130 FERC ¶ 61,206 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 35 

[Docket No. RM04-7-008; Order No. 697-D] 

Market-Based Rates For Wholesale Sales of Electric Energy, Capacity And Ancillary 

Services By Public Utilities 

(Issued March 18, 2010) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Order on Rehearing and Clarification. 

SUMMARY: The Federal Energy Regulatory Commission is granting in part and 

denying in part the requests for rehearing and clarification of its determinations in Order 

No. 697-C, which granted rehearing and clarification of certain revisions to Commission 

regulations and to the standards for obtaining and retaining market-based rate authority 

for sales of energy, capacity and ancillary services to ensure that such sales are just and 

reasonable. 

EFFECTIVE DATE: This order on rehearing will become effective [Insert_Date 30 days 

after publication in the FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT: 

Michelle Barnaby (Technical Information) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8407 
Docket No. RM04-7-008 - 2 - 

Paige Bullard (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6462 

SUPPLEMENTARY INFORMATION

:
TABLE OF CONTENTS

Paragraph Numbers

I. Introduction ....................................................................................................................... 1.

II. Background...................................................................................................................... 2.

III. Discussion ...................................................................................................................... 10.

A. Vertical Market Power ................................................................................................ 10.

Other Barriers to Entry ................................................................................................. 10.

B. Mitigation .................................................................................................................... 25.

Protecting Mitigated Markets ....................................................................................... 25.

IV. Information Collection Statement .................................................................................. 53.

V. Document Availability .................................................................................................... 54.

VI. Effective Date................................................................................................................. 57.
130 FERC ¶ 61,206 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Marc Spitzer, Philip D. Moeller, 

 and John R. Norris. 

Market-Based Rates For Wholesale Sales of Electric 

Energy, Capacity And Ancillary Services By Public 

Utilities 

Docket No. RM04-7-008 

ORDER NO. 697-D 

ORDER ON REHEARING AND CLARIFICATION 

(Issued March 18, 2010) 

I. Introduction

1. In this order, the Federal Energy Regulatory Commission (Commission) addresses 

requests for rehearing and clarification of Order No. 697-C.1

 Specifically, the 

Commission provides additional clarification on the requirement that sellers file a 

notification of change in status when they acquire sites for new generation capacity 

development.2

 The Commission denies the requests for rehearing of the tariff provision 

 1 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 

(2009). 

2

 18 CFR 35.42. 
Docket No. RM04-7-008 - 2 -

governing mitigated sales at the metered boundary and reaffirms its determination in 

Order No. 697-B to revise the mitigated sales tariff provision in order to ensure that a 

mitigated seller making market-based rate sales at the metered boundary does not sell 

power into the mitigated market either directly or through its affiliates.3

II. Background

2. On June 21, 2007, the Commission issued Order No. 697,4

 codifying and, in 

certain respects, revising its standards for obtaining and retaining market-based rates for 

public utilities. In order to accomplish this, as well as streamline the administration of 

the market-based rate program, the Commission modified its regulations at 18 CFR 

Part 35, subpart H, governing market-based rate authorization. Order No. 697 became 

effective on September 18, 2007. 

 3 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, Order No. 697-B, FERC Stats. & Regs. 

¶ 31,285 (2008). 

4 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, Order No. 697, FERC Stats. & Regs. ¶ 31,252 

(Order No. 697 or Final Rule), clarified, 121 FERC ¶ 61,260 (2007), order on reh’g, 

Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 (2008); clarified, 124 FERC ¶ 61,055 

(2008) (July 17 Clarification Order), order on reh’g, Order No. 697-B, FERC Stats. & 

Regs. ¶ 31,285 (2008), order on reh’g, Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 

(2009). 
Docket No. RM04-7-008 - 3 -

 

3. The Commission issued an order clarifying four aspects of Order No. 697 on 

December 14, 2007.5

 Specifically, that order addressed: (1) the effective date for 

compliance with the requirements of Order No. 697; (2) which entities are required to file 

updated market power analyses for the Commission’s regional review; (3) the data 

required for horizontal market power analyses; and (4) what constitute “seller-specific 

terms and conditions” that sellers may list in their market-based rate tariffs in addition to 

the standard provisions listed in Appendix C to Order No. 697. 

4. On April 21, 2008, the Commission issued Order No. 697-A,6

 which, in most 

respects, affirmed the determinations made in Order No. 697 and denied rehearing of the 

issues raised. However, with respect to several issues, the Commission granted rehearing 

or provided clarification. 

5. On July 17, 2008, the Commission issued an order clarifying certain aspects of 

Order No. 697-A related to the allocation of simultaneous transmission import capability 

for purposes of performing the indicative screens.7

 

5 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, 121 FERC ¶ 61,260 (2007) (December 14 

Clarification Order). 

6

 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 (2008). 

7

 July 17 Clarification Order, 124 FERC ¶ 61,055. 
Docket No. RM04-7-008 - 4 -

 

6. On December 19, 2008, the Commission issued Order No. 697-B8 in which it 

clarified and affirmed the determinations made in Order No. 697-A. Specifically, the 

Commission provided clarification regarding the allocation of seasonal and longer 

transmission reservations and also clarified that it will require a seller making an 

affirmative statement as to whether a contractual arrangement transfers control to seek a 

“letter of concurrence” from other affected parties identifying the degree to which each 

party controls a facility, and to submit these letters with its filing. The Commission 

denied the request that it clarify that only sites for which necessary permitting for a 

generation plant has been completed and/or sites on which construction for a generation 

plant has begun apply under the definition of “inputs to electric power production” in 

§ 35.36(a)(4) of the Commission’s regulations. Order No. 697-B also revised the 

definition of “affiliate” in § 35.36(a)(9) of its regulations to delete the separate definition 

for exempt wholesale generators. The Commission also provided a number of other 

clarifications with regard to, among others, the pricing of sales of non-power goods and 

services and the tariff provision governing sales at the metered boundary. 

7. On January 28, 2009, in response to Tampa Electric Company’s (Tampa Electric) 

request for extension of time to comply with the tariff provision on mitigated sales at the 

metered boundary as revised in Order No. 697-B, the Commission issued an order 

8

 Order No. 697-B, FERC Stats. & Regs. ¶ 31,285. 
Docket No. RM04-7-008 - 5 -

B. 

 

granting the extension requested by Tampa Electric until such time as the Commission 

issued an order on rehearing of Order No. 697-B.9

 That order clarified that affected 

entities must continue to comply with the mitigated sales tariff provision adopted in 

Order No. 697-A10 (which became effective on June 6, 2008), until the Commission 

acted on the requests for rehearing of Order No. 697-

8. On June 18, 2009, the Commission issued Order No. 697-C11 in which it clarified 

the requirement that sellers file a notification of change in status when they acquire sites 

for new generation capacity development. The Commission denied the requests for 

rehearing of the tariff provision governing mitigated sales at the metered boundary and 

affirmed its determination in Order No. 697-B to revise the mitigated sales tariff 

provision in order to ensure that a mitigated seller making market-based rate sales at the 

metered boundary does not sell power into the mitigated market either directly or through 

its affiliates. 

9 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity, and 

Ancillary Services by Public Utilities, 126 FERC ¶ 61,072 (2009) (Order Granting 

Extension of Time to Comply). 

10 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at Appendix C. 

11 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity, and 

Ancillary Services by Public Utilities, Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 

(2009). 
Docket No. RM04-7-008 - 6 -

9. The American Wind Energy Association (American Wind), the Edison Electric 

Institute (EEI), and Progress Energy, Inc.12 (Progress), and AES Corporation (AES) 

request rehearing and/or clarification of Order No. 697-C. American Wind, EEI and AES 

request clarification of the requirement to report the acquisition of sites for new 

generation capacity development. EEI and Progress request rehearing and clarification of 

the Commission’s determination in Order No. 697-C to deny the requests for rehearing of 

the mitigated sales tariff provision, and to affirm the Commission’s determination in 

Order No. 697-B to revise the mitigated sales tariff provision in order to ensure that a 

mitigated seller making market-based rate sales at the metered boundary does not sell 

power into the mitigated market either directly or through its affiliates. 

