoh 

AP/SAS STC installed on one model 

helicopter. It is not a rule of general 

applicability and affects only the 

applicant who applied to the FAA for 

approval of these features on the 

helicopter. 

The substance of these special 

conditions has been subjected to the 

notice and comment period previously 

and has been derived without 

substantive change from those 

previously issued. It is unlikely that 

prior public comment would result in a 

significant change from the substance 

contained herein. Therefore, because a 

delay would significantly affect the 

certification of the helicopter, which is 

imminent, the FAA has determined that 

prior public notice and comment are 

unnecessary and impracticable, and 

good cause exists for adopting these 

special conditions upon issuance. The 

FAA is requesting comments to allow 

interested persons to submit views that 

may not have been submitted in 

response to the prior opportunities for 

comment. 

List of Subjects in 14 CFR Part 27 

Aircraft, Aviation safety. 

The authority citation for these 

special conditions is as follows: 

Authority: 42 U.S.C. 7572, 49 U.S.C. 

106(g), 40105, 40113, 44701–44702, 44704, 

44709, 44711, 44713, 44715, 45303. 

The Special Conditions 

Accordingly, pursuant to the 

authority delegated to me by the 

Administrator, the following special 

conditions are issued as part of the Hoh 

Aeronautics, Inc. (Hoh) supplemental 

type certificate basis for the installation 

of an autopilot/stability augmentation 

system (AP/SAS) on the Bell Helicopter 

Textron Canada Limited (Bell) model 


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Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Rules and Regulations 10491 

407 helicopter, Type Certificate Number 

H2SW. 

The AP/SAS must be designed and 

installed so that the failure conditions 

identified in the Functional Hazard 

Assessment and verified by the System 

Safety Assessment, after design 

completion, are adequately addressed in 

accordance with the ‘‘failure condition 

categories’’ and ‘‘requirements’’ sections 

(including the system design integrity, 

design environmental, and test and 

analysis requirements) of these special 

conditions. 

Failure Condition Categories Failure 

conditions are classified, according to 

the severity of their effects on the 

rotorcraft, into one of the following 

categories: 

1. No Effect—Failure conditions that 

would have no effect on safety; for 

example, failure conditions that would 

not affect the operational capability of 

the rotorcraft or increase crew workload; 

however, could result in an 

inconvenience to the occupants, 

excluding the flight crew. 

2. Minor—Failure conditions which 

would not significantly reduce rotorcraft 

safety, and which would involve crew 

actions that are well within their 

capabilities. Minor failure conditions 

would include, for example, a slight 

reduction in safety margins or 

functional capabilities, a slight increase 

in crew workload, such as, routine flight 

plan changes, or result in some physical 

discomfort to occupants. 

3. Major—Failure conditions which 

would reduce the capability of the 

rotorcraft or the ability of the crew to 

cope with adverse operating conditions 

to the extent that there would be, for 

example, a significant reduction in 

safety margins or functional capabilities, 

a significant increase in crew workload 

or result in impairing crew efficiency, 

physical distress to occupants, 

including injuries, or physical 

discomfort to the flight crew. 

4. Hazardous/Severe-Major—Failure 

conditions which would reduce the 

capability of the rotorcraft or the ability 

of the crew to cope with adverse 

operating conditions to the extent that 

there would be: 

• A large reduction in safety margins 

or functional capabilities; 

• Physical distress or excessive 

workload that would impair the flight 

crew’s ability to the extent that they 

could not be relied on to perform their 

tasks accurately or completely; or, 

• Possible serious or fatal injury to a 

passenger or a cabin crewmember, 

excluding the flight crew. 

Note 1: ‘‘Hazardous/severe-major’’ failure 

conditions can include events that are 

manageable by the crew by the use of proper 

procedures, which, if not implemented 

correctly or in a timely manner, may result 

in a catastrophic event. 

5. Catastrophic—Failure conditions 

which would result in multiple fatalities 

to occupants, fatalities or incapacitation 

to the flight crew, or result in loss of the 

rotorcraft. 

The present §§ 27.1309(b) and (c) 

regulations do not adequately address 

the safety requirements for systems 

whose failures could result in 

‘‘catastrophic’’ or ‘‘hazardous/severemajor’’ failure conditions, or for 

complex systems whose failures could 

result in ‘‘major’’ failure conditions. The 

current regulations are inadequate 

because when §§ 27.1309(b) and (c) 

were promulgated, it was not 

envisioned that this type of rotorcraft 

would use systems that are complex or 

whose failure could result in 

‘‘catastrophic’’ or ‘‘hazardous/severemajor’’ effects on the rotorcraft. This is 

particularly true with the application of 

new technology, new application of 

standard technology, or other 

applications not envisioned by the rule 

that affect safety. 

Hoh must provide the FAA with a 

systems safety assessment (SSA) for the 

final AP/SAS installation configuration 

that will adequately address the safety 

objectives established by the functional 

hazard assessment (FHA) and the 

preliminary system safety assessment 

(PSSA), including the fault tree analysis 

(FTA). This will show that all failure 

conditions and their resulting effects are 

adequately addressed for the installed 

AP/SAS. 

