135 FERC ¶ 61,137 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Marc Spitzer, Philip D. Moeller, 

 John R. Norris, and Cheryl A. LaFleur. 

Promoting a Competitive Market for Capacity 

Reassignment 

Docket No. RM10-22-001 

ORDER NO. 739-A 

ORDER ON REHEARING AND CLARIFICATION 

(Issued May 19, 2011) 

1. On September 20, 2010, the Federal Energy Regulatory Commission 

(Commission) issued a Final Rule in this proceeding that revised the pro forma open 

access transmission tariff (OATT) to lift the price cap for sales of reassigned electric 

transmission capacity beyond the end of a two-year study period.1

 This action was 

intended to facilitate the development of a market for electric transmission capacity 

reassignments as a competitive alternative to primary transmission capacity. Powerex 

Corp. (Powerex) and Portland General Electric Co. (PGE) filed requests for clarification 

or, in the alternative rehearing. They request that the Commission clarify, or find on 

rehearing, that certain rate schedules, approved by the Commission in separate 

proceedings, that have allowed Powerex, PGE, and other transmission customers within 

Bonneville Power Administration’s (Bonneville) service area to make reassignments of 

electric transmission capacity via bilateral sales at negotiated rates remain operative. In 

addition, Powerex seeks clarification on how opportunity costs should be calculated 

under the price cap provisions of Bonneville’s OATT. In this order, we deny the requests 

for rehearing and clarification. 

1 Promoting a Competitive Market for Capacity Reassignment, Order No. 739, 132 

FERC ¶ 61,238 (2010). 
Docket No. RM10-22-001 - 2 - 

I. Background

2. To foster the development of a more robust secondary market for transmission 

capacity, the Commission, in Order No. 890, concluded that it was appropriate to lift the 

price cap for all transmission customers reassigning transmission capacity.2

 The 

Commission stated that this would allow transmission capacity to be allocated to those 

entities that value it most, thereby sending more accurate price signals to identify the 

appropriate location for construction of new transmission facilities to reduce congestion.3

 

The Commission also found that market forces, combined with the requirements of the 

pro forma OATT as modified in Order No. 890, would limit the ability of resellers, 

including affiliates of the transmission provider, to exert market power. 

3. The Commission directed staff to closely monitor the reassignment-related data 

submitted by transmission providers in their quarterly reports to identify any problems in 

the development of the secondary market for transmission capacity and, in particular, the 

potential exercise of market power.4

 The Commission also directed staff to prepare, 

within six months of receipt of two years of quarterly reports, a report summarizing its 

findings.5

 In addition, the Commission encouraged market participants to provide 

feedback regarding the development of the secondary electric transmission capacity 

market and, in particular, to contact the Commission’s Enforcement Hotline if concerns 

arise. 

4. In Order No. 890-A, the Commission affirmed its decision to remove the price cap 

on reassignments of electric transmission capacity but granted rehearing to limit the 

period during which reassignments may occur above the cap.6

 The period was limited so 

 2 Preventing Undue Discrimination and Preference in Transmission Service, 

Order No. 890, FERC Stats. & Regs. ¶ 31,241, at P 808 (2007), order on reh'g, Order No. 

890-A, FERC Stats. & Regs. ¶ 31,261 (2007), order on reh’g, Order No. 890-B, 123 

FERC ¶ 61,299 (2008), order on reh’g, Order No. 890-C, 126 FERC ¶ 61,228 (2009), 

order on clarification, Order No. 890-D, 129 FERC ¶ 61,126 (2009). 

3

 Order No. 890, FERC Stats. & Regs. ¶ 31,241 at P 808. 

4 Id. P 820. 

5 Id. 

6

 Order No. 890-A, FERC Stats. & Regs. ¶ 31,261 at P 388, 390. 
Docket No. RM10-22-001 - 3 - 

 

that the Commission could review the Staff Report to see if changes were needed based 

on the actual operation of the reassignment program. Accordingly, the Commission 

amended section 23.1 of the pro forma OATT to reinstate the price cap as of October 1, 

2010.7

 Commission staff published its report on the two-year study period on April 15, 

2010.8

 

5. Based on its experience regulating capacity reassignment markets and the twoyear study, the Commission issued Order No. 739, which lifted the price cap for all 

electric transmission customers reassigning transmission capacity beyond October 1, 

2010. To implement this reform, the Commission revised section 23 of the pro forma 

OATT and directed transmission providers to file conforming changes within 30 days 

from publication of the Final Rule in the Federal Register. The Commission also denied 

a request from Bonneville for a blanket waiver for non-jurisdictional entities that are 

unable to satisfy reciprocity conditions with regard to the reassignment of transmission 

capacity. 

