27878 Federal Register / Vol. 60, No. 102 / Friday, May 26, 1995 / Rules and Regulations

1 Inquiry Concerning the Commission’s Pricing

Policy for Transmission Services Provided by Public

Utilities Under the Federal Power Act, Policy

Statement, III FERC Stats. & Regs. ¶ 31,005 (1994);

59 FR 55031, Nov. 3, 1994. (Policy Statement).

2See American Electric Power Service

Corporation (AEP), 67 FERC ¶ 61,168 (1994), reh’g

pending. The comparability standard generally

provides that ‘‘[a]n open access tariff that is not

unduly discriminatory or anticompetitive should

offer third parties access on the same or comparable

basis, and under the same or comparable terms and

conditions, as the transmission provider’s uses of

its system.’’ Id. at 61,490. The Commission

explained in the Policy Statement that

comparability of service applies to price as well as

to terms and conditions. Policy Statement at 31,142.

The Commission recently issued a Notice of

Proposed Rulemaking in which it proposes to

require all public utilities to have on file nondiscriminatory open access transmission tariffs and

provides guidance on the comparability standard.

See Promoting Wholesale Competition Through

Open Access Non-discriminatory Transmission

Services by Public Utilities; Recovery of Stranded

Costs by Public Utilities and Transmitting Utilities,

Docket Nos. RM95–8–000 and RM94–7–001, Notice

of Proposed Rulemaking, 60 FR 17662 (Apr. 7,

1995), IV FERC Stats. & Regs. ¶ 32,514 (1995) (Open

Access NOPR).

Paragraph 6005 Class E Airspace Areas

Extending Upward From 700 Feet or More

Above the Surface of the Earth

* * * * *

ASW TX E5 Ozona, TX [New]

Ozona, Ozona Municipal Airport, TX

(lat. 30°44′06′′ N., long. 101°12′10′′ W.)

That airspace extending upward from 700

feet above the surface within a 6.5-mile

radius of Ozona Municipal Airport.

* * * * *

Issued in Fort Worth, TX, on May 11, 1995.

Larry D. Gray,

Manager, Air Traffic Division, Southwest

Region.

[FR Doc. 95–13017 Filed 5–25–95; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

18 CFR Part 2

[Docket No. RM93–19–001]

Inquiry Concerning the Commission’s

Pricing Policy for Transmission

Services Provided by Public Utilities

Under the Federal Power Act

Issued May 22, 1995.

AGENCY: Federal Energy Regulatory

Commission.

ACTION: Final rule; order on

reconsideration and clarifying policy

statement.

SUMMARY: The Commission in its

Transmission Pricing Policy Statement,

issued on October 26, 1994, announced

a new policy regarding the pricing of

transmission services provided by

public utilities and transmitting utilities

under the Federal Power Act that allows

greater transmission pricing flexibility

than was allowed under previous

Commission policies. The Commission

traditionally had allowed only postagestamp, contract-path pricing. the Policy

Statement announced that the

Commission also will allow a variety of

other pricing methods that may be more

suitable for competitive wholesale

power markets, including distancesensitive and flow-based pricing. In

response to filings by certain entities,

the Commission is denying requests for

reconsideration of the Policy Statement;

however, the Commission is clarifying

certain matters concerning nonconforming transmission pricing

proposals.

EFFECTIVE DATE: This order is effective as

of May 22, 1995.

FOR FURTHER INFORMATION CONTACT:

Deborah B. Leahy, Office of the General

Counsel, Federal Energy Regulatory

Commission, 825 North Capitol Street

NE, Washington, D.C. 20426,

Telephone: (202) 208–2039, (legal

issues)

Stephen J. Henderson, Office of

Economic Policy, Federal Energy

Regulatory Commission, 825 North

Capitol Street NE, Washington, D.C.

20426, Telephone: (202) 208–0100,

(technical issues)

SUPPLEMENTARY INFORMATION: In

addition to publishing the full text of

this document in the Federal Register,

the Commission also provides all

interested persons an opportunity to

inspect or copy the contents of this

document during normal business hours

in Room 3104, at 941 North Capitol

Street, N.E., Washington, D.C. 20426.

