Document ID: FERC-2006-1464-0001
Agency: ferc
Document Type: Rule
Title: Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005
Posted Date: 2006-07-28T04:00Z

[Federal Register: July 28, 2006 (Volume 71, Number 145)]
[Rules and Regulations]               
[Page 42750-42756]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy06-2]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 366

[Docket No. RM05-32-002, Order No. 667-B]

 
Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005

Issued July 20, 2006.
AGENCY: Federal Energy Regulatory Commission, DoE.

ACTION: Final Order; Order on Rehearing.

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SUMMARY: By this order, the Federal Energy Regulatory Commission 
(Commission) grants clarification and rehearing in part of Order No. 
667-A. Order No. 667-A granted rehearing in part and denied rehearing 
in part of Order No. 667, which amended the Commission's regulations to 
implement repeal of the Public Utility Holding Company Act of 1935 and 
enactment of the Public Utility Holding Company Act of 2005.

DATES: Effective Date: This order is effective on August 28, 2006.

FOR FURTHER INFORMATION CONTACT:

Lawrence Greenfield (Legal Information), Federal Energy

[[Page 42751]]

Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6415.
Andrew Lyon (Legal Information), Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426. (202) 502-6614.
Laura Wilson (Legal Information), Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426. (202) 502-6128.
James Guest (Technical Information), Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426. (202) 502-
6614.

SUPPLEMENTARY INFORMATION:
Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead 
Brownell, and Suedeen G. Kelly.

Order on Rehearing

    1. Subtitle F of Title XII of the Energy Policy Act of 2005 (EPAct 
2005) repealed the Public Utility Holding Company Act of 1935 (PUHCA 
1935) and enacted the Public Utility Holding Company Act of 2005 (PUHCA 
2005).\1\ In Order No. 667, the Federal Energy Regulatory Commission 
(Commission) amended Subchapter U of its regulations to implement 
Subtitle F.\2\ In Order No. 667-A, the Commission denied rehearing in 
part and granted rehearing in part of Order No. 667.\3\ In the present 
order, we grant clarification and rehearing in part of Order No. 667-A 
and amend our regulations accordingly.
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    \1\ Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 
(2005).
    \2\ Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005, Order 
No. 667, 70 FR 75592 (Dec. 20, 2005), FERC Stats. & Regs. ] 31,197 
(2005).
    \3\ Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005, Order 
No. 667-A, 71 FR 28446 (May 16, 2006), FERC Stats. & Regs. ] 31,213 
(2006).
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Introduction

    2. On rehearing of Order No. 667-A, commenters \4\ raise five 
issues. First, National Grid, EEI, Duke, and Consumers seek 
clarification and/or rehearing of changes in the regulatory text that 
could be construed to place conditions on the effectiveness of status 
as an exempt wholesale generator (EWG) or foreign utility company 
(FUCO). Under the Commission's PUHCA 2005 regulations, a person that is 
a holding company solely with respect to an EWG or FUCO is eligible for 
exemption from books-and-records, accounting, record retention and 
reporting requirements.\5\ In Order No. 667-A, the Commission modified 
the regulatory text governing procedures for obtaining EWG status to 
state that self-certification (or a Commission determination) would not 
become effective until the relevant state commissions had made certain 
determinations under section 32(c) of PUHCA 1935 in those cases where 
such determinations were necessary under section 32(c) of PUHCA 1935. 
Similar language was included with respect to FUCO self-certifications 
(and Commission determinations); i.e., that such status would not 
become effective until the relevant state commissions had provided 
certain certifications under section 33(a)(2) of PUHCA 1935. National 
Grid, EEI, Duke, and Consumers suggest that the Commission cannot and 
should not require those determinations and certifications, and they 
seek clarification or rehearing. As discussed below, we reaffirm that 
EWGs are subject to section 32(c) of PUHCA 1935.\6 \However, we clarify 
that we did not intend that an entity that meets the definition of a 
FUCO would not have FUCO status until a state commission certification 
is also provided. Accordingly, we revise the regulatory text that 
created this confusion.
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    \4\ Commenters in this second rehearing phase include: AES 
Corporation (AES); ALCOA Inc. (ALCOA); Consumers Energy Company and 
CMS Energy Corporation (Consumers); Duke Energy Corporation (Duke); 
Edison Electric Institute (EEI); Edison International (Edison); 
Interstate Natural Gas Association of America (INGAA); Invenergy 
Investment Company LLC and Mayflower Management Services LLC 
(Invenergy); National Grid USA (National Grid); PPL Corporation 
(PPL); and Sempra Energy (Sempra).
    \5\ 18 CFR 366.7(a).
    \6\ We note that, in practice, section 32(c) of PUHCA only 
applies to EWGs whose generation facilities' costs were included in 
state-regulated rates and rate base as of the date of enactment of 
the Energy Policy Act of 1992 (October 24, 1992). Where it does not 
apply and therefore where State commission determinations are not 
necessary, an EWG need merely inform us of that fact.
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    3. Second, EEI, Sempra, Edison, PPL, and AES ask for clarification 
or rehearing of the Commission's definition of ``single-state holding 
company system.'' Under the Commission's PUHCA 2005 regulations, a 
single-state holding company system is eligible for waiver of 
accounting, record retention and reporting requirements.\7\ In Order 
No. 667-A, for purposes of such waiver, the Commission defined 
``single-state holding company system'' as a system that derives no 
more than thirteen percent of its ``public-utility company'' revenues 
from outside of a state. The Commission also defined ``public-utility 
company'' and ``electric utility company'' to include EWGs, FUCOs, and 
qualifying facilities (QFs).\8\ As a result, interests in out-of-state 
EWGs, FUCOs or QFs might make a system ineligible for waiver. EEI, 
Sempra, Edison, PPL, and AES suggest that this result is unnecessary 
and would discourage investment. We grant clarification as discussed 
below, and modify the regulatory text to reflect this clarification.
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    \7\ 18 CFR 366.3(c)(1).
    \8\ See 18 CFR 366.1.
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    4. Third, ALCOA expresses concern as to the requirement in Order 
No. 667-A that, when a subsidiary owns jurisdictional transmission 
facilities, the parent company must apply for exemption from the 
Commission's PUHCA 2005 regulations rather than being eligible for 
exemption upon the provision of notice. ALCOA suggests that, if the 
subsidiary is not primarily engaged in the provision of transmission 
service, the parent company should be eligible for exemption upon 
provision of notice. We deny rehearing as discussed below.
    5. Fourth, INGAA requests clarification of the Commission's 
definition of ``gas utility company.'' Under Order No. 667-A, a natural 
gas pipeline company that makes only incidental retail sales is a ``gas 
utility company.'' An upstream owner of the pipeline company is 
therefore subject to regulation under the Commission's PUHCA 2005 
regulations. It asserts that this result imposes unnecessary burdens 
and should be avoided through adoption of a de minimis standard for 
retail sales. We grant clarification and revise the relevant regulatory 
text to add an additional exemption to address this circumstance as 
discussed below.
    6. Finally, we clarify (1) in response to a concern raised by EEI 
and Duke, a subsidiary holding company may be eligible for an exemption 
or waiver even if an upstream holding company is not; and (2) in 
response to a concern raised by Invenergy, service companies within an 
exempt holding company system are themselves exempt from the 
requirements of sections 366.2, 366.22, and 366.23.