III. Discussion 

A. Vertical Market Power

Other Barriers to Entry

Background

10. Order No. 697 adopted the proposal in the notice of proposed rulemaking (NOPR) 

to consider a seller’s ability to erect other barriers to entry as part of the vertical market 

 12 Progress Energy, Inc. submits its request for rehearing and technical conference 

on behalf of its subsidiaries Carolina Power & Light Company, doing business as 

Progress Energy Carolinas, Inc., and Florida Power Corporation, doing business as 

Progress Energy Florida. 
Docket No. RM04-7-008 - 7 -

power analysis, but modified the requirements when addressing other barriers to entry.13 

It also provided clarification regarding which inputs to electric power production the 

Commission will consider as other barriers to entry, and modified the proposed 

regulatory text in that regard.14

11. On rehearing in Order No. 697-A, the Commission clarified that “inputs to electric 

power production” encompasses physical coal sources and ownership of or control over 

who may access transportation of coal via barges and railcar trains,15 and revised its 

definition of “inputs to electric power production” in § 35.36(a)(4) to reflect this 

clarification.16 

12. In Order No. 697-B, with respect to the definition of “inputs to electric power 

production,” the Commission rejected the Electric Power Supply Association’s (EPSA) 

proposal that the term “sites for new generation capacity development” means only sites 

with respect to which permits for new generation have been obtained or where 

construction of new generation is underway, and not encompass land that could 

potentially be used for generation. The Commission clarified that “sites for new 

 13 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 440. 

14 Id. 

15 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 176 (emphasis in 

original). 

16 Id. 
Docket No. RM04-7-008 - 8 -

 

generation capacity development” should be construed to include ownership of land that 

could potentially be used for generation, not just sites for which permits for new 

generation have been obtained or where construction of new generation is underway. 

The Commission also clarified that “sites for new generation capacity development” does 

not include land that cannot be used for generation capacity development.17

13. In Order No. 697-C, in order to address the Commission’s regulatory concerns and 

the concerns of the American Wind, the Commission granted rehearing in order to revise 

the change in status reporting requirement in § 35.42 of its regulations to require marketbased rate sellers to report the acquisition of control of sites for new generation capacity 

development on a quarterly basis instead of within 30 days of the acquisition. In 

particular, § 35.42(d) requires quarterly reporting of a seller’s acquisition of a site or sites 

for new generation capacity development for which site control has been demonstrated in 

the interconnection process and for which the potential number of megawatts that are 

reasonably commercially feasible on the site or sites for new generation capacity 

development is equal to 100 megawatts or more.18

14. Separate and apart from this reporting requirement, and in order to address its 

concern that sellers may acquire land that is not used for the development of new 

17 Order No. 697-B, FERC Stats. & Regs. ¶ 31,285 at P 38. 

18 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 18. 
Docket No. RM04-7-008 - 9 -

 

generation capacity, and that is instead acquired for the purpose of preventing new 

generation capacity from being developed on that land, in Order No. 697-C the 

Commission stated that a seller must also report any land it has acquired, taken a 

leasehold interest in, obtained an option to purchase or lease, or entered into an 

exclusivity or other arrangement to acquire for the purpose of developing a generation 

site and for which site control has not yet been demonstrated during the prior three years 

(triggering event), and for which the potential number of megawatts that are reasonably 

commercially feasible on the land for new generation capacity development is equal to 

100 megawatts or more. The Commission stated that a seller must report each such 

triggering event in a single report by January 1 of the year following the calendar year in 

which the triggering event occurred.19 This reporting requirement is set forth in 

§ 35.42(e).

15. On December 10, 2009, the Commission granted an extension of time to comply 

with the requirement to report sites for which site control has not been demonstrated 

during the prior three years, until 30 days after the Commission issues an order on the 

requests for clarification and rehearing of Order No. 697-C.20

19 Id. P 20. 

20 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, Docket No. RM04-7-006, December 10, 2009 

Notice of Extension of Time. 
Docket No. RM04-7-008 - 10 -

Requests for Clarification

16. On rehearing of Order No. 697-C, American Wind states that it applauds the 

Commission for modifying the change in status reporting requirements, but nevertheless 

seeks clarification on certain issues.21 In particular, American Wind requests 

clarification regarding the deadline for the first quarterly filing. American Wind points 

out that Order No. 697-C states that “‘quarterly filings must be submitted within 30 days

of the end of each quarter’” and it assumes that since Order No. 697-C becomes effective

on July 29, 2009, the first quarterly filings will be due by October 30, 2009 thirty days 

after the end of the first full quarter after the effective date. American Wind also asks 

whether the initial quarterly report must include only new site control changes from the 

prior quarter, or must include all changes since the prior triennial filing (or the initial 

market-based rate filing by the seller), and, because the new reporting requirement is 

taking effect in the middle of the triennial filing cycle, American Wind seeks clarification

on the period that should be covered in the first quarterly report.

 

17. American Wind also seeks clarification regarding the interaction between the 

three-year triggering event reporting requirement and the quarterly reporting requirement. 

It requests that the Commission clarify that market-based rate sellers are not required to 

submit a quarterly report for a site that they have previously reported in accordance with 

21 American Wind July 20, 2009 Request for Clarification at 2-3. 
Docket No. RM04-7-008 - 11 -

the reporting requirement for sites for which site control has not been demonstrated 

during the prior three years. In support of this argument, American Wind argues that 

requiring sellers to submit a quarterly report upon demonstration of site control for a site 

that they may have previously reported in accordance with the reporting requirement for 

sites for which site control has not been demonstrated during the prior three years will not 

give the Commission any additional insight about the seller’s market power and could 

lead to the mistaken belief that a seller has more land under its control than is actually the 

case.

22

18. AES asks that the Commission clarify whether the first quarterly report submitted 

under revised § 35.42 of the Commission’s regulations (i.e., the report for the third 

quarter of 2009) is “cumulative” and must address “all sites meeting the requisite criteria 

that were acquired by a seller and its affiliates in the prior periods (including the third 

quarter of 2009) and had not been previously reported to the Commission,” and whether 

all subsequent quarterly reports under § 35.42 are “limited to the incremental number of 

sites and potential capacity for development acquired during the quarter in question.”23

19. Both American Wind and the EEI request that the date for reporting sites for 

which site control has not been demonstrated during the prior three years be changed 

 22 Id. at 3-4. 

23 AES November 11, 2009 Request for Clarification at 2. 
Docket No. RM04-7-008 - 12 -

 

from January 1 to January 30 of the year following the calendar year in which the 

triggering event occurred.24 American Wind and EEI argue that adjusting the deadline 

from January 1 to January 30 would reflect deadlines for other reports, and in particular, 

the Commission’s fourth quarter report for generation sites for which site control has 

been demonstrated in the interconnection process. They also state that the January 1 

reporting date poses challenges given the end-of-year holiday schedules of employees. 

EEI states that companies must prepare a significant number of financial and operational 

reports at the end of each year, not only for submission to the Commission, but also for 

submission to state regulatory commissions, the Securities and Exchange Commission, 

and the Energy Information Administration, among others.

