10426 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Proposed Rules 

1As envisioned in this NOPR, primary frequency 

response service would be a reserve product that 

involves dedicating capacity on a generator or other 

resource for autonomous, automatic, and rapid 

action to change its output (within seconds) to 

rapidly dampen large changes in frequency. 

2 16 U.S.C. 824d, 824e (2012). 

3Third-Party Provision of Ancillary Services; 

Accounting and Financial Reporting for New 

Electric Storage Technologies, Order No. 784, 78 FR 

46,178 (July 30, 2013), FERC Stats. & Regs. ¶ 31,349, 

at PP 6–7 (2013), order on clarification, Order No. 

784–A, 146 FERC ¶ 61,114 (2014). 

4See Promoting Wholesale Competition Through 

Open Access Non-Discriminatory Transmission 

Services by Public Utilities; Recovery of Stranded 

Costs by Public Utilities and Transmitting Utilities, 

Order No. 888, FERC Stats. & Regs. ¶ 31,036 (1996), 

order on reh’g, Order No. 888–A, FERC Stats. & 

Regs. ¶ 31,048, order on reh’g, Order No. 888–B, 81 

FERC ¶ 61,248 (1997), order on reh’g, Order No. 

888–C, 82 FERC ¶ 61,046 (1998), aff’d in relevant 

part sub nom. Transmission Access Policy Study 

Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d 

sub nom. New York v. FERC, 535 U.S. 1 (2002). 

5The first category consists of Scheduling, 

System Control and Dispatch service and Reactive 

Supply and Voltage Control from Generation 

Sources service. 

6The second category consists of Regulation and 

Frequency Response service, Energy Imbalance 

service, Operating Reserve-Spinning service, and 

Operating Reserve-Supplemental service. Order No. 

890 later added an additional ancillary service to 

this category: Generator Imbalance service. See 

Preventing Undue Discrimination and Preference in 

Transmission Service, Order No. 890, FERC Stats. 

& Regs. ¶ 31,241, at P 85, order on reh’g, Order No. 

890–A, FERC Stats. & Regs. ¶ 31,261 (2007), order 

on reh’g, Order No. 890–B, 123 FERC ¶ 61,299 

(2008), order on reh’g, Order No. 890–C, 126 FERC 

¶ 61,228 (2009), order on clarification, Order No. 

890–D, 129 FERC ¶ 61,126 (2009). 

7Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 

31,720–21. 

8Avista Corp., 87 FERC ¶ 61,223, at 61,882, order 

on reh’g, 89 FERC ¶ 61,136 (1999) (Avista). Outside 

the markets operated by regional transmission 

organizations and independent system operators, 

Avista authorizes suppliers who cannot show a lack 

of market power with respect to certain ancillary 

(i) Related Information 

Refer to MCAI European Aviation Safety 

Agency (EASA) AD No. 2015–0010R1, dated 

February 4, 2015, for related information. 

You may examine the MCAI on the Internet 

at http://www.regulations.gov by searching 

for and locating Docket No. FAA–2015–0415. 

For service information related to this AD, 

contact Grob Aircraft AG, Customer Service, 

Lettenbachstrasse 9, D–86874 TussenhausenMattsies, Germany, telephone: + 49 (0) 8268– 

998–105; fax: + 49 (0) 8268–998–200; email: 

productsupport@grob-aircraft.com; Internet: 

grob-aircraft.com. You may review copies of 

the referenced service information at the 

FAA, Small Airplane Directorate, 901 Locust, 

Kansas City, Missouri 64106. For information 

on the availability of this material at the 

FAA, call (816) 329–4148. 

Issued in Kansas City, Missouri, on 

February 19, 2015. 

Pat Mullen, 

Acting Manager, Small Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. 2015–03979 Filed 2–25–15; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 35 

[Docket No. RM15–2–000] 

Third-Party Provision of Primary 

Frequency Response Service 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Energy 

Regulatory Commission (Commission) 

proposes to revise its regulations to 

foster competition in the sale of primary 

frequency response service. Specifically, 

the Commission proposes to amend its 

regulations to revise the regulations 

governing market-based rates for public 

utilities pursuant to the Federal Power 

Act (FPA) to permit the sale of primary 

frequency response service at marketbased rates by sellers with market-based 

rate authority for energy and capacity. 

DATES: Comments are due April 27, 

2015. 

ADDRESSES: Comments, identified by 

docket number, may be filed in the 

following ways: 

• Electronic Filing through http://

www.ferc.gov. Documents created 

electronically using word processing 

software should be filed in native 

applications or print-to-PDF format and 

not in a scanned format. 

• Mail/Hand Delivery: Those unable 

to file electronically may mail or handdeliver comments to: Federal Energy 

Regulatory Commission, Secretary of the 

Commission, 888 First Street NE., 

Washington, DC 20426. 

Instructions: For detailed instructions 

on submitting comments and additional 

information on the rulemaking process, 

see the Comment Procedures Section of 

this document. 

FOR FURTHER INFORMATION CONTACT: 

Rahim Amerkhail (General Information), 

Federal Energy Regulatory 

Commission, Office of Energy Policy 

and Innovation, 888 First Street NE., 

Washington, DC 20426, (202) 502– 

8266. 

Gregory Basheda (Market Power 

Screening Information), Federal 

Energy Regulatory Commission, 

Office of Energy Market Regulation, 

888 First Street NE., Washington, DC 

20426, (202) 502–6479. 

Lina Naik (Legal Information), Federal 

Energy Regulatory Commission, 

Office of the General Counsel, 888 

First Street NE., Washington, DC 

20426, (202) 502–8882. 

SUPPLEMENTARY INFORMATION: 

1. In this Notice of Proposed 

Rulemaking (NOPR), the Federal Energy 

Regulatory Commission (Commission) 

proposes to revise its regulations to 

foster competition in the sale of primary 

frequency response service.1

Specifically, the Commission proposes 

to amend its regulations to revise 

Subpart H to Part 35 of Title 18 of the 

Code of Federal Regulations governing 

market-based rates for public utilities 

pursuant to the Federal Power Act 

(FPA) 2 to permit the sale of primary 

frequency response service at marketbased rates by sellers with market-based 

rate authority for energy and capacity. 