Discussion

1. EWG and FUCO Status

Background
    7. PUHCA 2005 requires the Commission to exempt from its books-and-
records requirements companies that are holding companies solely with 
respect to an ``exempt wholesale generator'' or ``foreign utility

[[Page 42752]]

company.'' \9\ PUHCA 2005 gives the term ``exempt wholesale generator'' 
the same meaning as in section 32 of PUHCA 1935 and gives the term 
``foreign utility company'' the same meaning as in section 33 of PUHCA 
1935.\10\
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    \9\ EPAct 2005 1266. See also EPAct 2005 1264.
    \10\ EPAct 2005 1262(6).
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    8. In the regulations implementing PUHCA 2005, the Commission 
restated the definition of EWG in section 32(a)(1) of PUHCA 1935. Under 
that definition, an EWG is a person that owns or operates an ``eligible 
facility,'' which is a facility that, with minor exception, is 
dedicated to wholesale sales.\11\
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    \11\ 18 CFR 366.1; 15 U.S.C. 79z-5(a)(1) and (2).
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    9. The Commission also incorporated into the definition of EWG the 
requirement for state commission determinations in section 32(c) of 
PUHCA 1935.\12\ Section 32(c) applies to generation facilities whose 
costs were included in state-regulated rates and rate base as of the 
date of enactment of the Energy Policy Act of 1992 (October 24, 
1992).\13\ Under section 32(c), for such a facility to be considered an 
``eligible facility,'' the relevant state commission must determine 
that dedication of the facility to wholesale sales will benefit 
consumers, will be in the public interest and will not violate state 
law.\14\ Because, by definition, an EWG can only own or operate 
eligible facilities, a person seeking EWG status whose generation 
facilities' costs were included in state-regulated rates and rate base 
as of the date of enactment of the Energy Policy Act of 1992 (October 
24, 1992) would not qualify as an EWG until the relevant state 
commission issues the specified determinations.\15\
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    \12\ 18 CFR 366.1, definition of ``exempt wholesale generator'' 
(1). See also 18 CFR 366.1, definition of ``exempt wholesale 
generator'' (2); 18 CFR 366.7 (conditioning EWG status on State 
determinations under section 32(c) of PUHCA 1935).
    \13\ Pub. L. 102-486, 106 Stat. 2776 (1992). To the extent that 
the facilities that are at issue are not encompassed within section 
32(c) of PUHCA 1935, e.g., the facilities are new facilities, then 
section 32(c) would not apply and the state commission 
determinations provided for in section 32(c) would not be necessary. 
The regulations state that, in such circumstances, the EWG need 
simply inform the Commission of that fact.
    \14\ 15 U.S.C. 79z-5a(a)(2) and (c).
    \15\ As noted supra note 13, to the extent that section 32(c) of 
PUHCA 1935 does not apply in a particular instance, the person 
seeking EWG status need simply inform the Commission of that fact.
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    10. In implementing PUHCA 2005, the Commission adopted the 
definition of ``foreign utility company'' in section 33(a)(3) of PUHCA 
1935.\16\ Under this definition, a FUCO is a company that owns or 
operates electricity or natural or manufactured gas facilities that are 
not located in the United States, that does not derive income from the 
generation, transmission or distribution of electricity or the 
distribution at retail of natural or manufactured gas in the United 
States, and that is not and has no subsidiary that is a public-utility 
company operating in the United States.
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    \16\ 18 CFR 366.1, definition of ``foreign utility company.'' 
See also 15 U.S.C. 79z-5b(a)(3)(B).
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    11. In modifications to the regulatory text adopted on rehearing, 
the Commission included in the definition of ``foreign utility 
company'' a provision that exempts FUCOs from all sections but section 
366.7 of the Commission's PUHCA 2005 regulations; \17\ section 366.7 
provides that FUCO status does not become effective until the FUCO has 
obtained state commission certification consistent with section 
33(a)(2) of PUHCA 1935.\18\ Section 33(a)(2) of PUHCA 1935, in turn, 