20. With respect to the requirement that a seller report any land it has acquired for the 

purpose of developing new generation capacity and for which site control has not yet 

been demonstrated during the prior three years, and for which the potential number of 

megawatts that is reasonably commercially feasible on the land for new generation 

capacity development is 100 megawatts or more, EEI seeks clarification of the term 

“reasonably commercially feasible” in the context of sites that are acquired for the 

purpose of developing a thermal generation facility, such as a natural gas plant, and for 

24 American Wind July 20, 2009 Rehearing Request at 4-5; EEI July 20, 2009 

Rehearing Request at 18. 
Docket No. RM04-7-008 - 13 -

which site control has not yet been demonstrated in the interconnection process. EEI 

states that unlike wind and solar generating plants, where the size of a site will have a 

direct impact on the number of megawatts that may be commercially developable, a 

single site for a thermal generation plant could theoretically accommodate an almost 

infinite array of possible megawatts that might be commercially developable.25 EEI 

argues that the Commission should clarify that a seller may base its determination on a 

planning horizon that is consistent with its state-regulated resource planning process (if it 

is subject to such a process), and should provide clarification by identifying some of the 

commercial and system factors that sellers can take into account such as current market 

prices, expected new regulatory requirements affecting the type of generation for which 

the site was acquired, and/or current system conditions.26 EEI states that providing these 

clarifications will ensure that the Commission is receiving adequate information to meet 

its needs, while also preserving Commission resources. 

Commission Determination

21. In response to the requests for clarification regarding the requirement that a seller 

report on a quarterly basis the acquisition of a site or sites for new generation capacity 

development for which site control has been demonstrated in the interconnection process, 

 25 EEI July 20, 2009 Rehearing Request at 17. 

26 Id. 
Docket No. RM04-7-008 - 14 -

we clarify that if no sites have been acquired during a quarter, then a seller should not file 

a report for that quarter.27 As with other types of change in status filings, a seller need 

only submit a change in status notification with the Commission if there is a change that 

may affect the conditions relied upon by the Commission since it initially granted the 

seller market-based rate authorization, or since the Commission accepted a seller’s 

updated market power analysis. Thus, a seller should not submit change in status reports 

to notify the Commission that it has not acquired any sites for new generation capacity 

development. 

22. We also clarify that a seller is required only to report the acquisition of sites for 

new generation capacity development that have not previously been reported. That is, the 

change in status reporting obligation for sites for new generation capacity development is 

not cumulative; rather, only sites that have not been reported previously must be included 

in the quarterly reports. 

23. With respect to EEI’s request for clarification of the term “reasonably 

commercially feasible” in the context of sites acquired for the purpose of developing a 

thermal generation facility and for which site control has not yet been demonstrated in the 

 27 Because the first quarterly report was due October 30, 2009 (30 days after the 

end of the first full quarter following the effective date of Order No. 697-C), American 

Wind’s request for clarification regarding the deadline for the first quarterly filing is now 

moot. 
Docket No. RM04-7-008 - 15 -

interconnection process, we appreciate the concerns raised by EEI regarding the difficulty 

sellers may have in providing information on the potential number of megawatts that are 

reasonably commercially feasible on such sites, and we believe that some of the same 

concerns may arise with respect to the requirement that a seller report any land it has 

acquired, taken a leasehold interest in, obtained an option to purchase or lease, or entered 

into an exclusivity or other arrangement to acquire for the purpose of developing a 

generation site and for which site control has not yet been demonstrated during the prior 

three years (triggering event), and for which the potential number of megawatts that are 

reasonably commercially feasible on the land for new generation capacity development is 

equal to 100 megawatts or more. In addition, as American Wind points out, because 

sellers are required to submit a quarterly report with the Commission for sites for new 

generation capacity development for which site control has been demonstrated in the 

interconnection process, also requiring the report for sites for which site control has not

been demonstrated during the prior three years could lead to the mistaken belief that a 

seller has more land under its control than is actually the case. Further, since the issuance 

of Order No. 697-C, two rounds of quarterly reports have been filed with the 

Commission. These quarterly reports provide the Commission and interested entities 

with information to evaluate a seller’s ability to erect barriers to entry through its 

acquisition of sites for new generation capacity development. Given the filing of the 

quarterly reports, and in light of EEI’s request for clarification of the term “reasonably 
Docket No. RM04-7-008 - 16 -

commercially feasible” in the context of sites acquired for the purpose of developing a 

thermal generation facility and for which site control has not yet been demonstrated in the 

interconnection process, we recognize the difficulty of determining the potential number 

of megawatts that are reasonably commercially feasible on sites for which site control has 

not yet been demonstrated in the interconnection process, and we have reconsidered the 

basis for the requirement imposed in § 35.42(e) that a seller report any land it has 

acquired, taken a leasehold interest in, obtained an option to purchase or lease, or entered 

into an exclusivity or other arrangement to acquire for the purpose of developing a 

generation site and for which site control has not yet been demonstrated during the prior 

three years (triggering event), and for which the potential number of megawatts that are 

reasonably commercially feasible on the land for new generation capacity development is 

equal to 100 megawatts or more. We have assessed the difficulty and burden of 

complying with this reporting requirement for both the industry and the agency against 

the Commission’s need to obtain the information necessary to evaluate a seller’s ability 

to erect barriers to entry, and have concluded that it is reasonable to gain more experience 

with regard to the quarterly filings before requiring the additional filing for sites for 

which site control has not been demonstrated during the prior three years. After careful 

consideration, we conclude that elimination of this reporting requirement is reasonable, 

and we therefore will revise § 35.42 of our regulations to remove subsection (e). Should 

we determine based on experience over a number of quarterly cycles that the quarterly 
Docket No. RM04-7-008 - 17 -

reports may not be providing sufficient information, we can reconsider our determination 

here. In any event, the Commission always reserves the right to require additional 

information, including an updated market power analysis, from a seller. As a result, if 

there is a concern that a particular seller may be acquiring land for the purpose of 

preventing new generation capacity from being developed on that land, the Commission 

can request additional information from the seller at any time. 

24. Because we are eliminating the reporting requirement for sites for which site 

control has not been demonstrated during the prior three years, EEI’s request for 

clarification of the term “reasonably commercially feasible” in the context of sites that 

are acquired for the purpose of developing a thermal generation facility, such as a natural 

gas plant, and for which site control has not yet been demonstrated in the interconnection 

process is moot. The requests of American Wind and EEI that the deadline for the 

reports under § 35.42(e) be moved from January 1 to January 30 of each year to coincide 

with the filing date for the quarterly reports required under § 35.42(d) is similarly 

rendered moot by virtue of the elimination of the three-year triggering event reporting 

requirement. 

 
Docket No. RM04-7-008 - 18 -

B. Mitigation

Protecting Mitigated Markets

Sales at the Metered Boundary

Background

25. The Commission explained in Order No. 697 that it would continue to apply 

mitigation to all sales in the balancing authority area in which a seller is found, or 

presumed, to have market power. However, the Commission explained that it would 

permit mitigated sellers to make market-based rate sales at the metered boundary between 

a balancing authority area in which a seller is found, or presumed, to have market power 

and a balancing authority area in which the seller has market-based rate authority, under 

certain circumstances.28 The Commission also adopted a requirement that mitigated 

sellers wishing to make such market-based rate sales at the metered boundary maintain 

sufficient documentation and include a specific mitigated sales tariff provisions.29

26. In Order No. 697-A, after considering comments regarding the difficulty of 

determining and documenting intent, the Commission decided to eliminate the intent 

element of the mitigated sales tariff provision, which stated that “any power sold 

 28 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 817 (citing North American 

Electric Reliability Corporation, Glossary of Terms Used in Reliability Standards at 2 

(2007), available at

ftp://www.nerc.com/pub/sys/all_updl/standards/rs/Glossary_02May07.pdf. 

29 Id. P 830. 
Docket No. RM04-7-008 - 19 -

 

hereunder is not intended to serve load in the seller’s mitigated market.” In eliminating 

the seller’s intent requirement, the Commission modified this provision to require that 

“the mitigated seller and its affiliates do not sell the same power back into the balancing 

authority area where the seller is mitigated.”30 In this regard, the Commission noted that 

“[t]o provide additional regulatory certainty for mitigated sellers, the Commission 

clarified that once the power has been sold at the metered boundary at market-based 

rates, the mitigated seller and its affiliates may not sell that same power back into the 

mitigated balancing authority area, whether at cost-based or market-based rates.”31 The 

Commission also stated that because it was eliminating the intent requirement, it need not 

address issues raised regarding documentation necessary to demonstrate the mitigated 

seller’s intent. 