6. In its comments to the notice of proposed rulemaking, Powerex expressed concern 

that Bonneville would reinstate the price cap as of October 1, 2010 and asked the 

Commission to clarify that Powerex’s stand-alone rate schedule (used for capacity 

reassignment) would remain effective beyond October 1, 2010 and to provide guidance 

on how to calculate the price cap based on the assignor’s opportunity costs capped at the 

cost of expansion. In the Final Rule, the Commission found Powerex’s concern to be 

premature since Bonneville had not made a final decision about re-instating the price cap 

as of October 1, 2010. The Commission noted that, when Bonneville submitted its tariff 

revisions pursuant to Order No. 890, it declined to adopt certain pro forma provisions 

related to the reassignment of transmission capacity and several transmission customers, 

within Bonneville, including Powerex, filed stand-alone rate schedules allowing them to 

sell transmission capacity above the price cap.9

 The Commission indicated that these 

(continued...) 

7 Id. P 390. 

8

 FERC Staff, Staff Finding on Capacity Reassignment (2010), available at

http://www.ferc.gov (Staff Report). 

9

 Order No. 739, 132 FERC ¶ 61,238 at P 38 (citing Portland General Electric 

Co., Docket No. ER09-93-000 (Dec. 3, 2008) (unpublished letter order); Idaho Power 

Co., Docket No. ER09-524-000 (Mar. 5, 2009) (unpublished letter order); Puget Sound 

Energy, Inc., Docket No. ER09-528-000 (Mar. 5, 2009) (unpublished letter order); Avista 

Corp., ER09-729-000 (May 12, 2009) (unpublished letter order); PacifiCorp, Docket No. 
Docket No. RM10-22-001 - 4 - 

customers could submit any necessary revisions to their rate schedules before October 1, 

2010 and request waiver of the prior notice requirement, if they find such action to be 

necessary and appropriate. 

II. Discussion

A. Requests for Clarification or, in the Alternative, Rehearing

7. Powerex and PGE state that because Bonneville has indicated that it will reinstate 

the price cap on its system as of October 1, 2010, Powerex’s concerns related to that 

re-imposition are no longer premature. They also state that Bonneville has declined to 

adopt the pro forma tariff language that would cause it to act as an intermediary or party 

in its customers’ reassignments. Powerex and PGE ask the Commission to clarify that 

under these circumstances the stand-alone rate schedules permitting capacity 

reassignments at negotiated rates within non-jurisdictional transmission providers (such 

as Bonneville) remain operative. 

8. Powerex states that for non-jurisdictional transmission providers that have adopted 

the Commission’s pro forma OATT provisions to facilitate transmission assignments, but 

have not removed the price cap for reassignments, transmission customers appear to be 

required to follow the non-jurisdictional transmission provider’s OATT provisions for 

reassignments. For those non-jurisdictional transmission providers that have not adopted 

the price reforms of Order No. 739, the price paid for reassigned capacity is set at the 

higher of several factors, one of which is the customer’s opportunity cost capped at the 

transmission provider’s cost of expansion. Accordingly, Powerex asks the Commission 

to provide guidance regarding the calculation of opportunity cost where transmission 

customers that may continue to be subject to price caps should evaluate or demonstrate 

such opportunity costs. If the Commission does not provide the requested clarification, 

Powerex and PGE request rehearing. 

9. Powerex and PGE explain that, on September 21, 2010, Bonneville sent an email 

to its transmission customers stating that it would reinstate the price cap on reassignments 

of transmission capacity beginning October 1, 2010. PGE also points out that Bonneville 

posted a revision to its business practices governing the resale transmission service to 

reinstate the price cap. Moreover, Powerex states that Bonneville has still declined to 

adopt the Order No. 890 pro forma tariff language requiring it to act as a financial 

 

ER09-921-001 (Sept. 29, 2009) (unpublished letter order); Powerex Corp., Docket No. 

