55796 Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 

1 16 U.S.C. 824d–824e (2000). Section 205(b) 

states that ‘‘[n]o public utility shall, with respect to 

any transmission or sale subject to the jurisdiction 

of the Commission, (1) make or grant any undue 

preference or advantage to any person or subject 

any person to any undue preference or 

disadvantage. * * * ’’ In addition, section 206(a) 

states that ‘‘[w]henever the Commission * * * shall 

find that any rate, charge, or classification 

demanded, observed, charged or collected by any 

public utility for any transmission or sale subject 

to the jurisdiction of the Commission, or that any 

rule, regulation, practice, or contract affecting such 

rate, charge, or classification is unjust, 

unreasonable, unduly discriminatory or 

preferential, the Commission shall determine the 

just and reasonable rate, charge, classification, rule, 

regulation, practice or contract to be thereafter 

observed and in force, and shall fix the same by 

order.’’

2Promoting 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, 61 FR 21,540 (May 10, 1996), FERC 

Stats. & Regs. ¶ 31,036 (1996), order on reh’g, Order 

No. 888–A, 62 FR 12,274 (March 14, 1997), FERC 

Stats. & Regs. ¶ 31,048 (1997), 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). 

3Order No. 888 at 31,669. 

received, whichever is earlier, until the 

date the unpaid portion of the payment 

is received. 

(2) A State agency may choose to pay 

the amount designated as at-risk prior to 

resolution of any appeals. If the State 

agency pays such claim (in whole or in 

part) and the claim is subsequently 

overturned or adjusted through 

administrative or judicial appeal, any 

amounts paid by the State agency above 

what is actually due shall be promptly 

returned with interest, accruing from 

the date the payment was received until 

the date the payment is returned. 

(3) Any interest assessed under 

paragraph (j)(1) of this section shall be 

computed at a rate determined by the 

Secretary based on the average of the 

bond equivalent of the weekly 90-day 

Treasury bill auction rates during the 

period such interest accrues. The bond 

equivalent is the discount rate (i.e., the 

price the bond is actually sold for as 

opposed to its face value) determined by 

the weekly auction (i.e., the difference 

between the discount rate and face 

value) converted to an annualized 

figure. The Secretary shall use the 

investment rate (i.e., the rate for 365 

days) compounded in simple interest for 

the period for which the claim is not 

paid. Interest billings shall be made 

quarterly with the initial billing 

accruing from the date the interest is 

first due. Because the discount rate for 

Treasury bills is issued weekly, the 

interest rate for State agency claims 

shall be averaged for the appropriate 

weeks. 

PART 277—PAYMENTS OF CERTAIN 

ADMINISTRATIVE COSTS OF STATE 

AGENCIES 

§ 277.4 [Amended] 

15. In § 277.4: 

a. Paragraph (b) is amended by 

removing paragraphs (b)(1), (b)(4), (b)(5), 

and (b)(6) and by redesignating 

paragraphs (b)(2), (b)(3), (b)(7), and 

(b)(8) as paragraphs (b)(1), (b)(2), (b)(3), 

and (b)(4), respectively. 

b. Newly redesignated paragraph 

(b)(3) is amended by removing the 

words ‘‘Beginning October 1982,’’ and 

by removing the reference ‘‘paragraphs 

(b)(2) and (b)(3)’’ and adding in its place 

the reference ‘‘paragraphs (b)(1) and 

(b)(2)’’. 

Dated: September 12, 2005. 

Eric M. Bost, 

Under Secretary, Food, Nutrition, and 

Consumer Services. 

[FR Doc. 05–19020 Filed 9–22–05; 8:45 am] 

BILLING CODE 3410–30–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Chapter I 

[Docket No. RM05–25–000] 

Preventing Undue Discrimination and 

Preference in Transmission Services 

September 16, 2005. 

AGENCY: Federal Energy Regulatory 

Commission, (DOE). 

ACTION: Notice of inquiry (NOI). 

SUMMARY: The Federal Energy 

Regulatory Commission (Commission) is 

inviting comments on whether reforms 

are needed to the Order No. 888 pro 

forma open access transmission tariff 

(OATT) and the OATTs of public 

utilities to ensure that services 

thereunder are just, reasonable and not 

unduly discriminatory or preferential. 

The Commission is also inviting 

comments on the implementation of the 

newly established section 211A of the 

Federal Power Act (concerning the 

provision of open access transmission 

service by unregulated transmitting 

utilities). Finally, the Commission is 

inviting comments on section 1233 of 

the Energy Policy Act of 2005, which 

defines native load service obligation. 

DATES: Comments on this NOI are due 

on November 22, 2005. 

ADDRESSES: Comments may be filed 

electronically via the eFiling link on the 

Commission’s Web site at http:// 

www.ferc.gov. Commenters unable to 

file comments electronically must send 

an original and 14 copies of their 

comments to: Federal Energy Regulatory 

Commission, Office of the Secretary, 

888 First Street, NE., Washington, DC 

20426. Refer to the Procedure for 

Comments section of the preamble for 

additional information on how to file 

comments. 

FOR FURTHER INFORMATION CONTACT: 

Daniel Hedberg (Technical Information), 

Office of Markets, Tariffs & Rates, 

Federal Energy Regulatory Commission, 

888 First Street, NE., Washington, DC 

20426, (202) 502–6243. 

David Withnell (Legal Information), 

Office of General Counsel—Markets, 

Tariffs & Rates, Federal Energy 

Regulatory Commission, 888 First 

Street, NE., Washington, DC 20426, 

(202) 502–8421. 

SUPPLEMENTARY INFORMATION: 

Introduction 

1. The Federal Energy Regulatory 

Commission (Commission) has a 

mandate under sections 205 and 206 of 

the Federal Power Act (FPA) 1 to ensure 

that, with respect to any transmission in 

interstate commerce or any sale of 

electric energy for resale in interstate 

commerce by a public utility, no person 

is subject to any undue prejudice or 

disadvantage. Under these sections, the 

Commission must determine whether 

any rule, regulation, practice, or 

contract affecting rates for such 

transmission or sale for resale is unduly 

discriminatory or preferential, and we 

must disapprove any of the foregoing 

that do not meet this standard. Pursuant 

to that mandate, in 1996, the 

Commission issued Order No. 888 2 to 

remedy undue discrimination or 

preference in access to the monopoly 

owned transmission wires that control 

whether and to whom electricity can be 

transported in interstate commerce.3

2. The Commission is issuing this 

Notice of Inquiry to seek comments on 

whether reforms are needed to the Order 

No. 888 pro forma open access 

transmission tariff (OATT) and to the 

OATTs of public utilities to prevent 

undue discrimination and preference in 

the provision of transmission services. 

The Commission’s preliminary view is 

that the pro forma OATT and public 

utilities’ OATTs should be reformed to 

reflect lessons learned during nearly a 

decade of the electric utility industry’s 

and the Commission’s experience with 

open access transmission. In addition, 

the Commission is concerned that 

public utility transmission providers 

have come to different interpretations of 

Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 55797 

4Energy Policy Act of 2005, Pub. L. 109–58, 

§§ 1231, 1233 119 Stat. 594 (2005) (EPAct 2005). 

5The Commission did not require corporate 

unbundling, stating that efforts to remedy undue 

discrimination should begin by requiring the less 

intrusive functional unbundling approach. 

6Concurrent with the issuance of Order No. 888, 

the Commission issued Order No. 889 that imposed 

standards of conduct governing communications 

between the utility’s transmission and wholesale 

power functions, to prevent the utility from giving 

its power marketing arm preferential access to 

transmission information. It also required all public 

utilities that own, control or operate facilities used 

in the transmission of electric energy in interstate 

commerce to create or participate in an Open 

Access Same-Time Information Systems (OASIS) 

that provides existing and potential transmission 

customers the same access to transmission 

information. Open Access Same-Time Information 

System (Formerly Real-Time Information Networks) 

and Standards of Conduct, Order No. 889, 61 FR 

21,737 (May 10, 1996), FERC Stats. & Regs. ¶ 31,035 

at 31,583 (1996), order on reh’g, Order No. 889–A, 

FERC Stats. & Regs. ¶ 31,049 (1997), order on reh’g, 

Order No. 889–B, 81 FERC ¶ 61,253 (1997). 

