134 FERC ¶ 61,123 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

[Docket No. RM11-9-000] 

Locational Exchanges of Wholesale Electric Power 

(February 17, 2011) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Inquiry. 

SUMMARY: In this Notice of Inquiry (NOI), the Commission seeks comment that 

would assist the Commission in providing guidance as to the circumstances under which 

locational exchanges of electric power should be permitted generically and circumstances 

under which the Commission should consider locational exchanges on a case-by-case 

basis. 

DATES: Comments are due [Insert date that is 60 days after publication in the 

FEDERAL REGISTER]. 

ADDRESSES: Commenters may submit comments, identified by docket number by any 

of the following methods: 

 Agency Web Site: http://www.ferc.gov. Documents created electronically using 

word processing software should be filed in native applications or print-to-PDF 

format and not in a scanned format. 

 Mail/Hand Delivery: Commenters unable to file comments electronically must 

mail or hand deliver an original copy of their comments to: Federal Energy 
Docket No. RM11-9-000 - 2 - 

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

Washington, DC 20426. Additional requirements can be found on the 

Commission’s website, see, e.g., the “Quick Reference Guide for Paper 

Submissions,” available at http://www/ferc.gov/docs-filing/efiling.asp, or via 

phone from FERC Online Support at 202-502-6652 or toll-free at 1-866-208-3676. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Knudsen (Legal Information) 

Federal Energy Regulatory Commission, Office of the General Counsel 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6527 

andrew.knudsen@ferc.gov

Andrew Weinstein (Legal Information) 

Federal Energy Regulatory Commission, Office of the General Counsel 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6230 

andrew.weinstein@ferc.gov

Melissa Lozano (Technical Information) 

Federal Energy Regulatory Commission, Office of Energy Market Regulation 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6267 

melissa.lozano@ferc.gov

Thomas Dautel (Technical Information) 

Federal Energy Regulatory Commission, Office of Energy Policy & Innovation 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6196 

thomas.dautel@ferc.gov

SUPPLEMENTARY INFORMATION:
134 FERC ¶ 61,123 

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. 

Locational Exchanges of Wholesale Electric Power Docket No. RM11-9-000 

NOTICE OF INQUIRY 

(Issued February 17, 2011) 

1. The Commission seeks comment regarding circumstances in which locational 

exchanges of electric power should be permitted generically or considered by the 

Commission on a case-by-case basis. Because locational exchanges, in different 

circumstances, might look either like wholesale power transactions that make efficient 

use of the transmission system or like the functional equivalent of transmission service, 

we also seek comments as to whether and how different types of locational exchanges are 

consistent with our core principles that transmission service must be available on a 

transparent and not unduly discriminatory basis. While the Commission has spoken to 

locational exchanges in the past and that guidance continues to apply today, any policy 

determinations made in this proceeding will only be applied prospectively. 

I. Background

A. Docket No. EL10-71-000

2. On June 4, 2010, Puget Sound Energy Inc. (Puget) filed a petition for declaratory 

order seeking a finding that a locational exchange is a wholesale power transaction and 
Docket No. RM11-9-000 - 2 - 

not transmission service subject to an open access transmission tariff (OATT). Puget 

defines a locational exchange as 

...a pair of simultaneously arranged wholesale power 

transactions between the same counterparties in which party 

A sells electricity to party B at one location, and party B sells 

the same volume of electricity to party A at a different 

location with the same delivery period, but not necessarily at 

the same price.1

3. In an order issuing contemporaneously with this NOI, the Commission finds that 

Puget’s Petition raises significant policy issues for market participants in the electric 

industry and that the record in Docket No. EL10-71-000 provides insufficient basis to 

make the determination requested by Puget.2

 The Commission has initiated this 

proceeding to develop the record necessary to address the proper regulatory treatment of 

locational exchanges. 

B. Prior Commission Policy

4. Prior to Puget’s Petition, the Commission discussed transactions similar to 

locational exchanges in Order No. 8883

 and subsequent Commission orders. As part of 

 1

 Puget, Petition for Declaratory Order, Docket No. EL10-71-000, at p. 1 (filed 

June 4, 2010) (Puget’s Petition). 

