58636 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

1Energy Policy Act of 2005, Pub. L. 109–58, 119 

Stat. 594 (2005). 

2EPAct 2005 §§ 1281 et seq. 

3 16 U.S.C. 824b (2000). 

4As noted below, EPAct 2005’s amendments to 

FPA section 203 will not take effect until February 

3, 2006. We will generally refer to EPAct 2005’s 

amended section 203 of the FPA as ‘‘amended 

section 203.’’ All other references to FPA section 

203 are as it currently exists. 

5 Inquiry Concerning the Commission’s Merger 

Policy Under the Federal Power Act: Policy 

Statement, Order No. 592, 61 FR 68,595 (Dec. 30, 

1996), FERC Stats. and Regs. ¶ 31,044 (1996), 

reconsideration denied, Order No. 592–A, 62 FR 

33,340 (June 19, 1997), 79 FERC ¶ 61,321 (1997) 

(Merger Policy Statement). 

6Although the Commission applies these factors 

to all section 203 transactions, not just mergers, the 

filing requirements and the level of detail required 

may differ. Id. at ¶ 30,113 n.7. See also 18 CFR 2.26 

(2005) (which codifies the Merger Policy 

Statement). 

7U.S. Department of Justice and Federal Trade 

Commission, Horizontal Merger Guidelines, 57 FR 

41,552 (1992), revised, 4 Trade Reg. Rep. (CCH) 

¶ 13,104 (Apr. 8, 1997). 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Parts 2 and 33 

[Docket No. RM05–34–000] 

Transactions Subject to FPA Section 

203 

Issued October 3, 2005. 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: Pursuant to Subtitle G 

(Market Transparency, Enforcement, 

and Consumer Protection), section 1289 

(Merger Review Reform), of Title XII 

(Electricity Modernization Act of 2005), 

of the Energy Policy Act of 2005 (EPAct 

2005), Pub. L. 109–58, 119 Stat. 594 

(2005), the Federal Energy Regulatory 

Commission (Commission) is proposing 

rules and amendments to the 

Commission’s regulations to implement 

amended section 203 of the Federal 

Power Act (FPA). The Commission 

seeks public comment on the rules and 

amended regulations proposed herein. 

EFFECTIVE DATE: Comments are due 

November 7, 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 Comment 

Procedures section of the preamble for 

additional information on how to file 

comments. 

FOR FURTHER INFORMATION CONTACT: 

Sarah McWane (Legal Information), 

Office of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–8372. 

Phillip Nicholson (Technical 

Information), Office of Markets, 

Tariffs and Rates—West, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–8240. 

Jan Macpherson (Legal Information), 

Office of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–8921. 

James Akers (Technical Information), 

Office of Markets, Tariffs and Rates—

West, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502–

8101. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

1. On August 8, 2005, the Energy 

Policy Act of 2005 (EPAct 2005) 1 was 

signed into law. Section 1289 (Merger 

Review Reform) of Title XII, Subtitle G 

(Market Transparency, Enforcement, 

and Consumer Protection),2 of EPAct 

2005 amends section 203 of the Federal 

Power Act (FPA) 3 and directs the 

Federal Energy Regulatory Commission 

(Commission) to adopt, by rule, 

procedures for the expeditious 

consideration of applications for the 

approval of dispositions, consolidations, 

or acquisitions under section 203 of the 

FPA. Amended section 203 also: (1) 

Increases (from $50,000 to $10 million) 

the value threshold for certain 

transactions subject to section 203; (2) 

extends the scope of section 203 to 

include transactions involving certain 

transfers of generation facilities and 

certain holding companies’ acquisitions 

with a value in excess of $10 million; 

(3) limits the Commission’s review of a 

public utility’s acquisition of securities 

of another public utility to transactions 

greater than $10 million; and (4) 

requires that the Commission, when 

reviewing a proposed section 203 

transaction, examine cross-subsidization 

and pledges or encumbrances of utility 

assets. The Commission proposes rules 

and amendments to the Commission’s 

regulations to implement amended 

section 203.4

2. The Commission intends to issue a 

final rule within six months after EPAct 

2005’s enactment to coincide with the 

date on which amended section 203 of 

the FPA takes effect, February 8, 2006. 

The Commission seeks public comment 

on the rules proposed herein. 

II. Background 

A. Commission Merger Policy Before 

Effective Date of Amended FPA Section 

203 

1. Section 203 of the FPA 

3. Section 203 of the FPA currently 

provides that Commission authorization 

is required for various types of 

dispositions and acquisitions of 

jurisdictional facilities, such as public 

utility mergers and consolidations. 

Specifically, section 203(a) of the FPA 

states: 

No public utility shall sell, lease or 

otherwise dispose of the whole of its 

facilities subject to the jurisdiction of the 

Commission, or any part thereof of a value 

in excess of $50,000, or by any means 

whatsoever, directly or indirectly, merge or 

consolidate such facilities or any part thereof 

with those of any other person, or purchase, 

acquire, or take any security of any other 

public utility, without first having secured an 

order of the Commission authorizing it to do 

so. 

The Commission shall approve such 

transactions if they are consistent with 

the public interest. 

2. The Commission’s Merger Policy 

Statement 

4. In 1996, the Commission issued the 

Merger Policy Statement 5 updating and 

clarifying the Commission’s procedures, 

criteria, and policies concerning public 

utility mergers in light of dramatic and 

continuing changes in the electric 

power industry and the regulation of 

that industry. The purpose of the Merger 

Policy Statement was to ensure that 

mergers are consistent with the public 

interest and to provide greater certainty 

and expedition in the Commission’s 

analysis of merger applications. 

5. The Merger Policy Statement sets 

out three factors the Commission 

generally considers when analyzing 

whether a proposed section 203 

transaction is consistent with the public 

interest: effect on competition; effect on 

rates; and effect on regulation.6

6. With respect to the effect on 

competition, the Merger Policy 

Statement adopts the Department of 

Justice (DOJ)/Federal Trade Commission 

(FTC) 1992 Horizontal Merger 

Guidelines (Guidelines) 7 as the 

analytical framework for examining 

horizontal market power concerns. The 

Merger Policy Statement also uses an 

analytical screen (Appendix A analysis) 

that is intended to allow early 

identification of transactions that clearly 

do not raise competitive concerns. As 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58637 

8Merger Policy Statement at ¶ 30,119–20. 

9See id. at ¶ 30,121–24. 

10 15 U.S.C. 79a et seq. (2000). 

11Merger Policy Statement at ¶ 30,125; see also 

Atlantic City Electric Company and Delmarva 

Power & Light Company, 80 FERC ¶ 61,126 at 

61,412, order denying reh’g, 81 FERC ¶ 61,173 

(1997). 

12Revised Filing Requirements Under Part 33 of 

the Commission’s Regulations, Order No. 642, 65 

FR 70,983 (Nov. 28, 2000), FERC Stats. & Regs., 

Regulations Preambles July 1996-Dec. 2000 ¶ 31,111 

(2000), order on reh’g, Order No. 642-A, 66 FR 

16,121 (Mar. 23, 2001), 94 FERC ¶ 61,289 (2001) 

(codified at 18 CFR Part 33 (2005) (Filing 

Requirements Rule)). 

13Filing Requirements Rule at ¶ 31,902 and 

¶ 31,907. It also provides that an applicant will not 

be required to file additional information regarding 

the vertical aspects of a proposed merger if it shows 

that the merger does not impair competition in 

‘‘downstream’’ electricity markets and involves an 

input supplier (the ‘‘upstream’’ merging firm) that 

sells: (1) An input that is used to produce a de 

minimis amount of the relevant product; or (2) no 

product into the downstream electricity geographic 

market. Id. At ¶ 31,903. 

14Regional Transmission Organizations, Order 

No. 2000, 65 FR 809 (Jan. 6, 2000), FERC Stats. & 

Regs. ¶ 31,089 at 31,108 (1999), order on reh’g, 

Order No. 2000–A, 65 FR 12,088 (Mar. 8, 2000), 

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). 

15Filing Requirements Rule at ¶ 31,902. The 

Commission clarified that, if it later determined that 

a filing raised competitive issues, the Commission 

would evaluate those issues and direct the 

applicant to submit any data needed to satisfy the 

Commission’s concerns. Id. at n.79. 

16 Id. at ¶ 31,873. 

17 Id. at ¶ 31,876. 

part of the screen analysis, applicants 

must define the relevant products sold 

by the merging entities, identify the 

customers and potential suppliers in the 

geographic markets that are likely to be 

affected by the proposed transaction, 

and measure the concentration in those 

markets.8 Using the delivered price test 

to identify alternative competing 

suppliers, the concentration of potential 

suppliers included in the defined 

market is then measured by the 

Herfindahl-Hirschman Index (HHI) and 

used as a screen to determine which 

transactions may raise market power 

concerns. 