2. This NOPR is an extension of the 

policy reforms the Commission started 

with Order No. 784,3 in which, among 

other things, the Commission revised 

Part 35 of its regulations to reflect 

reforms to its policy governing the sale 

of ancillary services at market-based 

rates to public utility transmission 

providers. As discussed in more detail 

below, the reforms proposed herein are 

in anticipation of the potential interest 

in purchase of primary frequency 

response service from third-parties as a 

result of a new reliability standard that 

requires a Balancing Authority to 

maintain a minimum frequency 

response obligation. 

I. Background 

3. The Commission in Order No. 888 4

delineated two categories of ancillary 

services: those that the transmission 

provider is required to provide to all of 

its basic transmission customers 5 and 

those that the transmission provider is 

only required to offer to provide to 

transmission customers serving load in 

the transmission provider’s control 

area.6 With respect to the second 

category, the Commission reasoned that 

the transmission provider is not always 

uniquely qualified to provide the 

services, and customers may be able to 

more cost-effectively self-supply them 

or procure them from other entities. The 

Commission contemplated that third 

parties (i.e., parties other than a 

transmission provider supplying 

ancillary services pursuant to its Open 

Access Transmission Tariff (OATT) 

obligation) could provide these ancillary 

services on other than a cost-of-service 

basis if such pricing was supported, on 

a case-by-case basis, by analyses that 

demonstrated that the seller lacks 

market power in the relevant product 

market.7

4. Subsequently, in Avista,8 the 

Commission adopted a policy allowing 


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Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Proposed Rules 10427 

services to nevertheless sell such services, subject 

to certain restrictions. One such restriction is that 

the authorization provided by Avista does not apply 

to sales to a public utility that is purchasing 

ancillary services to satisfy its own OATT 

requirements to offer ancillary services to its own 

customers. 

9These ancillary services included: Regulation 

and Frequency Response, Energy Imbalance, 

Operating Reserve-Spinning, and Operating 

Reserve-Supplemental. The Commission did not 

extend this Avista policy to Reactive Supply and 

Voltage Control from Generation Sources service, 

which means that third parties wishing to sell this 

ancillary service at market-based rates would be 

required to present specific evidence of a lack of 

market power in the provision of this specific 

product before the Commission would authorize 

sales of this service at market-based rates. The 

Commission also did not extend the Avista policy 

to Scheduling, System Control and Dispatch 

service. Because only balancing area operators can 

provide this ancillary service, it does not lend itself 

to competitive supply. 

10Because energy and generator imbalance 

services merely require the ability to respond to 

dispatch within the hour, the Commission found 

that any sub-hourly transmission scheduling 

interval would be sufficient. Order No. 784–A, 146 

FERC ¶ 61,114 at P 12. Because the operating 

reserve services require more rapid response within 

the hour (spinning reserves must be available 

immediately and supplemental reserves must be 

available within a short period of time), the 

Commission required potential sellers of operating 

reserve services to satisfactorily explain, in their 

market-based rate applications, how the particular 

intra-hour transmission scheduling practices or 

other protocols in their regions permit resources in 

one balancing area to respond to contingencies in 

a neighboring balancing area within these tight time 

frames. Order No. 784–A, 146 FERC ¶ 61,114 at PP 

13–15. 

11Order No. 784, FERC Stats. & Regs. ¶ 31,349 at 

PP 59–61. 

12 Id. PP 99–101. 

13 Id. PP 82–85. 

14 Id. P 61. 

15See Third-Party Provision of Reactive Supply 

and Voltage Control and Regulation and Frequency 

Response Services, Final Agenda, Docket No. 

AD14–7–000 (Apr. 22, 2014). 

16For example, most commenters echoed EEI’s 

arguments that virtually all generators can provide 

primary frequency response, and because it is 

provided at the interconnection level, balancing 

authority areas have more flexibility on the location 

of the resource than they would for other products. 

See, e.g., Edison Electric Institute Post-Workshop 

Comments, Docket No. AD14–7–000, at 7–8 (filed 

June 3, 2014). 

17Reliability standards proposed by the North 

American Electric Reliability Corporation (NERC) 

are subject to the Commission’s jurisdiction under 

section 215 of the Federal Power Act; 16 U.S.C. 

824o(d). The Commission has authority to approve 

or reject such standards, and to enforce those that 

are approved. 

18The NERC Glossary defines a Balancing 

Authority as ‘‘(t)he responsible entity that integrates 

resource plans ahead of time, maintains loadinterchange-generation balance within a Balancing 

Authority Area, and supports Interconnection 

frequency in real time.’’ See http://www.nerc.com/ 

pa/Stand/Glossary%20of%20Terms/Glossary_of_

Terms.pdf. 

19See Frequency Response and Frequency Bias 

Setting Reliability Standard, Order No. 794, 146 

FERC ¶ 61,024 (2014). 

20 Id. PP 62–63. 

21 Id. P 6. 

third-party ancillary service providers 

that could not perform a market power 

study to sell certain ancillary services at 

market-based rates with certain 

restrictions.9

5. The instant proceeding derives 

from Order No. 784 in which the 

Commission found that when 

appropriate intra-hour transmission 

scheduling practices are in place, the 

Avista restrictions need not apply to the 

sale of Energy Imbalance, Generator 

Imbalance, Operating Reserve-Spinning 

and Operating Reserve-Supplemental 

services, because with those practices in 

place, the results of the existing market 

power screens for sales of energy and 

capacity can also be applied to sales of 

these ancillary services.10

6. However, the Commission also 

found in Order No. 784 that the record 

developed to that point did not support 

expanding these market-based rate 

authorizations to include sales of 

Reactive Supply and Voltage Control 

(under OATT Schedule 2) (Schedule 2 

service) and Regulation and Frequency 

Response (under OATT Schedule 3) 