The Commission Issuance Posting

System (CIPS), an electronic bulletin

board service, provides access to the

texts of formal documents issued by the

Commission. CIPS is available at no

charge to the user and may be accessed

using a personal computer with a

modem by dialing (202) 208–1397. To

access CIPS, set your communications

software to 19200, 14400, 12000, 9600,

7200, 4800, 2400, 1200 or 300 bps, full

duplex, no parity, 8 data bits and 1 stop

bit. The full text of this document will

be available on CIPS for 60 days from

the date of issuance in ASCII and

WordPerfect 5.1 format. After 60 days

the document will be archived, but still

accessible. The complete text on

diskette in WordPerfect format may also

be purchased from the Commission’s

copy contractor, La Dorn Systems

Corporation, also located in Room 3104,

941 North Capitol Street NE.,

Washington, D.C. 20426.

Order on Reconsideration and

Clarifying Policy Statement

Issued May 22, 1995.

On October 26, 1994, the Commission

issued a Transmission Pricing Policy

Statement.1 We announced a new policy

regarding the pricing of transmission

services provided by public utilities and

transmitting utilities under the Federal

Power Act (FPA) that allows greater

transmission pricing flexibility than was

allowed under previous Commission

policies. The Commission traditionally

had allowed only postage-stamp,

contract-path pricing. The Policy

Statement announced that the

Commission also will allow a variety of

other pricing methods that may be more

suitable for competitive wholesale

power markets, including distancesensitive and flow-based pricing.

The Policy Statement identified five

principles for evaluating transmission

pricing proposals. The first principle is

that transmission pricing should

conform to the traditional embedded

cost revenue requirement. However, the

Commission also provided procedures

whereby utilities can propose rates that

do not conform to the traditional

revenue requirement and thus do not

meet the first principle, i.e., nonconforming proposals. The second

principle requires that any new

transmission pricing proposal,

conforming or non-conforming, must

meet the Commission’s comparability

standard.2 The remaining three

principles (concerning economic

efficiency, fairness, and practicality)

reflect goals that an applicant must try

to meet, but that may need to be

balanced against one another in the

Commission’s determination of whether

the proposed rates are just and

reasonable.

On November 22, 1994, the Vermont

Department of Public Service (Vermont

Department) filed a request for

reconsideration of the Commission’s

decision to treat opportunity cost

pricing as a form of marginal cost

pricing consistent with comparability

principles. On November 23, 1994, the

American Forest and Paper Association

(American Forest and Paper) filed a

request for rehearing and motion for

reconsideration concerning several

aspects of the Policy Statement.

American Forest and Paper asks the

Commission to replace the Policy

Statement with a Notice of Proposed

Rulemaking. Further, it opposes the

Commission’s decision to allow

opportunity cost pricing and marginal
Federal Register / Vol. 60, No. 102 / Friday, May 26, 1995 / Rules and Regulations 27879

3On November 28, 1994, the Rural Utilities

Service (RUS), a credit agency in the U.S.

Department of Agriculture, filed comments in

response to the Policy Statement. RUS asks the

Commission to consider the impact of transmission

pricing decisions on the RUS electric program,

under which RUS provides low-cost financial

assistance to rural electric distribution and power

generation and transmission cooperatives pursuant

to the Rural Electrification Act (RE-Act). RUS

suggests, for example, that in considering pricing

mechanisms involving RUS borrowers, the

Commission should not permit non-RE-Act

beneficiaries to get the benefit of RUS loan

subsidies to the detriment of RUS borrowers.

Although styled as comments, RUS’s pleading was

submitted after the deadline for comments in this

proceeding had closed. Accordingly, we will treat

RUS’s pleading as a motion for reconsideration and

deny it because we believe the issues raised by RUS

are best addressed on a case-by-case basis as they

may arise in connection with a particular

transmission pricing proposal.

4We stated in the Policy Statement that we would

accept motions for reconsideration to help us refine

the principles established therein and to provide an

opportunity to respond to any questions or clarify

any ambiguity. Policy Statement at 31,150.