7. The Commission stated in the 

Merger Policy Statement that it will 

examine the second factor, the effect on 

rates, by focusing on customer 

protections designed to insulate 

consumers from any harm resulting 

from the transaction. We directed 

applicants to attempt to negotiate such 

measures with their customers before 

filing their applications.9

8. The Merger Policy Statement set 

forth a third factor for examination, the 

effect on regulation. This includes both 

state regulation and the Commission’s 

regulation, including any potential shift 

in regulation from the Commission to 

the Securities and Exchange 

Commission (SEC) due to a transaction 

creating a registered public utility 

holding company under the Public 

Utility Holding Company Act of 1935 

(PUHCA 1935).10 The Merger Policy 

Statement explained that, unless 

applicants commit themselves to abide 

by this Commission’s policies with 

regard to affiliate transactions involving 

non-power goods and services, we will 

set the issue of the effect on regulation 

for hearing.11 With respect to a 

transaction’s effect on state regulation, 

where the state commissions have 

authority to act on the transaction, the 

Commission stated that it intends to rely 

on them to exercise their authority to 

protect state interests. 

3. The Filing Requirements Rule and 

Revised Filing Requirements Under 18 

CFR Part 33 of the Commission’s 

Regulations 

9. The Commission later issued the 

Filing Requirements Rule,12 a final rule 

updating the filing requirements under 

18 CFR Part 33 of the Commission’s 

regulations for section 203 applications. 

The Filing Requirements Rule 

implements the Merger Policy 

Statement and provides detailed 

guidance to applicants for preparing 

applications. The revised filing 

requirements were also designed to 

assist the Commission in determining 

whether section 203 transactions are 

consistent with the public interest, to 

provide more certainty, and to expedite 

the Commission’s handling of such 

applications. 

10. The Filing Requirements Rule 

codifies the Commission’s screening 

approach, provides specific filing 

requirements consistent with Appendix 

A of the Commission’s Merger Policy 

Statement, establishes guidelines for 

vertical competitive analysis, and sets 

forth filing requirements for mergers 

that may raise vertical market power 

concerns. It also streamlined the rules, 

eliminated unnecessary Part 33 filing 

requirements, and reduced the 

information burden for transactions that 

raise no competitive concerns. 

11. In the Filing Requirements Rule, 

the Commission explained that for 

certain transactions, abbreviated filing 

requirements are appropriate because it 

is relatively easy to determine that they 

will not harm competition and, thus, a 

full-fledged screen or vertical 

competitive analysis is not required. 

The Commission does not require the 

full Appendix A analysis screen if: (1) 

The applicant demonstrates that the 

merging entities do not operate in the 

same geographic markets, or if they do, 

that the extent of such overlapping 

operation is de minimis; and (2) no 

intervenor has alleged that one of the 

merging entities is a perceived potential 

competitor in the same geographic 

market as the other.13 Furthermore, the 

Commission stated that it will not 

require section 203 applicants to 

provide an Appendix A analysis if: (1) 

The application is a regional 

transmission organization (RTO) filing 

that directly responds to the 

Commission’s RTO rule; 14 (2) the 

transaction is simply an internal 

corporate reorganization; or (3) the 

transaction only involves a disposition 

of transmission facilities.15

12. The Commission also stated in the 

Filing Requirements Rule that, as 

announced in the Merger Policy 

Statement, it intended to continue 

processing section 203 applications 

expeditiously, with a goal of issuing an 

initial order for most mergers within 

150 days of a completed application.16

Further, the Commission stated that it 

intended to continue processing 

uncontested non-merger applications 

within 60 days of filing and protested 

non-merger applications within 90 days 

of filing.17

B. Section 203 as Amended by EPAct 

2005 

13. EPAct 2005 revises section 203(a) 

of the FPA as follows: 

14. Amended section 203(a)(1) states 

that no public utility shall, without first 

having secured an order of the 

Commission authorizing it to do so: (A) 

Sell, lease, or otherwise dispose of the 

whole of its facilities subject to the 

jurisdiction of the Commission, or any 

part thereof of a value in excess of $10 

million; (B) merge or consolidate, 

directly or indirectly, such facilities or 

any part thereof with those of any other 

person, by any means whatsoever; (C) 

purchase, acquire, or take any security 

with a value in excess of $10 million of 

any other public utility; or (D) purchase, 

lease, or otherwise acquire an existing 

generation facility: (i) that has a value in 

excess of $10 million; and (ii) that is 

used for interstate wholesale sales and 

over which the Commission has 

jurisdiction for ratemaking purposes. 

15. Section 203(a)(2) adds the entirely 

new requirement that no holding 

company in a holding company system 

that includes a transmitting utility or an 

electric utility shall purchase, acquire, 

or take any security with a value in 

excess of $10 million of, or, by any 

means whatsoever, directly or 

indirectly, merge or consolidate with, a 

transmitting utility, an electric utility 

58638 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

18EPAct 2005 § 1261 et seq. 

19Section 203(b) states: 

The Commission may grant any application for an 

order under this section in whole or in part and 

upon such terms and conditions as it finds 

necessary or appropriate to secure the maintenance 

of adequate service and the coordination in the 

public interest of facilities subject to the 

jurisdiction of the Commission. The Commission 

may from time to time for good cause shown make 

such orders supplemental to any order made under 

this section as it may find necessary or appropriate. 

20Because proposed section 33.1(a) is almost 

identical to amended sections 203(a)(1)(A)–(D) and 

(a)(2), which are summarized in section II.B. above 

and set forth in the proposed regulatory text, we 

will not recite that text here. 

21We note that the $10 million value threshold 

that is to be applied to the transfer of jurisdictional 

facilities under amended section 203(a)(1)(A), 

similar to the prior $50,000 threshold under section 

203(a), is important for determining whether the 

transfer of part of a public utility’s jurisdictional 

facilities is subject to section 203. The transfer of 

all of a public utility’s jurisdictional facilities, 

regardless of value, is subject to amended section 

203, as it was with section 203. 

company, or a holding company in a 

holding company system that includes a 

transmitting utility, or an electric utility 

company, with a value in excess of $10 

million without Commission 

authorization. 

16. Like the existing section 203(a), 

amended section 203(a)(3) provides that 

upon receipt of an application for such 

approval, the Commission shall give 

reasonable notice in writing to the 

Governor and state commission of each 

of the states in which the physical 

property affected is situated, and to 

such other persons as it may deem 

advisable. 

17. Amended section 203(a)(4) states 

that after notice and opportunity for 

hearing the Commission shall approve 

the proposed disposition, consolidation, 

acquisition, or change in control if it 

finds that the transaction will be 

consistent with the public interest, but 

also adds the entirely new requirement 

that the Commission must find that the 

transaction will not result in crosssubsidization of a non-utility associate 

company or pledge or encumbrance of 

utility assets for the benefit of an 

associate company, unless that crosssubsidization, pledge, or encumbrance 

will be consistent with the public 

interest. 

18. Section 203(a)(5) adds the entirely 

new requirement that the Commission 

shall: 

By rule, adopt procedures for the 

expeditious consideration of applications for 

the approval of dispositions, consolidations, 

or acquisitions, under this section. Such 

rules shall identify classes of transactions, or 

specify criteria for transactions, that normally 

meet the standards established in paragraph 

(4). The Commission shall provide expedited 

review for such transactions. The 

Commission shall grant or deny any other 

application for approval of a transaction not 

later than 180 days after the application is 

filed. If the Commission does not act within 

180 days, such application shall be deemed 

granted unless the Commission finds, based 

on good cause, that further consideration is 

required to determine whether the proposed 

transaction meets the standards of paragraph 

(4) and issues an order tolling the time for 

acting on the application for not more than 

180 days, at the end of which additional 

period the Commission shall grant or deny 

the application. 

19. Section 203(a)(6), which is also 

new, provides that for purposes of this 

subsection, the terms ‘‘associate 

company,’’ ‘‘holding company,’’ and 

‘‘holding company system’’ have the 

meaning given those terms in the Public 

Utility Holding Company Act of 2005 

(PUHCA 2005).18

20. Section 1289(b) provides that the 

amendments made by this section shall 

take effect six months after the date of 

enactment of EPAct 2005. 

21. Section 1289(c) provides that the 

amendments made by subsection (a) 

shall not apply to any section 203 

application that was filed on or before 

the date of enactment of EPAct 2005. 

22. Section 203(b) of the FPA remains 

unchanged.19

III. Discussion 

23. The Commission proposes to 

revise 18 CFR Part 33 (Application for 

Acquisition, Sale, Lease, or Other 

Disposition, Merger or Consolidation of 

Facilities, or for Purchase or Acquisition 

of Securities of a Public Utility) and 18 

CFR 2.26 (Policies concerning review of 

applications under section 203) to 

implement amended section 203 of the 

FPA. 

A. Proposal To Amend 18 CFR Part 33 

1. Part 33—Title 

24. Currently, 18 CFR Part 33 is titled 

‘‘Application for Acquisition, Sale, 

Lease, or Other Disposition, Merger or 

Consolidation of Facilities, or for 

Purchase or Acquisition of Securities of 

a Public Utility.’’ The Commission 

proposes to revise the title of 18 CFR 

part 33 to read as follows: ‘‘Applications 

Under Federal Power Act Section 203.’’

2. Applicability and Definitions—18 

CFR 33.1 

25. Proposed section 33.1(a) is 

intended to clarify what transactions are 

subject to amended section 203 of the 

FPA and Part 33 as a result of amended 

sections 203(a)(1)(A)–(D) and (a)(2) of 

the FPA.20 Proposed new subsection 

33.1(b) would define certain new terms 

in amended section 203 that are not 

defined in EPAct 2005. 

a. ‘‘Value’’

26. Proposed subsection 33.1(b) 

would define ‘‘value.’’ Currently, 

subsection 33.1(b) defines ‘‘[v]alue in 

excess of $50,000’’ as ‘‘the original cost 

undepreciated as defined in the 

Commission’s Uniform System of 

Accounts prescribed for public utilities 

and licensees in part 101 of this 

chapter.’’

