128 FERC ¶ 61,263 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 38 

(Docket No. RM05-5-017) 

Standards for Business Practices and 

Communication Protocols for Public Utilities 

(Issued September 17, 2009) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Proposed Rulemaking. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) proposes to 

incorporate by reference in its regulations at 18 CFR 38.2 business practice standards 

adopted by the Wholesale Electric Quadrant of the North American Energy Standards 

Board (NAESB) to categorize various demand response products and services and to 

support the measurement and verification of these products and services in wholesale 

electric energy markets. 

DATES: Comments on the proposed rule are due [insert date 30 days after publication in 

the FEDERAL REGISTER]. 

ADDRESSES: You may submit comments identified by Docket No. RM05-5-017, by 

one of the following methods: 

 Agency Web Site: http://www.ferc.gov. Follow the instructions for 

submitting comments via the eFiling link found in the Comment Procedures 

Section of the preamble. 
Docket No. RM05-5-017 ii

 Mail: Commenters unable to file comments electronically must mail or 

hand deliver an original and 14 copies of their comments to the Federal Energy 

Regulatory Commission, Secretary of the Commission, 888 First Street, NE, 

Washington, DC 20426. Please refer to the Comment Procedures Section of 

the preamble for additional information on how to file paper comments. 

FOR FURTHER INFORMATION CONTACT: 

Bruce McAllister (technical issues) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8296 

Ryan M. Irwin (technical issues) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6454 

 

Gary D. Cohen (legal issues) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8321 

SUPPLEMENTARY INFORMATION: 

 
128 FERC ¶ 61,263 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Standards for Business Practices and 

Communication Protocols for Public Utilities Docket No. RM05-5-017 

NOTICE OF PROPOSED RULEMAKING 

(Issued September 17, 2009) 

1. In this Notice of Proposed Rulemaking (NOPR), the Federal Energy 

Regulatory Commission (Commission) proposes to amend its regulations under the 

Federal Power Act1

 to incorporate by reference business practice standards adopted 

by the Wholesale Electric Quadrant (WEQ) of the North American Energy Standards 

Board (NAESB) to categorize various demand response products and services and to 

support the measurement and verification of these products and services in wholesale 

electric energy markets. 

I. Background

2. NAESB is a non-profit standards development organization that serves as an 

industry forum for the development of business practice standards. These standards 

promote a seamless marketplace for wholesale and retail natural gas and electricity.2

 

Since 1995, NAESB and its predecessor, the Gas Industry Standards Board, have 

 1

 16 U.S.C. 791a, et seq.

2 See Standards for Business Practices and Communication Protocols for 

Public Utilities, Final Rule, FERC Stats. & Regs. ¶ 31,274, at P 2 (2008). 
Docket No. RM05-5-017 - 2 -

been accredited members of the American National Standards Institute (ANSI), 

complying with ANSI’s requirements that its standards reflect a consensus of the 

affected industries.3

3. NAESB’s standards include business practices that streamline the transactional 

processes of the natural gas and electric industries, as well as communication 

protocols and related standards designed to improve the efficiency of communication 

within each industry. NAESB supports all four quadrants of the gas and electric 

industries – wholesale gas, wholesale electric, retail gas, and retail electric. All 

participants in the gas and electric industries are eligible to join NAESB and 

participate in standards development.4

4. Wholesale electric industry business practice standards are developed by the 

WEQ (Wholesale Electric Quadrant) of NAESB. To become a WEQ standard, a 

consensus of six industry segments, transmission, generation, marketer/brokers, 

distribution/load serving entities, end users, and independent grid operators/planners, 

must approve the standard. Under the WEQ process, for a standard to be approved, it 

must receive a super-majority vote of 67 percent of the members of the WEQ's 

Executive Committee with support from at least 40 percent of each of the six industry 

segments. For final approval, 67 percent of the WEQ's general membership must 

 3 Id.

4 Id. P 3. 
Docket No. RM05-5-017 - 3 -

ratify the standards.5

 In a series of Orders,6 the Commission has incorporated 

certain of NAESB’s standards into its regulations. These standards include standar

for business practices as well as standards and protocols for electronic 

communication, and business practice standards related to reliability standards 

promulgated by NERC and approve

ds 

d by the Commission. 