27. Further, in response to a request for clarification submitted by the Pinnacle West 

Companies (Pinnacle), the Commission reiterated in Order No. 697-A32 that an affiliate 

30 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 334. In Order No. 697-A, 

the Commission revised the tariff language governing market-based rate sales at the 

metered boundary to conform with the discussion in the December 14 Clarification Order 

regarding use of the term “mitigated market.” The Commission stated that, as explained 

in the December 14 Clarification Order, “balancing authority area in which a seller is 

found, or presumed, to have market power” is a more accurate way to describe the area in 

which a seller is mitigated. Id. P 333. 

31 Id. n.464. 

32 Id. P 335. 
Docket No. RM04-7-008 - 20 -

 

of a mitigated seller is prohibited from selling power that was purchased at a marketbased rate at the metered boundary back into the balancing authority area in which the 

seller has been found, or presumed, to have market power. The Commission explained 

that to the extent that the mitigated seller or its affiliates believe that it is not practical to 

track such power, they can either choose to make no market-based rate sales at the 

metered boundary or limit such sales to sales to end users of the power, thereby 

eliminating the danger that they will violate their tariff by re-selling the power back into a 

balancing authority in which they are mitigated.33

28. In Order No. 697-B, in response to the rehearing request of E.ON U.S. LLC 

(E.ON), the Commission explained that it appreciated concerns regarding the difficulty of 

defining the term “same power” that it introduced in Order No. 697-A. For this reason, 

the Commission revised the mitigated sales tariff provision to state that “if the Seller 

wants to sell at the metered boundary of a mitigated balancing authority area at marketbased rates, then neither it nor its affiliates can sell into that mitigated balancing authority 

area from the outside.” The Commission explained that this revised tariff language 

prohibits a mitigated seller making market-based rate sales at the metered boundary from 

selling power into the mitigated market through its affiliates. The Commission again 

33 Id. P 336. 
Docket No. RM04-7-008 - 21 -

 

explained that sellers may either refrain from making market-based rate sales at the 

metered boundary, or limit such sales to end users of the power.34 

29. In Order No. 697-C, the Commission denied the requests for rehearing concerning 

the revised mitigated sales tariff provision. However, the Commission agreed with E.ON 

that the tariff provision should be revised to state “if the Seller sells” instead of “if the 

Seller wants to sell....” The Commission clarified that it is not the seller’s intent, but 

rather the seller’s action that triggers the limitation set forth in the mitigated sales tariff 

provision. The Commission also affirmed its determination to revise the mitigated sales 

tariff provision in Order No. 697-B in order to ensure that a mitigated seller making 

market-based rate sales at the metered boundary does not re-sell power into the mitigated 

market either directly or through its affiliates.35 The Commission also denied petitioners’ 

requests that the Commission return to the intent-based concept first used in Order 

No. 697.36

34 Order No. 697-B, FERC Stats. & Regs. ¶ 31,285 at P 77 (citing Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 336). 

35 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 42 (citing Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 336). 

36 Id. P 44. 
Docket No. RM04-7-008 - 22 -

Requests for Rehearing 

30. EEI and Progress (collectively, Petitioners) request rehearing and clarification of 

the Commission’s determination in Order No. 697-C to deny the requests for rehearing of 

the mitigated sales tariff provision, and to affirm the Commission’s determination in 

Order No. 697-B to revise the mitigated sales tariff provision in order to ensure that a 

mitigated seller making market-based rate sales at the metered boundary does not sell 

power into the mitigated market either directly or through its affiliates. EEI requests that 

the Commission grant rehearing, clarification and/or a technical conference on the 

mitigated sales tariff provision, and requests that the Commission grant its motion for 

extension of time to delay the deadline for complying with the mitigated sales tariff 

provision until the Commission issues an order responding to EEI’s request for rehearing 

of Order No. 697-C, or following a technical conference if the Commission intends to 

retain the constraints contained in the mitigated sales tariff provision.37 Progress 

supports EEI’s request for rehearing, clarification and/or technical conference, and 

motion for an extension of time.38 

 

31. EEI contends that the final tariff language adopted in Appendix C to Order No. 

697-C prohibits mitigated sellers who make market-based rate sales at the metered 

37 EEI July 20, 2009 Rehearing Request at 3, 15. 

38 Progress July 20, 2009 Rehearing Request at 2. 
Docket No. RM04-7-008 - 23 -

 

boundary, and their affiliates, from selling power back into the mitigated market, and that 

this constraint will require mitigated sellers to reform their participation in markets 

substantially.39 EEI requests that the Commission grant rehearing or clarification, and 

reconsider the need for and scope of any constraints placed on mitigated sellers who 

make market-based rate sales at the metered boundary. It argues that mitigated sellers 

should be permitted to make sales at the metered boundary without subsequent 

restrictions on the mitigated seller’s ability to make sales into the balancing authority area 

in which it is mitigated.40 It asserts that if the Commission believes that some additional 

constraints are needed on border sales by mitigated sellers, the Commission should grant 

rehearing and/or clarification to ensure that constraints imposed are reasonable, focus 

narrowly on the underlying problem, and do not prevent legitimate transactions.41 

32. EEI argues that if the Commission “intends to retain constraints on mitigated 

sellers and/or their affiliates in the wake of a market-based rate sale at the metered 

boundary between a mitigated market and a non-mitigated market, beyond a requirement 

that the original market-based rate sale involve title transfer to an unaffiliated entity,” the 

Commission should hold a technical conference to address these issues so that the 

39 Id. at 14. 

40 EEI July 20, 2009 Rehearing Request at 12. 

41 Id. 
Docket No. RM04-7-008 - 24 -

 

ultimate constraints are appropriate.42 Progress argues that a technical conference on this 

issue is needed to “provide the Commission and the industry with a forum to test its 

views as to what the specific market power concerns are” and it asserts that such a 

technical conference should address the following questions: (1) should the market 

power concern regarding a market-based rate sale at the metered boundary of a mitigated 

balancing authority be limited to the concern that the seller or its affiliate will obtain or 

re-obtain title to that same power and re-sell it at market-based rates into the mitigated 

balancing authority area; (2) if the seller makes a market-based rate sale at the metered 

boundary, is there a market power concern if the seller or affiliate resells that same power 

back into the mitigated market under a Commission-approved system operating 

agreement or cost-based agreement that the Commission has determined to be just and 

reasonable; and (3) if the seller makes a market-based rate sale at the metered boundary, 

is there a market power concern if the seller or affiliate resells different power back into 

the mitigated market under a Commission-approved system operating agreement or costbased agreement that the Commission has determined to be just and reasonable.43 

33. EEI contends that the Commission has not clearly articulated the problem that the 

current metered boundary tariff text is intended to address, nor demonstrated the need for 

42 Id. at 14. 

43 Progress July 20, 2009 Rehearing Request at 4-5. 
Docket No. RM04-7-008 - 25 -

a ban on all sales by a mitigated seller and its affiliates into a mitigated market from 

outside following any market-based rate sale at the metered boundary. Progress argues 

that the text of the mitigated sales provision is arbitrary and capricious because it is not 

premised on specific statements of the harm to be prevented, is not tailored to prevent 

those harms, and would prohibit many legitimate transactions.44 Specifically, Progress 

asserts that under the mitigated sales tariff provision, as soon as its subsidiaries Progress 

Energy Carolinas, Inc. and Progress Energy Florida, Inc. sell capacity and energy at 

market-based rates at the metered boundary to a third party, they would be precluded 

from selling capacity and energy to each other under their Commission-approved system 

operating agreement, and therefore would be required to choose between making sales 

under Progress’ system operating agreement and making sales at market-based rates at 

the metered boundary. Progress states that the Commission in Order No. 697-C “appears 

to respond to this concern by stating that entities, like [Progress Energy Carolinas, Inc. 