2

 134 FERC ¶ 61,122 (2011). 

3

 Promoting Wholesale Competition Through Open Access Non-Discriminatory 

Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities 

and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036 (1996), order 

on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, order on reh’g, Order No. 

888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 

(1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group v. 

FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 

(2002). 
Docket No. RM11-9-000 - 3 - 

its statutory obligation under sections 205 and 206 of the Federal Power Act4

 to remedy 

undue discrimination, the Commission adopted Order No. 888, which prohibits public 

utilities from using their monopoly power over transmission to engage in undue 

discrimination against others. In Order No. 888, the Commission discussed certain “buysell arrangements” that could be used “to obfuscate the true transactions taking place and 

thereby allow parties to circumvent Commission regulation of transmission in interstate 

commerce.”5 The Commission further noted in Order No. 888-A that “[we] reserve our 

authorities to ensure that public utilities and their customers are not able to circumvent 

non-discriminatory transmission in interstate commerce.”6 Moreover, the Commission 

recognized that a wide range of existing programs and transactions might fall within a 

category of arrangements that look similar to buy-sells and indicated that it would 

address these on a case-by-case basis.7

5. Subsequent to Order No. 888, the Commission has considered exchanges of power 

resembling those proposed by Puget on at least two occasions. In UAMPS, the 

 4 16 U.S.C. 824d. 

5

 Order No. 888, FERC Stats. & Regs. at 31,785. The Commission discussed a 

specific type of transaction in which “an end user arranges for the purchase of generation 

from a third-party supplier and a public utility transmits that energy in interstate 

commerce and re-sells it as part of a ‘bundled’ retail sale to the end user.” Notice of 

Proposed Rulemaking, FERC Stats. & Regs. ¶ 32,514, at 33,082-83 (1995). 

6

 Order No. 888-A, FERC Stats. & Regs. at 30,344. 

7 Id. The Commission has subsequently enforced this prohibition against “buysell” arrangements. See New York State Electric and Gas Corporation, 77 FERC 

¶ 61,044 (1996), reh’g denied, 83 FERC ¶ 61,203 (1998). 
Docket No. RM11-9-000 - 4 - 

Commission prohibited an arrangement in which a transmission customer sold electricity 

to a transmission provider’s merchant affiliate at one location, and the transmission 

provider’s merchant affiliate sold the same volume of electricity to the transmission 

customer at a different location.8

 Prior to entering into the exchange, the transmission 

customer had sought to interconnect additional generation to the transmission provider’s 

system. However, because this customer was operating under a grandfathered bilateral 

agreement and not the OATT adopted under Order No. 888, the transmission customer 

did not have a right to demand the redispatch necessary to place the generation on the 

transmission provider’s network. As an alternative to obtaining redispatch, the customer 

entered into an exchange with the transmission provider’s merchant affiliate. 

Subsequently, the customer filed a complaint with the Commission alleging that the 

transmission provider had failed to maintain functional separation between its 

transmission and merchant functions. The Commission prohibited this transaction, 

finding that it effectuated transmission service and violated the separation of functions 

between the merchant affiliate and the transmission provider. The Commission 

explained, 

The redispatch transaction offered by PacifiCorp's Merchant 

Function is, unquestionably, a transmission service; the sole 

result of the transaction is to deliver a Utah Municipal 

 8 Utah Associated Municipal Power Systems v. PacifiCorp, 83 FERC ¶ 61,337, at 

62,367 (1998) (UAMPS I), reh’g denied and clarification granted, 87 FERC ¶ 61,044, at 

61,187-88 (1999) (UAMPS II) (collectively, UAMPS). 
Docket No. RM11-9-000 - 5 - 

Systems resource from a receipt point on PacifiCorp's system 

to a delivery point on PacifiCorp's system.9

 

The Commission further explained that all transmission service must be provided under 

an OATT or under grandfathered bilateral arrangements. The Commission reiterated that 

the only permissible way for a customer to arrange transmission service on a transmission 

provider’s system through the merchant affiliate is via re-assignment of point-to-point 

transmission service. On rehearing, the Commission affirmed the prohibition on the 

transaction in which a transmission provider’s merchant function purchased power from a 

transmission customer at receipt points on the transmission provider’s system and 

simultaneously sold the same amount of power to the transmission customer at delivery 

points again on the transmission provider’s transmission system.10 Characterizing the 

exchange as redispatch of generation resources that effectuated transmission service, the 

Commission emphasized that transmission service can only be provided under the OATT. 