Although American Forest and Paper styled its

pleading as both a request for rehearing and a

motion for reconsideration, we will treat it as a

motion for reconsideration only, as we find that

rehearing does not lie. First, contrary to American

Forest and Paper’s argument that the Policy

Statement has the force of a final rule ‘‘because it

changes the filing requirements for electric

transmission rates’’ (American Forest and Paper

pleading at 1 n.1), as discussed below, the Policy

Statement makes no such change in the filing

requirements. Second, we find that rehearing does

not lie because the Policy Statement constitutes a

general statement of policy to be applied to

transmission pricing proposals submitted in

individual cases. See, e.g., Pacific Gas & Electric

Company v. FPC, 506 F.2d 33 (D.C. Cir. 1974).

5Catex pleading at 2.

6Policy Statement at 31,139.

7 Id. at 31,143.

8 Id. at 31,139.

9 Id. at 31,144.

10 Id. at 31,138.

cost pricing. In addition, it asks the

Commission to clarify that nonconforming proposals are subject to the

notice and filing requirements of the

FPA. Also on November 23, 1994, Catex

Vitol Electric, Inc. (Catex) filed a request

for reconsideration. Catex argues, among

other things, that a generic approach

specifying a standard method of

transmission pricing is preferable to a

case-by-case approach that allows

experimentation.3

As discussed below, the requests for

reconsideration of the Policy Statement

are denied.4 However, the Commission

clarifies certain matters concerning nonconforming transmission pricing

proposals.

Discussion

A. Policy Statement or Rulemaking

American Forest and Paper and Catex

support a generic approach to

transmission pricing in lieu of the caseby-case approach envisioned in the

Policy Statement. American Forest and

Paper argues that the Policy Statement

will increase uncertainty concerning

transmission rates and thus inhibit the

development of competitive power

markets. It contends that the Policy

Statement will allow utilities to propose

widely varying tariffs that will make it

difficult for a prospective customer to

calculate transmission rates. American

Forest and Paper and Catex argue that

the customer will be forced to bear

litigation costs and to wait until the

completion of rate proceedings and any

court review to know with certainty

what rates, terms and conditions will be

in effect. By that time, the customer may

have lost the opportunity to win a

competitive bid or otherwise finalize a

long-term power plant financing.

American Forest and Paper also argues

that the Policy Statement will create a

heavy administrative burden because

the Commission will be required to

adjudicate a high number of

transmission rate cases. It requests that

the Commission replace the Policy

Statement with a Notice of Proposed

Rulemaking of greater specificity.

Catex similarly asks the Commission

to consider adopting a generic approach

to transmission pricing, arguing that

transmitting utilities will use the caseby-case approach to file experimental

tariffs that will inhibit the transition to

competition and open access. It submits

that power marketers may be foreclosed

for economic reasons from participating

in all of the rate cases that they deem

important. Catex also argues that the

case-by-case approach will create a

patchwork of rate structures that will

make it difficult for transmission

customers to arrange multi-utility

transactions or calculate rates.

While we understand the concerns

voiced by American Forest and Paper

and Catex, we nevertheless do not

believe that a ‘‘simple, generic approach

to transmission pricing’’ 5 is advisable.

As we noted in the Policy Statement,

there was a strong consensus among the

165 entities from whom the Commission

received comments that we should

allow greater pricing flexibility. We

provided several reasons in the Policy

Statement why greater pricing flexibility

is required.6 First, exclusive use of

methods that worked reasonably well in

the past does not provide sufficient

flexibility to accommodate the evolving

needs of transmission owners and users

in a more competitive era. Second, our

existing ‘‘or’’ pricing policy may not

always encourage the most efficient

investments in and use of the

transmission grid. Third, regional

differences, such as power flow patterns

and population densities, justify a more

flexible policy that can account for such

differences. Fourth, a more flexible

pricing policy may be necessary to

implement effectively our regional

transmission group (RTG) policy, which

encourages RTGs to deal with a broad

range of issues, including pricing, and

which indicates that the Commission

will afford deference to RTG decisionmaking.

Our conclusion at this juncture in the

transition to competitive bulk power

markets is that, if the pricing flexibility

envisioned in the Policy Statement is to

be achieved, a case-by-case approach to

transmission pricing, not a generic

approach, is appropriate. As a result, we

will deny the requests of American

Forest and Paper and Catex to replace

the Policy Statement with a generic

proceeding.