27. Before EPAct 2005, the question of 

what ‘‘value’’ means was not 

particularly significant for determining 

section 203 applicability, since most 

transactions involving the transfer of 

jurisdictional facilities clearly met the 

relatively low $50,000 threshold 

regardless of how ‘‘value’’ was defined. 

Most transactions involving the transfer 

of physical jurisdictional facilities 

(usually transmission) were clearly 

subject to section 203 simply because 

the ‘‘original cost undepreciated’’ of 

almost any transmission facility 

exceeded the relatively low $50,000 

threshold set forth in FPA section 

203(a). However, with the higher $10 

million threshold, the question of how 

to define ‘‘value’’ may become 

significant for determining whether 

section 203 applies to certain 

transactions involving jurisdictional 

facilities (either physical or paper),21

generation facilities, securities, 

individual companies or holding 

companies. 

28. As relevant here, we believe that 

‘‘value’’ can be viewed in two broad 

ways: Original/accounting cost value 

and market value. Original cost 

undepreciated is the amount actually 

paid for installing an original plant and 

equipment and additions thereto. A 

market value approach, on the other 

hand, bases value on the probable or 

expected future earnings or profits over 

the life of the asset. Different potential 

buyers of the asset will, of course, place 

different valuations on an asset, 

depending on their estimates of future 

expected profitability and their cost of 

capital. 

29. As discussed below, the 

Commission proposes to generally rely 

on a ‘‘market value’’ approach for 

determining whether asset transfers are 

jurisdictional under section 203, with 

the exception of transfers of wholesale 

contracts. We invite comment on 

whether the ‘‘market value’’ concept or 

other alternative concepts are 

appropriate. We also invite comment 

and suggestions on measures of market 

value or other measures of value. 

30. With respect to transactions 

involving the transfer of physical 

facilities, such as an existing generation 

facility or a transmission facility, which 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58639 

22Admittedly, this example addresses transfers of 

relatively small generation or transmission 

facilities. Even at a historical cost of $101 per 

kilowatt, the original cost of a 100 megawatt plant 

would exceed $10 million and thus the transfer 

would be jurisdictional. 

23 In Enron Power Marketing, Inc., 65 FERC 

¶ 61,305 at 62,405 (1993), the Commission merely 

noted, without discussion, that the value of the 

wholesale contract must exceed $50,000 for the 

transfer to be subject to section 203 of the FPA. See 

also Ocean State Power, 38 FERC ¶ 61,140 (1987). 

24We note that for purposes of determining 

destination markets to be used in the Appendix A 

analysis, Part 33 requires applicants to identify 

individual wholesale customers based on sales. 18 

CFR 33.3(c)(2). 

25Boston Edison Company Re: Edgar Electric 

Energy Company, 55 FERC ¶ 61,382 (1991) (Edgar). 

The Edgar standard of review is designed to prevent 

affiliate abuse and to ensure prices that are 

consistent with competitive outcomes. The Edgar 

decision outlined three methods by which a buyer 

could demonstrate that the transaction was free 

from potential affiliate abuse. First, the buyer can 

present evidence of direct head-to-head competition 

either through a formal solicitation or an informal 

negotiation process. Second, the buyer can present 

evidence of the prices that non-affiliated buyers 

were willing to pay for similar services to the 

proposed affiliate sale. Third, the buyer can present 

benchmark evidence showing the terms, prices and 

conditions of sales of similar services made by nonaffiliated sellers in the relevant market. Id. at 

62,168–69. 

26However, we note that EPAct 2005 §§ 1284(d) 

and (e) expand the Commission’s criminal and civil 

penalty authority, which will discourage 

Continued 

is addressed by amended subsections 

203(a)(1)(A) and (D), the use of ‘‘original 

cost undepreciated’’ could lead to a 

different jurisdictional determination 

for facilities of equal size. For example, 

two generation units of the same size 

and type, but of substantially different 

ages, would likely have different values 

based on ‘‘original cost undepreciated.’’

The transfer of the newer generation 

unit could be deemed jurisdictional 

because its original construction cost 

exceeded $10 million, while the transfer 

of the older unit might not be 

jurisdictional because its original 

construction cost was less than $10 

million. Thus, although the effects on 

markets of the transfer of both 

generation units could be the same, 

under the existing regulations the 

Commission would be prevented from 

evaluating the public interest 

implications of the transfer of the older 

unit.22 Therefore, the Commission 

proposes that ‘‘value,’’ as applied to 

transmission facilities and existing 

generation facilities, be defined as the 

market value of such facilities. We 

recognize, however, that the 

determination of the market value for 

transmission facilities can be difficult in 

some instances and thus propose that, 

in the absence of a readily ascertainable 

market value, original cost 

undepreciated would be used. We seek 

comment on whether this measure of 

‘‘value’’ of transmission and generation 

facilities, or some other measure, should 

be used, for transactions between nonaffiliates and between affiliates. For 

transactions involving transfers of 

facilities between non-affiliates, the 

Commission believes that market value 

will, in most circumstances, be reflected 

in the transaction price. However, for a 

transaction between affiliates, it cannot 

be readily assumed that the market 

value will be reflected in the transaction 

price, since the buyer and seller do not 

bargain at arms’ length. A possible 

alternative measure is original cost 

undepreciated. Therefore, the 

Commission seeks comments on these 

or other possible alternatives for 

defining value for transactions between 

affiliates. 

31. With respect to paper 

jurisdictional facilities (usually 

wholesale contracts), Commission 

precedent does not address how the 

value of a wholesale contract should be 

determined for purposes of determining 

whether section 203 applies.23 Rather, it 

appears to have been assumed, by 

applicants and the Commission alike, 

that the value of a wholesale contract, 

however measured, would exceed 

$50,000. However, with the increase in 

the value threshold to $10 million in 

amended section 203, the ‘‘value’’ of a 

wholesale contract may become 

significant. 

32. For example, a wholesale contract 

may have a total revenue stream that 

exceeds $10 million, but with profits of 

much less than $10 million. A market 

value approach would involve basing 

‘‘value’’ on the price or consideration 

paid for the contract, which, as with any 

other asset, would depend on the 

valuation of expected profits over the 

remaining life of the contract. 

Alternatively, the significance of a 

wholesale contract in terms of its effect 

on the market may be better reflected by 

defining ‘‘value’’ as total expected 

contract revenues over the remaining 

life of the contract. Total revenues are 

directly related to the quantity of power 

and energy delivered under the contract, 

which contributes to total market 

supply.24 It may also be appropriate to 

factor into this determination the value 

of options that might affect the price 

and any rights to extend the contract or 

change the quantities sold. At this 

juncture, however, we propose that for 

purposes of determining the 

applicability of amended section 203 

and Part 33 to a given transaction, the 

value of any wholesale contract 

included in the transaction would be 

based on total expected contract 

revenues over the remaining life of the 

contract. We seek comment on whether 

this measure of ‘‘value’’ of wholesale 

power sales contracts, a market value 

measure, or some other measure, should 

be used. 

33. In addition, existing section 203 

requires prior Commission approval for 

a public utility to acquire any security 

of another public utility, regardless of 

the value of the security. Thus, up to 

this point there was no need to define 

‘‘value’’ for security acquisitions in Part 

33. Amended sections 203(a)(1)(C) and 

(a)(2), however, state that the securities 

must have a value in excess of $10 

million. The Commission proposes to 

define ‘‘value’’ of a security as the 

market price at the time the security is 

acquired. For transactions between nonaffiliated companies, we will rebuttably 

presume that the market value is the 

agreed-upon transaction price. We seek 

comment on whether this measure of 

‘‘value’’ of securities, or some other 

measure, should be used. We also seek 

comment on how to determine value for 

security transactions involving affiliates 

if the securities are not widely traded. 

For example, should the Commission 

consider using the Edgar standard 25 of 

review when determining value in 

affiliate transactions? While this 

valuation method would not require a 

direct solicitation, the Commission 

seeks comments as to whether we 

should give particular weight to 

evidence of non-affiliate transactions 

involving either non-affiliated buyers or 

sellers of securities of similarly situated 

utilities or assets. 

34. The Commission proposes to 

define ‘‘value’’ with respect to a merger 

or consolidation with a transmitting 

utility, an electric utility company, or a 

holding company in a holding company 

system that includes a transmitting 

utility, or an electric utility company, 

with a value in excess of $10 million, 

as used in amended section 203(a)(2), as 

‘‘market value.’’ As noted above, we 

would expect that in most 

circumstances ‘‘market value’’ will be 

reflected in the transaction price for 

transactions between non-affiliates. We 

seek comment on whether this measure 

of ‘‘value’’ or some other measure 

should be used in these circumstances. 

35. Further, given the increased 

significance of valuation of a transaction 

under amended section 203, we solicit 

comment on whether the Commission’s 

existing record keeping and reporting 

requirements, outside the section 203 

context, provide an adequate basis for 

monitoring jurisdictional entities’

determinations of when a section 203 

application is required.26 For example, 

58640 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

noncompliance with the requirements of FPA 

section 203. 