 

5. On April 17, 2009, after two years of development, NAESB reported to the 

Commission that, on March 16, 2009, it adopted its initial set of business practice 

standards for the measurement and verification of demand response products and 

services (NAESB Phase I M&V Standards).7

 NAESB states that these initial 

standards will need to be followed by the development of more detailed technical 

standards for the measurement and verification of demand response products and 

services in independent system operator/regional transmission organization 

(ISO/RTO) footprint areas. NAESB states that its Demand Side Management-Energy 

5 Standards for Business Practices and Communication Protocols for Public 

Utilities, Notice of Proposed Rulemaking, FERC Stats. & Regs. ¶ 32,582, at P 13 

(2005); Standards for Business Practices of Interstate Natural Gas Pipelines, Final 

Rule, Order No. 587-O, FERC Stats. & Regs. ¶ 31,129, n. 14 (2002). 

6 See n.2 supra. 

7

 When NAESB adopts a business practice standard as a Final Action, the 

standard is considered complete from NAESB’s perspective, but, from the 

Commission’s perspective, compliance with such a standard is not mandatory until 

such time as the Commission takes formal action to incorporate such a standard by 

reference into its regulations. NAESB’s Phase I M&V Standards were adopted in the 

WEQ’s 2009 Annual Plan 5(a) Final Action. NAESB’s Apr. 17, 2009 submittal is 

also available for viewing in eLibrary under Docket No. RM05-5-017. The link to 

eLibrary is as follows: http://www.ferc.gov/docs-filing/efiling.asp. 
Docket No. RM05-5-017 - 4 -

Efficiency subcommittee has already begun efforts to plan the development of these 

more detailed (Phase II) standards; however, actual standards development has not 

yet started. 

6. The NAESB Phase I M&V Standards include 40 definitions and 31 business 

practice standards. The definitions identify basic product categories, i.e., energy 

service, capacity service, reserve service and regulation service. They identify the 

measurement and verification characteristics of demand response products and 

services offered in organized wholesale electricity markets, such as reduction 

deadlines, advance notification instructions, telemetry accuracy, and communication 

protocols. The business practice standards address the major operational categories 

associated with demand response. NAESB stresses that the key to several NAESB 

participants’ willingness to accept the standards submitted on April 17th was the 

agreement among participants to include more specific technical measurement and 

verification standards in NAESB’s current annual work plan and to proceed with 

further work on more detailed technical standards. 

II. Description of NAESB's Phase I M&V Standards

7. The Phase I M&V Standards include two parts. First, there are standards that 

identify operational information about demand response products that system 

operators need to make available. Second, specific standards address the 

performance evaluation methods appropriate to use for demand response products. 

These standards are described briefly below. In addition, associated terms are 

defined in a glossary. 
Docket No. RM05-5-017 - 5 -

8. First, the NAESB Phase I M&V Standards address transparency of the 

provision of four wholesale electric demand response products: energy 

(WEQ-015-1.0 through WEQ-015-1.3); capacity (WEQ-015-1.4 through 1.7); 

reserves (WEQ-015-1.8 through 1.11); and regulation (WEQ- 015-1.12 through 

1.15). For each of these products, the standards require system operators to make 

information publicly available on: (1) specific operational requirements listed in the 

business practice standards, e.g., notification requirements; (2) telemetry 

requirements, e.g., the telemetry interval shall not exceed five minutes; (3) after-thefact metering requirements, e.g., the metering accuracy shall not exceed three percent 

of full scale; and (4) performance evaluation rules, e.g., the performance evaluation 

method applicable to the product being delivered. Most of these transparency 

requirements are the same for all four products, although some only apply where 

appropriate. Other requirements apply only to one product; for example, demand 

resources providing regulation services are required to automatically respond to grid 

frequency deviations, similar to the governor action provided by generation 

resources, unless otherwise specified by the system operator. 

9. Second, the NAESB Phase I M&V Standards require the system operator to 

make publicly available the specific method to be used and the information required 

for the performance of resources providing demand response products (the 

performance evaluation method). Information standards specify that a system 

operator must define criteria and requirements for telemetry, metering, and 

performance evaluation, including baseline window, calculation type, sampling, 
Docket No. RM05-5-017 - 6 -

baseline adjustments and measurement methods for each method that may be used to 

evaluate the performance of each demand response product. The system operator 

must specify that some or all of five methods may be used: Maximum Base Load 

Evaluation (WEQ-015-1.16 through WEQ-015-1.18); Meter Before/Meter After 

(WEQ-015-1.19 through WEQ-015-1.21); Baseline Type I – Interval Meter 

(WEQ-015-1.22 through WEQ-015-1.24); Baseline Type II – Non-Interval Meter 

(WEQ-015-1.25 through WEQ-015-1.27); and Metering Generator Output 

(WEQ-015-1.28 through WEQ-015-1.30). 