Note 2: The SSA process, FHA, PSSA, and 

FTA are all parts of the overall safety 

assessment (SA) process discussed in FAA 

Advisory Circular (AC) 27–1B (Certification 

of Normal Category Rotorcraft) and Society of 

Automotive Engineers (SAE) document 

Aerospace Recommended Practice (ARP) 

4761 (Guidelines and Methods for 

Conducting the Safety Assessment Process on 

Civil Airborne Systems and Equipment). 

Requirements 

Hoh must comply with the existing 

requirements of § 27.1309 for all 

applicable design and operational 

aspects of the AP/SAS with the failure 

condition categories of ‘‘no effect,’’ and 

‘‘minor,’’ and for non-complex systems 

whose failure condition category is 

classified as ‘‘major.’’ Hoh must comply 

with the requirements of these special 

conditions for all applicable design and 

operational aspects of the AP/SAS with 

the failure condition categories of 

‘‘catastrophic’’ and ‘‘hazardous severe/ 

major,’’ and for complex systems whose 

failure condition category is classified 

as ‘‘major.’’ 

A complex system is a system whose 

operations, failure conditions, or failure 

effects are difficult to comprehend 

without the aid of analytical methods 

(for example, FTA, Failure Modes and 

Effect Analysis, FHA). 

System Design Integrity Requirements 

Each of the failure condition 

categories defined in these special 

conditions relate to the corresponding 

aircraft system integrity requirements. 

The system design integrity 

requirements, for the Hoh AP/SAS, as 

they relate to the allowed probability of 

occurrence for each failure condition 

category, and the proposed software 

design assurance level, are as follows: 

• ‘‘Major’’—For systems with ‘‘major’’ 

failure conditions, failures resulting in 

these major effects must be shown to be 

remote, a probability of occurrence on 

the order of between 1 × 10 ¥5 to 

1 × 10 ¥7 failures/hour, and associated 

software must be developed to the 

RTCA/DO–178B (Software 

Considerations in Airborne Systems 

And Equipment Certification) Level C 

software design assurance level. 

• ‘‘Hazardous/Severe-Major’’—For 

systems with ‘‘hazardous/severe-major’’ 

failure conditions, failures resulting in 

these hazardous/severe-major effects 

must be shown to be extremely remote, 

a probability of occurrence on the order 

of between 1 × 10 ¥7 to 1 × 10 ¥9

failures/hour, and associated software 

must be developed to the RTCA/DO– 

178B (Software Considerations in 

Airborne Systems and Equipment 

Certification) Level B software 

assurance level. 

• ‘‘Catastrophic’’—For systems with 

‘‘catastrophic’’ failure conditions, 

failures resulting in these catastrophic 

effects must be shown to be extremely 

improbable, a probability of occurrence 

on the order of 1 × 10 ¥9 failures/hour 

or less, and associated software must be 

developed to the RTCA/DO–178B 

(Software Considerations in Airborne 

Systems and Equipment Certification) 

Level A design assurance level. 

System Design Environmental 

Requirements 

The AP/SAS system equipment must 

be qualified to the appropriate 

environmental level per RTCA 

document DO–160F (Environmental 

Conditions and Test Procedures for 

Airborne Equipment), for all relevant 

aspects. This is to show that the AP/ 

SAS system performs its intended 

function under any foreseeable 

operating condition, which includes the 

expected environment in which the AP/ 


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10492 Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Rules and Regulations 

1Credit Reforms in Organized Wholesale Electric 

Markets, Order No. 741, 75 FR 65942 (Oct. 21, 

2010), FERC Stats. & Regs. ¶ 31,317 (2010) (Order 

No. 741). 

2 16 U.S.C. 824d, 824e. 

3 In organized wholesale electric markets, defaults 

not supported by collateral are typically socialized 

among all other market participants. 

4Promoting Wholesale Competition Through 

Open Access Non-Discriminatory Transmission 

Services by Public Utilities; Recovery of Stranded 

Costs by Public Utilities and Transmitting Utilities, 

Order No. 888, 61 FR 21540 (May 10, 1996), FERC 

Stats. & Regs. ¶ 31,036, at 31,937 (1996) (pro forma 

OATT, section 11 (Creditworthiness)), order on 

reh’g, Order No. 888–A, 62 FR 12274 (Mar. 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 relevant 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). 

5 109 FERC ¶ 61,186 (2004) (Policy Statement). 

6References to FTR markets in this order, as in 

Order No. 741, also include the Transmission 

SAS is intended to operate. Some of the 

main considerations for environmental 

concerns are installation locations and 

the resulting exposure to environmental 

conditions for the AP/SAS system 

equipment, including considerations for 

other equipment that may be affected 

environmentally by the AP/SAS 

equipment installation.The level of 

environmental qualification must be 

related to the severity of the considered 

failure conditions and effects on the 

rotorcraft. 