6. In El Paso, however, the Commission reached a different decision based on a 

different set of facts and found that the specific locational exchange proposed by El Paso 

and a counterparty (Phelps Dodge) was permissible.11 In El Paso, the parties submitted 

their agreement to the Commission for approval and provided additional information in 

response to data requests from Commission staff. In permitting the exchange in El Paso, 

the Commission expressly distinguished the factual circumstances related to the exchange 

 9 UAMPS I, 83 FERC at 62,367. 

10 UAMPS II, 87 FERC at 61,188. 

11 El Paso Electric Co., 115 FERC ¶ 61,312 (2006) (El Paso). 
Docket No. RM11-9-000 - 6 - 

in El Paso from the exchange in UAMPS. The Commission observed that, unlike the 

facts presented in UAMPS, in El Paso (1) the generation substations at which the sales 

occurred and the lines interconnecting the substations were owned jointly by multiple 

parties, not just El Paso, and thus El Paso’s counterparty could have obtained service 

from another source; (2) the counterparty had not requested redispatch, nor was 

redispatch needed to complete the transaction; (3) the counterparty was not an existing 

transmission customer of El Paso, so it was not paying twice for the same service and had 

not requested nor had it been denied transmission service; and (4) the swap could have 

been entered into with another power marketer instead of El Paso’s merchant affiliate.12 

II. Subject of the Notice of Inquiry

7. The Commission seeks comments regarding circumstances in which locational 

exchanges of electric power should be permitted generically or considered by the 

Commission on a case-by-case basis. The Commission specifically requests comments 

addressing the topics identified below, as well as any other relevant issues identified by 

interested parties. 

A. General Information

8. The Commission seeks comment regarding the characteristics of locational 

exchanges and whether the definition set forth by Puget’s Petition sufficiently accounts 

for those characteristics. Puget defined a locational exchange as “[a] pair of 

simultaneously arranged wholesale power transactions between the same counterparties 

 12 El Paso, 115 FERC ¶ 61,312 at P 18-22. 
Docket No. RM11-9-000 - 7 - 

in which party A sells electricity to party B at one location, and party B sells the same 

volume of electricity to party A at a different location with the same delivery period, but 

not necessarily at the same price.”13 Puget also describes the locational exchanges it is 

proposing as different from the buy-sell transactions discussed in Order No. 888. Puget 

explains that, in Order No. 888, the Commission was concerned about exchanges in 

which one party wanted to transmit power from one location to another location, and a 

second party with transmission capacity on that path simply purchased the power from 

the first party at the point of delivery, moved the power to the point of receipt using its 

transmission capacity, and sold the same power back to the first party at the point of 

receipt. In contrast to such buy-sell transactions, Puget explains, the parties to a 

locational exchange both have power at the respective sides of the transaction, which is 

exchanged bilaterally resulting in exchanges that “are simply symmetrical swaps of 

power at two points.”14 We encourage commenters to identify other transactions that 

may be different in form from the types of transactions encompassed by Puget’s proposal 

but should be considered by the Commission as part of this proceeding. 

9. Moreover, the Commission understands that various parties, at least in the 

Northwest, believe that locational exchanges provide certain benefits, including the 

 13 Puget’s Petition, at p. 1. 

14 Puget Petition at p. 15. Puget elaborates that “Party A has power at Point X and 

wants to market or use it at Point Y and Party B has power at Point Y and wants to 

market or use it at Point X.” Id. at 14-15. 
Docket No. RM11-9-000 - 8 - 

ability to streamline operations.15 For example, as discussed more fully below, some 

parties assert that locational exchanges may reduce transmission congestion and improve 

system reliability by offering an alternative mechanism to serve load while avoiding the 

transmission of electricity over congested transmission paths. Parties also assert that 

locational exchanges (1) facilitate access to distant energy resources, including wind 

power and other variable resources located far from native load; (2) allow market 

participants to take advantage of price spreads at different locations; (3) enable market 

participants to more efficiently utilize their existing transmission capacity rights; (4) ease 

scheduling burdens by eliminating the need for hourly and daily scheduling of 

transmission between the exchange points; and (5) allow entities such as power marketers 

the ability to avoid having to return small amounts of in-kind power to the transmission 

provider in order to manage transmission service-related imbalances. 

10. Moreover, it is the Commission’s understanding that locational exchanges 

typically occur outside of organized markets. To the extent that the exchange involves 

power located inside an organized market, the other side of the exchange typically 

involves power located outside of an organized market. The Commission also 

understands that locational exchanges may vary in duration, as many of them are for only 

a few hours or days whereas others may be for longer periods. The Commission 

 15 E.g., Puget’s Petition; Xcel Energy Services Inc., Comments, Docket 

No. EL10-71-000, (filed July 6, 2010); Portland General Electric Co., Docket 

No. EL10-71-000 (filed July 6, 2010); Financial Institutions Energy Group, Comments, 

Docket No. EL10-71-000 (filed July 6, 2010). 
Docket No. RM11-9-000 - 9 - 

understands that these exchanges may be arranged several months to several days in 

advance or shortly before the exchange is initiated. 

11. The Commission seeks information regarding the characteristics of locational 

exchanges to help the Commission understand how market participants use and benefit 

from these arrangements, as well as how these arrangements affect the electric power 

system. In particular, the Commission encourages commenters to address the following 

questions: 

1) How common are locational exchanges? 

2) What types of parties use locational exchanges (affiliate, marketer, generator)? 

How common is it for an affiliate of the transmission provider to be one of the 

parties to a locational exchange? 

3) In what regions of the country and in what types of organized and non-organized 

markets are locational exchanges used? 

4) In a typical locational exchange how much power (in megawatts) is being 

exchanged? To the extent the amount of power varies significantly, please give a 

range. 

5) Do locational exchanges typically involve short-term or long-term contracts? 

How many days in advance is a locational exchange typically arranged? 
Docket No. RM11-9-000 - 10 - 

6) Under what circumstances, and for what purposes are locational exchanges used? 

How are locational exchanges arranged (bilateral negotiation via email, phone call, 

or instant message; broker; electronic exchange)? 

7) What are the benefits of locational exchanges? In identifying the benefits of these 

arrangements, please describe the type of circumstances in which the locational 

exchange provides this benefit and why the locational exchange serves as a means 

to achieve the specified benefit. The Commission also urges commenters to 

provide specific examples demonstrating particular benefits. 

B. Effects of Locational Exchanges on System Congestion

12. The Commission understands that some parties believe that certain types of 

locational exchanges may relieve physical congestion. In cases such as those 

contemplated in Puget’s Petition,16 it would seem that the locations and magnitudes of 

the generation sources and load sinks on the system remain unchanged. Thus, although 

the parties to the locational exchange may eliminate their own risks of curtailment due

congestion over that path, the distribution of power flows on the transmission system 

before and after the locational exchange transactions appears to remain unchanged. The 

Commission seeks comment on this and on whether other types of locational exchanges 

(for example, as described in the example below and depicted in Figure 1, where one 

 to 

 16 Puget’s Petition, Figure 1, 3, and 4. For instance, in Figure 3, both generators 

output is the same with and without a locational exchange. The benefit cited by Puget 

appears to be that Puget avoids the need to use a constrained transmission path. 
Docket No. RM11-9-000 - 11 - 

party replaces a source of power with a new source, rather than simply swapping preexisting generator output) may actually increase congestion. Thus, the Commission 

encourages parties to comment on the effect of locational exchanges on system 

congestion and to provide examples of how these arrangements do or do not reduce 

system congestion. 

C. Merchant Affiliate Issues 

13. In both UAMPS and El Paso, the Commission focused specifically on locational 

exchanges involving a merchant affiliate as one of the parties to the exchange. In 

UAMPS, the Commission rejected the proposed locational exchange, finding that “[a] 

public utility’s merchant function may not provide transmission service.”17 In El Paso, 

however, the Commission accepted the locational exchange involving a merchant 

affiliate as a permissible marketbased rate wholesale power sale due to the factual 

distinctions described previously. 