services (Schedule 3 service).11 Instead, 

the Commission allowed market-based 

rate sales of Schedule 2 and Schedule 3 

services to a public utility that is 

purchasing ancillary services to satisfy 

its OATT requirements, provided the 

sale is made pursuant to a competitive 

solicitation that meets certain specified 

requirements 12 or the sale is made at or 

below the buying public utility 

transmission provider’s own Schedule 2 

or 3 rate, as applicable.13 The 

Commission further stated its intention 

to gather more information regarding the 

technical, economic and market issues 

concerning the provision of these 

services in a separate proceeding that 

considers, among other things, the ease 

and cost-effectiveness of relevant 

equipment upgrades, the need for and 

availability of appropriate special 

arrangements such as dynamic 

scheduling or pseudo-tie arrangements, 

and other technical requirements related 

to the provision of Schedule 2 and 

Schedule 3 services.14

7. Pursuant to that directive, 

Commission staff held a workshop on 

April 22, 2014 to obtain input from 

interested persons regarding the 

technical, economic and market issues 

concerning the provision of Schedule 2 

and Schedule 3 services.15 Among other 

things, the workshop explored issues 

surrounding the sale of these services at 

market-based rates. Comments 

submitted in response to the workshop 

that discussed the characteristics 

associated with a primary frequency 

response product indicated that marketbased rate sales of such a product are 

feasible.16

8. Separately, the Commission on 

January 16, 2014 issued a Final Rule 

approving reliability standard BAL– 

003–1 17 under which a Balancing 

Authority 18 must maintain a minimum 

frequency response obligation.19 While 

most Balancing Authorities should be 

able to meet the new reliability standard 

using their own resources,20 some may 

nevertheless be interested in purchasing 

primary frequency response service 

from others if doing so would be 

economically beneficial. Accordingly, 

the Commission concludes that there 

could be interest in the near future in 

voluntary purchases of a primary 

frequency response product. 

9. For the reasons described more 

fully below, the Commission finds that 

sales of primary frequency response 

service at market-based rates should be 

authorized for entities granted marketbased rate authority for sales of energy 

and capacity. 

10. With respect to the remainder of 

the issues discussed at the workshop 

and in written comments, the 

Commission does not see sufficient 

evidence to support pursuing additional 

reforms on a generic basis. 

II. Discussion 

A. Primary Frequency Response Service 

11. As explained in Order No. 794, 

reliable operation of a power system 

depends on maintaining frequency 

within predetermined boundaries above 

and below a scheduled value, which is 

60 Hertz (Hz) in North America.21 In 

order to do that, sufficient amounts of 

primary and secondary frequency 

response reserves must be maintained to 

stabilize frequency within an 

interconnection immediately following 

the sudden loss of generation or load. 

12. Primary frequency response 

involves the autonomous, automatic, 

and rapid action of a generator, or other 

resource, to change its output (within 

seconds) to rapidly dampen large 

changes in frequency. Regulation, also 

known as secondary frequency 

response, is produced from either 

manual or automated dispatch from a 

centralized control system, generally 

using the communications and control 

system known as automatic generation 

control (AGC). In both cases, capacity 

must be set aside to provide the 

responses described above. 

13. Mechanically, the BAL–003–1 

reliability standard provides 

interconnection-wide primary frequency 

response obligations for each of the 

Eastern, Western, Electric Reliability 

Council of Texas, and Hydro Quebec 


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22Order No. 784, FERC Stats. & Regs. ¶ 31,349 at 

PP 59–61. 

23Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 

31,707. 

24 18 CFR 35.37(b) (2014). 

25See Order No. 697, FERC Stats. & Regs. ¶ 

31,252 at PP 13, 62. See also 18 CFR 35.37(b), (c)(1) 

(2014). 

26Order No. 697, FERC Stats. & Regs. ¶ 31,252 at 

P 43. 

27 Id. PP 43–44, 80, 89. 

28 18 CFR 35.37(c)(1) (2014). 

29Order No. 697, FERC Stats. & Regs. ¶ 31,252 at 

P 42. 

30 18 CFR 35.37(c)(1) (2014). 

31 18 CFR 35.37(c)(2) (2014). For purposes of 

rebutting the presumption of horizontal market 

power, sellers may use the results of the delivered 

price test to perform pivotal supplier and market 

share analyses and market concentration analyses 

using the Herfindahl-Hirschman Index (HHI). The 

HHI is a widely accepted measure of market 

concentration, calculated by squaring the market 

share of each firm competing in the market and 

summing the results. The Commission has stated 

that a showing of an HHI less than 2,500 in the 

relevant market for all season/load periods for 

sellers that have also shown that they are not 

pivotal and do not possess a market share of 20 

percent or greater in any of the season/load periods 

would constitute a showing of a lack of horizontal 

market power, absent compelling contrary evidence 

from intervenors. Order No. 697, FERC Stats. & 

Regs. ¶ 31,252 at P 111. 

32 18 CFR 35.37(c)(3) (2014). 

33Order No. 697, FERC Stats. & Regs. ¶ 31,252 at 

P 15. 

34A necessary condition that must be satisfied to 

justify an alternative market is a demonstration 

regarding whether there are frequently binding 

transmission constraints during historical peak 

seasons examined in the screens and at other 

competitively significant times that prevent 

competing supply from reaching customers within 

the proposed alternative geographic market. Id. P 

268. 

Interconnections. The interconnectionwide frequency response obligation is 

then allocated among all of the 

Balancing Authorities (or Frequency 

Response Sharing Groups made up of 

multiple Balancing Authorities) within 

each interconnection based on the ratio 

of the Balancing Authority’s generation 

and load to the total interconnectionwide generation and load times the 

interconnection-wide frequency 

response obligation, and this value is 

called the Balancing Authority’s 

Frequency Response Obligation. 

However, Balancing Authorities are not 

limited in how they meet the 

requirements of BAL–003–1; the 

standard neither prohibits purchases 

nor requires self-supply. 

14. In Order No. 784, the Commission 

evaluated, among other things, whether 

the existing market power screens for 

sales of energy and capacity could be 

applied to the sale of Schedule 3 service 

without significant modification.22 In 

Order No. 784, the Commission 

discussed Schedule 3 without making a 

distinction between primary frequency 

response and regulation. 