and Progress Energy Florida, Inc.], would simply choose not to make market-based sales 

at the metered boundary so that they would continue [to] have the right to make sales into 

the mitigated balancing authority.”45 Progress argues that the Commission fails to 

explain why such a choice is necessary to prevent the exercise of market power, i.e., why 

 44 Id. at 2. 

45 Id. at 4. 
Docket No. RM04-7-008 - 26 -

 

a market-based rate seller or its affiliate’s sales into the mitigated balancing authority 

area under a Commission-approved system operating agreement or a cost-based tariff 

suddenly are unjust and unreasonable as a result of a seller making a market-based rate 

sale at the metered boundary.46 

34. Similarly, EEI asserts that the Commission has not explained why such sales by a 

mitigated seller, when title transfers to an unaffiliated entity at the metered boundary, 

need to be further constrained at all.47 EEI also argues that the Commission has not 

explained why, if a seller is mitigated in a given market, it should not be permitted to sell 

into that market at the seller’s mitigated rates from outside simply because the seller has 

engaged in a market-based rate sale at the metered boundary.48

35. EEI contends that the tariff text’s prohibition on subsequent sales by a mitigated 

seller are overbroad and over-inclusive, and will have unreasonable negative 

consequences for mitigated sellers, their customers, and competitive markets. According 

to EEI, the tariff provision is overbroad because: (1) the prohibition does not clearly 

apply only if the seller is originally selling from within the mitigated market at the 

metered boundary; and (2) the prohibition does not include any temporal or other limits 

46 Id. at 3-4. 

47 EEI July 20, 2009 Rehearing Request at 6. 

48 Id. at 7. 
Docket No. RM04-7-008 - 27 -

 

to ensure that the subsequent prohibited sales into the mitigated market are linked to the 

original outbound border sales.49 

36. EEI argues that this prohibition on subsequent sales could interfere with the ability 

of mitigated sellers to meet their obligations under reliability arrangements, and would 

unnecessarily restrict their ability to transact for the benefit of customers and ensure 

reliability during peak-demand periods or under emergency conditions. EEI contends 

that where must-offer requirements apply, companies must post available capacity on a 

daily basis, and that “if companies subject to these obligations are not permitted to make 

sales into a mitigated area or are effectively prohibited from making sales at border points 

because they have made a single market-based rate border sale, must-offer postings may 

be less effective because companies may have to withhold available generation from their 

listings as a result of these constraints on sales in certain areas, including areas that may 

be resource-deficient in peak load months.”50 EEI also alleges that this prohibition could 

prevent companies from entering into Commission-approved purchased power 

agreements to provide load-following service to wholesale customers within mitigated 

markets, resulting in potential negative impacts on markets and reliability during periods 

of high demand when the purchaser’s load may outstrip the seller’s ability to serve it 

49 Id. 

50 Id. at 8. 
Docket No. RM04-7-008 - 28 -

 

without using purchased power.51 Further, EEI contends that companies will be forced to 

either pancake another transmission wheel for any market-priced power transaction in 

order to move it beyond the border, “adding costs that will ultimately be borne by 

customers, or simply to sell at cost-based rates at the metered boundary, reducing the 

availability of power competing at market-based rates at the border.”52 

37. EEI argues that because the tariff provision effectively prohibits a mitigated seller 

and its affiliates from making other sales that bring power from outside the mitigated area 

to the border, the mitigated seller and its affiliates would not be able to compete in the 

adjacent market, which could lower market liquidity and increase price volatility in the 

adjacent non-mitigated markets.53 In addition, EEI contends that the mitigated sales tariff 

provision could potentially enable non-mitigated competitors to purchase from mitigated 

sellers at capped day-ahead rates, and then to sell the power back to the mitigated sellers 

the following day at higher prices when loads are higher than expected or power or 

transmission is in short supply, resulting in the mitigated sellers’ wholesale and retail 

51 Id. at 9. 

52 Id. 

53 Id. at 10. 
Docket No. RM04-7-008 - 29 -

 

ratepayers incurring higher costs, given the pass-through feature of typical fuel 

adjustment clauses.54 

38. In addition, EEI asserts that the Commission should affirmatively authorize types 

of transactions that are clearly independent of market-based rate sales at the metered 

boundary, such as blocks of power to be delivered at dates and times other than the 

metered boundary sale block of power, power made available under must-offer 

requirements, and load-following power.55 EEI also argues that in order to protect 

reliability, the Commission should clarify that limitations on sales at the metered 

boundary do not require a mitigated seller or its affiliate, if otherwise precluded from 

selling power into the mitigated area from the outside, to withhold making those sales 

during times at which the seller or its affiliates are called on to act to maintain system 

reliability. In addition, EEI requests clarification that these limitations will not prevent 

sales that are otherwise authorized by the Commission, either generically or on a case-bycase basis. Further, with respect to the Commission’s statement in Order No. 697-C 

reiterating that “mitigated sellers may choose to make no market-based rate sales at the 

metered boundary, or to limit such sales to end users, thereby eliminating the risk that 

54 Id. 

55 Id. at 13. 
Docket No. RM04-7-008 - 30 -

 

they will re-sell power back to the balancing authority area where they are mitigated”56

EEI requests that the Commission clarify that end users include load-serving entities such 

as investor-owned utilities, municipalities, and cooperatives that service retail load.57 

39. EEI also argues that the tariff text, which provides that if a mitigated seller “sells 

at the metered boundary of a mitigated balancing authority area at market-based rates, 

then neither it nor its affiliates can sell into that mitigated balancing authority area from 

the outside” is effectively limitless in that the prohibition is not limited to the quantity, 

date, and time-of-day of the power or services originally sold, but extends to all 

subsequent sales by the mitigated seller and its affiliates, and that it applies to all 

subsequent sales by the mitigated seller and its affiliates into the mitigated area, even at 

mitigated rates which are typically cost-based and pre-approved by the Commission. 

40. Further, EEI argues that the Commission’s statements in paragraphs 42 and 43 of 

Order No. 697-C should be incorporated in the tariff text in Appendix C to Order 

No. 697-C. Specifically, EEI states that the Commission’s statement at the end of 

paragraph 42 that “mitigated sellers may choose to make no market-based rates sales at 

the metered boundary, or to limit such sales to end users, thereby eliminating the risk that 

56 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 42 (citing Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 336). 

57 EEI July 20, 2009 Rehearing Request at 13-14. 
Docket No. RM04-7-008 - 31 -

 

they will re-sell power back to the balancing authority area where they are mitigated”58

should be incorporated in the tariff text in Appendix C. EEI also argues that the 

Commission’s statement in paragraph 43 that “[a] mitigated seller can perform each of 

the above-enumerated functions either by selling at cost-based rates within its restricted 

balancing authority area, selling at cost-based rates at the metered boundary of its 

restricted balancing authority area, or by selling at market-based rates at the metered 

boundary as long as it makes sure that title to the power sold transfers at or beyond the 

metered boundary”59 should be incorporated in the tariff text. The Commission’s 

statement in this regard was made in response to petitioners’ concerns that the mitigated 

sales tariff provision interferes with must-offer and reliability requirements, reserve 

sharing agreements, and cost-based requirement contracts. EEI asserts that the tariff text 

as written does not allow mitigated sellers to exercise these “options,” which, according 

to EEI, “allow market-based rate sales by a mitigated seller at the metered boundary 

without such subsequent constraints, provided title transfers to the power or service sold 

at or beyond the metered boundary, or the power or service is sold to an end user” and 

that, as a result, the tariff text does not address the concerns that paragraphs 42 and 43 

58 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 42 (citing Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 336). 

