Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13103 

73 Petition at 14-15. 

74 Invista also submitted the results of several 

other tests purporting to show that PTT does not 

perform significantly better than PET. See supra 

note 37. The record does not indicate that any of 

these tests are current or former industry standard 

tests. In addition, some of them involved heavier 

weight PET and PTT carpet than the weight of 

carpet consumers typically purchase and, for 

others, the record does not indicate the weight of 

the carpets tested. Therefore, we accord these test 

results less weight. 

75 DuPont #535294-00017 at 13. 

76 Petition at 7-8. 

77 Expert Report. 

78 The Commission has selected the name 

‘‘triexta’’ because it was the one subclass name 

proposed by Petitioners to which no commenter 

objected. 

79 72 FR 48600 (Aug. 24, 2007). 

CRI ratings, PTT significantly 

outperformed PET on the heaviest of the 

three wear cycles. Specifically, in the 

vast majority of trials, PET performed 

below an acceptable rating (i.e., 3) while 

PTT performed at or above a 3 rating in 

all trials.73 Moreover, the central 

tendency of each data set shows a 

difference of over one full interval. 

Second, Petitioners tested carpet 

weights that consumers typically 

purchase, whereas Invista’s Vettermann 

Drum testing utilized heavier carpet that 

only a small percentage of consumers 

actually buy.74 Finally, Invista’s 

assertion that Petitioners tested PET and 

PTT of different fiber weights (dpf) is 

not at issue because Petitioners did, in 

fact, test the same weight PET and PTT 

carpet fibers.75 Accordingly, the Petition 

satisfies the second criterion for 

granting a new generic fiber subclass 

name. 

Third, Petitioners have demonstrated 

that PTT’s distinctive properties are of 

importance to the general public. As 

discussed earlier, Mohawk’s consumer 

survey shows that consumers shopping 

for carpet consider durability/resiliency 

to be very important attributes. 

Specifically, a 2004 study that Mohawk 

commissioned found that 67% of 

respondents rated carpet durability/ 

resiliency as a very important trait. 

Thus, the Petition satisfies the third 

criterion for granting a new generic fiber 

subclass name. 

Finally, PTT’s enhanced durability is 

the result of substantially differentiated 

physical characteristics. Specifically, 

Petitioners explained that the molecular 

structure of PTT is more coil-like than 

PET’s straight-wire structure. Thus, PTT 

fibers are better able to recover without 

permanently deforming and developing 

a crushed appearance.76 The 

Commission’s textile expert reviewed 

the material that Petitioners submitted 

and confirmed this fact.77 Accordingly, 

the Petition satisfies the final criterion 

for granting a new generic fiber subclass 

name. 

Because the Petition meets all the 

criteria for establishing a new generic 

subclass fiber name, the Commission 

amends Rule 7(c) to define the generic 

subclass ‘‘triexta’’ and to allow use of 

the name ‘‘triexta’’ as an alternative to 

the generic name ‘‘polyester’’ for PTT 

fiber.78 Because ‘‘triexta’’ is the second 

subclass generic designation for 

‘‘polyester,’’ we have moved the first 

subclass designation to its own 

subsection, (c)(1), for clarity. Finally, 

based on this decision, the temporary 

designation ‘‘PTT001’’ is revoked as of 

the effective date of this amendment. 

VI. Effective Date 

The Commission is making the 

amendment effective today, March 26, 

2009, as permitted by 5 U.S.C. 553(d), 

because the amendment does not create 

new obligations under the Textile Rules; 

rather, it merely creates a fiber name 

and definition that covered companies 

may use to comply with the Textile 

Rules. 

VII. Regulatory Flexibility Act 

In the Request for Public Comment,79

the Commission tentatively concluded 

that the provisions of the Regulatory 

Flexibility Act relating to an initial 

regulatory analysis, 5 U.S.C. 603-604, 

did not apply to the Petition’s proposal 

because the amendment, if promulgated, 

would not have a significant economic 

impact on a substantial number of small 

entities. The Commission believed that 

the proposed amendment would impose 

no additional obligations, penalties, or 

costs. The amendment simply would 

allow covered companies to use a new 

generic name as an alternative to an 

existing generic name for that defined 

subclass of fiber, and would impose no 

additional labeling requirements. To 

ensure, however, that the Commission 

did not overlook any substantial 

economic impact, the Commission 

solicited public comment in the Request 

for Public Comment on the effects of the 

proposed amendment on costs, profits, 

competitiveness of, and employment in 

small entities. 

The Commission did not receive any 

comment in response. Accordingly, the 

Commission hereby certifies, pursuant 

to the Regulatory Flexibility Act, 5 

U.S.C. 605(b), that the amendment 

promulgated today will not have a 

significant economic impact on a 

substantial number of small entities. 

VIII. Paperwork Reduction Act 

This amendment does not constitute a 

‘‘collection of information’’ under the 

Paperwork Reduction Act of 1995, Pub. 

L. 104-13, 109 Stat. 163, 44 U.S.C. 

chapter 35 (as amended), and its 

implementing regulations, 5 CFR 1320 

et seq. Those procedures for establishing 

generic names that do constitute 

collections of information, 16 CFR 

303.8, have been submitted to OMB, 

which has approved them and assigned 

them control number 3084-0101. 

List of Subjects in 16 CFR Part 303 

Labeling, Textile, Trade practices. 

IX. PART 303—RULES AND 

REGULATIONS UNDER THE TEXTILE 

FIBER PRODUCTS IDENTIFICATION 

ACT 

■ 1. The authority citation for part 303 

continues to read as follows: 

Authority: Sec. 7(c) of the Textile Fiber 

Products Identification Act (15 U.S.C. 70e(c)). 

■ 2. In § 303.7, in paragraph (c), 

designate the second sentence, which 

follows the second chemical 

description, as paragraph (c)(1) and add 

new paragraph (c)(2) to read as follows: 

§ 303.7 Generic names and definitions for 

manufactured fibers. 

* * * * * 

(c) * * * 

(2) Where the glycol used to form the 

ester consists of at least ninety mole 

percent 1,3-propanediol, the term 

‘‘triexta’’ may be used as a generic 

description of the fiber. 

* * * * * 

By direction of the Commission. 

Donald S. Clark, 

Secretary. 

[FR Doc. E9–6633 Filed 3–25–09: 8:45 am] 

BILLING CODE 6750–01–S 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 42 

[Docket No. RM06–8–002; Order No. 681– 

B] 

Long-Term Firm Transmission Rights 

in Organized Electricity Markets 

Issued March 20, 2009. 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Final rule; order on rehearing 

and clarification. 

SUMMARY: The Federal Energy 

Regulatory Commission is issuing an 

order on rehearing and clarification of 

Long-Term Firm Transmission Rights in 

Organized Electricity Markets, Order 

No. 681–A, 71 FR 68,440 (November 16, 

13104 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

1 Long-Term Firm Transmission Rights in 

Organized Electricity Markets, Order No. 681, 71 FR 

43,564 (Aug. 1, 2006), FERC Stats. & Regs. ¶ 31,226, 

reh’g denied, Order No. 681–A, 117 FERC ¶ 61,201 

(2006). 

2Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 1, 23; Order No. 681–A, 117 FERC ¶ 61,201 at P 

1. 

3Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 318. 

4 Id. P 320. 

5Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 318 (construing EPAct 2005, section 217; Pub. L. 

109–58, § 1233, 119 Stat. 594, 957 (2005); 16 U.S.C. 

824q (2006)). 

6Order No. 681–A, 117 FERC ¶ 61,201 at P 81. 

7Public Law No. 109–58, 119 Stat. 594 (2005). 

8 16 U.S.C. 824q (2006). 