7 In Order No. 2000, the Commission found that 

‘‘opportunities for undue discrimination continue 

to exist that may not be remedied adequately by 

[the] functional unbundling [remedy of Order No. 

888] * * *.’’ Regional Transmission Organizations, 

Order No. 2000, FERC Stats. & Regs. ¶ 31,089 at 

31,105 (1999), order on reh’g, Order No. 2000–A, 

FERC Stats. & Regs. ¶ 31,092 (2000), aff’d sub nom. 

Public Utility District No. 1 of Snohomish County, 

Washington v. FERC, 272 F.3d 607 (D.C. Cir. 2001). 

8Order No. 888 at 31,652. 

9 Id. at 31,682. 

10For example, remaining corporate ties between 

generation and transmission within public utilities 

have proven problematic for transmission access by 

new generators and new load-serving entities. Also, 

transmission providers have delayed the processing 

of a competitor’s request for new service. Further, 

concerns regarding the calculation of available 

transfer capability (ATC) have arisen. (We note that 

the Commission used the term ‘‘Available 

Transmission Capability’’ in Order No. 888 to 

describe the amount of additional capability 

available in the transmission network to 

accommodate additional transmission services. To 

be consistent with the term generally accepted 

throughout the industry, ‘‘Available Transfer 

Capability’’ will be used). 

11See, e.g., Order No. 2003 at P 696 (noting that 

many decisions under the OATT are ‘‘subjective’’

and that a ‘‘[t]ransmission [p]rovider that is not an 

independent entity has the ability and the incentive 

to exploit this subjectivity to its own advantage’’). 

Standardization of Generator Interconnection 

Agreements and Procedures, Order No. 2003, 68 FR 

49,845 (Aug. 19, 2003), FERC Stats. & Regs. ¶ 31,146 

(2003), order on reh’g, Order No. 2003–A, 69 FR 

15,932 (Mar. 26, 2004), FERC Stats. & Regs. ¶ 31,160 

(2004), order on reh’g, Order No. 2003–B, 70 FR 265 

(Jan. 4, 2005), FERC Stats. & Regs. ¶ 31,171 (2005), 

order on reh’g, Order No. 2003–C, 70 FR 37,661 

(June 30, 2005) FERC Stats. & Regs. ¶ 31,190 (2005). 

12See, e.g., 2004 State of the Market Report: 

Midwest ISO at 30–31, 34, http:// 

www.midwestmarket.org/publish/Document/ 

2b8a32_103ef711180_-7bf20a48324a/ 

2004%20MISO

%20SOM%20Report.pdf?action=download

&_property=Attachment. 

provisions of their OATTs and have 

implemented them in ways that need 

clarification by the Commission to avoid 

unduly discriminatory or preferential 

terms and conditions. The 

Commission’s preliminary view is that 

reforms to the pro forma OATT and 

public utilities’ OATTs appear 

necessary and the Commission seeks 

comments on how best to accomplish 

that. Further, the Commission is seeking 

comments on how best to implement 

section 1231 of the Energy Policy Act of 

2005 (establishing section 211A of the 

FPA, which concerns the provision of 

open access transmission service by 

unregulated transmitting utilities). 

Finally, the Commission is seeking 

comments on section 1233 of EPAct 

2005 (which defines native load service 

obligation).4

Background 

3. In Order No. 888, the Commission 

required, as a remedy for undue 

discrimination, that all public utilities 

provide open access transmission 

service consistent with the terms and 

conditions of a pro forma OATT. The 

Commission determined that nondiscriminatory open access transmission 

service, including access to 

transmission information, and stranded 

cost recovery were the most critical 

components of a successful transition to 

competitive wholesale markets. To 

achieve this, the Commission required 

all public utilities that own, control or 

operate facilities used for transmitting 

electric energy in interstate commerce to 

file OATTs containing certain non-price 

terms and conditions, and to 

functionally unbundle wholesale power 

services from transmission services.5

With functional unbundling, public 

utilities must: (1) Take wholesale 

transmission services under the same 

tariff of general applicability as they 

offer their customers; (2) state separate 

rates for wholesale generation, 

transmission and ancillary services; and 

(3) rely on the same electronic 

information network that their 

transmission customers rely on to obtain 

information about the utilities’

transmission systems.6 While Order No. 

888 set the foundation upon which to 

attain competitive electric markets, the 

Commission has recognized that Order 

No. 888 did not eliminate the potential 

to engage in undue discrimination and 

preference in the provision of 

transmission service.7

4. In Order No. 888, the Commission 

found that transmission utilities own 

the transportation system over which 

bulk power competition occurs and 

transmission service was a natural 

monopoly.8 The electric industry has 

changed considerably since Order No. 

888 was issued. It has evolved from one 

characterized by large, vertically 

integrated utilities to an industry with 

increasing wholesale trade and 

increasing numbers of independent 

buyers and sellers of wholesale power. 

Public utilities today purchase 

significantly more wholesale power to 

meet their load than in the past and seek 

non-discriminatory access to 

transmission facilities. Transactions 

have become less localized, with trade 

occurring on a more regionalized basis. 

Improved information about 

transmission systems has become 

available to all participants in the bulk 

power market. The Commission has 

approved the voluntary formation of a 

number of independent system 

operators (ISO) and regional 

transmission organizations (RTOs). New 

generation resources have been 

developed in areas that had experienced 

generation shortages. Regional trading 

patterns have expanded. Large numbers 

of merger applications and applications 

to charge market-based rates have been 

accepted by the Commission. 

5. In the wake of these industry 

changes, questions have arisen 

concerning the efficacy of various terms 

and conditions of the transmission 

providers’ OATTs. As the Commission 

noted in Order No. 888, it is in the 

economic self-interest of transmission 

monopolists, particularly those with 

high-cost generation assets, to deny 

transmission or to offer transmission on 

a basis that is inferior to that which they 

provide themselves.9 This is still the 

view of the Commission. We have 

observed that public utilities continue 

to have the discretion and the incentive 

to interpret and apply the provisions of 

their OATTs in a manner that can result 

in unduly discriminatory behavior on 

each particular public utility’s 

transmission system.10 This is 

exacerbated by the fact that, in a number 

of respects, Order No. 888 and the pro 

forma OATT allow public utilities 

discretion in implementing the terms 

and conditions of providing 

transmission service. This not only 

makes it difficult for public utilities to 

comply, but makes it difficult for the 

Commission to identify violations.11

Further, this can lead to inconsistent 

results across public utility systems to 

the detriment of customers. 

Transmission customers have also 

found ways to use the OATTs to their 

own advantage, particularly in the 

scheduling and queuing processes.12

Moreover, OATT provisions have been 

modified in numerous ways on a 

company-by-company basis, leading to 

uncertainties within the industry as to 

the proper interpretation of those 

provisions and to unnecessarily 

inconsistent treatment of customers 

across public utilities. While some 

55798 Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 

market participants have raised 

concerns with the implementation of 

OATTs, others may be reluctant to bring 

issues to the Commission. 

6. We are also concerned that undue 

discrimination and preferential 

treatment is much more difficult to 

detect when the transmission grid is 

constrained. For example, some 

transmission constraints have created 

fairly small local load pockets in 

primarily urban areas, e.g., New York 

City, Long Island, Boston, parts of 

Connecticut, and the San Francisco Bay 

Area. Other load pocket concerns have 

arisen in parts of northern Virginia, New 

Orleans and various load centers in the 

Southwest Power Pool (SPP). Still other 

constraints are more regional in scope: 

(1) From the Midwest to the MidAtlantic; (2) from the Midwest to the 

Tennessee Valley Authority (TVA); (3) 

into and within California; (4) from TVA 

and the Southern Companies into 

Entergy; (5) from Mid-America 

Interconnected Network into Wisconsin 

Upper Michigan Systems and (6) into 

Florida. The existence of these and 

other constraints affects transmission 

systems resulting in a reduction in 

available transfer capability, a possible 

increase in the frequency of denials of 

requests for transmission service, and a 

possible increase in the frequency of 

transmission service interruptions and/ 

or curtailments of transmission service. 