15. However, as noted above, primary 

frequency response is distinct from 

regulation; and the April 22, 2014 

workshop distinguished between these 

two services for the purpose of 

discussing market power issues. While 

the Commission, in Order No. 888, 

found that primary frequency response 

did not merit a separate ancillary 

service given then-standard industry 

practices,23 we preliminarily find that 

we can distinguish between primary 

frequency response and regulation for 

the purposes of considering how the 

transmission provider may procure the 

services it must offer under OATT 

Schedule 3. 

16. Specifically, following the 

approval of the new BAL–003–1 

Frequency Response and Frequency 

Bias Setting Reliability Standard, it is 

now appropriate to consider the 

possibility that entities may wish to 

undertake voluntary sales of primary 

frequency response service as a standalone product distinct from regulation 

service. The Commission anticipates 

that sales of such a product would 

involve bilateral transactions by sellers 

and, while such sales could be made at 

cost-based rates, many sellers may 

prefer the administrative ease of marketbased rates. Accordingly, provision 

would need to be made for sales of 

primary frequency response within the 

Commission’s market-based rate 

program. 

17. The Commission analyzes below 

the horizontal market power issues 

relevant to a primary frequency 

response product. 

B. The Existing Market Power Analyses 

18. The Commission analyzes 

horizontal market power 24 for sales of 

energy and capacity using two 

indicative screens, the wholesale market 

share screen and the pivotal supplier 

screen, to identify sellers that raise no 

horizontal market power concerns and 

can otherwise be considered for marketbased rate authority.25 The wholesale 

market share screen measures whether a 

seller has a dominant position in the 

relevant geographic market in terms of 

the number of megawatts of 

uncommitted capacity owned or 

controlled by the seller, as compared to 

the uncommitted capacity of the entire 

market.26 A seller whose share of the 

relevant market is less than 20 percent 

during all seasons passes the wholesale 

market share screen.27 The pivotal 

supplier screen evaluates the seller’s 

potential to exercise horizontal market 

power based on the seller’s 

uncommitted capacity at the time of 

annual peak demand in the relevant 

market.28 A seller satisfies the pivotal 

supplier screen if its uncommitted 

capacity is less than the net 

uncommitted supply in the relevant 

market.29

19. Passing both the wholesale market 

share screen and the pivotal supplier 

screen creates a rebuttable presumption 

that the seller does not possess 

horizontal market power; failing either 

screen creates a rebuttable presumption 

that the seller possesses horizontal 

market power.30 A seller that fails one 

of the screens may present evidence, 

such as a delivered price test, to rebut 

the presumption of horizontal market 

power.31 In the alternative, a seller may 

accept the presumption of horizontal 

market power and adopt some form of 

cost-based mitigation.32

20. Three of the key components of 

the analysis of horizontal market power 

are the definition of products, the 

determination of appropriate geographic 

scope of the relevant market for each 

product, and the identification of the 

uncommitted generation supply within 

the relevant geographic market. In Order 

No. 697, the Commission adopted a 

default relevant geographic market for 

sales of energy and capacity.33

Specifically, the Commission generally 

uses a seller’s Balancing Authority area 

plus directly interconnected Balancing 

Authority areas, or the RTO/ISO market 

as applicable, as the default relevant 

geographic market. However, where the 

Commission has made a specific finding 

that there is a submarket within an RTO, 

that submarket becomes the default 

relevant geographic market for sellers 

located within the submarket for 

purposes of the market-based rate 

analysis. The Commission also provided 

guidance as to the factors the 

Commission will consider in evaluating 

whether, in a particular case, to adopt 

an alternative larger or smaller 

geographic market instead of relying on 

the default geographic market.34

C. Applicability of Existing Indicative 

Screens to Primary Frequency Response 

Service 

21. The Commission has considered 

whether passing the market-based rate 

screens for energy and capacity 

described above should create a 

rebuttable presumption that the seller 

lacks horizontal market power for sales 

of primary frequency response service. 

As discussed below, the Commission 

believes it should. 

22. As described above, primary 

frequency response service involves the 

autonomous, automatic, and rapid 

reaction of an individual turbinegenerator or other resource to change its 


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Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Proposed Rules 10429 

35See, e.g., Kosterev Statement, Docket No. 

AD14–7–000 Workshop Transcript, at 180 (Apr. 22, 

2014) (‘‘. . . every synchronous machine has a 

governor’’). 

36See, e.g., Edison Electric Institute PostWorkshop Comments, Docket No. AD14–7–000, at 

8 (filed June 3, 2014). 

37Primary frequency response service would 

entail the setting aside of some amount of capacity 

dedicated to providing autonomous frequency 

response, and the actual autonomous responses to 

predefined levels of frequency deviation. While the 

capacity would be set aside for extended periods, 

the actual autonomous responses would be of very 

short duration, as explained in the next section of 

the text. 

38When some event causes a sudden and large 

drop (or increase) in system frequency across the 

interconnection in question, all of the frequencyresponsive resources maintained by Balancing 

Authorities in that interconnection will 

automatically and autonomously begin to respond 

within fractions of a second to try to arrest the 

deviation in frequency. Within 2–6 seconds after 

that, each Balancing Authority’s AGC system will 

begin issuing dispatch instructions to regulation 

resources to try to reverse the deviation in 

frequency and return the interconnection-wide 

system frequency to 60Hz, and those regulation 

resources, depending upon their ramping 

capabilities, may take up to 10 minutes or so to 

reach their full dispatched levels. At this point, 

they should have fully displaced the autonomous 

primary frequency response resources that initially 

reacted to slow and arrest the frequency deviation. 

39As relevant to the topic of this order, such 

frequency responsive reserves (resources set aside 

to provide primary frequency response) may 

include both resources owned by the Balancing 

Authorities and resources purchased from other 

entities anywhere within the same interconnection. 