With regard to the concerns of

American Forest and Paper and Catex as

to transmission pricing certainty, as the

Policy Statement makes clear, the

Commission, too, supports pricing

certainty. Indeed, the Policy Statement

states that the comparability principle

includes comparable pricing certainty.7

In addition, the fifth pricing principle is

that transmission pricing should be

practical and as easy to administer as

appropriate given the other pricing

principles. The Policy Statement

recognizes, however, that certain of the

Commission’s goals may have to be

balanced against one another. For

example, we recognize the inevitability

of tradeoffs between the sometimes

competing goals of simplicity and better

price signals.8 Some pricing proposals

may be so complex that they are

difficult to understand and analyze. The

Policy Statement indicates that while

such complexity is not fatal, it should

be balanced by efficiency gains or other

advantages.9

B. Opportunity Cost and Marginal Cost

Pricing

In the Policy Statement, the

Commission explained that when the

transmission grid is constrained and a

utility chooses not to expand its system,

we have allowed the utility to charge

transmission-only customers the higher

of embedded costs or legitimate and

verifiable opportunity costs, but not the

sum of the two (‘‘or’’ pricing). The

opportunity costs are capped by

incremental expansion costs.10 The

Policy Statement reflects the

Commission’s support for the use of

marginal cost pricing to promote

efficient decision-making by both

transmission owners and users. It states

that, to the extent practicable,
27880 Federal Register / Vol. 60, No. 102 / Friday, May 26, 1995 / Rules and Regulations

11 Id. at 31,143.

12The Vermont Department notes that the Policy

Statement provides that comparability of pricing

includes certainty of pricing and that a transmission

customer should have the same price certainty as

does the transmitting utility. Policy Statement at

31,143. The Vermont Department (as well as

American Forest and Paper) argue that price

certainty is particularly important in light of the

court’s decision in Cajun Electric Power

Cooperative, Inc. v. FERC, F.3d 173 (D.C. Cir.

1994).

13See, e.g., Policy Statement at 31,137–38;

Pennsylvania Electric Company, 58 FERC ¶ 61,278,

reh’g denied and pricing policy clarified, 60 FERC

¶ 61,034, reh’g denied, 60 FERC ¶ 61,244 (1992),

affirmed sub nom. Pennsylvania Electric Company

v. FERC, 11 F.3d 207 (D.C. Cir. 1993).

14Marginal cost pricing could be implemented

either by charging all customers the same price or

by charging a customer for marginal costs at the

time it signs a contract. Under the contract version

of marginal cost pricing, customers who sign

contracts at different times would be charged

different prices.

15Policy Statement at 31,143.

16American Forest and Paper pleading at 7.

17Policy Statement at 31,148.

18 Id.

19 Id. at 31,147.

transmission rates should be designed to

reflect marginal costs, rather than

embedded costs, in a manner consistent

with the remaining pricing principles.

As we explained, when lines are not

congested, marginal transmission costs

are primarily line losses. When lines are

congested, marginal transmission costs

are opportunity costs.11

The Vermont Department asks us to

reconsider our holding that opportunity

cost pricing is a form of marginal cost

pricing consistent with comparability

principles. It argues that opportunity

cost pricing is not marginal cost pricing

because marginal cost pricing

contemplates that all customers will be

assessed the same marginal cost price

and because opportunity costs are

inherently unverifiable. The Vermont

Department further contends that

opportunity cost pricing makes rates

unpredictable, contrary to the

comparability requirement.12 The

Vermont Department requests that the

Commission either find that opportunity

cost pricing is inconsistent with the

comparability standard or provide that

filings proposing opportunity cost

pricing will be treated as nonconforming proposals.

American Forest and Paper similarly

urges the Commission to reconsider

whether utilities should be permitted to

propose opportunity cost pricing. It

argues that opportunity cost pricing is

unfair and anticompetitive. According

to American Forest and Paper, the

requirement that the utility charge itself

the same opportunity costs as it charges

others is unenforceable because the

determination that opportunity costs

exist is a subjective decision made by

the utility.

American Forest and Paper also

opposes the use of marginal cost

pricing, arguing that it will not create

efficient transmission and generation

siting decisions, as anticipated by the

Policy Statement, in the absence of a

competitive market for transmission. It

suggests that the expansion of

transmission capacity and the location

of new generators and new load will be

based on critical environmental, fuel

supply, and siting factors rather than on

marginal cost-based transmission rates.