While such results may be legitimate 

because of such things as reliability or 

native load priority, these same results 

may provide an increased opportunity 

for transmission providers to engage in 

actions that are unduly discriminatory. 

Distinguishing between the two may be 

difficult to achieve. Consequently, the 

existence of transmission constraints 

and their effect on transmission system 

operations make it more difficult for us 

to carry out our statutory responsibility 

to ensure that transmission providers 

provide nondiscriminatory open access 

transmission service. In recognition of 

this problem, Congress, in section 1241 

of the EPAct 2005, has directed the 

Commission to issue a rule to promote 

investment in the transmission grid by 

establishing incentive-based rate 

treatments ‘‘for the purpose of 

benefiting consumers by ensuring 

reliability and reducing the cost of 

delivered power by reducing 

transmission congestion.’’ We will do 

so, but in a proceeding separate from 

this one and at a later date. 

7. The Commission recognizes that 

the question of whether Order No. 888 

adequately remedies undue 

discrimination can be contentious. 

Customers often argue that undue 

discrimination can be remedied only 

through structural reforms or by 

applying the OATT to bundled retail 

load. Transmission providers often 

argue that the Commission should not 

consider such broader remedies because 

it lacks the authority to do so or because 

Order No. 888 is working well as it is. 

State commissions often express 

concern that, although the Commission 

should seek to remedy undue 

discrimination at the wholesale level, it 

should not do so in ways that will 

intrude on state jurisdiction over 

bundled retail load. In issuing this NOI, 

the Commission emphasizes its desire to 

avoid the more polarizing elements of 

this debate and to pursue instead a 

pragmatic approach to reforming Order 

No. 888 that focuses on the specific 

problems that continue to exist and 

targeted remedies to address them. To 

that end, we encourage the parties to 

identify with specificity any alleged 

defects in Order No. 888 and to 

recommend reforms that are 

appropriately targeted to remedying 

those defects. Sweeping generalizations 

regarding undue discrimination (or the 

lack thereof) are not encouraged. 

The Subject of the Notice of Inquiry 

8. The Commission seeks to explore 

whether, and if so, which, reforms are 

necessary to the Order No. 888 pro 

forma OATT and to the individual 

public utility OATTs, given the current 

state of the electric industry and the 

apparent uncertainties and inconsistent 

application concerning various tariff 

provisions that have arisen since 

implementation of Order No. 888. The 

Commission’s goal continues to be to 

prevent undue discrimination and 

preference in the provision of 

transmission service. Our preliminary 

view is that reforms to Order No. 888 

are necessary to accomplish that goal 

and discharge our obligations under the 

FPA. The Commission is particularly 

interested in receiving comments 

describing specific enhancements that 

are needed to: (1) Remedy any unduly 

discriminatory or preferential 

application of the pro forma OATT or 

(2) improve the clarity of the Order No. 

888 pro forma OATT and the individual 

public utility OATTs in order to more 

readily identify violations and facilitate 

compliance. In addition, the 

Commission is seeking comments on 

how best to implement the newly 

established section 211A (concerning 

the provision of open access 

transmission service by unregulated 

transmitting utilities). 

9. Significantly, the Commission 

emphasizes that it is not proposing to 

change the native load preference 

established in Order No. 888. Section 

1233 of EPAct 2005 defines native load 

service obligation. The Commission 

seeks comments on whether or not the 

approach the Commission took in Order 

No. 888 is the same as that set forth in 

section 1233. If it is not, the 

Commission requests commenters to 

identify the differences. 

Questions for Response 

10. The Commission encourages any 

and all comments regarding the topics 

broadly discussed above. Commenters 

are invited to share with the 

Commission their overall thoughts, 

including technical and legal matters, 

on how the pro forma OATT has worked 

thus far, e.g., which portions of the pro 

forma OATT have worked well, which 

portions of the pro forma OATT could 

be improved, and what are the best 

practices of individual transmission 

providers and should these practices be 

made a part of the pro forma OATT and 

thus applicable to all public utility 

transmission providers. In addition, the 

Commission seeks responses to the 

following specific questions: 

A. Undue Discrimination Generally 

11. In Order No. 888, the Commission 

adopted a functional unbundling 

approach as a remedy for undue 

discrimination. Since that time, the 

Commission has found that the 

incentive and opportunity for undue 

discrimination nonetheless continues to 

exist. The Commission therefore 

encouraged the structural separation of 

generation from transmission through 

RTOs, ISOs and similar organizations. 

The Commission is interested in 

receiving comments on whether there 

are remedies other than structural 

separation that would adequately 

address undue discrimination. 

1. Is undue discrimination difficult to 

detect? If it is, would greater 

transparency allow the Commission to 

better understand the scope of the 

problem as well as to provide a 

disincentive to discriminate? Would 

increased reporting requirements (e.g., 

regarding denials of service, congestion 

management, and transmission 

expansion) be beneficial and cost 

effective? 

2. What are the particular 

circumstances under which undue 

discrimination is most likely to occur? 

For example, is discrimination most 

likely to occur in areas where the 

transmission provider retains discretion 

as to how to implement a particular 

OATT provision (e.g., ATC calculation)? 

If so, is standardization and 

specification of certain practices a 

potential remedy to undue 

discrimination? 

Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 55799 

13Order No. 888 at 31,690. 

14 Id. at 31,736. 

3. How should the Commission 

address the tension between a 

transmission provider’s obligation to 

serve bundled native load customers 

and its obligation to provide 

nondiscriminatory access under the 

OATT? Are there certain practices that 

transmission providers use to serve 

native load customers that are not 

available to non-affiliates under the 

OATT and, if so, should they be made 

available on an open access basis under 

the OATT? 

B. Transmission Pricing 

12. The Commission is interested in 

receiving comments on whether any 

reforms to the Commission’s 

transmission pricing policies should be 

considered as part of OATT reform. 

1. Are there changes to the 

Commission’s current pricing policies 

that could be made to increase the 

efficient use of the grid on systems that 

do not use locational marginal pricing? 

2. In Order No. 888, the Commission 

concluded that a public utility’s tariff 

must explicitly permit the voluntary 

reassignment of all, or part of, a holder’s 

firm transmission capacity rights to any 

eligible customer. (Order No. 888 at 

31,696 and pro forma OATT section 23.) 

Does this approach to capacity 

reassignment remain reasonable today? 

If not, should greater capacity 

reassignment rights be encouraged by, 

for example, different pricing policies? 

Please provide specific suggestions. 

3. In Order No. 888, the Commission 

capped the price for reassigned capacity 

at the highest of: (1) The original 

transmission rate charged to the 

purchaser (assignor), (2) the 

transmission provider’s maximum 

stated firm transmission rate in effect at 

the time of the reassignment, or (3) the 

assignor’s own opportunity costs 

capped at the cost of expansion (Price 

Cap). (Order No. 888 at 31,697). Does 

this pricing approach continue to be 

reasonable or should the price cap be 

modified or eliminated to further 

encourage capacity reassignment? 

4. Does capacity reassignment provide 

a competitive alternative to the primary 

capacity provided by the transmission 

provider? If not, how should capacity 

reassignments be changed to achieve 

this result? 

5. A secondary market for 

transportation capacity on natural gas 

pipelines helps to ensure that capacity 

is allocated to the highest valued use. 

Capacity resale of electric transmission 

is limited, however, because network 

service cannot be resold under Order 

No. 888. Should greater resale rights be 

permitted under the OATT and can this 

be accomplished consistent with the 

network properties of electric 

transmission? 

6. Should the Commission allow 

deviations to its ‘‘higher of’’ policy to 

encourage greater incremental pricing of 

redispatch service or transmission 

upgrades? Should deviations be limited 

to cases where transmission providers 

hire an independent third party to 

administer such pricing reforms? 

7. In Order No. 888, the Commission 

stated that its use of the contract path 

model of power flows and embedded 

cost ratemaking was intended to initiate 

open access, but was not intended to 

signal a preference for contract path/ 

embedded cost pricing for the future. 