For remote resources within the same 

interconnection, arrangements will have to be made 

for sharing telemetry data from the resources in 

order to allow the host Balancing Authority to 

demonstrate that it met its frequency response 

obligation, and for ACE accounting purposes, but 

such telemetry sharing should not pose any 

significant barrier to the use of remote resources for 

the purposes of market-based rates here. 

output to rapidly dampen changes in 

interconnection-wide frequency. With 

respect to the technical capability of 

resources to provide such response, 

essentially all synchronous resources 

and some non-synchronous resources 

have governors or equivalent control 

equipment capable of autonomous and 

automatic responses such as those 

necessary for primary frequency 

response.35 The only real difference 

among resources in this regard involves 

the choice of settings applied to that 

equipment, where settings can range 

from those that result in appropriate 

levels of primary frequency response to 

those that result in no response at all, 

or even responses that worsen the 

situation. However, such settings can be 

changed on short notice, thus enabling 

resources that have never provided 

primary frequency response in the past 

to quickly begin providing it if there is 

some reason and incentive to do so. 

Accordingly, the set of resources 

technically capable of providing 

primary frequency response service 

does not differ significantly from the set 

of resources represented in the existing 

market power screens. 

23. With respect to the geographic 

market, the frequency of an 

interconnection is uniform throughout 

that interconnection and is determined 

largely by the dynamic interconnectionwide balance of supply with demand. 

Large contingency events, such as the 

unexpected loss of large amounts of 

generation or load, which happen 

anywhere within a given 

interconnection, cause deviations from 

the target 60Hz frequency that propagate 

throughout that interconnection. 

Accordingly, primary frequency 

response service can be effectively 

supplied by any resource throughout an 

interconnection and have the same 

ability to dampen harmful changes in 

interconnection-wide frequency.36

Therefore, the geographic market for a 

primary frequency response product 

could be the entire interconnection 

within which the buyer resides, and in 

any event would be no smaller than the 

geographic market represented in the 

existing market power screens. 

24. With respect to potential barriers 

related to transmission scheduling or 

reservation, while information sharing 

arrangements will certainly be necessary 

between buyers and sellers to enable the 

buyers to rely on purchased resources to 

meet their frequency response 

obligations under BAL–003–1, primary 

frequency response service should not 

require any transmission reservation or 

scheduling, even for sales from 

resources in a different Balancing 

Authority area. This is because 

individual frequency responses, by 

definition,37 would not be sustained for 

long enough periods to trigger a need for 

transmission service or schedule 

changes. Rather, regulation resources 

dispatched by balancing authorities 

would be expected to assume 

responsibility for returning the system 

to the target 60Hz frequency as soon as 

the central dispatch system is able to 

send appropriate dispatch signals and 

the dispatched resources are able to 

respond. 

25. The AGC signals used for that 

dispatch are generally issued every 2–6 

seconds, and actual response from 

dispatched resources is a gradual 

process on a scale of minutes due to the 

inherent ramping constraints of each 

resource; for example, PJM 

Interconnection, L.L.C. requires a 

maximum response time of 5 minutes, 

and certain regions may allow up to 10 

minutes. Accordingly, the expectation 

would be for primary frequency 

response to gradually decline over a 

span of 1 to 10 minutes as regulation 

resources ramp up to their designated 

output.38 As such, this short period of 

time means that transmission 

scheduling and reservation should not 

be needed in connection with the 

provision of the temporary, autonomous 

changes in output associated with 

primary frequency response service that 

would in all normal cases be quickly 

replaced by regulation service.39

26. Accordingly, there should be no 

barriers related to transmission 

scheduling or reservation preventing 

sellers anywhere within the same 

interconnection as the buyer from 

providing effective primary frequency 

response service to that buyer. 

III. Proposal 

27. For the reasons discussed above, 

the Commission concludes that passage 

of the existing market-based rate screens 

for sales of energy and capacity can 

adequately demonstrate lack of market 

power for sales of primary frequency 

response service. 

28. The Commission, therefore, 

proposes that sellers passing the 

existing market power screens should be 

permitted to sell primary frequency 

response service at market-based rates. 

As a result, we propose to revise our 

regulations governing market-based rate 

authorizations to provide that sellers 

passing the existing market-based rate 

screens in a given geographic market 

should be granted a rebuttable 

presumption that they lack horizontal 

market power for sales of primary 

frequency response service in that 

market. Specifically, section 35.37 of the 

Commission’s regulations would be 

revised to state that a seller would have 

a rebuttable presumption it lacks market 

power with respect to sales of energy, 

capacity, energy imbalance service, 

generator imbalance service, and 

primary frequency response service if 

the seller passes the indicative screens 

for that geographic market. The 

Commission preliminarily concludes 

that expanding the rebuttable 

presumption adopted in Order No. 697 

for energy and capacity to include 

primary frequency response service 

provides adequate protection that 

market-based rates charged by public 

utilities will be just and reasonable and 

not unduly discriminatory or 

preferential. 

29. Any entity selling primary 

frequency response service, either at 

market-based or cost-based rates, will be 

required to report such sales in the 

Electric Quarterly Report. Accordingly, 

the Commission proposes to update its 

Electric Quarterly Report system to 


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10430 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Proposed Rules 

40Order No. 697, FERC Stats. & Regs. ¶ 31,252 at 

Appendix C. 

41 In Order No. 784, the Commission revised the 

standard third party provider provision to reflect 

the changes adopted in Order No. 784. Order No. 

784, FERC Stats. & Regs. ¶ 31,349 at P 200. 

42 44 U.S.C. 3501–3520. 

43See 5 CFR 1320.10 (2014). 

44 It is likely that some customers purchase 

primary frequency response service along with 

other services on a bundled basis, such as through 

full requirements contracts, but this NOPR is 

focused on unbundled sales of primary frequency 

response service. 

45For example, the need to maintain Open Access 

Transmission Tariffs and Open Access Same-Time 

Information Systems related to any jurisdictional 

transmission facilities owned by the entity, the 

need to adhere to the Commission’s standards of 

conduct, the need to adhere to the detailed cost-ofservice related requirements of subparts B and C of 

Part 35 of the Commission’s regulations, the need 

to adhere to the accounting and reporting 

requirements of Parts 41, 101, and 141 of the 

Commission’s regulations, and the need to seek 

separate authorizations for issuances of securities 

and assumptions of liabilities under FPA section 

204 and Part 34 of the Commission’s regulations. 

include a specific product name option 

for primary frequency response service. 