required state certification as a condition on exemption of a FUCO's 
parent company from public utility holding company regulation under 
PUHCA 1935. For the exemption to be effective, each state commission 
with jurisdiction over associated retail electricity and natural gas 
suppliers needed to certify that the state commission could adequately 
protect retail ratepayers.\19\
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    \17\ Id.
    \18\ 18 CFR 366.7.
    \19\ See 15 U.S.C. 79z-5b(a)(1) and (2).
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Comments
    12. National Grid, EEI, Duke, and Consumers seek clarification and/
or rehearing of the requirements for state commission determinations 
and certifications. They assert that the requirements violate PUHCA 
2005 by incorporating operative provisions of PUHCA 1935. They add that 
state involvement is unnecessary because the Commission may prevent 
cross-subsidization between EWGs and FUCOs and retail suppliers. 
Finally, they assert that, if the Commission conditions FUCO status on 
state commission certification, it will prevent companies from 
representing that they have FUCO status until state commission 
certification has been obtained, and also will be inconsistent with 
such companies' ability to rely on FUCO status under PUHCA 1935. 
According to these commenters, the associated uncertainty and delay 
will put companies with United States affiliates at a disadvantage in 
bidding for foreign utility companies.
Decision
    13. We will deny rehearing with respect to EWGs, but grant relief 
with respect to FUCOs.
    14. For some entities, EWG status does not take effect until state 
commission determinations have been obtained consistent with section 
32(c) of PUHCA 1935.\20\ PUHCA 2005 gives the term ``exempt wholesale 
generator'' the same meaning as in section 32 of PUHCA 1935.\21\ 
Section 32(a)(1) of PUHCA 1935 defines ``exempt wholesale generator'' 
as a person that owns or operates an ``eligible facility.'' Section 
32(c) of PUHCA 1935 states that certain facilities, i.e., those whose 
costs were included in state-regulated rates and rate base as of the 
date of enactment of the Energy Policy Act of 1992 (October 24, 1992), 
are not eligible facilities until specified state commission 
determinations are obtained.\22\ Thus, because, by definition, an EWG 
can only own or operate eligible facilities, and certain facilities can 
only be eligible facilities with state commission determinations, a 
person cannot be an EWG if it owns or operates such facilities (i.e., 
if it owns or operates generation facilities whose costs were included 
in state-regulated rates and rate base as of the date of enactment of 
the Energy Policy Act of 1992 (October 24, 1992)) without having 
obtained the necessary State commission determinations.
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    \20\ As noted supra note 13, to the extent that section 32(c) of 
PUHCA 1935 does not apply in a particular instance, the person 
seeking EWG status need simply inform the Commission of that fact.
    \21\ EPAct 2005 1262.
    \22\ See 15 U.S.C. 79z-5a(a)(1) and (c).
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    15. With respect to FUCOs, we clarify that the Commission did not 
intend to establish a requirement that an entity cannot meet the 
definition of a FUCO without first obtaining state commission 
certification. In contrast to the statutory definition of EWG in 
section 32 of PUHCA 1935, the statutory definition of FUCO in section 
33 of PUHCA 1935 is not tied to state commission certification, and 
PUHCA 2005 gives the term ``foreign utility company'' the same meaning 
as in section 33 of PUHCA 1935. Under section 33 of PUHCA 1935, state 
commission certification affected only the availability of an exemption 
from public utility holding company regulation under PUHCA 1935, but 
was not part of the definition of ``foreign utility company.'' \23\ As 
a result, state commission certification is not required by PUHCA 2005 
as a condition of FUCO status, and we will eliminate the reference to 
such state commission certification in the regulatory text.
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    \23\ See 15 U.S.C. 79z-5b(a).
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    16. Consistent with the foregoing, we also will move paragraph (2) 
of the definitions of EWG and FUCO to a new section 366.7(e).

