[Federal Register Volume 70, Number 184 (Friday, September 23, 2005)]
[Proposed Rules]
[Pages 55796-55805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19003]


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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).

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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\
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    \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.''
    \2\ Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 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).
    \3\ Order No. 888 at 31,669.
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    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

[[Page 55797]]

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\
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    \4\ Energy Policy Act of 2005, Pub. L. 109-58, Sec. Sec.  1231, 
1233 119 Stat. 594 (2005) (EPAct 2005).
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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 non-discriminatory 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\
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    \5\ The Commission did not require corporate unbundling, stating 
that efforts to remedy undue discrimination should begin by 
requiring the less intrusive functional unbundling approach.
    \6\ Concurrent 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).
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    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.
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    \8\ Order No. 888 at 31,652.
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    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

[[Page 55798]]

market participants have raised concerns with the implementation of 
OATTs, others may be reluctant to bring issues to the Commission.
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    \9\ Id. at 31,682.
    \10\ For 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).
    \11\ See, 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).
    \12\ See, 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.
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    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 Mid-Atlantic; (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?

[[Page 55799]]

    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 non-discriminatory open access basis.\13\
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    \13\ Order No. 888 at 31,690.
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    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?
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    \14\ Id. at 31,736.
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    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 point-to-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?

[[Page 55800]]

    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)?
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    \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).
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    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 market-
based 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).
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    \16\ Order No. 888 at 31,751-53.
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    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.

[[Page 55801]]

    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-to-point 
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

[[Page 55802]]

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.
---------------------------------------------------------------------------

    \17\ Order No. 888-A at 30,218-19.
---------------------------------------------------------------------------

    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 non-firm service made 
available in a non-discriminatory 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\
---------------------------------------------------------------------------

    \18\ See, e.g., Consolidated Edison Company of New York, 108 
FERC ] 61,120 (2004).
---------------------------------------------------------------------------

    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 short-term 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-to-point 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 over-designation 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

[[Page 55803]]

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.
---------------------------------------------------------------------------

    \19\ Order No. 2003-A at P 541.
---------------------------------------------------------------------------

    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 long-term 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:
---------------------------------------------------------------------------

    \20\ Order No. 888 at 31,703; see also Schedule 4 of the pro 
forma OATT.

[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 <plus-minus>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.
---------------------------------------------------------------------------

    \21\ Order No. 888-A at 30,232.
---------------------------------------------------------------------------

    1. Does the deviation band of <plus-minus>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.

[[Page 55804]]

    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.
---------------------------------------------------------------------------

    \22\ Id. at 30,230.
---------------------------------------------------------------------------

    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 
transmission-owning 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\
---------------------------------------------------------------------------

    \23\ See, 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).
---------------------------------------------------------------------------

    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 non-public 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.
---------------------------------------------------------------------------

    \24\ Order No. 888 at 31,760-63; Order No. 888-A at 30,281-90.
---------------------------------------------------------------------------

    35. The Commission noted that while many non-public utilities were 
willing to offer reciprocal access, including through an open access 
tariff, these non-public 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 (non-discrimination) 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.
---------------------------------------------------------------------------

    \25\ The 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.
---------------------------------------------------------------------------

    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

[[Page 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 (e-mail at <a href="/cdn-cgi/l/email-protection#8fc9caddccc0e1e3e6e1eadcfaffffe0fdfbcfe9eafdeca1e8e0f9"><span class="__cf_email__" data-cfemail="c68083948589a8aaafa8a395b3b6b6a9b4b286a0a3b4a5e8a1a9b0">[email protected]</span></a>) or the Public Reference 
Room at 202-502-8371, TTY 202-502-8659 (e-mail at 
<a href="/cdn-cgi/l/email-protection#14646176787d773a6671727166717a7771667b7b7954727166773a737b62"><span class="__cf_email__" data-cfemail="f78782959b9e94d98592919285929994928598989ab791928594d9909881">[email protected]</span></a>).

    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


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