III. Discussion

10. The Commission proposes to incorporate by reference into our regulations the 

NAESB Phase I M&V Standards and associated terms used in the WEQ-015 

glossary.8

 The Phase I M&V Standards are primarily intended to enhance the 

transparency and consistency of the methods used to measure and verify demand 

response products in wholesale electricity markets administered by RTO’s and 

ISO’s. The glossary provides standardized definitions of demand response services, 

 8

 We propose to incorporate by reference the following standards collectively 

identified by NAESB as 2008 Annual Plan Item 5(a): Provision of Wholesale 

Electric Demand Response Energy Products- Standards 015-1.0–1.3; Provision of 

Wholesale Electric Demand Response Capacity Products- Standards 015-1.4–1.7 

Provision of Wholesale Electric Demand Response Reserve Products- Standards 

015-1.8–1.11; Provision of Wholesale Electric Demand Response Regulation 

Products- Standards 015-1.12-1.15; Maximum Base Load Evaluation- Standards 

015-1.16-1.18; Meter Before/Meter After- Standards 015-1.19–1.21; Baseline Type I 

– (Interval Meter)- Standards 015-1.22–1.24; Baseline Type II – (Non-Interval 

Meter)- Standards 015-1.25-1.27; and Metering Generator Output- Standards 

015-1.28-1.30. 
Docket No. RM05-5-017 - 7 -

operational terms and performance measurements. The NAESB Phase I M&V 

Standards that we are proposing to incorporate by reference in this NOPR provide a 

starting place to develop a more comprehensive set of standards for the provision of 

demand response products in wholesale markets. 

11. NAESB adopted its Phase I M&V Standards under its consensus procedures.9

 

Adoption of consensus standards is appropriate because the consensus process helps 

to ensure the reasonableness of the standards by requiring that the standards draw 

support from a broad spectrum of all segments of the industry. Moreover, because 

the industry itself has to conduct business under these standards, the Commission's 

regulations should reflect those standards that have the widest possible support. In 

section 12(d) of the National Technology Transfer and Advancement Act of 1995 

(NTT&AA), Congress affirmatively requires federal agencies to use technical 

standards developed by voluntary consensus standards organizations, like NAESB, as 

a means to carry out policy objectives or activities determined by the agencies unless 

use of such standards would be inconsistent with applicable law or otherwise 

impractical.10

12. The NAESB Phase II M&V Standards are intended to establish business 

practice standards that facilitate the ability of demand response providers to 

participate in electricity markets, reducing transaction costs and providing an 

 9 See P 4 supra. 

10 Pub. L. No. 104-113, 12(d), 110 Stat. 775 (1996), 15 U.S.C. 272 note 

(1997). 
Docket No. RM05-5-017 - 8 -

opportunity for more customers to participate in these programs, especially customers 

that operate in more than one organized market. The NAESB Phase I M&V 

Standards provide a framework for further business practice standardization efforts, 

and participants in the WEQ process can use these standards to identify those 

elements for which standardization would be beneficial. We believe it is appropriate 

to develop criteria and standards that system operators can use to determine how 

demand response will be initiated, communicated, controlled, adjusted, measured and 

verified. 

13. We appreciate the efforts of the WEQ thus far in developing these standards. 

It is clear, however, that much work still needs to be done. Members of the WEQ 

need to continue their efforts to develop the substantive standards needed to achieve 

greater efficiency in the operation and evaluation of the performance of demand 

response products and services. The Commission continues to believe that the 

industry should take the lead in developing and implementing demand response 

standards that will be both practical and workable. However, we request comments 

on whether the Commission should establish a deadline for the development of these 

remaining critical standards and, if so, what that deadline should be. 

IV. Notice of Use of Voluntary Consensus Standards

14. Office of Management and Budget Circular A-119 (section 11) (Feb. 10, 1998) 

provides that federal agencies should publish a request for comment in a NOPR when 

the agency is seeking to issue or revise a regulation proposing to adopt a voluntary 

consensus standard or a government-unique standard. In this NOPR, the Commission 
Docket No. RM05-5-017 - 9 -

is proposing to incorporate by reference a voluntary consensus standard developed by 

the NAESB WEQ. 

V. Information Collection Statement

15. The following collections of information contained in this proposed rule have 

been submitted to the Office of Management and Budget (OMB) for review under 

section 3507(d) of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507(d). The 

Commission solicits comments on the Commission's need for this information, 

whether the information will have practical utility, the accuracy of the provided 

burden estimates, ways to enhance the quality, utility, and clarity of the information 

to be collected, and any suggested methods for minimizing respondents' burden, 

including the use of automated information techniques. Respondents subject to the 

filing requirements of this rule will not be penalized for failing to respond to these 

collections of information unless the collections of information display a valid OMB 

Control number. 