9 119 Stat. 594, 960. ‘‘Transmission organization’’ 

is defined in EPAct 2005 as ‘‘a Regional 

Transmission Organization, Independent System 

Operator, independent transmission provider, or 

other transmission organization finally approved by 

the Commission for the operation of transmission 

facilities.’’ Public Law No. 109–58, § 1291, 119 Stat. 

594, 985. In Order Nos. 681 and 681–A, we adopted 

this definition with slight modifications for the 

purposes of the Final Rule. 

2006). The order on rehearing affirms, 

with certain clarifications, the 

fundamental determinations made in 

Order No. 681, as clarified by Order No. 

681–A. 

DATES: Effective Date: Order No. 681 

became effective on August 31, 2006. 

This order on rehearing and clarification 

will become effective April 27, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Roland Wentworth (Technical 

Information), Office of Energy Market 

Regulation, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502–8262. 

Michael P. McLaughlin (Technical 

Information), Office of Energy Market 

Regulation, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502–6135. 

Heidi Werntz (Legal Information), 

Office of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 20426, 

(202) 502–8910. 

Richard Wartchow (Legal 

Information), Office of the General 

Counsel, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502–8744. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

Paragraph 

Numbers 

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

II. Background ......................................................................................................................................................................................... 4 

A. Energy Policy Act of 2005 ......................................................................................................................................................... 4 

B. Notice of Proposed Rulemaking ................................................................................................................................................ 5 

C. Final Rule: Order No. 681 .......................................................................................................................................................... 6 

D. Rehearing Order: Order No. 681–A ........................................................................................................................................... 11 

III. Discussion ......................................................................................................................................................................................... 15 

A. Procedural Matters ..................................................................................................................................................................... 15 

B. Requests for Rehearing and/or Clarification ............................................................................................................................. 16 

1. Contract with Transmission Owner Rather than Transmission Organization ................................................................. 16 

Commission Determination ..................................................................................................................................................... 19 

2. Lack of a Transmission Agreement ..................................................................................................................................... 20 

Commission Determination ..................................................................................................................................................... 22 

3. Clarification of Paragraph 80 of Order No. 681–A ............................................................................................................ 24 

Commission Determination ..................................................................................................................................................... 26 

4. Comparable Treatment for External and Internal Load Serving Entities ......................................................................... 29 

Commission Determination ..................................................................................................................................................... 35 

5. Marginal Losses .................................................................................................................................................................... 38 

Commission Determination ..................................................................................................................................................... 43 

I. Introduction 

1. In this order we affirm, with certain 

clarifications, the fundamental 

determinations made in Order Nos. 681 

and 681–A.1 In Order No. 681, as 

reaffirmed and clarified in Order No. 

681–A, the Commission required each 

transmission organization that is a 

public utility with one or more 

organized electricity markets to make 

available long-term firm transmission 

rights that satisfy each of seven 

guidelines.2

2. Under guideline (5), the 

Commission permits transmission 

organizations to place reasonable limits 

on the amount of capacity used to 

support long-term firm transmission 

rights.3 Recognizing that ‘‘transmission 

capacity is limited and the amount that 

can reasonably be made available for 

long-term transmission rights may be 

lesser still,’’ 4 the Commission construed 

new section 217 of the Federal Power 

Act (FPA) to provide a general 

preference for load serving entities to 

obtain transmission service.5 On 

rehearing, in discussing priority when 

transmission capacity is limited, the 

Commission declined to draw a broad 

conclusion that it would always be 

unreasonable for a transmission 

organization to treat external and 

internal load serving entities differently 

in allocating long-term firm 

transmission rights.6 Three parties filed 

requests for clarification or, in the 

alternative, rehearing of Order Nos. 681 

and 681–A, focusing primarily on issues 

associated with the allocation of longterm firm transmission rights to load 

serving entities serving load located 

outside the transmission organization 

(external load serving entities). 

Rehearing was also requested on the 

Commission’s determination that the 

statute does not require a hedge for 

marginal loss charges. 

3. In this order, we grant certain 

clarifications concerning allocation of 

long-term firm transmission rights to 

external load serving entities and deny 

requests for rehearing. 

II. Background 

A. Energy Policy Act of 2005 

4. On August 8, 2005, EPAct 2005 7

was signed into law. Section 1233 of 

EPAct 2005 added a new section to the 

FPA, section 217, which provides: 

The Commission shall exercise the 

authority of the Commission under this Act 

in a manner that facilitates the planning and 

expansion of transmission facilities to meet 

the reasonable needs of load-serving entities 

to satisfy the service obligations of the loadserving entities, and enables load-serving 

entities to secure firm transmission rights (or 

equivalent tradable or financial rights) on a 

long-term basis for long-term power supply 

arrangements made, or planned, to meet such 

needs.8

The statute further required the 

Commission to implement section 217 

of the FPA within one year of the 

effective date of EPAct 2005.9

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13105 

10 Long-Term Firm Transmission Rights in 

Organized Electricity Markets, NOPR, 71 FR 6,693 

(Feb. 9, 2006), FERC Stats. & Regs. ¶ 32,598 (2006). 

11Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 494. 

12 Id. P 16. 

13 Id. 

14 Id. P 17–18. 

15 Id. P 323. 

16 Id. 

17 Id. P 18. 

18 Id. P 2. The Commission recognized the 

possibility that the flexible regional approach 

adopted in the Final Rule could create seams issues, 

and directed each transmission organization to 

explain in its compliance filing how its proposal 

addresses potential seams issues. Id. P 107. 

19 Id. P 325; 18 CFR 42.1(d)(5) (2008). 

20Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 318. 

21 Id. P 321. 

22 Id. P 328. 

23 Id. 

24 Id. P 329. 

25 Id. 

26Order No. 681–A, 117 FERC ¶ 61,201 at P 78. 

27 Id. 

B. Notice of Proposed Rulemaking 

5. As a first step towards 

implementing FPA section 217, on 

February 2, 2006, the Commission 

issued a Notice of Proposed Rulemaking 

(NOPR) that proposed to amend its 

regulations to require each transmission 

organization that is a public utility with 

one or more organized electricity 

markets to make available long-term 

firm transmission rights that satisfy 

guidelines established by the 

Commission.10 The NOPR proposed 

eight guidelines, and sought comments 

on various issues raised by the 

introduction of long-term firm 

transmission rights in the organized 

electricity markets. 

C. Final Rule: Order No. 681 

6. On July 20, 2006, the Commission 

issued a Final Rule in this proceeding, 

Order No. 681. Consistent with EPAct 

2005, in Order No. 681, the Commission 

required independent transmission 

organizations that oversee electricity 

markets to make available long-term 

firm transmission rights that satisfy each 

of the seven guidelines ultimately 

established by the Commission in that 

order. The Commission further directed 

transmission organizations subject to 

the Final Rule to file, no later than 

January 29, 2007, either: (1) Tariff sheets 

and rate schedules that make available 

long-term firm transmission rights that 

satisfy each of the seven guidelines; or 

(2) an explanation of how the 

transmission organization’s tariff and 

rate schedules already provide for longterm firm transmission rights that satisfy 