ER09-926-000 (May 21, 2009) (unpublished letter order)). 
Docket No. RM10-22-001 - 5 - 

intermediary for capacity reassignments. PGE contends that, to the extent transmission 

customers on Bonneville’s system are uncertain as to the prices at which they may 

reassign transmission capacity, this lack of clarity will inhibit reassignments and 

undermine the development of robust secondary markets. PGE further contends that the 

Commission’s goals are only likely to be achieved, particularly in the Pacific Northwest, 

if entities holding rights to capacity on Bonneville’s transmission system can reassign 

those rights at market-based rates. 

B. Answers

10. In an answer filed on September 30, 2010, Bonneville asks the Commission to 

deny Powerex’s request that Powerex’s stand-alone rate schedule permitting capacity 

reassignments at negotiated rates remain effective. Bonneville contends that to allow 

Powerex to continue using its stand-alone rate schedule would be inconsistent with 

Bonneville’s tariff, which re-imposed the price cap as of October 1, 2010. Bonneville 

explains that it is a non-jurisdictional transmission provider, not subject to the 

Commission’s jurisdiction under sections 205 and 206 of the Federal Power Act and, as 

such, the Commission cannot authorize a public utility (such as Powerex) to act 

inconsistently with Bonneville’s tariff. Moreover, Bonneville contends that the authority 

of its customers to resell transmission capacity at negotiated rates under stand-alone rate 

schedules was only necessary on Bonneville’s system to accommodate the two-year 

study by Commission staff. Bonneville contends that reinstating the price cap for 

reassignments of transmission on the Bonneville system will not hinder the development 

of a robust resale market. 

11. Bonneville states that it has been working to resolve its customers’ concerns and, 

on September 28, 2010, posted proposed revisions to its Resale of Transmission Service 

business practice that would allow transmission customers to resell transmission capacity 

pursuant to Section 23.1(iii) above the rate at which customers purchased that capacity 

and above the maximum rate that Bonneville has on file. Bonneville explains that, under 

the proposed revisions, Bonneville would assume that, unless there is evidence to the 

contrary, capacity reassignments at a price above Bonneville’s rate would fall within 

Section 23.1(iii), which sets the resale value as the reseller’s opportunity cost capped at 

the transmission provider’s cost of expansion. On November 5, 2010, Bonneville filed an 

answer to PGE’s request for clarification in which Bonneville summarized its response to 

Powerex. 

12. In its answer, Powerex contends that Bonneville’s business practices have no 

bearing on the applicability of Powerex’s existing rate schedule for certain transmission 

reassignments. Powerex explains that the reason Powerex and other transmission 

customers required independent market-based rate authority for capacity reassignments 
Docket No. RM10-22-001 - 6 - 

 

on certain non-jurisdictional transmission systems was not due to Order No. 890’s 

removal of the price cap, but rather because certain transmission providers had not 

chosen to adopt the Order No. 890 pro forma tariff provisions requiring them to act as 

financial intermediaries for reassignments on their systems. Powerex further explains 

that, in such cases, jurisdictional transmission customers seeking to reassign capacity 

must engage in bilaterally-negotiated transactions with their counterparty-assignees. 

Powerex contends that, because Bonneville continues not to act as an intermediary for 

transmission reassignments, Powerex’s independent market-based rate schedule for 

reassignments remains fully necessary and operative. 

13. Powerex also contends that Bonneville’s proposed business practice would allow 

customers to sell transmission capacity at rates above Bonneville’s maximum tariff rate at 

a price capped at the customer’s opportunity cost. Powerex explains that Bonneville’s 

draft business practice states that Bonneville will assume that, “unless there is evidence to 

the contrary,” resales of transmission at a price above the maximum tariff rate will fall 

under the “opportunity cost” cap in Section 23.1 of Bonneville’s OATT. Powerex 

contends that the proposed business practice creates more uncertainty because of 

Bonneville’s unbounded discretion to determine whether a customer’s market-based 

reassignment qualifies as being at or below the customer’s opportunity cost. 

