127 FERC ¶ 61,284 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 35 

[Docket No. RM04-7-006; Order No. 697-C] 

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

Services By Public Utilities 

(Issued June 18, 2009) 

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-B, 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, N.E. 

Washington, DC 20426 

(202) 502-8407 
Docket No. RM04-7-006 - 2 - 

Paige Bullard (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, DC 20426 

(202) 502-6462 

SUPPLEMENTARY INFORMATION

:
TABLE OF CONTENTS

Paragraph Numbers

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

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

III. Discussion ................................................................................................................... 8.

 A. Vertical Market Power ........................................................................................... 8.

 Other Barriers to Entry ........................................................................................... 8.

 B. Mitigation ............................................................................................................. 23.

 Protecting Mitigated Markets ............................................................................... 23.

 C. Implementation Process ....................................................................................... 47.

 Clarifications on Implementation Process............................................................ 47.

IV. Information Collection Statement ............................................................................. 49.

 V. Document Availability .............................................................................................. 50.

VI. Effective Date............................................................................................................ 53.

Regulatory Text 

Appendix C to Order No. 697-C: Revised Tariff Language 

Appendix D-2 to Order No. 697-C: Revised Regional Review Schedule 
127 FERC ¶ 61,284 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Suedeen G. Kelly, Marc Spitzer, 

 and Philip D. Moeller. 

Market-Based Rates For Wholesale Sales of Electric 

Energy, Capacity And Ancillary Services By Public 

Utilities 

Docket No. RM04-7-006 

ORDER NO. 697-C 

ORDER ON REHEARING AND CLARIFICATION 

(Issued June 18, 2009) 

I. Introduction

1. In this order, the Commission addresses requests for rehearing and clarification of 

Order No. 697-B. Specifically, the Commission clarifies the requirement that sellers file 

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

development.1

 The Commission denies the requests for rehearing of the tariff provision 

governing mitigated sales at the metered boundary and affirms its determination in Order 

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

 1

 18 CFR 35.42 (2008). 
Docket No. RM04-7-006 - 2 -

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

the mitigated market either directly or through its affiliates.2

II. Background

2. On June 21, 2007, the Federal Energy Regulatory Commission (Commission) 

issued Order No. 697,3

 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 marketbased rate authorization. The Commission explained that there are three major aspects of 

its market-based regulatory regime: (1) market power analyses of sellers and associated 

conditions and filing requirements; (2) market rules imposed on sellers that participate in 

Regional Transmission Organization (RTO) and Independent System Operator (ISO) 

organized markets; and (3) ongoing oversight and enforcement activities. Order No. 697 

focused on the first of the three features to ensure that market-based rates charged by 

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

Ancillary Services by Public Utilities, Order No. 697-B, 73 FR 79,610 (Dec. 30, 

2008), FERC Stats. & Regs. ¶ 31,285 (2008). 

3 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, 73 FR 25,832 (May 7, 2008), FERC Stats. & Regs. ¶ 31,268 (2008); 

clarified, 124 FERC ¶ 61,055 (2008) (July 17 Clarification Order), order on reh’g, Order 

No. 697-B, 73 FR 79,610 (Dec. 30, 2008), FERC Stats. & Regs. ¶ 31,285 (2008). 
Docket No. RM04-7-006 - 3 -

 

public utilities are just and reasonable. Order No. 697 became effective on September 

18, 2007. 

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

December 14, 2007.4

 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. The Commission also 

extended the deadline for sellers to file the first set of regional triennial studies that were 

directed in Order No. 697 from December 2007 to 30 days after the date of issuance of 

the December 14 Clarification Order. 

4. On April 21, 2008, the Commission issued Order No. 697-A,5

 in which it 

responded to a number of requests for rehearing and clarification of Order No. 697. In 

most respects, the Commission affirmed the determinations made in Order No. 697 and 

4 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). 

5

 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 (2008). 
Docket No. RM04-7-006 - 4 -

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.6

 Specifically, that order granted the 

requests for rehearing with regard to footnote 208 of Order No. 697-A and clarified that 

in performing the indicative screen analysis, market-based rate sellers may allocate the 

simultaneous import limit capability on a pro rata basis (after accounting for the seller’s 

firm transmission rights) based on the relative shares of the seller’s (and its affiliates’) 

and competing suppliers’ uncommitted generation capacity in first-tier markets.7

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. The Commission 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 

 6

 July 17 Clarification Order, 124 FERC ¶ 61,055. 

7 Id. P 5. 

8

 Order No. 697-B, FERC Stats. & Regs. ¶ 31,285. 
Docket No. RM04-7-006 - 5 -

 

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. The Commission also 

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

separate definition for exempt wholesale generators. In addition, the Commission 

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 

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

issues 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 

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). 
Docket No. RM04-7-006 - 6 -

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

Commission acts on the requests for rehearing of Order No. 697-B. 

III. Discussion 

A. Vertical Market Power

Other Barriers to Entry

Background

8. Order No. 697 adopted the NOPR proposal to consider a seller’s ability to erect 

other barriers to entry as part of the vertical market power analysis, but modified the 

requirements when addressing other barriers to entry.11 It also provided clarification 

regarding the information that a seller must provide with respect to other barriers to entry 

(including which inputs to electric power production the Commission will consider as 

other barriers to entry) and modified the proposed regulatory text in that regard.12

9. On rehearing, the Commission clarified that it was not its intent for the term 

“inputs to electric power production” to encompass every instance of a seller entering 

into a coal supply contract with a coal vendor in the ordinary course of business. The 

Commission clarified that Order No. 697 encompasses physical coal sources and 

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

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

12 Id. 
Docket No. RM04-7-006 - 7 -

ownership of or control over who may access transportation of coal via barges and railcar 

trains.13 Thus, the Commission revised its definition of “inputs to electric power 

production” in § 35.36(a)(4) as follows: “intrastate natural gas transportation, intrastate 

natural gas storage or distribution facilities; sites for new generation capacity 

development; physical coal supply sources and ownership of or control over who may 

access transportation of coal supplies.”14 

10. In Order No. 697-B, the Commission rejected the Electric Power Supply 

Association’s (EPSA) proposal that the term “sites for new generation capacity 

development” mean 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 explained that “sites 

for new 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. 

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

original). 