each of the guidelines. The Commission 

also required entities that subsequently 

meet the statutory definition of 

transmission organization after January 

29, 2007 to satisfy the requirements of 

the Final Rule.11

7. In issuing Order No. 681, the 

Commission explained that it sought to 

provide increased certainty regarding 

the congestion cost risks of long-term 

firm transmission service in organized 

electricity markets in order to facilitate 

new investments and other long-term 

power supply arrangements.12 The 

guidelines adopted in Order No. 681 

were intended to ensure that the longterm firm transmission rights made 

available by transmission organizations 

subject to the rule would support longterm power supply arrangements.13

Moreover, the Commission emphasized 

that it would not compel transmission 

organizations to provide rights that are 

infeasible based on the existing system, 

nor would the Commission guarantee 

that a load serving entity will be able to 

obtain long-term firm transmission 

rights sufficient to hedge its entire 

resource portfolio or be able to obtain all 

of its requested long-term firm 

transmission rights.14 Rather, the 

Commission concluded that 

transmission organizations and their 

stakeholders should each have 

flexibility to determine the level at 

which a load serving entity may 

nominate long-term firm transmission 

rights, as long as that level does not fall 

below the entity’s ‘‘reasonable 

needs.’’ 15 By reasonable needs, the 

Commission meant that long-term firm 

transmission rights should be sufficient 

to hedge the congestion associated with 

providing baseload service.16 Once an 

entity obtains long-term firm 

transmission rights, Order No. 681 

requires these rights to be fully funded 

over their entire term.17

8. Significantly, Order No. 681 

adopted guidelines rather than 

prescriptive requirements for long-term 

firm transmission rights. While 

transmission organizations are required 

to satisfy each guideline, the 

Commission gave them the flexibility to 

design long-term firm transmission 

rights that reflect regional preferences 

and accommodate regional market 

designs.18

9. Many of the rehearing requests 

focus on guideline (5), which gives load 

serving entities priority to transmission 

rights on the existing system: 

Load serving entities must have priority 

over non-load serving entities in the 

allocation of long-term firm transmission 

rights that are supported by existing capacity. 

The transmission organization may propose 

reasonable limits on the amount of existing 

capacity used to support long-term firm 

transmission rights.19

10. In the preamble to guideline (5), 

the Commission rejected the NOPR 

proposal for an absolute preference for 

load serving entities with long-term 

power supply arrangements.20 Instead, 

the Commission opted for a general 

preference for load-serving entities over 

non-load serving entities, although 

transmission organizations, on a 

regional basis, are not precluded from 

giving allocation priority to holders of 

long-term contracts over other load 

serving entities when capacity is 

limited.21 Further, with respect to 

priority of eligibility, the Commission 

explained that ‘‘long-term firm 

transmission rights should be made 

available first to those entities that have 

an obligation to serve load within the 

transmission organization’s service 

territory and are required to contribute 

to the embedded cost of the 

transmission organization’s 

transmission system.’’ 22 The 

Commission concluded that ‘‘[a]ny 

entity that has neither an obligation to 

serve load on the transmission 

organization’s transmission system, nor 

an obligation to pay the embedded costs 

of that system, should not be given a 

preference to acquire long-term firm 

transmission rights supported by the 

system’s existing capacity.’’ 23 Further, 

the Commission explained that ‘‘longterm firm transmission rights must be 

available to all market participants.’’ 24

Guideline (5) ‘‘serves only as a 

‘tiebreaker’ between load serving 

entities and non-load serving entities 

when existing transmission capacity is 

limited.’’ 25

D. Rehearing Order: Order No. 681–A 

11. On rehearing, the Commission 

upheld its determinations in Order No. 

681 and offered certain clarifications. 

Specifically, on the issue of priority for 

load serving entities with load outside 

the region, the Commission stated that 

a load serving entity should receive 

preference in the allocation of long-term 

firm transmission rights within a 

transmission organization’s region ‘‘only 

to the extent that the transmission 

organization plans and constructs its 

transmission system to support the load 

of the load serving entity, and the load 

serving entity contributes to the cost 

that the transmission organization 

incurs for that purpose.’’ 26 The 

Commission found that it would be 

unreasonable to provide a preference 

where the load has not contributed to 

the system’s embedded costs, and the 

transmission organization has not 

planned and built its system to 

accommodate the load.27

13106 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

28 Id. P 79. 

29 Id. 

30 Id. P 80. 

31 Id. P 81 (erroneously citing New England Power 

Pool, 100 FERC ¶ 61,287, at P 85 (2002); correctly 

citing Cal. Indep. Sys. Operator Corp., 116 FERC 

¶ 61,274, at P 766 (2006) (MRTU Order), order on 

reh’g, 119 FERC ¶ 61,076 (2007) (MRTU Rehearing 

Order)). 

32 Id. 

33Modesto Rehearing Request at 4–5. 

34See, e.g., New England Power Pool, 100 FERC 

¶ 61,287, at P 85 (2002). 

35See, e.g., PJM Interconnection, L.L.C., 119 FERC 

¶ 61,144, at P 40 & n.34, order on clarification, 121 

FERC ¶ 61,073 (2007) (upholding PJM’s proposal to 

allow an external load serving entity to receive 

long-term firm transmission rights in stage 1A if it 

is a transmission customer taking and paying for 

firm service and if it was serving load from 

resources within a zone at the time that zone was 

integrated into PJM). 

12. The Commission provided two 

examples where external load serving 

entities should be given a preference in 

the allocation of long-term firm 

transmission rights equivalent to the 

preference accorded to load serving 

entities with loads that lie within the 

transmission organization’s region. 

First, the Commission recognized that a 

load serving entity that has an existing 

agreement with the transmission 

organization to pay a share of the 

embedded costs of the transmission 

system on a long-term basis to support 

load outside the region should be 

entitled to receive this preference.28

Second, external load-serving entities 

should qualify for the preference where 

pancaked rates between the 

transmission organization and the other 

transmission provider(s) have been 

eliminated, as long as the agreement 

with the load-serving entity provides for 

cost sharing in accordance with the nonpancaked rates currently in effect.29

13. In addition, the Commission 

stated that, where there is no agreement 

between an external load serving entity 

and the transmission organization: 

a load serving entity with load that sinks 

outside the transmission organization’s 

region is entitled to receive long-term firm 

transmission rights from existing system 

capacity to support that load to the extent 

that capacity is available after the needs of 

the load serving entities whose loads are 

within the region have been met. However, 

in such cases, we expect that the load serving 

entity would be required to contribute, on a 

long-term basis, toward the embedded cost of 

the transmission system, by paying either 

pancaked or non-pancaked rates, as 

applicable.30

14. The Commission also denied the 

Sacramento Municipal Utility District 

(SMUD) request to clarify that it would 

be unreasonable for a transmission 

organization to allocate long-term firm 

transmission rights based on whether 

load is located in the transmission 

organization’s control area or has agreed 

to cede control of its transmission 

facilities to that organization. The 

Commission noted that it is not unduly 

discriminatory for a transmission 

organization to impose additional 

requirements on external load as a 

precondition to receiving such rights.31

The Commission declined to draw a 

broad conclusion in a rulemaking of 

general applicability that it may never 

be reasonable to treat external load 

differently from internal load for 

purposes of allocating long-term firm 

transmission rights.32

III. Discussion 

A. Procedural Matters 

15. Timely requests for rehearing and/ 

or clarification were filed by the 

following entities: Long Island Power 

Authority and its wholly-owned 

operating subsidiary, LIPA (LIPA), 

Modesto Irrigation District (Modesto), 

and SMUD. 

B. Requests for Rehearing and/or 

Clarification 

1. Contract With Transmission Owner 

Rather Than Transmission Organization 

16. Modesto states that the Final Rule 

allowed load serving entities that pay 

the embedded costs of a transmission 

organization’s system to qualify for 

priority in receiving long-term firm 

transmission rights, even if located 

outside of the transmission 

organization’s control area. Modesto 

argues that in so doing, however, the 

Commission created ‘‘an unjust and 

unreasonable and unduly 

discriminatory condition’’ in that such 

load-serving entities must contract 

directly with the transmission 

organization, rather than with entities 

within the transmission organization’s 

footprint, to pay the embedded cost of 

the transmission system, in order to 

qualify for priority in receiving longterm firm transmission rights.33

17. Modesto explains that it is a load 

serving entity located outside of and 

adjacent to the California Independent 

System Operator (CAISO). To meet its 

native load obligations, Modesto states 

that it often must wheel power over the 

CAISO-controlled grid from resources 

located inside and outside of the CAISO 

control area. Modesto states that one of 

its pre-existing arrangements through 

which it facilitates transmission of its 

electricity through the CAISO control 

area is with Pacific Gas & Electric 

Company (PG&E), a participating 

transmission owner of the CAISO. 

