Document ID: FERC-2007-1308-0003
Agency: ferc
Document Type: Rule
Title: Cross-Subsidization Restrictions on Affiliate Transactions
Posted Date: 2008-04-01T04:00Z

[Federal Register: April 1, 2008 (Volume 73, Number 63)]
[Rules and Regulations]               
[Page 17246-17247]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap08-3]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM07-15-000]

 
Cross-Subsidization Restrictions on Affiliate Transactions

Issued March 25, 2008.
AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Final Rule: Notice Extension of Time.

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SUMMARY: On February 21, 2008, the Federal Energy Regulatory Commission 
issued Order No. 707, which amended its regulation to codify 
restrictions on affiliate transactions between franchised public 
utilities that have captive customers or that own or provide 
transmission service over jurisdictional transmission facilities, and 
their market-regulated power sales affiliates or non-utility 
affiliates. The Commission is extending the time for any contracts, 
agreements or arrangements entered into on or after March 31, 2008, the 
effective date of Order No. 707, to comply with the requirements of 
Order No. 707.

DATES: The later of July 1, 2008 or 30 days after the issuance of an 
order on rehearing of Order No. 707.

FOR FURTHER INFORMATION CONTACT: 

Carla Urquhart (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8496,
Mosby Perrow (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6857,
David Hunger (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8148,
Stuart Fischer (Technical Information), Office of Enforcement, Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426, (202) 502-8517.

SUPPLEMENTARY INFORMATION: 

    Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

Order Granting Extension of Time

    (Issued March 25, 2008).
    1. On February 21, 2008, the Commission issued Order No. 707, which 
amended its regulations to codify restrictions on affiliate 
transactions between franchised public utilities that have captive 
customers or that own or provide transmission service over 
jurisdictional transmission facilities, and their market-regulated 
power sales affiliates or non-utility affiliates.\1\ The Commission 
stated that Order No. 707 would become effective 30 days after 
publication in the Federal Register, that is, March 31, 2008.\2\ On 
March 11, 2008, the Edison Electric Institute (EEI) filed a motion for 
extension of the effective date from March 31, 2008 to either July 1, 
2008 or 30 days after the Commission issues an order on rehearing, 
whichever is later. EEI states that although affiliate restrictions 
have been applicable to market-based rate power sellers and merging 
companies, the new final rule requirements will apply more broadly and 
compliance ``will be a significant undertaking for many companies.'' It 
also states that the rule ``raises some important questions that EEI 
and others are likely to ask the Commission to address in requests for 
rehearing * * * '' and urges the Commission to provide ample time for 
the new rule to be clarified before it takes effect.\3\
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    \1\ Cross-Subsidization Restrictions on Affiliate Transactions, 
Order No. 707, 73 FR 11,013 (Feb. 29, 2008), FERC Stats. & Regs. 
]31,264 (2008) (Order No. 707).
    \2\ Id. P 85.
    \3\ EEI Motion at 2.
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    2. As an initial matter, the Commission notes that Order No. 707 
stated that the pricing rules adopted therein are prospective and will 
apply to any contracts, agreements or arrangements entered into on or 
after the effective date of the rule (March 31, 2008); to the extent 
different pricing was in effect for any contract, agreement or 
arrangement entered into prior to the effective date of the final rule, 
such pricing may remain in effect.\4\ Thus, when the Commission issued 
the final rule, it should have been clear to the industry that, for 
purposes of complying with Order No. 707, public utilities would not 
have to modify pricing under contracts, agreements or arrangements in 
effect before March 31, 2008.\5\ We therefore do not believe that, for 
purposes of this rule, there should be any compliance problems with 
respect to pre-existing contracts, agreements or arrangements.
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    \4\ Order No. 707, FERC Stats. & Regs. ] 31,264 at P 85.
    \5\ Our ``grandfathering'' of preexisting contracts, agreements 
and arrangements was only for purposes of compliance of this rule. 
To the extent public utilities were required to comply with the same 
or similar pricing restrictions pursuant to a merger order or in 
conjunction with a market-based rate authorization, our action to 
make Order No. 707 compliance prospective only did not change any 
such obligations under other orders or rules. That is, pricing 
restrictions imposed pursuant to a merger order, a market-based rate 
authorization order or the Commission's market-based rate rules are 
not within the scope of Order No. 707 and, consequently, the Order 
No. 707 grandfathering provision does not relieve a public utility 
of its obligations under other orders and rules with respect to 
contracts, agreements or arrangements entered into prior to March 
31, 2008.
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    3. With respect to any contracts, agreements or arrangements 
entered into on or after the effective date of the rule (March 31, 
2008), however, public utilities were on notice when Order No. 707 was 
published in the Federal Register that they would have to comply with 
the pricing restrictions of the rule. If we were to change the 
effective date,

[[Page 17247]]

as requested by EEI, public utilities would have a window of time to 
enter into new contracts, agreements or arrangements that would not 
have to comply with the new pricing restrictions. It is therefore 
important that we not change the effective date of the rule. Although 
we will not change the effective date of the rule, the Commission 
recognizes that many companies, particularly those not previously 
subject to the same or similar pricing restrictions as a result of a 
merger order or a market-based rate authorization, may need further 
time to ensure that they will be in compliance with the new 
restrictions and/or to obtain clarification from the Commission upon 
rehearing of the final rule.
    4. Accordingly, upon consideration of the concerns raised by EEI, 
the Commission will grant an extension of time until 30 days after the 
issuance of an order on rehearing of Order No. 707 or until July 1, 
2008, whichever comes later, for any contracts, agreements or 
arrangements entered into on or after March 31, 2008 to comply with the 
requirements of Order No. 707. This means that if utilities enter into 
contracts, agreements or arrangements on or after March 31, 2008, and 
if the pricing under such contracts, agreements or arrangements is not 
consistent with the pricing requirements as they may be clarified or 
modified by the Commission on rehearing of Order No. 707, these 
utilities will not be subject to enforcement action for non-compliance 
for the period beginning March 31, 2008 until the later of July 1, 2008 
or 30 days after issuance of an order on rehearing of Order No. 707. 
However, such contracts, agreements or arrangements will either: (1) 
Need to contain a provision making them automatically subject to 
compliance with the pricing restrictions, as they may be clarified or 
modified on rehearing, as of the later of July 1, 2008 or 30 days after 
issuance of an order on rehearing; or (2) need to be modified to make 
them consistent with the pricing restrictions as of the later of July 
1, 2008 or 30 days after issuance of an order on rehearing.

The Commission Orders

    The Commission hereby grants an extension of time for compliance 
with Order No. 707, as discussed in the body of this order.

    By the Commission.
Kimberly D. Bose,
Secretary.
[FR Doc. E8-6617 Filed 3-28-08; 8:45 am]

BILLING CODE 6717-01-P