27Reporting Requirement for Changes in Status 

for Public Utilities with Market-Based Rate 

Authority, Order No. 652, 70 FR 8,253 (Feb. 18, 

2005), FERC Stats. & Regs. ¶ 31,175, order on reh’g, 

111 FERC ¶ 61,413 (2005). 

28 16 U.S.C. 796 (2000). 

29EPAct 2005 § 1291. 

30 Id. at § 1262. 

31 Id. at § 1262(5). 

32 Id. at § 1262. 

33 ‘‘Unregulated’’ companies, as the term is used 

herein, would include those that have no rate 

regulation oversight (e.g., real estate businesses) as 

well as those that are regulated on a market rate 

basis (e.g., wholesale sellers granted market-based 

rate authority by the Commission). 

34See Central Illinois Public Service Company, 42 

FERC ¶ 61,073 at 61,328 (1988); Boston Edison 

Company and BEC Energy, 80 FERC ¶ 61,274 at 

61,994 (1997). 35See Sierra Pacific Power Company, 95 FERC 

¶ 61,193 at 61,678–79 (2001) (Sierra Pacific). 

do FERC Form 1s or Order No. 652 27

market-based rate change in status 

reports provide sufficient information to 

monitor compliance with section 203? 

b. ‘‘Existing Generation Facility’’

36. Proposed subsection 33.1(b) also 

defines the term ‘‘existing generation 

facility.’’ Amended section 203(a)(1)(D) 

provides that the acquisition of ‘‘an 

existing generation facility’’ with a 

value in excess of $10 million ‘‘that is 

used for interstate wholesale sales and 

over which the Commission has 

jurisdiction for ratemaking purposes’’ is 

now subject to section 203 of the FPA. 

37. The Commission proposes to 

define ‘‘existing generation facility’’ for 

section 203 purposes as a generation 

facility that is operational at the time 

the transaction is consummated. If such 

a generation facility is intended to be 

used in whole or in part for wholesale 

sales in interstate commerce by a public 

utility, it is subject to our jurisdiction 

for ratemaking purposes and thus 

covered under amended section 

203(a)(1)(D). Although the statutory 

provision refers to a facility that ‘‘is’’

used for wholesale sales (and over 

which the Commission has jurisdiction 

for ratemaking purposes), we believe a 

reasonable interpretation is that the 

provision would apply to newly 

constructed facilities that have already 

been energized at the time the 

transaction is consummated and are 

intended to be used in whole or in part 

for wholesale sales in interstate 

commerce by public utilities. We also 

note that if it can be demonstrated that 

a facility is used exclusively for retail 

sales, then amended section 203(a)(1)(D) 

is not triggered. We seek comment on 

the definition of the term ‘‘existing 

generation facility.’’ We seek comment 

on whether ‘‘at the time the section 203 

transaction is consummated’’ is the 

correct point in time for determining 

whether a facility is an ‘‘existing’’

facility. 

c. ‘‘Associate Company,’’ ‘‘Holding 

Company,’’ ‘‘Holding Company 

System,’’ ‘‘Transmitting Utility,’’ and 

‘‘Electric Utility Company’’

38. The term ‘‘transmitting utility’’ is 

already defined in amended section 3 of 

the FPA 28 as ‘‘an entity (including an 

entity described in section 201(f)) that 

owns, operates, or controls facilities 

used for the transmission of electric 

energy—(A) in interstate commerce; (B) 

for the sale of electric energy at 

wholesale.’’ 29

39. Amended section 203(a)(6) states 

that the terms ‘‘associate company,’’

‘‘holding company,’’ and ‘‘holding 

company system’’ shall have the 

meaning given those terms in PUHCA 

2005.30

40. We note that amended section 

203(a)(2) refers to the term ‘‘electric 

utility company,’’ but provides no 

definition of that term. However, 

‘‘electric utility company’’ is a PUHCA 

term and we believe that the most 

reasonable interpretation, especially in 

light of amended section 203(a)(6), is 

that it has the same meaning as used in 

PUHCA 2005, which is any company 

that owns or operates facilities used for 

the generation, transmission, or 

distribution of electric energy for sale.31

We seek comments on this proposed 

definition. 

d. ‘‘Non-Utility Associate Company’’

41. Amended section 203(a)(4) adds 

the new requirement that before we can 

approve a proposed section 203 

transaction, the Commission must find 

that the transaction will not result in 

cross-subsidization of a non-utility 

associate company or a pledge or 

encumbrance of utility assets for the 

benefit of an associate company, unless 

that cross-subsidization, pledge, or 

encumbrance will be consistent with the 

public interest. However, because EPAct 

2005 provides no definition of the term 

‘‘non-utility associate company,’’

proposed subsection 33.1(b) would 

define this term. 

42. PUHCA 2005, Subtitle F of EPAct 

2005, defines an ‘‘associate company’’ of 

a company as any company in the same 

holding company system with such 

company, but does not define ‘‘nonutility associate company.’’ 32 A 

reasonable interpretation, as explained 

below, is that Congress was concerned 

about the potential that customers of 

‘‘regulated’’ public utilities (persons that 

own or operate facilities used for 

wholesale sales or transmission in 

interstate commerce) would 

inappropriately subsidize ‘‘unregulated’’

associate companies 33 in the same 

holding company system, whether the 

associate companies were in energy or 

non-energy businesses. Such crosssubsidization can harm not only 

customers of the regulated public utility 

but it can also harm competition by 

giving ‘‘unregulated’’ sellers a 

competitive advantage. Similarly, 

Congress was concerned that regulated 

public utility assets not be 

inappropriately pledged or used to 

support non-regulated associate 

companies, to the harm of customers of 

the regulated public utility. 

43. Historically, the Commission has 

used the term ‘‘non-utility’’ in more 

than one context and with more than 

one meaning. In the context of 

considering cross-subsidization 

concerns arising from the formation of 

holding companies, ‘‘non-utility 

operations’’ has been used to refer to the 

operation of businesses completely 

uninvolved in any aspect of the 

generation, transmission, distribution, 

or sale of electricity.34 An example 

would be an associate company that 

engages in real estate development or 

residential construction. In the context 

of considering cross-subsidization or 

affiliate abuse concerns associated with 

power transactions between public 

utility affiliates, the Commission has 

differentiated between utility activities 

and non-utility activities according to 

whether they were being conducted by 

a public utility with captive wholesale 

or retail customers served under costbased rates (sometimes described as a 

‘‘traditional public utility’’). In this 

context, the Commission has sometimes 

referred to a power marketer (a public 

utility authorized to charge marketbased rates but without captive 

customers) affiliate of a traditional 

public utility as a non-utility affiliate.35

44. To provide the broadest crosssubsidization protection, the 

Commission proposes to interpret the 

term ‘‘non-utility associate company’’ to 

mean any associate company in a 

holding company system other than a 

public utility or electric utility company 

that has wholesale or retail customers 

served under cost-based regulation. 

Therefore, a non-utility associate 

company would include, for example, a 

power marketer, a generator that does 

not have captive customers, a gas 

marketer, a fuel supply company or a 

company that provides inputs to power 

production, or a company that is 

involved in business activities not 

related to the generation, transmission, 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58641 

36These are examples only. This list is not 

intended to be exhaustive. 

37 16 U.S.C. 824d (2000). 

38See e.g., Sierra Pacific, 95 FERC ¶ 61,193; 

Boston Edison Company, 80 FERC ¶ 61,274 (1997). 

39Regulation of Cash Management Practices, 

Order No. 634, 68 FR 40,500 (Jul. 8, 2003), III FERC 

Stats. & Regs. ¶ 31,145 (June 26, 2003), Order No. 

634–A, 68 FR 61,993 (Oct. 31, 2003), III FERC Stats. 

& Regs. ¶ 31,152 (2003) (Cash Management Rule). 

40We note, however, that in our recently issued 

notice of proposed rulemaking to implement 

PUHCA 2005, we have sought comment on whether 

the Commission should apply the lower of cost or 

market standard for the provision of non-power 

goods and services or if we should instead adopt 

the SEC ‘‘at cost’’ standard. Repeal of the Public 

Utility Holding Company Act of 1935 and 

Enactment of the Public Utility Holding Company 

Act of 2005, 112 FERC ¶ 61,300 at P 15 (2005) 

(PUHCA NOPR). 

41 16 U.S.C. 824e (2000). 

42Additionally, issues can arise regarding costs 

that are allocated among holding company affiliates 

that all have captive customers. This does not raise 

the same concerns discussed above regarding the 

transfer of benefits from captive customers to 

shareholders. Rather, it raises the issue of one set 

of captive customers unfairly subsidizing another 

set of captive customers. The Commission 

addresses these types of issues in the context of 

setting cost-based rates under FPA sections 205 and 

206. Historically, a related problem occurred when 

regulated companies traded an asset at inflated 

prices to the detriment of customers. Modern 

accounting rules generally prevent this problem. 

43Public Service Company of Colorado and 

Southwestern Public Service Company, 75 FERC ¶

61,325 at 62,046 (1996); Merger Policy Statement at 

¶ 30,124–25; 18 CFR 2.26(e). However, as is 

discussed below, with the repeal of the PUHCA 

Continued 

distribution, or sale of electricity.36 We 

seek comment on whether this 

definition is appropriate or whether the 

Commission should use a narrower 

definition, e.g., one which defines a 

‘‘non-utility associate company’’ as a 

company that is in a business not 

related to generation, transmission, 

distribution, or sale of electricity. 

