Federal Energy Regulatory Commission

2008 ANNUAL REPORT 
The Federal Energy Regulatory Commission retains rights to all photographic images included in this annual report 

and thanks FERC staff for their contributions. Images do not exclusively represent regulated industries in 2008. 

Images contained may not be reproduced without permission. 
 

 

 

 

 

 

Message from the Chairman	 


Section 1: Management Summary	 


Section 2: Energy Infrastructure 

Section 3: Market Regulation	 

Section 4: Safety	 

Section 5: Reliability	 

Section 6: Enforcement	 

Section 7: Appendices 

Appendix A 67
 

Appendix B 74
 

Appendix C 76 
 

Appendix D 78

1 

5
 


5
 Organization 

5
 Summary

9
 

10
 Natural Gas 

15
 Electric

18
 Hydropower 

22
 Oil Pipelines

23
 Landowner Issues 

27
 

29
 Fair and Efficient Competitive Market Rules 

35
 Preventing Accumulation and Exercise of Market Power 

41
 

42
 Natural Gas 

43
 Hydropower 

47
 

49
 Reliability Standards 

52
 Cyber Security 

55
 

56 Vigilant Oversight 

60 Firm but Fair Enforcement 

67
 

Background Information 

67 Commission Overview 

67 Regulatory Authority 

70 
 Strategic Plan 

71 Office Descriptions

72 Guiding Principles

Settlements and the Alternative Dispute Resolution Process 

Hydropower Tables 

List of Acronyms 

Federal Energy Regulatory Commission
	
 

Federal Energy Regulatory Commission Annual Report 2008 . . . . . 

Chairman Joseph T. Kelliher 

I am pleased to submit to Congress the Federal Energy 

Regulatory Commission’s annual report, covering the fiscal 

year from October 1, 2007, through September 30, 2008. 

This is the 88th Annual Report issued by the Commission 

and its predecessor, the Federal Power Commission. 

Competition in wholesale electric and natural gas markets 

has been the foundation for federal energy policy for the 

past 30 years, and has guided much of the Commission’s 

work over that period. For FERC, competition policy is not 

“deregulation,” for the simple reason that the Commission 

never stopped regulating wholesale power sales or the 

transmission of electricity and natural gas. Competition 

policy relies on both competitive forces and regulation and 

it seeks the best possible mixture of the two. Practically 

speaking, it requires the establishment of clear and enforceable rules that allow competitive energy markets to benefit 

consumers and market competitors alike. 

The heart of FERC’s competition policy in fiscal year 2008 continued to be to seek the best possible 

combination of competition and regulatory forces so that competition is effective, efficient and above all, fair. 

That requires a continuous effort, since electricity and natural gas markets are highly dynamic. Competition policy is not an event, but a process that moves continuously toward more perfect competition. The 

direction of competition policy at FERC has been consistent for many years. But competitive 

energy markets will continue to evolve, and FERC policies must accommodate and adapt to those changes to 

continue ensuring effective competition and consumer protection, and to meet the challenges facing the 

Commission in the future. 

P ag e 1 
Page 2 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Competitive markets cannot function properly without an adequate infrastructure, and much of the Commission’s work is dedicated to promoting a robust energy infrastructure. That is reflected in our transmission 

investment policy and our incentive decisions on particular grid projects, as well as our approval of forward 

wholesale power capacity markets, and our policies governing rates for interstate natural gas pipelines. 

Fiscal year 2008 marked a year in which FERC continued to lay the groundwork for the competitive energy 

markets of the future – markets that will incorporate generation, transmission and demand resources. In particular, we promoted effective competition in wholesale power markets through targeted reforms to improve 

energy efficiency and demand response and encourage greater entry of generation and demand resources 

during periods of peak demand. We clarified and formalized our policy with respect to regional market monitors. We acted to speed the interconnection of renewable energy generation and address the growing backlog of wind projects. We encouraged compliance with FERC regulatory requirements by adopting new policies 

to encourage strong compliance programs by regulated companies and entities. We also established new 

rules to improve the transparency of the price and availability of natural gas. 

I am proud of the FERC staff for its knowledge and dedication to serving energy consumers in this nation, and 

I would like to praise my colleagues for their leadership in helping FERC achieve its goals of ensuring effective 

competition and guarding the consumer. To them, I convey my thanks and congratulations. 

Sincerely, 

Joseph T. Kelliher 

Chairman 
Federal Energy Regulatory Commission Annual Report 2008

Suedeen G. Kelly

Commissioner

Philip D. Moeller

Commissioner

Marc Spitzer

Commissioner

Jon Wellinghoff

Commissioner

. . . . . Page 3
 . . . . . Annual Report 2008 Federal Energy Regulatory Commission

Federal Energy Regulatory Commission

Commissioner Commissioner Chairman Commissioner Commissioner

Office of 

Administrative 

Law Judges

Office of 

Executive Director

Office of 

External Affairs

Office of 

Administrative 

Litigation

Office of the 

General Counsel

Office of 

Enforcement

Office of 

Energy Market 

Regulation

Office of 

Energy Projects

Note: This organization chart depicts the Commission in FY 2008.

Office of 

Electric Reliability

Page 4
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 5 

 

 

 

Management Summary
	

Organization 

The Commission is an independent regulatory agency whose function is to regulate the nation’s electric, 

natural gas, hydroelectric and oil pipeline industries. 

It is headed by a bi-partisan, five-member Commission, comprised of the Chairman and four Commissioners, appointed by the President and confirmed 

by the Senate. The Chairman serves as the chief 

executive officer of the agency, and is responsible 

for management of the agency’s staff and budget, 

and for development of the Commission’s agenda. 

In FY 2008, FERC was organized into nine functional 

offices (see chart on left). The Commission’s headquarters are in Washington, D.C., and it has five regional offices throughout the country dedicated to 

hydroelectric dam safety. 

In FY 2008, Congress appropriated $260,425,000 to 

support Commission activities. As of September 30, 

2008, the Commission had 1,349 staff, including 1,332 

permanent staff and 17 temporary staff. 

Summary 

In FY 2008, the Commission took actions to support 

competitive markets and promote a strong energy 

infrastructure, consistent with its mission. Enforcement activities continue to promote compliance 

with the Commission’s rules, and protect consumers 

from the consequences of market participant misconduct. The Commission also continued its work 

toward responding to the current and growing demand for electricity and natural gas. 

This document outlines the Commission’s substantive accomplishments in these areas, as summarized 

below. The report that follows provides more detail, 

and is divided to reflect the Commission’s five priorities for the year: Energy Infrastructure, Market 

Regulation, Safety, Reliability, and Enforcement. 
Page 6 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

		 The Commission implemented new rules 

aimed at ensuring comparable treatment of 

all resources (generation, transmission and 

demand resources), including Order No. 890 

(open access transmission) and Order No. 719 

(wholesale competition in organized markets). 

 

Energy Infrastructure 

Our nation relies upon a robust energy infrastructure, which supports competitive markets and assures reliability of supply. A strong infrastructure can 

protect against higher prices, greater price volatility, 

lower supply reliability and less effective competition. In FY 2008, the Commission took the following 

significant actions: 

•		 The Commission continued to certificate new 

natural gas storage facilities and new pipeline 

projects, including the Rockies Express East 

Pipeline, which consists of 639 miles of new 

pipeline and the Midcontinent Express Pipeline, 

which consists of 508 miles of new pipeline. 

•		 The Commission approved the Broadwater and 

Bradwood liquefied natural gas (LNG) projects. 

•		 The Commission approved the Floridian storage 

project, Florida’s first in-state natural gas storage facility. 

•		 The Commission issued original licenses, relicenses and 5 MW exemptions totaling 2,788.4 

megawatts (MW) of non-federal hydropower. 

•		 The Commission issued its first hydrokinetic 

license, for the Makah Bay Offshore Wave Project 

in the Pacific Ocean off the coast of Washington 

State. 

•		 The Commission for the first time initiated the 

pre-filing process for siting a proposed transmission line, from California to Arizona. 

Market Regulation 

The central charge of the Commission under the Natural Gas Act and the Federal Power Act is to protect 

energy consumers by ensuring that rates for energy 

and transportation services are just and reasonable 

and not unduly discriminatory or preferential. Many 

of the orders and rules issued by the Commission relate to its responsibility to ensure that rates, terms 

and conditions of jurisdictional sales are just and reasonable. To fulfill its responsibility, the Commission 

relies on a mix of regulation and competition. In FY 

2008, the Commission took the following actions: 

•

•		 The Commission prevented the accumulation 

and exercise of market power by largely affirming its rules and codifying regulations for 

market-based wholesale electric power sales. 

• The Commission addressed the need for transmission development by responding to proposals for regional cost allocation and acting on requests for incentives for transmission projects. 

•		 The Commission convened a conference and 

directed Regional Transmission Organizations 

(RTOs) and Independent System Operators (ISOs) 

to address proactively the growing backlog of 

generator interconnection requests, many of 

which are for the interconnection of renewable 

energy. 

The Commission commenced work on a number of 

legislative mandates, including the assessment of 

demand response and interoperability standards 

pursuant to the Energy Independence and Security 

Act of 2007. 

The Commission promulgated new rules under Energy Policy Act of 2005 (EPAct 2005) authority to improve the transparency of the price and availability 

of natural gas. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 7 

Safety

The Commission regulates the safety of on-shore 

LNG and non-federal hydropower facilities throughout the entire life cycle of a project: design review, 

construction and operation. In FY 2008, the Commission took the following significant actions: 

•		 The Commission reviewed and approved the 

final engineering design and safety aspects of 

nine LNG projects. 

•		 The Commission conducted biennial operational 

inspections at six LNG peak-shaving facilities and 

annual operational inspections at five LNG import terminals, and at one LNG export terminal. 

•		 The Commission also cooperated with a large 

number of federal and state agencies including, 

more recently, the Department of Homeland Security, to ensure and promote dam safety. 

•		 The Commission conducted over 2,000 dam 

safety inspections, and evaluated over 300 independent consultant inspection reports. 

Reliability 

Since passage of EPAct 2005, the Commission has 

continued to make progress in improving reliability 

of the bulk power electric grid. Over the past three 

years the Commission certified an Electric Reliability 

Organization (ERO) and has issued rules underpinning the reliability program. In FY 2008, the Commission established an Office of Electric Reliability and 

took the following significant actions: 

•		 The Commission approved eight new mandatory 

critical infrastructure protection reliability standards to protect the nation’s bulk power system 

against potential disruptions from cyber security 

breaches, and ordered significant modifications 

to those standards to further improve protection. 

•		 The Commission initiated a proceeding to address the cyber security of nuclear power stations in a cooperative manner with the Nuclear 

Regulatory Commission (NRC). 

•		 The Commission adopted an administrative policy for its review of notices of penalty filed by the 

Commission-certified ERO. 

Enforcement

The Commission continues to use its enforcement 

authority to protect consumers. It monitors activities in the market to identify potential problems, 

and its priority is to strengthen compliance with the 

agency’s rules throughout the regulated community. 

EPAct 2005 provided the Commission with stronger 

civil penalty authority, which it has used to penalize 

violations of its rules and regulations. EPAct 2005 

also gave the Commission the authority to implement a broad ban on market manipulation. Finally, 

this legislation allowed the Commission to increase 

transparency in energy markets. In FY 2008, the 

Commission took the following actions: 

•		 The Commission issued a package of orders designed to strengthen the Commission’s enforcement program and provide the industry with 

guidance to encourage compliance. 

•		 The Commission held a technical conference on 

enforcement and issued a staff report on enforcement policy. 

•		 The Commission held a compliance workshop 

with industry groups. 

•		 The Commission revised its natural gas and electric utility financial forms to improve transparency and accuracy of reporting. 
Page 8 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 9 

 

Energy Infrastructure 

Ensuring safe and reliable energy infrastructure for the nation is a priority for the Commission. The agency 

authorizes the construction and operation of LNG facilities, certificates interstate natural gas pipelines and 

storage projects, issues permits for electric transmission facilities in interstate commerce (under certain circumstances) and licenses non-federal hydropower projects. Throughout all of these application processes, 

the Commission’s goal is to reduce the time it takes to review projects without compromising its environmental protection and public participation responsibilities. Reconciling competing interests, however, remains a 

significant challenge to this process. The Commission believes these issues are best addressed openly and 

early in the application process. In fact, the Commission encourages, and sometimes even requires, project 

proponents to engage state and federal agencies, Indian tribes, affected landowners and the general public 

early in the process. 

The Commission further stimulates infrastructure by setting appropriate pricing policies and operating 

procedures. Pricing policies and operating procedures influence the level of infrastructure investment, timing 

of infrastructure development and the efficiency of infrastructure operations. 

The Commission encourages rate designs that support competitive wholesale markets for electric power 

and natural gas and provide incentives for companies to build and efficiently operate new projects. When 

consistently applied to infrastructure projects, pricing policies must give investors confidence that they will 

have an opportunity to recover their investment as well as provide certainty to customers. Without such 

assurances, investors will face greater risks, companies will find it more difficult to obtain financing for 

jurisdictional facilities, and fewer energy projects will be constructed than the nation needs. That, in turn, will 

undermine the provision of adequate and reliable energy service. Wholesale electric utility and natural gas and 

oil pipeline customers need regulatory certainty about: (1) the transportation costs they can expect to face; 

(2) the fairness of these costs; (3) continued access to nondiscriminatory transportation services; and (4) adequate transportation capacity. The Commission works to ensure that terms and conditions of service provide 

reliable access to service for all customers. 
Page 10 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Natural Gas
 

Gas Pipelines 

To meet the growing demand for natural gas, the 

Commission must continue to respond quickly 

when companies propose to expand and construct 

needed pipelines and related facilities. Through its 

promotion of the pre-filing process, which engages 

stakeholders early and results in the completion of a 

substantial portion of the environmental review and 

the identification of significant issues prior to the 

filing of an application, the Commission has been able 

to expedite the certification process. In FY 2008, Commission staff actively participated in 31 projects that 

used the pre-filing process. The staff’s participation 

and initiative in these efforts led to better and more 

complete certificate applications, enabling more 

efficient and expeditious consideration by the 

Commission. 

Overall, the Commission approved more than 2,200 

miles of natural gas pipelines in FY 2008. This demonstrates the Commission’s ability to approve pipeline 

projects quickly, in response to changing patterns 

of domestic natural gas production, while still 

ensuring adequate protection of the environment. 

In FY 2008, the Commission approved 2,587 miles of 

new pipeline construction. The following major projects comprise 2,160 miles: 

•		 In November 2007, the Commission issued a certificate to Transwestern Pipeline Company, LLC 

to construct and operate its proposed Phoenix 

Expansion Project in Arizona and New Mexico. 

The 280-mile pipeline project will allow the transportation of up to 500,000 dekatherms of natural gas per day (Dth/d) from Ash Fork, Arizona, 

to the markets in central and southern Arizona. 

•		 In December 2007, the Commission issued a 

certificate to Guardian Pipeline to construct 

and operate its proposed G-II Expansion Project from Ixonia, Wisconsin to Green Bay, Wisconsin. The 119-mile pipeline project will allow 

for the transportation of an additional 537,200 

Dth/d from Joliet, Illinois to Ixonia, Wisconsin. 

•		 In April 2008, the Commission issued a certificate to Gulf Crossing Pipeline Company, LLC and 

Gulf South Pipeline Company, LP to construct 

and operate facilities to be known as the Gulf 

Crossing Project. The 353.2-mile pipeline project will have a capacity of 1,732 Dth/d extending from a point near Sherman, Texas to an 

interconnection in Madison Parish, Louisiana. 

•		 In May 2008, the Commission issued a certificate 

to Texas Gas Transmission, LLC to construct and 

operate the Fayetteville/Greenville Expansion 

Project in Arkansas and Mississippi. The 262.6- 

mile pipeline project will have a capacity of 1,609 

Dth/d. 

•		 In May 2008, the Commission issued a certificate 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 11 

 

to Rockies Express Pipeline, LLC to construct 

and operate the REX-East project, which will extend from Audrain County, Missouri, through Illinois and Indiana, terminating in Monroe County, 

Ohio. The 639-mile pipeline project will transport more than 1,800,000 Dth/d of Rocky Mountain natural gas. 

•		 In July 2008, the Commission issued a certificate 

to Midcontinent Express Pipeline to construct 

and operate the Midcontinent Express Project 

in Oklahoma, Texas, Louisiana, Mississippi and 

Alabama. The 506.1 mile pipeline project will 

transport up to 1,500,000 Dth/d to customers in 

southern and eastern markets. 

In FY 2008, the Commission took the following industry-wide actions to provide greater regulatory 

certainty and facilitate the expansion and construction of needed pipelines and related facilities: 

•		 In October 2007, the Commission issued a final 

rule amending its regulations to modify the landowner notification requirements and require a 

noise survey following the completion of projects involving compressor facilities undertaken 

pursuant to blanket certificate authority. The 

regulatory revisions will enhance public participation in the Commission’s consideration of proposed projects. 

•		 In April 2008, the Commission adopted a new 

policy that will allow Master Limited Partnerships 

to be included in rate of return proxy groups for 

determining rates for services provided by interstate natural gas and oil pipelines. The proposed 

change was made in response to structural 

changes that have occurred in both the natural 

gas and oil pipeline sector in recent years. These 

structural changes have impaired the usefulness 

of the Commission’s prior approach towards 

proxy group composition. As a result of mergers, acquisitions and other changes in the natural 

gas industry, fewer and fewer interstate natural 

gas companies have satisfied our prior requirements for proxy group composition. 

LNG Facilities 

Importation of LNG offers an option to augment 

North American natural gas production and reduce 

energy price volatility during peak demand periods. 

The demand for natural gas in the United States has 

been exceeding domestic supply for most of the decade. However, the nation is seeing developments 

in the production of non-conventional sources of 

natural gas (coal bed methane, tight sands formations, and shale) that may increase North American 

gas supply. Nevertheless, the development of LNG 

facilities will allow the United States the option to 

import LNG when global price levels are favorable 

compared to domestic price levels. Further, the large 

amount of domestic underground storage allows 
Page 12 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

		 In September 2008, the Commission authorized, 

with conditions, a proposed terminal by Bradwood Landing, LLC and NorthernStar Energy, 

LLC, which would deliver up to 1.3 Bcf per day to 

the Pacific Northwest. The LNG terminal would 

be constructed and operated on the Columbia 

River in Clatsop County, Oregon, and would consist of a single marine berth and two insulated 

LNG storage tanks, among other related faciliadditional flexibility by permitting the import of LNG 

at any time it is financially advantageous. These options will allow the United States to supply ample 

amounts of natural gas to growing markets at the 

lowest possible price levels. In FY 2008, the Commission approved two LNG terminals: 

•		 In March 2008, the Commission authorized, with 

conditions, the construction and operation of 

the Broadwater Project in the Long Island Sound. 