The Commission further stated that it 

would entertain non-discriminatory 

tariff innovations to accommodate new 

pricing proposals in the future. Order 

No. 888 at 31,734–35. Should the 

Commission continue to use the 

contract path model in the future? 

8. How should any new services be 

priced in order to maximize their 

availability? 

C. Network and Point-to-Point 

Transmission Service 

13. In Order No. 888, the Commission 

required each public utility to offer 

transmission services that it is 

reasonably capable of providing, not just 

those services that it is currently 

providing to itself or others. It explained 

that because a public utility that is 

reasonably capable of providing 

transmission services may provide itself 

such services at any time it finds those 

services desirable, it is irrelevant that it 

may not be using or providing that 

service today. Thus, the Commission 

required all public utilities to offer both 

firm and non-firm point-to-point 

transmission service and firm network 

transmission service on a nondiscriminatory open access basis.13

1. Should changes be made to the 

different services required by Order No. 

888? 

2. In Order No. 888, the Commission 

concluded that the load ratio allocation 

method of pricing network service 

continues to be reasonable for purposes 

of initiating open access transmission.14

We note that on June 14, 2005, the 

United States Court of Appeals for the 

District of Columbia Circuit remanded 

the issue of physical impossibility as it 

relates to load ratio pricing in Florida 

Municipal Power Agency v. FERC, 411 

F.3d 287 (D.C. Cir. 2005). Does the 

approach established in Order No. 888 

continue to be reasonable today? Are the 

pricing differences established by public 

utility transmission providers in their 

individual OATTs between network and 

point-to-point transmission services 

reasonable in light of the differences in 

the network and point-to-point 

transmission services? 

3. Should network service be 

converted to a contract demand service 

(i.e., similar to Florida Power Corp., 71 

FERC ¶ 61,248 (1995); Wisconsin 

Electric Power Co., 72 FERC ¶ 61,033 

(1995); and Florida Power Corp., 81 

FERC ¶ 61,247 (1997)) or should pointto-point transmission service and 

network service be merged into a 

contract demand service? 

4. Should new transmission services 

such as conditional firm, partial firm, 

and seasonal firm be required? Describe 

any such proposed service in detail, 

including necessary definitions. 

5. Are the firm services being offered 

under the pro forma OATT (network 

and point-to-point) being offered in a 

manner comparable to the services 

provided to the transmission owner’s 

unbundled retail customers? 

6. Are there pricing policies that can 

create an incentive to maximize the use 

of the transmission system? If so, please 

explain in detail. 

D. Untimely Processing of Requests for 

Transmission Service 

14. The pro forma OATT provides 

deadlines for public utility transmission 

providers to complete system impact 

and other studies related to requests for 

transmission service. Sections 17.5 

(Response to a Completed Application) 

and 18.4 (Determination of Available 

Transmission Capability) of the pro 

forma OATT provide that following 

receipt of a completed application for 

service the transmission provider must 

timely respond to transmission 

customer requests for determinations of 

firm and non-firm ATC. They then 

provide that the transmission provider 

must make the determination as soon as 

reasonably practicable after receipt but 

no later than certain specified time 

periods (or such time periods generally 

accepted in the region). 

1. Are there provisions of the pro 

forma OATT that need to be reformed to 

better define the obligations of public 

utility transmission providers in 

responding to requests for transmission 

service? 

2. Are the allowable time frames for 

public utility transmission providers to 

respond to transmission customers 

manageable? 

3. Have transmission customers 

experienced delays by public utility 

transmission providers in responding to 

requests for transmission service? What 

delays have been experienced? 

55800 Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 

15 Investigation of Terms and Conditions of Public 

Utility Market-Based Rate Authorizations, 105 

FERC ¶ 61,218 (2003), order on reh’g, 107 FERC 

¶ 61,175 (2004). 

16Order No. 888 at 31,751–53. 

4. Have the delays by public utility 

transmission providers been unduly 

discriminatory or preferential? 

5. What remedies can the Commission 

impose on public utility transmission 

providers for missing deadlines set forth 

in their OATTs? 

E. Remedies, Penalties and Enforcement 

15. Order No. 888 allows public 

utility transmission providers to impose 

penalty charges on transmission 

customers for certain identified tariff 

violations, such as penalties for 

imbalances, penalties in the event a 

customer fails to curtail as required 

under the pro forma OATT, and 

penalties for failure to maintain 

specified power factors. The purpose of 

these charges is to discourage certain 

behavior. Order No. 888 makes no 

mention of adverse consequences if a 

public utility transmission provider 

violates its OATT. Since the adoption of 

Order No. 888, the Commission has, in 

individual cases, approved a variety of 

remedies (e.g., revoking market-based 

rate authority, providing refunds to 

customers, approving organizational 

changes in the transmission function). 

The EPAct 2005 gives the Commission 

civil penalty authority for violations of 

the FPA, including violations of the 

OATT. The Commission is interested in 

receiving comments on whether it 

should address the issue of remedies or 

penalties as part of OATT reform. The 

EPAct 2005 strengthened the 

Commission’s civil penalty authority, 

and the Commission can now impose 

civil penalties for tariff violations, in 

addition to penalty charges. 

1. Should there be identified penalty 

charges in the tariff to address a 

transmission provider violating the tariff 

provisions? Should there be additional 

penalty charges in the pro forma OATT 

for tariff violations by transmission 

customers? 

2. Does the pro forma OATT need to 

be clarified so that transmission 

providers and customers are subject to 

the same penalty charges for the same 

violations? 

3. Should overrun penalty charges 

(penalties for taking transmission 

service in excess of what the entity is 

contractually entitled to take) apply if a 

transmission provider takes service 

inconsistent with its OATT? 

4. Should public utility transmission 

providers be subject to revocation of 

their market-based rate authority for 

certain OATT violations? Should certain 

violations (e.g., setting aside more 

transmission capacity than is needed to 

serve native load and using the capacity 

for third-party sales) be considered 

market manipulation under the Market 

Behavior Rules 15 and section 1283 of 

the EPAct 2005 (which amends Part II 

of the FPA by adding a prohibition of 

energy market manipulation)? 

5. Should the Commission provide 

greater specificity as to which penalty 

charges will apply to particular 

violations? Would greater specificity 

provide a greater deterrent effect on 

undue discrimination? 

6. If the Commission provides greater 

specificity, which penalty charges 

should apply to which violations? For 

example, should penalty charges apply 

to failures to comply with OATT 

deadlines to encourage transmission 

providers to devote adequate resources 

to this area? Should a revocation of 

market-based rate authority be used to 

deter preferential treatment of an 

affiliate that is selling power at marketbased rates? 

7. Should the issue of remedies and 

penalties be considered in reforming 

Order No. 888 or as part of a broader 

effort to develop a comprehensive 

enforcement policy that would apply to 

all areas of Commission regulation? 

F. Hourly Firm Transmission Service 

16. Section 13.1 of the pro forma 

OATT (Term) provides that the 

minimum term of firm point-to-point 

transmission service shall be one day. In 

Order No. 888, the Commission adopted 

a one-day minimum term, explaining 

that this would moot a number of 

reliability concerns and allegations 

about possible ‘‘cream-skimming.’’ 16

Entities had argued that comparability 

would not be achieved by permitting 

others to have service for one hour with 

equal priority to native load and other 

long-term customers that have to pay 

the fixed cost of the transmission system 

every hour of the year. They also had 

expressed concern that a one-hour 

minimum term would promote selective 

use of the transmission system, impair 

the ability of a utility to plan its system, 

and adversely impact longer term 

transactions. Finally, some expressed 

concern that a one-hour firm service 

may encourage speculative advance 

requests for service during the system 

peak day (cream skimming). However, 

we note that several public utility 

transmission providers have 

individually filed for and received 

Commission authorization to modify 

their OATT to provide hourly firm 

point-to-point transmission service. See, 

e.g., El Paso Electric Company, 

(unpublished letter order dated April 9, 

2004 in Docket No. ER04–567–000); 

Entergy Services, Inc., 85 FERC ¶ 61,163 

(1998), order on reh’g, 91 FERC ¶ 61,153 

(2000). 

1. Are the concerns expressed in 

Order No. 888 regarding minimum 

terms no longer relevant? 