3. Contents of Application—General 

Information Requirements Regarding 

Cross-Subsidization—18 CFR 33.2(j) 

45. Proposed new subsection 33.2(j) 

would implement section 203(a)(4) by 

requiring applicants to include in their 

section 203 applications an explanation 

of how applicants are providing 

assurance that the proposed transaction 

will not result in cross-subsidization of 

a non-utility associate company or 

pledge or encumbrance of utility assets 

for the benefit of an associate company, 

with appropriate evidentiary support for 

such explanation; or, if no such 

assurance can be provided, an 

explanation of how such crosssubsidization, pledge, or encumbrance 

will be consistent with the public 

interest. This explanation will be 

Exhibit M to the applicant’s application. 

The Commission seeks comment on 

what evidence parties should be 

required to submit to support any 

explanation offered under this 

subsection. 

46. EPAct 2005 provides no guidance 

on how the Commission, when 

reviewing section 203 applications, 

should determine whether or not a 

proposed transaction will result in 

cross-subsidization or a pledge or 

encumbrance of utility assets for the 

benefit of an associate company. The 

Commission has sought to guard against 

potential cross-subsidization and 

affiliate abuse when it reviews 

applications for cost-based or marketbased rate authority under section 205 

of the FPA 37 or dispositions of 

jurisdictional facilities under section 

203 involving public utilities with 

captive customers or their affiliates.38

The Commission also has in place cash 

management rules to monitor 

proprietary capital ratios and money 

lending or other financial arrangements 

that can harm regulated companies.39 In 

light of the Congress’ clear directive in 

EPAct 2005 that the Commission make 

findings regarding cross-subsidization 

and the pledge or encumbrance of 

utility assets in the context of a section 

203 application, we seek comment, as 

discussed below, on what additional 

safeguards or conditions may need to be 

placed on section 203 transactions. 

47. The Commission’s primary focus 

has been to prevent a transfer of benefits 

from a traditional public utility’s 

captive customers to shareholders of the 

public utility’s holding company due to 

an intra-system transaction that involves 

power or energy, generation facilities, or 

non-power goods and services. 

Concerns arise both in the circumstance 

in which an ‘‘unregulated’’ affiliate (e.g., 

a power marketer or non-utility affiliate) 

provides power or goods and services to 

a public utility with captive customers, 

as well as the circumstance in which the 

public utility with captive customers 

provides power or goods and services to 

the ‘‘unregulated’’ affiliate. For instance, 

a traditional public utility with captive 

customers served at cost-based rates 

may purchase power from its marketing 

affiliate at a price above market or sell 

power to its marketing affiliate at belowmarket prices, thus transferring benefits 

from customers to shareholders of the 

holding company. Customers served at 

cost-based rates by a traditional public 

utility may also be harmed if the 

traditional public utility buys a 

generation facility from an affiliate at a 

price greater than market or sells a 

generation plant to an affiliate at less 

than cost or market value, whichever is 

higher. Further, customers may be 

harmed if the traditional public utility 

purchases non-power goods and 

services from an affiliate at above 

market prices or sells non-power goods 

and services to an affiliate at less than 

the higher of cost or market value.40

48. The Commission’s regulatory tool 

for protecting against inappropriate 

cross-subsidization, on an on-going 

basis, has primarily been its FPA 

sections 205 and 206 41 rate authority. 

This includes: review of just and 

reasonable rates and prudently incurred 

costs (e.g., costs of purchasing power or 

non-power goods and services from an 

affiliate) for public utilities that sell at 

cost-based rates; imposing conditions 

and codes of conduct on market-based 

rate authorizations for sellers that have, 

or are affiliated with companies that 

have, captive customers; and auditing 

the accounts, books, and records of 

public utilities to ensure that 

inappropriate cross-subsidization does 

not occur. 

49. As noted above, the Commission, 

through its FPA sections 205 and 206 

ratemaking authority, already protects 

in several ways against affiliate abuse in 

connection with power and energy 

transactions and non-power transactions 

between traditional public utilities and 

their affiliates. The latter affiliates may 

be affiliated generators or marketers 

with market-based rates, affiliate 

companies that provide goods such as 

fuel or supplies, or service company 

affiliates that provide services such as 

accounting or legal services. When we 

grant market-based rate authority under 

section 205 of the FPA, the Commission 

requires that a power marketer not sell 

power to, or purchase power from, any 

utility affiliate without prior 

Commission approval. Another 

requirement is that sales of non-power 

goods and services from the traditional 

public utility to a marketing affiliate 

occur at the higher of cost or market 

value and that the traditional public 

utility’s purchases of non-power goods 

and services from an affiliate (e.g., an 

affiliate fuel company) occur at market 

value or less. Under section 205 of the 

FPA, the Commission also applies the 

Edgar standard to ensure that a 

traditional public utility’s power 

purchases from an affiliate occur at a 

just and reasonable rate.42

50. In the section 203 context, the 

Commission currently requires that to 

gain section 203 approval without a 

hearing, if the transaction would create 

a registered holding company under 

PUHCA 1935, applicants must agree to 

abide by the Commission’s policy on 

intra-system transactions for non-power 

goods and services.43 Further, when a 

58642 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

1935 registered holding companies will no longer 

exist and there will be no SEC review of non-power 

goods and services transactions; thus, all intrasystem affiliate transactions will be subject to this 

Commission’s review and conditioning if relevant 

to jurisdictional rates. 

44 16 U.S.C. 825 (2000). 

45New England Power Company, 87 FERC ¶

61,287 (1999). 

46Cash Management Rule at P 9. 

47See, e.g., In the Matter of the Application of 

Enron Corp for an Order Authorizing the Exercise 

of Influence Over Portland General Electric 

Company, Public Utility Commission of Oregon, 

Order No. 97–196, UM–814 (June 4, 1997); Joint 

Petition of Long Island Lighting Company and The 

Brooklyn Union Gas Company for Authorization 

under Section 70 of the Public Service Law to 

Transfer Ownership to an Unregulated Holding 

Company and Other Related Approvals, New York 

Public Service Commission, Case 97–M–0567 (April 

14, 1998); Joint Application of Pacific Enterprises, 

Enova Corporation, Mineral Energy Company, B 

Mineral Energy Sub and G Mineral Energy Sub for 

Approval of a Plan of Merger of Pacific Enterprises 

and Enova Corporation With and Into B Mineral 

Energy Sub and G Mineral Energy Sub, the Wholly 

Owned Subsidiaries of A Newly Created Holding 

Company, Mineral Energy Company, 79 CPUC2d 

343, D.98–03–073 (March 26, 1998); Standards of 

Conduct for Distribution Companies and Their 

Competitive Affiliates, 220 Mass. Code Regs. 12 

(2005). 

48 In addition to these types of conditions, the 

Commission could, depending upon the specific 

facts presented, consider as a condition of approval 

of a proposed section 203 transaction that the 

transaction be structured a different way to avoid 

inappropriate cross-subsidization. 

49We note that in our recently issued notice of 

proposed rulemaking to implement PUHCA 2005, 

we sought comment on whether the Commission 

should amend its rules or policies to provide 

additional protection against inappropriate crosssubsidization or pledges or encumbrances of utility 

assets, particularly pursuant to our FPA section 205 

and 206 ratemaking authority. PUHCA NOPR at P 

26. 

50As set forth in the Merger Policy Statement, a 

complete application is one that adequately and 

accurately describes the merger being proposed and 

that contains all the information necessary to 

explain how the merger is consistent with the 

public interest, including an evaluation of the 

merger’s effect on competition, rates, and 

regulation. Merger Policy Statement at ¶ 30,127. 

The Commission’s review process will begin when 

the application is deemed to be complete. 

public utility disposes of its 

jurisdictional facilities to another 

company, whether domestic or foreign, 

the Commission protects public utility 

customers against inappropriate crosssubsidization by conditioning its 

authorization on the applicants’

acceptance of the Commission’s 

authority, under section 301(c) of the 

FPA,44 to review the parent company’s 

books and records as they relate to 

transactions with or the business of the 

public utility.45

51. Finally, with respect to potential 

encumbrances or pledges of utility 

assets, the Commission requires 

Commission-regulated entities that have 

not been granted waivers of our 

accounting and reporting rules to file 

copies of all cash management 

arrangements and changes to these 

arrangements. We also require 

jurisdictional entities that participate in 

such programs to calculate their 

proprietary capital ratios quarterly and 

to notify the Commission if they fall 

below 30 percent of total capitalization 

and provide other detailed 

information.46

52. All of these policies seek to 

safeguard the interests of captive 

customers served at cost-based rates and 

protect regulated public utility assets. 