We stand by our policy of allowing

utilities to include opportunity cost

charges in their transmission rates. The

rationale for that policy is discussed in

the Policy Statement, is set forth in prior

Commission orders, and has been

affirmed by the Court of Appeals for the

District of Columbia Circuit.13

Moreover, because any new

transmission pricing proposal, whether

conforming or non-conforming, must

meet the comparability standard, we

will have ample opportunity to address

any concerns that opportunity cost

pricing may be unfair and

anticompetitive or otherwise

inconsistent with the comparability

standard in the course of our evaluation

of a particular transmission pricing

proposal. With regard to the Vermont

Department’s argument that opportunity

cost pricing is not the equivalent of

marginal cost pricing because marginal

cost pricing contemplates that all

customers will be charged the same

price, we do not agree that marginal cost

pricing requires that all customers be

charged the same price. 14

With regard to American Forest and

Paper’s opposition to marginal cost

pricing, while we agree that

environmental, fuel supply, and siting

factors are important considerations in

the expansion of transmission capacity

and the location of new generators and

load, we also believe that providing

more efficient price signals through the

use of marginal cost pricing can

influence efficient siting decisions. As

we make clear in the Policy Statement,

we believe that marginal cost pricing

will promote efficient decision-making

by both transmission owners and users.

15 As a result, we encourage

experimentation regarding marginal cost

pricing proposals, but we expect such

proposals to be fully supported. In the

end, the Commission will determine the

appropriateness of marginal cost pricing

proposals on a case-by-case basis.

C. Procedures For Filing NonConforming Proposals

American Forest and Paper argues

that two of the procedures in the Policy

Statement relating to non-conforming

proposals may be inconsistent with the

FPA. First, it notes that the Policy

Statement would permit a utility to

submit a non-conforming proposal in

the form of a petition for declaratory

order. However, American Forest and

Paper suggests that the FPA requires

utilities to file and support proposed

changes in rates and requires ‘‘a hearing

in which [the utilities’] customers can

be afforded due process of law.’’ 16

Second, American Forest and Paper

objects that the Policy Statement would

improperly exempt non-conforming

proposals from the notice provisions of

section 205. It asks the Commission to

clarify that the FPA controls the notice

and filing requirements for utilities

submitting non-conforming proposals.

The clarification that American Forest

and Paper seeks concerning nonconforming proposals submitted via a

petition for declaratory order is

unnecessary. A non-conforming

proposal that is submitted in a petition

for declaratory order will be subject to

a notice and comment period. If, at the

end of the declaratory order proceeding,

the Commission finds that a nonconforming pricing proposal meets the

statutory criteria, the Policy Statement

provides that ‘‘the utility would still

need to file a rate reflecting the proposal

pursuant to FPA section 205.’’ 17 As the

Policy Statement suggests,

‘‘[p]resumably the section 205

proceeding would be straightforward

(i.e. akin to a compliance filing) * * *

since the Commission would have

already addressed the merits of the

proposal in the declaratory order.’’ 18

However, such a non-conforming

proposal would, in any event, be subject

to the notice and filing requirements,

and opportunity for hearing, under

section 205.

With regard to non-conforming

proposals submitted under section 205

in conjunction with conforming

proposals, the Policy Statement

provides that ‘‘[t]he conforming

proposal would be subject to the notice

and suspension procedures of section

205. The non-conforming proposal

would not.’’ 19 The phrase ‘‘notice and

suspension procedures of section 205’’

was intended to refer to those

provisions of section 205 that require a

public utility to give 60 days’ notice to

the Commission and the public before

making a rate change and that permit

the Commission to suspend the effective
Federal Register / Vol. 60, No. 102 / Friday, May 26, 1995 / Rules and Regulations 27881

20See 16 U.S.C. §§ 824d(d),(e); Policy Statement

at 31,136.

21Policy Statement at 31,136. As the Policy

Statement provides, if ‘‘the Commission determines

that the alternative, non-conforming rate proposal is

acceptable under the FPA, the Commission will

allow the utility to make a compliance rate filing,

and the rates will be put into effect prospectively.’’

Id. at 31,147.

22 Id.

23We note that in Entergy Services, Inc., et al., 70

FERC ¶ 61,006 (1995) (Entergy), the Commission

rejected the non-conforming pricing proposal that

Entergy Services, Inc. (Entergy) filed

simultaneously with a conforming pricing proposal.