16. The following burden estimate is based on the projected costs for the industry 

to implement revisions to the WEQ Standards currently incorporated by reference 

into the Commission’s regulations at 18 CFR 38.2 and to implement the new 

standards adopted by NAESB that we propose here to incorporate by reference. 
Docket No. RM05-5-017 - 10 -

Data Collection No. of 

Respondents 

No. of 

Responses Per 

Respondent 

Hours Per 

Response 

Total No. of 

Hours 

FERC-51611 6 1 6 36 

FERC-71712 6 1 12 72 

Totals 108 

Total Annual Hours for Collection 

(Reporting and Recordkeeping, (if appropriate)) = 108 hours 

Information Collection Costs: The Commission seeks comments on the costs to 

comply with these requirements. It has projected the average annualized cost for all 

respondents to be the following:13

FERC-516 FERC-717 

Annualized Capital/Startup Costs $13,320 $26,640 

Annualized Costs (Operations & 

Maintenance) 

N/A

Total Annualized Costs $13,320 $26,64014

 11 “FERC-516” is the Commission’s identifier that corresponds to OMB 

control no. 1902-0096 which identifies the information collection associated with 

Electric Rate Schedules and Tariff Filings. 

12 “FERC-717” is the Commission’s identifier that corresponds to OMB 

control no. 1902-0173 which identifies the information collection associated with 

Standards for Business Practices and Communication Protocols for Public Utilities. 

13 The total annualized costs for the information collection is $39,960. This 

number is reached by multiplying the total hours to prepare responses (108) by an 

hourly wage estimate of $370 (a composite estimate that includes legal, technical and 

support staff rates, $250+$95+$25=$370), 108 hours x $370/hour= $39,960. 

14 We note that 36 hours at $370/hr.= $13,320 and 72 hours at 

$370/hr.=$26,640. Together, $13,320+$26,640=$39,960 as in note 13 supra. 
Docket No. RM05-5-017 - 11 -

17. OMB regulations15 require OMB to approve certain information collection 

requirements imposed by agency rule. The Commission is submitting notification of 

this proposed rule to OMB. These information collections are mandatory 

requirements. 

Title: Standards for Business Practices and Communication Protocols for Public 

Utilities (formerly Open Access Same Time Information System) (FERC-717); 

Electric Rate Schedule Filings (FERC-516). 

Action: Proposed collection. 

OMB Control No.: 1902-0096 (FERC-516); 1902-0173 (FERC-717). 

Respondents: Business or other for profit, (Public Utilities - Not applicable to small 

businesses). 

Frequency of Responses: One-time implementation (business procedures, 

capital/start-up). 

Necessity of the Information: This proposed rule, if implemented would standardize 

the definitions used by ISOs and RTOs to identify their various demand response 

products and to measure and verify the results obtained by these products. 

18. Internal Review: The Commission has reviewed the revised business practice 

standards proposed in this NOPR and has made a preliminary determination that 

these standards are necessary to maintain consistency among the ISOs/RTOs as to the 

demand response products they offer in their wholesale electricity markets. The 

 15 5 CFR 1320.11. 
Docket No. RM05-5-017 - 12 -

Commission has assured itself, by means of its internal review, that there is specific, 

objective support for the burden estimate associated with the information 

requirements. 

19. Interested persons may obtain information on the reporting requirements by 

contacting the following: 

Federal Energy Regulatory Commission, 

Attn: Michael Miller, Office of the Executive Director 

888 First Street, NE 

Washington, DC 20426 

Tel: (202) 502-8415 / Fax: (202) 273-0873 

Email: michael.miller@ferc.gov 

20. Comments concerning the information collections proposed in this NOPR and 

the associated burden estimates, should be sent to the contact listed above and to the 

Office of Management and Budget, Office of Information and Regulatory Affairs, 

Washington, DC 20503 [Attention: Desk Officer for the Federal Energy Regulatory 

Commission, phone: (202) 395-7345, fax: (202) 395-7285]. 