[[Page 42753]]

2. Single-State Holding Companies

Background
    17. In implementing PUHCA 2005, the Commission provided for waiver 
of accounting, recordkeeping and reporting requirements for single 
state holding company systems.\24\ The waiver reflects the principle 
that, when a system operates substantially within a single state, 
ratepayers are adequately protected by state oversight as well as by 
federal oversight under the Federal Power Act, 16 U.S.C. 824 et seq.
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    \24\ 18 CFR 366.3(c).
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    18. In Order No. 667-A, the Commission defined ``single-state 
holding company system'' with reference to revenues from in-state 
versus out-of-state activities. For purposes of waiver from the 
Commission's accounting, record-keeping and reporting requirements, the 
Commission defined a single-state holding company system as a system 
that derives no more than thirteen percent of its ``public-utility 
company revenues'' from outside of a single state.\25\ The Commission 
also defined ``public-utility company'' and ``electric utility 
company'' to include EWGs, FUCOs and QFs.\26\ As a result, a system 
whose traditional utility operations are largely confined to a single 
state might be subject to federal accounting, record-keeping and 
reporting requirements as a result of owning out-of-state EWGs, FUCOs 
or QFs.
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    \25\ 18 CFR 366.3(c)(1).
    \26\ 18 CFR 366.1.
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Comments
    19. EEI, Sempra, Edison, PPL, and AES suggest that ownership of 
out-of-state EWGs, FUCOs or QFs should not affect a system's 
eligibility for waiver of federal accounting, recordkeeping and 
reporting requirements. They state that ownership of out-of-state EWGs, 
FUCOs and QFs did not affect a system's eligibility for the single-
state exemption from public utility holding company regulation under 
PUHCA 1935. They suggest that considering ownership of out-of-state 
EWGs, FUCOs and QFs now would subject holding company systems to new 
obligations and would therefore contradict Congress's goal in PUHCA 
2005 of removing regulatory obstacles to investment.
Decision
    20. The Commission's intent in adopting the 13 percent of revenues 
standard to identify who is a single state holding company system 
entitled to a waiver was to use the same 13 percent standard applied by 
the SEC under PUHCA 1935. Although we have defined ``public-utility 
company'' and ``electric utility company'' to include EWGs, FUCOs, and 
QFs, we clarify that we did not intend to include such entities' 
revenues for purposes of applying the 13 percent of revenues standard 
to identify who is a single state holding company system entitled to 
waiver. We will revise the relevant regulatory text in 18 CFR 
366.3(c)(1) accordingly.
    21. This approach is similar to the section 3(a) exemption under 
PUHCA 1935, which exempted single-state holding company systems from 
plenary federal oversight of the system's corporate and financial 
structure.\27\ The section 3(a) exemption of PUHCA 1935 reflected 
Congress's assessment that the states and the federal government, 
through corporate and rate regulation, could otherwise effectively 
oversee a single-state system without the necessity of public utility 
holding company regulation. Existing state and federal regulation 
should continue to be sufficient to protect against any abuses 
associated with ownership of out-of-state EWGs, FUCOs and QFs.
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    \27\ 15 U.S.C. 79c(a).
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    22. Accordingly, we will amend our regulations to provide that, for 
purposes of waiver under section 366.3(c)(1), revenues derived from 
EWGs, FUCOs and QFs will not be considered to be ``public-utility 
company'' revenues and therefore will not affect the availability of 
waiver of federal accounting and related requirements.\28\
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    \28\ In the separate context of the statutory exemption of PUHCA 
2005 section 1275(d), as reflected in 18 CFR 366.5, involving cost 
allocation for non-power goods and services in the case of a holding 
company system whose public utility operations are confined 
substantially to a single state, EEI asks that the Commission not 
require that a holding company file a petition for declaratory order 
in order to obtain a Commission determination that the holding 
company's public utility operations are confined substantially to a 
single state. EEI Rehearing Request at 4, 12-13. As a Commission 
determination that a holding company's public utility operations are 
confined substantially to a single state would be a declaratory 
order, the appropriate vehicle to seek such a determination would be 
a petition for a declaratory order.
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3. Companies That Are Not Primarily Engaged in Transmission