The Commission gave three reasons for its decision,

one of which was that Entergy’s non-conforming

proposal was premature because Entergy did not

have on file (i.e., accepted by the Commission) an

open access tariff offering comparable services.

Although our clarification in this order of the

procedures for submitting non-conforming pricing

proposals eliminates prematurity as a basis for

rejecting Entergy’s non-conforming proposal, the

other two bases remain valid. As a result, our

clarification here does not require reversal of the

Entergy result.

24See Policy Statement at 31,148.

25 Id. at 31,150.

26 Id. at 31,144–46.

27We are aware of only two pricing proposals

filed since the issuance of the Policy Statement that

propose an alternative to postage-stamp, contractpath pricing. See Jersey Central Power & Light

Company, et al., Docket No. ER95–791–000;

Southern Company Services, Inc., Docket No.

ER95–969–000.

28Under the Commission’s recently proposed

Open Access NOPR, if utilities have not filed open

access comparability tariffs by the time a final rule

is issued, the Commission in Stage One would

place on file for such utilities open access tariffs

reflecting postage-stamp embedded cost rates. Such

utilities could seek a different rate methodology in

Stage Two. See Open Access NOPR, IV FERC Stats.

& Regs. ¶ 32,514 at ll, mimeo at 288–95.

date of such rates. 20 These provisions

are not applicable to non-conforming

proposals because, as the Policy

Statement indicates, a non-conforming

proposal will be permitted to go into

effect only prospectively from the date

the Commission determines that such a

pricing proposal meets the statutory

requirements. 21 Although American

Forest and Paper apparently has

interpreted the statement that nonconforming proposals would not be

subject to the notice and suspension

procedures of section 205 to mean that

public utilities would not be required to

provide notice of the submission of nonconforming proposals, that was not the

Commission’s intention. Accordingly,

we clarify that any non-conforming

proposal submitted in conjunction with

a conforming proposal must still be filed

with the Commission. As with any rate

filing under section 205, the

Commission would notice the filing of

both pricing proposals (i.e., conforming

and non-conforming) and provide a

period for public comment.

We also wish to clarify the procedures

for filing non-conforming pricing

proposals. In the Policy Statement, the

Commission described those procedures

as follows:

Any public utility that seeks nonconforming pricing must have on file with

the Commission an open access transmission

tariff offering comparable services. Such

comparability tariff must have been accepted

for filing by the Commission before a nonconforming pricing proposal will be

considered. Moreover, utilities proposing

non-conforming transmission pricing must

submit such pricing proposals either: (a) in

conjunction with a section 205 conforming

transmission pricing proposal (the nonconforming proposal would be reflected as

alternative ‘‘pro forma’’ rate sheets to the

conforming proposal); or (b) in a petition for

declaratory order.22

The Policy Statement states that, for

alternative (a) above, the Commission

and interested parties would review the

non-conforming proposal in conjunction

with review of the companion

conforming pricing proposal.

The above-quoted language is

somewhat unclear. On one hand, it

states that the Commission will not

consider a non-conforming proposal

unless a comparability tariff has already

been accepted for filing. On the other

hand, it contemplates that a utility may

file a non-conforming pricing proposal

simultaneously with the filing of a

conforming pricing proposal—one that

has not already been accepted for filing.

We wish to clarify that if a public

utility does not already have on file an

open access comparability tariff, it may

simultaneously file both a conforming

pricing proposal and a non-conforming

pricing proposal in conjunction with its

filing of an open access comparability

tariff;23 however, the non-conforming

proposal must consist of ‘‘pro forma’’

rate sheets that can take effect, if at all,

only on a prospective basis at the end

of the section 205 proceeding. If a

public utility chooses to submit a nonconforming proposal via a petition for a

declaratory order, it must already have

a comparability tariff that has been

accepted for filing by the Commission.

We also clarify that if a utility already

has an open access comparability tariff

on file and later seeks to file a nonconforming pricing proposal, the utility

can submit the non-conforming

proposal either in a section 205 filing or

in a petition for a declaratory order. In

other words, the utility may submit the

non-conforming proposal alone in a

section 205 filing, to take effect, if at all,

only on a prospective basis at the end

of the section 205 proceeding; it does

not have to re-file the conforming

proposal that already has been accepted

or file a new conforming proposal. In

any event, the open access

comparability tariff must be filed before

or simultaneously with the nonconforming proposal.