The floating terminal would meet increasing energy demand in New York and Connecticut. The 

Broadwater project would deliver up to 1.25 billion cubic feet (Bcf) of natural gas per day to fuel 

electric generating plants and heat homes. During the review of this project, the Commission 

held or participated in 35 community and state 

and federal agency meetings. Commission staff 

prepared a draft environmental impact statement (EIS) of 825 pages and a final EIS that exceeded 2,200 pages. The total record in this proceeding consisted of some 7,100 documents and 

exhibits. In addition, the Commission’s response 

to comments is over 1,200 pages long. Altogether, Commission review of this project took more 

than three years (38 months) and 25,000 staff 

hours. 

•

ties. The terminal would serve rising energy demand in the Pacific Northwest. The approval of 

the project requires the applicant to fully implement 109 mitigation measures designed to enhance the safety and security of the facilities and 

to ensure the project has limited effects on the 

environment. The total record in this proceeding consisted of over 50,000 pages. 

Storage Projects 

Volatility of natural gas prices in today’s market, and 

its impact on customers, can be moderated by hedging supplies through the use of natural gas storage. 

Underground storage facilities can be used to balance a variable demand with a nearly constant supply of natural gas provided by the pipeline system. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 13 

 

Storage fields are, in effect, warehouses with a ready 

supply of natural gas that can serve a market with 

high peak demands in warm or cold weather. The 

Commission is acting to encourage expansion of gas 

storage capacity through the adoption of pricing 

reforms, consistent with EPAct 2005. In FY 2008, 

the Commission continued to certificate projects to 

increase the storage capacity in the United States. 

Specifically, the Commission certificated the following major storage projects and expansions: 

•		 In December 2007, the Commission issued a 

certificate to Monroe Gas Storage Company to 

construct a natural gas storage facility approximately 2.5 miles northeast of the City of Amory in 

Monroe County, Mississippi. The project would 

provide 12.08 Bcf of working gas storage capacity 

and 10.96 Bcf of cushion gas. 

•		 In December 2007, the Commission issued a certificate to Golden Triangle Storage, Inc. to construct a natural gas storage facility and associated pipeline facilities in Jefferson and Orange 

Counties, Texas. The facility will consist of two 

caverns each with a working gas capacity of 6.0 

Bcf and a cushion gas capacity of 3.1 Bcf. 

•		 In March 2008, the Commission issued a certificate to PetroLogistics Natural Gas Storage, LLC 

to operate a salt dome natural gas storage facility and associated pipeline facilities in Iberville 

Parish, Louisiana. The project would provide 6 

Bcf of working gas storage capacity and 3 Bcf of 

cushion gas. 

•		 In April 2008, the Commission issued a certificate to Enstor Houston Hub Storage and Transportation, LP to operate a salt dome natural gas 

storage facility and associated pipeline facilities 

in Liberty County, Texas. The project will consist 

of four natural gas storage caverns providing an 

ultimate total working gas capacity of 30 Bcf. 

•		 In June 2008, the Commission issued a certificate to Steckman Ridge, LP to operate a natural 

gas storage facility and associated facilities in 

Bedford County, Pennsylvania. The project will 

have a total capacity of 17.7 Bcf (12 Bcf working 

gas and 5.7 Bcf cushion gas). 

•		 In June 2008, the Commission issued a certificate to Black Bayou Storage, LLC to construct 

and operate a salt dome natural gas storage facility in Cameron Parish, Louisiana. The two fully 

developed salt storage caverns that make up this 

project will have a total capacity of nearly 20.8 

Bcf (15 Bcf of working gas and 5.8 Bcf of cushion 

gas). 

•		 In June 2008, the Commission issued a certificate 

to Tarpon Whitetail Gas Storage, LLC to construct 

and operate a natural gas storage facility and associated facilities in Monroe County, Mississippi. 

The project will have a total capacity of 22.8 Bcf 

(8.6 Bcf working gas and 14.2 Bcf cushion gas). 

•		 In August 2008, the Commission issued a certificate to Floridian Natural Gas Storage Company, 

LLC to construct and operate a new liquefied 

natural gas storage facility in Martin County, 

Florida, that would involve the liquefaction and 

revaporization of up to 8 Bcf of domestic natural 

gas. This storage facility is Florida’s first in-state 

natural gas storage facility. 
Page 14 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

 

Environmental Mitigation 

The Commission includes environmental protection, mitigation and enhancement measures in certificates and authorization for natural gas pipelines 

and storage facilities. During FY 2008, Commission 

staff completed the environmental review of 441 gas 

To assist members of the industry in understanding 

the Commission’s environmental regulations, Commission staff held two industry seminars for environmental training in May and September 2008. These 

seminars explained construction and restoration 

requirements for natural gas pipeline construction 

projects and provided a detailed overview of the 

pipeline and LNG filings, including 72 Environmental Assessments (EAs) and nine EISs. Concurrently, 

Commission staff continued work on an additional 23 

EAs and seven EISs, primarily for new gas pipelines. 

As a result of the effective use of the Commission’s 

pre-filing process, the average time for the completion of an EIS was about nine months. 

Recommendations from the environmental review 

of pipeline and LNG applications are frequently included as conditions in the certificate orders. For 

example, the Commission included 147 environmental conditions in the order approving the Rockies 

Express-East pipeline. These conditions were necessary to ensure that the pipeline would be constructed in a manner to prevent or mitigate adverse 

environmental impacts. For LNG applications, safety 

conditions are imposed in addition to environmental conditions. For example, in the Broadwater LNG

Project, the Commission imposed more than 80 mitigation measures to enhance safety and security and 

to ensure limited environmental impacts. 

FERC Upland Erosion Control, Revegetation and 

Maintenance Plan, and the FERC Wetland and Waterbody Construction and Mitigation Procedures. 

Over the past four years, the Commission has seen 

a steady increase in the number of certificate holders seeking to engage in third-party compliance 

monitoring as a way of achieving a higher level of 

compliance with Commission regulations and certificate conditions. The compliance monitoring program establishes a full-time, on-site presence, and 

provides natural gas companies with a mechanism 

for “reminding” the construction work force of the 

importance of environmental compliance, and also 

provides the Commission with immediate access 

to detailed information on field conditions. Access 

to real-time information enables both the natural 

gas industry and the Commission to respond more 

quickly to the many issues that can arise during 

construction. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 15 

 

 

Electric
 

The transmission grid is the interstate highway system for wholesale power markets. A robust grid is 

necessary to assure reliability and support competitive markets. The grid no longer consists of a multitude of local systems. Rather, the U.S. transmission 

system is regional in nature, with some systems extending into Canada and part of Mexico. Transmission investment has roughly doubled in recent years, 

after suffering from a sustained period of underinvestment. In response to the broad recognition of 

the national importance of a robust transmission 

grid, Congress gave the Commission significant new 

regulatory authority in EPAct 2005 to improve and 

ensure the reliability and security of the grid. The 

way this law affects the Commission’s work related 

to infrastructure development is described further 

below. 

Transmission Investment 

Section 1241 of EPAct 2005 directed the Commission to establish, by rule, incentive-based (including 

performance-based) rate treatments for the transmission of electric energy in interstate commerce 

by public utilities. In 2006, the Commission issued 

a final rule (Order No. 679) designed to implement 

those incentive rate treatments, provide regulatory 

certainty and support expanded and improved transmission infrastructure while ensuring that transmission rates remain just and reasonable. The purpose 

of establishing rate-based incentives is to encourage 

investment in transmission for the purpose of reducing transmission congestion, ensuring reliability and 

reducing the cost of delivered power. 

In FY 2008, the Commission approved a number of 

incentive rate proposals to encourage transmission 

investment: 

•		 In November 2007, the Commission approved 

Southern California Edison’s request for incentives for three projects. The first is the DeversPalo Verde II Project. This consists of the construction of two major transmission lines. The 

second is the Tehachapi Project, comprising more 

than 200 miles of 500 kilovolt (kV) transmission 

line, approximately 10 miles of 220 kV transmission line and three new substation facilities. The 

third is Rancho Vista Project. It includes a proposed new 500 kV substation. 

•		 In December 2007, the Commission conditionally granted Xcel Energy Services, Inc.’s request 

for incentive transmission rates as part of that 

company’s plan for six transmission upgrades to 

meet state renewable energy generation standards and serve increased power demand in the 

Upper Midwest states of the U.S. 

•		 In February 2008, the Commission granted the 

Potomac-Appalachian Transmission Highline’s 

request to implement a transmission cost-ofservice formula rate for a proposed transmission project and implement incentive rate authorization for the project, which is a proposed 

290-mile transmission line from West Virginia to 

Maryland. 

•		 In April 2008, the Commission granted certain 

transmission rate incentives for a PPL Electric 

Utilities Corporation and Public Service Electric and Gas Company project, designated the 

Susquehanna-Roseland Line, which will span 130 

miles across Pennsylvania to northern New Jersey. 

•		 In August 2008, the Commission granted Pepco 

Holdings, Inc.’s request to implement a transmission rate incentive plan for eight transmis-
Page 16 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

sion projects in Maryland, New Jersey and the 

Delmarva Peninsula that will improve reliability 

and reduce congestion. 

•		 In August 2008, the Commission granted Virginia 

Electric Power Company’s request for transmission incentives, increasing its return on equity 

for 11 transmission projects in Virginia and parts 

of the PJM Interconnection. 

•		 In September 2008, the Commission granted in 

part and denied in part New York Regional Interconnect, Inc.’s request for certain incentives for 

a proposed 1,200 megawatt transmission line to 

span 190 miles between Marcy, New York, and 

New Windsor, New York. The Commission’s conditional rate approval includes a 275 basis point, 

or 2.75%, addition to the return on equity that the 

company will earn. 

Transmission Expansion Cost Allocation 

In FY 2008, the Commission reviewed proposed 

transmission cost allocation plans in certain organized markets to ensure that they result in rates that 

are not unduly discriminatory or preferential: 

•		 In January 2008, the Commission accepted a 

compliance filing on fixed cost recovery policies for pricing transmission service between 

the Midwest Independent Transmission System 

Operator, Inc. (Midwest ISO) and PJM Interconnection, LLC (PJM), and within the Midwest ISO. 

First, the Commission addressed two competing 

proposals submitted by Midwest ISO and PJM to 

establish a methodology for allocating the cost 

of new transmission facilities that are built for 

reliability purposes in an RTO but that provide 

benefits to another RTO (known as cross-border 

facilities), and approved and adopted Midwest 

ISO’s proposal. Next, the Commission affirmed 

the justness and reasonableness of a pricing design proposal that would continue to use the 

existing inter-RTO rate design to price transmission service between the RTOs after the initial 

transition period that ended January 31, 2007. 

Lastly, the Commission affirmed the justness 

and reasonableness of the existing rate design 

for transmission service within the Midwest ISO

and approved its continued use after the initial 

transition period that ended January 31, 2007. 

•		 In February 2008, the Commission denied rehearing of an order that conditionally accepted 

proposed revisions to the Midwest ISO’s Open 

Access Transmission and Energy Markets Tariff 

to incorporate a cost allocation methodology 

for Regionally Beneficial Projects (i.e., transmission upgrades that provide economic benefits 

by reducing congestion) that was established 

through the Midwest ISO’s Regional Expansion 

Criteria and Benefits Task Force. 

Transmission Line Siting 

The Commission now has limited siting authority for 

electric transmission facilities through Congressional 

action that added a new section 216 to the Federal 

Power Act. EPAct 2005 authorized the Commission 

to issue construction permits for the siting and construction of electric transmission facilities in certain 

circumstances. The siting authority entrusted to the 

Commission is limited in scope. Congress took a very 

different approach with respect to federal transmission siting than it took with federal siting of interstate natural gas pipelines. When Congress acted 

on federal siting of interstate natural gas pipelines, 

it provided for exclusive and preemptive federal 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 17 

 

siting. By contrast, transmission siting is not exclusive. Federal transmission siting supplements state 

siting, instead of supplanting state siting. 

Beginning February 2, 2007, the Commission’s new 

rules over its siting authority went into effect. These 

rules govern the filing requirements and procedures 

for entities asking the Commission to exercise its 

supplemental authority to site interstate transmission facilities under EPAct 2005. The final rule reflects the Commission’s extensive experience in 

licensing transmission for hydroelectric generation 

facilities and issuing certificates for interstate natural gas pipelines, and it applies this knowledge and 

experience to the electric transmission construction 

permit program. 

The Commission’s authority is limited to National 

Interest Electric Transmission Corridors. In October 

2007, the Department of Energy (DOE) issued an order designating two national interest electric transmission corridors. The Mid-Atlantic Area National 

Corridor includes portions of Delaware, Maryland, 

New Jersey, New York, Ohio, Pennsylvania, Virginia, 

West Virginia and Washington, DC. The Southwest 

Area National Corridor includes portions of southern 

California and western Arizona. 

In FY 2008, the Commission received its first request 

to initiate the pre-filing process for a proposed 

transmission line. Southern California Edison’s (SCE) 

Devers-Palo Verde No. 2 project (DPV2) is a 267-mile 

500 kV transmission line from California to Arizona 

(97 miles in Arizona). The proposed project consists 

of two segments: the Devers-Harquahala Line (225 

miles) and the Devers-Valley No. 2 Line (42 miles). 

DPV2 would run adjacent to the existing 500 kV 

DPV1 line and would be located entirely within DOE’s 

Southwest National Interest Electric Transmission 

Corridor. 

During the pre-filing process, Commission staff has 

worked with SCE to make sure that all interested 

stakeholders, including the Arizona Corporation 

Commission, have been made aware of the proposed 

project and have had the opportunity for their views 

and recommendations to be considered. Milestones 

reached in the pre-filing process in FY 2008 include 

the following: 

•		 SCE initiated consultation with the Office of 

Energy Projects on February 25, 2008. 

•		 SCE filed a pre-filing request on May 16, 2008. 

•		 The Office of Energy Projects Director approved 

SCE’s pre-filing request on May 30, 2008. 

•		 The Commission issued the Notice of Intent to 

prepare a draft EIS on June 17, 2008. 

•		 Commission staff held two scoping meetings in 

Arizona, July 8-9, 2008. 

In FY 2008, the Commission staff issued “A Guide to 

the FERC Electric Transmission Facilities Permit Process.” This guide was created to inform the public 

on the permitting process. The Commission also created a webpage for the public to access important 

information on pending projects and other relevant 

materials. 
Page 18 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

Hydropower
 

Hydropower Projects 

Hydropower remains an important renewable component of the nation’s energy portfolio and supports 

efficient, competitive electric markets by providing 

low-cost energy reserves and ancillary services. Hydropower projects provide public benefits such as 

managed water supply, recreation, economic development and flood control while minimizing adverse 

impacts on environmental resources. In FY 2008, 

the Commission authorized 303.8 MW of additional 

capacity at existing licensed hydropower projects, 

including 66 MW of additional capacity at the Bear 

Swamp Hydroelectric Project in Massachusetts. 

The Commission also granted an increasingly large 

number of preliminary permits authorizing feasibility studies for more than 3,800 MW of conventional 

capacity for 79 new projects. The purpose of a preliminary permit is to maintain priority of application 

for a license for three years while the permit holder 

conducts investigations and secures data necessary 

to determine the feasibility of a new project and prepares an application to develop it. In addition, 9,400 

MW hours of incremental generation increases were 

certified at 13 projects for production tax credits pursuant to EPAct 2005. 

During FY 2008, the Commission acted on a total of 

19 hydropower applications, which included a total of 13 relicense applications. These relicense applications represented an installed capacity of over 

2,659.78 MW. The Commission also initiated the processing of 14 relicense applications, three of which 

have an installed capacity in excess of 200 MW. 

Several original hydropower licenses and a 5 MW 

exemption were issued representing an increase in 

capacity of 128.57 MW. The following actions took 

place in FY 2008: 

•		 In October 2007, the Commission issued a new 

30-year license to Northern Indiana Public Service Company to continue operation and maintenance of the 16.4 MW Norway-Oakdale Hydroelectric Project, located on the Tippecanoe River, 

near the town of Monticello, in Carroll and White 

Counties, Indiana. 

•		 In December 2007, the Commission issued a new 

40-year license to PPL Montana for its 11.25 MW 

Mystic Lake Project on West Rosebud Creek near 

Fishtail, Montana. 

•		 In April 2008, the Commission issued a new 30-

year license to PacifiCorp for its 41.56 MW Prospect Nos. 1, 2 and 4 Hydroelectric Project. The 

project is located on the Rogue River, Middle 

Fork Rogue River, and Red Blanket Creek in Jackson County, Oregon. 

•		 In April 2008, the Commission issued a new 44-

year license to the Public Utility District No. 2 

of Grant County, Washington for the continued 

operation of the 1,993.6 MW Priest Rapids Hydroelectric Project on the mid-Columbia River in 

Washington. 

•		 In April 2008, the Commission issued a new 30-

year license to the City of Ottumwa, Iowa to continue operation and maintenance of the 3.2 MW 

Ottumwa Project, located on the Des Moines 

River in the City of Ottumwa, Wapello County, 

Iowa. 

•		 In May 2008, the Commission issued a new 30-

year license to Georgia Power Company for the 

continued operation and maintenance of the 

16.8 MW Morgan Falls Hydroelectric Project, 

which is located on the Chattahoochee River in 

Cobb and Fulton Counties, Georgia. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 19 

• 		 In June 2008, the Commission issued a new 30-

year license to Virginia Electric Power Company 

to continue operation and maintenance of its 

7.5 MW Cushaw Hydroelectric Project, which is 

located on the James River in Bedford and Amherst Counties, Virginia. 

•		 In June 2008, the Commission issued an original 

50-year license to the City of Hamilton, Ohio to 

construct, operate and maintain the proposed 

105 MW Meldahl Hydroelectric Project. The project would be located on the Ohio River, near the 

City of Augusta, Bracken County, Kentucky. 

•		 In June 2008, the Commission issued licenses for 

the continued operation of four hydroelectric 

projects located on the North Fork Lewis River in 

Cowlitz and Skamania Counoperation and maintenance of its 1.42 MW Santa 

Felicia Project located on Piru Creek, a tributary 

of the Santa Clara River, in Ventura County, California. 

•		 In September 2008, the Commission issued 

an original 50-year license to the Borough of 

Lehighton to construct, operate and maintain 

the proposed 2.6 MW Beltzville Hydroelectric 

Project. The project would be located on the Lehigh River northeast of the Borough of Lehighton in Carbon County, Pennsylvania. 

The Integrated Licensing Process (ILP) was designated by the Commission as its default licensing process 

in 2005. The ILP was designed to fully engage Commission staff in the pre-filing portion of the process 

and help stakeholders define 

the scope of the licensing

process along with the type 

and number of studies to be 

undertaken, which, in the 

end, would enable the Commission to take final action 

on a license application within 18 months of filing. In FY 

2008, the number of hydro

ties, Washington. Specifically, 

the Commission issued new 

licenses for the 240 MW Swift 

No. 1 Project, the 134 MW Yale 

Project, the 136 MW Merwin 

Project and the 70 MW Swift 

No. 2 Project. 