Background
    23. In Order No. 667-A, the Commission exempted from its PUHCA 2005 
regulations persons that are holding companies with respect to 
Commission-jurisdictional utilities when (1) neither the utility nor an 
affiliate has captive customers and (2) neither the utility nor an 
affiliate owns Commission-jurisdictional transmission facilities or 
provides Commission-jurisdictional transmission services.\29\
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    \29\ See 18 CFR 366.3(b)(2)(ii).
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Comments
    24. ALCOA suggests that the Commission should exempt, under 18 CFR 
366.3(b)(2) and 366.4(b)(1), i.e., by way of FERC-65A, companies whose 
subsidiaries have no captive customers and are not primarily engaged in 
transmission in interstate commerce, regardless of whether a subsidiary 
owns transmission facilities. According to ALCOA, the Commission's 
regulations as they stand require companies such as ALCOA to instead 
apply for exemption, under 18 CFR 366.3(d) and 366.4(b)(3), when a 
subsidiary owns discrete transmission facilities and acquired those 
facilities by what it characterizes as historical coincidence. ALCOA 
suggests that there is no regulatory interest in oversight of the 
parent company in those circumstances and that, therefore, the parent 
company should not be required to apply for exemption.
    25. ALCOA also suggests that the Commission must make the exemption 
process provided in 18 CFR 366.3(b)(2) and 366.4(b)(1), i.e., by way of 
FERC-65A, available to companies such as ALCOA because (1) those 
companies were exempted from public utility holding company regulation 
under PUHCA 1935, (2) the Commission's notice of proposed rulemaking in 
this proceeding suggested that the Commission did not intend to impose 
burdens beyond those in PUHCA 1935, and (3) the Commission did not make 
the parent company of a transmission owner ineligible for the 
notification process until rehearing of the Commission's initial order 
in this proceeding. According to ALCOA, to now require ALCOA to apply 
for exemption would violate notice requirements of the Administrative 
Procedure Act, 5 U.S.C. 551-59, and ALCOA's constitutional right to the 
equal protection of the laws.
Decision
    26. At issue is not whether ALCOA and similar companies are 
eligible for exemption from the Commission's PUHCA 2005 regulations but 
whether those companies must individually and formally apply for 
exemption under 18 CFR 366.3(d) and 366.4(b)(3), rather than submitting 
an exemption notification, i.e., a FERC-65A, under 18 CFR 366.4(b)(1). 
Contrary to ALCOA's suggestion, at this early stage in our 
implementation of PUHCA 2005, there is a strong regulatory interest in

[[Page 42754]]

requiring holding companies that do not qualify for the exemptions or 
waivers identified in 18 CFR 366.3(b)(2) and 366.3(c) to apply formally 
for exemption. As relevant here, that would include, where no other 
exemption or waiver applies, where the company or a subsidiary owns 
jurisdictional transmission facilities or provides jurisdictional 
transmission service. We do not mean to suggest that on the facts and 
circumstances of a particular case an exemption or waiver might not be 
appropriate. Rather, at this point in time, the formal application 
process gives the Commission the opportunity to make such 
determinations on the facts and circumstances of each case. For 
example, the process gives the Commission the opportunity to determine 
whether there might be significant potential for transmission service 
customers to subsidize wholesale sales and, if so, whether the cross-
subsidies could be adequately addressed through rate regulation. Based 
on that analysis, the Commission would or would not, as the facts and 
circumstances dictate, permit exemption from oversight under the 
Commission's PUHCA 2005 regulations.\30\
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    \30\ In fact, ALCOA has made a formal filing, in Docket No. 
EL06-75-000, seeking an exemption. That filing is presently pending.
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    27. Moreover, the requirement does not impose undue regulatory 
burdens. In its request for rehearing, ALCOA cites cases in which the 
SEC determined that ALCOA was exempt from holding company regulation 
under PUHCA 1935. In light of the SEC's past, active involvement in 
determining eligibility for exemption under PUHCA 1935, our requirement 
that companies formally apply to us for exemption under the 
Commission's PUHCA 2005 regulations (rather than obtaining exemption by 
filing a FERC-65A) is unexceptional. It is true that companies like 
ALCOA must apply anew for exemption rather than relying on prior SEC 
determinations. That obligation flows directly from Congress's decision 
to change the governing law and is not an unreasonable cost of doing 
business.
    28. Finally, the Administrative Procedure Act does not require us 
to issue a new notice of proposed rulemaking every time that we make a 
change to a proposed rule. The express purpose of the comment, 
decision, and rehearing process is to allow the Commission to make 
changes to a proposed rule. As evidenced by ALCOA's request for 
rehearing, moreover, ALCOA had actual and timely notice and opportunity 
to address provisions and changes that affected ALCOA.

4. Pipeline Companies That Make Incidental Retail Gas Sales

Background
    29. Pursuant to PUHCA 1935, and specifically section 2(a)(4) of 
PUHCA 1935, a natural gas pipeline that was not ``primarily engaged'' 
in the sale of natural gas at retail was not considered to be a ``gas 
utility company.'' \31\ As a result, under PUHCA 1935, a holding 
company with interests in that pipeline would not, by virtue of those 
interests, be subject to public utility holding company regulation.\32\
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    \31\ 15 U.S.C. 79b(a)(4).
    \32\ 15 U.S.C. 79b(a)(7); see also 17 CFR 250.7(a) (a pipeline 
company was not ``primarily engaged'' in the sale of natural gas at 
retail if gross revenues from retail sales were less than an 
average, annual amount of $5,000,000 over the preceding three 
calendar years).
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    30. PUHCA 2005 defines ``gas utility company'' without regard to 
whether a company is primarily engaged in the retail sale of natural 
gas.\33\ In implementing PUHCA 2005, the Commission adopted the 
statutory definition of ``gas utility company,'' with the added 
clarification that an entity that is engaged only in the marketing of 
natural gas is not a ``gas utility company'':
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    \33\ EPAct 2005 1262(7).