59 Id. P 43. 
Docket No. RM04-7-008 - 32 -

 

appear to address.60 EEI therefore concludes that the tariff text and paragraphs 42 and 43 

of the preamble are in direct conflict, “creating ambiguity and nullifying the options that 

the Commission purports to provide mitigated sellers who make market-based rate sales 

at the metered boundary.”61 EEI therefore requests that the Commission modify the 

mitigated sales tariff provision to include the options it alleges are set forth in paragraphs 

42 and 43.62 

41. EEI references the Commission’s statement in paragraph 43 that the “restrictions 

on sales at the border only apply to new agreements that the seller enters into prospective 

from the date that Order No. 697-B became effective. No existing agreements are upset 

or need to be revised in any way provided that the seller abides by our restrictions on any 

new agreements that it enters into prospectively.” EEI asserts that “[w]hile some of these 

agreements already exist...., sales under such agreements are not executed until there is a 

requirement for such service.”63 EEI states that “[i]f these sales are permitted because 

the agreement already exists, by the same logic, any sales under the WSPP tariff, for 

example would be permitted because the agreement already exists and the sales are 

60 EEI July 20, 2009 Rehearing Request at 5. 

61 Id. at 10. 

62 Id. at 13. 

63 Id. at 11. 
Docket No. RM04-7-008 - 33 -

ts already existed.”65 

executed under it.”64 EEI therefore requests “that the Commission clarify whether such 

sales would be permitted in the mitigated area after a market-based rate border sale 

occurred[,]” and “[i]f not, which sales were the Commission referring to that would be 

permitted because the agreemen

Commission Determination

42. On rehearing of Order No. 697-C, petitioners have not provided any new 

arguments that persuade us that the Commission should permit mitigated sellers making 

market-based rate sales at the metered boundary to sell power into the mitigated market, 

either directly or through their affiliates. Petitioners repeat many of the same arguments 

in their requests for rehearing that the Commission responded to in Order Nos. 697-B and 

697-C. For the reasons discussed below, we deny petitioners’ requests that mitigated 

sellers be permitted to make sales at the metered boundary without subsequent 

restrictions on a mitigated seller’s ability to make sales into the balancing authority area 

in which it is mitigated,66 and we re-affirm the Commission’s determination to revise the 

mitigated sales tariff provision in Order No. 697-B to ensure that mitigated sellers 

 64 Id. at 11-12. 

65 Id. at 12. 

66 See id. 
Docket No. RM04-7-008 - 34 -

 

making market-based rate sales at the metered boundary do not subsequently sell power 

into the mitigated market either directly or through their affiliates. 

43. We disagree with petitioners’ arguments that the Commission has not clearly 

articulated the problem that the tariff text governing sales at the metered boundary is 

intended to address, and that the tariff text is not tailored to address the harms the 

mitigated sales tariff provision seeks to prevent. Contrary to petitioners’ arguments in 

this regard, the Commission has explained repeatedly why mitigated sellers and their 

affiliates are prohibited from making market-based rate sales anywhere within the 

balancing authority area in which the seller is mitigated. Specifically, in Order No. 697 

the Commission explained that: 

Allowing market-based rate sales by a seller that has been found to have 

market power, or has so conceded, in the very market in which market 

power is a concern is inconsistent with the Commission’s responsibility 

under the FPA to ensure that rates are just and reasonable and not unduly 

discriminatory. While we generally agree that it is desirable to allow 

market-based rate sales into markets where the seller has not been found to 

have market power, we do not agree that it is reasonable to allow a 

mitigated seller to make market-based rate sales anywhere within a 

mitigated market. It is unrealistic to believe that sales made anywhere in a 

balancing authority area can be traced to ensure that no improper sales are 

taking place. Such an approach would also place customers and 

competitors at an unreasonable disadvantage because the mitigated seller 

has dominance in the very market in which it is making market-based rate 

sales.67

67 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 819. 
Docket No. RM04-7-008 - 35 -

 

Thus, the Commission prohibited mitigated sellers and their affiliates from selling power 

at market-based rates in the balancing authority area in which the seller is found, or 

presumed, to have market power, and, because sales cannot be traced to ensure that no 

improper sales are taking place, the Commission placed restrictions on mitigated sellers’ 

market-based rate sales at the metered boundary.68

44. We also reject petitioners’ assertions that the Commission has failed to explain 

why, as a result of a mitigated seller making market-based rate sales at the metered 

boundary, such seller or its affiliate’s sales into the mitigated balancing authority area 

under a Commission-approved cost-based tariff are unjust and unreasonable. As 

explained in Order Nos. 697-B and 697-C, petitioners’ arguments on rehearing of Order 

No. 697-A effectively conceded that they cannot guarantee that market-based rate sales at 

the metered boundary ultimately serve load beyond the balancing authority area where 

the seller is mitigated.69 Not only is it unrealistic to believe that power sold by mitigated 

68 Id. P 821; see also Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 335. 

69 Order No. 697-B, FERC Stats. & Regs. ¶ 31,285 at P 66-67, 69; E.ON May 21, 

2008 Rehearing Request at 12-14, Pinnacle May 21, 2008 Rehearing Request at 4-6. See

also Westar Energy, Inc. v. FERC, 568 F.3d 985, 988 (D.C. Cir. 2009) (stating that in 

Order No. 697 the Commission concluded that “it ‘is unrealistic to believe that’ such 

sales ‘can be traced to ensure that no improper sales are taking place.’”) (citation 

omitted); Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 321. 
Docket No. RM04-7-008 - 36 -

 

sellers at the metered boundary can be traced,70 these petitioners have failed to explain or 

demonstrate how the Commission could effectively monitor to ensure that power sold by 

a mitigated seller at cost-based rates into the mitigated balancing authority area did not 

originate from that mitigated seller’s sale at market-based rates at the metered boundary. 

Therefore, in order to ensure that mitigated sellers are not making market-based rate sales 

anywhere within a balancing authority area in which they are mitigated, once a mitigated 

seller sells power at the metered boundary at market-based rates, the mitigated seller and 

its affiliates may not sell power into the balancing authority area in which the seller is 

found, or presumed, to have market power, whether at cost-based or market-based rates.71 

As the Commission has explained, this prohibition is necessary to ensure that no 

improper sales are taking place, and to enable the Commission to ensure market power is 

not being exercised in the balancing authority area in which a seller is mitigated. 

45. We deny petitioners’ request that we modify the mitigated sales tariff provision to 

include the options in paragraphs 42 and 43, and their request that the Commission 

clarify that the tariff text governing sales at the metered boundary “will not prevent sales 

that are otherwise authorized by the Commission, either generically or on a case-by-case 

70 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 818 and n.963 (citing to 

utility comments critical of tagging for monitoring market transactions). 

71 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at n.464. 
Docket No. RM04-7-008 - 37 -

 

basis in individual agreements.”72 Petitioners’ arguments that the tariff text governing 

sales at the metered boundary does not allow mitigated sellers to exercise the options 

discussed in paragraphs 42 and 43 of Order No. 697-C, and that paragraphs 42 and 43 are 

therefore in direct conflict with the tariff text, is premised on a misreading of paragraphs 

42 and 43. Petitioners are incorrect that paragraphs 42 and 43 “purport to allow marketbased rate sales at the metered boundary without [the] subsequent constraints [contained 

in the tariff text], provided title transfers to the power or service at or beyond the metered 

boundary, or the power or service is sold to an end user.”73 The Commission’s statement 

at the end of paragraph 42 that “mitigated sellers may choose to make no market-based 

rates sales at the metered boundary, or to limit such sales to end users, thereby 

eliminating the risk that they will re-sell power back to the balancing authority area 

where they are mitigated”74 does not conflict with the mitigated sales tariff provision, 

which states that “if the Seller sells at the metered boundary of a mitigated balancing 

authority area at market-based rates, then neither it nor its affiliates can sell into that 

mitigated balancing authority area from the outside.”75 Because a mitigated seller 

72 EEI July 20, 2009 Rehearing Request at 13. 

73 Id. at 5. 

74 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 42 (citing Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 336). 

75 Id. at Appendix C. 
Docket No. RM04-7-008 - 38 -

making market-based rate sales at the metered boundary and its affiliates cannot make 

sales into the mitigated balancing authority area from the outside under the options 

provided in paragraph 42, both options in paragraph 42 are consistent with the text of the 

mitigated sales tariff provision. 