2. Should public utility transmission 

providers be required to offer hourly 

firm point-to-point transmission 

service? 

3. For reservation and scheduling 

purposes, should the Commission 

permit transmission customers to batch 

hourly firm transmission requests so 

that the public utility transmission 

provider can evaluate them as if they 

were a single request? 

4. Should the scheduling timelines for 

firm and non-firm hourly transmission 

service be the same or should they 

differ? Please explain. 

G. Changes in Receipt and Delivery 

Points (Redirects) 

17. Section 22.2 of the pro forma 

OATT (Modification on a Firm Basis) 

provides that any request by a 

transmission customer to modify receipt 

and delivery points on a firm basis shall 

be treated as a new request for service 

in accordance with section 17 of the pro 

forma OATT (Procedures for Arranging 

Firm Point-to-Point Transmission 

Service). While this new request is 

pending, the transmission customer 

retains its priority for service at the 

existing firm receipt and delivery points 

specified in the service agreement. 

1. Have transmission customers been 

unduly discriminated against in 

attempting to modify their receipt and 

delivery points? If so, provide specific 

examples. 

2. If there are problems associated 

with this section, what reforms are 

needed, or is this an enforcement 

matter? 

H. Rollover Rights 

18. Section 2.2 of the pro forma OATT 

(Reservation Priority for Existing Firm 

Service Customers) provides that 

existing firm service customers 

(wholesale requirements and 

transmission-only, with a contract term 

of one-year or more) have the right to 

continue to take transmission service 

from the public utility transmission 

provider when the contract expires, 

rolls over or is renewed. It specifically 

provides that this transmission 

reservation priority is independent of 

whether the existing customer continues 

to purchase capacity and energy from 

the public utility transmission provider 

or elects to purchase capacity and 

energy from another supplier. 

Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 55801 

17Order No. 888–A at 30,218–19. 

1. Have public utility transmission 

providers hindered customers under 

pre-Order No. 888 agreements from 

rolling over their contracts that allow 

purchase of capacity and energy from 

another supplier? 

2. Does the language in section 2.2 

need to be reformed to ensure that 

rollover rights are provided when 

transmission customers are seeking 

access to alternative supply sources, or 

is this an enforcement matter? 

3. Should rollover right policy 

determinations made subsequent to 

Order No. 888 be included in the pro 

forma OATT? 

4. Are there other problems with 

section 2.2, either as written or as 

implemented by public utility 

transmission providers, that need to be 

addressed? 

5. Are any potential transmission 

customers denied transmission access 

by the exercise of rollover rights? 

6. Should the concept of rollover 

rights be reconsidered? Is one-year 

service with rollover rights consistent 

with the need to create incentives for 

transmission investment or should a 

longer minimum term of service be 

adopted to qualify for rollover rights? If 

so, how can the terms and conditions of 

rollover rights be reformed to ensure 

proper incentives for transmission 

investment? 

I. Rules, Standards and Practices 

Governing the Provision of 

Transmission Service 

19. Certain rules, standards and 

practices governing the provision of 

transmission service, such as public 

utilities’ business practices, are not 

reflected in the Commission’s pro forma 

OATT or in individual public utility 

tariffs. The Commission has previously 

adopted certain uniform business 

practices and amended the 

Commission’s regulations to require 

compliance with such practices (see, 

e.g., Open Access Same-Time 

Information System and Standards of 

Conduct, Order No. 638, 65 FR 17,370 

(February 25, 2000), FERC Stats. & Regs. 

¶ 31,093 (2000)). The Commission has 

also recently issued a Notice of 

Proposed Rulemaking proposing to 

amend its regulations to incorporate by 

reference standards promulgated by the 

North American Energy Standards 

Board’s (NAESB) Wholesale Electric 

Quadrant (WEQ) dealing with OASIS 

business practice standards and 

proposing to require each electric utility 

to revise its OATT to include the 

applicable WEQ standards. (See 

Standards for Business Practices and 

Communication Protocols for Public 

Utilities, 111 FERC ¶ 61,204 (2005), 70 

FR 28,222 (May 17, 2005), FERC Stats. 

& Regs. ¶ 32,582 (2005)). 

1. Should such rules, standards and 

practices be required to be included in 

public utilities’ OATTs? 

2. If not all, which of such rules, 

standards and practices should be 

included in OATTs (with the exception 

of the NAESB standards subject to the 

proceeding discussed above)? 

3. Should rules, standards and 

practices not required to be included in 

OATTs be required to be posted on 

public utilities’ OASIS to increase 

transparency? 

J. Joint Transmission Planning 

20. Currently, joint planning between 

a public utility transmission provider 

and transmission customer is not 

required by Order No. 888. However, 

section 30.9 of the pro forma OATT 

(Network Customer Owned 

Transmission Facilities) provides that 

for facilities constructed by a network 

customer, the network customer must 

receive credit where such facilities are 

jointly planned and installed in 

coordination with the transmission 

provider. 

1. Does the requirement that a public 

utility transmission provider provide 

credits to new customer-owned 

transmission facilities have the effect of 

discouraging joint transmission 

planning? 

2. Should joint transmission planning 

be made mandatory, for example, when 

transmission requests affect adjacent 

transmission systems? If so, under what 

authority could the Commission impose 

such a requirement? 

3. Should public utility transmission 

providers be required to report to the 

Commission on an annual basis the joint 

planning that has occurred or been 

requested on their systems? Should the 

Commission conduct audits to 

determine the level of compliance with 

any joint planning requirement? 

4. Should the pro forma OATT be 

reformed to include a provision for 

credits for transmission facilities built 

by a point-to-point transmission 

customer? Should credits be provided 

only for point-to-point service of a 

longer term, e.g., five years? 

K. Obligation To Expand Capacity 

21. The pro forma OATT requires 

public utility transmission providers to 

expand capacity, if necessary, to satisfy 

the needs of network transmission 

customers (section 28.2) and point-topoint transmission service customers 

(sections 13.5 and 15.4). The 

transmission customer, however, must 

agree to compensate the transmission 

provider for any necessary transmission 

facility additions. 

1. Has this provision met transmission 

customers’ needs? 

2. Have public utility transmission 

providers fulfilled these obligations? 

3. How can the pro forma OATT be 

reformed to ensure that public utility 

transmission providers’ obligations to 

expand are clarified or is this an 

enforcement matter only? 

4. Have transmission customers been 

unduly discriminated against by 

transmission providers failing to plan 

and construct their transmission 

systems to accommodate the needs of 

network customers? If so, please provide 

specific examples. Should the pro forma 

OATT be reformed? 

5. Are there other changes to the pro 

forma OATT that could achieve the goal 

of having transmission built? 

6. Are there transmission pricing 

policies, such as demand charges, that 

would eliminate any financial 

disincentive for the transmission 

provider not to build transmission 

upgrades? 

7. Does ‘‘lumpiness’’ act as a 

disincentive to expanding the 

transmission system, i.e., where the 

transmission requests received are not 

of a sufficient transmission capacity to 

cost justify a substantial system upgrade 

(only 100 MW requested for a minimum 

200 MW upgrade)? If so, what changes 

could be made to lessen this 

disincentive? 

8. Are there interconnection 

procedures established in Order No. 

2003 et seq., that may be considered as 

best practices that should be adopted or 

possibly expanded in the pro forma 

OATT for point-to-point or network 

integration transmission services? 

9. Should there be lower charges for 

longer-term transmission service that 

require transmission system upgrades, 

such as for five years rather than one 

year, because of the possibility of lower 

risk of revenue recovery for the 

transmission provider? If so, how would 

such a rate be designed? 

L. Joint Ownership 

22. In Order No. 888–A, the 

Commission required each public utility 

that owns interstate transmission 

facilities with a non-jurisdictional entity 

to offer open access transmission service 

over its share of the joint facilities.17

Some current jointly-owned 

transmission facilities are the Georgia 

Integrated Transmission System, owned 

by Southern Company subsidiary 

Georgia Power, the Municipal Electric 

Authority of Georgia (MEAG Power), the 

55802 Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 

18See, e.g., Consolidated Edison Company of New 

York, 108 FERC ¶ 61,120 (2004). 