    The term ``gas utility company'' means any company that owns or 
operates facilities used for distribution at retail (other than the 
distribution only in enclosed portable containers or distribution to 
tenants or employees of the company operating such facilities for 
their own use and not for resale) of natural or manufactured gas for 
heat, light, or power. For the purposes of this subchapter, ``gas 
utility company'' shall not include entities that engage only in 
marketing of natural and manufactured gas.\34\
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    \34\ 18 CFR 366.1.

    Under that definition, a pipeline that makes incidental retail 
sales of natural gas could be interpreted to be a ``gas utility 
company,'' such that a parent of the pipeline would be subject to the 
Commission's PUHCA 2005 regulations.\35\
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    \35\ EPAct 2005 1262(8) and (13); 18 CFR 366.1.
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Comments
    31. INGAA seeks clarification of the Commission's interpretation of 
``gas utility company'' and asks us to find that a company that ``owns 
an interstate natural gas pipeline company, which pipeline makes 
deliveries to industrial customers and power plants and/or de minimis 
deliveries to farmers and/or ranchers located adjacent to the 
pipeline's rights-of-way is not, due to such ownership, a `holding 
company' under the Commission's PUHCA [2005] regulations.'' INGAA 
relies primarily on section 2(a)(4) of PUHCA 1935, which allowed the 
SEC to except from the definition of ``gas utility company'' companies 
that were not ``primarily engaged in'' retail sales of natural gas. 
According to INGAA, section 2(a)(4) of PUHCA 1935 demonstrated 
Congressional intent not to impose holding company regulation in the 
context of pipeline companies that make incidental retail sales. INGAA 
suggests there is no need to change that longstanding practice under 
PUHCA 1935 and, in particular, to impose regulatory obligations under 
PUHCA 2005 where none existed under PUHCA 1935. It also points out that 
under PUHCA 1935 the SEC promulgated a regulation exempting entities 
from the definition of ``gas utility company'' if their revenues from 
retail distribution of natural gas were de minimis and that the most 
recent monetary limit was an average annual amount of $5 million over 
the preceding three calendar years.
Decision
    32. A holding company is defined in PUHCA 2005 and in the 
Commission's PUHCA 2005 regulations based on its ownership of a public-
utility company. A public-utility company, in turn, includes a gas 
utility company, but does not include a natural gas company. So, for a 
public-utility company that is a gas utility company, its parent may 
fall within the definition of a holding company. In contrast, for a 
public-utility company that is a natural gas company and not a gas 
utility company, its parent would not fall within the definition of a 
holding company. INGAA's concern is that some pipelines may make 
incidental sales of natural gas at retail. That fact would result in 
their also being considered gas utility companies rather than solely 
natural gas companies--thus resulting in regulation of their parent 
companies as holding companies.
    33. The relevant language in PUHCA 2005 at issue here defining 
``gas utility company'' and when exemptions would be warranted under 
PUHCA 2005 is not identical to the corresponding language in PUHCA 1935 
highlighted by INGAA above defining ``gas utility company'' and when 
exemptions were warranted under PUHCA 1935. That fact notwithstanding, 
we agree with INGAA and believe that the fact that a pipeline makes 
sales of natural gas to end-use customers located adjacent to the 
pipeline's right of way should not, on that basis alone, lead to the 
pipeline's parent being considered a holding

[[Page 42755]]

company under PUHCA 2005.\36\ We will revise the regulatory text 
accordingly to add an additional exemption to address such 
circumstances.
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    \36\ As we previously noted in both Order No. 667 and Order No. 
667-A, we again note that we have independent authority under the 
Natural Gas Act to obtain the books and records of regulated 
companies and any person that controls such companies if relevant to 
jurisdictional activities. 15 U.S.C. 717g.
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5. Additional Clarifications

    34. We hereby grant two clarifications to Order No. 667-A. The 
first clarification relates to the following statement in the narrative 
preamble of Order No. 667-A:

    Where the parent holding company qualifies for an exemption or 
waiver, the subsidiary holding company would necessarily equally 
qualify; phrased differently, if the subsidiary did not qualify for 
a particular exemption or waiver, then the parent would not qualify 
for that same exemption or waiver either.\37\
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    \37\ Order No. 667-A at P 20, n.41.

    EEI and Duke urge us to delete the latter portion of the quoted 
sentence that begins with ``phrased differently'' on the grounds that 
it creates unnecessary confusion. Upon further review, the first 
portion of the above-quoted sentence is sufficiently clear on its own. 
We therefore void the latter, ``phrased differently'' portion of the 
sentence.
    The second clarification relates to section 366.3(a) of our 
regulations, which states that holding companies that meet the 
requirements of that section are exempt from specified provisions of 
the Commission's PUHCA 2005 regulations:

    Any person that is a holding company solely with respect to one 
or more of the following will be exempt from the requirements of 
Sec.  366.2 and the accounting, record-retention, and reporting 
requirements of Sec. Sec.  366.21, 366.22, and 366.23 * * * .\38\
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    \38\ 18 CFR 366.3(a).