14 Id. 
Docket No. RM04-7-006 - 8 -

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

not include land that cannot be used for generation capacity development.15

Requests for Rehearing

11. American Wind Energy Association (American Wind) requests rehearing of 

Order No. 697-B’s clarification that sites for new generation capacity development 

should be construed to include ownership of land that could potentially be used for 

generation, arguing that the scope and intent behind this requirement was not fully 

illuminated until the Commission’s clarification of this requirement in Order 

No. 697-B.16 American Wind contends that the Commission should grant rehearing of 

the term “sites for new generation capacity development” so as to only require reporting 

for sites for new generation development that are located in load pockets where a 

“potential” for vertical market power may exist, and should clarify that it will rely on the 

existing rebuttable presumption that all other sites do not create a barrier to entry.17

12. American Wind argues that the Commission’s interpretation of the reporting 

burden to include sites that could potentially be used for generation substantially 

increases the regulatory compliance burden on market-based rate sellers, and that the 

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

16 American Wind January 21, 2009 Rehearing Request at 5. 

17 Id. at 5-6. 
Docket No. RM04-7-006 - 9 -

 

increased burden can be illustrated with respect to the impact on wind energy developers. 

It explains that in developing new wind power generation sites, wind energy developers 

seek to initially lease approximately 150 acres for each turbine. American Wind states 

that in developing a 100 megawatt project using 1.5 megawatt wind turbines, a developer 

may seek to initially have 10,000 acres of land under control. It further explains that 

control over such land may result from leases that would likely be made with multiple 

landowners over a period of several months, and that in regions with significant wind 

development, it would not be surprising to find a vast number of acres for potential new 

generation sites under some form of control, via leases or some other form of agreement, 

by wind energy developers.18

13. According to American Wind, the requirement to file notifications of change in 

status every time a market-based rate seller or its affiliates acquire sites that potentially 

could be used for generation would create a substantial burden and a competitive risk, 

while not providing any associated benefit to the Commission. American Wind asserts 

that wind developers in particular would be subjected to increased risk of the disclosure 

of their proprietary and competitive information because wind developers regularly 

compete for new land that can be used for wind development projects.19 It states that in 

18 Id. at 6-7. 

19 Id. at 7. 
Docket No. RM04-7-006 - 10 -

 

the development process, wind energy developers spend significant time and effort 

searching for new land that may be appropriate for wind development sites, and that 

information as to where a wind energy developer is considering the development of new 

generation projects is highly proprietary and confidential. American Wind contends that 

even assuming a filing submitted at the Commission includes information “on a 

summarized, balancing authority area basis, given the small size of some balancing 

authorities, the public release of such proprietary and confidential information could lead 

to competitive harm.”20 American Wind also argues that if a seller’s control of potential 

new generation sites were alleged to create a new barrier to entry, the Commission, either 

pursuant to a complaint filed by a third party or a Commission-initiated investigation, 

would have ample authority to take action and challenge the rebuttable presumption that 

ownership or control over sites for new generation development does not create a barrier 

to entry.21

14. American Wind therefore requests that the Commission grant rehearing of the 

term “sites for new generation capacity development” so as to only require reporting for 

sites for new generation capacity development that are located in load pockets where a 

“potential” for vertical market power may exist. American Wind argues that for the 

20 Id. 

21 Id. at 8. 
Docket No. RM04-7-006 - 11 -

 

purposes of this reporting requirement, the Commission could define load pockets as 

submarkets where the Commission has determined that internal transmission constraints 

make the market smaller than the balancing authority area, RTO/ISO footprint or 

RTO/ISO submarket.22

15. If the Commission declines to grant its request to only require reporting for sites 

for new generation development that are located in load pockets where a “potential” for 

vertical market power may exist, American Wind requests clarification that the 

Commission will only require reporting for sites for new generation capacity 

development when “site control” is first required to be demonstrated in the 

interconnection process.23 American Wind claims that sites that have not yet been 

required to demonstrate site control in the interconnection process would not likely be 

used to enhance a seller’s vertical market power, and accordingly, there is no need for the 

Commission to be notified of such sites prior to when “site control” is required to be 

demonstrated. American Wind argues that using this milestone as the triggering point for 

when a seller must notify the Commission of sites for new generation capacity 

development “would better align the reporting requirement with the underlying vertical 

market power concerns that are at the heart of the requirement” and “would strike a better 

22 Id. at 9. 

23 Id. at 11. 
Docket No. RM04-7-006 - 12 -

balance between the Commission’s regulatory concerns and the compliance burden on 

and competitive risks to market-based rate sellers.”24

Commission Determination

16. We will deny American Wind’s request for rehearing of the definition of “inputs 

to electric power production” so that it requires only reporting for sites for new 

generation capacity development that are located in load pockets where a “potential” for 

vertical market power may exist. Such a revision to the requirement is too narrowly 

focused and therefore would not allow the Commission to timely monitor for potential 

barriers to entry or affiliate abuse involving generation sites. Since load pockets typically 

exist in areas (e.g., population centers) that are not well-suited for the development of 

renewable generation sources (e.g., large wind farms requiring thousands of acres of 

land),25 limiting the reporting of sites for new generation development to just load 

pockets would mean that the Commission would not be informed of most instances 

where land was being acquired for the development of new renewable generation 

capacity.

 24 Id. 

25 See id. at 6 (stating that “in developing a 100 MW project using 1.5 MW wind 

turbines (approximately 65 turbines), a developer may seek to initially have under control 

10,000 acres of land.”). 
Docket No. RM04-7-006 - 13 -

 

17. With respect to American Wind’s alternative request that the Commission only 

require reporting for sites for new generation capacity development when site control is 

first required to be demonstrated in the interconnection process, we believe this approach 

has merit, as modified below. Modifications are necessary because it is not clear that 

American Wind’s request would address both its concerns about the disclosure of 

commercially sensitive information and the Commission’s regulatory concerns regarding 

a seller’s ability to erect barriers to entry through its acquisition of sites for new 

generation capacity development. First, the information provided in an interconnection 

request, including the demonstration of site control, is not required to be public.26 

Second, transmission providers post the location of interconnection requests on OASIS 

by county and state, but do not post the identity of the interconnection customer when the 

interconnection request is made “because disclosing the identity at that early stage may 

put the Interconnection Customer at a competitive disadvantage and its project at risk.”27 

Thus, the American Wind alternative approach would require the seller to report 

26 Standardization of Generator Interconnection Agreements and Procedures, 

Order No. 2003, FERC Stats. & Regs. ¶ 31,146, at P 270 (2003), order on reh’g, Order 

No. 2003-A, FERC Stats. & Regs. ¶ 31,160, order on reh’g, Order No. 2003-B, FERC 

Stats. & Regs. ¶ 31,171 (2004), order on reh’g, Order No. 2003-C, FERC Stats. & Regs. 