18. Modesto asserts that, through its 

payments to PG&E, it contributes to the 

embedded costs of the transmission 

system that is under the CAISO’s 

operational control. Modesto argues 

that, under Order No. 681–A, it would 

be denied a priority for obtaining longterm firm transmission rights because its 

agreement is with a participating 

transmission owner, PG&E, and not with 

the CAISO. Modesto argues that 

conditioning eligibility for allocation of 

long-term firm transmission rights on 

whether an agreement is with a 

transmission organization rather than a 

participant of that organization unduly 

discriminates against entities that are 

similarly situated. Specifically, Modesto 

complains that entities that are 

contributing to the embedded costs of 

the transmission organization’s system 

through pre-existing arrangements with 

the transmission organization are 

unduly discriminated against, compared 

with entities that have pre-existing 

arrangements with transmission owners 

who have turned their transmission over 

to the operational control of the 

transmission organization. 

Commission Determination 

19. We grant Modesto’s requested 

clarification. In Order No. 681–A, the 

Commission did not intend to restrict 

unnecessarily the types of contractual 

vehicles by which a load serving entity 

with load outside a transmission 

organization’s region may demonstrate 

that it is entitled to receive a preference 

in the allocation of long-term firm 

transmission rights supported by the 

region’s existing transmission capacity. 

The salient issue here is whether the 

external load serving entity has 

historically contributed and will 

continue to contribute on an ongoing 

basis to the embedded costs of the 

transmission system.34 As long as the 

external load serving entity can 

demonstrate that it has paid and will 

continue to pay the embedded costs of 

the transmission system, the precise 

vehicle by which this is accomplished 

is not important. Thus, a commitment to 

pay an appropriate share of embedded 

costs could be achieved through a 

contractual agreement with the 

transmission organization itself, through 

a pre-existing agreement with one or 

more transmission owners that have 

turned operational control of their 

transmission system over to the 

transmission organization, or by some 

other verifiable means.35 We further 

note that, while Modesto’s specific 

contractual issue is beyond the scope of 

this general rulemaking proceeding, it 

appears to have been favorably resolved 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13107 

36See Cal. Indep. Sys. Operator Corp., 120 FERC 

¶ 61,023, at P 188 (2007), reh’g denied, 124 FERC 

¶ 61,095, at P 42–45 (2008) (accepting MRTU Tariff 

section 36.9, which establishes an external load 

serving entity’s eligibility for firm transmission 

rights based on a forward-looking showing of need). 

37SMUD Rehearing Request at 14. ‘‘ISO’’ refers to 

‘‘Independent System Operator’’ and ‘‘RTO’’ refers 

to ‘‘Regional Transmission Operator.’’ 

38 Id. 

39 Id. at 14–15. 

40 Id. 

41See MRTU Rehearing Order, 119 FERC ¶ 61,076 

at P 373 (rejecting request to give external load 

serving entities the opportunity to demonstrate 

reliance on the CAISO grid in order to avoid 

prepaying for the transmission service necessary to 

qualify for allocation of congestion revenue rights, 

which can be converted into long-term firm 

transmission rights). 

42We note that the DC Circuit Court upheld the 

Commission’s finding that PG&E’s notice of 

termination of its long-term contract with SMUD 

was just and reasonable. Sacramento Municipal 

District v. FERC, 474 F.3d 797, 801 (DC Cir. 2007). 

Nevertheless, the CAISO allows an external load 

serving entity such as SMUD to obtain long-term 

firm transmission rights through a combination of 

pre-payment of wheeling access charges and 

ownership of or contract for generation within the 

CAISO. See generally MRTU Tariff § 36.9. In 

addition, the MRTU Tariff allows SMUD to rollover 

a short-term firm transmission right indefinitely 

and use this to hedge CAISO congestion charges, as 

long as this does not interfere with the 

simultaneous feasibility of other allocated rights. Id. 

§ 36.9.5. 

43Order No. 681–A, 117 FERC ¶ 61,201 at P 80. 

in the compliance phase of this 

proceeding.36

2. Lack of a Transmission Agreement 

20. SMUD asks the Commission to 

clarify whether a load serving entity 

outside an ISO/RTO control area could 

qualify for an allocation priority 

equivalent to that of a load serving 

entity within the control area where its 

lack of an existing long-term firm 

service arrangement is the transmission 

organization’s ‘‘fault.’’ 37 Asserting that 

this question is not purely ‘‘academic,’’ 

SMUD explains that it had a long-term 

firm transmission arrangement for more 

than 35 years, which, according to 

SMUD, lapsed due to the CAISO’s delay 

in developing long-term firm 

transmission rights. Pointing out that 

the CAISO was initially ordered to 

develop long-term firm transmission 

rights in 1997, SMUD argues that it 

would have continued to have a longterm firm transmission agreement in 

place and would have qualified for a 

priority equivalent to that accorded load 

serving entities within the CAISO 

control area if the CAISO had developed 

those long-term rights on a timely 

basis.38

21. SMUD states that it is willing to 

provide assurances to the CAISO that it 

will continue to pay a share of the fixed 

costs of the transmission grid operated 

by the CAISO. SMUD insists that absent 

clarification, however, Order No. 681–A 

does not provide a clear opportunity for 

SMUD and other similarly situated load 

serving entities to provide such 

assurances.39 SMUD asks the 

Commission to clarify that a load 

serving entity located outside an ISO/ 

RTO control area that lacks an existing 

long-term firm transmission agreement 

can qualify for the same treatment 

accorded a load serving entity with an 

existing long-term firm transmission 

agreement, if it can demonstrate: (1) Its 

reliance on the ISO/RTO transmission 

grid; (2) its commitment to continue to 

contribute to the fixed costs of the 

system; and (3) that its lack of a longterm transmission agreement with the 

ISO/RTO was outside of its control.40

Commission Determination 

22. We grant in part and deny in part 

the clarification requested by SMUD. 

First, we decline to adopt SMUD’s 

three-part test for determining whether 

an external load serving entity should 

qualify for a preference in the allocation 

of long-term firm transmission rights.41

However, we grant clarification 

regarding the broader issue SMUD 

raises, which is whether an external 

load serving entity may qualify for a 

preference if it contributes to the 

embedded cost of the regional 

transmission system, but is not a party 

to a qualifying agreement for long-term 

transmission service at the time of its 

request. We clarify that the lack of an 

existing long-term service agreement 

with the transmission organization or a 

participating transmission owner does 

not necessarily disqualify an external 

load serving entity from receiving a 

preference in the allocation of long-term 

firm transmission rights that are 

supported by the existing capacity of the 

transmission organization’s system. If 

the external load serving entity has 

maintained a continuous service 

relationship with the transmission 

organization or transmission owner, 

through which it continues to contribute 

to the embedded costs of the 

transmission system for the duration of 

the long-term firm transmission rights it 

seeks, that entity may be entitled to an 

allocation of long-term firm 

transmission rights. However, the entity 

must also satisfy all of the other 

eligibility requirements of the 

transmission organization, and it must 

provide the transmission organization 

with appropriate assurances that it will 

continue to satisfy these requirements 

going forward. 