    35. The specified provisions include two provisions--sections 
366.22 and 366.23--that apply to service companies. Invenergy requests 
clarification that, if a holding company is exempt as provided in 
section 366.3(a), service companies within the holding company system 
are exempt from sections 366.22 and 366.23. We agree with the requested 
clarification and will change section 366.3(a) accordingly.
Information Collection Statement
    36. The regulations of the Office of Management and Budget (OMB) 
\39\ require that OMB approve information-collection burdens that are 
imposed by an agency. OMB has approved the information-collection 
burdens that were imposed in Order Nos. 667 and 667-A.\40\ The present 
order clarifies those orders. Accordingly, OMB approval for this order 
is not necessary. The Commission will send a copy of this order to OMB 
for informational purposes.
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    \39\ 5 CFR 1320.12.
    \40\ See OMB Control Nos. 1902-0166, 1902-0216.
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    37. Interested persons may obtain information on the information 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426 [Attention: 
Michael Miller, Office of the Executive Director, ED-34], Phone: (202) 
502-8415, Fax: (202) 273-0873, e-mail: michael.miller@ferc.gov.
The Commission Orders
    Rehearing and clarification is hereby granted in part and denied in 
part as discussed in the body of this order.

    By the Commission.
Magalie R. Salas,
Secretary.

List of Subjects in 18 CFR Part 366

    Electric power, Natural gas, Public utility holding companies and 
service companies, Reporting and recordkeeping requirements.

0
In consideration of the foregoing, under the authority of PUHCA 2005, 
the Commission is amending Part 366 in Chapter I of Title 18 of the 
Code of Federal Regulations, as set forth below:

Subchapter U--Regulations Under the Public Utility Holding Company Act 
of 2005

PART 366--PUBLIC UTILITY HOLDING COMPANY ACT OF 2005

Subpart A--PUHCA 2005 Definitions and Provisions

0
1. The authority citation for part 366 continues to read as follows:

    Authority: Pub. L. 109-58, 1261 et seq., 119 Stat. 594, 972 et 
seq.

0
2. Section 366.1 is amended by revising the definitions of ``exempt 
wholesale generator'' and ``foreign utility company'' to read as 
follows:

Subpart A--PUHCA 2005 Definitions and Provisions

Sec.  366.1  Definitions.

    For purposes of this part:
* * * * *
    Exempt wholesale generator. The term ``exempt wholesale generator'' 
means any person engaged directly, or indirectly through one or more 
affiliates as defined in this subchapter, and exclusively in the 
business of owning or operating, or both owning and operating, all or 
part of one or more eligible facilities and selling electric energy at 
wholesale. For purposes of establishing or determining whether an 
entity qualifies for exempt wholesale generator status, sections 
32(a)(2) through (4), and sections 32(b) through (d) of the Public 
Utility Holding Company Act of 1935 (15 U.S.C. 79z-5a(a)(2)-(4), 79z-
5a(b)-(d)) shall apply.
    Foreign utility company. The term ``foreign utility company'' means 
any company that owns or operates facilities that are not located in 
any state and that are used for the generation, transmission, or 
distribution of electric energy for sale or the distribution at retail 
of natural or manufactured gas for heat, light, or power, if such 
company:
    (1) Derives no part of its income, directly or indirectly, from the 
generation, transmission, or distribution of electric energy for sale 
or the distribution at retail of natural or manufactured gas for heat, 
light, or power, within the United States; and
    (2) Neither the company nor any of its subsidiary companies is a 
public-utility company operating in the United States.
* * * * *

0
3. Section 366.3 is amended by revising paragraphs (a) introductory 
text, (b)(2) introductory text, (c) introductory text, and (c)(1), and 
by adding paragraph (b)(2)(vii) to read as follows:

Sec.  366.3  Exemption from Commission access to books and records; 
waivers of accounting, record-retention, and reporting requirements.

    (a) Exempt classes of entities. Any person that is a holding 
company solely with respect to one or more of the following will be 
exempt from the requirements of Sec. Sec.  366.2 and 366.21 and any 
associated service company will be exempt from the requirements of 
Sec. Sec.  366.2, 366.22, and 366.23; such person need not make the 
filings provided in Sec.  366.4(a) or (b):
* * * * *
    (b) * * *
    (2) Commission exemption of additional persons and classes of 
transactions.
    The Commission has determined that the following persons and 
classes of transactions satisfy the requirements of paragraph (b)(1) of 
this section, and any person that is a holding company solely with 
respect to one or more of the following may file to obtain an exemption 
for that person or class of transactions, as appropriate, from the