¶ 31,190 (2005), aff'd sub nom. Nat’l Ass’n of Regulatory Util. Comm’rs v. FERC, 475 

F.3d 1277 (D.C. Cir. 2007). 

27 Id. P 114. 
Docket No. RM04-7-006 - 14 -

 

information that in the interconnection process may be considered non-public and 

proprietary. While American Wind’s concerns about the disclosure of commercially 

sensitive information could be addressed by allowing sellers to file site information with 

the Commission confidentially, we do not believe that it is appropriate to routinely permit 

change in status reports to be filed at the Commission as non-public documents. One of 

the purposes of the change of status reporting requirement is to provide interested parties 

the opportunity to intervene and comment if they believe the seller’s acquisition of sites 

for new generation capacity development creates a barrier to entry, which could be 

undermined if such reports were routinely filed with confidential information redacted.28

18. Accordingly, in order to address our regulatory concerns and the concerns of 

American Wind, we grant rehearing and revise section 35.42 of our regulations to 

require, for all entities with market-based rate authorization, 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. For 

28 See Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 446; 1018 (explaining 

that the Commission will allow intervenors to rebut the presumption that a seller’s 

ownership of, control of or affiliation with entities that own or control inputs to electric 

power production do not allow a seller to raise entry barriers). 
Docket No. RM04-7-006 - 15 -

 

the purposes of this reporting requirement, we will use the definition of “site control” that 

is provided in section 1 of the Standard Large Generator Interconnection Procedures 

(LGIP).29 To the extent that a seller elects to make a monetary deposit so that it may 

demonstrate site control at a later time in the interconnection process,30 such deposit will 

trigger this quarterly reporting requirement instead of the demonstration of site control if 

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.31 

29 Section 1 of the LGIP adopted in Order No. 2003 defines “site control” as 

“documentation reasonably demonstrating: (1) ownership of, a leasehold interest in, or a 

right to develop a site for the purpose of constructing the Generating Facility; (2) an 

option to purchase or acquire a leasehold site for such purpose; or (3) an exclusivity or 

other business relationship between Interconnection Customer and the entity having the 

right to sell, lease or grant Interconnection Customer the right to possess or occupy a site 

for such purpose.” Order No. 2003, FERC Stats. & Regs. ¶ 31,146, LGIP § 1. The same 

requirements apply to small generators and wind generating facilities. See Order No. 

2006, FERC Stats. & Regs. ¶ 31,180, Small Generator Interconnection Procedures § 1.5; 

Interconnection for Wind Energy, Order No. 661, FERC Stats. & Regs. ¶ 31,186, order 

on reh’g, Order No. 661-A, FERC Stats. & Regs. ¶ 31,198 (2005). 

30 See LGIP § 3.3.1 (stating that “[t]o initiate an Interconnection Request, 

Interconnection Customer must submit all of the following: (i) a $10,000 deposit, (ii) a 

completed application in the form of Appendix 1, and (iii) demonstration of Site Control 

or a posting of an additional deposit of $10,000. Such deposits shall be applied toward 

any Interconnection Studies pursuant to the Interconnection Request. If Interconnection 

Customer demonstrates Site Control within the cure period specified in Section 3.3.3 

after submitting its Interconnection Request, the additional deposit shall be refundable; 

otherwise, all such deposit(s), additional and initial, become non-refundable.”). 

31 We note that if a term other than “site control” is used to describe the specific 

means by which site control is demonstrated in the interconnection process, then the 

(continued...) 
Docket No. RM04-7-006 - 16 -

ther 

ccurs.33 

 

All market-based rate sellers will be required 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.32 Such quarterly filings must be submitted within 30 days after the end 

of each quarter, e.g., by April 30 for the first quarter. Thus, the time period in which 

sellers are required to report the acquisition of control of sites for new generation 

capacity development is being extended, which will ease some of the administrative 

burden about which American Wind has raised concerns. For all changes in status o

than the acquisition of control of sites for new generation capacity development, all 

sellers will still be required to file a change in status report no later than 30 days after the

change in status o

reporting requirement will be triggered when a demonstration of site control is made 

under that term. For example, “site exclusivity” is considered as the specific means by 

which site control is determined in the California Independent System Operator’s 

(CAISO) Generator Interconnection Process Reform tariff amendment. See California 

Independent System Operator Corp., 124 FERC ¶ 61,292, at P 40-41, 63 (2008). 

Therefore, the demonstration of “site exclusivity” in the interconnection process set forth 

in the CAISO’s Generator Interconnection Process Reform tariff amendment will trigger 

the quarterly requirement to report a seller’s acquisition of control of a site or sites for 

new generation capacity development. 

32 In this context, “control” refers to “site control” as it is defined in the LGIP, or 

as explained in footnote 31. 

33 A change in status includes, but is not limited to, the following: 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 affiliation with any entity not disclosed in the application for market-based 

(continued...) 
Docket No. RM04-7-006 - 17 -

 

19. The quarterly reports that entities will be submitting to report the acquisition of 

control of a site or sites for new generation capacity development must include: (a) the 

number of sites acquired; (b) the relevant geographic market in which the sites are 

located;34 and (c) the maximum potential number of megawatts that are reasonably 

commercially feasible on the sites reported, which must be justified.35 The information 

regarding the maximum potential number of megawatts for the sites may be reported on 

an aggregate basis for each relevant geographic market(s) in which the site(s) are located, 

i.e., without providing the specific location of particular sites. Sellers must provide a 

justification for the number of megawatts that they estimate could be developed on the 

site or sites. Such justification must be based on the maximum potential number of 

megawatts that could be produced on the site with the technology for which the site was 

acquired. Sellers must be forthright in estimating and reporting the maximum potential 

number of megawatts that are reasonably commercially feasible on the site or sites for 

rate authority that owns or controls generation facilities or inputs to electric power 

production or that owns, operates or controls transmission facilities, or affiliation with 

any entity that has a franchised service area. See 18 CFR 35.42. 

34 The relevant geographic markets include those defined in Order No. 697 and 

those defined in subsequent Commission orders. Order No. 697, FERC Stats. & Regs. 

¶ 31,252 at P 231-32, 237. 

35 We note that if a site is later expanded to allow for additional generation 

capacity development and such expansion results in an increase of 100 megawatts or 

more, a seller will be required to file a notification of change in status to notify the 

Commission of such a change within 30 days after the end of that quarter. 
Docket No. RM04-7-006 - 18 -

new generation capacity development. The Commission will use all of this reported 

information to identify sellers that may be erecting barriers to entry. We will revise 

section 35.42 of our regulations to reflect this site acquisition change to the change in 

status reporting requirement.