23. With regard to the status of 

SMUD’s long-term contractual 

relationship with the CAISO or any of 

its Participating Transmission Owners, 

including the question of which party 

may be at fault for causing a prior 

agreement to lapse, we note that this is 

a case-specific matter and, as such, is 

beyond the scope of this proceeding.42

3. Clarification of Paragraph 80 of Order 

No. 681–A 

24. LIPA asks the Commission to 

clarify that, consistent with paragraph 

78 of Order No. 681–A, there should be 

no distinction between the treatment of 

internal and external load serving 

entities when allocating long-term firm 

transmission rights, where the 

transmission organization plans and 

constructs its transmission system to 

support the external load serving 

entity’s requirements and the load 

serving entity is obligated to contribute 

to the costs the ISO/RTO incurs for that 

purpose. LIPA’s concern centers on 

paragraph 80 of Order No. 681–A, 

which provides that: 

in cases where [an external load serving 

entity does not have an existing agreement to 

pay embedded system costs], a load serving 

entity with load that sinks outside the 

transmission organization’s region is entitled 

to receive long-term firm transmission rights 

from existing system capacity to support that 

load to the extent that capacity is available 

after the needs of the load serving entities 

whose loads are within the region have been 

met.43

In LIPA’s view, the allocation 

preference expressed in paragraph 80 

only applies with respect to the initial 

allocation of long-term firm 

transmission rights to an external load 

serving entity that has no existing 

agreement with the ISO/RTO or does 

not hold long-term rights for which such 

ISO/RTO plans and constructs its 

transmission system. 

25. LIPA argues specifically that firm 

transmission withdrawal rights in PJM 

meet the standard articulated by the 

Commission in paragraph 78 of Order 

No. 681–A and, according to LIPA, these 

withdrawal rights should entitle 

external load serving entities to the 

same rights as internal load serving 

entities. As LIPA explains, PJM awards 

firm transmission withdrawal rights for 

merchant transmission lines that 

include the right to withdraw energy 

and capacity from the PJM system up to 

a specific megawatt level. LIPA explains 

that PJM first subjects the award of such 

firm transmission withdrawal rights to 

system impact studies through the 

interconnection process and considers 

any potential system upgrades. Next, 

according to LIPA, PJM includes such 

13108 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

44See Midwest Indep. Transmission Sys. 

Operator, Inc., 121 FERC ¶ 61,062, at P 40–41 

(2007), order on reh’g, 123 FERC ¶ 61,178 (2008), 

and Midwest Indep. Transmission Sys. Operator, 

Inc., 121 FERC ¶ 61,063, at P 53–54 (2007) (finding 

that stage 2 eligibility for long-term firm 

transmission rights to cover transmission service 

obtained after the reference year is not unduly 

discriminatory). 

45 Indeed, it appears this issue has been 

appropriately asked and answered in the 

compliance phase of this rulemaking proceeding. 

See PJM Interconnection, L.L.C., 119 FERC ¶ 61,144 

at P 37–44, clarified on other grounds, 121 FERC 

¶ 61,073 (denying LIPA’s request for preferential 

allocation of long-term firm transmission rights in 

PJM because LIPA did not take service from PJM 

during the historical reference year, nor does it 

continue to pay the embedded cost of the PJM 

transmission system). The Commission notes, 

however, that on Jan. 28, 2009, in Docket No. ER09– 

585–000, PJM filed tariff revisions that would allow 

external load-serving entities, including holders of 

firm withdrawal rights, to obtain long-term firm 

transmission rights, provided certain conditions are 

met. 

46LIPA states that, for purposes of its clarification 

request, qualifying external load serving entities are 

those entities for which the transmission 

organization plans and constructs its transmission 

system to support the load serving entity’s load and 

the load serving entity contributes to the cost that 

the transmission organization incurs for that 

purpose. LIPA Rehearing Request at 3 & n.9. 47 Id. at 4 & n.10. 48SMUD refers to the fact that the CAISO, like 

other ISOs/RTOs, uses nomination tiers to allocate 

long-term firm transmission rights. In each tier, a 

load serving entity is allowed to nominate a 

percentage of the total amount of transmission 

rights it is eligible to request. The ISO/RTO then 

runs a simultaneous feasibility test on all 

nominated rights to determine the feasible set of 

rights that it can award. Load serving entities 

typically nominate their most highly-valued rights 

in the first tier. See generally Cal. Indep. Sys. 

Operator Corp., 125 FERC ¶ 61,153 (2008). 

firm transmission withdrawal rights in 

its Regional Transmission Enhancement 

Plan (RTEP) and thereby plans for and 

constructs its system to ensure the 

availability of such firm transmission 

withdrawal rights. LIPA further states 

that PJM has proposed (and the 

Commission has agreed) that the costs of 

RTEP upgrades to support such 

withdrawal rights may be allocated to 

merchant transmission lines. LIPA adds 

that the use of withdrawal rights also 

requires scheduling of transmission 

service over the PJM system, for which 

the customer also then pays a ‘‘Border 

Rate’’ charged to exports from the 

system, and through which PJM 

recovers the embedded system costs. 

LIPA asks the Commission to clarify 

that the lower allocation priority and 

potential for reduced allocation of longterm firm transmission rights discussed 

in paragraph 80 does not apply to 

holders of long-term firm transmission 

rights such as firm withdrawal rights. 

Further, LIPA argues that any reduction 

contemplated under paragraph 80 

should only be triggered when, as part 

of the evaluation of all internal and 

external load serving entity requests, 

there is a binding constraint that does 

not allow a full allocation of long-term 

firm transmission rights to qualifying 

load serving entities. LIPA states that, in 

such a case, the initial request for longterm firm transmission rights may be 

prorated downward to ensure that an 

internal load serving entity or external 

load serving entity with an existing 

agreement or long-term rights receives 

its full allocation of long-term firm 

transmission rights. 

Commission Determination 

26. We grant in part and deny in part 

LIPA’s requested clarification. First, we 

clarify that an external load serving 

entity may receive the same allocation 

priority as an internal load serving 

entity if the external load serving entity 

can demonstrate that the transmission 

organization plans and constructs its 

transmission system to support the 

external load serving entity’s load 

serving requirements and the external 

load serving entity contributes to the 

costs incurred for such purpose. We 

further clarify that paragraph 80 of 

Order No. 681–A is intended to apply 

only to situations where a load serving 

entity with load external to the region 

makes an initial request to obtain longterm firm transmission rights. That is, 

paragraph 80 serves only to establish the 

initial priority for the allocation of longterm firm transmission rights to an 

external load serving entity that has not 

historically contributed to the 

embedded costs of the transmission 

system, and for whom the transmission 

organization has not planned and 

constructed its transmission system.44

27. LIPA also requests clarification of 

the conditions under which a reduced 

allocation of long-term firm 

transmission rights is contemplated 

under paragraph 80. We clarify that an 

external load serving entity may be 

allocated fewer long-term firm 

transmission rights than it requests in a 

situation where its initial request for 

long-term firm transmission rights 

cannot be accommodated by the system 

capacity that is available after the needs 

of the load serving entities whose loads 

are within the region have been met. 

This rule would apply to an initial 

request where the transmission 

organization has not historically 

planned and constructed its system to 

meet the external load serving entity’s 

load serving needs. 

28. However, we decline to grant 

LIPA’s requested clarification that its 

firm transmission withdrawal rights in 

PJM meet the standard articulated by 

the Commission in paragraph 78 of 

Order No. 681–A, such that these rights 

should entitle external load serving 

entities like LIPA to be granted the same 

rights as internal load serving entities. 