Similarly, we clarify that if a public

utility already has an approved nonconforming proposal and seeks to

submit a replacement non-conforming

proposal, the utility can submit the new

non-conforming proposal either in a

section 205 filing, to take effect, if at all,

only on a prospective basis at the end

of the section 205 proceeding (the utility

need not file a conforming proposal) or

in a petition for a declaratory order. In

those cases in which the utility chooses

the declaratory order procedure, and the

Commission finds that the utility’s

proposal meets the statutory criteria, the

utility would still need to file a rate

reflecting the proposal pursuant to FPA

section 205.24

We hope that this clarification

removes any uncertainty that may have

existed regarding the procedures for

filing non-conforming pricing proposals.

As we noted in the Policy Statement, we

believe that those procedures are

flexible enough to permit utilities to

propose non-conforming pricing

innovations which they believe will

benefit ratepayers and promote the

development of a competitive bulk

power market.25

In addition to allowing utilities to

propose non-conforming pricing

proposals, the Policy Statement also

allows considerable flexibility in the

types of conforming proposals that may

be filed. As we stated in the Policy

Statement, we anticipate that a wide

variety of pricing proposals may be

reconciled with the traditional revenue

requirement.26 However, only a few

such proposals have been filed to date.27

Accordingly, we reiterate here that

many varieties of cost-based pricing are

possible and encourage utilities to

consider innovative pricing approaches

that conform to the traditional revenue

requirement. We anticipate that many

utilities will consider filing such pricing

proposals in conjunction with nondiscriminatory open access

(comparability) tariffs that could be filed

either prior to issuance of a final rule on

open access or in Stage Two

proceedings following issuance of any

final rule.28

D. Miscellaneous

Catex urges the Commission to: (1)

emphasize that rates must be simple and

predictable; (2) require a utility to give

the same transmission rate discounts to

a competitor as are given to the utility’s

affiliates or to support the utility’s own

sales; (3) avoid subsidies and the

loading of fixed costs onto non-firm
27882 Federal Register / Vol. 60, No. 102 / Friday, May 26, 1995 / Rules and Regulations

29See Open Access NOPR, IV FERC Stats. & Regs.

¶ 32,514 at ll, mimeo at 96–97; 290–91.

30Policy Statement at 31,144.

31However, we note that our ‘‘or’’ policy permits

transmission rates to reflect the higher of embedded

or opportunity costs and that the calculation of

such costs can be on an annual basis. See Florida

Power & Light Company, 70 FERC ¶ 61,158 at

61,483 (1995), rehearing pending.

32See, e.g., Heartland Energy Services, Inc., 68

FERC ¶ 61,223 at 62,062–63 (1994); Ocean State

Power, 44 FERC ¶61,261 at 61,983–85 (1988).

33See AEP, 67 FERC at 61,490; Open Access

NOPR, IV FERC Stats. & Regs. ¶ 32,514 at ll,

mimeo at 87–88.

34Policy Statement at 31,142–43.

35 Id. at 31,142–43.

transmission rates; and (4) require

power pools to meet the comparability

standard. We will deny Catex’s motion

for reconsideration with regard to these

issues. The first three issues are already

adequately addressed in the pricing

principles set forth in the Policy

Statement as discussed briefly below.