20. Separate and apart from the above reporting requirement, and in order to address 

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

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

generation capacity from being developed on that land, 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 (as discussed 

above) 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. 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. Thus, for example, if a Seller acquires land for new 

generation capacity development in January 2009, and additional land in March 2009 and 

it has not demonstrated site control for generation projects on that land (as described 

above) as of January and March 2012, respectively, then such Seller must file a change in 

status report notifying the Commission of both acquisitions by January 1, 2013. The 
Docket No. RM04-7-006 - 19 -

information that must be provided and the aggregation of the maximum potential number 

of megawatts by relevant geographic market is the same as required in the quarterly 

reports, as described above. We will revise section 35.42 of our regulations to reflect this 

additional change to the change in status reporting requirement.

21. Finally, for acquired, leased or optioned land lacking site control that have already 

been held for three years or more prior to the effective date of this order, a Seller must 

report the required information by January 1, 2010, unless this information has been 

previously provided to the Commission. 

22. We believe that our revision to this requirement strikes a balance by addressing 

American Wind’s concern regarding the burden of the existing requirement and its 

concern that commercially sensitive information about sites for wind generation 

development will be made public, and by also providing the Commission with the 

information necessary to evaluate a seller’s ability to erect barriers to entry. In particular, 

permitting the information on sites for new generation capacity development to be 

provided on an aggregate basis for each relevant geographic market reduces any potential 

competitive harm that could result from reporting the location of the sites (since reporting 

will be on an aggregate basis), and also enables the Commission, which evaluates vertical 

market power by examining the relevant geographic market in which a seller is located, 

to obtain the information it needs to evaluate a seller’s ability to exercise market power in 

a particular relevant geographic market. Requiring quarterly (and yearly, as necessary) 
Docket No. RM04-7-006 - 20 -

reporting of sites acquired for new generation capacity development also reduces the 

administrative burden on sellers, which previously were required to report the acquisition 

of sites within 30 days of the acquisition. In addition, requiring reporting on a quarterly 

basis (and yearly, as necessary) will likely reduce any potential competitive harm that 

could result from the disclosure of the nominal information regarding the location of the 

site or sites for new generation capacity development. Further, in their applications for 

market-based rate authority and their updated market power analyses, sellers are 

obligated to make an affirmative statement that they have not erected barriers to entry 

into the relevant market and will not erect barriers to entry into the relevant market. This 

continuing obligation provides assurance to the Commission that a seller is not erecting 

barriers to entry.36

B. Mitigation

Protecting Mitigated Markets

Sales at the Metered Boundary

Background

23. In Order No. 697, the Commission stated 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 said it would allow 

 36 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 447. 
Docket No. RM04-7-006 - 21 -

 

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.37 The Commission also adopted a requirement that mitigated 

sellers wishing to make market-based rate sales at the metered boundary between a 

balancing authority area in which the seller was found, or presumed, to have market 

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

maintain sufficient documentation and use a specific tariff provision for such sales.38

24. On rehearing 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.39 

37 Id. 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)). 

38 Id. P 830. 

39 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 333. 
Docket No. RM04-7-006 - 22 -

 

25. In addition, after considering comments regarding the difficulty of determining 

and documenting intent, the Commission decided in Order No. 697-A to eliminate the 

intent element of the tariff provision, which stated that “any power sold hereunder is not 

intended to serve load in the seller’s mitigated market.” Because the Commission 

eliminated the seller’s intent requirement, it modified the tariff 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.”40 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.”41 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. 

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

Companies (Pinnacle), the Commission also clarified in Order No. 697-A that mitigated 

sellers and their affiliates are prohibited from selling power at market-based rates in the 

40 Id. P 334. 

41 Id. n.464. 
Docket No. RM04-7-006 - 23 -

 

balancing authority area in which a seller is found, or presumed, to have market power.42 

Accordingly, the Commission clarified that an affiliate of a mitigated seller is prohibited 

from selling power that was purchased at a market-based 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 stated 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.43

27. 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.” For this reason, the Commission revised the tariff 

provision for market-based rate sales at the metered boundary, which included revising 

the provision stating that the “Seller and its affiliates do not sell the same power back into 

the balancing authority area where the seller is mitigated,” 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 

42 Id. P 335. 

43 Id. P 336. 
Docket No. RM04-7-006 - 24 -

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

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

selling power into the mitigated market through its affiliates. It also explained that sellers 

may choose to make no market-based rate sales at the metered boundary, or to limit such 

sales to end users of the power, thereby eliminating the danger they will violate their 

tariff by re-selling power back into a balancing authority in which they are mitigated.44 

Requests for Rehearing 

28. On rehearing of Order No. 697-B, E.ON again takes issue with the mitigated sales 

tariff provision, arguing that the Commission erred in revising the mitigated sales tariff 

provision in Order No. 697-B. E.ON contends that the revised tariff provision is 

overbroad and prohibits legitimate transactions. It argues that the tariff provision should 

be revised to state that “ii) if the Seller wants to sellsells 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 at the same border 

for delivery at the same time except pursuant to long-term (one-year or longer) 

agreements or as a result of changed circumstances.”45 E.ON argues that, as revised in 

 44 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). 

45 E.ON January 21, 2009 Rehearing Request at 3, 5. 
Docket No. RM04-7-006 - 25 -

 

Order No. 697-B, the tariff provision governing mitigated sales does not expressly state 

that a border sale need actually occur. E.ON suggests that the Commission should 

change the words “wants to sell” to “sells” to eliminate any risk of misinterpretation. In 

support of its proposal, 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. E.ON believes that the Commission intended only to stop the “looping” of power in 

a manner that circumvents the mitigation imposed on an entity.46 

29. E.ON also argues that the mitigated sales tariff provision should contain an 

exemption for retail or wholesale cost-based requirements contracts into the mitigated 

balancing authority area from the outside so that long-term purchases from outside a 

mitigated market used to serve retail or cost-based wholesale requirements customers do 

not restrict the ability of a mitigated seller from making a spot “outbound” border sale. 

According to E.ON, failure to modify the condition in this manner would severely restrict 

the ability of its public utility subsidiaries Louisville Gas and Electric Company and 

Kentucky Utilities Company to make truly “outbound” off-system sales at the border of 

their control area, leading to higher prices.47 E.ON also proposes adding language to the 

46 Id. at 8. 

47 Id. at 10. 
Docket No. RM04-7-006 - 26 -

 

condition so as to carve out long-term agreements of one-year or more in duration that 

provide for the sale of power into the mitigated market from the outside. E.ON contends 

that as revised in Order No. 697-B, the mitigated sales tariff provision could prohibit 

transactions necessitated by reserve sharing agreements or changed operational 

circumstances, and could have a chilling effect on forward contracting by forcing 

mitigated sellers to only transact in real time because of their concerns that they may 

guess wrong and need to buy power at the last minute if they are short, or sell power at 

the last minute if called upon under a reserve sharing agreement.48 In addition, E.ON 

asserts that the revised mitigated sales tariff provision could prohibit opportunity 

purchases by utilities that seek to reduce the costs of serving load.49

30. Pinnacle, too, seeks further revision to the mitigated sales tariff provision and 

argues that the Commission erred in linking all market-based rate sales made at the 

metered boundary to all incoming sales into a mitigated balancing authority area. 