However, any merger transaction that 

creates another affiliate opens the door 

to possible affiliate abuse or crosssubsidization concerns or pledges or 

encumbrances of assets. There are 

various ways we could address these 

concerns. We note that some state 

commissions, when reviewing a merger 

transaction, impose specific conditions 

designed to protect customers against 

unfair competitive practices, crosssubsidization, and affiliate abuse.47

Examples of these conditions include, 

among other things: Reporting and 

information access requirements; 

restrictions on intra-corporate 

transactions that result in direct charges 

or cost allocations; a prohibition on the 

local utility bearing any of the merger 

acquisition premium, transaction costs, 

or merger transition costs; measures to 

protect the utility’s financial position; a 

service quality program, under which 

the local utility would be subject to 

revenue requirement reductions if it did 

not meet certain performance targets 

established annually; and restrictions on 

a holding company’s access to the local 

utility’s power, natural gas assets, and 

its individual and aggregated customer 

information. Given Congress’

amendment of section 203, the 

Commission solicits comments on the 

adequacy of its present policies 

preventing affiliate abuse and crosssubsidization, and whether conditions 

such as those imposed by state 

commissions may need to be placed on 

section 203 transactions.48

53. We also seek comment on whether 

additional conditions should be placed 

on section 203 approvals to ensure that 

there is no pledge or encumbrance that 

harms utility customers.49 Specifically, 

we seek comment on the types of 

activities that would typically result in 

a pledge or encumbrance and the types 

of pledges and encumbrances that 

would be consistent with the public 

interest. We also seek comment on 

whether the Commission should require 

that all existing pledges and 

encumbrances be disclosed in any 

section 203 application proposing any 

sort of corporate reorganization. 

54. The Commission notes that 

section 203(a)(4) refers to a pledge or 

encumbrance of utility assets for the 

benefit of an ‘‘associate’’ company, as 

opposed to a ‘‘non-utility associate’’

company. Since an associate company 

may either be a utility or non-utility, we 

interpret this provision to require the 

Commission to determine whether the 

transaction will result in the use of 

utility assets to finance, or serve as 

collateral for, activities engaged in by an 

associate company, whether it is a nonutility or a utility. 

4. Commission Procedures for 

Consideration of Applications Under 

Section 203 of the FPA—18 CFR 33.11 

55. Amended section 203(a)(5) of the 

FPA directs the Commission to adopt 

procedures for the expeditious 

consideration of applications for the 

approval of dispositions, consolidations, 

or acquisitions under section 203 of the 

FPA. Section 203(a)(5) also requires the 

Commission to ‘‘identify classes of 

transactions, or specify criteria for 

transactions, that normally meet the 

standards established in [section 

203(a)(4)].’’

56. Proposed New sections 33.11(a) 

and (b) would implement amended 

section 203(a)(5). Specifically, proposed 

subsection 33.11(a) provides that the 

Commission will act on completed 

applications for approval of a 

transaction (i.e., one that is consistent 

with the requirements of Part 33), not 

later than 180 days after the completed 

application is filed.50 If the Commission 

does not act within 180 days, such 

application shall be deemed granted 

unless the Commission finds, based on 

good cause, that further consideration is 

required and issues an order tolling the 

time for acting on the application for not 

more than 180 days, at the end of which 

additional period the Commission shall 

grant or deny the application, as 

required by amended section 203 of the 

FPA. 

57. Proposed subsection 33.11(b) 

would provide for the expeditious 

consideration of completed section 203 

applications that are not contested, are 

not mergers, and are consistent with 

Commission precedent, because they 

should typically meet the standards 

established in section 203(a)(4). 

58. We note that, generally, the most 

critical period of the Commission’s 

review of a particular section 203 

application is the time between the end 

of the notice period and the issuance of 

a Commission decision (i.e., the review 

period). The length of the review period 

needed depends on the complexity of 

the application, issues raised by any 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58643 

51We note that PUHCA 1935 exempted from its 

requirements certain acquisitions of foreign utility 

companies by a holding company with operations 

in the United States. 15 U.S.C. 33 (2000); 17 CFR 

250.57 (2005). However, amended section 203 

appears to provide no such exemption. 

52See Senate Floor Statements by Senators 

Bingaman (D–NM) and Domenici (R–NM), H.R. 6, 

Energy Policy Act of 2005, Congressional Record at 

S9359 (July 29, 2005) (discussing concerns 

regarding Commission approval of certain foreign 

transactions outside of the United States). 

53See 18 CFR 33.3 and 33.4. 

54Filing Requirements Rule at ¶ 31,877–78. 

55EPAct 2005 § 1263. 

56See 17 CFR part 250 (2005). 

57Ohio Power Company v. FERC, 954 F.2d 779 

(D.C. Cir. 1992), cert. denied, 498 U.S. 73 (1992). 

protests, Commission staff’s analysis, 

and the need to hold an evidentiary 

hearing. In the Filing Requirements 

Rule, we stated that we typically 

process uncontested non-merger 

applications within 60 days of the date 

of filing and protested non-merger 

applications within 90 days of filing. 

Since the issuance of that rule, the 

Commission has met these goals in 

almost all instances. 

59. The Commission cannot provide a 

comprehensive description of all the 

classes or types of transactions that will 

be encompassed in the expedited review 

category. However, the Commission 

proposes that the transactions that 

would generally warrant expedited 

review include: (1) A disposition of only 

transmission facilities, particularly 

those that both before and after the 

transaction remain under the functional 

control of a Commission-approved RTO 

or independent system operator; (2) 

transfers involving generation facilities 

of a size that do not require an 

Appendix A analysis; (3) internal 

corporate reorganizations that do not 

present cross-subsidization issues; and 

(4) the acquisition of a foreign utility 

company by a holding company with no 

captive customers in the United 

States.51

60. With respect to the latter category, 

the acquisition of a foreign utility 

company by a holding company with no 

captive customers in the United States, 

we recognize that amended section 

203’s requirement for regulatory 

approval could have the potential to 

impede or have a chilling effect on 

investment—particularly if the 

transaction were subjected to a lengthy 

regulatory review. Such a transaction 

would not cause competitive concerns 

in the United States and, further, there 

would be no concerns about crosssubsidization that harms captive 

customers in the United States. In 

addition, even with respect to the 

acquisition of a foreign utility company 

by a holding company with captive 

customers in the United States, there 

may be safeguards or conditions that 

could be adequate in order to expedite 

approval of such transactions. The 

Commission does not want to impede 

investment in the U.S. or abroad and we 

seek comment on procedures the 

Commission might adopt, or safeguards 

it might require, to pre-approve or 

expedite such transactions while at the 

same time protecting U.S. captive 

customers.52

61. For the section 203 applications 

that involve a competitive analysis per 

the guidelines of the revised filing 

requirements,53 or that may raise crosssubsidization issues or other issues, the 

amount of time needed for review will 

depend on the complexity of the issues 

involved. In cases where the 

Commission decides that a hearing 

should be held, establishing a specific 

review period could also be 

problematic. However, as provided in 

amended section 203(a)(5), the 

Commission must grant or deny the 

application within 360 days of filing. 

62. The Commission also proposes to 

indicate the length of the notice period 

for various types of filings. In the Filing 

Requirements Rule, the Commission 

stated that we will notice section 203 

filings that contain either a competitive 

analysis screen or a vertical competitive 

analysis (per the requirements of part 

33) for 60 days and that we will notice 

all other section 203 filings, including 

mergers that do not require a 

competitive analysis, for less than 60 

days.54 Since the issuance of the Filing 

Requirements Rule, the Commission 

has, in almost all instances, met these 

goals. 

63. Occasionally, applicants have 

sought shortened notice periods, to 

achieve certain financial or tax 

objectives or to serve certain business 

purposes. Most of these applications, 

particularly those that do not involve a 

competitive analysis and do not raise 

other competitive concerns from 

affiliate transactions, do not require a 

complex analysis and, thus, they 

warrant a shortened notice period. 

64. Thus, we have continued to apply 

our notice policy in a way that has 

allowed us to continue processing 

section 203 applications quickly and 

that is consistent with reasonable 

business goals and purposes. 

Accordingly, we expect to have a 60-day 

notice period for section 203 

applications that involve, contain, or 

require a competitive analysis per the 

revised filing requirements and a 21-day 

notice period for all other section 203 

applications, except, as explained 

below, certain applications that may 

raise cross-subsidization concerns. 

However, we do not propose to 

formalize this policy by rule, so that we 

can maintain the flexibility needed to 

deal with varying circumstances. 

65. In determining the length of the 

notice period, as a matter of policy, the 

Commission expects to have, in most 

instances, a notice period between 21 

days and 60 days for applications that 

seek authorization to transfer ownership 

of a generation plant from one affiliate 

or associate company to another 

company within the same corporate 

structure and for other applications that 

may raise cross-subsidization or pledge 

or encumbrance issues. Not included in 

this category are transactions that 

merely change upstream ownership 

interests held by parent companies of 

public utilities or transactions that do 

not alter the terms of power supply or 

power supply costs for captive 

customers. 

B. Summary of the Commission’s 

Proposal To Amend 18 CFR 2.26, the 

Merger Policy Statement 

1. Effect on Regulation—18 CFR 2.26(1) 

66. Section 2.26(b) lists the three 

factors that the Commission will 

generally consider in determining 

whether a proposed transaction subject 

to section 203 is consistent with the 

public interest. When considering the 

third factor, a proposed transaction’s 

effect on federal regulation, section 

2.26(e)(1) states that ‘‘[w]here the 

merged entity would be part of a 

registered public utility holding 

company, if applicants do not commit 

in their application to abide by this 

Commission’s policies with regard to 

affiliate transactions, the Commission 

will set the issue for a trial-type 

hearing.’’