The fourth (i.e., that power pools be

required to meet the comparability

standard) has already been proposed by

the Commission in the Open Access

NOPR.29

With regard to Catex’s request that the

Commission emphasize simplicity and

predictability in transmission rates, we

note that the Policy Statement already

reflects the Commission’s support of

transmission pricing that is simple and

predictable. Indeed, one of the Policy

Statement’s pricing principles is that

transmission pricing should be

practical. To this end, the Policy

Statement provides that a transmission

user should be able to calculate how

much it will be charged for transmission

service.30 At the same time, however,

the Policy Statement recognizes that this

principle may need to be balanced on a

case-by-case basis against the other

pricing principles, such as the principle

that transmission pricing should

promote economic efficiency. In

addition, although Catex contends that

charges to a transmission customer

should not be raised after the fact, for

example, to compensate for loop flows

on other systems, the Commission

believes that whether a transmission

rate should be increased, as opposed to

fixed for the term of a transaction, is a

matter to be determined based on the

facts and circumstances of a particular

case.31

With regard to Catex’s concern about

discounts, we note that the Commission

historically has prohibited preferential

pricing to affiliates.32 Moreover, such

preferential pricing would be

inconsistent with the requirement of

non-discriminatory open access

transmission.33 As the Policy Statement

makes clear, the requirement that

transmission pricing must reflect

comparability prohibits the

transmission owner from selling itself

transmission service at a discount.34

As to Catex’s concern that subsidies

be avoided, we reiterate that the Policy

Statement provides that, consistent with

the principle that transmission pricing

must reflect comparability, a

transmission owner that uses its own

transmission system to make off-system

sales should pay for transmission

service at the same rate that third-party

customers pay for the same service. As

a result, a transmission owner is

prohibited from selling itself

transmission service at a discount that

would be subsidized by native load and

transmission-only customers.35 With

respect to Catex’s concerns about

appropriate pricing of non-firm

transmission services, the Commission

will consider on a case-by-case basis

whether non-firm transmission

customers are subsidizing other

transmission users.

The Commission Orders

(A) The motions for reconsideration of

American Forest and Paper, Catex, the

Vermont Department, and RUS are

hereby denied as set forth in the body

of this order.

(B) The Commission’s Policy

Statement is hereby clarified as set forth

in the body of this order.

By the Commission.

Linwood A. Watson, Jr.,

Acting Secretary.

[FR Doc. 95–12990 Filed 5–25–95; 8:45 am]

BILLING CODE 6717–01–P

18 CFR Part 34

[Docket No. RM92–12–000]

Streamlining of Regulations Pertaining

to Parts II and III of the Federal Power

Act and the Public Utility Regulatory

Policies Act of 1978; Technical

Amendment to Order No. 575

May 22, 1995.

AGENCY: Federal Energy Regulatory

Commission.

ACTION: Final rule; technical

amendment.

SUMMARY: The Federal Energy

Regulatory Commission is amending the

final rule issued on January 13, 1995 (60

FR 5831, Jan. 25, 1995) in this

proceeding to correct an error in the

‘‘Worksheet for Computation of Interest

Coverage’’ contained in 18 CFR 34.4(e).

EFFECTIVE DATE: May 22, 1995.

FOR FURTHER INFORMATION CONTACT:

Wayne McDanal, Office of Chief

Accountant, Federal Energy Regulatory

Commission, 825 North Capitol Street,

N.E., Washington, D.C. 20426, (202)

219–2622.

SUPPLEMENTARY INFORMATION:

List of Subjects in 18 CFR Part 34

Electric power, Electric utilities,

Reporting and recordkeeping

requirements, Securities.

Lois D. Cashell,

Secretary.

Accordingly, Part 34, Chapter I, Title

18 of the Code of Federal Regulations is

amended as set forth below.

PART 34—APPLICATION FOR

AUTHORIZATION OF THE ISSUANCE

OF SECURITIES OR THE ASSUMPTION

OF LIABILITIES

1. The authority citation for Part 34

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.

§ 34.4 [Amended]

2. In the worksheet in § 34.4(e) the

words

‘‘Total Interest Expense ÷ Income Before

Interest and Income Taxes = Interest

Coverage’’

are removed and the words

‘‘Income Before Interest and Income

Taxes ÷ Total Interest Expense =

Interest Coverage’’

are added in their place.

[FR Doc. 95–12988 Filed 5–25–95; 8:45 am]

BILLING CODE 6717–01–M

DEPARTMENT OF THE TREASURY

United States Secret Service

31 CFR Part 413

[1505–AA68]

Closure of Streets

AGENCY: United States Secret Service,

Treasury.

ACTION: Final rule.

SUMMARY: Pursuant to 31 U.S.C. 321, 18

U.S.C. 3056, 3 U.S.C. 202, and Treasury

Order 170–09, the Secret Service has

closed to public vehicular traffic the

following streets in order to secure the

perimeter of the White House: (i) the

segment of Pennsylvania Avenue NW.,

between Madison Place and

Seventeenth Street and; (ii) State Place

and the segment of South Executive

Avenue that connects into State Place.

DATES: 5:00 a.m. (local time), May 20,

1995.