Pinnacle requests that the Commission clarify that making a border sale does not prohibit 

all future sales of a mitigated seller or its affiliates from entering the mitigated balancing 

authority area. It states that, at a minimum, the Commission should clarify that it does 

not intend for the revised provision to capture cost-based sales into or out of a mitigated 

48 Id. at 12. 

49 Id. at 13. 
Docket No. RM04-7-006 - 27 -

 

balancing authority area.50 Pinnacle states that if the revised provision is interpreted to 

prohibit any subsequent sales of a mitigated seller or its affiliates from entering the 

mitigated balancing authority area, this would completely preclude the mitigated seller 

from selling into the mitigated balancing authority area. Such a result, Pinnacle contends, 

could endanger the stability of the Phoenix Valley Load Pocket in the event of an 

emergency,51 and could result in Pinnacle violating its must-offer requirements. 

Specifically, Pinnacle states that if it is not permitted to make sales into the mitigated 

balancing authority area, or is effectively prohibited from making sales at border points, 

its posting of available capacity will be less effective for the Southwest in that Pinnacle 

would have to withhold available generation due to its inability to make sales in certain 

areas.52

31. MidAmerican Energy Company (MidAmerican) and American Electric Power 

Service Corporation (AEP) also seek rehearing of the mitigated sales tariff provision as 

revised in Order No. 697-B. These petitioners argue that the Commission erred in 

adopting an overly broad mitigation provision that could restrict legitimate transactions. 

They contend that under the tariff provision adopted in Order No. 697-B, mitigated 

50 Pinnacle January 21, 2009 Rehearing Request at 5. 

51 Id. at 3-4. 

52 Id. at 4. 
Docket No. RM04-7-006 - 28 -

 

utilities are presented with three alternatives, each of which “unnecessarily and unfairly” 

disadvantages their customers: (i) decline to make market-based rate sales and thereby 

forego revenues used to reduce system costs; (ii) decline to import power from “the 

outside” and thereby forego least-cost resources that could be used to reliably serve load 

and make sales within the mitigated market; or (iii) make sales to customers within the 

mitigated market at prices that may not recover incremental costs, thereby unfairly 

subsidizing those transactions.53 MidAmerican and AEP therefore assert that the 

Commission should rescind Order No. 697-B’s revision and revert to the mitigated sales 

tariff provision adopted in Order No. 697. According to these petitioners, the tariff 

provision adopted in Order No. 697 captures transactions purposefully structured to 

evade mitigation while permitting utilities to continue to engage in legitimate transactions 

from the “outside,” even when energy scheduled under those transactions subsequently is 

reflected in the price for opportunity sales made within the balancing authority area.54

32. MidAmerican and AEP argue that if the Commission declines to grant rehearing, 

it should clarify that the mitigated sales tariff provision applies only to short-term 

purchases made from the “outside” by the mitigated seller and not to deliveries scheduled 

from the mitigated seller’s own generation originating “outside” the mitigated balancing 

53 MidAmerican January 21, 2009 Rehearing Request at 6. 

54 Id. at 7-8. 
Docket No. RM04-7-006 - 29 -

 

authority area or from long-term capacity contracts entered into to meet load 

requirements. These petitioners contend that these arrangements “do not involve the 

Commission’s ricochet concern and should not be swept within the Order No. 697-B 

mitigation provision.”55

33. Xcel Energy Services Inc. (Xcel) requests clarification that the prohibition on 

sales into the mitigated balancing authority area does not prevent a mitigated seller from 

engaging in a purchase of economy power from outside the mitigated balancing authority 

area in order to lower costs for serving native load. It argues that mitigated sellers that 

make sales of power at border locations may have opportunities to enter into legitimate 

economy purchases outside the balancing authority area that would serve to lower overall 

generation costs to their native load customers. Xcel contends that one mitigation option 

is to “track the power from a border sale with the possibility of retroactive re-pricing.”56

34. Xcel requests clarification that mitigated sellers are only prohibited from making 

sales into a mitigated balancing authority area if the seller is simultaneously engaged in a 

sale at the metered boundary.57 In support of this request, Xcel argues that during 

periods when the seller is not making sales at the border of its mitigated balancing 

55 Id. at 8. 

56 Xcel January 21, 2009 Request for Clarification at 7. 

57 Id. at 5. 
Docket No. RM04-7-006 - 30 -

s 

ation 

rity area. 

 

authority area, there would be no way for the seller or its affiliates to benefit from their 

market power in the mitigated balancing authority area through a sale that originate

outside of that mitigated balancing authority area.58 Xcel therefore asks for clarific

that it is permitted to enter into a sale at a delivery point located outside of the mitigated 

balancing authority area to a counterparty within the balancing autho

35. The Edison Electric Institute (EEI) likewise seeks rehearing of the mitigated 

sales tariff provision as set forth in Order No. 697-B.59 EEI contends that the revised 

provision will unnecessarily constrain sales by mitigated sellers and their affiliates to the 

detriment of customers in all markets. EEI argues that as revised in Order No. 697-B, the 

mitigated sales tariff provision could be interpreted to prohibit all sales by mitigated 

sellers and their affiliates into a mitigated market from the outside if the sellers opt to 

engage in one or more metered boundary sales. EEI asserts that this interpretation would 

completely exclude all sales into the mitigated balancing authority area by a mitigated 

seller and its affiliates, removing these sellers from the marketplace and exacerbating any 

58 Id. at 8. 

59 We note that EEI’s request for rehearing of the mitigated sales tariff provision is 

out-of-time insofar as EEI did not raise issues concerning mitigated sales at the metered 

boundary on rehearing of Order Nos. 697 and 697-A and appears to be an attempt to relitigate the determinations made by the Commission in those orders. 
Docket No. RM04-7-006 - 31 -

 

potential imbalance of market power in the mitigated balancing authority area.60 EEI 

contends that the revised tariff language could be interpreted to violate certain must-offer 

and load-following requirements. 