30. The Commission seeks comment 

on this proposal, including the 

proposed revisions to section 35.37(c)(1) 

of our regulations. Comments may 

address, among other things, any unique 

technical requirements or limitations 

that might apply to the provision of 

primary frequency response service, and 

the Commission’s proposal to extend 

the rebuttable presumption to primary 

frequency response service. 

IV. Summary of Compliance and 

Implementation 

31. In Order No. 697, the Commission 

provided standard tariff provisions that 

sellers must include in their marketbased rate tariffs to the extent they are 

applicable based on the services 

provided by the seller,40 including a 

provision for sales of ancillary services 

as a third-party provider.41 The 

Commission proposes to revise the 

‘‘Third Party Provider’’ ancillary 

services provision filed by utilities in 

their market-based rate tariffs to change 

the reference to ‘‘Regulation and 

Frequency Response Service’’ to 

‘‘Regulation Service’’ and to add a 

reference to ‘‘Primary Frequency 

Response Service.’’ The proposed new 

language is as follows: 

Third-party ancillary services: Seller offers 

[include all of the following that the seller is 

offering: Regulation Service, Reactive Supply 

and Voltage Control Service, Energy and 

Generator Imbalance Service, Operating 

Reserve-Spinning, Operating ReserveSupplemental, and Primary Frequency 

Response Service]. Sales will not include the 

following: (1) Sales to an RTO or an ISO, i.e., 

where that entity has no ability to self-supply 

ancillary services but instead depends on 

third parties; and (2) sales to a traditional, 

franchised public utility affiliated with the 

third-party supplier, or sales where the 

underlying transmission service is on the 

system of the public utility affiliated with the 

third-party supplier. Sales of Operating 

Reserve-Spinning and Operating ReserveSupplemental will not include sales to a 

public utility that is purchasing ancillary 

services to satisfy its own open access 

transmission tariff requirements to offer 

ancillary services to its own customers, 

except where the Commission has granted 

authorization. Sales of Regulation Service 

and Reactive Supply and Voltage Control 

Service will not include sales to a public 

utility that is purchasing ancillary services to 

satisfy its own open access transmission tariff 

requirements to offer ancillary services to its 

own customers, except at rates not to exceed 

the buying public utility transmission 

provider’s OATT rate for the same service or 

where the Commission has granted 

authorization. 

32. The Commission proposes that a 

seller that already has market-based rate 

authority as of the effective date of the 

Final Rule issued in this proceeding 

would be authorized as of the effective 

date of the Final Rule to make sales of 

primary frequency response service at 

market-based rates. Such a seller would 

be required to revise the third-party 

provider ancillary services provision of 

its market-based rate tariff to reflect that 

it wishes to make sales of primary 

frequency response service at marketbased rates. However, while this 

authorization would be effective for 

sellers with existing market-based rate 

authority as of the date specified in a 

Final Rule in this proceeding, the 

Commission proposes that such sellers 

may wait to file this tariff revision until 

the next time they make a market-based 

rate filing with the Commission, such as 

a notice of change in status filing or a 

triennial update. 

V. Information Collection Statement 

33. The Paperwork Reduction Act 

(PRA) 42 requires each federal agency to 

seek and obtain Office of Management 

and Budget (OMB) approval before 

undertaking a collection of information 

directed to ten or more persons or 

contained in a rule of general 

applicability. OMB regulations require 

approval of certain information 

collection requirements imposed by 

agency rules.43 Upon approval of a 

collection(s) of information, OMB will 

assign an OMB control number and an 

expiration date. Respondents subject to 

the filing requirements of an agency rule 

will not be penalized for failing to 

respond to the collection of information 

unless the collection of information 

displays a valid OMB control number. 

34. The Commission will submit the 

proposed revised information collection 

requirements to OMB for its review and 

approval. The Commission solicits 

public comments on its need for this 

information, whether the information 

will have practical utility, the accuracy 

of burden and cost estimates, ways to 

enhance the quality, utility, and clarity 

of the information to be collected or 

retained, and any suggested methods for 

minimizing respondents’ burden, 

including the use of automated 

information techniques. 

35. Burden Estimate and Information 

Collection Costs: While, to the 

Commission’s knowledge, no entity 

currently sells primary frequency 

response service on an unbundled 

basis,44 there is no reason why primary 

frequency response service could not be 

sold today under cost-based rates. Such 

cost-based sales, if they occurred, would 

face all of the burdens associated with 

cost-of-service regulation, including a 

variety of requirements from which 

market-based rate sellers frequently seek 

and are granted waiver.45 Furthermore, 

just like market-based rate sellers, costbased rate sellers must report all 

transactions in the Electric Quarterly 

Report. Accordingly, the Commission 

views this NOPR as providing potential 

market-based rate sellers of primary 

frequency response service with the 

opportunity to avoid cost-of-service 

regulation for such sales and the 

associated substantial reporting 

burdens. 

36. Below, we discuss the expected 

increases in burdens as a result of the 

proposals in this NOPR, which we 

expect to be greatly outweighed by the 

reduction in burden from avoiding costof-service regulation. The additional 

estimated annual public reporting 

burdens and costs for the requirements 

in this proposed rule are as follows. 


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46We think that industry staff members are 

similarly situated to FERC, in terms of hourly cost 

per full time employee. Therefore, the estimated 

average hourly cost (salary plus benefits) is $72.00. 

47The 1,551 respondent universe includes 

existing sellers (1,965 total market-based rate 

sellers—697 Category 1 sellers + 70 Category 1 

sellers = 1,338 sellers estimated to sell primary 

frequency response services) plus 213 new marketbased rate applicants (as estimated in Docket No. 

RM14–14). (We estimate that ten percent (or 70, as 

indicated above) of the Category 1 sellers may 

choose to sell primary frequency response services.) 