Whether these firm withdrawal rights 

qualify LIPA for receipt of long-term 

firm transmission rights in PJM requires 

a fact-based determination that is 

outside the scope of a general 

rulemaking proceeding.45

4. Comparable Treatment for External 

and Internal Load Serving Entities 

29. LIPA asks the Commission to 

clarify that ‘‘qualifying’’ external load 

serving entities are able to participate in 

the same phase of long-term firm 

transmission rights allocation as 

internal load serving entities and 

receive a long-term firm transmission 

right of the same length and attributes 

as an internal load serving entity.46

LIPA states that, as noted in Order No. 

681–A, Order No. 681 provides that 

transmission organizations must make 

long-term firm transmission rights 

available to load serving entities with 

term lengths and/or renewal rights that 

are sufficient to meet load serving 

entities’ need to hedge long-term power 

supply arrangements. LIPA points out 

that the Commission required long-term 

firm transmission rights to have a 

specific term length and/or use of 

renewal rights to provide firm coverage 

for at least a 10-year period.47 LIPA 

states that a 10-year term length, 

renewal rights, and firmness of coverage 

are the ‘‘backbone’’ of long-term firm 

transmission rights, which LIPA argues 

should not differ regardless whether a 

load serving entity is internal or 

external to the ISO or RTO. 

30. Also focusing on this issue, SMUD 

challenges the Commission’s ruling that 

only load serving entities in a 

transmission organization’s control area 

or those load serving entities with 

existing long-term firm service contracts 

would qualify for a first-tier allocation 48

of long-term firm service rights. SMUD 

argues that this ruling prejudices those 

load serving entities located outside the 

CAISO’s control area whose long-term 

firm service agreements lapsed, with no 

long-term firm service replacement, due 

to the CAISO’s ‘‘history of 

procrastination’’ in developing such 

rights. 

31. Furthermore, SMUD asserts that 

the Commission failed to engage in 

reasoned decision-making by 

inconsistently applying its precedent 

and suggesting that a transmission 

organization may give preference to load 

serving entities located in its own 

control area over those located outside 

its control area. SMUD states that the 

Commission offered no valid grounds 

for its departure from Order No. 888, 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13109 

49SMUD Rehearing Request at 6–7 (referencing 

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)). 

50By ‘‘prepayment obligation,’’ SMUD refers to 

the fact that the CAISO, for example, requires an 

external load serving entity to agree in advance to 

pay a year’s worth of wheeling access charges to be 

eligible for allocation of long-term firm 

transmission rights on the same basis as internal 

load serving entities. See MRTU Order, 116 FERC 

¶ 61,274 at P 706–15; MRTU Rehearing Order, 119 

FERC ¶ 61,076 at P 358 (discussing prepayment in 

connection with short-term firm transmission 

rights, which may be converted to long-term rights); 

Cal. Indep. Sys. Operator Corp., 120 FERC ¶ 61,023 

at P 266. 

51SMUD Rehearing Request at 6. 

52 Id. (citing Preventing Undue Discrimination 

and Preference in Transmission Service, Notice of 

Proposed Rulemaking, Docket Nos. RM05–17–000 

and RM05–25–000, FERC Stats. & Regs. ¶ 32,603, at 

P 100 (2006), order issuing final rule Order No. 890, 

FERC Stats. & Regs. ¶ 31,241 (2007), order on reh’g, 

Order No. 890-A, 73 FR 2984 (Jan. 16, 2008), FERC 

Stats. & Regs. ¶ 31,261 (2007), order on reh’g, Order 

No. 890–B, 73 FR 39,092 (July 8, 2008), 123 FERC 

¶ 61,299 (2008)). 

53 Id. (citing Order No. 888, FERC Stats. & Regs. 

¶ 31,036 at 31,760). 

54SMUD Rehearing Request at 7 (citing MAPP, 87 

FERC ¶ 61,075 at 61,309–10). 

55See Regional Transmission Organizations, 

Order No. 2000–A, 65 FR 12,088 (2000), FERC Stats. 

& Regs. ¶ 31,092 at 31,385 (2000) (‘‘We do not agree 

with the premise of some of the petitioners who 

conclude that rate differences of any type [between 

RTO participants and non-participants] would 

constitute undue discrimination.’’), aff’d sub nom., 

Public Util. Dist. No. 1 of Snohomish, Wash. v. 

FERC, 272 F.3d 607 (DC Cir. 2001). 

56See MRTU Order, 116 FERC ¶ 61,274 at P 766 

(stating that external load and internal load are not 

similarly situated with respect to their reliance on 

the transmission organization’s grid); MRTU 

Rehearing Order, 119 FERC ¶ 61,076, at P 377 

(2007) (requiring external load serving entities to 

satisfy additional requirements to verify need for 

long-term firm transmission rights does not violate 

Order No. 888 because external load serving entities 

are not denied transmission service and all 

customers receive the same service under the 

MRTU Tariff). 

and cases interpreting Order No. 888, 

which SMUD argues require 

transmission providers to offer service 

to all customers on a non-discriminatory 

basis.49 In addition, SMUD argues that 

the Commission’s proposal to 

distinguish among load serving entities 

on the basis of control area is 

inconsistent with section 217 of the 

FPA. Specifically, SMUD asserts that 

allowing transmission organizations to 

impose a prepayment obligation 50 on 

external load serving entities is unduly 

discriminatory. 

32. First, SMUD argues that the 

principle that a transmission provider 

may place preconditions on a 

customer’s right to service based on 

whether it is located inside or outside 

of the transmission provider’s control 

area ‘‘turns Order No. 888 on its 

head.’’ 51 Citing the NOPR for Order No. 

890,52 SMUD asserts that the 

Commission has made clear that 

transmission organizations covered by 

Order No. 681 must continue to offer 

service as good as or superior to that 

offered under an Order No. 888 Open 

Access Transmission Tariff (OATT). 

SMUD states that under Order No. 888, 

a transmission provider is required to 

provide customers non-discriminatory 

access to the grid equivalent to the 

transmission service it provides itself.53

SMUD posits that if a transmission 

owner with a traditional OATT were to 

treat a customer outside its control area 

differently than it treats its own control 

area load, that transmission owner 

would be engaging in blatantly 

discriminatory conduct. SMUD insists 

that the Commission’s interpretation of 

New England Power Pool leads to the 

conclusion that transmission owners 

with OATTs could turn control of their 

facilities over to an ISO and then have 

the ISO discriminate against those same 

customers, customers still dependent on 

their transmission, but now located 

outside the ISO’s control area. 

33. Next, SMUD argues that the 

Commission’s interpretation of New 

England Power Pool is an ‘‘unexplained 

departure’’ from its holding in MidContinent Area Power Pool, 87 FERC 

¶ 61,075 (1999) (MAPP). SMUD quotes 

MAPP: 

Order No. 888 requires that pool 

compliance tariffs provide service to 

members and non-members alike. We stated 

that members of a loose power pool, as well 

as non-members, must have access to the 

same transmission services within that power 

pool on a comparable basis and pay the same 

or a comparable rate for those services.54

SMUD argues that, just as transmission 

providers within a power pool cannot 

condition access to transmission service 

on a customer’s willingness to join the 

pool, it is unduly discriminatory to 

condition a transmission customer’s 

access to firm transmission service on 

its location within a transmission 

provider’s control area. 

34. Third, SMUD argues that, far from 

supporting the notion that customers 

outside the control area should be 

treated differently, New England Power 

Pool reaffirms the principle that 

customers outside an ISO’s control area 

that are committed to contributing to the 

ISO’s fixed costs under a long-term firm 

transmission agreement must be treated 

on a non-discriminatory basis and that 

they should not be given lower priority 

based on their location outside the 

transmission provider’s control area. 