[[Page 42756]]

requirements of Sec. Sec.  366.2 and 366.21 (applicable to holding 
companies) and Sec. Sec.  366.2, 366.22, and 366.23 (applicable to the 
holding companies' associated service companies), pursuant to the 
notification procedure contained in Sec.  366.4(b):
* * * * *
    (vii) Natural gas companies that distribute natural or manufactured 
gas at retail to industrial or electric generation customers and/or 
distribute de minimis amounts of natural or manufactured gas at retail 
to farmer or rancher customers located adjacent to the natural gas 
company's rights-of-way.
    (c) Waivers. Any person that is a holding company solely with 
respect to one or more of the following may file to obtain a waiver of 
the accounting, record-retention, and reporting requirements of Sec.  
366.21 (applicable to holding companies) and Sec. Sec.  366.22 and 
366.23 (applicable to the holding companies' associated service 
companies), pursuant to the notification procedures contained in Sec.  
366.4(c):
    (1) Single-state holding company systems; for purposes of Sec.  
366.3(c)(1), a holding company system will be deemed to be a single-
state holding company system if the holding company system derives no 
more than 13 percent of its public-utility company revenues from 
outside a single state (for purposes of this waiver, revenues derived 
from exempt wholesale generators, foreign utility companies and 
qualifying facilities will not be considered public-utility company 
revenues);
* * * * *

0
4. In Sec.  366.7, paragraphs (a) and (b) are revised to read as 
follows, and paragraph (e) is added to read as follows:

Sec.  366.7  Procedures for obtaining exempt wholesale generator and 
foreign utility company status.

    (a) Self-certification notice procedure. An exempt wholesale 
generator or a foreign utility company, or its representative, may file 
with the Commission a notice of self-certification demonstrating that 
it satisfies the definition of exempt wholesale generator or foreign 
utility company (including stating the location of its generation); 
such notices of self-certification must be subscribed, consistent with 
Sec.  385.2005(a) of this chapter, but need not be verified. In the 
case of exempt wholesale generators, the person filing a notice of 
self-certification under this section must also file a copy of the 
notice of self-certification with the state regulatory authority of the 
state in which the facility is located, and that person must also 
represent to this Commission in its submittal with this Commission that 
it has filed a copy of the notice of self-certification with the state 
regulatory authority of the state in which the facility is located. 
Notice of the filing of a notice of self-certification will be 
published in the Federal Register. Persons that file a notice of self-
certification must include a form of notice suitable for publication in 
the Federal Register in accordance with the specifications in Sec.  
385.203(d) of this chapter. A person filing a notice of self-
certification in good faith will be deemed to have temporary exempt 
wholesale generator or foreign utility company status. If the 
Commission takes no action within 60 days from the date of filing of 
the notice of self-certification, the self-certification shall be 
deemed to have been granted; however, consistent with section 32(c) of 
the Public Utility Holding Company Act of 1935 (15 U.S.C. 79z-5a (c)) 
any self-certification of an exempt wholesale generator may not become 
effective until the relevant state commissions have made the 
determinations provided for therein if such determinations are 
necessary (if such determinations are not necessary, the notice of 
self-certification should state so). The Commission may toll the 60-day 
period to request additional information, or for further consideration 
of the request; in such cases, the person's exempt wholesale generator 
or foreign utility company status will remain temporary until such time 
as the Commission has determined whether to grant or deny exempt 
wholesale generator or foreign utility company status; however, 
consistent with section 32(c) of the Public Utility Holding Company Act 
of 1935 (15 U.S.C. 79z-5a (c)), any self-certification of an exempt 
wholesale generator may not become effective until the relevant state 
commissions have made the determinations provided for therein if such 
determinations are necessary (if such determinations are not necessary, 
the notice of self-certification should state so). Authority to toll 
the 60-day period is delegated to the Secretary or the Secretary's 
designee, and authority to act on uncontested notices of self-
certification is delegated to the General Counsel or the General 
Counsel's designee.
    (b) Optional procedure for Commission determination of exempt 
wholesale generator status or foreign utility company status. A person 
may file for a Commission determination of exempt wholesale generator 
status or foreign utility company status under Sec.  366.1 by filing a 
petition for declaratory order pursuant to Sec.  385.207(a) of this 
chapter, justifying the request for such status; however, consistent 
with section 32(c) of the Public Utility Holding Company Act of 1935 
(15 U.S.C. 79z-5a (c)), a Commission determination of exempt wholesale 
generator status may not become effective until the relevant state 
commissions have made the determinations provided for therein if such 
determinations are necessary. (If such determinations are not 
necessary, the petition for declaratory order should state so.) Persons 
that file petitions must include a form of notice suitable for 
publication in the Federal Register in accordance with the 
specifications in Sec.  385.203(d) of this chapter.
* * * * *
    (e) An exempt wholesale generator shall not be subject to any 
requirements of this part other than Sec.  366.7, i.e., procedures for 
obtaining exempt wholesale generator status. A foreign utility company 
shall not be subject to any requirements of this part other than Sec.  
366.7, i.e., procedures for obtaining foreign utility company status.
 [FR Doc. E6-12048 Filed 7-27-06; 8:45 am]

BILLING CODE 6717-01-P