Georgia Transmission Corporation—a 

cooperative utility—and Dalton 

Utilities—a municipal system; the 

Pacific Intertie and Path 15. Order No. 

888 did not address the possibility of 

existing transmission customers 

participating with the transmission 

provider in the joint ownership of new 

transmission facilities. 

1. Should public utility transmission 

providers be required to offer their 

network service and point-to-point 

transmission customers the opportunity 

to participate in the joint ownership of 

new transmission facilities and network 

upgrades? If so, under what authority 

would the Commission impose such a 

requirement? 

2. Would joint ownership reduce 

disputes over cost allocation for new 

capacity and provide a source of 

additional capital? 

3. How would ownership rights affect 

the usage of the jointly owned facilities 

and how would this affect the rights of 

non-owners? 

4. Should a provision(s) be included 

in the pro forma OATT concerning joint 

ownership? If so, please describe in 

detail. 

M. Tariff Compliance Reviews 

23. The Commission has relied 

primarily on transmission customer 

complaints and staff audits to identify 

OATT violations. 

1. Should the Commission establish a 

regime of systematic tariff compliance 

reviews in order to monitor 

transmission providers’ compliance 

with the terms and conditions of their 

OATTs? 

2. Should these reviews be the 

equivalent of audits and investigations 

with due process and remedies for any 

violations? 

3. Should the Commission require 

public utility transmission providers to 

hire independent reviewers to prepare 

reports for submission to the 

Commission and release to the public? 

If so, what role should the Commission 

play in such a process? 

N. Hoarding of Transmission Capacity 

24. In Order No. 888, the Commission 

acknowledged that hoarding of 

transmission capacity was a possibility. 

For example, the Commission found 

that firm transmission customers should 

not lose their rights to firm capacity 

simply because they do not use that 

capacity for certain periods of time. It 

explained that it would not limit the 

amount of transmission capacity that a 

customer may reserve, except in the face 

of evidence of hoarding or other 

anticompetitive practices. 

1. Is there evidence of hoarding or 

anticompetitive practices by public 

utility transmission providers or 

customers that warrants reforms to the 

pro forma OATT? If so, please provide 

specific examples. 

2. Are transmission providers 

adequately making non-firm 

transmission service available when it is 

not used by firm point-to-point and 

network service customers? Is the nonfirm service made available in a nondiscriminatory fashion? 

3. Are there pricing policies that 

would further encourage transmission 

providers to make additional non-firm 

transmission service available? 

O. Curtailments 

25. Section 1.7 of the pro forma OATT 

defines curtailment as ‘‘a reduction in 

firm or non-firm transmission service in 

response to a transmission capacity 

shortage as a result of system reliability 

conditions.’’ Curtailment provisions for 

point-to-point transmission service are 

established in sections 13.7 and 14.7 for 

firm and non-firm transmission services 

respectively and the curtailment 

provisions for network integration 

transmission service are contained in 

section 33. Complaints regarding 

improper curtailment of service by 

transmission providers have been made 

in a variety of proceedings and the 

Commission has found cases of 

improper curtailment in the past.18

1. Is there evidence of improper 

curtailment practices by public utility 

transmission providers or customers 

that warrants reforms to the pro forma 

OATT? If so, please provide specific 

examples. 

2. Should curtailments determined to 

be improper be subject to monetary 

penalties? 

3. Should curtailments of firm 

transmission service designed to permit 

wholesale power sales by the merchant 

function of the transmission provider, or 

an affiliate, be considered market 

manipulation? 

P. Reservation Priority 

26. Section 13.2 of the pro forma 

OATT (Reservation Priority) provides 

that long-term firm point-to-point 

transmission service will be available on 

a first-come, first-served basis. With 

regard to short-term point-to-point 

transmission service requests, this 

section establishes that reservations will 

be conditional based upon the length of 

the requested transaction. This section 

further provides, in the context of shortterm firm point-to-point transmission 

service, that if ATC is insufficient for all 

service requests, customers with a 

reservation for shorter-term service will 

have a right of first refusal to match 

longer-term reservations before losing 

their reservation priority. 

1. Has the first-come, first-served 

approach to reservation priorities 

resulted in a fair and equitable means to 

allocate transmission capacity when the 

transmission system is oversubscribed? 

If not, what alternative approach should 

be implemented? 

2. Is the right of first refusal with 

respect to short-term point-to-point 

transmission service working fairly and 

effectively to provide ATC to those 

customers who request the longest 

duration of short-term firm point-topoint transmission service or does it 

provide an unfair competitive advantage 

or an opportunity for abuse? 

3. Should the right of first refusal in 

this context be eliminated? 

Q. Designation of Network Resources 

27. Section 30.1 of the pro forma 

OATT (Designation of Network 

Resources) provides that network 

resources shall include all generation 

owned, purchased or leased by the 

network customer designated to serve 

network load under the Tariff. Section 

30.2 of the pro forma OATT 

(Designation of New Network 

Resources) provides that the network 

customer may designate a new network 

resource by providing the transmission 

provider with as much advance notice 

as practicable. Section 30.4 of the pro 

forma OATT (Operation of Network 

Resources) provides that network 

customers may not make firm off-system 

sales from designated network 

resources. Section 30.7 of the pro forma 

OATT (Limitation on Designation of 

Network Resources) provides that the 

network customer must demonstrate 

that it owns or has committed to 

purchase generation pursuant to an 

executed contract in order to designate 

a generating resource as a network 

resource. 

1. Is there a problem with overdesignation of network resources? 

2. If so, how can the pro forma OATT 

be reformed to eliminate the problem? 

3. Should network resource 

designations be limited to a specific 

ratio of the monthly peak load for the 

customer? 

4. Are network resources consisting of 

firm contracts that do not specify 

generation sources until the energy is 

scheduled (sometimes referred to as 

‘‘seller’s choice’’) a problem? If so, 

should these generation sources only be 

allowed to be designated as network 

Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 55803 

19Order No. 2003–A at P 541. 

20Order No. 888 at 31,703; see also Schedule 4 

of the pro forma OATT. 

21Order No. 888–A at 30,232. 

resources after the seller has identified 

the specific generating sources? 

5. Have network customers been 

unduly discriminated against in 

attempting to modify their receipt and 

delivery points? 

6. What specific difficulties have been 

experienced with designation of 

network resources? 

7. If there are problems associated 

with this provision, what reforms to the 

provision are needed or is this an 

enforcement matter? 

8. Should customers be allowed to 

‘‘undesignate’’ portions of their 

designated network resources on a 

short-term basis in order to make firm 

sales from these resources? 

R. Queuing for Long-Term Transmission 

Service 

28. The pro forma OATT did not 

explicitly address queuing issues, but 

rather established provisions addressing 

the obligations and timeframes for a 

public utility transmission provider to 

address requests for transmission 

service that cannot be immediately 

granted due to a lack of ATC. The pro 

forma OATT also required public utility 

transmission providers to separately 

establish their ‘‘Methodology for 

Completing a System Impact Study’’ as 

Attachment D to the pro forma OATT. 

In Order No. 2003–A, the Commission 

found that although interconnection and 

delivery, and transmission service 

under the pro forma OATT, are separate 

services, it agreed that the queues for 

the two services must be closely 

coordinated.19 Thus, in general, 

interconnection customers and 

transmission delivery service customers 

should have equal access to ATC, with 

priority being established on a first 

come, first served basis according to the 

date on which service is requested. 

Furthermore, studies for 

interconnection services should be 

coordinated with the facilities studies 

performed for transmission delivery 

services. This ensures that all required 

upgrades are planned and designed in a 

least cost manner. 

1. What problems associated with the 

queuing process have been 

encountered? 

2. Should the pro forma OATT be 

reformed to establish more specific rules 

about how other transmission requests 

in the queue should be accounted for 

when conducting studies? 

3. Should clustering, i.e., the studying 

of transmission requests as a group, be 

required? The Commission has allowed 

this practice on a case-by-case basis, see, 

e.g., Southwest Power Pool, Inc., 110 

FERC ¶ 61,028 (2005). 

4. Are there blocking issues where a 

customer submits multiple requests 

intending to proceed with a single 

request specifically to keep others out of 

the queue? If so, how would the 

Commission decide which requests are 

legitimate versus blocking in nature? 