• In August 2008, the Commis- - sion issued a new 40-year li- power projects using the ILP 

increased from 28 to 37. Of

significant note, in December 

2007, the Commission issued 

a new license for the Mys

cense to FPL Energy Maine 

Hydro, LLC to continue operation and maintenance of 

its 4.0 MW Bar Mills Hydro- - electric Project located on 

the Saco River in York County, 

Maine. 

tic Lake Project and in May 

2008, the Commission issued 

a new license for the Morgan 

Falls Project. These were 

the first and second licenses 

issued for projects whose 

applications were prepared 

mission issued a new 40-year 

• In September 2008, the Comlicense to United Water Conservation District to continue 
Page 20 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

using the ILP. Throughout FY 2008, the Commission 

continued to educate the industry, resource agencies, tribes, nongovernmental organizations, citizen 

groups and other stakeholder groups on the ILP. 

Commission staff made presentations and led discussions on the ILP at several national hydropower 

meetings. 

Headwater Benefits 

Headwater benefits refer to additional electric generation that results at a downstream project from 

regulation of the flow of the river by an upstream 

headwater project. These benefits are usually attributable to increasing or decreasing the release of 

water from a storage reservoir. Pursuant to section 

10(f) of the Federal Power Act, in FY 2008 the Commission assessed $7,638,000 in headwater benefits 

in 26 river basins covering 116 hydroelectric projects 

for energy benefits provided by federal headwater 

storage facilities. Headwater benefit assessments 

are returned to the U.S. Treasury to offset headwater project construction costs. 

Hydrokinetic Energy 

Hydrokinetic energy is hydroelectric generation 

from ocean waves, tides and currents as well as from 

free-flowing rivers. In the past, efficient and reliable 

conversion of kinetic energy from water has proven 

elusive, but with recent advances in technology, rising fuel costs and a growing demand for renewable 

energy, the potential for hydropower using new 

technologies is on the rise. The development of 

this new source of hydropower has the potential to 

add a substantial amount of power to the nation’s 

generation capacity, particularly in the area of renewable energy. At present, however, the development and commercialization of the new technologies are just beginning. In FY 2008, the Commission 

issued 76 preliminary permits to study the feasibility 

of 2,880 MW of hydrokinetic energy projects. 

In late FY 2007, the Commission created the Pilot 

License program which allows developers to: test 

new technologies; determine appropriate sites and 

confirm environmental effects while connected to 

the grid; complete the full project licensing process 

in as few as six months; and provide for Commission 

oversight and input from affected states and other 

federal agencies. The process is available for projects that are five MW or smaller, removable or able 

to shut down on relatively short notice, and located 

in waters that have no sensitive designations. In December 2007, the Commission issued its first license 

for a hydrokinetic energy project, which will be located in the Pacific Ocean off the coast of Washington State. The license, for the Makah Bay Offshore 

Wave Project, includes mitigation measures to protect the environment, and was issued for a term of 

five years. 

In addition to this license, in FY 2008, the Commission took several other important steps to foster the 

development of hydrokinetic energy proposals: 

•		 In October 2007, Commissioner Moeller, accompanied by Commissioner Wellinghoff and staff, 

hosted a workshop on the proposed process for 

hydrokinetic pilot projects in Portland, Oregon. 

Staff described the pilot license proposal and 

panelists and audience members provided comment. 

•		 In December 2007, the Commission issued a 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 21 

 

policy statement that allows the Commission to 

issue conditioned licenses for hydrokinetic energy projects under appropriate circumstances. 

This process is for hydrokinetic projects only. 

The Commission may issue a project license 

where it has completed processing an application while other authorizations under federal 

law remain outstanding. Licenses issued under 

these circumstances would preclude the developer from starting construction until the licensee has obtained all necessary authorizations 

required by federal law and filed those with the 

Commission. 

•		 In March 2008, the Commission and the State of 

Oregon signed a Memorandum of Understanding (MOU) to coordinate procedures and schedules for review of wave energy projects in state 

waters off the coast of Oregon. The MOU establishes Oregon’s support of the Commission’s 

procedures for a shorter-term, experimental pilot license that ensures environmental, economic and social protections. 

•		 In April 2008, Commission staff provided the public with answers to frequently asked questions 

concerning hydrokinetic pilot project licensing 

and the conditioned license program. 

Environmental Mitigation 

The Commission safeguards the environment by 

requiring that all hydropower applicants communicate with affected federal and state natural resource agencies, tribes, and state water quality 

agencies prior to submitting an application to the 

Commission. In FY 2008, Commission staff completed the environmental review of more than 1,400 

hydroelectric license and exemption amendment 

applications, including 40 EAs and five EISs. Concurrently, Commission staff continued work on 11 draft 

EAs and three draft EISs. 

Hydropower licenses include requirements that are 

designed to protect, mitigate and enhance the environmental resources of project areas. These terms 

and conditions address such things as water quality, 

land use, wildlife, water supply, flood control, endangered species, recreation, cultural resources and 

fish habitat and passage. For example, the license 

issued for the Priest Rapids Project contained over 

200 license articles implementing environmental recommendations made during the license proceeding. 

Regulated lakes and reservoirs throughout the country are seeing continuing changes in demographics, 

intense interest in water recreation, increased developmental pressures including building lake front 

properties with associated docks and marinas, and 

the desire of people to have their primary homes 

along the 55,000 miles of shoreline that are associated with the Commission’s licensed projects. Along 

with this interest comes increasing public involvement in the Commission’s post-licensing process of 

reviewing shoreline management plans, recreation 

plans and shoreline development applications. 

In FY 2008, the Commission continued to monitor 

compliance through its environmental inspection 

program. Commission staff conducted more than 

125 inspections and evaluated and assessed implementation and compliance with the environmental 

and public use requirements of licenses to ensure 

the protection and enhancement of resources at 

each project. 
Page 22 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Oil Pipelines
 

The United States has about 200,000 miles of oil and 

oil products pipelines, with ten companies accounting for more than half of the total miles. There are 

more than 200 interstate pipelines, comprised of a 

few large companies and many small pipelines. 

In FY 2008, the Commission encouraged and supported the construction and expansion of petroleum product lines through its orders on pipeline 

petitions for declaratory orders. In these orders, the 

Commission approved certain flexible rate methodologies and granted other rate assurances prior to 

construction in order to reduce the uncertainty and 

risk inherent with these large infrastructure projects. 

Specifically, the Commission took the following major actions: 

•		 In December 2007, the Commission approved a 

request to confirm the proposed capacity allocation and rate structure for a planned expansion 

of the Spearhead Pipeline. The expansion will increase Spearhead’s average annual capacity between Flanagan, Illinois, and Cushing, Oklahoma, 

by 65,000 barrels per day of crude oil. 

•		 In December 2007, the Commission approved a 

proposed rate structure for the United States 

portion of the planned Southern Lights Pipeline, 

which will transport light liquid hydrocarbons 

from Chicago, Illinois, to Edmonton, Alberta, for 

use in transporting heavy crude petroleum produced from Canada’s oil sands. 

•		 In May 2008, the Commission approved the proposed tariff structure for the Southern Access 

Extension Pipeline. The pipeline will extend 

approximately 178 miles south from Flanagan, 

Illinois, to the major oil pipeline hub at Patoka, 

Illinois. 

•		 In August 2008, the Commission approved a rate 

structure for the Texas Access Pipeline Project, 

consisting of pipeline facilities from the Patoka, 

Illinois hub to crude oil terminals near Nederland and Houston, Texas. The proposed project 

would provide for an estimated monthly capacity of approximately 445,000 barrels per day. 

In addition to these infrastructure rate issues, in 

June 2008, the Commission acted on an oil matter 

related to the Trans-Alaska Pipeline System (TAPS). 

It found that the existing methodology TAPS used to 

calculate rates was no longer just and reasonable. 

The Commission required the TAPS pipeline to institute a new rate methodology that would meet 

the Commission’s requirement for justness and 

reasonableness. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 23 

Landowner Issues
 

One of the most difficult aspects of regulating infrastructure is the balance between the nation’s need 

for new energy facilities, and the concerns of landowners, who are most directly impacted by their 

construction. FERC is committed to ensuring that 

the review process allows landowners ample opportunity to have their issues and concerns heard and 

considered. FERC notifies property owners of a proposal, convenes public hearings and provides assistance for landowners seeking to get involved in the 

pre-filing or filing phases of proposal review. 

tunity to provide information or comments that will 

be included in the formal record for the proceeding. 

Public concerns raised in these hearings may result 

in changes reflected in FERC’s final orders. 

The pre-filing process is designed to enable stakeholders to identify issues and to reach a cooperative 

resolution of issues raised about proposed routes. 

Landowners are encouraged to participate in the prefiling process, as well as the formal environmental 

review. If such issues cannot be resolved, FERC has 

Public hearings play an important role in Commission decisions. For long pipelines or transmission 

projects, such hearings will occur at a number of 

sites along the proposed route. Hearings are held 

during the day, in the evening and on weekends. 

These hearings give the public a convenient oppordemonstrated its willingness under certain circumstances to change route segments for projects to 

avoid problems with individual landowners’ homes 

or businesses. Landowners are also encouraged to 

submit their comments directly into the record developed on the proposed project. After a project 
Page 24 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

is authorized, construction is allowed to begin only 

after the developer has satisfied conditions in the 

Commission’s order designed to prevent or mitigate 

impacts. The Commission’s technical staff monitors 

construction progress by conducting on-site inspections. Similarly, operation of the new facility may 

commence only after compliance with pipeline testing, route restoration and other completion requirements. 

In addition, Commission staff will investigate landowner complaints about developers’ operations before, during and after construction of facilities. During project development, this may be done by staff 

from FERC’s Office of Energy Projects (OEP). Others 

may be addressed by FERC’s Enforcement Hotline in 

conjunction with OEP. 

During FY 2008, FERC’s Enforcement Hotline received various landowner complaints about natural 

gas interstate pipeline construction. These included 

allegations of improper landowner notification prior 

to commencement of construction, disturbances 

and/or damage caused to property by pipeline construction, inadequate post-construction restoration 

of property, trespassing on landowners’ property 

(such as when pipeline construction crews strayed 

beyond the pipeline’s right-of-way) and other 

issues. 

Staff answering calls for the Hotline can explain 

the Commission’s rules and regulations and help 

landowners understand the pipeline construction 

process and their rights. They also understand the 

obligations of the pipeline sponsor during construction as well as any specific requirements established 

in the certificate issued by the Commission, which 

authorizes construction. If necessary, Hotline staff 

resolves issues by contacting the company, and coordinates with Commission technical staff overseeing pipeline construction to determine appropriate 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 25 

resolution. Under certain circumstances, the Commission’s technical staff from OEP will conduct additional on-site inspections to determine the extent 

of the problems that may be occurring. 

The Commission’s web site includes information 

about current pipeline projects and pamphlets that 

help citizens understand the process and how to 

get involved, through www.FERC.gov. These materials include lists of projects in various areas of the 

country, information on how to get involved, and 

guides to gas facilities, LNG, electric transmission siting, hydropower licensing and the pre-filing process. 

In FY 2008, the Commission expanded landowners’ 

access to project materials by creating a gas pipeline webpage, which includes lists of pipelines approved, pending and on the horizon. The webpage 

(www.FERC.gov/industries/gas/indus-act/pipelines. 

asp) offers easy access to the important documents 

in those proceedings. 
Page 26 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 2 7 

Market Regulation 

For more than 20 years, the Commission has promoted effective competition in the wholesale markets 

it regulates by providing open access to transmission facilities. Over time, the natural gas and electric industries transformed from companies using their monopoly-owned transportation and transmission facilities to supply all the needs of their own wholesale customers, to companies providing competing suppliers 

and wholesale customers with open and non-discriminatory access to their facilities, under Commissionapproved tariffs. This allows independent suppliers to compete for natural gas and electric energy sales and 

to offer market choices for customers at wholesale. The development and operation of RTO, ISO and independent transmission companies in the electric industry, and market hubs in the gas industry, has increased 

competitive opportunities in the provision of services for buying and selling energy. The Commission monitors wholesale power and natural gas markets to ensure that its policies mitigate market power. 

The Commission is charged by statute with ensuring that prices in jurisdictional energy markets remain just 

and reasonable and are not unduly discriminatory or preferential. The Commission pursues this duty by 

developing rules that encourage fair and effective competitive markets and prevent the accumulation and 

exercise of market power. The Commission’s flexible regulatory approach allows it to react effectively to 

changes in energy markets caused by concerns for the environment, new technology and emerging issues 

related to the ongoing evolution of markets and their operations. This flexibility also allows the Commission to find the best possible mix of regulation and competition to encourage fair and effective competitive 

markets. The Commission’s statutory authority includes the following: 

•		 Authority to assure just and reasonable rates and prevent undue discrimination and preference under 

sections 205 and 206 of the Federal Power Act. 

•		 Responsibility under section 203 of the Federal Power Act to assure mergers and acquisitions and other 

corporate transactions are in the public interest. 

•		 Rate jurisdiction and authority to prevent undue discrimination and preference under sections 4 and 5 of 

the Natural Gas Act and section 311 of the Natural Gas Policy Act of 1978. 
Page 28 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

 

•		 Duty to prevent manipulation of wholesale power and natural gas markets and transmission services under section 222 of the Federal Power Act 

and section 4A of the Natural Gas Act. 

•		 Authority to assure transparency of electricity 

and gas markets under section 220 of the Federal Power Act and section 23 of the Natural Gas 

Act. 

The agency’s continuing efforts to promote competitive markets are taking place at a time when the 

costs of natural gas and primary fuels used to generate electricity are unusually volatile. In 2002, the 

wholesale average national citygate price of natural 

gas was $4.12/Mcf. Through July 2008, the average 

citygate price was $10.23/Mcf, an increase of $6.11/ 

Mcf or 148%. Such increases were borne by natural 

gas consumers. They are also borne by electricity 

consumers, since increasing fuel costs put upward 

pressure on power prices. 

The Commission continues to advance and respond 

to the ongoing evolution of energy markets and 

their operation. Some of the momentum of continued evolution is arising from actions at the state 

level. States have acted on their concern over the 

cost and siting of new energy infrastructure to meet 

growing demand through legislation and regulations 

that mandate increased demand response and energy efficiency. The concern about energy security and 

environmental quality, including climate change, has 

also had effects on energy markets and their operations. More than half of the states in the nation have 

adopted renewable portfolio standards. There are 

now three regional accords to develop greenhouse 

gas cap-and-trade systems. 

The Commission formed a new group within its Office of Energy Market Regulation, the Energy Innovations Sector, in October 2007, to study the implications of new developments on Commission policy, 

such as distributed generation, renewable energy 

issues, greenhouse gas emissions policies, and advanced technologies. In December 2007, Congress 

gave the Commission mandates related to some of 

these aspects of continued market evolution in the 

Energy Independence and Security Act of 2007. The 

new group began helping the Commission meet its 

new requirements and coordinate related policy 

with regard to jurisdictional transmission and wholesale energy markets. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 29 

 

 

Fair and Efficient Competitive Market Rules
	

The Commission ensures that access to markets is 

available to all market participants at reasonable 

prices on a nondiscriminatory basis by requiring 

natural gas pipelines and electric utilities to provide 

open access transmission service. This is the foundation for fair and efficient competitive wholesale 

energy markets for electricity and natural gas. In exercising its jurisdiction over wholesale markets and 

transportation in interstate commerce, the Commission strives to reduce barriers to access in both gas 

and electric markets. Furthermore, the Commission 

seeks to adopt approaches that are complementary to those of the states in their regulation of retail 

markets. 

Market Rule Changes 

The Commission continues to strengthen competitive wholesale power and gas markets. In particular, 

it has proposed a number of reforms and taken specific actions in FY 2008 to make continued progress 

towards more perfect competition: 

•		 In January 2008, the Commission addressed issues in wholesale competitive markets by issuing 

a proposal to improve operations in organized 

electric markets, boost competition and bring 

additional benefits to consumers. The proposed 

reforms are designed to ensure just and reasonable rates, to remedy undue discrimination and 

preference and to improve wholesale competition in organized markets. They address demand 

response and market pricing during a period of 

reserve shortage, long-term power contracting, market-monitoring policies and responsiveness of RTOs and ISOs to stakeholders and 

customers. 

•		 In June 2008, the Commission approved a rule 

designed to enhance competition in secondary 

natural gas capacity release markets. This is accomplished principally by removing price caps 

on short-term releases of capacity, and increasing flexibility afforded asset management agreements under the Commission’s capacity release 

rules. 

In addition, the Commission strengthened competitive wholesale markets by addressing proposed market rule changes to reform specific markets through 

the following actions: 

•		 In February 2008, the Commission conditionally 

accepted Midwest ISO’s proposal to implement 

a day-ahead and real-time ancillary services market. Under the ancillary services market, the 

Midwest ISO will determine operating reserve 

requirements and procure operating reserves 

through a single market from all qualified resources in place of the current system of local 

management and procurement of reserves by 

the 24 balancing authorities. This will allow for 

price competition among resources and provide 

for greater participation by demand resources 

and simultaneous co-optimization of energy 

and operating reserve markets, which should 

substantially improve efficiency and reliability in 

one of the largest organized markets in North 

America. 

•		 In March 2008, the Commission conditionally 

accepted Midwest ISO’s proposal to address 

comprehensively long-term resource adequacy 

requirements in its markets. The provisions 

contain mandatory requirements for any market participant serving load in the Midwest ISO 
Page 3 0 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

region to have and maintain access to sufficient 

planning resources. The proposal represents an 

important step in establishing the framework 

for efficient and reliable energy and operating 

reserves markets in this region in the future. 

•		 In March 2008, the Commission accepted two of 

three proposals by PJM to revise its credit policy regarding financial transmission rights in the 

wake of defaults by Power Edge, LLC in PJM’s 

market. These tariff provisions establish collateral requirements that will help PJM manage the 

risk and volatility of certain positions taken by 

traders in the Financial Transmission Rights auction markets PJM has established. 

•		 In May 2008, the Commission established a proceeding under section 206 of the Federal Power 

Act to examine whether PJM’s existing market 

power screen had become unjust and unreasonable. 

•		 In September 2008, the Commission approved 

plans by a group of Western transmission providers for a two-year experimental regional transmission pricing initiative intended to encourage 

more efficient use of the grid and reduce customer costs by expanding access to coordinated 

transmission service from multiple transmission 

providers at a single rate. 

•		 In September 2008, the Commission conditionally accepted the California Independent System Operator Inc.’s (California ISO) proposal to 

establish modeling and pricing proxy points for 

import and export transactions that would be 

consistent with the conversion to the new Market Redesign and Technology Upgrade (MRTU) 

market design. 

•		 In September 2008, the Commission issued an 

order directing PJM to evaluate, on a prospective 

basis, the design of the reliability pricing model 

and file a progress report with the Commission 

by December 15, 2008. FERC also directed staff 

to convene a technical conference in February 

2009 on the issues related to the Reliability Pricing Model buyers’ complaint and other issues 

raised by PJM stakeholders. 