46. We further reject petitioners’ argument that the options set forth in paragraph 43 

of Order No. 697-C are in conflict with the tariff text. In responding to petitioners’ 

arguments that the mitigated sales tariff provision interferes with must-offer and 

reliability requirements, reserve sharing agreements, and cost-based requirement 

contracts, the Commission explained at paragraph 43 that “if a mitigated seller does not 

make market-based rate sales at the border, either that mitigated seller or its affiliates 

may make sales at cost-based rates into the balancing authority area in which it is 

mitigated.”76 The Commission stated that “[a] mitigated seller can perform each of the 

above-enumerated functions either by selling at cost-based rates within its restricted 

balancing authority area, selling at cost-based rates at the metered boundary of its 

restricted balancing authority area, or by selling at market-based rates at the metered 

boundary as long as it makes sure that title to the power sold transfers at or beyond the 

metered boundary.”77 Thus, the mitigated seller can fulfill any obligations it has under 

 76 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 43 (emphasis in original). 

77 Id. (emphasis added). 
Docket No. RM04-7-008 - 39 -

must-offer and reliability requirements, reserve sharing agreements, and cost-based 

requirement contracts by making sales at cost-based rates into the balancing authority 

area in which it is mitigated, as long as a mitigated seller does not make market-based 

rate sales at the metered boundary. It could also fulfill such obligations by selling at 

cost-based rates at the metered boundary of its restricted balancing authority area. Or, the 

mitigated seller could fulfill such obligations by making sales at the metered boundary of 

a mitigated balancing authority area at market-based rates, as long as neither it nor its 

affiliates sell into that mitigated balancing authority area from the outside. 

47. Because a mitigated seller can fulfill any obligations it has under must-offer and 

reliability requirements, reserve sharing agreements, and cost-based requirement 

contracts under one of these options, we reject petitioners’ argument that the tariff text’s 

prohibition on subsequent sales by a mitigated seller are overbroad and over-inclusive. 

To the contrary, the mitigated sales tariff provision enables the Commission to ensure 

that no improper sales are taking place, and thereby enables the Commission to ensure 

market power is not being exercised in the balancing authority area in which a seller is 

mitigated. Moreover, the Court of Appeals for the District of Columbia Circuit recently 

confirmed that “a wholesaler ... can easily comply with the [Commission] rule and still 

make sales into other regions at market-based rates. A wholesaler simply needs to ensure 

that title passes at or beyond the metered boundary between the mitigated and non-
Docket No. RM04-7-008 - 40 -

 

mitigated areas, instead of inside a mitigated area.”78 Thus, we reject EEI’s argument 

that the tariff text’s prohibition on subsequent sales by a mitigated seller are overbroad 

and over-inclusive. 

48. Petitioners’ argument that the tariff provision is overbroad because it does not 

clearly apply only if the seller is originally selling from within the mitigated market at the 

metered boundary and because it does not include any temporal or other limits to ensure 

that the subsequent prohibited sales into the mitigated market are linked to the original 

outbound border sales79 was previously raised in the requests for rehearing of Order 

No. 697-B.80 The Commission rejected that argument in Order No. 697-C and affirmed 

its determination to revise the mitigated sales tariff provision in Order No. 697-B to 

ensure that a mitigated seller making market-based rate sales at the metered boundary 

does not sell power into the mitigated market either directly or through its affiliates.81 In 

addition, petitioners’ requests that the Commission: (1) clarify whether end users include 

78 Westar Energy, Inc. v. FERC, 568 F.3d 985, 988 (D.C. Cir. 2009) (citation 

omitted). 

79 EEI July 20, 2009 Rehearing Request at 7. 

80 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 28 (stating that “E.ON 

contends that the revised tariff provision is overbroad and prohibits legitimate 

transactions” and “E.ON argues that the mitigated sales tariff provision should contain a 

‘temporal limitation’ so that it cannot be read to prohibit a mitigated seller or its affiliates 

from ever selling from the outside into the mitigated balancing authority area.”). 

81 Id. P 42. 
Docket No. RM04-7-008 - 41 -

 

load-serving entities such as investor-owned utilities, municipalities, and cooperatives 

that service retail load; (2) authorize “sales of blocks of power to be delivered at dates 

and times other than the border sale block of power, power made available under must 

offer requirements, and load-following power”, and (3) “clarify that the border sale 

constraints do not require a mitigated seller or its affiliate, if otherwise precluded from 

selling power into the mitigated area from the outside, to withhold making those sales 

during times at which the seller or affiliates are called on to maintain system reliability”82

were also previously raised by EEI in its request for rehearing of Order No. 697-B as part 

of its argument that the Commission should return to the intent-based concept adopted in 

Order No. 697, wherein EEI identified five types of transactions that it suggested should 

be permitted without first needing to demonstrate intent, even if a mitigated seller does 

make market-based rate sales at the metered boundary.83 The Commission responded to 

(continued...) 

82 EEI July 20, 2009 Rehearing Request at 13-14. 

83 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 36. Specifically, EEI 

argued that the Commission should permit sales to load-serving entities such as investorowned utilities, municipalities, and cooperatives that serve retail load outside the 

mitigated market, even if those entities may at times need to sell power back into the 

mitigated market if their supply is too great. EEI January 22, 2009 Corrected Rehearing 

Request at 7-9. It also argued that the Commission should permit other types of 

transactions that are independent of the border sales, such as sales of blocks of power to 

be delivered at dates and times other than the border sale block of power, power made 

available under must offer requirements, and load-following power, and should clarify 

that the border sale constraints do not require a mitigated seller or its affiliates, which 

otherwise would be precluded from selling power into the mitigated area from the 
Docket No. RM04-7-008 - 42 -

 

this argument in Order No. 697-C, explaining that it would not return to the intent based 

concept as requested by EEI because, as it stated in Order No. 697-A, the Commission 

agreed with petitioners that it would be difficult to determine and document intent, and 

therefore decided to eliminate the intent element of the tariff provision.84 The 

Commission does not allow rehearing of an order denying rehearing.85 Therefore, we 

dismiss petitioners’ argument that the tariff provision is overbroad, and their requests that 

the Commission authorize mitigated sellers to make the same types of sales that EEI 

previously asked the Commission to permit, as these arguments are an attempt to 

re-litigate the determinations made by the Commission in Order No. 697-C. 

49. In response to petitioners’ request that the Commission clarify whether end users 

include load-serving entities such as investor-owned utilities, municipalities, and 

cooperatives that service retail load, we clarify that for the purposes of the mitigated sales 

tariff provision adopted in this rulemaking proceeding, end users of power could include, 

but are not limited to, buyers that serve end-use customers, which as suggested by EEI, 

could include load serving entities serving their retail load, such as investor-owned 

outside, to withhold making those sales during times at which the seller or affiliates are 

called on to maintain system reliability. EEI January 22, 2009 Corrected Rehearing 

Request at 8-9. 

84 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 44. 

85 Southwestern Public Service Co., 65 FERC ¶ 61,088, at 61,533 & n.14 (1993). 
Docket No. RM04-7-008 - 43 -

 

utilities, municipalities, and cooperatives. However, end users do not include entities that 

sell power into the balancing authority area in which the seller is mitigated.86

50. With respect to petitioners’ request for clarification concerning the applicability of 

the mitigated sales tariff provision, as the Commission explained in Order No. 697-C, the 

restrictions on market-based rate sales at the metered boundary only apply to new 

agreements that the seller enters into prospectively from the date that Order No. 697-B 

became effective, and no existing agreements are upset or need to be revised in any way 

provided that the seller abides by our restrictions on any new agreements that it enters 

into prospectively.87 EEI’s interpretation that if “sales [under existing agreements] are 

permitted because the agreement already exists” then the mitigated sales tariff provision 

does not apply to “any sales under the WSPP tariff, for example ... because the 

agreement already exists and the sales are executed under it[,]”88 is incorrect. Although 

86 See Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 36 (summarizing the 

argument in EEI’s request for rehearing of Order No. 697-B that, even if a mitigated 

seller does engage in border sales, the Commission should permit “sales to load-serving 

entities such as investor-owned utilities, municipalities, and cooperatives that serve retail 

load outside the mitigated market, even if those entities may at times need to sell power 

back into the mitigated market if their supply is too great (since the timing and 

occurrence of such excess-power sales back into the mitigated market will be beyond the 

control of the mitigated seller”) (citing EEI January 22, 2009 Corrected Rehearing 

Request at 8-9). 