Would charging a processing fee that 

would increase with the duration of 

service for requests reduce the incentive 

to submit multiple self competing 

requests? 

5. Should the public utility 

transmission provider’s planning 

process be required to reflect plans for 

all new generation sources in the 

interconnection and transmission 

queues to ensure that customers can 

request transmission as easily for power 

and energy from independent power 

producers’ generation as from the public 

utility transmission provider’s own 

generation? 

6. Should the duration of the longterm transmission request affect the 

transmission customer’s queue position, 

for example a request for a five-year firm 

service receive a higher queue position 

for study purposes than a one-year firm 

service request? 

S. Ancillary Services 

29. In the pro forma OATT, the 

Commission established six ancillary 

services to be offered, including the 

following Schedules: (1) Scheduling, 

System Control and Dispatching 

services; (2) Reactive Supply and 

Voltage Control from Generation 

Sources Service; (3) Regulation and 

Frequency Response Service; (4) Energy 

Imbalance Service; (5) Operating 

Reserve—Spinning Reserve Service; and 

(6) Operating Reserve—Supplemental 

Reserve Service. The Commission 

explained that it generally adopted the 

North American Electric Reliability 

Council’s recommendations for 

ancillary service definitions and 

descriptions. 

1. Have the correct ancillary services 

needed to provide open access 

transmission service been identified? 

2. Are there additional ancillary 

services that should be included in the 

pro forma OATT? If so, please identify 

such services and provide proposed 

definitions. 

3. Are there ancillary services 

identified in the pro forma OATT that 

should be treated separately as distinct 

services, such as regulation and 

frequency response service? 

4. Are the definitions for the ancillary 

services used in Order No. 888 still 

viable? If not, please provide proposed 

revised definitions. 

5. Should the Commission address 

ancillary service pricing issues in this 

proceeding? 

i. Energy Imbalances 

30. In Order No. 888, the Commission 

explained that energy imbalance service 

‘‘is provided when the transmission 

provider makes up for any difference 

that occurs over a single hour between 

the scheduled and the actual delivery of 

energy to a load located within its 

control area.’’ 20 The Commission also 

explained: 

[f]or minor hourly differences between the 

scheduled and delivered energy, the 

transmission customer is allowed to make up 

the difference within 30 days (or other 

reasonable period generally accepted in the 

region) by adjusting its energy deliveries to 

eliminate the imbalance. A minor difference 

is one for which the actual energy delivery 

differs from the scheduled energy by less 

than 1.5 percent, except that any hourly 

difference less than one megawatt-hour is 

also considered minor. Thus, the Final Rule 

established an hourly energy deviation band 

of ±1.5 percent (with a minimum of 1 MW) 

for energy imbalance. The transmission 

customer must compensate the transmission 

provider for an imbalance that falls outside 

the hourly deviation band and for 

accumulated minor imbalances that are not 

made up within 30 days. 

The Commission further explained 

that this bandwidth promotes good 

scheduling practices and that it is 

important that the implementation of 

each scheduled transaction not overly 

burden others.21 The pricing for energy 

within and outside of this bandwidth 

was left for public utility transmission 

providers to propose on a case-by-case 

basis. Since the issuance of Order No. 

888, the Commission has approved 

energy imbalance service pricing 

provisions on a case-by-case basis. 

Generally, public utility transmission 

providers proposed energy imbalance 

charges, including penalty charges for 

scheduling deviations set at a 

percentage of the energy price, e.g., 90 

percent for excess energy and 110 

percent for energy shortfalls. 

1. Does the deviation band of ±1.5 

percent continue to be appropriate? 

2. Should penalty charges be 

eliminated entirely for transmission 

customers and/or should they be 

charged no more than the control area’s 

cost of supplying energy to correct the 

imbalance? Should there be low or no 

penalty charges when reliability is not 

threatened and higher penalty charges 

only when reliability is threatened? 

Provide examples of threats to reliability 

in this context. 

55804 Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 

22 Id. at 30,230. 

23See, e.g., Trans-Elect, Inc., 98 FERC ¶ 61,142 

(2002), order on reh’g, 98 FERC ¶ 61,368 (2002); ITC 

Holdings Corp., 102 FERC ¶ 61,182, order on reh’g, 

104 FERC ¶ 61,033 (2003); American Transmission 

Co., 103 FERC ¶ 61,388 (2003), order on reh’g, 107 

FERC ¶ 61,117 (2004); See also Policy Statement 

Regarding Evaluation of Independent Ownership 

and Operation of Transmission, 111 FERC ¶ 61,473 

(2005) (stating that the Commission would entertain 

proposals for market participants to hold passive 

equity interests in ITCs). 

24Order No. 888 at 31,760–63; Order No. 888–A 

at 30,281–90. 

25The Commission explained that ‘‘a nonpublic 

utility seeking to take service under a transmission 

provider’s OATT must agree to offer to provide the 

transmission provider any service that the 

nonpublic utility provides or is capable of 

providing on its system in order to satisfy 

reciprocity.’’ Order No. 888–A at 30,286. 

3. Would increased scheduling 

flexibility help? 

4. Should transmission customers be 

allowed to aggregate energy imbalances 

over a greater time period than 30 days 

or be allowed to net energy imbalances? 

5. Is it unduly discriminatory or 

preferential for a transmission customer 

to be charged energy imbalance 

penalties when the public utility 

transmission provider does not have to 

pay a penalty and incurs only a cost no 

higher than its incremental cost of 

energy for imbalances occurring in its 

control area or between control areas 

(return in kind)? 

ii. Generator Imbalances 

31. In Order No. 888, the Commission 

defined generator imbalance as the 

difference between the scheduled and 

actual delivery of energy from the 

generator. The Commission did not 

adopt a pro forma generator imbalance 

schedule, explaining that a generator 

should be able to deliver its scheduled 

hourly energy with precision. It also 

expressed concern that if a generator 

was allowed to deviate from its 

schedule by 1.5 percent without penalty 

(as permitted for energy imbalances), it 

would discourage good generator 

operating practices.22 The Commission 

concluded that generator imbalances 

should be specified in each generator’s 

interconnection agreement with its 

transmission provider or control area 

operator. 

1. Should the Commission require 

that a generator imbalance schedule be 

included in the pro forma OATT? Is 

comparability in the treatment of 

generator imbalances needed? 

2. How should generator imbalances 

be priced? 

3. Should there be low or no penalty 

charges when reliability is not 

threatened and higher penalty charges 

only when reliability is threatened? 

T. Pro Forma OATT Definitions 

32. In order to promote consistency 

and clarity in the non-discriminatory 

provision of open access transmission 

service, the Commission included 

certain common service provisions in 

the pro forma OATT, including a 

definitions section to establish a 

common understanding of the terms 

used throughout the pro forma OATT. 

1. Are the existing pro forma OATT 

terms and their definitions sufficient to 

ensure not unduly discriminatory 

transmission? 

2. If not, what reforms or additional 

terms are needed? Please provide 

specific definitions. 

3. The new FPA section 215(a)(4) 

established by EPAct 2005 defines 

reliable operation. Is there any reason 

that this definition of reliability should 

not be incorporated in the pro forma 

OATT? 

U. ISO, RTO, and ITC Tariffs 

33. In Order No. 888, the Commission 

encouraged the voluntary formation of 

properly-structured ISOs and provided 

the industry guidance on ISO formation, 

in the form of ISO principles to be used 

to assess ISO proposals submitted to the 

Commission. In addition, in 1999, the 

Commission issued a Final Rule in 

Order No. 2000 to advance the 

voluntary formation of RTOs with the 

objective of having all transmissionowning entities place their transmission 

facilities under the control of 

appropriate RTOs. The Commission 

concluded that such regional 

institutions could address the 

operational and reliability issues 

confronting the industry, and eliminate 

undue discrimination in transmission 

services that can occur when the 

operation of the transmission system 

remains in the control of a vertically 

integrated utility. Subsequently, the 

electric industry has made significant 

progress in the development of 

voluntary RTOs/ISOs (e.g., Midwest 

Independent Transmission System 

Operator, Inc. and Southwest Power 

Pool, Inc.) and the Commission has 

accepted a wide range of ISO and RTO 

proposals. Further, the Commission has 

also authorized the formation of 

independent transmission companies 

(ITC).23

1. Which of the matters discussed 

throughout this NOI, if any, need not be 

applied to ISO and RTO tariffs? Please 

provide specifics. 