14. The Commission seeks comment as to whether locational exchanges may offer 

opportunities for transmission providers and their merchant affiliates to discriminate 

unduly against or between non-affiliate transmission customers. We seek comment on 

whether a merchant affiliate of a transmission provider is uniquely positioned, due to its 

access to network transmission service, to provide locational exchanges on its affiliated 

transmission provider’s system, and whether, in some cases, may be the only 

counterparty available for a customer seeking to enter into a locational exchange. We 

 17 UAMPS II, 87 FERC at 61,188. 
Docket No. RM11-9-000 - 12 - 

seek comment on whether, under these circumstances, the merchant affiliate of a 

transmission provider (or its parent company) could benefit from revenues that flow from 

the locational exchange, while the transmission provider continues to recover its 

transmission cost-of-service, effectively shifting costs to network and native load 

customers due to decreased use of point-to-point transmission service pursuant to the 

OATT. Thus, the Commission seeks comment regarding potential concerns involving 

locational exchanges executed by a merchant affiliate on its affiliated transmission 

provider’s system. 

15. Recognizing that there may be safeguards to address concerns regarding affiliate 

transactions, the Commission seeks comment on how industry participants now assure 

that such activities do not violate Commission policies. For example, do tagging 

obligations, Electric Quarterly Report (EQR) filings, standards of conduct rules and 

market-based rates rules provide sufficient protections and transparency to mitigate 

against the possible risks related to locational exchanges involving a merchant affiliate 

transacting on its affiliated transmission provider’s system? The Commission would also 

welcome comment on whether any additional regulatory safeguards are necessary. 

D. Flexible Use of Network Transmission Service to Effectuate Locational 

Exchanges

16. The Commission seeks comment on whether locational exchanges could interact 

with network service rights in a manner that is inconsistent with the Commission’s open 

access principles. One potential such transaction, shown in Figure 1 below, could 

involve an arrangement in which Party A operates expensive generation at Location X to 
Docket No. RM11-9-000 - 13 - 

serve its load at Location X. Party A wishes to replace its expensive generation with 

inexpensive generation it owns at Location Y, but the Y-to-X path is congested. Party 

A’s solution is to enter into a locational exchange with Party B, which has network 

transmission service, network resources, and load straddling Locations X and Y. Parties 

A and B enter an agreement in which Party A sells its inexpensive generation at Location 

Y to Party B, and Party B sells to Party A some of its generation that is closer to Location 

X and unaffected by the constraint on the Y-to-X path.18 In this example, Party A’s 

reduction in resources at Location X and Party B’s new purchase of generation at 

Location Y may effectively transfer to Party A the inherent flexibility afforded to Party B 

as a network customer. The Commission further notes that this transaction has the effect 

of physically sending more power over the already congested Y-to-X path and onto Party 

A’s load. More generally, the Commission is inquiring whether the interaction between 

network service rights and locational exchanges could create a risk that parties will be 

able to engage in the effective provision of transmission service in a non-transparent 

manner outside of an OATT. 

17. Thus, the Commission seeks comment whether a party with network transmission 

rights could use locational exchanges to circumvent the Commission’s open access 

principles.

 18 In this example, Party B undesignates as a network resource the capacity it sells 

to Party A, and instead uses the generation at Location Y it has purchased from Party A. 
Docket No. RM11-9-000 - 14 - 

Figure 1
Docket No. RM11-9-000 - 15 - 

E. Potential Discriminatory Effects 

18. The Commission seeks comment as to whether locational exchanges allow some 

parties to obtain the functional equivalent of transmission service on more favorable 

terms or rates than those available to other parties. The Commission also seeks comment 

regarding the potential distortive effects of locational exchanges on billing determinants 

and how such distortions may affect transmission rates. Transmission rates are 

determined by distributing transmission costs among different transmission services 

(such as point-to-point and network service) and dividing those costs by billing 

determinants calculated based upon the power amounts served by each transmission 

service.19 If locational exchanges are not considered transmission service and are 

therefore not included in the billing determinants used to set transmission rates, locational 

exchanges that serve as an alternative to transmission service may increase transmission 

rates for remaining customers. Thus, the Commission seeks comment as to whether 

locational exchanges could increase charges for remaining transmission customers while 

allowing those entering into locational exchanges to avoid transmission charges. 