The Commission also encourages business rules 

and practices that maximize market efficiency, ease 

market entry and reduce transaction costs. In part, it 

relies on organizations like the North American Energy Standards Board (NAESB), RTOs and ISOs, where 

appropriate. For example, in July 2008, the Commission revised its regulations to incorporate by reference the latest version of certain standards adopted 

by the Wholesale Electric Quadrant of NAESB. The 

NAESB standards revise existing Open Access SameTime Information Systems and reliability-related 

business practice standards, and add new standards on transmission loading relief for the Eastern 

Interconnection and public key infrastructure. 

Incorporating these revised standards will provide 

customers with information to enable them to obtain transmission service on a non-discriminatory basis. The revised standards will assist the Commission 

in supporting needed infrastructure and will bolster 

the reliability of the interstate transmission grid. 

Demand Response 

Competitive markets should reflect both supply and 

demand conditions. Demand response programs 

and strategies allow users to respond to market 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 3 1 

conditions triggered by prices or reliability signals. 

The Commission supports and facilitates demand 

response by ensuring its comparable treatment because it helps hold down wholesale power prices, 

reduces price volatility, increases awareness of energy usage, provides for more efficient operation of 

markets, mitigates market power and enhances reliability. In FY 2008, the Commission took important 

steps to help facilitate demand response programs: 

•		 In February 2008, the Commission proposed new 

rules to improve operations in organized electric 

markets. Specifically, with respect to demand 

response, the Commission proposed to require 

RTOs and ISOs to: (1) accept bids from demand 

response resources in their markets for certain 

ancillary services comparable to other resources; (2) during a system emergency, eliminate a 

charge to a buyer for taking less energy in the 

real-time market than it purchased in the dayahead market; (3) permit an aggregator of retail 

customers to bid demand response on behalf of 

retail customers; and (4) modify market rules to 

allow market-clearing prices, during a period of 

operating reserve shortage, to reach a level that 

rebalances supply and demand so as to maintain 

reliability while providing sufficient provisions 

for mitigating market power. 

•		 In March 2008, the Commission conducted two 

national electric industry surveys. The surveys 

were conducted to assist the Commission in 

preparing an annual demand response and advanced metering report. Among information 

sought on the survey were the saturation and 

penetration rates of advanced meters and communications, the annual resource contribution 

of demand response resources, and the potential for demand response as a quantifiable, reliable resource for regional planning purposes. 

•		 In May 2008, the Commission conducted a technical conference on integrating demand response 

in wholesale power markets. Commission staff 

examined issues including: the value of demand 

response in organized markets; comparable 

compensation of demand response in organized 

markets; barriers to comparable treatment of 

demand response that have not previously been 

identified; solutions to eliminate such barriers; 

and the need for and the ability to standardize 

terms, practices, rules and procedures associated with demand response. 

Open Access Transmission Tariff Reform 

In February 2007, the Commission issued the Open 

Access Transmission Tariff reform final rule or Order No. 890. The primary goal of the final rule was 

to prevent undue discrimination and preference in 

transmission service, thus allowing wholesale customers to access lower-cost power supplies. 

The final rule limits undue discrimination and preference by increasing the transparency of Open Access Transmission Tariff administration. The final 

rule also limits undue discrimination by requiring 

an open, transparent and coordinated transmission 

planning process that would consider the needs of 

native load customers and transmission customers, 

as well as transmission providers. The Commission 

took a number of steps to implement the provisions 
Page 3 2 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

of the Open Access Transmission Tariff final rule and 

to offer guidance to the industry in the following 

actions: 

•		 In December 2007, the Commission largely affirmed Order No. 890. The Commission affirmed 

that, based on the extensive record of this proceeding, the particular reforms adopted in Order 

No. 890 were appropriate to satisfy the obligation to remedy undue discrimination. 

•		 In June 2008, the Commission reconsidered certain other aspects of Order No. 890 that parties 

questioned, as well as its December 2007 affirmation of the rule described previously. The Commission also provided clarification and guidance 

on the rule at that time. 

One of the most important reforms adopted in Order No. 890 was in the area of transmission planning. 

The power grid is regional in nature, and transmission planning should reflect that reality. The requirement that transmission owners engage in regional 

transmission planning, consistent with principles in 

Order No. 890, was a significant policy change. Having an open and transparent planning process helps 

eliminate opportunities for discrimination and provides customers with information and studies that 

will help them decide whether potential upgrades or 

other investments could reduce congestion or enable 

integration of new resources. Pursuant to Order No. 

890, transmission providers were required to submit 

an Attachment K to their Open Access Transmission 

Tariff incorporating the transmission planning principles and concepts by December 2007. In October 

2007, the Commission held technical conferences on 

Open Access Transmission Tariff transmission planning in three different regions of the country. 

In May 2008, the Commission began approving transmission planning process compliance filings. As of 

the end of FY 2008, the Commission had approved 

34 Open Access Transmission Tariff transmission 

planning compliance filings with appropriate modifications. This includes proposals from all regions of 

the country. 

Long-Term Transmission Rights 

Since July 2006, the Commission has approved a 

number of orders making long-term firm transmission rights available to all transmission customers. 

The availability of such rights provides financial certainty to load-serving entities that wish to enter into 

long-term power supply arrangements. In FY 2008, 

the Commission continued this policy by taking the 

following actions on filings made by RTOs and ISOs: 

•		 In April 2008, the Commission approved, with 

modifications, the New York Independent System Operator, Inc.’s (NYISO) revisions to its Open 

Access Transmission Tariff to institute long-term 

firm transmission rights in New York. Under the 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 3 3 

 

 

 

proposal, as modified, market participants that 

desire to secure long-term firm transmission 

rights would be able to secure these rights in sufficient quantities to meet a reasonable percentage of their load serving obligations as required 

under EPAct 2005. 

•		 In May 2008, the Commission denied rehearing of 

an order that accepted the Midwest ISO’s longterm firm transmission rights proposal, subject to 

modification. 

•		 In July 2008, the Commission denied rehearing 

of an order that conditionally accepted, subject 

to modification, proposed revisions to the California ISO’s Market Redesign and Tariff Upgrade 

tariff to implement long-term firm transmission 

rights. 

Reduction of Barriers to Trade 

The Commission continues to make progress in reducing barriers to trade between regional electric 

wholesale markets. These disparities, often referred to as “seams,” include differences in market 

rules and designs, operating and scheduling protocols, and other control-area practices that could inhibit or preclude the ability to execute transactions 

across regional boundaries. Significant differences in 

power products, pricing and rules among markets 

can reduce competition among suppliers across the 

regions and create inefficiencies. Resolving these 

differences could lower transaction costs, permit 

greater utilization of resources and, ultimately, lower costs to customers. In FY 2008, the Commission 

took the following actions: 

•		 In November 2007 and July 2008, the Commission accepted the Midwest ISO and PJM’s proposed revisions to the Congestion Management 

Process of their seams management agreement. 

In July 2007, the Commission accepted the 

Midwest ISO and Southwest Power Pool 

Inc.’s proposed revisions to the Congestion 

Management Process of their seams management agreement. 

•		 In June 2008, the Commission accepted the 

Midwest ISO’s proposed Reliability Service and 

Seams Service, which provides for enhanced reliability coordination and coordination of congestion management across market-to-non-market 

seams on a broader, more uniform basis than 

had currently existed. 

Interconnection Queue Issues 

In 2003, the Commission issued Order No. 2003 to 

standardize the agreements and procedures related 

to the interconnection of large generating facilities. 

The goal of this order was to minimize opportunities 

for undue discrimination and to expedite the development of new generation, while protecting reliability and ensuring that rates are just and reasonable. 

Queue problems have increased recently because of 

the surge of new entry by generators in certain regions of the country. There is great interest in gaining access to RTO and ISO markets by new generation entrants, especially those with wind and other 

renewable energy projects. The nature of the queue 

problem varies from region to region. In some regions, such as the Midwest, the queue problem arises because of the unprecedented entry of renewable energy generation, particularly wind projects. 

In other regions, the issues are related more to the 

inception of forward capacity markets. 
Page 3 4 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

In FY 2008, the Commission took the following major 

actions to encourage regional flexibility in remedying the problems: 

•		 In December 2007, the Commission held a technical conference to seek information on queue 

issues that have arisen since issuance of Order 

No. 2003 and solutions that may have been developed or proposed to deal with those queue 

issues. The conference also explored existing 

practices that have proven effective in addressing interconnection queue problems experienced by both traditional and renewable generation. 

•		 In March 2008, the Commission directed RTOs 

and ISOs to report on the status of their efforts 

to improve the processing of their interconnection queues. The order followed the December 

2007 technical conference on interconnection 

queue practices, where participants complained 

of transmission providers’ delays in processing interconnection queues. The Commission learned 

that delays were especially long in RTO and ISO 

regions that were attracting significant new entry into generation markets and in regions where 

the industry is working to meet state renewable 

portfolio standards. 

•		 In August 2008, the Commission approved an 

application by the Midwest ISO to revise its tariff 

to improve the process by which generators interconnect to the transmission grid it operates, 

especially regarding its queuing procedure. 

•		 In September 2008, the Commission conditionally approved an application by the California 

ISO, which will improve the efficiency of the 

California ISO’s interconnection process, clear 

the California ISO’s interconnection backlog and 

allow the interconnection process to be better 

integrated into the California ISO’s transmission 

planning process. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 3 5 

Preventing Accumulation and Exercise of Market Power
	

Competitive markets, to be fair and efficient, require 

transparency and oversight to prevent the accumulation and exercise of market power. Commission 

rules promote transparency of competitive electric 

and gas markets and discourage unfair trading practices. Appropriate regulatory oversight safeguards 

consumers from consolidations of energy assets 

that reduce competition, and ensures that rates customers pay for electricity and transmission services 

in wholesale markets are just and reasonable. 

Restructuring is not uncommon in industries that are 

experiencing dynamic change. This restructuring includes consolidation of companies within individual 

segments of the industry. Mergers and other dispositions or acquisitions can bring efficiencies associated with combining operations, and can represent 

the success of competition as more effective business models develop. However, they also may eliminate competitors and lead to markets that are too 

concentrated and not fully competitive. 

The Federal Power Act and the Natural Gas Act enable the Commission to identify and disallow from 

jurisdictional rates any imprudently incurred, unjust 

or unreasonable, or unduly discriminatory or preferential costs from affiliate transactions among companies in the same holding company system. 

Review of Mergers and Acquisitions 

and Other Corporate Review 

Mergers and acquisitions within the Commission’s 

jurisdiction over the electric industry must be consistent with the public interest. In reviewing mergers and acquisitions, the Commission examines the 

effect of a transaction on competition, rates and 

regulation, and the potential for cross-subsidization. 

The Commission’s approach to mergers analyzes 

horizontal and vertical competitive concerns, and 

establishes filing requirements and conditions for 

mergers that raise market power concerns. 

In reviewing mergers and other corporate transactions, the Commission uses its authority under section 203 of the Federal Power Act to prevent the 

accumulation of market power. A merger could 

potentially increase market power by eliminating a 

competitor or overly concentrating those markets 

where the merging parties have overlapping generation resources. In such a case, the Commission 

would either reject the merger, or impose conditions or accept applicant commitments to ensure 

that competition is not harmed. 

EPAct 2005 expanded the Commission’s merger and 

corporate review authority under section 203 of the 

Federal Power Act. Specifically, EPAct 2005 clarified 

the Commission’s jurisdiction over public utility holding company mergers, and granted the Commission 

authority over acquisitions of generation facilities 

used for wholesale sales and certain holding company securities acquisitions. The Commission approved 

the following significant mergers and acquisitions in 

FY 2008: 

•		 In October 2007, the Commission approved the 

two-step transaction under which Aquila Inc. 

will sell its Colorado-based electric utility and its 

Colorado, Iowa, Kansas and Nebraska natural 

gas operations to Black Hills Corporation, and 

will merge its Missouri electric utility assets with 

Great Plains Energy Inc. 

•		 In November 2007, the Commission authorized 
Page 3 6 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Calcasieu Power, LLC to sell, and Entergy Gulf 

States to acquire, a 310 MW natural gas-fired 

combustion turbine generating facility located 

in Calcasieu Parish, Louisiana. 

•		 In December 2007, the Commission approved 

the acquisition of transmission facilities owned 

by Interstate Power & Light Company by ITC 

Midwest LLC, a unit of ITC Holdings Corp. 

•		 In December 2007, the Commission authorized 

the merger of Energy East Corporation and the 

Spanish utility holding company, Iberdrola S. A. 

•		 In April 2008, the Commission conditionally approved a merger between Washington-based 

Puget Energy, Inc. and an international investment consortium led by the Macquarie Group. 

•		 In October 2007, the Commission granted blanket approval of three applications by financial 

and investment companies involving acquisition 

of securities of electric utility companies, finding 

that the transactions will facilitate investment in 

the utility industry consistent with the goals of 

EPAct 2005, while protecting the nation’s consumers from abusive market power practices. 

EPAct 2005 largely codified the merger test used by 

the Commission for some years, with one significant 

change. This law added to the public interest determination a required finding that a transaction will not 

result in cross subsidization of a non-utility associate 

company or the pledge or encumbrance of utility assets for the benefit of an associate company, unless 

such pledge or encumbrance is in the public interest. In February 2008, the Commission finalized two 

rules to ensure that ratepayers are protected against 

unauthorized cross-subsidies by utilities of their nonutility affiliates and to accommodate greater investment in the electric utility industry. Specifically, the 

Commission took the following actions: 

•		 In the first final rule, the Commission codified 

cross-subsidy pricing restrictions on power and 

non-power goods and services transactions between franchised public utilities with captive 

customers and their market-regulated power 

sales affiliates or non-utility affiliates. 

•		 In the second final rule, the Commission granted 

an additional limited blanket authorization for 

certain dispositions of voting securities by public 

utilities to public utility holding companies. 

In July 2008, the Commission upheld its rules protecting ratepayers against unauthorized cross-subsidization in an order that provides important clarifications 

to utilities and other entities. The Commission also 

issued a notice seeking supplemental comments on 

the narrow issue of the scope and form of reporting 

requirements that would apply to expanded blanket 

authorization. 

Market Power in Wholesale Power Sales 

Qualified applicants have been granted marketbased rate authority, on a case-by-case basis, since 

1988. This program first requires a seller seeking a 

market-based rate authorization to demonstrate 

that neither it nor its affiliates have market power in 

generation or transmission (or that any such market 

power is sufficiently mitigated). If such demonstration is made, the grant of market-based rate autho-
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 3 7 

rization is conditioned on adherence to a code of 

conduct, filing transaction information through the 

Electric Quarterly Report, and filing of any change in 

status affecting market power. 

The Commission continues to take action on marketbased rate policy issues, which builds on Order No. 

697, its June 2007 final rule on the proposed amendments to its market-based rate policy. The rule reflects the Commission’s fundamental responsibilities 

to oversee wholesale power markets and protect 

consumers from exploitation in those markets. During FY 2008, the Commission took the following significant actions: 

•		 In February 2008, the Commission determined 

that the Western Systems Power Pool Agreement’s demand charge ceiling rate was no longer 

just and reasonable for use by public utility sellers in markets in which the sellers do not have 

market-based rate authority unless such sellers 

can cost-justify the rate, and ordered certain 

power sellers to justify their use of it. 

•		 In April 2008, the Commission largely affirmed its 

findings in Order No. 697. The order made one 

substantive change to the rule: sellers that lose 

or surrender their market-based rate authority 

can file contract-specific requests to make longterm sales of a year or more at such rates. The 

Commission also indicated its willingness to consider case-specific sensitivity studies as part of a 

marker power analysis. 
 

Date Settling Parties		 Payment
	

December 21, 2007 Enron and the Public Utility District No. 2 

of Grant County, Washington 

$3 million 

January 8, 2008 Enron and the Public Utility District No. 1 

of Snohomish County, Washington 

$8 million 

April 2, 2008 Midway Sunset Cogeneration Company and 1 the California Parties$85.7 million 

May 23, 2008 Public Utility District No. 2 of Grant County, 

Washington and the California Parties 

$26.5 million 

June 4, 2008 California Parties and the Cities of Riverside Calif., 

Anaheim, Calif. and Azusa, Calif. 

$3.5 million 

June 30, 2008		 California Parties and Strategic Energy, LLC $1.6 million
	

June 30, 2008		 California Parties and Pinnacle West Capital Corporation 

and APS Energy Services Company, Inc. 

$1.1 million 

Western Energy Settlements 

During FY 2008, the Commission approved several settlements in refund proceedings for companies involved 

in the 2000-2001 Western energy crisis. While litigation continues in various appeals and Commission proceedings, this represents continued progress towards full resolution of the Western energy crisis. 

1 The California Parties generally consist of Pacific Gas and Electric Company, Southern California Edison Company, San 

Diego Gas & Electric Company, the People of the Stat

Electricity Ov ornia Public Utilities Commission. 

e of California, 

include the Calif

ersig

ornia Department of W

ht Board, and the Calif

ater Resources acting solely under authority and po

ex rel. Edmund G. Br

For purposes of this settlement

own Jr., Attorney Gener

wers created by Calif

, Calif

al, the Calif

ornia Assembl

ornia Parties also 

ornia 

1 of the First Extraordinary Session of 2001-2002, codified in sections 80000 through 80270 of the California Water Code. 

y Bill 

Page 38 . . . . . Annual Report 2008		 Federal Energy Regulatory Commission
	
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 3 9 

Transparency 

The Commission continues to take action to improve 

market transparency under the guidance of EPAct 

2005. Sections 316 and 1281 of that legislation added 

section 23 to the Natural Gas Act and section 220 to 

the Federal Power Act. These sections provide that 

the Commission may act to facilitate price transparency in wholesale natural gas and electricity markets 

and authorize the Commission to adopt such rules as 

may be necessary to assure the timely dissemination 

of information about the availability and prices of 

natural gas, electric energy and transmission service 

in such markets. In FY 2008, the Commission took 

action to improve natural gas market transparency 

by requiring the gathering of information to improve 

the Commission’s understanding of index pricing, 

which in turn should allow market participants to improve their confidence in index prices. Specifically, 

the Commission took the following actions: 

•		 In December 2007, the Commission issued a 

final rule that requires certain natural gas market participants to file information annually on 

their wholesale, physical natural gas transactions. Specifically, the rule introduces a new annual reporting requirement, Form No. 552, for 

any buyer or seller of more than 2.2 million Btus 

of physical natural gas each year to report aggregate volumes of relevant transactions. The 

Form No. 552 must be filed by May 1 of each year, 

starting in 2009 for transactions delivered in the 

previous year. 

•		 In December 2007, the Commission also sought 

public comment on a proposal to require both 

interstate and certain major non-interstate pipelines to post on a daily basis, capacity, scheduled 

flow information and actual flow information. 

The proposal would facilitate transparency of 

price and availability of natural gas by providing 

a more complete picture of daily supply and demand information across the United States. 

• In April 2008, Commission staff held a technical 

conference to address implementation issues 

associated with the transparency posting proposal, such as obtaining and posting actual and 

scheduled flow information and obtaining and 

posting information from storage facilities. 

•		 In September 2008, in response to 13 requests 

for rehearing and clarification of the transparency rule and the comments received at the technical conference, the Commission clarified that 

natural gas market participants must report all 

data on FERC Form No. 552 for transactions that 

use, contribute to, or could contribute to a price 

index. 
Page 40 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 41 

Safety 

The Commission has oversight responsibility for the safety of onshore LNG and non-federal hydropower 

facilities throughout the entire life cycle of a project: design review, construction and operation. 

The Commission reviews and approves the final engineering design of authorized LNG projects, inspects 

these facilities during construction to ensure compliance with the safety and reliability requirements of 

Commission orders, and conducts the annual and biennial safety and reliability inspections of the existing 

jurisdictional LNG peak shaving and marine import terminals for the life of these facilities. 

Similarly, once the Commission licenses a hydropower project, it’s primary duty is to assure the safe 

construction and operation of the project to protect the public. The Commission discharges that duty 

through the dam safety program, by conducting inspections, by assessing the risks posed by various projects, by requiring the development of Emergency Action Plans, and by requiring drills of those plans. It is 

necessary that the licensee and the community be prepared to act in the unlikely event there is a project 

failure, and the public is put in harm’s way. 
Page 42 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

Natural Gas
 

Safety at LNG Facilities 

Public safety is the Commission’s central focus when 

fulfilling its Congressional mandate under the Natural Gas Act to regulate facilities for importation of 

natural gas. The Commission addresses safety concerns proactively and rigorously applies high safety 

standards to these projects. Projects that meet the 

Commission’s safety standards and are found to be 

in the public interest are approved. Projects that fall 

short of these standards are rejected. 

The Commission and other federal agencies work 

together to ensure public safety through a comprehensive strategy for siting and oversight of LNG facilities. The Commission works with the U.S. Department of Transportation (DOT), which is responsible 

for safety of gas pipelines once operational, and the 

U.S. Coast Guard to ensure the safe siting, operations and reliability of facilities. This process ensures 

that approved LNG peak-shaving facilities and LNG 

terminals, including associated LNG vessel traffic, 

meet safety and environmental requirements during 

construction and operation. For each project, the 

Commission, in coordination with DOT and the U.S. 

Coast Guard, conducts an engineering and siting review geared toward assuring that a facility will operate safely and securely in an environmentally sound 

manner. 

The Commission’s safety review process starts during the mandatory pre-filing phase of an application, 

a minimum six-month period for all LNG import terminals or major modifications. During this period, 

Commission staff reviews and comments on engineering and safety issues related to the proposal. 

Once a complete application is filed, Commission 

staff convenes a Cryogenic Design and Technical Review Conference to evaluate the operability, reliability and safety of the facility’s design. The recommendations from the conference are incorporated into 

the National Environmental Policy Act document 

and, subsequently, become conditions attached to a 

Commission authorization. In FY 2008, the Commission reviewed eight LNG applications to ensure that 

safety concerns were appropriately addressed. 

If a company receives authorization for new LNG facilities, Commission staff monitors the project through 

construction, commissioning and operation. Compliance monitoring during construction includes onsite staff inspections at prescribed intervals, review 

and approval of final design submittals and monthly 

reporting by the company. In FY 2008, sixty-three 

construction/pre-operational inspections were conducted for five new terminals and four terminal expansions. During the later stages of construction, 

Commission staff is actively involved in commissioning activities to verify that the constructed facility 

complies with the design authorized by the Commission. No facility may enter into service until all conditions of the Commission Order have been met. 

All operational LNG facilities under Commission jurisdiction are inspected throughout the entire life of 

the project. Commission staff conducts annual onsite inspections for each import terminal and biennial 

inspections of each jurisdictional peak-shaving plant. 

Additional inspections may be conducted at any 

time, as warranted by the operator’s required semiannual reports, or other conditions. In FY 2008, the 

Commission conducted 12 operation inspections. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 43 

Hydropower
 

Dam Safety 

The Commission’s dam safety program, through its 

many components, helps ensure dam safety, public 

safety, and reliability in the electric industry. More 

than 2,500 FERC-licensed dams are in the program. 

Periodic inspections verify the structural integrity of 

dams and compliance with engineering and public 

safety conditions and regulations. They also identify 

necessary maintenance and remedial modifications. 

Inspection types include prelicense, construction, 

operation, instrumentation and special. The Commission’s five regional offices conduct the inspections. Over 2,000 dam safety inspections were conducted during FY 2008. 

The Commission is an active member of the Interagency Committee on Dam Safety, the U.S. Society 

of Dams, and the Association of State Dam Safety 

Officials, and also shares its dam safety expertise 

internationally. Additionally, during FY 2008, the 

Commission provided dam inspection and evalua-
Page 44 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

tion services to the NRC and the DOE, and assisted 

the Director of the Federal Emergency Management 

Agency in implementing the National Dam Safety 

Program. 

The Commission’s dam safety program is recognized both nationally and internationally as a leading expert in Emergency Action Planning. Program 

staff conduct biennial open training workshops for 

federal, state and local dam safety and emergency 

response agencies for emergency action planning 

and conducting exercises. Emergency Action Plans 

(EAPs) are an integral part of the Commission’s dam 

safety program. The Commission’s guidelines require 

licensees on an annual basis to test the state of training and readiness of key personnel responsible for 

actions during an emergency. In FY 2008, Commission staff conducted three workshops on this issue. 

The Commission has developed and implemented 

an innovation in dam safety evaluations entitled 

the Potential Failure Mode Analysis. The Commission provides training to federal and state dam 

safety agencies in this analysis, which identifies the 

possible failure modes for specific dams and determines necessary actions before a problem occurs, 

thereby ensuring the safety of dams and preventing failure emergencies. The entire United States 

dam safety community has embraced the value that 

Potential Failure Mode Analysis brings to ensuring 

dam safety. 

Commission staff also has assumed a leadership role 

in many of the important technical advancements in 

the areas of dam safety research, training, dam safety program design, and the importance of coordinating EAPs with the local first responder agencies. 

During FY 2008, Commission staff took the following 

actions: 

•		 Developed and provided individual EAPs, dam 

site security, and stability analysis training to 

dam safety offices in the States of Rhode Island, 

Pennsylvania, New York and Georgia, in an expanded effort to assist states with technical dam 

safety training. 

•		 Successfully addressed the numerous severe 

flood events that occurred in the Northeast and 

Midwest by collaborating with dam owners and 

local officials on safe dam operations and public 

education efforts. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 45 

•		 Convened a Security and EAP Workshop with 

dam owners, federal and state dam safety agencies, and consultants to share information, solicit recommendations and review the status of 

security and EAP efforts. 

In FY 2008, Commission staff also focused on safety 

issues associated with a sinkhole discovered in the 

crest of the Swinging Bridge Dam on the Mongaup 

River in Sullivan County, New York. A report from 

December 2007 noted that the Swinging Bridge Dam 

performed as expected during the refilling stage. A 

Surveillance and Monitoring Program proposed by 

the licensee has been reviewed by the Commission 

and found to be adequate. The dam is under close 

monitoring for another year and the results of this 

monitoring are periodically reviewed by the licensee, 

by its consultants and by the Commission. 
Page 46 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 47 

 

 

 

 

 

 

 Reliability 

The reliability of our nation’s bulk power system directly affects the security, safety and economic well-being 

of our citizens. The industry must have clear, unambiguous, mandatory and enforceable reliability standards 

and secure communications and control technology. 

Historically, the Commission had no role in approving or enforcing reliability standards, even though it regulated access to the transmission grid and transmission service. Our nation’s response to reliability has generally been triggered by events. In the first part of the last century, reliability of the interconnected grid was 

managed by individual electric utilities, or groups of utilities, accountable by varying degrees to state and local 

regulators. However, following the Northeast Blackout of 1965, regional reliability organizations and, later, 

the predecessor to the North American Electric Reliability Corp. (NERC), were formed to develop voluntary reliability rules and to encourage reliable operating practices. However, over time this voluntary regime proved 

to be insufficient. 

Five years ago, the United States experienced the largest blackout in the nation’s history. More than 50 million Americans were affected, and the economy suffered a blow. Five years later, FERC has made significant 

progress to reduce the prospect of another regional blackout, and to limit the extent of any such blackout. 

Since the August 2003 blackout, Congress enacted a law to authorize the Commission to approve and enforce 

mandatory reliability standards, and FERC quickly issued rules implementing its new authority. The Commission certified an ERO to develop and propose mandatory reliability standards, and authorized delegation of 

enforcement powers to regional entities that are the first line of enforcement. In FY 2007, the Commission 

approved mandatory reliability standards, which went into effect on June 18, 2007. For the first time, reliability 

of the U.S. bulk power grid was protected by mandatory reliability standards.
Page 48 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

 

 

Importantly, the Commission has taken action to 

strengthen reliability standards, directing the ERO 

to submit revisions that would clarify and improve 

the standards. In this manner, the Commission will 

steadily raise the bar for grid reliability over time. 

There are four necessary elements of a reliability 

regime: (1) mandatory reliability standards; (2) effective enforcement of those standards; (3) a commitment to operational excellence by grid operators; 

and (4) a more robust transmission grid. In FY 2008, 

the Commission has made significant progress in 

all four areas. Threats to reliability remain but they 

have been reduced. 

In October 2007, the Commission recognized the importance of reliability issues by creating the Office of 

Electric Reliability (OER). This office is tasked with 

helping protect and improve the reliability and security of the nation’s bulk power system through effective regulatory oversight as established by Congress 

and the President in EPAct 2005. Specifically, OER 

oversees the development and review of mandatory 

reliability standards, including those related to security, and monitors compliance with the approved 

mandatory standards by the users, owners and operators of the bulk power system. 

In FY 2008, the Commission has continued a dialogue 

with other government agencies to examine issues 

related to the bulk power system. For example, in 

April 2008, the Commission hosted a meeting with 

the NRC to discuss the status of new reactors, the 

regional planning process to address the new reactors, reliability standards activities affecting nuclear 

power plants and grid operations, cyber security and 

future coordination between the two agencies. This 

marked the third joint meeting of the two agencies 

since the August 14, 2003 blackout, reflecting the 

continuing commitment of the agencies to work together to address issues of common interest. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 49

 

 

Reliability Standards
	

On June 18, 2007, 83 reliability standards became 

mandatory and enforceable for the users, owners 

and operators of the bulk electric system. During FY 

2008, the Commission took the following additional 

steps to implement section 215 of the Federal Power 

Act and to ensure the establishment of mandatory 

reliability standards: 

•		 In December 2007, the Commission issued a rule 

approving three reliability standards that set 

requirements for the development of system 

operating limits of the electricity grid for use in 

planning and operation horizons. 

•		 In March 2008, the Commission proposed to 

approve a reliability standard that coordinates 

certain activities between nuclear power plants 

and transmission entities. The Nuclear Plant Interface Coordination Reliability Standard would 

require a nuclear power plant operator and its 

suppliers of offsite power and related transmission and distribution services to coordinate concerning requirements for safe and reliable nuclear plant operation and system operating limits. 

•		 In July 2008, the Commission acted to improve 

grid reliability by approving modifications to five 

reliability standards related to interchange scheduling and coordination and approved NERC’s 

interpretation of five specific requirements of 

Commission-approved reliability standards. This 

marked the first time the Commission approved 

modifications to strengthen previously approved 

reliability standards. 

Compliance 

In FY 2008, the Commission took several steps to 

strengthen the reliability of the bulk power system 

by issuing several orders that govern the assessment 

of penalties by NERC for violations of mandatory reliability standards approved by the Commission. Specifically, the Commission took the following actions: 

•		 In November 2007 and February 2008, the Commission issued orders that completed its approval of Violation Risk Factors for the 83 Reliability Standards approved in Order No. 693. A 

Violation Risk Factor represents the potential 

reliability risk (“high,” “medium” or “lower”) a 

violation of a requirement presents to the BulkPower System. A Violation Risk Factor and the 

Violation Severity Level are the first steps in the 

determination of a monetary penalty for a violation of a requirement of a Reliability Standard. 

•		 In March 2008, the Commission provided guidance on the recovery of reliability penalty costs 

by RTOs and ISOs. The order directed that proposals to recover penalties be filed on a caseby-case basis. In evaluating such proposals, the 

Commission will consider, among other things, 

the nature of the reliability standard violation 

and the factors that contributed to the violation, 

including the integrity of the RTO or ISO compliance program to prevent such violations. 

•		 In April 2008, the Commission adopted an administrative policy for its review of notices of 

penalty filed by the Commission-certified ERO. 

The administrative policy also sets out schedules 

for filing, intervention and review by the Commission. 

•		 In June 2008, the Commission largely completed the matrix NERC and Regional Entities use 

in setting penalties for violations of mandatory 

electric reliability standards by approving assign-
Page 5 0 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

ments of Violation Severity Levels proposed by 

NERC for the first 83 FERC-approved reliability 

standards. A Violation Severity Level is a postviolation measurement of the degree to which 

a requirement was violated and will be used by 

NERC and the Regional Entities in the determination of a monetary penalty for the violation. The 

guidelines for evaluating the validity of Violation 

Severity Level assignments to ensure consistent 

and objective assessments are: (1) Violation Severity Level assignments should not have the unintended consequence of lowering the current 

level of compliance; (2) Violation Severity Level 

assignments should ensure uniformity and consistency among all approved reliability standards 

in the determination of penalties; (3) Violation 

Severity Level assignments should be consistent 

with the corresponding requirement; and (4) 

Violation Severity Level assignments should be 

based on a single violation, not on a cumulative 

number of violations. The Commission required 

NERC to determine whether its Violation Severity 

Level assignments should be changed to follow 

these guidelines. The Commission will consider 

Violation Severity Level assignments for other 

Reliability Standards it has accepted. 

•		 In July 2008, the Commission issued guidelines 

for reporting Notices of Penalty for violations 

of mandatory electric reliability standards filed 

by NERC to provide greater clarity and establish 

the appropriate level of information to help the 

Commission gauge the reasonableness of any 

penalty assessment. The Commission also stated that it would not institute a separate review 

on its own motion for the first group of penalty 

notices, and the guidance order is intended to 

minimize the number of occasions when the 

Commission would have to review future Notice 

of Penalty filings. 

•		 Throughout FY 2008, the Commission issued orders on 10 appeals of NERC compliance registry 

decisions. The Commission approved NERC’s 

compliance registry criteria, which defines 

whether an entity is subject to the mandatory 

reliability standards under one or more functions (e.g., generator owner or transmission operator). An entity registered by NERC for one or 

more functions may appeal its inclusion on the 

compliance registry. The Commission’s rulings in 

these orders clarify which entities are required 

to meet the reliability standards. 
 

New Approved Reliability Standards 

CIP-002-1 Critical Cyber Asset Identification 

CIP-003-1 Security Management Controls 

CIP-004-1 Personnel and Training 

CIP-005-1 Electronic Security Perimeter(s) 

CIP-006-1 Physical Security of Critical 

Cyber Assets 

CIP-007-1 Systems Security Management 

CIP-008-1 Incident Reporting & Response 

Planning 

CIP-009-1 Recovery Plans for Critical 

Cyber Assets 

NUC-001-1 Nuclear Plant Interface Coordination 

FAC-010-1 System Operating Limits Methodology 

for the Planning Horizon 

FAC-011-1 System Operating Limits Methodology 

for the Operations Horizon 

FAC-014-1 Establish and Communicate System 

Operating Limits 

Approved Modifications to Standards 

INT-001-3 Interchange Information 

INT-004-2 Dynamic Interchange Transaction 

Modifications 

INT-005-2 Interchange Authority Distributes 

Arranged Interchange 

INT-006-2 Response to Interchange Authority 

INT-008-2 Interchange Authority Distributes 

Status 

Four Approved Interpretations 

BAL-001-0 Real Power Balancing Control 

Performance, Requirement R1; 

BAL-003-0 Frequency Response and Bias, 

Requirement R3; 

BAL-005-0 Automatic Generation Control, 

Requirement R17; 

VAR-002-1 Generator Operation for Maintaining 

Network Voltage Schedules, 

Requirements R1 and R2. 

The term “bulk-power system” means: 

(A) f

(or an

acilities and contr

y portion thereof

ol s

); and 

ystems necessary for operating an interconnected electric energy transmission network

(B) electric energy from generation facilities needed to maintain transmission system reliability. 

Electric Reliability Standards Approved in 2008 

Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 51
	
Page 5 2 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Cyber Security
	

Damage from cyber attacks could be enormous. A 

coordinated attack could affect the electrical grid 

to a greater extent than the August 2003 blackout 

and cause more extensive damage. Cyber attacks 

can physically damage the generating facilities and 

other equipment with the result that restoration of 

power could take weeks or longer, instead of a few 

hours or days. Widespread disruption of electric service can quickly undermine the government, military 

readiness and economy, and endanger the health 

and safety of millions of citizens. 

When it comes to cyber security, the Commission’s 

approach has been very deliberate. The Commission 

recognizes that the cyber security standards must 

strike a reasonable balance. Overly prescriptive 

standards may impose a “one size fits all” solution 

that fails to recognize the significant differences in 

system architectures, technologies and risk profiles 

among entities. However, cyber security standards 

lacking sufficient detail will provide little useful direction, make compliance and enforcement difficult, allow flawed implementation and result in inadequate 

protection. In FY 2008, the Commission took the following actions with respect to cyber security: 

•		 In January 2008, the Commission issued a final 

rule that approved eight new mandatory critical 

infrastructure protection reliability standards to 

protect the nation’s bulk power system against 

potential disruptions from cyber security breaches. They contained approximately 160 requirements and sub-requirements. The mandatory 

reliability standards require certain users, owners and operators of the bulk power system to 

establish policies, plans and procedures to safeguard physical and electronic access to control 

systems, to train personnel on security matters, 

to report security incidents, and to be prepared 

to recover from a cyber incident. The final rule 

ordered significant changes to the standards 

that would improve their effectiveness and the 

Commission’s ability to monitor compliance with 

these mandatory standards. It also directed 

NERC to monitor the development and implementation of cyber security standards of the 

National Institute of Standards and Technology 

to determine if they contain provisions that will 

protect the Bulk-Power System better than the 

approved cyber security reliability standards. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 5 3 

•		 In September 2008, the Commission issued an 

order seeking public comment on a proposed 

clarification of the Cyber Security Standards, 

stressing that its intent is to eliminate a potential 

gap in the regulation of critical assets and critical 

cyber assets at nuclear power plants, not to subject specific facilities to dual regulation by both 

the Commission and the NRC. 

•		 The Commission has engaged in an effort to address the requirements of the Energy Independence and Security Act of 2007, which announced 

that it is federal policy to modernize the nation’s 

transmission and distribution grid through increased use of digital information and controls 

technology to improve reliability, security and 

efficiency of the grid. The Act directed the Commission to adopt certain standards and protocols for a smart grid interoperability framework 

developed by the National Institute of Standards 

and Technology. The Commission is especially 

focused on issues related to cyber security, and 

has been working with the National Institute of 

Standards and Technology in this regard. 

While section 215 of the Federal Power Act is an adequate tool for protecting the bulk power system 

against most reliability threats, cyber security threats 

are different. Cyber security threats may be posed 

by foreign nations or others intent on undermining 

the nation through its electric grid. Cyber security 

threats stand in contrast to past causes of regional 

blackouts and reliability failures, such as vegetation 

management, relay maintenance and training. Given 

the national security risk of cyber security threats, 

the Commission may need to act quickly to protect 

the bulk power system, to act in a manner that goes 

beyond the existing standards development process, and to protect certain information from public 

disclosure. In light of these concerns, the Commission has requested that Congress enact new legislation to combat cyber security threats. 
Page 5 4 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 55 

 

 

 Enforcement
	

Effective regulation is required if competitive energy markets are to succeed. Dramatic changes in both the 

natural gas and electricity industries have required the Commission to adjust its regulatory policies. While the 

core legal duties of the Commission to guard the consumer have not changed, the means of discharging this 

duty have evolved over time. 

The Commission approves market-based rates and institutes generally-applicable sets of rules that govern 

market participants and, where applicable, an entire market. As a result of this regulatory approach, it is even 

more important for the Commission to promote compliance with, and enforce, the statutes it is responsible 

for implementing and the regulations it issues under those statutes. 

The Commission seeks to understand market dynamics, detect problems or issues in energy markets early, 

prevent violations of its rules, and enforce compliance with the laws under its jurisdiction. The Commission 

also needs to ensure that utilities subject to its jurisdiction have effective internal monitoring and compliance 

programs in place to help assure that they are following established Commission rules and regulations. Commission oversight must then provide an independent and external check to ensure energy markets are operating in accordance with supply and demand fundamentals and, periodically, to audit utility compliance with 

Commission rules, regulations and statutory requirements. 

EPAct 2005 enhanced the Commission’s enforcement tools by providing, for the first time, civil penalty authority for violations of the Natural Gas Act and all of Part II of the Federal Power Act. This expanded penalty 

authority also applies to any entity (not just companies traditionally subject to the Commission’s jurisdiction) 

that manipulates wholesale gas or electric markets by engaging in fraud or deceit in connection with jurisdictional transactions. Armed with this expanded authority, the Commission has created an even stronger and 

more effective compliance and enforcement program to protect the public interest. 

The Division of Energy Market Oversight, within the Office of Enforcement, monitors markets on a daily basis 

and maintains regular contact with the market monitors in the Commission-approved RTOs and ISOs. The 

Division of Investigations conducts non-public investigations of violations of Commission orders, rules or regulations. The Division of Audits conducts operating and financial audits of regulated entities’ practices.
Page 5 6 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

 

Vigilant Oversight
	

Vigilant oversight requires that regulators appreciate the complexity and rapid changes that occur 

within an energy market. A key part of the Commission’s market-oriented approach to its oversight of 

the natural gas and electric power industries is to 

identify potential problems and to address them 

promptly. Transparency of market operations is essential to market oversight. 

Identification and Remedy 

of Potential Market Problems 

The Commission’s oversight program is a key component in its efforts to secure a well-functioning 

competitive market. In FY 2008, the Commission 

continued to enhance these efforts. Staff analysts 

review all key markets daily to detect both anomalous behavior by individual market participants and 

problems with market rules or operations that affect 

outcomes significantly. The program uses a real-time 

information capability to address rapidly developing 

situations and emergencies. The Commission’s Market Monitoring Center provides analysts with such 

data from numerous sources of market information. The information includes data on prices from 

sources such as RTOs and the trade press on physical 

flows on the pipeline and electric transmission systems (largely from data aggregators), on the operating status of some generating units (for example, 

operational information on nuclear plants from the 

NRC) and on some aspects of individual transactions 

from some trading platforms. It acts as a nerve center where analysts can quickly examine market conditions, exchange insights, and develop shared understanding of the information observed. Through 

daily fact-finding meetings attended by Commission 

staff, followed by briefings if warranted, the market 

oversight program helps keep key decision makers 

updated on market activities. 

The Commission’s market oversight program examines detailed interactions between the wholesale 

physical markets for natural gas and electric power 

and associated transmission markets. An analysis of 

interactions between the two industries helps to detect any possible problems as soon as possible after 

their occurrence. Because many other markets affect the operation of the physical electric power and 

natural gas markets, the oversight program also reviews related markets every day, including: financial 

markets for electric power and natural gas; markets 

for generation fuels and emissions credits; and international markets. 

The Commission also continues to support state efforts to monitor power and gas markets. The Research in Market Oversight (RIMO) program allows 

representatives from state agencies to spend a 

week at the Commission to research an energy market issue of importance to their states. This program 

pairs the RIMO participants with the Commission’s 

Market Oversight staff. The first RIMO project in 

April 2007 saw five representatives from Wyoming 

(including three aides to the Governor) study the effect of natural gas pipelines on prices paid to producers in Wyoming. In FY 2008, the Commission’s staff 

hosted three RIMO programs. The first was with the 

Environmental Protection Agency’s Program Development Branch and its Emissions Monitoring Branch, 

which included a review of a time series analysis of 

fuel and emissions prices, research on the growth of 

financial players in the emissions markets and historical trends in allowance transfers. The second was 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 5 7 

 

 

 

with the Missouri Public Service Commission economics staff, which focused on the underlying forces 

that create market volatility, market distortions and 

market manipulation. The third was with the Chairman of Ireland’s Commission on Energy Regulation 

and staff. Discussions covered energy financial and 

futures markets, emissions trading markets and 

regulation, the Commission’s RTO/ISO initiatives and 

Ireland’s single electricity market. 

The Commission also provides opportunities for 

state agencies to discuss information on energy 

markets with our staff. Topics of discussion include 

natural gas supplies, prices of electric power, LNG facilities planned and under construction, coal market 

fundamentals, weather implications and an analysis 

of observed changes over the month. The program 

provides for a monthly regional phone discussion 

with representatives of various agencies that have 

requested participation, using information as posted 

on the Market Oversight web site (www.FERC.gov/ 

oversight) and other energy issues the agencies may 

wish to discuss. This outreach program started out 

modestly and has now grown to more than 28 federal and state agencies participating each month. 

The Enforcement Hotline program complements 

market oversight. The Hotline provides a way for 

market participants and the public to contact the 

Commission’s enforcement staff on a confidential 

basis by telephone or email on matters affecting 

prices and wholesale utility service, including bidding anomalies, price spikes, inappropriate use of 

financial instruments, changes in available capacity 

on electric transmission systems or natural gas pipelines, undue discrimination in access to interstate 

transmission or transportation services, or violations 

of the Commission’s Standards of Conduct or other 

improper affiliate transactions. The Hotline also is 

available to landowners to raise concerns regarding 

pipeline construction and remediation that affects 

their property. Matters brought to the attention of 

the Hotline may result in investigations by the Commission’s enforcement staff. 

Standards of Conduct 

The Commission issued a Notice of Proposed Rulemaking in March of 2008, which proposed revamping the Standards of Conduct for Transmission Providers. The last major overhaul to the Standards, 

made in 2003, was overturned in part with respect 

to the gas industry in 2006 by the U.S. Court of Appeals for the D.C. Circuit. 

The proposed reforms refocused the Standards of 

Conduct on the areas where there is the greatest 

potential for affiliate abuse, making the rules clearer 

and thus easier to comply with and enforce. To accomplish this, the Commission proposed returning 

to the employee functional approach that pre-dated 

the 2003 changes to the Standards of Conduct. This 

approach confines the prohibited group of recipients 

of transmission function information to those employees actively engaged in marketing, thus eliminating the need for complex shared employee exemptions, and facilitating integrated resource planning 

and competitive bidding for system expansions. The 

proposed reforms also eliminated the concept of energy affiliates, streamlined and clarified posting and 

record retention requirements, and reorganized the 

Standards of Conduct as a whole to provide greater 

ease of use. 
Page 5 8 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Market Oversight 

One of the Office of Enforcement’s market oversight activities involves the examination of seasonal 

events affecting natural gas and electricity prices. 

The goal of this activity is to provide information for 

the Commission and the public on factors affecting 

energy supply and demand, as well as natural gas 

and electricity prices. At several Commission meetings, staff presented the Commission and the public detailed information relating to current market 

prices and analyses, explaining those prices and their 

effect on supply and demand in the various regions 

of the Nation, including the 2007/2008 Winter Market Assessment, the 2008 Summer Market and Reliability Assessment, the State of the Market Report 

and an examination of the causes of and responses 

to rising electricity costs. 

In addition, the Commission has required that all 

RTOs and ISOs incorporate a market monitoring 

function to analyze the state of the markets, propose solutions to market design flaws, and refer to 

the Commission any suspected market violations. In 

February of 2008, the Commission issued a Notice of 

Proposed Rulemaking on Wholesale Competition in 

Regions with Organized Electric Markets, which included a section on market monitoring reforms. The 

Commission proposed to enhance the independence 

of market monitors and to expand the scope of the 

reporting required of market monitors. The proposed reforms included requiring market monitors 

to report to the RTO or ISO board of directors rather 

than to management, clarifying the role of market 

monitors in market mitigation, defining an expanded 

set of core market monitoring functions, requiring 

the RTO or ISO to provide the market monitor with 

adequate resources and requiring ethics standards 

for market monitors and their employees. The proposed reforms also required production of quarterly 

reports, broadened the category of recipients of 

market data produced by the market monitors, expanded the ability of state commissions to request 

information from market monitors and shortened 

the lag time for the release of offer and bid data. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 5 9 

Oversight of Reporting Requirements 

for Regulated Entities 

During FY 2008, the Commission administered, analyzed and ensured compliance with the filing requirements for Electric Quarterly Reports (EQR) and the 

FERC financial forms and reporting requirements for 

natural gas pipelines, public utilities and licensees, oil 

pipeline carriers and centralized service companies. 

EQRs summarize data about currently effective contracts and wholesale power sales made by public 

utilities during each calendar quarter. EQR data is 

public and is made available for use on the Commission’s website. Although the primary purpose of 

requiring public utilities to file EQRs is to satisfy section 205(c) of the Federal Power Act’s requirement 

to have rates on file in a convenient form and place, 

EQRs are also helpful in monitoring the market. For 

example, EQRs play a critical role in the Commission’s oversight of the market-based 

rate program, which relies on the 

dual requirement of an ex ante finding of the absence of market power 

and sufficient post-approval reporting requirements, including the EQR. 

The Commission, as well as the industry, also uses 

the data reported in the financial reports to consider whether existing rates continue to be just and 

reasonable. 

In FY 2008, the Commission took the following actions to improve accounting and reporting of financial information: 

•		 In March 2008, the Commission revised the financial forms, statements and reports required 

of interstate natural gas companies to better 

reflect the current market and cost information 

needed for regulatory oversight of their rates 

and terms of service. The rule revises FERC Form 

No. 2, FERC Form No. 2-A and FERC Form No. 3-Q. 

The rule became effective beginning January 1, 

2008, with the filing of the revised Form No. 3-Q 

beginning with the first quarter of 2009. The revised Form No. 2 and Form No. 2-A for calendar 

year 2008 must be filed by April 18, 

2009. 

• In September 2008, following up 

on a proposal from January 2008, 

the Commission revised its financial 

reporting forms for electric utilities 

and licensees to allow for fuller detail and give the Commission the 

information it needs to carry out its 

Federal Power Act responsibilities 

to ensure that rates are just and reasonable. The rule includes changes 

for the FERC Form No. 1, FERC Form 

No. 1-F and FERC Form No. 3-Q. The 

rule will take effect January 1, 2009. 

The Commission requires electric utilities, interstate natural gas pipelines 

and oil pipelines subject to its jurisdiction to keep financial and related 

records in accordance with the Uniform System of Accounts and submit 

annual and quarterly financial forms. 

The Commission uses these financial 

forms for a variety of purposes, including establishing cost-based rates. 
Page 60 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Firm but Fair Enforcement
 

The Commission has taken a cohesive approach to 

enforcement, built on the central principle that Commission enforcement actions will be firm but fair. 

The Commission now has a full range of remedies 

available, including: civil penalties; disgorgement of 

unjust profits; or conditioning, revocation or suspension of authorizations. However, it exercises discretion when applying such penalties and remedies in a 

fair, reasonable and appropriate manner. 

The Commission’s authority is a direct result of substantially enhanced authority granted by EPAct 2005. 

First, that law expanded the Commission’s authority 

to assess civil penalties to include all of the Natural 

Gas Act and Part II of the Federal Power Act, and set 

the maximum civil penalty authority for the Natural 

Gas Act, Part II of the Federal Power Act, and the Natural Gas Policy Act of 1978 at $1 million per violation 

per day. Second, EPAct 2005 amended the Natural 

Gas Act and Federal Power Act to prohibit the use 

of manipulative or deceptive devices or contrivances 

by any entity in connection with the purchase or sale 

of electric energy, natural gas, or transmission or 

transportation services subject to the jurisdiction of 

the Commission. 

Clear and Fair Processes 

In May 2008, the Commission issued a package of 

reforms designed to strengthen its enforcement 

program and assure that the program is dedicated 

towards firm but fair enforcement. The package 

achieves this by adopting and proposing reforms 

that should facilitate compliance, assure fairness 

and protect the integrity of the conduct of investigations and enforcement actions. The package also 

provides greater clarity in our enforcement process, 

including how the Commission conducts audits and 

investigations. Specifically, the following determinations comprised the May enforcement package: 

•		 The Commission issued a new policy statement 

on enforcement reflecting the experience the 

Commission has gained in administering the enhanced enforcement tools Congress granted under EPAct 2005 and responded to requests from 

regulated entities for more transparency in the 

process. The revised policy statement builds on 

provisions in the original policy statement issued 

in October 2005 by providing further guidance 

on factors FERC considers in its enforcement 

decisions. It also provides a detailed picture of 

how the FERC investigative process works, including the considerations that staff of the Office of Enforcement take into account when 

determining whether to open an investigation 

and, once opened, whether to close it without 

further action or to recommend sanctions. The 

policy statement also sets forth in detail the factors considered in determining a penalty, as well 

as the appropriate level of the penalty. 

•		 The interpretive order expanded the scope of 

issues for which the Commission will permit requests for no-action letters, and the process 

through which regulated entities seek a determination on whether staff would recommend enforcement action if particular transactions, practices or situations are pursued. This process now 

will include everything within the area of energy 

markets jurisdiction with the exception of issues 

relating to the licensing of hydroelectric projects, 

certification of natural gas pipelines, operation 

of LNG terminals and enforcement of mandatory reliability standards. FERC also established 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 61 

 

 

an Internet-based compliance “help desk” as 

another way to obtain staff guidance, to complement the current mechanisms for obtaining 

formal and informal guidance through petitions 

for declaratory order, general counsel opinion 

letters, accounting interpretations, the enforcement Hotline and other informal communication 

with the Commission staff. 

•		 The Commission proposed to revise its regulations to clarify the application of rules governing 

off-the-record contacts and separation of functions in the context of non-public investigations. 

The proposal will ensure that the rules limiting 

contact with Commissioners and decisional staff 

apply in the same manner to outside parties as 

they do to litigation staff, and clarified the rule 

on intervention to specify that intervention is 

not available as a right in proceedings arising 

from non-public investigations. 

•		 The Commission issued a rule amending its regulations to clarify the rights of an entity when 

Enforcement staff intends to seek an Order to 

Show Cause. The rule states that Enforcement 

staff, in all but extraordinary circumstances, will 

notify the entity when it intends to seek an Order to Show Cause. The subject will have 30 days 

to respond, and the response will be presented 

to the Commission together with Enforcement 

staff’s memorandum requesting an Order to 

Show Cause, both of which will be non-public 

documents. 

Investigations and Enforcement 

Market participants, in the course of seeking new 

profit opportunities, may violate rules or manipulate 

markets to reap unjust profits. In FY 2008, the Commission actively monitored electric and natural gas 

markets to determine whether price movements 

were the result of market manipulation or market 

fundamentals. The Commission’s market oversight 

and investigations staff continually reviewed market 

activity for any possible manipulation of prices. In 

close coordination with investigations staff, market 

oversight staff performs a detailed review of wholesale electric and natural gas prices and market activity on a daily basis with the intent of identifying 

areas of possible manipulation. If Commission staff 

identifies price anomalies that are not explained by 

market fundamentals, it will investigate the matter. 

The object of the Commission’s enforcement program is compliance, and a priority of the Commission 

in this area is to strengthen the compliance programs 

within the regulated community. Strengthening 

compliance programs will pay great dividends over 

time, as the incidence and seriousness of violations 

decrease. It will also allow the Commission to dedicate more of its enforcement resources to identify 

and punish those companies determined to violate 

the Commission’s rules. In support of this priority the Commission took the following actions in FY 

2008: 

•		 In November 2007, the Commission held a technical conference to highlight the implementation 

of FERC’s enforcement authority as expanded by 

EPAct 2005. 

•		 In November 2007, just prior to the enforcement 

technical conference, staff released an enforcement report to offer insights into the evolution 

of the Commission’s enforcement program, and 

to show how the Commission uses its enforce-
Page 62 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

 

ment tools to encourage companies to develop 

effective compliance programs and to deter and 

punish misconduct. 

•		 In July 2008, Commission staff hosted a workshop to provide a forum for interested participants to share perspectives and information on 

federal energy regulatory compliance and the 

development of effective internal compliance 

programs. 

The Commission’s enforcement investigations in 

FY 2008 focused on possible market manipulation, 

undue discrimination or affiliate abuses, violations 

of Standards of Conduct requirements, compliance 

with hydropower requirements, violations of the 

terms and conditions of tariffs, referrals from market monitors in organized markets, and violations related to Commission rules and regulations. Enforcement investigations arise from a variety of sources, 

including referrals from the Commission, Enforcement Hotline calls, direct contact with enforcement 

staff, observations of markets, referrals from market 

monitors in RTOs and ISOs, and anonymous tips. 

In addition to non-public investigations, in FY 2008, 

the Commission publicly announced that it was 

working on the following investigations: 

•		 In March 2008, the Commission joined NERC and 

the Florida Reliability Coordinating Council’s investigation into the February 26, 2008, Florida 

blackout by initiating a non-public, formal investigation into whether any mandatory federal 

reliability standards were violated during the 

event. 

•		 In March 2008, the Commission’s Office of Enforcement issued a staff report closing out an 

investigation of the installed capacity market for 

New York City. The Commission had ordered the 

investigation in July 2007 after allegations were 

made by various parties that one of the suppliers 

of capacity had engaged in economic withholding by consistently offering its capacity at its bid 

cap and therefore had raised prices in the market. The report stated that Enforcement Staff 

found no evidence that any of the generators in 

the case violated the NYISO service tariff or the 

Commission’s anti-manipulation regulations. 

•		 In August 2008, the Commission disclosed that 

since May 2008, the Commission’s Office of Enforcement had been undertaking a non-public 

investigation into the scheduling of flows over 

circuitous paths in the NYISO market. 

•		 In September 2008, the Commission’s Office of 

Enforcement issued a report closing an investigation of alleged market manipulation. The 

Commission had referred allegations made by 

DC Energy that HQ Energy had manipulated the 

NYISO energy and transmission congestion contract markets. The Commission denied the complaint based on the findings of the staff report. 

The Enforcement Hotline continues to be a mechanism that allows industry participants to provide 

information to the Commission to identify potential 

investigations. The Commission, in FY 2008, also encouraged self-policing and reporting of violations 

through the Hotline. 

When violations are identified, the Commission 

applies remedies to mitigate the effects of market 

power, requires disgorgement of unjust profits 

where appropriate, imposes civil penalties or other 

sanctions when available under existing laws, and requires compliance plans to prevent future violations. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 63 

 

Date 

 

Subject of 

investigation 

Total payment 

civil penalty, 

disgorgement, other 

Explanation of payments and compliance plans 

May 29, 2008 Duquesne Light 

Company 

$250,000 

Civil Penalty 

$1,000,000 

Compliance Plan 

Civil penalty and at least $1,000,000 designated 

for a comprehensive compliance plan for 

violations of FERC cost allocation procedures, 

the electric quarterly report filing requirement 

and the standards of conduct. 

May 19, 2008 

 

Edison Mission $7,000,000 

Civil Penalty 

$2,000,000

Compliance Plan 

Civil penalty and at least $2,000,000 designated 

for a comprehensive compliance plan for violations 

 of 18 C.F.R. § 35.41(b) (2007), which imposes a duty 

to provide accurate, factual and complete information 

in communications with the Commission upon electric 

power sellers authorized to engage in sales for resale 

of electric energy at market based rates. 

March 11, 2008 Entergy 

New Orleans 

$400,000 

Civil Penalty 

Civil penalty resulting from self-reported violations of 

the Commission’s shipper-must-have-title requirement. 

March 11, 2008 Constellation 

New Energy-Gas 

Division LLC 

$5,000,000 

Civil Penalty 

$1,899,416 

Disgorgement 

Civil penalty, disgorgement and a compliance 

monitoring plan resulting from self-reported violations 

of the Commission’s capacity release policies, including 

circumvention of the posting and bidding requirements 

for released capacity, violations of the shipper-musthave-title requirement and violations of the prohibition 

on buy-sell transactions. 

October 25, 2007 BP Energy Company $7,000,000 

Civil Penalty 

Civil penalty and compliance monitoring plan resulting 

from self-reported violations of competitive bidding 

regulations, shipper-must-have-title requirement and 

prohibition on buy/sell arrangements. 

October 25, 2007 MGTC, Inc. $300,000 

Civil Penalty 

Civil penalty and compliance report resulting from selfreported violations of the shipper-must-have-title 

requirement. 

Enforcement proceedings often result in settlements. Settlements benefit consumers by delivering benefits such as disgorgement of profits sooner 

than would be possible under litigation. They are 

also administratively efficient and allow the Commission more flexibility in managing its enforcement resources. In FY 2008, the Commission approved the 

following settlements of enforcement matters: 
Page 64 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

Not all enforcement actions result in settlements. 

As described in the previously reported period, the 

Commission has issued two show cause orders that 

made preliminary findings of market manipulation 

and proposed civil penalties and disgorgement of 

unjust profits. In FY 2008, the Commission continued 

to move forward with both actions: 

•		 In May 2008, the Commission established an 

Administrative Law Judge (ALJ) hearing to determine whether Energy Transfer Partners, L.P. 

and its affiliates, Energy Transfer Company, ETC 

Marketing Ltd., and Houston Pipeline Company, 

engaged in market manipulation in violation of 

FERC rules by manipulating wholesale gas prices 

at the Houston Ship Channel to benefit ETP’s financial positions and other physical positions between December 2003 and December 2005. 

•		 In July 2008, the Commission ordered an ALJ 

hearing to determine whether certain natural 

gas futures trading activities by Amaranth Advisors, LLC, its affiliated entities and two individual 

traders violated the Commission’s anti-market 

manipulation regulations. 

Internal Compliance 

In FY 2008, the Commission received 68 self-reports 

of violations of various Commission orders, rules or 

regulations. In many cases companies took self-corrective action before making the self-report. During 

FY 2008, 25 self-reports involving less serious matters were closed without further action by the Commission, upon a showing by the company that it was 

now in compliance. Elsewhere, the Commission has 

imposed civil penalties for more serious violations 

that were self-reported, but in doing so gave significant credit in determining the penalty amount to the 

company for having self-reported. The Commission 

encourages companies to instill a strong culture of 

compliance in their organizations, and to self-report 

violations promptly and fully. 

Market, reliability and other regulatory rules must 

be clear, enforceable and fully understood by the jurisdictional entities that the Commission regulates. 

Yet the obligation to comply with those regulations, 

rules and standards lies with the regulated entity. 

Therefore, it is important that regulated entities 

have a rigorous internal compliance program that 

provides the tools, processes and high-level management support to identify problems or areas of 

non-compliance and to report such problems to the 

Commission. 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 65 

 

Industry Compliance through Audits 

A crucial component of the Commission’s goal of 

ensuring compliance is the Office of Enforcement’s 

audit program. In FY 2008 Commission staff conducted audits on a regular but unscheduled basis to 

ensure that jurisdictional companies complied with 

Commission regulations, orders and policies in four 

major program areas: Open Access Transmission 

Tariff; market-based rate program; market-based 

rate storage program; and price transparency. Audits in these major program areas are performed to 

ensure that jurisdictional companies are following 

appropriate Commission precedent when providing 

and obtaining transmission service, making power 

sales in wholesale power markets, pricing storage 

and storage services at market prices, and reporting trade data to price index publishers. In FY 2008, 

the Commission has completed major audits in these 

program areas to improve jurisdictional companies’ 

compliance with Commission precedent. Corrective 

actions resulting from these audits included structural, process and procedural changes, as well as 

remedies to improve market transparency. 

The Commission completed 60 audits of public utilities and natural gas pipeline and storage companies 

in FY 2008. The audits consisted of 21 operational audits and 39 financial audits. The jurisdictional companies implemented corrective actions to comply with 

the recommendations issued by the Commission. 

The Commission conducted these audits proactively 

on a regular but unscheduled basis to ensure compliance with various Commission requirements. 

These audits resulted in the implementation of 

compliance plans to ensure adherence to the 

Commission’s policies and procedures, including 

requirements to conduct training and to conduct 

periodic internal audits related to the areas of noncompliance, as well as requirements to make certain 

refunds and correct accounting entries, and to file 

tariff revisions. 
Page 66 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . P ag e 6 7 

 

Appendix A – Background Information 

Appendices:
	

Commission Overview 

The Federal Energy Regulatory Commission (FERC 

or the Commission) is an independent agency that 

regulates aspects of the electric, natural gas, and oil 

pipeline industries. Specifically, the Commission: 

•		 Regulates the transmission and sale of natural 

gas for resale in interstate commerce. 

•		 Regulates the transmission of oil by oil pipelines 

in interstate commerce. 

•		 Regulates the transmission and wholesale sales 

of electricity in interstate commerce. 

•		 Reviews mergers, acquisitions, asset sales and 

certain security transactions in the electric 

industry. 

•		 Licenses and inspects private, municipal and 

state hydroelectric projects. 

•		 Approves the siting and abandonment of interstate natural gas pipeline and storage facilities, 

and ensures the safe operation and reliability of 

proposed and operating LNG terminals. 

•		 Oversees the reliability of the high voltage 

interstate transmission system. 

•		 Monitors and investigates energy markets. 

•		 Imposes civil penalties and other remedies on 

energy organizations and individuals who violate FERC rules in the energy markets. 

•		 Oversees environmental matters related to 

natural gas and hydroelectricity projects. 

•		 Approves siting applications for electric transmission facilities under limited circumstances. 

•		 Administers accounting and financial reporting 

regulations and conduct of regulated companies. 

Regulatory Authority 

The Commission is an independent regulatory agency within the U.S. Department of Energy (DOE). 

The Commission was created through the Department of Energy Organization Act on October 1, 1977. 

At that time, the Federal Power Commission (FPC), 

the Commission’s predecessor that was established 

in 1920, was abolished and the Commission inherited 

most of the FPC’s regulatory mission. 

The Commission has five members who are appointed by the President of the United States with the 

advice and consent of the Senate to five-year staggered terms. Each Commissioner has an equal vote 

on regulatory matters and no more than three Commissioners may belong to the same political party. 

One member is designated by the President to serve 

as Chairman and is the Commission’s chief executive 

officer. 

Mission 

Regulate and oversee energy industries in the 

economic, environmental, and safety interests 

of the American public. 

Vision 

Abundant, reliable energy in a 

fair competitive market. 
Page 68 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

Hydropower regulation, the oldest area of the Commission’s jurisdiction, began with the FPC’s regulation of non-federal hydroelectric generation in 1920 

and includes authorizing the construction of projects 

in interstate commerce and overseeing their operation and safety. 

Since 1935, the Commission has regulated certain 

electric industry activities under the Federal Power Act. Under Federal Power Act sections 205 and 

206, the Commission ensures that the rates, terms 

and conditions of sales for resale of electric energy 

and transmission service in interstate commerce by 

public utilities are just, reasonable, and not unduly 

discriminatory or preferential. Under Federal Power Act section 203, as amended by EPAct 2005, the 

Commission reviews mergers and acquisitions, and 

certain corporate transactions involving public utilities and public utility holding companies. Under Federal Power Act sections 203, 205 and 206, the Commission primarily regulates investor-owned utilities. 

Government-owned utilities (e.g., Tennessee Valley 

Authority, federal power marketing agencies, and 

state and municipal utilities) and most cooperatively 

owned utilities are not, in large part, subject to Commission regulation (with certain exceptions). 

The Commission has electric regulatory responsibilities under portions of the Public Utility Regulatory 

Policies Act of 1978 and the Public Utility Holding 

Company Act of 2005 pertaining to qualifying facilities, exempt wholesale generators, and books and 

records access requirements. Under the Energy Independence and Security Act of 2007, the Commission, along with DOE and the National Institute of 

Standards and Technology, participates in a smart 

grid taskforce to ensure awareness, coordination 

and integration of the federal government’s diverse 

activities related to smart grid technologies and practices. Regulation of retail sales and local distribution 

of electricity are matters left to the states. 

The Commission does not have a role in authorizing 

the construction of new electric generation facilities 

(other than non-federal hydroelectric facilities) as 

regulation of such construction is the responsibility 

of state and local governments. EPAct 2005 gave 

the Commission authority to permit the construction 

or modification of transmission facilities in national 

interest electric transmission corridors designated 

by the Secretary of Energy, if certain conditions are 

met. 

A major new area of Commission regulation as a result of EPAct 2005 is oversight of the ERO that will 

develop and enforce mandatory reliability standards 

for the Nation’s bulk power system, subject to Commission approval pursuant to new section 215 of the 

FPA. On July 20, 2006, the Commission conditionally certified NERC as the ERO. On March 15, 2007, 

the Commission acted to protect the reliability of the 

nation’s bulk power system by approving 83 reliability standards proposed by the Commission-certified 

ERO. On June 18, 2007, all owners, users and operators of the bulk power system became subject to 

mandatory and enforceable reliability standards approved by the Commission. 

The Commission’s role in regulating the natural gas 

industry is largely defined by the Natural Gas Act. 

Under sections 3 and 7 of the Natural Gas Act, the 

Commission regulates the construction of new on-
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 69 

shore LNG import terminals and natural gas pipelines and related facilities. Under sections 4 and 5 

of the Natural Gas Act, it oversees the rates, terms 

and conditions of sales for resale and transportation 

of natural gas in interstate commerce. The Commission’s jurisdiction over wholesale sales of natural gas 

is limited by the Natural Gas Policy Act of 1978 and 

the Wellhead Decontrol Act of 1989. Pipeline siting 

and construction is authorized by the Commission if 

found to be required by public convenience and necessity. As with hydropower licensing, the Commission’s actions on LNG and pipeline projects typically 

require consideration of factors under the National 

Environmental Policy Act of 1969, the Endangered 

Species Act, the Coastal Zone Management Act and 

other such statutes. Regulation of the production 

and gathering of natural gas, as well as retail sales 

and local distribution of natural gas, are matters left 

to the states. 

Finally, the Interstate Commerce Act gives the Commission jurisdiction over the rates, terms and conditions of transportation services provided by interstate oil pipelines. The Commission has no authority 

over the construction of new oil pipelines, or over 

other aspects of the industry such as production, refining or wholesale or retail sales of oil. 
Page 70 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

 

Strategic Plan
 

Federal Energy Regulatory Commission 

Strategic Plan Framework 

FY 2006 – FY 2011 

Mission 

Regulate and oversee energy industries in the economic, 

environmental and safety interests of the American 

public. 

Vision 

Abundant, reliable energy in a fair, competitive market. 

Guiding Principles that Strengthen the 

Commission’s Overall Performance 

To fulfill its Mission, the Federal Energy Regulatory 

Commission commits to: 

Organizational Excellence 

Use resources efficiently and effectively to achieve its 

strategic priorities. 

Due Process and Transparency 

Complete regulatory proceedings in an open and fair 

manner, consistent with established regulations. 

Regulatory Certainty 

Provide regulatory certainty through consistent Commission approaches and actions. 

Stakeholder Involvement 

Ensure that interested parties are informed and provided 

an appropriate opportunity to participate in Commission 

proceedings. 

Timeliness 

Act on regulatory matters in an expeditious manner. 

Goal 1: Energy Infrastructure

Promote the Development of 

a Strong Energy Infrastructure 

Objective A: Stimulate Appropriate Infrastructure 

Development 

•		 Resolve regulatory and other challenges to needed 

development 

•		 Encourage investment and effect timely cost recovery 

Objective B: Maintain a Reliable and Safe Infrastructure 

•		 Assure reliability of the interstate transmission grid 

•		 Protect safety at LNG and hydropower facilities 

•		 Incorporate environmental considerations into 

Commission decisions 

Goal 2: Competitive Markets

Support Competitive Markets 

Objective A: Develop Rules that Encourage Fair and 

Efficient Competitive Markets 

•		 Employ best practices in market rules 

•		 Reduce barriers to trade between markets and among 

regions 

Objective B: Prevent Accumulation and Exercise of 

Market Power 

•		 Assure that proposed mergers and acquisitions are 

in the public interest 

•		 Address market power in jurisdictional wholesale 

markets 

Goal 3: Enforcement 

Prevent Market Manipulation 

Objective A: Provide Vigilant Oversight 

•		 Identify and remedy problems with structure and 

operations in energy markets 

Objective B: Provide Firm but Fair Enforcement 

•		 Establish clear and fair processes 

•		 Conduct investigations promptly and impose penalties where appropriate 

•		 Encourage self-policing and reporting of violations 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 71 

Offices/Organizations		 Descriptions
	

Office of Administrative Law Judges		 Resolves contested cases as directed by the Commission effectively, 

efficiently and expeditiously, either through impartial hearing and 

decision or through negotiated settlement, ensuring that the rights of 

all parties are preserved. 

Office of Administrative Litigation		 Represents the public interest and seeks to litigate or settle cases set for 

hearing in a timely, efficient and equitable manner while ensuring that 

outcomes are consistent with Commission policy. 

Office of External Affairs Handles all external communications with the public, press, Congress and 

the states for the Commission. 

Office of the Executive Director		 Provides administrative support services to the Commission including 

human resources, procurement, information technology, organizational 

management, financial, logistics and others. 

Office of Energy Projects		 Strengthens our energy infrastructure through the approval and 

oversight of hydroelectric, natural gas energy projects and electric 

transmission projects that are in the public interest and assures the 

safety of hydroelectric and LNG facilities. 

Office of the General Counsel		 Provides legal services to the Commission. OGC represents the 

Commission before the courts and Congress, and is responsible for the 

legal phases of the Commission’s activities. 

Office of Enforcement		 Ensures effective regulation and protection of consumers by monitoring 

the operation of energy markets, identifying and remedying market 

problems in a timely manner, and enforcing Commission orders, rules 

and regulation. 

Office of Energy Market Regulation Deals with matters involving markets, tariffs and rates related to electric, 

natural gas and oil pipeline facilities and services. 

Office of Electric Reliability		 Oversees the development and review of mandatory reliability and 

security standards. Ensures compliance with the approved mandatory 

standards by the users, owners and operators of the bulk power system. 

Office Descriptions
	
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Guiding Principles that Strengthen the Commission’s Overall Performance
	

Five principles guide the Commission as it exercises 

its jurisdiction under its governing statutes. Whether the Commission is adjudicating a rate filing, ruling 

on a permit application or developing a new policy, it 

strives to meet these criteria as a means of ensuring 

that each of its actions is consistent with the public 

interest. 

•		 Organizational Excellence. Above all, the Commission strives to use its resources efficiently 

and effectively to achieve its strategic priorities. 

This includes its human resources. The Commission performs targeted recruiting and hiring and 

has developed a markets-oriented training curriculum for entry-level and experienced staff and 

a retention and mentoring program for new employees. The Commission also makes efficient 

use of its information technology to receive filings, produce reports and orders, and maintain 

data repositories. The Commission tracks the 

activities of its staff to ensure that they are directed at meeting the Commission’s strategic 

goals and objectives. 

•		 Due Process and Transparency. Paramount in 

all of its proceedings is the Commission’s determination to be open and fair to all participants. 

All significant initial filings submitted to the Commission are announced by way of public notice 

published in the Federal Register. Material issues 

of fact are litigated in public hearings governed 

by due process rules. Many of the Commission’s 

major decisions are discussed and announced at 

open meetings that are webcast at no charge on 

its website. Significant items are posted on the 

Commission’s website and summaries of items 

from Commission meetings are immediately 

posted following the meeting. 

•		 Regulatory Certainty. In each of the thousands 

of orders, opinions and reports issued by the 

Commission each year, the Commission strives 

to provide regulatory certainty through consistent approaches and actions. Without an assurance that the Commission’s policies will be 

internally consistent and applied consistently, 

investors may be unwilling to bear the risks associated with investing in critical energy infrastructure. Where appropriate, the Commission provides generic direction to industry participants in 

the form of guidance orders, policy statements 

or rulemakings, to avoid the uncertainty present 

in case-by-case adjudications. The Commission 

also has codified market power rules designed 

to help prevent the exercise of market power 

and market abuse to provide a more stable marketplace and create an environment that will attract needed investment capital. 