67. However, because EPAct 2005 

repeals PUHCA 1935,55 activities of 

registered holding companies that were 

previously subject to SEC regulation, 

including intercompany transactions, 

will no longer be exempt from this 

Commission’s regulation once PUHCA 

1935 repeal takes effect on February 8, 

2006.56 In particular, the Commission’s 

conditions and policies under FPA 

sections 205 and 206 with respect to 

non-power goods and services 

transactions between holding company 

affiliates, discussed previously, can be 

applied to all public utilities that are 

members of holding companies.57 In 

addition, the Commission will have 

authority to review allocations of 

service company costs among members 

of holding companies that have public 

utilities with captive customers. There 

58644 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

58 44 U.S.C. 3507(d) (2000). 

59 5 CFR 1320.11 (2005). 

60Order No. 486, Regulations Implementing the 

National Environmental Policy Act, 52 FR 47,897 

(Dec. 17, 1987), FERC Stats. & Regs. Preambles 

1986–1990 ¶ 30,783 (1987). 

61 18 CFR 380.4(a)(2)(ii) (2005). 

62 5 U.S.C. 601–12 (2000). 

is thus no longer a concern about any 

potential shift in regulation from this 

Commission to the SEC under the effect 

of regulation factor, and we propose to 

delete section 2.26(e)(1) from our 

consideration of whether a proposed 

203 transaction is consistent with the 

public interest. However, applicants are 

still required to address whether the 

transaction will have any other effect on 

the Commission’s regulation. 

2. Proposed New 18 CFR 2.26(f) 

68. Proposed new subsection 2.26(f) 

would be added to the Commission’s 

policies and would state that the 

Commission will also not approve a 

transaction that will result in crosssubsidization of a non-utility associate 

company or pledge or encumbrance of 

utility assets for the benefit of an 

associate company unless that crosssubsidization, pledge, or encumbrance 

will be consistent with the public 

interest. 

IV. Information Collection Statement 

69. The following collection of 

information contained in this proposed 

rule has been submitted to the Office of 

Management and Budget (OMB) for 

review under section 3507(d) of the 

Paperwork Reduction Act of 1995.58

OMB’s regulations require OMB to 

approve certain information collection 

requirements imposed by agency rule.59

70. Comments are solicited on the 

need for this information, whether the 

information will have practical utility, 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected, and any suggested methods 

for minimizing respondents’ burden. 

The Commission notes that in proposing 

to modify its current part 33 filing 

requirements it is carrying out an 

express statutory mandate set forth in 

EPAct 2005. The regulations that the 

Commission proposes should have a 

minimal impact on the current reporting 

burden associated with an individual 

application, as they do not substantially 

change the filing requirements with 

which section 203 applicants must 

currently comply. Further, the 

Commission does not expect the total 

number of section 203 applications 

under amended section 203 to increase 

substantially. While the proposed 

rulemaking implements the expanded 

scope of section 203 to include certain 

transactions involving existing 

generation facilities and certain holding 

company acquisitions, amended section 

203 also substantially raises the value 

threshold to be used in determining 

whether certain classes of transactions 

involving the transfer of jurisdictional 

facilities and acquisition of securities 

(both of which are already subject to the 

Commission’s section 203 jurisdiction) 

are subject to section 203. As a result, 

applications in these latter two classes 

should decline somewhat. 

Title: FERC–519, Applications Under 

Federal Power Act Section 203. 

Action: Proposed Information 

Collection. 

OMB Control No: 1902–0082. 

The applicant will not be penalized 

for failure to respond to this information 

collection unless the information 

collection displays a valid OMB control 

number or the Commission has 

provided justification as to why the 

control number should not be 

displayed. 

Respondents: Businesses or other for 

profit. 

Necessity of the Information: The 

information collected under the 

requirements of FERC–519 is used by 

the Commission to implement section 

203 of the Federal Power Act and the 

Code of Federal Regulations under 18 

CFR Part 33 and 18 CFR 2.26. This 

notice of proposed rulemaking is 

limited to implementing amended 

section 203 of the FPA, which directs 

the Commission to adopt a rule to do so. 

Further, the proposed rule does not 

substantially change the current filing 

requirements or regulations that 

applicants must comply with for 

transactions subject to FPA section 203. 

Internal Review: The Commission has 

reviewed these requirements pertaining 

to the implementation of amended 

section 203 of the FPA and has 

determined that the proposed 

requirements are necessary for the 

Commission to meet the provisions of 

the Energy Policy Act of 2005. These 

requirements conform to the 

Commission’s plan for efficient 

information collection, communication, 

and management within the bulk power 

system. 

71. Please send your comments 

concerning the collection of information 

and the associated burden estimates to: 

(1) Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426 [Attention: 

Michael Miller, Office of the Executive 

Director, Phone (202) 502–8415, fax 

(202) 273–0873, e-mail: 

michael.miller@ferc.gov] and (2) the 

Office of Management and Budget 

[Attention: Desk Officer for the Federal 

Energy Regulatory Commission, fax 

(202) 395–7285, e-mail 

oira_submission@omb.eop.gov]. 

V. Environmental Analysis 

72. The Commission is required to 

prepare an Environmental Assessment 

or an Environmental Impact Statement 

for any action that may have a 

significant adverse effect on the human 

environment.60 The Commission 

concludes that neither an 

Environmental Assessment or an 

Environmental Impact Statement is 

required for this notice of proposed 

rulemaking under section 380.4(a)(2)(ii) 

of the Commission regulations, which 

provides a ‘‘categorical exclusion for 

rules that do not substantively change 

the effect of legislation.’’ 61

VI. Regulatory Flexibility Act 

Certification 

73. The Regulatory Flexibility Act of 

1980 (RFA) 62 requires that a rulemaking 

contain either a description and analysis 

of the effect that the proposed rule will 

have on small entities or a certification 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. However, the 

RFA does not define ‘‘significant’’ or 

‘‘substantial,’’ instead leaving it up to an 

agency to determine the effect of its 

regulations on small entities. 

74. In drafting this rule, the 

Commission has followed the 

provisions of both the RFA and the 

Paperwork Reduction Act to consider 

the potential effect of the regulations on 

small businesses and other small 

entities. Specifically, the RFA directs 

agencies to consider four regulatory 

alternatives to be considered in a 

rulemaking to lessen the effect on small 

entities: tiering or establishment of 

different compliance or reporting 

requirements for small entities; 

classification, consolidation, 

clarification or simplification of 

compliance and reporting requirements; 

performance rather than design 

standards; and exemptions. 

75. The Commission does not believe 

that this proposed rule would have a 

significant economic impact on a 

substantial number of small entities. As 

noted above, EPAct 2005 directs the 

Commission to issue a rule adopting 

procedures for the expeditious 

consideration of applications for the 

approval of dispositions, consolidations, 

or acquisition, under this section. In 

accordance with this directive, this 

proposed rule is intended to implement 

section 203 of the FPA. In particular, the 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58645 

proposed rule increases the value 

threshold for filing a section 203 

application with the Commission from 

transactions in excess of $50,000 to 

transactions in excess of $10 million 

(under amended section 203 of the 

FPA). Further, the proposed rule does 

not substantially change the current 

requirements and regulations that 

applicants must comply with for 

transactions subject to FPA section 203. 

Accordingly, the Commission certifies 

that the proposed rule will not have a 

significant economic impact on a 

substantial number of small entities. 

VII. Comment Procedures 

76. The Commission invites interested 

persons to submit comments on this 

notice, or alternative proposals 

addressing the issues raised by the 

changes in amended section 203. 

Comments are due November 7, 2005. 

Comments must refer to Docket No. 

RM05–34–000, and must include the 

commenter’s name, the organization 

they represent, if applicable, and their 

address. Comments may be filed either 

in electronic or paper format. 

77. Comments may be filed 

electronically via the eFiling link on the 

Commission’s web site at http:// 

www.ferc.gov. The Commission accepts 

most standard word processing formats 

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. 

78. All comments will be placed in 

the Commission’s public files and may 

be viewed, printed, or downloaded 

remotely as described in the Document 

Availability section below. Commenters 

on this proposal are not required to 

serve copies of their comments on other 

commenters. 

VIII. Document Availability 

79. 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 

FERC’s Home Page (http://www.ferc.gov) 

and in FERC’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. 

80. 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 ‘‘RM05–34’’ in the 

docket number field. 

81. User assistance is available for 

eLibrary and the FERC’s Web site during 

normal business hours. For assistance, 

please contact FERC Online Support at 

1–866–208–3676 (toll free) or 202–502–

6652 (e-mail at 

FERCOnlineSupport@FERC.gov), or the 

Public Reference Room at 202–502–

8371, TTY 202–502–8659 (e-mail at 

public.referenceroom@ferc.gov). 

List of Subjects in 18 CFR Parts 2 and 

33 

Electric utilities, Reporting and 

recordkeeping requirements. 

By direction of the Commission. 

Magalie R. Salas, 

Secretary. 

In consideration of the foregoing, the 

Commission proposes to amend Chapter 

I, Title 18, Code of Federal Regulations, 

as follows: 

PART 2—GENERAL POLICY AND 

INTERPRETATIONS 

1. The authority citation for Part 2 is 

revised to read as follows: 

Authority: 5 U.S.C. 601; 15 U.S.C. 717–

717w, 3301–3432; 16 U.S.C. 792–825y, 2601–

2645; 42 U.S.C. 4321–4361, 7101–7352; Pub. 