48We expect respondents to enter the primary 

frequency response market gradually. For each of 

the next three years, we expect all 213 new marketbased rate applicants per year (or 639 total during 

Years 1–3), to include the primary frequency 

response language in their tariffs. 

Additionally, during the three-year period, we 

expect a total of ten percent of the existing 1,338 

respondents (or 134 respondents), to decide to sell 

primary frequency response services and to make 

the corresponding FERC–516 rate filing. The 

corresponding annual estimate is 45 of the existing 

respondents (an average of 3.3% annually). 

Therefore, the annual estimate, including both new 

respondents and existing respondents, is an average 

of 258 (213 + 45) respondents and responses per 

year. 

49As respondents decide to sell primary 

frequency response services, they would report the 

new offering in their Electric Quarterly Report 

(FERC–920), and would continue to report in 

subsequent EQRs. When a filer adds the new 

service, we estimate the one-time burden to be two 

hours. We expect any additional burden associated 

with reporting the new service in the EQR to be 

negligible after the first implementation as it would 

become part of the respondent’s normal reporting 

practice in the EQR and would only involve 

selecting the ‘primary frequency response’ option 

from a list of product names. On average, we expect 

filers of the new primary frequency response 

service to phase in: 

• Year 1, 258 respondents or 16.6 percent of EQR 

filers. 

• Year 2, 258 respondents or 16.6 percent of EQR 

filers. 

• Year 3, 258 respondents or 16.6 percent of EQR 

filers. 

50Regulations Implementing the National 

Environmental Policy Act, Order No. 486, 52 FR 

47,897 (Dec. 17, 1987), FERC Stats. & Regs., 

Regulations Preambles 1986–1990 ¶ 30,783 (1987). 

51 18 CFR 380.4(a)(15) (2014). 

52 5 U.S.C. 601–612 (2012). 

53 13 CFR 121.101 (2014). 

CHANGES PROPOSED IN NOPR IN RM15–2 46

Number of respondents 

Annual number 

of responses per 

respondent 

Total number of 

responses 

Average burden 

& cost per 

response 

Total annual 

burden hours & 

total annual cost 

Cost per 

response 

(a) (b) (a) × (b) = (c) (d) (c) × (d) = (e) (e)/(c) 

FERC–516 (Electric Rate Schedules and Tariff Filings) (one time, phased in) 

1,551 47 ............................................................ 48 0.166 258 6, $432 1,548, $111,456 $432 

FERC–920 (Electric Quarterly Report) (one-time, phased in) 

1,551 ................................................................ 49 0.166 258 2, $144 516, $37,152 144 

Action: Proposed changes. 

OMB Control Nos.: 1902–0096 (FERC– 

516) and 1902–0255 (FERC–920). 

Respondents: Public utilities, FERC 

licensees. 

Frequency of responses: One-time 

(FERC–516) and (FERC–920). 

Necessity of the Information: 

Regarding FERC–516, section 205(c) of 

the Federal Power Act requires public 

utilities to file with the Commission 

schedules showing all rates and charges 

for any transmission or sale subject to 

the Commission’s jurisdiction. 

Accordingly, entities wishing to sell 

primary frequency response service at 

market-based rates must amend their 

market-based rate tariffs to include the 

language included in this NOPR. 

Regarding FERC–920, the Commission 

is revising the EQR to ensure that public 

utilities that may sell primary frequency 

response service at market-based rates 

report those sales in the EQR, consistent 

with their filing obligations under 

section 205(c). 

Internal Review: The Commission has 

reviewed the requirements associated 

with the proposed revisions to the 

information collections and determined 

they are necessary to ensure that rates 

remain just, reasonable, and not unduly 

discriminatory. 

37. These requirements conform to 

the Commission’s need for efficient 

information collection, communication, 

and management within the energy 

industry. The Commission has assured 

itself, through internal review, that there 

is specific, objective support for the 

burden estimates associated with the 

information collection requirements. 

38. Interested persons may obtain 

information on the reporting 

requirements by contacting the 

following: Federal Energy Regulatory 

Commission, 888 First Street NE., 

Washington, DC 20426 [Attention: Ellen 

Brown, Office of the Executive Director], 

email: DataClearance@ferc.gov, Phone 

(202) 502–8663, fax: (202) 273–0873. 

Comments on the collections of 

information and associated burden 

estimates in the proposed rule should be 

sent to the Commission in this docket 

and may also be sent to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Washington, DC 20503 [Attention: Desk 

Officer for the Federal Energy 

Regulatory Commission]. For security 

reasons, comments to OMB should be 

submitted by email to: oira_

submission@omb.eop.gov. Please refer 

to OMB Control No. 1902–0096 (FERC– 

516) and OMB Control No. 1902–0255 

(FERC–920). 

VI. Environmental Analysis 

39. The Commission is required to 

prepare an Environmental Assessment 

or an Environmental Impact Statement 

for any action that may have a 

significant adverse effect on the human 

environment.50 The Commission 

concludes that neither an 

Environmental Assessment nor an 

Environmental Impact Statement is 

required for this Final Rule under 

section 380.4(a)(15) of the Commission’s 

regulations, which provides a 

categorical exemption for approval of 

actions under sections 205 and 206 of 

the FPA relating to the filing of 

schedules containing all rates and 

charges for the transmission or sale 

subject to the Commission’s 

jurisdiction, plus the classification, 

practices, contracts, and regulations that 

affect rates, charges, classifications, and 

services.51

VII. Regulatory Flexibility Act 

40. The Regulatory Flexibility Act of 

1980 (RFA) 52 generally requires a 

description and analysis of proposed 

rules that will have significant 

economic impact on a substantial 

number of small entities. 

41. The Small Business 

Administration’s (SBA) Office of Size 

Standards develops the numerical 

definition of a small business.53 The 

SBA recently revised its size standard 

for electric utilities (effective January 

22, 2014) from a standard based on 

megawatt hours to a standard based on 

the number of employees, including 


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10432 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Proposed Rules 

54SBA Final Rule on ‘‘Small Business Size 

Standards: Utilities,’’ 78 FR 77,343 (Dec. 23, 2013). 