2. Which of the matters discussed 

throughout this NOI, if any, need not be 

applied to ITCs? Please provide 

specifics. 

V. Open Access by Unregulated 

Transmitting Utilities (Section 1231 of 

the Energy Policy Act of 2005) 

34. In Order No. 888, the Commission 

concluded that it was appropriate to 

require a reciprocity provision in the 

pro forma OATT, which applied to all 

customers, including non-public utility 

entities that own, control or operate 

transmission facilities and that take 

service under the open access tariff.24

The Commission did not require nonpublic utilities to provide transmission 

access; instead, the Commission 

conditioned the use of open access 

services on an agreement to offer open 

access services in return. The 

Commission found that while it did not 

have the authority to require non-public 

utilities to make their systems generally 

available, it did have the ability, and the 

obligation, to ensure that open access 

transmission is as widely available as 

possible and that Order No. 888 did not 

result in a competitive disadvantage to 

public utilities. 

35. The Commission noted that while 

many non-public utilities were willing 

to offer reciprocal access, including 

through an open access tariff, these nonpublic utilities were fearful that a public 

utility may deny service based simply 

on a claim that the open access tariff 

offered by a non-public utility is not 

satisfactory. To assist these non-public 

utilities, the Commission developed a 

voluntary safe harbor procedure to 

alleviate those concerns. Under this 

procedure, non-public utilities could 

submit to the Commission a 

transmission tariff and a request for 

declaratory order that the tariff meets 

the Commission’s comparability (nondiscrimination) standards.25 If the 

Commission found that a tariff contains 

terms and conditions that substantially 

conform or are superior to those in the 

pro forma tariff, the Commission 

deemed it an acceptable reciprocity 

tariff and required public utilities to 

provide open access service to that 

particular non-public utility. 

36. The EPAct 2005 now authorizes 

the Commission to require non-public 

utilities (or ‘‘unregulated transmitting 

utilities’’) to provide open access 

transmission service. Section 1231 of 

the EPAct 2005 establishes a new 

section 211A in Part II of the FPA, 

which states in part that the 

Commission ‘‘may, by rule or order, 

require an unregulated transmitting 

utility to provide transmission services’’

at rates that are comparable to those it 

charges itself and under terms and 

conditions (unrelated to rates) that are 

comparable to those it applies to itself 

Federal Register / Vol. 70, No. 184 / Friday, September 23, 2005 / Proposed Rules 55805 

and that are not unduly discriminatory 

or preferential. 

1. Should the Commission require 

unregulated transmission utilities to 

provide transmission service under rates 

that are comparable to those they charge 

themselves and under terms and 

conditions that are comparable to those 

they apply to themselves and that are 

not unduly discriminatory or 

preferential? 

2. If so, should the Commission 

impose this requirement on all 

unregulated transmission utilities 

through a rulemaking proceeding, or 

should the Commission apply this new 

law on a case-by-case basis, through 

complaints, motions seeking 

enforcement or sua sponte action by the 

Commission? 

3. Section 1231 of the EPAct 2005 

authorizes the Commission to require 

unregulated transmitting utilities to 

provide transmission service on terms 

and conditions that are comparable to 

those under which the utility provides 

transmission service to itself and that 

are not unduly discriminatory or 

preferential. Can terms and conditions 

be both comparable and unduly 

discriminatory or preferential or are 

comparable terms and conditions 

necessarily not unduly discriminatory 

or preferential? 

Procedure for Comments 

37. The Commission invites interested 

persons to submit comments, and other 

information on the matters, issues and 

specific questions identified in this 

notice. Comments are due on or before 

November 22, 2005. Comments must 

refer to Docket No. RM05–25–000, and 

must include the commenters’ name, 

the organization they represent, if 

applicable, and their address. 

38. To facilitate the Commission’s 

review of the comments, commenters 

are requested to provide an executive 

summary of their position, not to exceed 

ten pages. Commenters are requested to 

identify each specific question posed by 

the NOI that their discussion addresses 

and to use appropriate headings. 

Additional issues the commenters wish 

to raise should be identified separately. 

The commenters should double space 

their comments. 

39. Comments may be filed on paper 

or electronically via the eFiling link on 

the Commission’s Web site at http:// 

www.ferc.gov. The Commission accepts 

most standard word processing formats 

and commenters may attach additional 

files with supporting information in 

certain other file formats. Commenters 

filing electronically do not need to make 

a paper filing. Commenters that are not 

able to file comments electronically 

must send an original and 14 copies of 

their comments to: Federal Energy 

Regulatory Commission, Office of the 

Secretary, 888 First Street NE., 

Washington, DC 20426. 

40. All comments will be placed in 

the Commission’s public files and may 

be viewed, printed, or downloaded 

remotely as described in the Document 

Availability section below. Commenters 

are not required to serve copies of their 

comments on other commenters. 

Document Availability 

41. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through the 

Commission’s Home page (http:// 

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

Public Reference Room during normal 

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

Eastern time) at 888 First Street, NE., 

Room 2A, Washington, DC 20426. 

42. From the Commission’s Home 

Page on the Internet, this information is 

available in the Commission’s document 

management system, eLibrary. The full 

text of this document is available on 

eLibrary in PDF and Microsoft Word 

format for viewing, printing, and/or 

downloading. To access this document 

in eLibrary, type the docket number 

(excluding the last three digits) in the 

docket number field. 

43. User assistance is available for 

eLibrary and the Commission’s Web site 

during normal business hours. For 

assistance, please contact the 

Commission’s Online Support at 1–866–

208–3676 (toll free) or 202–502–6652 (email at FERCOnlineSupport@ferc.gov) 

or the Public Reference Room at 202–

502–8371, TTY 202–502–8659 (e-mail at 

public.referenceroom@ferc.gov). 

By direction of the Commission. 

Magalie R. Salas, 

Secretary. 

[FR Doc. 05–19003 Filed 9–22–05; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Parts 365 and 366 

[Docket No. RM05–32–000] 

Repeal of the Public Utility Holding 

Company Act of 1935 and Enactment 

of the Public Utility Holding Company 

Act of 2005 

September 16, 2005. 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Notice of Proposed Rulemaking. 

SUMMARY: Pursuant to Title XII, Subtitle 

F of the Energy Policy Act of 2005 

(EPAct 2005), the Federal Energy 

Regulatory Commission (Commission) 

proposes to issue rules implementing 

the repeal of the Public Utility Holding 

Company Act of 1935, and the 

enactment of the Public Utility Holding 

Company Act of 2005, EPAct 2005. The 

Commission also proposes to remove its 

exempt wholesale generator rules, 18 

CFR part 365 (2005), as they are no 

longer necessary. The Commission seeks 

public comment on the rules proposed 

herein. 

DATES: Comments are due October 14, 

2005. Reply comments are due October 

21, 2005. 

ADDRESSES: Comments and reply 

comments may be filed electronically 

via the eFiling link on the Commission’s 

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

Commenters unable to file comments 

electronically must send an original and 

14 copies of their comments and reply 

comments to: Federal Energy Regulatory 

Commission, Office of the Secretary, 

888 First Street, NE., Washington, DC, 

20426. Refer to the Comment 

Procedures section of the preamble for 

additional information on how to file 

comments and reply comments. 

FOR FURTHER INFORMATION CONTACT: 

Brandon Johnson (Legal Information), 

Federal Energy Regulatory Commission, 

888 First Street, NE., Washington, DC 

20426, (202) 502–6143. 

James Guest (Technical Information), 

Federal Energy Regulatory Commission, 

888 First Street, NE., Washington, DC 

20426, (202) 502–6614. 

James Akers (Technical Information), 

Federal Energy Regulatory Commission, 

888 First Street, NE., Washington, DC 

20426, (202) 502–8101. 

SUPPLEMENTARY INFORMATION: