Document ID: FERC-2009-1443-0002
Agency: ferc
Document Type: Rule
Title: Standards for Business Practices and Communication Protocols for Public Utilities
Posted Date: 2010-04-22T04:00Z

[Federal Register: April 22, 2010 (Volume 75, Number 77)]
[Rules and Regulations]               
[Page 20901-20909]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ap10-2]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 38

[Docket No. RM05-5-017; Order No. 676-F]

 
Standards for Business Practices and Communication Protocols for 
Public Utilities

Issued April 15, 2010.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
amending its regulations at 18 CFR 38.2 to incorporate by reference 
business practice standards adopted by the Wholesale Electric Quadrant 
of the North American Energy Standards Board (NAESB) to categorize 
various demand response products and services and to support the 
measurement and verification of these products and services in 
wholesale electric energy markets. This rule ensures that participants 
in wholesale energy markets where demand response products are 
administered receive standardized access to information that will 
enable them to participate in those markets and addresses performance 
evaluation methods appropriate to use for demand response products. 
This rule facilitates the ability of demand response providers to 
participate in electricity markets, reducing transaction costs and 
providing an opportunity for more customers to participate in these 
programs, especially customers that operate in more than one organized 
market. It also provides a foundation for further business practice 
standardization efforts, and participants in the NAESB process can use 
these standards to identify those elements for which standardization 
would be beneficial. Further, adoption of measurement and verification 
standards will improve the methods and procedures for measuring 
accurately the performance of demand response resources and assist in 
monitoring demand response services for potential manipulation.

DATES: Effective Date: This rule will become effective May 24, 2010. 
Dates for implementation of the standards are provided in the Final 
Rule. This incorporation by reference of certain publications in the 
rule is approved by the Director of the Federal Register as of May 24, 
2010.

FOR FURTHER INFORMATION CONTACT: Ryan Irwin (technical issues), Office 
of Energy Policy and Innovation, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, (202) 502-6454.
    Gary D. Cohen (legal issues), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8321.

SUPPLEMENTARY INFORMATION:

Table of Contents

                                                               Paragraph
                                                                 Nos.

I. Background...............................................          3.
II. Discussion..............................................          9.
    A. Overview.............................................          9.
    B. NAESB Phase I M&V Standards..........................         15.
        1. Adoption of NAESB Phase I M&V Standards..........         15.
        2. Clarification of Jurisdictional Concerns.........         17.

[[Page 20902]]

        3. Nomenclature.....................................         21.
    C. Phase II M&V Standards...............................         24.
        1. Proper Organization(s) To Develop Phase II M&V            24.
         Standards..........................................
        2. Guidance on the Scope of the Phase II M&V                 29.
         Standards..........................................
        3. Suggested Improvements to Standards..............         35.
        4. Deadline for Phase II M&V Standards Development..         38.
    D. Incorporation by Reference...........................         42.
III. Implementation Dates and Procedures....................         43.
IV. Notice of Use of Voluntary Consensus Standards..........         47.
V. Information Collection Statement.........................         48.
VI. Environmental Analysis..................................         54.
VII. Regulatory Flexibility Act.............................         55.
VIII. Document Availability.................................         58.
IX. Effective Date and Congressional Notification...........         61.

Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip 
D. Moeller, and John R. Norris.

Final Rule

    1. The Federal Energy Regulatory Commission (Commission) is 
amending its regulations at 18 CFR 38.2(a) (which establish standards 
for business practices and electronic communications for public 
utilities)\1\ to incorporate by reference business practice standards 
adopted by the Wholesale Electric Quadrant (WEQ) of the North American 
Energy Standards Board (NAESB) to categorize various demand response 
products and services and to support the measurement and verification 
of these products and services in wholesale electric energy markets. We 
also take this opportunity to update 18 CFR 38.2(b) to reflect NAESB's 
new address.
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    \1\ 18 CFR 38.2(a).
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    2. These standards identify operational information about demand 
response products that system operators need to make available to 
participants in markets where such products are offered and address 
performance evaluation methods appropriate to use for demand response 
products. They also facilitate the ability of demand response providers 
to participate in electricity markets, reducing transaction costs and 
providing an opportunity for more customers to participate in these 
programs, especially customers that operate in more than one organized 
market. In addition, these standards provide a foundation for further 
business practice standardization efforts, which participants in 
NAESB's WEQ process can use to identify those elements for which 
standardization would be beneficial. Further, adoption of measurement 
and verification standards will improve the methods and procedures for 
measuring accurately the performance of demand response resources and 
assist in monitoring demand response services for potential 
manipulation.

I. Background

    3. NAESB is a private consensus standards developer that divides 
its activities among four quadrants, each of which is composed of 
members from all segments of its respective industry.\2\ NAESB is an 
accredited standards organization under the auspices of the American 
National Standards Institute (ANSI). NAESB's procedures are designed to 
ensure that all industry members can have input into the development of 
a standard, whether or not they are members of NAESB, and each 
wholesale electric standard that NAESB's WEQ adopts is supported by a 
consensus of the seven industry segments: End Users, Distribution/Load 
Serving Entities, Transmission, Generation, Marketers/Brokers, 
Independent Grid Operators/Planners and Technology/Services. Under the 
WEQ process, for a standard to be approved, it must receive a super-
majority vote of 67 percent of the members of the WEQ's Executive 
Committee with support from at least 40 percent of each of the seven 
industry segments.\3\ For final approval, 67 percent of the WEQ's 
general membership must ratify the standards.\4\ NAESB's standards are 
voluntary. However, the Commission has made compliance with these 
standards mandatory in those instances where it has incorporated such 
standards by reference into its regulations.
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    \2\ The four quadrants are the wholesale and retail electric 
quadrants and the wholesale and retail natural gas quadrants.
    \3\ Under NAESB's procedures, interested persons may attend and 
participate in NAESB committee meetings, and phone conferences, even 
if they are not NAESB members.
    \4\ See Standards for Business Practices and Communication 
Protocols for Public Utilities, Order No. 676, FERC Stats. & Regs. ] 
31,216, n.5 (2006), reh'g denied, Order No. 676-A, 116 FERC ] 61,255 
(2006).
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    4. In 2006, the Commission adopted Order No. 676, a Final Rule that 
incorporated by reference business practice standards adopted by NAESB 
applicable to public utilities.\5\ Since 2006, the NAESB consensus 
industry stakeholder process has reviewed the NAESB business practice 
standards for public utilities with a view to creating a more efficient 
marketplace and it has adopted revisions that, in a number of 
instances, the Commission has made mandatory by incorporating the 
standards by reference into the Commission's regulations.\6\
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    \5\ Id.
    \6\ Standards for Business Practices and Communication Protocols 
for Public Utilities, Order No. 676-E, Final Rule, 74 FR 63288 (Dec. 
3, 2009), FERC Stats. & Regs. ] 31,299 (2009), Order No. 676-D, 
order granting clarification and denying reh'g, 124 FERC ] 61,317 
(2008), Order No. 676-C, Final Rule, FERC Stats. & Regs. ] 31,274 
(2008), Order No. 676-B, Final Rule, FERC Stats. & Regs. ] 31,246 
(2007).
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    5. NAESB began work on the development of business practice 
standards pertaining to the measurement and verification of demand 
response products and services in July 2007, when the NAESB WEQ Demand 
Side Management--Energy Efficiency (DSM) subcommittee began work on 
this issue. This effort led to the adoption and ratification by NAESB 
of measurement and verification standards early in 2009. Key to 
obtaining consensus on the initial set of standards was the agreement 
to proceed with further work on more detailed technical standards for 
the measurement and verification of demand response resources.
    6. On April 17, 2009, NAESB filed a report informing the Commission 
that it had adopted an initial set of business practice standards to 
categorize various demand response products and services and to support 
the measurement and verification of these products and services in 
wholesale electric energy markets. The NAESB report recognized

[[Page 20903]]

that these standards would need to be followed by the development of 
more detailed technical standards for the measurement and verification 
of demand response products and services in independent system 
operator/regional transmission organization (ISO/RTO) footprint areas.
    7. After a review of NAESB's April 2009 Report, the Commission 
issued a notice of proposed rulemaking on September 17, 2009 that 
proposed to amend the Commission's regulations at 18 CFR 38.2 to 
incorporate by reference the consensus standards adopted by NAESB's WEQ 
on March 16, 2009 (NAESB Phase I M&V Standards).\7\ NAESB has initiated 
specific plans to improve and adopt additional technical standards 
(Phase II M&V Standards).\8\ In the Phase I M&V NOPR, the Commission 
specifically requested comments on whether the Commission should 
establish a deadline for the development of these remaining critical 
standards and, if so, what that deadline should be.
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    \7\ Standards for Business Practices and Communication Protocols 
for Public Utilities, Notice of Proposed Rulemaking, 74 FR 48173 
(Sep. 22, 2009), FERC Stats. & Regs. ] 32,646 (2009) (Phase I M&V 
NOPR).
    \8\ Item 4a of NAESB's 2010 Annual Plan calls for the WEQ to 
review the NAESB Business Practices for Measurement and Verification 
of Wholesale Electricity Demand Response (WEQ-015) in conjunction 
with the Demand Response Matrix developed by the ISO/RTO Council and 
to identify business practice requirements that could be improved or 
made clearer through the addition of specific technical detail. The 
ISO/RTO Council's 2009 ``North American Wholesale Electricity Demand 
Response Program Comparison'' may be viewed at the ISO/RTO Council's 
Web site at http://www.isorto.org. The Annual Plan provides that 
wholesale and retail demand response work groups and the Smart Grid 
task force should actively and timely communicate and coordinate 
work products to ensure consistency among the three work groups. The 
Annual Plan further provides that each work group should take into 
account the work products developed by the other groups.
    Item 4b of NAESB's 2010 Annual Plan calls for the WEQ, using the 
ISO/RTO Council's matrix as a starting point, to review each 
performance evaluation type/service type combination identified in 
WEQ-015 to assess and determine what standards or guidelines, if 
any, should be developed to aid all participants in the use of 
measurement and verification methods for demand response programs in 
organized wholesale electric markets. If the determination is made 
that standards or guidelines will be developed, those items will be 
added as sub-items to 4(b).
    Item 4c of NAESB's 2010 Annual Plan calls for the WEQ to develop 
a glossary of terms used in demand response business practice 
standards.
    Item 4d of NAESB's 2010 Annual Plan calls for the WEQ to develop 
business practice standards to measure and verify energy reductions 
that are made to comply with a Renewable Portfolio Standard that 
includes energy efficiency or a stand-alone Energy Efficiency 
Portfolio Standard as part of an overall effort to measure and 
verify reductions in energy and demand from energy efficiency in 
wholesale and retail markets.
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    8. In response to the Phase I M&V NOPR, comments were filed by 19 
entities.\9\
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    \9\ The entities that filed comments and the abbreviations used 
in this Final Rule to identify these entities are listed in Appendix 
A.
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II. Discussion

A. Overview

    9. In this Final Rule, the Commission is revising its regulations 
at 18 CFR 38.2 to incorporate by reference the NAESB Phase I M&V 
Standards. The new standards will facilitate development of 
standardized business practices for measuring and verifying demand 
resource products and services for the wholesale electric market. In 
addition, they will help create a framework for a more seamless 
electronic marketplace by providing consistent terms and definitions 
that can be used in electronic protocols across both the wholesale and 
retail electric markets. Further, adoption of measurement and 
verification standards will improve the methods and procedures for 
measuring accurately the performance of demand response resources and 
assist in monitoring demand response services for potential 
manipulation.
    10. The NAESB Phase I M&V Standards were approved by the WEQ and 
ratified by the NAESB membership under NAESB's consensus 
procedures.\10\ As the Commission found in Order No. 587,\11\ adoption 
of consensus standards is appropriate because the consensus process 
helps ensure the reasonableness of the standards by requiring that the 
standards draw support from a broad spectrum of industry participants 
representing all segments of the industry. Moreover, since the industry 
itself has to conduct business under these standards, the Commission's 
regulations should reflect those standards that have the widest 
possible support. In section 12(d) of the National Technology Transfer 
and Advancement Act of 1995 (NTT&AA), Congress affirmatively requires 
federal agencies to use technical standards developed by voluntary 
consensus standards organizations, like NAESB, as a means to carry out 
policy objectives or activities determined by the agencies unless use 
of such standards would be inconsistent with applicable law or 
otherwise impractical.\12\
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    \10\ This process first requires a super-majority vote of 67 
percent of the members of the WEQ's Executive Committee with support 
from at least 40 percent of each of the seven industry segments, 
which are enumerated in P 3, supra. For final approval, 67 percent 
of the WEQ's general membership voting must ratify the standards.
    \11\ Standards for Business Practices of Interstate Natural Gas 
Pipelines, Order No. 587, 61 FR 39053 (July 26, 1996), FERC Stats. & 
Regs., ] 31,038 (1996).
    \12\ Pub. L. 104-113, Sec.  12(d), 110 Stat. 775 (1996), 15 
U.S.C. Sec.  272 note (1997). This requirement is further discussed 
at P 48, infra.
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    11. The specific NAESB standards that we are incorporating by 
reference in this Final Rule are business practices for Measurement and 
Verification of Wholesale Electricity Demand Response. The standards 
have three sections; the first section (Introduction and Definition of 
Terms) contains an overview of the standards and definitions, the 
second section (Standards 015-1.0 through 015-1.15) contains standards 
on Provision of Wholesale Electric Demand Response Energy, Capacity, 
Reserve and Regulation Products, and the third section (Standards 015-
1.16 through 015-1.30) contains standards on the five performance 
evaluation methodologies: (1) Maximum Base Load; (2) Meter Before/Meter 
After; (3) Baseline Type-I (Interval Meter); (4) Baseline Type-II (Non-
Interval Meter); and (5) Metering Generator Output.
    12. The NAESB Phase I M&V Standards also provide a foundation for 
further business practice standardization efforts, and participants in 
the WEQ process can use these standards to identify those elements for 
which standardization would be beneficial. We believe that development 
of the Phase II M&V Standards to which NAESB has committed will help 
improve the methods and procedures for measuring accurately the 
performance of demand responders. Such standards also will facilitate 
the ability of demand response providers to participate in electricity 
markets, in particular customers and aggregators that may participate 
in multiple markets. Standards for measuring and verifying demand 
response can help these customers reduce the transaction costs of 
participating in these markets.
    13. Because of the importance of moving forward on the development 
and adoption of the Phase II M&V Standards, we urge NAESB to complete 
its development of these standards within one year, as discussed below. 
If NAESB is unable to meet this goal, we request that it file with the 
Commission within one year, a report of the progress it has made, as 
well as the areas in which consensus has not been reached.
    14. We address below the issues raised by the commenters.

[[Page 20904]]

B. NAESB Phase I M&V Standards

1. Adoption of NAESB Phase I M&V Standards
a. Comments
    15. Nearly all the commenters support the proposal to incorporate 
the NAESB Phase I M&V Standards by reference. California Commission, 
Comverge, EEI, EnerNOC, EPSA, Indiana Commission, ISO/RTO Council, 
NARUC, NRECA, Public Interest Orgs, SDG&E, TVA and Westar all express 
support for the proposal. For example, EnerNOC asserts the NAESB Phase 
I M&V Standards address a need within the industry to develop 
consistent measurement and verification (M&V) practices across the 
country. While NRECA and Indiana Commission raised concerns about the 
costs of obtaining NAESB standards, addressed below, they did not 
oppose the incorporation by reference of the NAESB Phase I M&V 
Standards.
b. Commission Determination
    16. The Commission is revising its regulations at 18 CFR 38.2 to 
incorporate by reference the NAESB Phase I M&V Standards. The new 
standards define terms and definitions that can be used to facilitate 
communications and provide standards for measurement and verification 
methodologies for demand resources in wholesale electric markets.
2. Clarification of Jurisdictional Concerns
    17. As we explained in the Phase I M&V NOPR, the NAESB Phase I M&V 
Standards will enhance transparency and consistency in the methodology 
used to measure and verify demand response products in wholesale 
markets administered by the ISOs and RTOs.\13\
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    \13\ Phase I M&V NOPR at P 10.
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a. Comments
    18. FirstEnergy, the California Commission and NARUC all caution 
that these standards are only applicable in the wholesale energy market 
and that the states have jurisdiction over retail demand response 
programs, meters and infrastructure.
    19. FirstEnergy argues that the Commission's involvement in demand 
response activities must continue to acknowledge that the states have 
jurisdiction in retail markets. Similarly, NARUC states that the 
Commission should continue to work closely with the states to outline 
jurisdictional boundaries with respect to the standards being proposed 
in the NAESB process.
b. Commission Determination
    20. We agree with the commenters that the NAESB Phase I M&V 
Standards that we are incorporating by reference in this Final Rule are 
applicable to wholesale energy markets under the Commission's 
jurisdiction and nothing in this Final Rule is intended to interfere 
with the states' jurisdiction over retail demand response programs.
3. Nomenclature
    21. The NAESB Phase I M&V Standards include 40 definitions. These 
definitions ``identify basic product categories, i.e., energy service, 
capacity service, reserve service and regulation service. They identify 
the measurement and verification characteristics of demand response 
products and services offered in organized wholesale electricity 
markets, such as reduction deadlines, advance notification 
instructions, telemetry accuracy, and communication protocols.'' \14\
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    \14\ Id. at P 6.
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a. Comments
    22. ELCON suggests in several instances that the definition 
included in the NAESB Phase I M&V Standards should be revised to add 
more specificity. For example, it would add further operating 
characteristics to the definitions of Normal Operations, Recovery 
Period and Demand Resource Availability Measurement.\15\ Additionally, 
ELCON suggests several edits and clarifications to these same terms and 
to the definition of Triggering Events and Telemetry.\16\ EPSA, 
likewise, asserts the standards in their current form do not provide 
enough detail to ensure demand response resources receive comparable 
treatment to those of other resources.\17\
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    \15\ ELCON Comments at 4-7.
    \16\ Id. at 5.
    \17\ EPSA Comments at 4.
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b. Commission Determination
    23. We find the definitions included in the NAESB Phase I M&V 
Standards adequate for the purposes of Phase I and we will incorporate 
them by reference as proposed in the Phase I M&V NOPR. Also, as we 
noted above, item 4c of the WGQ 2010 Action Plan is devoted to the 
formulation of a glossary of demand response terminology. ELCON and 
EPSA may pursue their concerns about the need for greater specificity 
in the definition of demand response terms by continuing their 
participation in the NAESB process.

C. Phase II M&V Standards

1. Proper Organization(s) to Develop Phase II M&V Standards
a. Comments
    24. Nearly all the comments support NAESB as the proper 
organization to develop the Phase II M&V Standards.\18\ For example, 
ISO/RTO Council asserts the NAESB process has been an effective way to 
bring demand response organizations together to create the NAESB Phase 
I M&V Standards. Comverge commends the efforts of NAESB to develop this 
initial set of standards. EPSA also supports the NAESB process and 
notes the ANSI-certified consensus-based approach is an effective means 
to craft standards. Comverge expresses appreciation to NAESB for its 
efforts and is supportive of its efforts that ensure increased demand 
response participation.
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    \18\ See supporting comments on this subject by Comverge, 
Curtailment Specialists, EEI, EPSA, ISO/RTO Council, NARUC and 
Westar. FirstEnergy also supports these efforts, although it 
cautions that we need to keep jurisdictional concerns in mind. See 
discussion at P 18-19, supra. TVA also stresses the need for the 
proper coordination of efforts. See P 39, infra. The objections of 
Industrial Coalitions on its preference for the Commission 
developing all standards are discussed in P 42, infra.
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    25. By contrast, Duke is the sole commenter raising an objection to 
the continuing role of NAESB in developing the Phase II M&V Standards. 
Duke contends that the ISOs and RTOs are in a better position to 
develop these standards, due to regional differences.
b. Commission Determination
    26. In our view, NAESB is best suited to develop these common Phase 
II M&V Standards. The NAESB DSM subcommittee has the membership and 
participation of demand response providers, ISOs, RTOs, public 
utilities and trade groups.
    27. The continued cooperation and efforts of all these participants 
in the NAESB Phase II M&V Standards process will create an environment 
conducive to creating transparent and consistent standards for the 
measurement and verification of demand response resources offered into 
wholesale electricity markets. Furthermore, the efforts of a single 
group sponsored by NAESB will allow for more efficient participation in 
the standards development process and will help provide greater 
consistency than might be possible from the individual efforts 
sponsored by six separate regional organizations.
    28. Improvement in measurement and verification standards will work 
to ensure that the performance of demand

[[Page 20905]]

response resources can be accurately quantified. Standardization of 
measurement and verification methods also will help to reduce costs for 
customers participating in multiple markets. Without consistent 
standards, customers and demand response providers that participate in 
more than one RTO or ISO would then have to incur the costs of 
developing different business processes to adapt to the differing RTO/
ISO requirements, increasing the cost and complexity of their business. 
Furthermore, the Phase II M&V Standards should help achieve greater 
efficiency in the operation and evaluation of the performance of demand 
response products and services.
2. Guidance on the Scope of the Phase II M&V Standards
a. Comments
    29. Many of the commenters find that NAESB's development of Phase 
II M&V Standards and the Commission's incorporation by reference of 
such standards will have the benefit of creating additional consistency 
and standardization across markets. These same commenters also noted 
the benefits to adoption of a common terminology for M&V methods. For 
example, Public Interest Orgs supports the standardization of M&V 
business rules and asserts that such standardization will increase 
participation, eliminate gaming opportunities and enable aggregators to 
overcome varying business practices. EPSA also finds benefit in the 
Commission acting to reduce needless and costly disparities among the 
ISOs and RTOs, but is concerned that the standards provide too much 
deference to ISO/RTO policies and that this will hinder efforts to 
standardize demand response rules. ELCON does not object to the role of 
NAESB in developing the Phase II M&V Standards, but finds that the 
process needs improvement in Phase II so that the concerns of demand 
response providers are given more consideration and the views of ISOs 
and RTOs are given less deference.\19\
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    \19\ ELCON Comments at 3.
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    30. SDG&E supports the adoption of standards that promote 
transparency and consistency across markets. SDG&E further states that 
adopting consistent standards across ISOs and RTOs could reduce 
barriers to demand response providers who operate in multiple markets. 
Industrial Coalitions states the standardization of demand response 
practices across power markets will improve their business 
objectives.\20\ Comverge supports Phase II M&V Standards that would 
simplify baseline approaches and expand the deployment of demand 
response. ISO/RTO Council notes approvingly that the use of common 
terminology has accelerated the development of retail standards as well 
as supported development of other demand response initiatives. TVA 
states that NAESB's Phase II M&V Standards efforts should concentrate 
on the measurement and verification of demand response.
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    \20\ Industrial Coalitions members include: Coalition of Midwest 
Transmission Customers; NEPOOL Industrial Customer Coalition; and 
PJM Industrial Customer Coalition.
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    31. Both Duke and FirstEnergy request guidance as to the content of 
the Phase II M&V Standards and what information is needed to facilitate 
and promote demand response in markets.
b. Commission Determination
    32. While NAESB's Phase I M&V Standards represent a good first 
step, additional substantive standards would appear beneficial in 
creating transparent and consistent measurement and verification of 
demand response products and services in wholesale electric markets. 
The measurement and verification standards needed to accomplish this 
goal should be a focus of NAESB's Phase II M&V Standards development 
efforts.
    33. While the development of the Phase II M&V Standards should be 
an industry-driven consensus-seeking process, we agree with commenters 
that more detailed measurement and verification standards will reduce 
costs for customers and market participants, particularly those 
participating in multiple markets. As discussed earlier, demand 
response providers that participate in more than one RTO or ISO should 
not have to incur the costs of developing different business processes 
to adapt to the differing RTO/ISO requirements, increasing the cost and 
complexity of their business.
    34. In response to Duke's and FirstEnergy's requests for additional 
guidance as to the content of the Phase II M&V Standards, we agree with 
NAESB's plan to start the process by reviewing the elements of the 
performance evaluation methods detailed in the ISO/RTO Council's demand 
response program matrix. While we do not expect NAESB to develop a 
single performance evaluation method, we reiterate that greater 
standardization of the performance evaluation methods will improve the 
accuracy of measuring and verifying demand response performance and may 
reduce costs. ELCON expresses concern that the views of RTOs and ISOs 
will be given greater consideration than those of other participants in 
the NAESB process. As discussed earlier, the NAESB process requires 
consensus agreement from all seven segments of the industry and no 
segment, therefore, can dominate the development of a standard. We 
expect the participants in the NAESB process actively to consider and 
be open to proposals and concerns from any source and to try to 
reconcile differences so that the standards promote accurate 
measurement and verification of the performance of demand resources.
3. Suggested Improvements to Standards
    35. In the Phase I M&V NOPR, the Commission stated that these 
standards represent a starting place to develop a more comprehensive 
set of standards, with the development of more detailed technical 
standards for the measurement and verification of demand response 
resources, to take place in the Phase II M&V Standards development 
process.
    36. A few of the commenters have raised some specific concerns that 
they would like addressed in the Phase II M&V Standards development 
process. For example, ELCON complains that the NAESB process gives too 
much weight to the views of ISOs and RTOs and argues that the standards 
place specific requirements on demand response providers while not 
spelling out the complementary obligations of system operators. ELCON 
would like this corrected in the Phase II M&V Standards process.\21\ 
Water Project stresses that the Phase II M&V Standards should be 
designed to accurately verify the performance of demand response 
resources according to the specific service they are providing. 
Curtailment Specialists suggests the DSM subcommittee concentrate its 
efforts on developing the five baseline types; Baseline Type-I and 
Type-II, Meter Before/Meter After, Maximum Base Load and Metering 
Generator Output.
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    \21\ ELCON Comments at 3.
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a. Commission Determination
    37. As discussed above, the NAESB process provides for a reasonable 
balance of interests so that no one sector, RTOs or any other sector, 
can dominate the process. We agree that the process needs to consider 
the issues and views of the participants. We expect the NAESB process 
to develop Phase II M&V standards which incorporate the interests of 
all stakeholders in the process of developing consensus standards. In 
response to Curtailment Specialists, we expect Phase II will address 
issues related to baseline

[[Page 20906]]

development, but we do not believe that Phase II should be limited to 
baseline development issues alone.
4. Deadline for Phase II M&V Standards Development
    38. In the Phase I M&V NOPR, the Commission invited comment on 
whether the Commission should establish a deadline to complete the 
Phase II M&V Standards. The comments we received were split on this 
issue.
a. Comments
    39. ELCON strongly supports a deadline for the development of the 
Phase II M&V Standards.\22\ EPSA and TVA support a deadline that should 
take into consideration efforts underway at the North American Electric 
Reliability Corporation (NERC) and the National Institute for Standards 
and Technology (NIST) for both demand response and Smart Grid 
activities. Similarly, FirstEnergy recommends that the Commission 
coordinate its efforts with those of NERC, NIST and the Electric Power 
Research Institute. EPSA also supports prompt action and notes that 
NERC is in the process of developing demand response measurement 
standards through its Demand Response Availability Data System (DADS). 
EPSA expresses concern that a long delay in the Phase II M&V Standards 
development process may hinder NERC's demand response registration 
processes. Likewise, Comverge and EnerNOC also both support an 
aggressive deadline for the timely completion of the Phase II M&V 
Standards development process.
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    \22\ ELCON Comments at 3.
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    40. By contrast, ISO/RTO Council, FirstEnergy, EEI, SDG&E, NRECA 
and the Indiana Commission all oppose a deadline. They all argue that 
setting a deadline would be premature and contend that the NAESB 
process should be allowed to run its course. Many of these commenters, 
however, agree that, absent a deadline, it would be appropriate for 
NAESB to provide the Commission with regular status reports on the 
progress made in the development of the Phase II M&V Standards.\23\
---------------------------------------------------------------------------

    \23\ See comments by FirstEnergy, EEI, Indiana Commission and 
ISO/RTO Council.
---------------------------------------------------------------------------

b. Commission Determination
    41. We request that NAESB seek to conclude its Phase II M&V 
Standards development within one year from the effective date of this 
order. In light of the importance of measuring and verifying demand 
response products, as well as the utility of these standards to the 
NIST and NERC initiatives, the Phase II M&V Standards should be 
developed as soon as possible. Prompt action in developing the Phase II 
M&V Standards is essential, in light of the importance of these 
standards in ensuring that the performance of demand response resources 
can be accurately quantified. A year for development of such standards 
is reasonable. Due to the importance of these standards, if NAESB is 
unable to fully develop standards within the one-year period, we 
request that it file a report with the Commission indicating the 
progress it has made, including the standards it has considered and the 
issues on which it has been unable to reach consensus. The Commission 
can then build upon the information developed during the NAESB process 
to propose standards or establish procedures for the development of 
such standards.

D. Incorporation by Reference

    42. A number of organizations (Industrial Coalitions, NRECA, and 
the Indiana Commission) filed comments objecting to the incorporation 
by reference of the NAESB standards, maintaining they should not have 
to pay to obtain copies of the copyrighted standards. We addressed this 
issue at length in Order No. 676-E \24\ in November of 2009, concluding 
that the NAESB process is the most efficient and cost-effective method 
of developing these standards, incorporation by reference is the 
appropriate method for the Commission to adopt the regulations, and the 
Commission must respect NAESB's copyright.\25\ As we pointed out in 
that order, obtaining these standards is not cost prohibitive. NAESB, 
in fact, makes the standards available for free for three consecutive 
business days for those who want to view the standards in order to make 
comments with the Commission.\26\ Even for those non-members seeking to 
purchase a copy, the standards are available for $900, which is not 
prohibitive, given the costs of otherwise participating in a notice and 
comment rulemaking proceeding, including the hiring of legal counsel.
---------------------------------------------------------------------------

    \24\ Order No. 676-E, FERC Stats. & Regs. ] 31,299 at P 115-121.
    \25\ Id.
    \26\ http://www.naesb.org/misc/NAESB_Nonmember_Evaluation_
LockLizard.pdf.
---------------------------------------------------------------------------

III. Implementation Dates and Procedures

    43. The Commission is requiring, consistent with our regulation at 
18 CFR 35.28(c)(vi), each ISO and RTO to revise its OATT to include the 
NAESB Phase I M&V Standards we are incorporating by reference herein. 
For standards that do not require implementing tariff provisions, the 
Commission will allow the ISO or RTO to incorporate the WEQ standard by 
reference in its OATT. Compliance with the standards incorporated in 
this Final Rule will be required beginning on the same date that the 
rule becomes effective (i.e., thirty days after publication in the 
Federal Register), even if this precedes the filing of a revised OATT 
reflecting these new requirements.
    44. However, as we proposed in the Phase I M&V NOPR, to lighten the 
burden associated with an immediate, stand-alone filing of a revised 
tariff reflecting the standards incorporated by reference in this Final 
Rule, we are giving ISOs and RTOs the option of including these changes 
as part of an unrelated tariff filing, even though compliance with the 
revised standards is required beginning on the effective date of this 
Final Rule.\27\
---------------------------------------------------------------------------

    \27\ See Order No. 676, P 100 (2006). If the ISO or RTO makes no 
unrelated tariff filing by December 31, 2010, it must make a 
separate tariff filing incorporating these standards by that date.
---------------------------------------------------------------------------

    45. If adoption of these standards does not require any changes or 
revisions to existing OATT provisions, ISOs and RTOs may comply with 
this rule by adding a provision to their OATTs that incorporates the 
standards adopted in this rule by reference, including the standard 
number used to identify the standard. To incorporate this standard into 
their OATTs, ISOs and RTOs must use the following language in their 
OATTs: Measurement and Verification of Wholesale Electricity Demand 
Response (WEQ-015, 2008 Annual Plan Item 5(a), March 16, 2009).
    46. If an ISO or RTO requests waiver of a standard, it will not be 
required to comply with the standard until the Commission acts on its 
waiver request. Therefore, if an ISO or RTO has obtained a waiver or 
has a pending request for a waiver, its proposed revision to its OATT 
should not include the standard number associated with the standard for 
which it has obtained or seeks a waiver. Instead, the ISO or RTO's OATT 
should specify those standards for which the ISO or RTO has obtained a 
waiver or has pending a request for waiver. Once a waiver request is 
denied, the ISO or RTO will be required to include in its OATT the 
standard(s) for which waiver was denied.

IV. Notice of Use of Voluntary Consensus Standards

    47. In section 12(d) of NTT&AA, Congress affirmatively requires 
federal

[[Page 20907]]

agencies to use technical standards developed by voluntary consensus 
standards organizations, like NAESB, as the means to carry out policy 
objectives or activities determined by the agencies unless use of such 
standards would be inconsistent with applicable law or otherwise 
impractical.\28\ NAESB approved the standards under its consensus 
procedures. Office of Management and Budget Circular A-119 (Sec.  11) 
(February 10, 1998) provides that federal agencies should publish a 
request for comment in a NOPR when the agency is seeking to issue or 
revise a regulation proposing to adopt a voluntary consensus standard 
or a government-unique standard. The Commission published a request for 
comment in the Phase I M&V NOPR.
---------------------------------------------------------------------------

    \28\ See n.12 supra.
---------------------------------------------------------------------------

V. Information Collection Statement

    48. The Office of Management and Budget's (OMB) regulations in 5 
CFR 1320.11 require that it approve certain reporting and recordkeeping 
requirements (collections of information) imposed by an agency. Upon 
approval of collections of information, OMB is expected to assign new 
expiration dates to FERC-516 (OMB Control Number 1902-0096) and FERC-
717 (OMB Control Number 1902-0173). The OMB Control Numbers will not be 
displayed in the NAESB standards; an explanation will be included in 
the clearance package submitted to OMB. The Commission will not enforce 
the requirements of this rule until OMB approval is obtained.
    49. This Final Rule upgrades the Commission's current business 
practice and communication standards to include NAESB's Phase I M&V 
Standards. The implementation of these standards is necessary to 
increase the efficiency of demand response in wholesale electric energy 
markets. In addition, requiring such information ensures a common means 
of communication and ensures common business practices that provide 
participants engaged in transactions with demand response programs with 
timely information and consistent business procedures across multiple 
markets. The implementation of these data requirements will help the 
Commission carry out its responsibilities under the Federal Power Act.
    50. The Commission sought comments on its estimate provided in the 
NOPR of the burden associated with adoption of the NOPR proposals. In 
response to the NOPR, no comments were filed that addressed the 
reporting burden imposed by these requirements. Therefore the 
Commission will use these same estimates in this Final Rule.
---------------------------------------------------------------------------

    \29\ ``FERC-516'' is the Commission's identifier that 
corresponds to OMB control no. 1902-0096 which identifies the 
information collection associated with Electric Rate Schedules and 
Tariff Filings.
    \30\ ``FERC-717'' is the Commission's identifier that 
corresponds to OMB control no. 1902-0173 which identifies the 
information collection associated with Standards for Business 
Practices and Communication Protocols for Public Utilities.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                 Data collection                     Number of     responses per     Hours per     Total Number
                                                    respondents     respondent       response        of hours
----------------------------------------------------------------------------------------------------------------
FERC-516 \29\...................................               6               1               6              36
FERC-717 \30\...................................               6               1              12              72
                                                 ---------------------------------------------------------------
    Totals......................................  ..............  ..............  ..............             108
----------------------------------------------------------------------------------------------------------------
Total annual Hours for Collection.

    (Reporting and Recordkeeping, if appropriate) = 108 hours.
    Information Collection Costs: The Commission seeks comments on the 
costs to comply with these requirements. The Commission projects the 
average annualized cost for all respondents as follows: \31\
---------------------------------------------------------------------------

    \31\ The total annualized costs for the information collection 
is $39,960. This number is reached by multiplying the total hours to 
prepare responses (108) by an hourly wage estimate of $370 (a 
composite estimate that includes legal, technical and support staff 
rates, $250 + $95 + $25 = $370), 108 hours x $370/hour = $39,960.
    \32\ We note that 36 hours at $370/hour= $13,320 and 72 hours at 
$370/hour = $26,640. Together, $13,320 + $26,640 = $39,960 as shown 
in note 32, supra.

------------------------------------------------------------------------
                                                  FERC-516     FERC-717
------------------------------------------------------------------------
Annualized Capital/Startup Costs..............      $13,320      $26,640
Annualized Costs (Operations & Maintenance)...          N/A  ...........
                                               -------------------------
    Total Annualized Costs....................       13,320  \32\ 26,640
------------------------------------------------------------------------

    51. OMB regulations \33\ require OMB to approve certain information 
collection requirements imposed by agency rule. The Commission is 
submitting this Final Rule to OMB. These information collections are 
mandatory requirements.
---------------------------------------------------------------------------

    \33\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    Title: Standards for Business Practices and Communication Protocols 
for Public Utilities (formerly Open Access Same Time Information 
System) (FERC-717); Electric Rate Schedule Filings (FERC-516).
    Action: Information collection.
    OMB Control No.: 1902-0096 (FERC-516); 1902-0173 (FERC-717).
    Respondents: Business or other for profit (Public Utilities--Not 
applicable to small businesses).
    Frequency of Responses: One-time implementation (business 
procedures, capital/start-up).
    52. Necessity of Information: The Commission's regulations adopted 
in this rule upgrade the Commission's current business practices and 
communication standards by standardizing the definitions used by ISOs 
and RTOs to identify their various demand response products and to 
measure and verify the results obtained by these products. Moreover, 
the implementation of these data requirements will help ensure 
consistency among the ISOs/RTOs with respect to the measurement and 
verification of demand response performance in their wholesale 
electricity markets.
    53. Interested persons may obtain information on the reporting 
requirements by contacting: Federal

[[Page 20908]]

Energy Regulatory Commission, Attn: Ellen Brown, Office of the 
Executive Director, 888 First Street, NE., Washington, DC 20426 Tel: 
(202) 502-8663, fax: (202) 273-0873, e-mail: DataClearance@ferc.gov or 
by contacting: Office of Management and Budget, Office of Information 
and Regulatory Affairs, Washington, DC 20503 [Attention: Desk Officer 
for the Federal Energy Regulatory Commission, e-mail: oira_
submission@omb.eop.gov; Tel: (202) 395-4638, fax: (202) 395-7285]. 
Comments to OMB should include the appropriate OMB Control Number(s) 
and collection number(s) (OMB Control No. 1902-0096 for FERC-516, and/
or OMB Control No. 1902-0173 for FERC-717) as a point of reference.

VI. Environmental Analysis

    54. 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.\34\ The 
Commission has categorically excluded certain actions from these 
requirements as not having a significant effect on the human 
environment.\35\ The actions adopted here fall within categorical 
exclusions in the Commission's regulations for rules that are 
clarifying, corrective, or procedural, for information gathering 
analysis, and dissemination, and for sales, exchange, and 
transportation of natural gas and electric power that requires no 
construction of facilities. Therefore, an environmental assessment is 
unnecessary and has not been prepared in this Final Rule.
---------------------------------------------------------------------------

    \34\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Preambles 1986-1990 ] 30,783 (1987).
    \35\ 18 CFR 380.4.
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act

    55. The Regulatory Flexibility Act of 1980 (RFA) \36\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
In drafting a rule an agency is required to: (1) Assess the effect that 
its regulation will have on small entities; (2) analyze effective 
alternatives that may minimize a regulation's impact; and (3) make the 
analysis available for public comment.\37\
---------------------------------------------------------------------------

    \36\ 5 U.S.C. 601-612.
    \37\ 5 U.S.C. 601-604.
---------------------------------------------------------------------------

    56. The regulations we are adopting in this Final Rule impose 
filing requirements only on ISOs and RTOs, none of which is a small 
business. Moreover, these requirements are designed to benefit all 
customers, including small businesses. As noted above, adoption of 
consensus standards helps ensure the reasonableness of the standards by 
requiring that the standards draw support from a broad spectrum of 
industry participants representing all segments of the industry. 
Because of that representation and the fact that industry conducts 
business under these standards, the Commission's regulations should 
reflect those standards that have the widest possible support.
    57. Accordingly, pursuant to section 605(b) of the RFA, the 
Commission hereby certifies that the regulations adopted herein will 
not have a significant adverse impact on a substantial number of small 
entities.

VIII. Document Availability

    58. 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.
    59. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    60. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or email at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202)502-8659. Email the Public Reference Room at 
public.referenceroom@ferc.gov.

IX. Effective Date and Congressional Notification

    61. These regulations are effective May 24, 2010. The Commission 
has determined (with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs of OMB) that this rule is not a 
``major rule'' as defined in section 351 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 18 CFR Part 38

    Conflict of interests, Electric power plants, Electric utilities, 
Incorporation by reference, Reporting and recordkeeping requirements.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

0
In consideration of the foregoing, the Commission amends part 38, 
Chapter I, Title 18, Code of Federal Regulations, as follows.

PART 38--BUSINESS PRACTICE STANDARDS AND COMMUNICATION PROTOCOLS 
FOR PUBLIC UTILITIES

0
1. The authority citation for part 38 continues to read as follows:

    Authority: 16 U.S.C. 791-825r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352.

0
2. In Sec.  38.2, paragraphs (a)(10), (a)(11), and (b) are revised and 
paragraph (a)(12) is added to read as follows:

Sec.  38.2  Incorporation by Reference of North American Energy 
Standards Board Wholesale Electric Quadrant standards.

    (a) * * *
    (10) Public Key Infrastructure (PKI) (WEQ-012, Version 002.1, March 
11, 2009, with minor corrections applied on May 29, 2009 and September 
8, 2009);
    (11) Open Access Same-Time Information Systems (OASIS) 
Implementation Guide, Version 1.5 (WEQ-013, Version 002.1, March 11, 
2009, with minor corrections applied on May 29, 2009 and September 8, 
2009); and
    (12) Business Practices for Measurement and Verification of 
Wholesale Electricity Demand Response (WEQ-015, 2008 Annual Plan Item 
5(a), March 16, 2009).
    (b) This incorporation by reference was approved by the Director of 
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 
51. Copies of these standards may be obtained from the North American 
Energy Standards Board, 801 Travis Street, Suite 1675, Houston, TX 
77002, Tel: (713) 356-0060. NAESB's Web site is at http://
www.naesb.org/. Copies may be inspected at the Federal Energy 
Regulatory Commission, Public Reference and Files Maintenance Branch, 
888 First Street, NE., Washington, DC 20426, Tel: (202) 502-8371, 
http://www.ferc.gov, or at the National Archives and Records 
Administration (NARA). For information on the availability of this 
material at NARA, call 202-741-6030, or go to: http://www.archives.gov/
federal_register/

[[Page 20909]]

code_of_federal_regulations/ibr_locations.html.
* * * * *

    Note: The following Appendix will not appear in the Code of 
Federal Regulations.

Appendix A

List of Commenters \38\
---------------------------------------------------------------------------

    \38\ The abbreviations used to identify these commenters in this 
Final Rule are shown parenthetically.
---------------------------------------------------------------------------

California Department of Water Resources State Water Project (Water 
Project)
California Public Utilities Commission (California Commission) (with 
notice of intervention)
Comverge, Inc. (Comverge)
Duke Energy Corporation (Duke)
Edison Electric Institute (EEI)
FirstEnergy Service Company (FirstEnergy)
Electric Power Supply Association (EPSA)
Electricity Consumers Resource Council (ELCON)
Energy Curtailment Specialists, Inc. (Curtailment Specialists) (also 
filed motion to intervene)
EnerNOC, Inc. (EnerNOC) (also filed motion to intervene)
Indiana Utility Regulatory Commission (Indiana Commission) (with 
notice of intervention)
Industrial Coalitions \39\
---------------------------------------------------------------------------

    \39\ Filed on behalf of Coalition of Midwest Transmission 
Customers, NEPOOL Industrial Customer Coalition, and PJM Industrial 
Customer Coalition.
---------------------------------------------------------------------------

List of Commenters

ISO/RTO Council \40\
---------------------------------------------------------------------------

    \40\ ISO/RTO Council includes the Independent System Operators 
operating as the Alberta Electric System Operator, the California 
Independent System Operator, Electric Reliability Council of Texas, 
the Independent Electricity System Operator of Ontario, Inc., ISO 
New England, Inc., Midwest Independent Transmission System Operator, 
Inc., New York Independent System Operator, Inc., PJM 
Interconnection, L.L.C., Southwest Power Pool, Inc., and New 
Brunswick System Operator.
---------------------------------------------------------------------------

National Association of Regulatory Utility Commissioners (NARUC)
National Rural Electric Cooperative Association (NRECA)
Public Interest Organizations (Public Interest Orgs) \41\
---------------------------------------------------------------------------

    \41\ Jointly filed on behalf of Project for Sustainable FERC 
Energy Policy, Natural Resources Defense Council, the Pace Energy 
and Climate Center and Conservation Law Foundation.
---------------------------------------------------------------------------

San Diego Gas & Electric Company (SDG&E)
Tennessee Valley Authority (TVA) (with motion to intervene)
Westar Energy, Inc. (Westar) (with motion to intervene)

[FR Doc. 2010-9084 Filed 4-21-10; 8:45 am]
BILLING CODE 6717-01-P