55 13 CFR 121.201, Sector 22, Utilities. 

56SBA’s regulations at 13 CFR 121.201 state that 

‘‘[t]he number of employees . . . indicates the 

maximum allowed for a concern and its affiliates 

to be considered small.’’ 

affiliates.54 Under SBA’s current size 

standards, the entities with marketbased rates which are affected by this 

NOPR likely come under the following 

categories 55 with the indicated 

thresholds (in terms of number of 

employees 56): 

• Hydroelectric Power Generation, 500 

employees 

• Fossil Fuel Electric Power Generation, 

750 employees 

• Nuclear Electric Power Generation, 

750 employees 

• Solar Electric Power Generation, 250 

employees 

• Wind Electric Power Generation, 250 

employees 

• Geothermal Electric Power 

Generation, 250 employees 

• Biomass Electric Power Generation, 

250 employees 

• Other Electric Power Generation, 250 

employees 

42. The categories for the applicable 

entities have a size threshold ranging 

from 250 employees to 750 employees. 

For the analysis in this proposed rule, 

we are using the threshold of 750 

employees for all categories. We 

anticipate that a maximum of 82 percent 

of the entities potentially affected by 

this NOPR are small. In addition, we 

expect that not all of those entities will 

be able to or will choose to offer primary 

frequency response service. 

43. Based on the estimates above in 

the Information Collection section, we 

expect a one-time cost of $576 

(including the burden cost related to 

filing both the tariff and the EQR) for 

each entity that decides to offer primary 

frequency response service. 

44. The Commission does not 

consider the estimated cost per small 

entity to impose a significant economic 

impact on a substantial number of small 

entities. Accordingly, the Commission 

certifies that this NOPR will not have a 

significant economic impact on a 

substantial number of small entities. 

VIII. Comment Procedures 

45. The Commission invites interested 

persons to submit comments on the 

matters and issues proposed in this 

notice to be adopted, including any 

related matters or alternative proposals 

that commenters may wish to discuss. 

Comments are due April 27, 2015. 

Comments must refer to Docket No. 

RM15–2–000, and must include the 

commenter’s name, the organization 

they represent, if applicable, and their 

address in their comments. 

46. The Commission encourages 

comments to be filed electronically via 

the eFiling link on the Commission’s 

Web site at http://www.ferc.gov. The 

Commission accepts most standard 

word processing formats. Documents 

created electronically using word 

processing software should be filed in 

native applications or print-to-PDF 

format and not in a scanned format. 

Commenters filing electronically do not 

need to make a paper filing. 

47. Commenters that are not able to 

file comments electronically must send 

an original of their comments to: 

Federal Energy Regulatory Commission, 

Secretary of the Commission, 888 First 

Street NE., Washington, DC 20426. 

48. All comments will be placed in 

the Commission’s public files and may 

be viewed, printed, or downloaded 

remotely as described in the Document 

Availability section below. Commenters 

on this proposal are not required to 

serve copies of their comments on other 

commenters. 

IX. Document Availability 

49. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through the 

Commission’s Home Page (http://

www.ferc.gov) and in the Commission’s 

Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. 

Eastern time) at 888 First Street NE., 

Room 2A, Washington, DC 20426. 

50. From the Commission’s Home 

Page on the Internet, this information is 

available on eLibrary. The full text of 

this document is available on eLibrary 

in PDF and Microsoft Word format for 

viewing, printing, and/or downloading. 

To access this document in eLibrary, 

type the docket number excluding the 

last three digits of this document in the 

docket number field. 

51. User assistance is available for 

eLibrary and the Commission’s Web site 

during normal business hours from the 

Commission’s Online Support at 202– 

502–6652 (toll free at 1–866–208–3676) 

or email at ferconlinesupport@ferc.gov, 

or the Public Reference Room at (202) 

502–8371, TTY (202) 502–8659. Email 

the Public Reference Room at 

public.referenceroom@ferc.gov. 

List of Subjects in 18 CFR Part 35 

Electric power rates; Electric utilities; 

Reporting and recordkeeping 

requirements. 

Issued: February 19, 2015. 

By direction of the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

In consideration of the foregoing, the 

Commission proposes to amend Part 35, 

Chapter I, Title 18, Code of Federal 

Regulations, as follows. 

PART 35—FILING OF RATE 

SCHEDULES AND TARIFFS 

■ 1. The authority citation for part 35 

continues to read as follows: 

Authority: 16 U.S.C. 791a–825r, 2601– 

2645; 31 U.S.C. 9701; 42 U.S.C. 7101–7352. 

■ 2. Revise § 35.37(c)(1) to read as 

follows: 

§ 35.37 Market power analysis required. 

* * * * * 

(c)(1) There will be a rebuttable 

presumption that a Seller lacks 

horizontal market power with respect to 

sales of energy, capacity, energy 

imbalance service, generation imbalance 

service, and primary frequency response 

service if it passes two indicative market 

power screens: a pivotal supplier 

analysis based on annual peak demand 

of the relevant market, and a market 

share analysis applied on a seasonal 

basis. There will be a rebuttable 

presumption that a Seller lacks 

horizontal market power with respect to 

sales of operating reserve-spinning and 

operating reserve-supplemental services 

if the Seller passes these two indicative 

market power screens and demonstrates 

in its market-based rate application how 

the scheduling practices in its region 

support the delivery of operating reserve 

resources from one balancing authority 

area to another. There will be a 

rebuttable presumption that a Seller 

possesses horizontal market power with 

respect to sales of energy, capacity, 

energy imbalance service, generation 

imbalance service, operating reservespinning service, operating reservesupplemental service, and primary 

frequency response service if it fails 

either screen. 

* * * * * 

[FR Doc. 2015–03741 Filed 2–25–15; 8:45 am] 

BILLING CODE 6717–01–P 

SOCIAL SECURITY ADMINISTRATION 

20 CFR Part 422 

[Docket No. SSA–2014–0042] 

RIN 0960–AH68 

Social Security Number Card 

Applications 

AGENCY: Social Security Administration. 


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