36. EEI argues that the Commission should return to the intent-based concept 

adopted in Order No. 697, while also identifying five types of transactions that would be 

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

engage in market-based rate sales at the metered boundary.61 EEI asserts that the 

following five types of transactions should be permitted without first needing to 

demonstrate intent, even if a mitigated seller does engage in market-based rate border 

sales: (1) sales at “liquid trading hubs” or into ISO and RTO markets outside of the 

seller’s mitigated market; (2) cost-based sales in which title transfers within the mitigated 

market (whether they are sourced and sunk in the mitigated market, are sourced “into” 

the mitigated market from the outside by the seller or its affiliates, or are wheeled “out 

of” the mitigated market by a purchaser); (3) 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 

60 EEI January 22, 2009 Corrected Rehearing Request at 5-6. 

61 Id. at 3. 
Docket No. RM04-7-006 - 32 -

 

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

mitigated seller); (4) 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 loadfollowing power; and (5) to bolster reliability, the Commission 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 outside, to 

withhold making those sales during times at which the seller or affiliates are called on to 

act to maintain system reliability. EEI argues that at a minimum, the Commission should 

clarify that the border sales constraints will not prevent emergency sales, sales that are 

required to maintain reserve levels or to comply with system redispatch obligations, or 

sales that are otherwise authorized by the Commission either generically or case-bycase.62

37. EEI also includes an expedited motion for partial stay in its rehearing request in 

which it asks that the Commission stay the effectiveness of the border sales constraints 

set forth in Order Nos. 697, 697-A and 697-B until at least 30 days after the Commission 

has acted on the merits of EEI’s request for rehearing.63 

62 Id. at 8-9. 

63 Id. at 9. 
Docket No. RM04-7-006 - 33 -

 

38. Separately, Tampa Electric submitted a motion for an extension of time to 

comply with the revised mitigated sales tariff provision set forth in Order No. 697-B. 

Tampa Electric requests that the Commission defer the effective date of the modified 

language governing mitigated sales at the metered boundary pending Commission action 

on requests for rehearing of Order No. 697-B on this issue.64 Tampa Electric also states 

that it supports EEI’s request for rehearing. 

39. On January 27, 2009, the National Rural Electric Cooperative Association 

(NRECA) and the American Public Power Association (APPA) filed an answer in 

response to EEI’s motion for partial stay. NRECA and APPA argue that EEI’s motion 

for partial stay should be denied because EEI does not demonstrate that a stay is 

appropriate. They argue that EEI does not specify any irreparable injury that EEI or its 

member companies will suffer absent a stay, does not address whether the requested stay 

would substantially harm other parties, and does not show that the stay is in the public 

interest. They point out that EEI’s request for rehearing is the third time in this 

proceeding that sellers have requested the Commission to modify the restrictions on 

64 In its request for an extension of time to comply with the revised mitigated sales 

tariff provision, Tampa Electric states that it supports EEI’s request for rehearing. On 

January 28, 2009, the Commission issued an order granting Tampa Electric’s request for 

an extension of time to comply with the tariff provision on mitigated sales at the metered 

boundary as revised in Order No. 697-B until such time as the Commission issues an 

order on rehearing of Order No. 697-B. Order Granting Extension of Time to Comply, 

126 FERC ¶ 61,072; see supra P 6. 
Docket No. RM04-7-006 - 34 -

market-based sale at the metered boundaries of mitigated balancing authority areas.65 

NRECA and APPA also argue that ending all restrictions on market based rate sales at 

the metered boundary of balancing authority areas in which a seller is mitigated, even 

temporarily, would harm wholesale markets and customers.66

Commission Determination

 Procedural Issues

40. We find that EEI does not provide the required justification for a stay of the 

mitigated sales tariff provision. Under section 705 of the Administrative Procedure Act 

(APA), the Commission may stay its action when it finds that “justice so requires.”67 In 

addressing motions for stay, the Commission considers: (1) whether the moving party 

will suffer irreparable injury without a stay; (2) whether issuing a stay will substantially 

harm other parties; and (3) whether a stay is in the public interest.68 The Commission’s 

general policy is to refrain from granting a stay of its orders, to assure definiteness and 

 65 NRECA and APPA January 27, 2009 Answer at 1-2. 

66 Id. at 3-4. 

67 5 U.S.C. § 705 (2006). 

68 Pinnacle West Capital Corp., 115 FERC ¶ 61,064, at P 8 (2006) (citing CMS 

Midland, Inc., Midland Cogeneration Venture Limited Partnership, 56 FERC ¶ 61,177, at 

61,361 (1991), aff’d sub nom. Michigan Municipal Cooperative Group v. FERC, 990 

F.2d 1377 (D.C. Cir. 1993), cert. denied, 510 U.S. 990 (1993)). 
Docket No. RM04-7-006 - 35 -

 

finality in Commission proceedings.69 The key element in the inquiry is irreparable 

injury to the moving party.70 If a party is unable to demonstrate that it will suffer 

irreparable harm absent a stay, we need not examine the other factors.71 However, the 

Commission may examine the other factors where appropriate.72

41. EEI’s request for stay does not address whether it will suffer irreparable injury 

without a stay of the mitigated sales tariff provision, and also does not address whether 

issuing a stay will substantially harm other parties or whether a stay is in the public 

interest. Rather, EEI’s request for stay consists only of the following statement: 

“[g]iven the serious, negative potential effects of the border sales related constraints set 

out in Orders No. 697, 697-A, and 697-B on market participants and customers in 

mitigated and non-mitigated markets, EEI requests that the Commission stay the 

effectiveness of those constraints until at least 30 days after the Commission has acted on 

69 Id. 

70 Id. 

71 CMS Midland, Inc., Midland Cogeneration Venture Limited Partnership, 

Midland Cogeneration Venture Limited Partnership, 56 FERC ¶ 61,177, at 61,631 (1991) 

(footnote omitted). 

72 Pinnacle West Capital Corp., 115 FERC ¶ 61,064, at P 8 (2006) (citing The 

Montana Power Company, Confederated Salish and Kootenai Tribes of the Flathead 

Reservation, 85 FERC ¶ 61,400, at 62,535 (1998)). 
Docket No. RM04-7-006 - 36 -

the merits of EEI’s request for rehearing.”73 This claim is too broad and speculative to 

justify the granting of injunctive relief.74 We also note that EEI did not raise issues 

concerning mitigated sales at the metered boundary on rehearing of Order Nos. 697 and 

697-A. Because EEI fails to provide the required justification for a stay of the mitigated 

sales tariff provision, EEI’s motion for a partial stay is denied.75

Substantive Issues

42. We deny the requests for rehearing concerning the mitigated sales tariff 

provision. However, we agree with E.ON that the tariff provision should be revised to 

 73 EEI January 21, 2009 Rehearing Request at 9. 

74 In Wisconsin Gas v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985) the court stated 

that, to meet the irreparable injury test for granting a stay: 

First, the injury must be both certain and great; it must be actual and not 

theoretical. Injunctive relief “will not be granted against something merely 

feared as liable to occur at some indefinite time,” Connecticut v. 