•		 Stakeholder Involvement. The Commission 

conducts regular outreach to ensure that interested parties have an appropriate opportunity 

to contribute to the performance of the Commission’s responsibilities. The Commission also 

organizes technical conferences and workshops 

designed to explain and explore issues related 

to the development and implementation of its 

policies. Throughout FY 2008, the Commission 

met with state and federal regulators, industry 

officials and the public to discuss significant energy issues. Specifically, the Commission held 

the following significant technical conference 

and workshops: 
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 73 

Date Subject Location 

October 1 and 2 Transmission Planning Draft Attachment K Technical Conference Atlanta, GA 

October 15 and 16 Transmission Planning Draft Attachment K Technical Conference Boston, MA 

October 23 and 24 Transmission Planning Draft Attachment K Technical Conference Denver, CO 

November 6 State of the Natural Gas Industry Conference Washington, DC 

November 16 Conference on Enforcement Washington, DC 

December 11 Technical Conference on Interconnection Queuing Practices Washington, DC 

January 23 Technical Conference on Composition of Proxy Groups for 

Determining Gas and Oil Pipeline Return on Equity Washington, DC 

February 26 Technical Conference on the EQR Data Dictionary Washington, DC 

March 27 Technical Conference for Reviewing the Submitted Other Federal 

Agency Costs for Administering Part I of the FPA Washington, DC 

April 3 Technical Conference on Transparency Provisions of Section 23 

of the Natural Gas Act Washington, DC 

April 22 Technical Conference on Form No. 552 Washington, DC 

May 7 Technical Conference on Forward Capacity Markets in the 

New England and PJM Regions Washington, DC 

May 19 Form No. 552 Follow-up Workshop Washington, DC 

May 21 Technical Conference on Demand Response in Organized 

Electric Markets Washington, DC 

July 1 Conference to Review the Current and Future State 

of Regional Wholesale Electricity Markets Washington, DC 

July 8 Compliance Workshop Washington, DC 

The Commission also held regional conferences to 

identify infrastructure conditions, needs and investment, as well as environmental and landowner concerns. Finally, in processing hydropower and gas-related permit applications, the Commission conducts 

an extensive collaborative pre-filing process, during 

which it receives input from a multitude of stakeholders, including: citizen groups; environmental 

organizations; tribal interests; and local, state and 

federal resource agencies. 

• Timeliness. The Commission’s goal is to reach an 

appropriate resolution of each proceeding in an 

expeditious manner. Toward that end, the Commission has steadily reduced the time it takes to 

act on projects, such as LNG import terminals, 

gas storage facilities and interstate natural gas 

pipelines. It has done so without compromising its environmental protection and public participation responsibilities. The Commission also 

sets and tracks compliance with goals for timely 

resolution of filings for cost recovery, new services or changes to existing services, as well as 

issues opinions resolving initial decisions, complaints and applications pursuant to section 203 

of the Federal Power Act. 
Page 74 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

Appendix B

Settlements and the Alternative Dispute Resolution Process

The Commission’s program on alternative dispute 

resolution (ADR) for energy conflict prevention and 

resolution serves as a model federal program. This 

past year the program continued to resolve complex 

energy cases successfully, instruct staff and external 

entities on ADR training and related skill sets in interest-based negotiation, conduct outreach to federal 

agencies and other energy stakeholders, and proactively pursue broad-scale program initiatives such as 

ADR provisions in rulemakings to increase the systematic use of ADR methods to resolve regulatory 

disputes in the 21st century. 

for the Administrative Law Judges on ADR and proIn FY 2008, the Commission’s Dispute Resolution 

Service had another successful year in mediating 

and facilitating energy cases across the four regulated energy industries: electricity, hydropower, 

natural gas and oil. The DRS addressed 57 new ADR 

requests and referrals. The DRS had a 90% success 

rate in assisting parties achieve consensual resolution of cases (18 out of 20 cases were resolved). 

For casework concluded during the period, all participants who completed evaluations gave the DRS 

staff favorable comments, for a satisfaction rate of 

100%, and all respondents indicated that the use of 

ADR resulted in savings of time and/or money over 

traditional processes. 

The DRS conducted a three-part annual training 

series on an Overview of ADR Methods, Facilitation 

and Group Problem Solving and Interest-Based Negotiation to Commission staff and developed new, customized ADR training for the Commission’s Office of 

Enforcement. The DRS produced a desktop manual 

vided training on ADR to the National Association of 

Regulatory Utility Commissioners, the U.S. Department of the Interior’s Minerals Management Service 

and a regional office of the U.S. Fish and Wildlife Service in Portland, Oregon. The DRS hosted Collaboration for the Federal Manager: Engaging Citizens in 

Government Decision-Making, which was attended 

by approximately 50 federal agency representatives 

and continued to host a number of brown bags at 

the Commission on ADR topics. 

In FY 2008, the DRS made numerous presentations to 

energy groups and trade associations, government 

partners, dispute resolution providers and affected 

stakeholders. The DRS renewed publication and 

dissemination internally and externally of The Commission’s ADR News. Foreign delegations visiting the 

Commission and other federal agencies expressed 

interest in learning about the Commission’s ADR 

program and the possibility of adopting ADR to help 

resolve conflicts in their emerging regulatory programs, in many cases involving government-owned 

energy infrastructures. The Commission’s Dispute 

Resolution Service met with delegations from China, 

Thailand and South Africa and made presentations 

on nine years of the successful application of ADR to 

energy conflicts at the Commission. 

The DRS assisted with several initiatives aimed at 

creating increased awareness of the benefits of ADR 

for energy and environment-related energy conflicts 

and ensuring the systematic application of ADR to 

resolve energy conflicts, as appropriate. For ex-
Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 75 

 

 

ample, three Commission rulemakings incorporated 

ADR provisions for companies to consider the use of 

ADR for energy disputes. 

To increase transparency in transmission planning 

on a nondiscriminatory basis, the Order 890 rulemaking included a dispute resolution provision in a 

list of best practices. The dispute resolution principle 

requires transmission providers to identify a process 

to manage disputes that arise in the transmission 

planning process. Transmission providers consider 

ADR in a three-step process of negotiation, mediation and either arbitration or filing with the Commission. In FY 2008, the Commission had received over 

40 filings from energy companies that address the 

dispute resolution provision. 

Having mechanisms in place to resolve disputes 

effectively, efficiently and in a timely manner will 

further reduce barriers to trade between markets 

and among regions. Through negotiation or mediation, in which a neutral third-party provides 

assistance, disputants are more likely to achieve 

resolution amicably and in less time, develop durable 

agreements and solve problems more creatively to 

meet the interests of all involved. In addition, negotiation and ADR processes that result in successful 

outcomes will reduce the number of complaints filed 

with the Commission. 

The Commission issued its first two Annual Reports 

on Environmental Conflict Resolution (ECR) Activities 

at the Commission to the Office of Management and 

Budget (OMB) and the Council on Environmental 

Quality (CEQ). The new annual reports were prompted by the OMB-CEQ joint policy memo encouraging 

agencies to use more ECR and collaborative problem-solving in stakeholder processes in carrying out 

their missions and environmental decision-making. 

Remarkably, the Commission’s program is one of 

the few in the federal government that offers comprehensive ECR case services for energy-related 

environmental matters, ADR/ECR skills training for 

participants and leaders in collaborative, multi-party 

environmental decision-making processes and certified full-time dispute resolution staff to perform the 

functions as outlined in the OMB-CEQ policy memo. 

The Commission highlighted in the recent ECR report the relicensing proceeding of the Upper American River Project and the Chili Bar Hydroelectric 

Project, comprised of eight hydroelectric developments. The projects are located in California on the 

American River and its tributaries and produce a 

significant amount of power (1,095 MW). A total of 

16 stakeholders signed the settlement agreement, 

including the Sacramento Municipal Utility District, 

Pacific Gas & Electric Co., federal and state resource 

agencies, environmental interest groups and others. The Commission’s DRS participated in numerous settlement discussions over a period of several 

months that set the tone for resolution of a multitude of issues among the various parties. Within a 

year, the parties signed the settlement agreement, 

which contributed to faster relicensing of the projects. The agreement provides for numerous environmental and recreational enhancements over the 

new license term. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix C

Hydroelectric Power Table

Projects for which licenses will expire between January 1, 2008 and December 31, 2013 

Project Project Licensee Waterway State Authorized Issue Expiration 

No. Name KW Date Date 

2197 YADKIN ALCOA POWER GENERATING INC. YADKIN RIVER NC 216380 5/1/1958 4/30/2008 

2206 YADKIN-PEE DEE PROGRESS ENERGY CAROLINAS,INC. PEE DEE RIVER NC 108600 5/19/1958 4/30/2008 

659 LAKE BLACKSHEAR CRISP COUNTY POWER COMM (GA) FLINT RIVER GA 15200 8/14/1980 8/9/2008 

2232 CATAWBA-WATEREE DUKE ENERGY CAROLINAS, LLC. WATEREE RIVER SC 804940 9/17/1958 8/31/2008 

2225 SULLIVAN LAKE (STORAGE) PUD NO 1 OF PEND OREILLE CNTY (WA) SULLIVAN CREEK WA 0 11/25/1958 9/30/2008 

2242 CARMEN-SMITH CITY OF EUGENE MCKENZIE RIVER OR 120500 1/8/1959 11/30/2008 

67 BIG CREEK NOS 2A,8 & EASTWOOD SOUTHERN CALIFORNIA EDISON CO (CA) SOUTH FORK SAN JOAQUIN RIVER CA 373320 8/9/1978 2/28/2009 

120 BIG CREEK NO 3 SOUTHERN CALIFORNIA EDISON CO (CA) SAN JOAQUIN RIVER CA 165375 9/7/1977 2/28/2009 

2175 BIG CREEK NO.1 & NO.2 SOUTHERN CALIFORNIA EDISON CO (CA) SAN JOAQUIN RIVER CA 150150 3/27/1959 2/28/2009 

2655 EAGLE & PHOENIX MILLS EAGLE & PHENIX HYDRO CO INC (SC) CHATTAHOOCHEE RIVER GA 27660 4/29/1975 2/28/2009 

2088 SOUTH FEATHER POWER SOUTH FEATHER WATER AND POWER AGENCY SOUTH FORK FEATHER RIVER CA 104100 7/21/1952 3/31/2009 

2281 WOODLEAF KANAKA T. L. PACIFIC GAS AND ELECTRIC CO (CA) BUTTE CO CA 0 11/1/1961 3/31/2009 

4851 SLY CREEK T. L. PACIFIC GAS AND ELECTRIC CO (CA) CA 0 2/12/1982 3/31/2009 

9988 JOHN P. KING MILL AUGUSTA CANAL AUTHORITY SAVANNAH RIVER GA 2125 6/29/1989 5/31/2009 

2261 LOLO-IMNAHA T. L. AVISTA CORPORATION OR 0 12/22/1959 7/22/2009 

7528 CANAAN PUBLIC SERVICE CO OF NH (NH) CONNECTICUT RIVER VT 1100 8/24/1984 7/31/2009 

1005 BOULDER CANYON BOULDER, CITY OF (CO) MIDDLE BOULDER CREEK CO 20000 4/28/1981 8/31/2009 

803 DESABLA-CENTERVILLE PACIFIC GAS AND ELECTRIC CO (CA) WEST BRANCH FEATHER RIVER CA 26650 6/12/1980 10/11/2009 

2801 GLENDALE LITTLEVILLE POWER CO INC (MA) HOUSATONIC RIVER MA 1140 11/23/1979 10/31/2009 

6885 CINNAMON RANCH MOSS, RICHARD MIDDLE CREEK CA 175 12/26/1985 12/31/2009 

2543 MILLTOWN CLARK FORK AND BLACKFOOT, LLC. CLARK FORK MT 3200 6/3/1968 12/31/2009 

2244 PACKWOOD LAKE ENERGY NORTHWEST LAKE CREEK WA 26125 7/7/1960 2/28/2010 

2210 SMITH MOUNTAIN APPALACHIAN POWER CO (VA) ROANOKE (STAUNTON) RIVER VA 636000 4/25/1960 3/31/2010 

785 CALKINS BRIDGE CONSUMERS ENERGY CO (MI) KALAMAZOO RIVER MI 2550 9/10/1980 4/10/2010 

733 OURAY JACOBSON, ERIC R UNCOMPAHGRE RIVER CO 700 1/30/1980 4/12/2010 

1992 FIRE MOUNTAIN WILLIS, KEN FERN SPRINGS CREEK CA 15 5/6/1980 4/30/2010 

400 TACOMA-AMES PUBLIC SERVICE CO OF COLORADO (CO) SAN MIGUEL RIVER CO 11500 9/1/1981 6/30/2010 

503 SWAN FALLS IDAHO POWER CO (ID) SNAKE RIVER ID 25000 12/22/1982 6/30/2010 

2277 TAUM SAUK UNION ELECTRIC CO (MO) EAST FORK BLACK RIVER MO 408000 8/26/1965 6/30/2010 

2677 BADGER-RAPIDE KAUKAUNA, CITY OF (WI) FOX RIVER WI 8000 1/30/1989 8/11/2010 

Page 76 . . . . . Annual Report 2008 Federal Energy Regulatory Commission
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Project Project Licensee Waterway State Authorized Issue Expiration 

No. Name KW Date Date 

516 SALUDA SOUTH CAROLINA ELECTRIC & GAS CO (SC) SALUDA RIVER SC 207300 6/1/1984 8/31/2010 

3041 HETTINGER MACKAY BAR CORP (ID) SMITH CREEK ID 12 11/14/1980 10/31/2010 

13 GREEN ISLAND GREEN ISLAND POWER AUTHORITY HUDSON RIVER NY 6000 2/7/1977 3/2/2011 

2211 MARKLAND DUKE ENERGY INDIANA, INC. OHIO RIVER IN 64800 5/31/1961 4/30/2011 

2985 WILLOW MILL MEAD PAPER CORP (MA) HOUSATONIC RIVER MA 100 5/1/1981 4/30/2011 

2157 HENRY M JACKSON (SULTAN) EVERETT, CITY OF (WA) SULTAN RIVER WA 111800 6/16/1961 5/31/2011 

739 CLAYTOR APPALACHIAN POWER CO (VA) NEW RIVER VA 75000 8/20/1980 6/30/2011 

2106 MCCLOUD-PIT PACIFIC GAS AND ELECTRIC CO (CA) PIT RIVER CA 340500 8/18/1961 7/31/2011 

2144 BOUNDARY SEATTLE, CITY OF (WA) PEND OREILLE RIVER WA 1024000 7/10/1961 9/30/2011 

2594 LAKE CREEK NORTHERN LIGHTS INC (ID) LAKE CREEK MT 4500 12/16/1981 11/30/2011 

2621 PACOLET LOCKHART POWER CO (SC) PACOLET RIVER SC 800 2/5/1982 1/31/2012 

2558 OTTER CREEK OMYA, INC. (VT) OTTER CREEK VT 18130 2/23/1976 3/31/2012 

2615 BRASSUA BRASSUA HYDROELECTRIC LTD PART (ME) MOOSE RIVER ME 4180 9/16/1977 3/31/2012 

2851 NATURAL DAM CELLU TISSUE CORPORATION ST. LAWRENCE RIVER NY 1020 4/13/1982 3/31/2012 

2149 WELLS PUD NO 1 OF DOUGLAS COUNTY (WA) COLUMBIA RIVER WA 774250 7/12/1962 5/31/2012 

2850 EMERYVILLE HAMPSHIRE PAPER CO INC (NY) ST. LAWRENCE RIVER NY 3481 6/17/1982 5/31/2012 

2662 SCOTLAND FIRSTLIGHT HYDRO GENERATING CO. SHETUCKET RIVER CT 2000 10/5/1982 8/31/2012 

4362 RIVERDALE INMAN MILLS (SC) ENOREE RIVER SC 1240 9/29/1982 8/31/2012 

12751 MAKAH BAY FINAVERA RENEWABLES OCEAN ENERGY PACIFIC OCEAN WA 1000 12/21/2007 11/30/2012 

2713 OSWEGATCHIE RIVER ERIE BOULEVARD HYDROPOWER, L.P. OSWEGATCHIE RIVER NY 28471 1/10/1983 12/31/2012 

2079 MIDDLE FORK AMERICAN RIVER PLACER COUNTY WATER AGENCY (CA) MIDDLE FORK AMERICAN RIVER CA 211153 3/1/1963 2/28/2013 

2309 YARDS CREEK JERSEY CENTRAL POWER & LIGHT CO (NJ) YARDS CREEK NJ 364500 3/14/1963 2/28/2013 

2479 FRENCH MEADOWS T. L. PACIFIC GAS AND ELECTRIC CO (CA) CA 0 6/30/1965 2/28/2013 

2266 YUBA-BEAR NEVADA IRRIGATION DISTRICT (CA) SOUTH YUBA RIVER CA 79920 6/24/1963 4/30/2013 

2310 DRUM-SPAULDING PACIFIC GAS AND ELECTRIC CO (CA) SOUTH YUBA RIVER CA 181205 6/24/1963 4/30/2013 

2784 ROLLINS T. L. PACIFIC GAS AND ELECTRIC CO (CA) CA 0 4/13/1978 4/30/2013 

349 MARTIN DAM ALABAMA POWER CO (AL) TALLAPOOSA RIVER AL 154200 5/11/1978 6/8/2013 

2305 TOLEDO BEND SABINE RIVER AUTHORITY-LA & TX (TX) SABINE RIVER TX 85750 10/14/1963 9/30/2013 

2469 TRANSMISSION LINE NO. 2469 PACIFICORP (OR) AZ 0 3/5/1969 12/31/2013 

Federal Energy Regulatory Commission Annual Report 2008 . . . . . Page 77
	
Page 78 . . . . . Annual R eport2008 Federal Energy Regulatory Commission 

ADR alternative dispute resolution 

ALJ Administrative Law Judge 

Bcf billion cubic feet 

Btu British thermal unit 

California ISO California Independent System 

Operator Inc. 

CEQ Council on Environmental Quality 

Commission Federal Energy Regulatory 

Commission 

DOE U.S. Department of Energy 

DOT U.S. Department of Transportation 

Dth/d dekatherms of natural gas per day 

EA Environmental Assessment 

EAP Emergency Action Plan 

ECR Environmental Conflict Resolution 

EIS Environmental Impact Statement 

EPAct 2005 Energy Policy Act of 2005 

EQR Electric Quarterly Report 

ERO Electric Reliability Organization 

FERC Federal Energy Regulatory 

Commission 

FPC Federal Power Commission 

ILP Integrated Licensing Process 

ISO Independent System Operator 

kV kilovolt 

LNG Liquefied Natural Gas 

Midwest ISO Midwest Independent Transmission 

System Operator Inc. 

MMC
	 Market Monitoring Center 

MMU
	 Market Monitoring Unit 

MOU
	 memorandum of understanding 

MRTU
	 Market Redesign and Technology 

Upgrade 

MW megawatts 

NAESB North American Energy Standards 

Board 

NERC North American Electric Reliability 

Corporation 

NEPA National Environmental Policy Act 

of 1969 

NRC Nuclear Regulatory Commission 

NYISO New York Independent System 

Operator, Inc. 

OASIS Open Access Same Time Information 

System 

OEP Office of Energy Projects 

OER Office of Electric Reliability 

OMB Office of Management and Budget 

PJM PJM Interconnection, LLC 

RTO Regional Transmission Organization 

SCE Southern California Edison 

TAPS Trans-Alaska Pipeline System 

Appendix D

List of Acronyms 

Acronyms and Abbreviations 
Federal Energy Regulatory Commission Annual Report 2008

. . . . . Page 79