Commission Determination 

35. In response to the requests of LIPA 

and SMUD, we clarify that the 

transmission organization’s criteria for 

determining a load serving entity’s 

eligibility to receive a preference in the 

allocation of long-term firm 

transmission rights must not be unduly 

discriminatory as between internal and 

external load serving entities. That is, 

the transmission organization may 

apply a variety of eligibility criteria that 

are appropriate for its region, as long as 

it applies those criteria in a manner that 

is not unduly discriminatory.55 For 

example, to be eligible for an allocation 

preference, the transmission 

organization may require a load serving 

entity to demonstrate that it has a longterm power supply arrangement from a 

historical point of receipt to a historical 

point of delivery, and that it will 

continue to contribute to the embedded 

cost of the transmission system for the 

duration of the period for which the 

load serving entity intends to hold the 

long-term firm transmission right. Such 

criteria would not be unduly 

discriminatory if they are tailored to 

meet the transmission organization’s 

legitimate need to verify entitlement to 

allocation of the long-term rights, i.e., 

that the external load serving entity 

intends to use these rights to serve its 

customers. If the transmission 

organization allocates long-term firm 

transmission rights using a system of 

stages or tiers, we would expect all 

qualified load serving entities to be 

placed in the same allocation stage or 

tier without regard to whether its load 

is internal or external to the region. 

36. In response to the assertion by 

SMUD that the Commission’s 

interpretation of New England Power 

Pool is an unexplained departure from 

precedent, we clarify that the citation to 

New England Power Pool in footnote 74 

of Order No. 681–A was the result of an 

inadvertent drafting error. Nevertheless, 

we reiterate our determination that it is 

not unduly discriminatory for a 

transmission organization to impose 

reasonable, additional requirements on 

customers external to the transmission 

organization’s control area as a 

precondition to receiving long-term firm 

transmission rights.56 It is within the 

transmission organization’s purview to 

create rules that aim to ensure equitable 

allocation/distribution of these 

potentially valuable rights. 

37. However, in response to LIPA, we 

clarify that any differences in the 

attributes (e.g., length, renewal rights 

13110 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

57Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 478. 

58 Id. 

59Order No. 681–A, 117 FERC ¶ 61,201 at P 105– 

06. 

60 Id. P 105. 

61 Id. P 106. 

62 Id. 63 Id. 

64Order No. 681, FERC Stats. & Regs. ¶ 31,226 at 

P 478; Order No. 681–A, 117 FERC ¶ 61,201 at P 

105–06. 

65Order No. 681–A, 117 FERC ¶ 61,201 at P 105– 

06. 

66SMUD Rehearing Request at 12. 

67Order No. 681–A, 117 FERC ¶ 61,201 at P 106. 

and firmness of coverage) of long-term 

firm transmission rights that are 

allocated among load serving entities 

should not be based on whether a load 

serving entity is internal or external to 

the transmission organization. 

5. Marginal Losses 

38. In Order No. 681, we concluded 

that section 217(b)(4) does not address 

marginal loss charges.57 Noting that 

each transmission organization that 

operates an organized electricity market 

has established methods for refunding 

marginal loss surpluses that reflect 

regional preferences, which the 

Commission has approved, we decided 

not to overturn those decisions in this 

proceeding.58 In Order No. 681–A, we 

upheld our statutory interpretation that 

section 217(b)(4) of the FPA does not 

address marginal loss charges.59 First, 

we explained that the issue of hedging 

long-term marginal loss charges is 

distinct from the issue of hedging 

marginal congestion charges. Congestion 

charges, we said, arise in part due to 

transmission constraints, and 

transmission organizations allocate 

transmission rights to hedge these costs. 

Marginal loss charges, we noted, are 

similar to congestion costs because they 

are a function of locational energy 

prices and line loadings. However, 

significantly, ‘‘the development of a 

financial instrument or other means for 

hedging of marginal losses has not been 

accomplished to date in any of the 

organized electricity markets.’’ 60

39. Next, we parsed the language of 

the statute and explained that the terms 

used in section 217(b)(4)—‘‘firm 

transmission rights’’ and ‘‘equivalent 

tradable or financial rights’’—‘‘are 

consistent with terminology 

traditionally used to discuss hedging of 

congestion, rather than marginal 

losses.’’ 61 We further explained that, 

since we do not interpret EPAct 2005 as 

requiring transmission organizations to 

provide long-term firm transmission 

rights with properties that are 

fundamentally different from those of 

the short-term rights that they now offer, 

we do not interpret the statute as 

requiring hedging of marginal losses. 

We emphasized that our interpretation 

of EPAct 2005 as not requiring hedging 

of marginal losses does not preclude 

future market design changes that allow 

hedging of losses.62 Significantly, we 

encouraged transmission organizations 

to explore methods to assist load serving 

entities and others to obtain a hedge for 

marginal losses.63

40. On rehearing, SMUD argues that, 

in light of FPA requirements and 

Congress’ clear intent that ‘‘financially 

firm’’ transmission service would 

provide customers the equivalent of 

firm physical rights, financial rights 

must include a hedge against marginal 

losses. SMUD argues that the 

Commission contravened Order No. 888 

and the plain language of the FPA by 

concluding that long-term firm 

transmission rights need only be similar 

to the short-term transmission rights 

now being offered by most transmission 

organizations, and that long-term firm 

transmission rights need not include a 

hedge against marginal losses because 

short-term rights do not include such a 

hedge. SMUD argues that the 

Commission’s conclusion that long-term 

rights should be similar to short-term 

rights with respect to their lack of a 

hedge against marginal losses has no 

record, logical, or factual basis. 

41. According to SMUD, the purpose 

of section 217(b)(4) of the FPA, reflected 

in the language of the statute, is to 

require transmission organizations to 

provide long-term firm service based on 

financial rights that is equivalent to 

long-term service based on ‘‘firm,’’ i.e., 

‘‘physical’’ transmission rights. SMUD 

argues that, since, as a matter of 

historical practice, long-term physical 

rights do not expose customers to 

marginal losses, then neither should 

their financial rights counterparts. 

42. SMUD reiterates its initial 

comments in this proceeding, asserting 

that marginal losses pose at least as big 

an uncertainty as congestion charges 

and, without hedges to insulate parties 

from the risks marginal loss exposure 

creates, interregional trade will be 

constrained. SMUD suggests that the 

Commission’s position is unsupported 

because most transmission 

organizations did not include marginal 

losses when they started their organized 

markets, and PJM only recently began 

offering them, so the past cannot be a 

valid prologue for the future. SMUD 

argues that relying on the possibility 

that transmission organizations may 

voluntarily offer hedges for marginal 

loss exposure is insufficient to ensure 

equivalence between financial and 

physical rights-based firm service. 

SMUD states that on rehearing the 

Commission should require 

transmission organizations to either: (1) 

Offer long-term firm service customers a 

hedge against marginal losses; or (2) 

exempt long-term firm customers from 

those charges and charge actual or 

estimated system average losses. 

Commission Determination 

43. We deny SMUD’s request for 

rehearing concerning marginal losses, 

primarily for the reasons discussed in 

Order Nos. 681 and 681–A.64 First, as 

we explained in Order No. 681–A, the 

issue of hedging long-term marginal loss 

charges is distinct from the issue of 

hedging long-term marginal congestion 

charges, and the language of section 217 

of the FPA is silent regarding marginal 

losses.65

44. We disagree with SMUD’s 

argument that the language of the statute 

mandates a hedge against marginal 

losses for long-term firm service 

customers. SMUD argues that the term 

‘‘firm service’’ in the statute denotes 

physical transmission service, and longterm physical rights do not expose 

customers to marginal losses, so neither 

should their financial counterparts.66

However, SMUD ignores the fact that 

transmission losses and congestion are 

distinct features of transmission service. 