VI. Environmental Analysis

21. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse 

effect on the human environment.16 The Commission has categorically excluded 

certain actions from these requirements as not having a significant effect on the 

 16 Regulations Implementing the National Environmental Policy Act, Order 

No. 486, FERC Stats. & Regs. ¶ 30,783 (1987). 
Docket No. RM05-5-017 - 13 -

human environment.17 The actions proposed here fall within categorical exclusions 

in the Commission’s regulations for rules that are clarifying, corrective, or 

procedural, for information gathering, analysis, and dissemination, and for sales, 

exchange, and transportation of electric power that requires no construction of 

facilities.18 Therefore, an environmental assessment is unnecessary and has not been 

prepared in this NOPR.

VII. Regulatory Flexibility Act Certification

22. The Regulatory Flexibility Act of 1980 (RFA)19 generally requires a 

description and analysis of final rules that will have significant economic impact on a 

substantial number of small entities. The regulations proposed here impose 

requirements only on ISOs and RTOs, which are not small businesses. Moreover, 

these requirements are designed to benefit all customers, including small businesses.

23. The Commission has followed the provisions of both the RFA and the 

Paperwork Reduction Act on potential impact on small business and other small 

entities. Specifically, the RFA directs agencies to consider four regulatory 

alternatives to be considered in a rulemaking to lessen the impact on small entities: 

tiering or establishment of different compliance or reporting requirements for small 

entities, classification, consolidation, clarification or simplification of compliance and 

reporting requirements, performance rather than design standards, and exemptions. 

 17 18 CFR 380.4. 

18 See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27). 

19 5 U.S.C. 601-612. 
Docket No. RM05-5-017 - 14 -

As these proposed standards would only be applicable to ISOs and RTOs, which are 

not small entities, the Commission hereby certifies, pursuant to section 605(b) of the 

RFA,20 that the regulations proposed herein will not have a significant adverse impact 

on a substantial number of small entities. 

VIII. Comment Procedures

24. The Commission invites interested persons to submit comments on the matters 

and issues proposed in this notice to be adopted, including any related matters or 

alternative proposals that commenters may wish to discuss. Comments are due 

[insert date 30 days from publication in the FEDERAL REGISTER]. Comments 

must refer to Docket No. RM05-5-017, and must include the commenter's name, the 

organization they represent, if applicable, and their address. Comments may be filed 

either in electronic or paper format. 

25. Comments may be filed electronically via the eFiling link on the 

Commission's web site at http://www.ferc.gov. The Commission accepts most 

standard word processing formats and commenters may attach additional files with 

supporting information in certain other file formats. Commenters filing electronically 

do not need to make a paper filing. Commenters that are not able to file comments 

electronically must send an original and 14 copies of their comments to: Federal 

Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE, 

Washington, DC 20426. 

 20 5 U.S.C. 605(b). 
Docket No. RM05-5-017 - 15 -

26. All comments will be placed in the Commission's public files and may be 

viewed, printed, or downloaded remotely as described in the Document Availability 

section below. Commenters on this proposal are not required to serve copies of their 

comments on other commenters. 

IX. Document Availability

27. 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 

(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. 

28. From FERC's Home Page on the Internet, this information is available in the 

eLibrary. The full text of this document is available in the eLibrary both in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

document in eLibrary, go to the FERC website at http://www.ferc.gov and type the 

docket number “RM05-5” in the docket number field, type “017” under the 

subdocket field, and request submittals filed on April 17, 2009. 

29. User assistance is available for eLibrary and the FERC's web site during our 

normal business hours. For assistance contact FERC Online Support at 

FERCOnlineSupport@ferc.gov or toll-free at (866) 208-3676, or for TTY, contact 

(202) 502-8659. 

List of subjects in 18 CFR Part 38
Docket No. RM05-5-017 - 16 -

Conflict of interests, Electric power plants, Electric utilities, Incorporation by 

reference, Reporting and recordkeeping requirements. 

By direction of the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 
Docket No. RM05-5-017 - 17 -

In consideration of the foregoing, the Commission proposes to revise Chapter 

I, Title 18, part 38 of the Code of Federal Regulations, as follows: 

PART 38 – BUSINESS PRACTICE STANDARDS AND COMMUNICATION 

PROTOCOLS FOR PUBLIC UTILITIES 

1. The authority citation for part 38 continues to read as follows: 

Authority: 16 U.S.C. 791-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-

7352. 

2. In § 38.2, paragraph (a)(12) is added to read as follows: 

§ 38.2 Incorporation By Reference Of North American Energy Standards

Board Wholesale Electric Quadrant Standards

(a) * * * 

(12) Measurement and Verification of Wholesale Electricity Demand 

Response (WEQ-015, 2008 Annual Plan Item 5(a), Mar. 16, 2009). 

* * * * *