Massachusetts, 282 U.S. 660, 674, 75 L. Ed. 602, 51 S. Ct. 286 (1931); the 

party seeking injunctive relief must show that “the injury complained of [is] 

of such imminence that there is a ‘clear and present’ need for equitable 

relief to prevent irreparable harm.” Ashland Oil, Inc. v. FTC, 409 F. Supp. 

297, 307 (D.D.C.), aff’d, 179 U.S. App. D.C. 22, 548 F.2d 977 (D.C. Cir. 

1976) (citations and internal quotations omitted). 

75 In granting Tampa Electric’s 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 clarified that affected entities must continue to comply with the 

mitigated sales tariff provision adopted in Order No. 697-A until such time as the 

Commission acts on the requests for rehearing of Order No. 697-B. Order Granting 

Extension of Time to Comply, 126 FERC ¶ 61,072. 
Docket No. RM04-7-006 - 37 -

 

state “if the Seller sells” instead of “if the Seller wants to sell....” We clarify 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. We affirm our 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 sell power into the mitigated 

market either directly or through its affiliates. Thus, we will revise the mitigated sales 

tariff provision to provide 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.” 76 Petitioners’ arguments 

on rehearing of Order No. 697-A indicated that they cannot guarantee that sales at the 

metered boundary ultimately serve load in a competitive market beyond the balancing 

authority area where the seller is mitigated.77 As explained in Order No. 697, “[a]llowing 

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 

76 Order No. 697-B, FERC Stats. & Regs. ¶ 31,285 at Appendix C. 

77 Id. P 66-67, 69; E.ON May 21, 2008 Rehearing Request at 12-14, Pinnacle May 

21, 2008 Rehearing Request at 4-6. 
Docket No. RM04-7-006 - 38 -

 

and not unduly discriminatory.”78 Accordingly, mitigated sellers and their affiliates are 

prohibited from selling power at market-based rates in the balancing authority area in 

which the seller is found, or presumed, to have market power.79 Thus, we affirm the 

Commission’s 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 sell power into the mitigated market either directly or through 

its affiliates. We also reiterate that mitigated sellers may choose to make no marketbased 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.80 

78 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 819. The Commission also 

stated “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.” Id.; see also Westar Energy, Inc. v. FERC, No. 08-1196, slip 

op. at 5 (D.C. Cir. June 12, 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. 

79 See Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 335. 

80 Id. P 336. 
Docket No. RM04-7-006 - 39 -

43. With respect to petitioners’ arguments that the mitigated sales tariff provision 

adopted in Order No. 697-B interferes with must-offer and reliability requirements, 

reserve sharing agreements, and cost-based requirement contracts, we note 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. 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. 

Moreover, we note that our 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. Of the rehearing requests that have been filed in this proceeding on 

this issue, none have identified in this rehearing why it is burdensome or unreasonably 

costly for sellers to enter into new power sales agreements where title transfers at or 

beyond the metered boundary between the mitigated and non-mitigated balancing 
Docket No. RM04-7-006 - 40 -

 

authority areas.81 Given that many petitioners have acknowledged that the approaches in 

Order No. 697 and 697-A would be extremely difficult to enforce because even the 

sellers themselves cannot guarantee that power sold on the seller’s side of the metered 

boundary will not somehow find its way back into the restricted market, we do not 

believe it is appropriate to return to a rule that is difficult not only for sellers to comply 

with but also for the Commission to enforce. Such an impracticable rule will not enable 

the Commission to ensure that market power is not being exercised in the restricted 

market. 

44. With respect to petitioners’ requests that the Commission return to the intentbased concept first used in Order No. 697, we note that in Order No. 697-A, the 

Commission revised the mitigated sales tariff provision to remove the intent element in 

response to petitioners’ requests, including Pinnacle, who questioned how the 

Commission could ensure that a mitigated seller knows what an unaffiliated buyer 

intends to do with power, and complained that it is difficult and administratively 

81 As the Court of Appeals for the District of Columbia Circuit recently confirmed, 

“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-mitigated areas, 

instead of inside a mitigated area.” Westar Energy, Inc. v. FERC, No. 08-1196, slip op. 

at 5 (D.C. Cir. June 12, 2009) (citation omitted). 
Docket No. RM04-7-006 - 41 -

 

burdensome to determine and document intent.82 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. On rehearing of 

Order No. 697-B, petitioners have not provided any new arguments that persuade us that 

returning to the intent-based concept first used in Order No. 697 will not present the same 

problems regarding the ability to determine and document intent. 

45. In addition, the mitigated sales tariff provision in Appendix C of Order 

Nos. 697-A and 697-B inadvertently omitted language that was included in the provision 

adopted in Order No. 697. Accordingly, we will revise the tariff provision for marketbased rate sales at the metered boundary as follows (bold font indicates new text): 

Sales of energy and capacity are permissible under this tariff in all 

balancing authority areas where the Seller has been granted market-based 

rate authority. Sales of energy and capacity under this tariff are also 

permissible at the metered boundary between the Seller’s mitigated 

balancing authority area and a balancing authority area where the Seller has 

been granted market-based rate authority provided: (i) legal title of the 

power sold transfers at the metered boundary of the balancing authority 

area where the seller has market-based rate authority; and (ii) 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. Seller must retain, for 

a period of five years from the date of the sale, all data and information 

related to the sale that demonstrates compliance with items (i) and 

(ii) above. 

82 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 334. 
Docket No. RM04-7-006 - 42 -

46. Sellers that have already adopted the tariff language prescribed in Order 

No. 697-B are directed to revise the provision in accordance with this order on the next 

occasion when they otherwise would be required to file revised tariff sheets with the 

Commission, a change in status filing, or triennial review.83 

C. Implementation Process

 Clarifications on Implementation Process

Background

47. In Order No. 697, to ensure greater consistency in the data used to evaluate 

Category 2 sellers, the Commission modified the timing for the submission of updated 

market power analyses. Order No. 697 requires analyses to be filed for each seller’s 

region on a pre-determined schedule, rotating by geographic region where two regions 

are reviewed each year, with the cycle repeating every three years.84 In Order No. 697-

A, the Commission provided additional guidance regarding the implementation process. 