While physical rights customers may 

not have been exposed to marginal 

losses, they generally had contractual 

arrangements concerning responsibility 

for losses on the transmission system. 

45. We further object to SMUD’s 

assertion that, in Order No. 681–A, the 

Commission declared, without record, 

logical or factual basis, that long-term 

firm transmission rights should have the 

same characteristics as short-term rights. 

Rather, the Commission simply 

observed that it did not interpret EPAct 

2005 as requiring transmission 

organizations to provide long-term firm 

transmission rights that are 

fundamentally different from the shortterm rights they now offer.67

Specifically, transmission organizations 

with short-term rights do not provide 

hedges for marginal losses, and EPAct 

2005 does not expressly require a hedge 

for marginal losses. 

46. Hedging marginal losses is more 

complex than hedging congestion costs 

due to the variable nature of losses. 

While it is theoretically possible to 

design a different type of firm 

transmission right—an unbalanced firm 

transmission right—to hedge against 

both congestion and marginal losses, 

such designs are only in the 

experimental stage. No transmission 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13111 

organization has yet to implement a 

hedge for marginal losses. Accordingly, 

we decline to order hedging of marginal 

losses at this time. Nevertheless, we 

recognize that a marginal loss hedge 

could provide benefits to certain market 

participants. The Commission supports 

development of a marginal loss hedging 

product if its design progresses beyond 

the theoretical level and it can be 

developed cost-effectively. 

47. The Commission also denies 

SMUD’s request to exempt long-term 

firm transmission customers from 

marginal losses and charge them actual 

or estimated system average losses. This 

raises a market design issue that has 

implications beyond the design of longterm firm transmission rights and is 

more appropriately resolved by each 

transmission organization on a case-bycase basis. Moreover, since we find that 

EPAct 2005 does not address marginal 

losses, this request is beyond the scope 

of this rulemaking proceeding. 

By the Commission. 

Kimberly D. Bose, 

Secretary. 

[FR Doc. E9–6698 Filed 3–25–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Parts 1, 26, 201, 203, 206, 310, 

312, 314, 320, and 600 

[Docket No. FDA–2009–N–0133] 

Change of Addresses and Names; 

Technical Amendment 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final rule; technical 

amendment. 

SUMMARY: The Food and Drug 

Administration (FDA) is amending its 

regulations to reflect a change of address 

for the Center for Drug Evaluation and 

Research’s (CDER’s) Central Document 

Room in Beltsville, MD; the relocation 

of certain CDER offices to the White Oak 

campus in Silver Spring, MD; and 

changes of the names of certain CDER 

organizational units. This action is 

editorial in nature and is intended to 

ensure the accuracy and clarity of the 

agency’s regulations. 

DATES: This rule is effective March 26, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

Wendy Aaronson, Center for Drug 

Evaluation and Research, Food and 

Drug Administration, 10903 New 

Hampshire Ave., Bldg. 22, rm. 1128, 

Silver Spring, MD 20993–0002, 301– 

796–0410. 

SUPPLEMENTARY INFORMATION: FDA is 

amending its regulations in parts 1, 26, 

201, 203, 206, 310, 312, 314, 320, and 

600 (21 CFR parts 1, 26, 201, 203, 206, 

310, 312, 314, 320, and 600) to reflect 

the following changes: (1) Names of 

certain CDER organizational units; (2) a 

change of address for CDER’s Central 

Document Room in Beltsville, MD; and 

(3) the relocation of certain CDER offices 

to the White Oak campus in Silver 

Spring, MD. The addresses are locations 

to which applicants must submit 

information related to marketing 

applications or products regulated by 

CDER or from which the public can 

request information. Where appropriate, 

Internet addresses for obtaining 

information and forms are added and 

outdated addresses are removed. 

The technical amendments made by 

this document are largely related to 

paper submissions; however, FDA is 

committed to adapting its business 

practices to evolving technology, 

including using the significant 

advancements in Web-based, electronic 

systems. We anticipate that, in future 

rulemakings, Web-based filing of most 

submissions will eventually be required. 

We anticipate that when a change to an 

electronic submission system is 

implemented, we will provide guidance 

to address any technical questions 

related to such submissions. 

The technical amendments, reflected 

in the regulatory text of this final rule, 

are as follows: 

• In § 1.101(d)(2)(ii), the address to 

submit notifications for products 

regulated by CDER exported under 

section 802 of the Federal Food, Drug, 

and Cosmetic Act (21 U.S.C. 382) is 

changed to the White Oak campus. 

• In Appendix E to subpart A of part 

26, the contact information for CDER’s 

Office of Compliance is updated to the 

White Oak campus. 

• In § 201.58, the address to submit 

requests for waivers of labeling 

requirements is updated to the Beltsville 

Central Document Room. 

• In § 203.12, the CDER address for 

notification of an appeal from an 

adverse decision regarding 

reimportation of an insulin-containing 

or prescription drug by a district office 

is changed to the White Oak campus. 

• In § 203.37(e), the address to submit 

information regarding falsification of 

drug sample records or loss or theft of 

samples for prescription drugs and 

biological products regulated by CDER 

is changed to the White Oak campus. 

• In § 203.70(b)(1), the address to 

apply for a reward for providing 

information leading to a criminal 

proceeding or conviction related to the 

sale, purchase, or trade of a drug sample 

is changed to the White Oak campus. 

• In § 206.7(b)(1)(i), the address to 

request exemptions from imprinting 

requirements for solid oral dosage form 

drugs is updated to the Beltsville 

Central Document Room. 

• In § 310.6(e), the address for 

interested parties to submit the names of 

drug products, and of their 

manufacturers or distributors, that 

should be subject to the same 

purchasing and regulatory policies as 

those reviewed by the Drug Efficacy 

Study Group is changed to the White 

Oak campus. 

• In §§ 310.305(c) and 314.98(b), the 

address to submit postmarketing safety 

reports is updated to the Beltsville 

Central Document Room. (Note that 

applicants and any person other than 

the applicant whose name appears on 

the label of an approved drug product 

as a manufacturer, packer, or distributor 

may also elect to submit postmarketing 

safety reports in electronic format.) 

• In §§ 310.305(d)(4) and 314.80(f)(4), 

the address to obtain reporting forms is 

updated to reflect Internet availability. 

• In §§ 310.501(e) and 310.515(d), the 

name and address to request labeling 

guidance for estrogen drug products are 

updated to the Division of Reproductive 

and Urologic Products and the White 

Oak campus. 

• In § 312.140(b), mailing instructions 

are updated to ensure submissions are 

addressed properly. 

• In §§ 312.145(b) and 314.445(b), the 

CDER unit from which to request a list 

of CDER guidances is updated to the 

Division of Drug Information. The 

address is updated to the White Oak 

campus, and an Internet address is 

added to reflect the availability of the 

list on the Internet. 

• In § 314.80(d)(2) and (f)(3)(ii), the 

CDER unit to contact regarding 

alternative reporting formats is updated 

to the Office of Surveillance and 

Epidemiology. 

• In § 314.81(b)(3)(i), the address to 

obtain Form FDA–2253 (Transmittal of 

Advertisements and Promotional 

Labeling for Drugs for Human Use) is 

updated to reflect Internet availability. 

• In § 314.200(a)(3), the address to 

request opinions of the applicability of 

a notice of opportunity for a hearing 

published in the Federal Register to a 

specific product that may be identical, 

related, or similar to a product listed in 

the notice is changed to the White Oak 

campus. 

• In § 314.440(a), an outdated address 

to submit applications, abbreviated 

applications, and related