Test & Analysis Requirements 

Compliance with the requirements of 

these special conditions may be shown 

by a variety of methods, which typically 

consist of analysis, flight tests, ground 

tests, and simulation, as a minimum. 

Compliance methodology is related to 

the associated failure condition 

category. If the AP/SAS is a complex 

system, compliance with the 

requirements for failure conditions 

classified as ‘‘major’’ may be shown by 

analysis, in combination with 

appropriate testing to validate the 

analysis. Compliance with the 

requirements for failure conditions 

classified as ‘‘hazardous/severe-major’’ 

may be shown by flight-testing in 

combination with analysis and 

simulation, and the appropriate testing 

to validate the analysis. Flight tests may 

be limited for ‘‘hazardous/severe-major’’ 

failure conditions and effects due to 

safety considerations. Compliance with 

the requirements for failure conditions 

classified as ‘‘catastrophic’’ may be 

shown by analysis, and appropriate 

testing in combination with simulation 

to validate the analysis. Very limited 

flight tests in combination with 

simulation are used as a part of a 

showing of compliance for 

‘‘catastrophic’’ failure conditions. Flight 

tests are performed only in 

circumstances that use operational 

variations, or extrapolations from other 

flight performance aspects to address 

flight safety. 

These special conditions require that 

the Hoh AP/SAS system installed on a 

Bell model 407 helicopter, Type 

Certificate Number H2SW, meet these 

requirements to adequately address the 

failure effects identified by the FHA, 

and subsequently verified by the SSA, 

within the defined system design 

integrity requirements. 

Issued in Fort Worth, Texas, on February 

14, 2011. 

Kimberly K. Smith, 

Manager, Rotorcraft Directorate, Aircraft 

Certification Service. 

[FR Doc. 2011–4229 Filed 2–24–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 35 

[Docket No. RM10–13–001; Order 

No. 741–A] 

Credit Reforms in Organized 

Wholesale Electric Markets 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Final rule; order on rehearing. 

SUMMARY: In this order on rehearing, the 

Commission reaffirms in part its 

determinations in Credit Reforms in 

Organized Wholesale Electric Markets, 

Order No. 741, to amend its regulations 

to improve the management of risk and 

use of credit in the organized wholesale 

electric markets. This order denies in 

part and grants in part rehearing and 

clarification regarding certain 

provisions of Order No. 741. 

DATES: Effective Date: This order will 

become effective on March 28, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Christina Hayes (Legal Information), 

Office of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–6194. 

Lawrence Greenfield (Legal 

Information), Office of the General 

Counsel, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502– 

6415. 

Scott Miller (Technical Information), 

Office of Energy Policy and 

Innovation, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502– 

8456. 

SUPPLEMENTARY INFORMATION: 

Before Commissioners: Jon Wellinghoff, 

Chairman; Marc Spitzer, Philip D. Moeller, 

John R. Norris, and Cheryl A. LaFleur. 

Order on Rehearing 

1. In Order No. 741, the Commission 

adopted reforms to credit policies used 

in organized wholesale electric power 

markets.1 In the instant order, the 

Commission addresses requests for 

rehearing of Order No. 741. The 

Commission grants rehearing as to its 

establishment of a $100 million 

corporate family cap on unsecured 

credit and extends the deadline for 

complying with the requirement 

regarding the ability to offset market 

obligations to September 30, 2011, with 

the relevant tariff revisions to take effect 

January 1, 2012, but denies rehearing in 

all other respects, as discussed below. 

I. Background 

2. As noted in Order No. 741, the 

Commission must ensure that all rates 

charged for the transmission or sale of 

electric energy in interstate commerce 

are just, reasonable, and not unduly 

discriminatory or preferential,2 and 

clear and consistent credit policies are 

an important element in ensuring rates 

that are just, reasonable, and not unduly 

discriminatory or preferential. The 

management of risk and credit requires 

a balance between protecting the 

markets from costly defaults 3 and 

ensuring that barriers to entry for market 

participants are not prohibitive. 

3. The Commission provided 

guidance to the industry on appropriate 

credit policies in Order No. 888 4 and 

the Policy Statement on Electric 

Creditworthiness.5 Credit policies 

among the organized wholesale electric 

markets, however, developed in an 

incremental manner leading to varying 

credit practices. Because these variable 

practices posed a heightened risk to the 

stability of the organized wholesale 

electric markets, and especially in light 

of recent events in the financial markets, 

the Commission proposed that the 

different credit practices among the 

organized wholesale electric markets be 

strengthened. 

4. In Order No. 741, the Commission 

directed the regional transmission 

organizations (RTO) and independent 

system operators (ISO) to revise their 

tariffs to reflect the following reforms: 

implementation of shortened settlement 

timeframes, restrictions on the use of 

unsecured credit, elimination of 

unsecured credit in all financial 

transmission rights (FTR) or equivalent 

markets,6 adoption of steps to address 


srobinson on DSKHWCL6B1PROD with RULES