L. 109–58, 119 Stat. 594. 

2. Section 2.26 is amended by revising 

paragraphs (e) and (f) to read as follows: 

§ 2.26. Policies concerning review of 

applications under section 203. 

* * * * * 

(e) Effect on regulation. (1) Where the 

affected state commissions have 

authority to act on the transaction, the 

Commission will not set for hearing 

whether the transaction would impair 

effective regulation by the state 

commissions. The application should 

state whether the state commissions 

have this authority. 

(2) Where the affected state 

commissions do not have authority to 

act on the transaction, the Commission 

may set for hearing the issue of whether 

the transaction would impair effective 

state regulation. 

(f) Under section 203(a)(4) of the 

Federal Power Act (16 U.S.C. 824b), in 

reviewing a proposed transaction 

subject to section 203, the Commission 

will also consider whether the proposed 

transaction will result in crosssubsidization of a non-utility associate 

company or pledge or encumbrance of 

utility assets for the benefit of an 

associate company, unless that crosssubsidization, pledge, or encumbrance 

will be consistent with the public 

interest. 

PART 33—APPLICATIONS UNDER 

FEDERAL POWER ACT SECTION 203 

3. The authority citation for Part 33 

continues to read as follows: 

Authority: 16 U.S.C. 791a–825r, 2601–

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

Pub. L. 109–58, 119 Stat. 594. 

4. The heading of Part 33 is revised 

to read as set forth above. 

5. Section 33.1 is revised to read as 

follows: 

§ 33.1 Applicability and definitions. 

(a) Applicability. (1) The requirements 

of this part will apply to any public 

utility seeking authorization under 

section 203 of the Federal Power Act to: 

(i) Dispose by sale, lease, or otherwise 

dispose of the whole of its facilities 

subject to the jurisdiction of the 

Commission, or any part thereof of a 

value in excess of $10 million; 

(ii) Merge or consolidate, directly or 

indirectly, such facilities or any part 

thereof with those of any other person, 

by any means whatsoever; 

(iii) Purchase, acquire, or take any 

security with a value in excess of $10 

million of any other public utility; or 

(iv) Purchase, lease, or otherwise 

acquire an existing generation facility: 

(A) That has a value in excess of $10 

million; and 

(B) That is intended to be used in 

whole or in part for wholesale sales in 

interstate commerce by a public utility. 

(2) The requirements of this part shall 

also apply to any holding company in 

a holding company system that includes 

a transmitting utility or an electric 

utility if such holding company seeks to 

purchase, acquire, or take any security 

with a value in excess of $10 million, 

or, by any means whatsoever, directly or 

indirectly, merge or consolidate with, a 

transmitting utility, an electric utility 

company, or a holding company in a 

holding company system that includes a 

transmitting utility, or an electric utility 

company, with a value in excess of $10 

million. 

(b) Definitions. For the purposes of 

this part, as used in section 203 of the 

Federal Power Act (16 U.S.C. 824b)—

(1) Existing generation facility means 

a generation facility that is operational 

at the time the section 203 transaction 

is consummated. 

(2) Non-utility associate company 

means any associate company in a 

holding company system other than a 

public utility or electric utility company 

58646 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

that has wholesale or retail customers 

served under cost-based regulation. 

(3) Value when applied to: 

(i) Transmission facilities, generation 

facilities, transmitting utilities, electric 

utility companies, and holding 

companies, means the market value of 

the facilities or companies. For 

transmission facilities, in the absence of 

a readily ascertainable market value, 

value means original cost 

undepreciated; 

(ii) Wholesale contracts, means the 

total expected contract revenues over 

the remaining life of the contract; and 

(iii) Securities, means the market 

price at the time the security is 

acquired. For transactions between nonaffiliated companies, the Commission 

will rebuttably presume that the market 

value is the agreed-upon transaction 

price. 

(4) The terms associate company, 

electric utility company, holding 

company, and holding company system 

have the meaning given those terms in 

the Public Utility Holding Company Act 

of 2005. 

6. Section 33.2 is amended to add 

paragraph (j) to read as follows: 

§ 33.2. Contents of application—general 

information requirements. 

* * * * * 

(j) An explanation (to be identified as 

Exhibit M to this application): 

(1) Of how applicants are providing 

assurance that the proposed transaction 

will not result in cross-subsidization of 

a non-utility associate company or 

pledge or encumbrance of utility assets 

for the benefit of an associate company, 

with appropriate evidentiary support for 

such explanation; or 

(2) If no such assurance can be 

provided, an explanation of how such 

cross-subsidization, pledge, or 

encumbrance will be consistent with the 

public interest. 

7. Section 33.11 is added to read as 

follows: 

§ 33.11 Commission procedures for the 

consideration of applications under section 

203 of the FPA. 

(a) The Commission will act on a 

completed application for approval of a 

transaction (i.e., one that is consistent 

with the requirements of this part) not 

later than 180 days after the completed 

application is filed. If the Commission 

does not act within 180 days, such 

application shall be deemed granted 

unless the Commission finds, based on 

good cause, that further consideration is 

required to determine whether the 

proposed transaction meets the 

standards of section 203(a)(4) of the FPA 

and issues, by the 180th day, an order 

tolling the time for acting on the 

application for not more than 180 days, 

at the end of which additional period 

the Commission shall grant or deny the 

application. 

(b) The Commission will provide for 

the expeditious consideration of 

completed applications for the approval 

of transactions that are not contested, do 

not involve mergers, and are consistent 

with Commission precedent. The 

transactions that would generally 

warrant expedited review include: 

(1) A disposition of only transmission 

facilities, particularly those that both 

before and after the transaction remain 

under the functional control of a 

Commission-approved regional 

transmission organization or 

independent system operator; 

(2) Transfers involving generation 

facilities of a size that do not require an 

Appendix A analysis; 

(3) Internal corporate reorganizations 

that do not present cross-subsidization 

issues; and 

(4) The acquisition of a foreign utility 

company by a holding company with no 

captive customers in the United States. 

[FR Doc. 05–20311 Filed 10–6–05; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[COTP Prince William Sound 02–011] 

RIN 1625–AA87 (Formerly 1625–AA00) 

Security Zones; Port Valdez and 

Valdez Narrows, Valdez, AK 

AGENCY: Coast Guard, DHS. 

ACTION: Third supplemental notice of 

proposed rulemaking; request for 

comments. 

SUMMARY: The Coast Guard proposes to 

establish permanent security zones 

encompassing the Trans-Alaska Pipeline 

(TAPS) Valdez Terminal Complex, 

Valdez, Alaska and TAPS Tank Vessels 

and a security zone in the Valdez 

Narrows, Port Valdez, Alaska. These 

security zones are necessary to protect 

the TAPS Terminal and vessels from 

damage or injury from sabotage, 

destruction or other subversive acts. 

Entry of vessels into these security 

zones would be prohibited unless 

specifically authorized by the Captain of 

the Port, Prince William Sound, Alaska. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

November 7, 2005. 

ADDRESSES: You may mail comments 

and related material to U.S. Coast Guard 

Marine Safety Office, PO Box 486, 

Valdez, Alaska 99686. Marine Safety 

Office Valdez, Port Operations 

Department maintains the public docket 

for this rulemaking. Comments and 

material received from the public, as 

well as documents indicated in this 

preamble as being available in the 

docket, will become part of this docket 

and will be available for inspection or 

copying at Marine Safety Office Valdez, 

105 Clifton, Valdez, AK 99686 between 

7:30 a.m. and 4:30 p.m., Monday 

through Friday, except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: 

LTJG Duane Lemmon, Port Operations 

Department, U.S. Coast Guard Marine 

Safety Office Valdez, Alaska, (907) 835–

7218. 

SUPPLEMENTARY INFORMATION: 

Regulatory History 

On November 7, 2001, we published 

three temporary final rules in the 

Federal Register (66 FR 56208, 56210, 

56212) that created security zones 

effective through June 1, 2002. The 

section numbers and titles for these 

zones are—

§ 165.T17–003—Security zone; TransAlaska Pipeline Valdez Terminal 

Complex, Valdez, Alaska; 

§ 165.T17–004—Security zone; Port 

Valdez, and 

§ 165.T17–005—Security zones; 

Captain of the Port Zone, Prince 

William Sound, Alaska. 

Then on June 4, 2002, we published 

a temporary final rule (67 FR 38389) 

that established security zones to 

replace these security zones. That rule 

issued in April 2002, which expired 

July 30, 2002, created temporary 

§ 165.T17–009, entitled ‘‘Port Valdez 

and Valdez Narrows, Valdez, Alaska—

security zone’’. 

Then on July 31, 2002, we published 

a temporary final rule (67 FR 49582) 

that established security zones to extend 

the temporary security zones that would 

have expired. This extension was to 

allow for the completion of a noticeand-comment rulemaking to create 

permanent security zones to replace the 

temporary zones. 

On October 23, 2002, we published a 

notice of proposed rulemaking (NPRM) 

that sought public comment on 

establishing permanent security zones 

similar to the temporary security zones 

(67 FR 65074). The comment period for 

that NPRM ended December 23, 2002. 

Although no comments were received 

that would result in changes to the 

proposed rule an administrative 

omission was found that resulted in the