UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Nora Mead Brownell, and Suedeen G. Kelly. 

Remedying Undue Discrimination Docket No. RM01-12-000 

through Open Access Transmission Service 

and Standard Electricity Market Design 

ORDER TERMINATING PROCEEDING 

(Issued July 19, 2005) 

1. In 2002, the Commission issued the Standard Market Design (SMD) Notice of 

Proposed Rulemaking (NOPR) in this proceeding.1

 For the reasons given below, we are 

exercising our discretion to terminate this proceeding. 

Background

2. On July 31, 2002, the Commission issued a NOPR proposing to remedy remaining 

undue discrimination and establish a standardized transmission service and wholesale 

electric market design to provide a level playing field for all entities seeking to participate 

in wholesale electric markets, while recognizing certain regional variations. The 

Commission explained that it was proposing to provide new choices through a flexible 

transmission service and an open and transparent spot market design that would provide 

the right pricing signals for investment in transmission and generation facilities. The 

Commission also explained that it was proposing regulatory backstops to protect 

customers against the exercise of market power when structures do not support a 

competitive market, i.e., market monitoring and market power mitigation. The 

Commission further proposed to exercise jurisdiction over the transmission component 

of bundled retail transactions and to require all transmission owners and operators that 

had not yet joined a regional transmission organization (RTO) to contract with an 

independent entity to operate their transmission facilities. 

 1 Remedying Undue Discrimination through Open Access Transmission Service 

and Standard Electricity Market Design, Notice of Proposed Rulemaking, 67 Fed. Reg. 

55,452 (Aug. 29, 2002), FERC Stats. & Regs. ¶ 32,563 (2002). 
Docket No. RM01-12-000 - 2 -

3. The Commission received extensive comments on its proposed rule raising a 

variety of concerns, including the following: (1) the Commission’s proposed assertion of 

jurisdiction over transmission used to provide retail service to native load customers 

infringed on state jurisdiction; (2) other specific features of the proposed rule also would 

infringe on state jurisdiction; (3) the transition process to the new proposed transmission 

service would not provide sufficient protection for existing customers; (4) the proposed 

rule was too prescriptive in substance and implementation and did not sufficiently 

accommodate regional differences; and (5) the proposed rule did not provide sufficient 

clarity on cost recovery for investment in new transmission facilities. 

4. On April 28, 2003, in response to the comments it received on its proposed rule, 

the Commission issued a Wholesale Power Market Platform White Paper laying out a 

revised proposal for building a wholesale electric market. The Commission reiterated its 

overall goals, proposed a more flexible approach to regional needs and expressed an 

intent to focus on the formation of RTOs. The Commission recognized the need for 

additional changes to its proposed rule and indicated that: (1) it would not assert 

jurisdiction over the transmission rate component of bundled retail service; (2) nothing in 

the Final Rule would change state authority over resource adequacy requirements and 

regional transmission planning requirements; (3) regional state committees would 

determine how firm transmission rights should be allocated to current customers; 

(4) implementation would be tailored to each region and modifications would be allowed 

to benefit customers in each region; (5) each RTO would be required to have a clear 

transmission cost recovery policy outlined in its tariff; and (6) it would eliminate the 

proposed requirement that public utilities create or join an independent entity, but would 

require them to join an RTO or independent system operator (ISO). 

5. While a number of entities expressed support for certain of the changes proposed 

by the Commission in its White Paper, many entities continued to oppose the 

Commission’s fundamental goals. For example, several entities spoke out against any 

national one size fits all approach, even with the modifications set forth in the White 

Paper, while others expressed concern with the ever-escalating costs of RTOs. Still 

others preferred that the Commission take a more regional approach that would allow 

markets to develop on a voluntary basis, instead of the mandatory approach to RTOs 

proposed by the Commission. A number of entities also expressed concern about the 

proposed regional state committees, including their concern that they would have to 

spread their scarce resources over a multitude of forums. 

Discussion

6. Since issuance of the SMD NOPR, the electric industry has made significant 

progress in the development of voluntary RTOs/ISOs (e.g., Midwest Independent 

Transmission System Operator, Inc. and Southwest Power Pool, Inc.). This has allowed 

interested parties, through region-specific proceedings, to shape the development of 
Docket No. RM01-12-000 - 3 -

independent entities to reflect the needs of each particular region. The Commission has 

also indicated that it intends to consider revisions to the Order No. 888 pro forma Open 

Access Transmission Tariff to reflect the electric utility industry’s and the Commission’s 

experience with open access transmission over the last decade. 

7. Given the continuing development of voluntary RTOs and ISOs and the 

Commission’s expressed intent to look into revisions to the Order No. 888 pro forma 

tariff in a separate proceeding, we have concluded that the SMD NOPR has been 

overtaken by events. Accordingly, we will exercise our discretion to terminate this 

proceeding. 

The Commission orders: 

 Docket No. RM01-12-000 is hereby terminated. 

By the Commission. 

( S E A L ) 

Linda Mitry, 

Deputy Secretary.