 19 Network service is priced based on the load ratio allocation method. “Because 

network service is load based, it is reasonable to allocate costs on the basis of load for 

purposes of pricing network service.” Order No. 888, FERC Stats. & Regs. at 31,736. 

Pro forma OATT, section 34. For firm and non-firm point-to-point service, the 

transmission customer will be billed for its reserved capacity under terms of schedule 7 

and 8, respectively. Pro forma OATT, section 25; schedules 7 and 8. The transmission 

customer’s reserved capacity is the maximum amount of capacity and energy that the 

transmission provider agrees to transmit for the transmission customer between the point 

of receipt and the point of delivery. Pro forma OATT, section 1.42.
Docket No. RM11-9-000 - 16 - 

19. The Commission seeks comments as to whether and, if so, how locational 

exchanges affect billing determinants or create other such potential market distortions. 

Moreover, if locational exchanges have an effect on billing determinants and the 

distribution of costs, the Commission seeks comment on whether certain types of 

customers are less likely to be able to enter into locational exchanges and thus may be 

forced to pay potentially increased transmission costs that result from the distorted billing 

determinants. 

F. Price Reporting

20. The Commission seeks comment as to whether the current EQR procedures and 

requirements are sufficient to ensure appropriate locational exchange data reporting. 

Under § 35.10b of the Commission’s regulations, sellers of power are required to report 

data to the Commission’s EQR system covering all services provided under part 35 of the 

Commission’s regulations. The EQR data dictionary provides for a category of services 

called “exchanges” within which “the receiver accepts delivery of energy for a supplier’s 

account and returns energy at times, rates, and amounts as mutually agreed if the receiver 

is not an RTO/ISO.”20 However, there is no rule describing whether an exchange 

transaction must be reported in EQR as an exchange, or whether an exchange transaction 

 20 Revised Public Utility Filing Requirements for Electric Quarterly Reports, 

Order No. 2001-I, 125 FERC 61,103, at Appendix A. The Commission has stated that 

the definition of “exchange” includes simultaneous trades at different locations. Revised 

Public Utility Filing Requirements for Electric Quarterly Reports, Order No. 2001-G, 

120 FERC ¶ 61,270, at P 53, order on reh'g and clarification, Order No. 2001-H, 121 

FERC ¶ 61,289 (2007). 
Docket No. RM11-9-000 - 17 - 

may alternatively be reported in EQR as two separate power sale transactions (one report 

by each seller). 

21. Because of the structure of a locational exchange, the price per megawatt hour at 

each side of the transaction does not appear to be of any immediate financial interest to 

the parties, except as those prices determine the price of the entire locational exchange 

position (or the spread). Thus, if an exchange were reported in EQR as two separate 

power sale transactions, parties may not have any financial incentive to establish and 

report realistic prices for the power at each location. For instance, parties would be 

indifferent between reporting prices of $5 and $10 versus $400 and $405, since in both 

cases the spread is $5. As a result, such reports could have the effect of distorting price 

data in the Commission’s EQR system. With respect to this issue, we encourage parties 

to respond to the following questions: 

1) How are locational exchanges typically reported to the EQR today? 

2) Are additional rules needed to ensure that locational exchanges are reported in 

EQR as exchanges, and not reported as two separate power sales?21 

 21 We note that the Commission’s rules provide that data for exchange transactions 

are not to be reported to developers of price indices. As such, there appears to be no 

concern related to locational exchanges affecting the accuracy of price indices. See 

18 CFR 35.41(c) and Commission’s Policy Statement on Natural Gas and Electric Price 

Indices, 104 FERC ¶ 61,121, at P 34 (2003). 
Docket No. RM11-9-000 - 18 - 

G. System Reliability 

22. The Commission inquires as to whether locational exchanges affect the ability of 

system operators and any other relevant entities to obtain information or perform other 

functions necessary to maintain adequate system reliability. The Commission also seeks 

comment on the effects and implications of locational exchanges on the transmission 

system(s) and the operator’s ability to comply with Commission approved North 

American Electric Reliability Corp. (NERC) reliability standards. 