87 Order No. 697-C, FERC Stats. & Regs. ¶ 31,291 at P 43. 

88 EEI July 20, 2009 Rehearing Request at 11-12. 
Docket No. RM04-7-008 - 44 -

 

EEI fails to describe the specific circumstances that give rise to its concerns, as EEI 

acknowledges, sales under such agreements are not executed until there is a requirement 

for service. Thus, the terms and conditions of an agreement executed under a generally 

applicable tariff are subject to the Commission’s rules and regulations in force at the time 

that such an agreement is executed. Accordingly, the mitigated sales tariff provision 

applies to sales under the WSPP tariff that are entered into prospectively from July 29, 

2009, the date that Order No. 697-B became effective. We therefore clarify that the 

restrictions in the mitigated sales tariff provision apply to agreements and transactions 

pursuant to them, that a seller enters into prospectively from July 29, 2009, the date that 

Order No. 697-B became effective.89 

51. We deny petitioners’ request that the Commission hold a technical conference to 

address issues related to the mitigated sales tariff provision. The Commission has 

provided extensive opportunity for comment on this issue, and has considered four 

rounds of comments, including the petitioners’ requests for rehearing of Order 

No. 697-C. As discussed above, contrary to petitioners’ argument that the Commission 

89 In this regard, we note that in accepting a utility’s proposed mitigation, the 

Commission explained that such mitigation is accepted on a prospective basis, and that it 

is appropriate for existing long-term agreements to remain in effect until terminated 

pursuant to their terms. See South Carolina Electric and Gas Co., 114 FERC ¶ 61,143, 

at P 18 (2006). 
Docket No. RM04-7-008 - 45 -

 

has not articulated the problem that this tariff provision is intended to address, the 

Commission explained in Order Nos. 697-B and 697-C that the tariff text adopted in 

Order No. 697-B enables the Commission to ensure that mitigated sellers, once they have 

made a market-based rate sale at the metered boundary of the mitigated balancing 

authority area, are not making such sales anywhere within a balancing authority area in 

which they are mitigated. 

52. We also deny petitioners’ request that the Commission delay the deadline for 

compliance with the mitigated sales tariff provision until the Commission issues an order 

responding to EEI’s request for rehearing of Order No. 697-C, or following a technical 

conference. The Commission has already granted an extension of time to comply with 

the revised mitigated sales tariff provision in response to the requests for rehearing of 

Order No. 697-B.90 In its January 28, 2009 order granting an extension of time to 

comply, the Commission explained that it was granting an extension of time to comply 

with the mitigated sales tariff provision as set forth in Order No. 697-B “until such time 

as the Commission issues an order on rehearing of Order No. 697-B.”91 Accordingly, we 

find that entities affected by the mitigated sales tariff provision as revised in Order 

90 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity, and 

Ancillary Services by Public Utilities, 126 FERC ¶ 61,072 (2009) (Order Granting 

Extension of Time to Comply). 

91 Id. 
Docket No. RM04-7-008 - 46 -

No. 697-B have been on notice since January 28, 2009 that they should be prepared to 

comply with this tariff provision upon the issuance of the Commission’s order on 

rehearing of Order No. 697-B. Moreover, petitioners have not provided any basis for a 

further extension of time to comply with the mitigated sales tariff provision; rather, 

petitioners repeat the same arguments in their requests for rehearing that the Commission 

responded to in Order Nos. 697-B and 697-C. 

IV. Information Collection Statement

53. The Office of Management and Budget (OMB) regulations require that OMB 

approve certain information collection requirements imposed by an agency.92 The Final 

Rule’s revisions to the information collection requirements for market-based rate sellers 

were approved under OMB Control Nos. 1902-0234. While this order clarifies aspects of 

the existing information collection requirements for the market-based rate program, it 

does not add to these requirements. Accordingly, a copy of this order will be sent to 

OMB for informational purposes only. 

V. Document Availability

54. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through FERC’s Home Page 

 92 5 CFR 1320.11. 
Docket No. RM04-7-008 - 47 -

(http://www.ferc.gov) and in FERC’s Public Reference Room during normal business 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington, DC 20426. 

55. From FERC’s Home Page on the Internet, this information is available on 

eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft 

Word format for viewing, printing, and/or downloading. To access this document in 

eLibrary, type the docket number excluding the last three digits of this document in the 

docket number field. 

56. User assistance is available for eLibrary and the FERC’s website during normal 

business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676) 

or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-

8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

VI. Effective Date

57. Changes adopted in this order on rehearing will become effective [insert date 

that is 30 days from publication in FEDERAL REGISTER]. 
Docket No. RM04-7-008 - 48 -

List of subjects in 18 CFR Part 35

Electric power rates, Electric utilities, Reporting and recordkeeping requirements. 

By the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 
Docket No. RM04-7-008 - 49 -

 In consideration of the foregoing, the Commission amends Part 35 

Chapter I, Title 18, Code of Federal Regulations, as follows: 

PART 35 – FILING OF RATE SCHEDULES AND TARIFFS 

1. The authority citation for Part 35 continues to read as follows: 

Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-

7352. 

2. Section 35.42 is revised to read as follows: 

§ 35.42 Change in status reporting requirement. 

 (a) As a condition of obtaining and retaining market-based rate authority, a Seller 

must timely report to the Commission any change in status that would reflect a departure 

from the characteristics the Commission relied upon in granting market-based rate 

authority. A change in status includes, but is not limited to, the following: 

 (1) Ownership or control of generation capacity that results in net increases of 

100 MW or more, or of inputs to electric power production, or ownership, operation or 

control of transmission facilities, or 

 (2) Affiliation with any entity not disclosed in the application for market-based 

rate authority that owns or controls generation facilities or inputs to electric power 

production, affiliation with any entity not disclosed in the application for market-based 

rate authority that owns, operates or controls transmission facilities, or affiliation with 

any entity that has a franchised service area. 
Docket No. RM04-7-008 - 50 -

 (b) Any change in status subject to paragraph (a) of this section, other than a 

change in status submitted to report the acquisition of control of a site or sites for new 

generation capacity development, must be filed no later than 30 days after the change in 

status occurs. Power sales contracts with future delivery are reportable 30 days after the 

physical delivery has begun. Failure to timely file a change in status report constitutes a 

tariff violation. 

 (c) When submitting a change in status notification regarding a change that 

impacts the pertinent assets held by a Seller or its affiliates with market-based rate 

authorization, a Seller must include an appendix of assets in the form provided in 

Appendix B of this subpart. 

 (d) A Seller must report on a quarterly basis the acquisition of control of a site or 

sites for new generation capacity development for which site control has been 

demonstrated in the interconnection process and for which the potential number of 

megawatts that are reasonably commercially feasible on the site or sites for new 

generation capacity development is equal to 100 megawatts or more. If a Seller elects to 

make a monetary deposit so that it may demonstrate site control at a later time in the 

interconnection process, the monetary deposit will trigger the quarterly reporting 

requirement instead of the demonstration of site control. A notification of change in 

status that is submitted to report the acquisition of control of a site or sites for new 

generation capacity development must include: 
Docket No. RM04-7-008 - 51 -

 (1) the number of sites acquired; 

 (2) the relevant geographic market in which the sites are located; and 

 (3) the maximum potential number of megawatts (MW) that are reasonably 

commercially feasible on the sites reported. 

 (e) For the purposes of paragraph (d) of this section, “control” shall mean “site 

control” as it is defined in the Standard Large Generator Interconnection Procedures 

(LGIP).