14. If Section 23 of Bonneville’s OATT is held to govern the pricing of bilaterally 

negotiated reassignments, Powerex contends that further specifications must be 

incorporated into Bonneville’s OATT. Powerex states that the Commission has 

consistently required that “utilities must file ‘those practices that affect rates and service 

significantly, that are reasonably susceptible of specification, and that are not so generally 

understood in any contractual arrangement as to render recitation superfluous.’”10 Thus, 

Powerex contends that, where a utility adopts certain practices that condition or otherwise 

significantly affect rates on its system, such as Bonneville’s business practice, those 

practices must be set forth in its tariff. Accordingly, Powerex contends that Bonneville 

should incorporate its business practice into its OATT along with any other provisions 

that would provide it with sole discretion to determine whether a customer’s 

reassignment price above the maximum tariff rate is acceptable under Section 23.1 of 

Bonneville’s OATT. 

10 Powerex Answer at 8 (citing KeySpan Ravenswood, LLC v. FERC, 474 F.3d 

804, 811 (D.C. Cir. 2007) (citing City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. 

Cir. 1985))). 
Docket No. RM10-22-001 - 7 - 

C. Commission Determination

15. The Commission denies the requests for clarification, or in the alternative 

rehearing, filed by Powerex and PGE. In Order No. 739, the Commission declined to 

clarify that the existing stand-alone rate schedules that allow reassignments above the 

price cap would remain operative because those rate schedules were outside the scope of 

this proceeding and it was unclear at the time whether Bonneville would re-impose the 

price cap. The Commission suggested that entities could file, in separate proceedings, 

revised rate schedules allowing them to continue reselling transmission capacity above a 

price cap if such a price cap were imposed by a non-jurisdictional entity. The 

Commission stated that these revisions could be filed by October 1, 2010 to allow 

transmission customers to continue to resell transmission capacity at negotiated rated 

even if a non-jurisdictional transmission provider re-imposed the price cap. 

16. We continue to find that the issues raised with respect to Bonneville are better 

resolved in specific proceedings rather than as part of a generic rulemaking. In fact, 

customers have made individualized filings raising these issues. Powerex, Macquarie 

Energy LLC (Macquarie), and Morgan Stanley Capital Group Inc. (MSCG) filed, in 

separate proceedings, revised stand-alone rate schedules governing reassignments of 

transmission capacity on non-jurisdictional systems that remove reference to the 

October 1, 2010 reinstatement of the price cap. The Commission did not receive any 

protests to any of these revised rate schedules and accepted all three.11 Like Powerex and 

others, PGE can file a stand-alone rate schedule governing reassignments of transmission 

capacity on non-jurisdictional systems to allow assignments over the cap of the 

non-jurisdictional system. The Commission will evaluate the merits of that filing once 

made, just as it has for Powerex, Macquarie, and MSCG. 

17. Powerex asks for Commission guidance regarding the calculation of opportunity 

cost where a non-jurisdictional transmission provider declined to lift the price cap on 

reassignments of transmission capacity beyond October 1, 2010 as directed in Order 

No. 739. We find Powerex’s concern to be beyond the scope of this proceeding. In 

Order No. 739, the Commission concluded that lifting the price cap on reassignments of 

transmission capacity would facilitate the development of a market for electric 

transmission capacity reassignments as a competitive alternative to transmission capacity 

 11 Powerex, Docket No. ER10-3060-000 (Nov. 18, 2010) (unpublished letter 

order); Macquarie Energy LLC, Docket No. ER10-3089-000 (Nov. 19, 2010) 

(unpublished letter order); Morgan Stanley Capital Group, Docket No. ER11-68-000 

(Nov. 23, 2010) (unpublished letter order). 
Docket No. RM10-22-001 - 8 - 

acquired directly from the transmission owner. Accordingly, the Commission revised 

section 23.1 of the pro forma OATT and directed all transmission providers to file these 

changes within 30 days of publication of Order No. 739 in the Federal Register. Issues of 

reciprocity with non-jurisdictional transmission providers, such as Bonneville, are outside 

the scope of this proceeding. Moreover, Powerex’s request appears moot at this point 

since, as discussed above, Powerex has an individual rate schedule permitting sales of 

transmission capacity above the price ceiling. 

Commission Orders: 

 The requests for rehearing and clarification are denied as discussed in the body of 

the order. 

By the Commission. 

( S E A L ) 

Kimberly D. Bose, 

Secretary.