23. Parties should describe (1) the potential effect of locational exchanges on system 

performance including inadvertent power flows and the availability of information 

regarding power flows to the transmission provider and other reliability entities; (2) how 

locational exchanges interact with scheduling and tagging requirements; and (3) how 

locational exchanges affect short-term and long-term system planning. The Commission 

also seeks information associated with the relationship between locational exchanges and 

curtailment issues and procedures. 

24. As parties provide this information, the Commission urges them to consider 

scenarios where a locational exchange is effectuated, including but not limited to, 

(a) within one balancing authority area; (b) within more than one balancing authority 

area; (c) over short distances as compared to long distances; (d) involving small amounts 

of MWs as opposed to large amounts of MWs; and (e) involving more than two points of 

exchanges in the context of the different scenarios listed in (a) through (d). 
Docket No. RM11-9-000 - 19 - 

H. Pricing of Locational Exchanges

25. If the Commission determines that a locational exchange is transmission service 

subject to an OATT, the Commission seeks comment as to whether there is an 

appropriate existing transmission pricing policy that should apply specifically to these 

types of arrangements. In the alternative, the Commission urges parties to propose a 

pricing mechanism that would efficiently price those exchanges that make use of the 

transmission system. 

I. Commission Review of Locational Exchanges

26. In addition, the Commission seeks comment regarding the potential effect of 

requiring parties to seek prior Commission approval for locational exchanges on a caseby-case basis.22 In particular, the Commission urges parties to comment as to whether 

such a requirement would impose undue delays and other administrative burdens 

affecting the ability of market participants to use locational exchanges. 

27. The Commission seeks comment regarding circumstances in which locational 

exchanges of electric power should be permitted generically. In this regard, the 

Commission seeks comment regarding criteria that might define a safe harbor within 

which a locational exchange would be deemed a permissible wholesale power transaction 

without prior Commission review of that transaction. Under this approach, those parties 

seeking to enter into exchanges that do not satisfy the safe harbor criteria could seek 

 22 For example, in El Paso, the Commission accepted a particular locational 

exchange after the parties filed the agreement and provided additional data to the 

Commission. El Paso, 115 FERC ¶ 61,312. 
Docket No. RM11-9-000 - 20 - 

Commission approval on a case-by-case basis. To the extent that there are circumstances 

in which locational exchanges are permitted on a generic basis, the Commission seeks 

comment regarding any additional rules that may be necessary to regulate the exchanges. 

J. Comment Procedures

28. The Commission invites interested persons to submit comments, and other 

information on the matters, issues, and specific questions identified in this notice. 

Comments are due [Insert date that is 60 days from publication in the FEDERAL 

REGISTER]. Comments must refer to Docket No. RM11-9-000, and must include the 

commenter's name, the organization they represent, if applicable, and their address in 

their comments. 

29. The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission's web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats. Documents created electronically using word 

processing software should be filed in native applications or print-to-PDF format and not 

in a scanned format. Commenters filing electronically do not need to make a paper 

filing. 

30. Commenters that are not able to file comments electronically must send an 

original copy of their comments to: Federal Energy Regulatory Commission, Secretary 

of the Commission, 888 First Street NE, Washington, DC 20426. The current copy 

requirements are specified on the Commission’s website, see, e.g., the “Quick Reference 

Guide for Paper Submissions,” available at http://ww.ferc.gov.docs-filing/efiling.asp, or 

via phone from FERC Online Support at 202-502-6652 or toll-free at1-866-208-3676. 
Docket No. RM11-9-000 - 21 - 

31. All comments will be placed in the Commission's public files and may be viewed, 

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

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

on other commenters. 

K. Document Availability

32. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through FERC's Home Page 

(http://www.ferc.gov) and in FERC's Public Reference Room during normal business 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington DC 20426. 

33. 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. 

34. 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 e-mail at ferconlinesupport@ferc.gov, or the Public Reference Room at 

 

 
Docket No. RM11-9-000 - 22 - 

(202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

By direction of the Commission. 

( S E A L ) 

Kimberly D. Bose, 

Secretary.