In particular, it explained that in the December 14 Clarification Order, it clarified tha

“transmission-owning

t 

 utilities with market-based rate authority and their affiliates with 

market-based rate authority are the entities required to file their updated market power 

 83 The revised tariff language set forth in the paragraph above is effective as of the 

effective date of Order No. 697-A. 

84 See Order No. 697, FERC Stats. & Regs. ¶ 31,252 at Appendix D. The regions 

include the Northeast, Southeast, Central, Southwest Power Pool, Southwest, and 

Northwest. 
Docket No. RM04-7-006 - 43 -

 

analyses first in each region.”85 Accordingly, in Order No. 697-A, the Commission 

revised Appendix D to make clear that transmission owners and their affiliates have 

earlier filing periods than other entities required to file in each region.86 

48. Upon further review of the Schedule for All Other Entities provided at 

Appendix D-2 to Order No. 697-A, it has come to our attention that the list of entities 

required to file updated market power analyses omits the 2010 filing dates for Southwest 

and Northwest non-transmission owning entities.87 Accordingly, we will revise 

Appendix D to add the following: 

85 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 374 (citing December 14 

Clarification Order, 121 FERC ¶ 61,260 at P 9) (emphasis in original). 

86 Id. 

87 These entities were included in the Regional Market Power Update Schedule 

provided in Appendix D to Order No. 697. 
Docket No. RM04-7-006 - 44 -

Appendix D – 2 

Schedule for All Other Entities 

Entities Required to File 

Filing Period 

(Anytime During 

the Month) 

Study Period 

 

Others in Southwest that 

did not file in December 

and have not been found to 

be Category 1 sellers. 

June, 2010 Dec. 1, 2009 - Nov. 30, 2010 

Others in Northwest that 

did not file in June and 

have not been found to be 

Category 1 sellers. 

December, 2010 Dec. 1, 2009 - Nov. 30, 2010 

IV. Information Collection Statement

49. The Office of Management and Budget (OMB) regulations require that OMB 

approve certain information collection requirements imposed by an agency.88 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 

 88 5 CFR 1320.11. 
Docket No. RM04-7-006 - 45 -

does not add to these requirements. Accordingly, a copy of this order will be sent to 

OMB for informational purposes only. 

V. Document Availability

50. 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, N.E., Room 2A, 

Washington D.C. 20426. 

51. 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. 

52. 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. 
Docket No. RM04-7-006 - 46 -

VI. Effective Date

53. Changes adopted in this order on rehearing will become effective [insert date 

30 days from publication in FEDERAL REGISTER]. 

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. RM04-7-006 - 47 -

 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. RM04-7-006 - 48 -

 (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: (a) the number of sites acquired; (b) the 
Docket No. RM04-7-006 - 49 -

relevant geographic market in which the sites are located; and (c) the maximum potential 

number of megawatts (MW) that are reasonably commercially feasible on the sites 

reported. 

 (e) A Seller must report to the Commission 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 new generation capacity development 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. 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. The information that must be provided and the aggregation of the maximum 

potential number of megawatts by relevant geographic market is the same as required in 

the quarterly reports, as described in paragraph (d) of this section. 

 (f) 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). 
Docket No. RM04-7-006 - 50 -

Note: The following appendix will not be published in the Code of Federal 

Regulations. 

Appendix C to Order No. 697-C

* * * * * 

Mitigated Sales

Sales of energy and capacity are permissible under this tariff in all balancing authority 

areas where the Seller has been granted market-based rate authority. Sales of energy and 

capacity under this tariff are also permissible at the metered boundary between the 

Seller’s mitigated balancing authority area and a balancing authority area where the 

Seller has been granted market-based rate authority provided: (i) legal title of the power 

sold transfers at the metered boundary of the balancing authority area where the seller has 

market-based rate authority; and (ii) 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. Seller must retain, 

for a period of five years from the date of the sale, all data and information related to the 

sale that demonstrates compliance with items (i) and (ii) above. 

* * * * * 
Docket No. RM04-7-006 - 51 -

Appendix D – 2 

Schedule for All Other Entities 

Entities Required to File 

Filing Period 

(Anytime During 

the Month) 

Study Period 

 

All others in Northeast that 

did not file in December 

including all power 

marketers that sold in the 

Northeast. 

June, 2008 Dec. 1, 2005 - Nov. 30, 2006 

All others in Southeast that 

did not file in June 

including all power 

marketers that sold in the 

Southeast and have not 

already been found to be 

Category 1 sellers. 

December, 2008 Dec. 1, 2005 - Nov. 30, 2006 

All others in Central that 

did not file in December 

including all power 

marketers that sold in the 

Central and have not 

already been found to be 

Category 1 sellers. 

June, 2009 Dec. 1, 2006 - Nov. 30, 2007 

All others in SPP that did 

not file in June including 

all power marketers that 

sold in SPP and have not 

already been found to be 

Category 1 sellers. 

December, 2009 Dec. 1, 2006 - Nov. 30, 2007 
Docket No. RM04-7-006 - 52 -

Entities Required to File 

Filing Period 

(Anytime During 

the Month) 

Study Period 

Others in Southwest that 

did not file in December 

and have not been found to 

be Category 1 sellers. 

June, 2010 Dec. 1, 2009 - Nov. 30, 2010 

Others in Northwest that 

did not file in June and 

have not been found to be 

Category 1 sellers. 

December, 2010 Dec. 1, 2009 - Nov. 30, 2010 

Others in Northeast that 

did not file in December 

and have not been found to 

be Category 1 sellers. 

June, 2011 Dec. 1, 2008 - Nov. 30, 2009 

Others in Southeast that 

did not file in June and 

have not been found to be 

Category 1 sellers. 

December, 2011 Dec. 1, 2008 - Nov. 30, 2009 

Others in Central that did 

not file in December and 

have not been found to be 

Category 1 sellers. 

June, 2012 Dec. 1, 2009 - Nov. 30, 2010 

Others in SPP that did not 

file in June and have not 

been found to be Category 

1 sellers. 

December, 2012 Dec. 1, 2009 - Nov. 30, 2010 

Others in Southwest that 

did not file in December 

and have not been found to 

be Category 1 sellers. 

June, 2013 Dec. 1, 2010 - Nov. 30, 2011 
Docket No. RM04-7-006 - 53 -

Entities Required to File 

Filing Period 

(Anytime During 

the Month) 

Study Period 

Others in Northwest that 

did not file in June and 

have not been found to be 

Category 1 sellers. 

December, 2013 Dec. 1, 2010 - Nov. 30, 2011