Document ID: FERC-2010-0396-0001
Agency: ferc
Document Type: Rule
Title: Orders on Rehearings and Clarifications: Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities
Posted Date: 2010-03-25T04:00Z

[Federal Register: March 25, 2010 (Volume 75, Number 57)]
[Rules and Regulations]               
[Page 14342-14352]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr10-6]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM04-7-008; Order No. 697-D]

 
Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities

Issued March 18, 2010.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule; order on rehearing and clarification.

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SUMMARY: The Federal Energy Regulatory Commission is granting in part 
and denying in part the requests for rehearing and clarification of its 
determinations in Order No. 697-C, which granted rehearing and 
clarification of certain revisions to Commission regulations and to the 
standards for obtaining and retaining market-based rate authority for 
sales of energy, capacity and ancillary services to ensure that such 
sales are just and reasonable.

DATES: Effective Date: This order on rehearing will become effective 
April 26, 2010.

FOR FURTHER INFORMATION CONTACT:
Michelle Barnaby (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8407.
Paige Bullard (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6462.

SUPPLEMENTARY INFORMATION:

                            Table of Contents

                                                              Paragraph
                                                               Numbers

I. Introduction............................................            1
II. Background.............................................            2
III. Discussion............................................           10
    A. Vertical Market Power...............................           10
        Other Barriers to Entry............................           10
    B. Mitigation..........................................           25
        Protecting Mitigated Markets.......................           25
IV. Information Collection Statement.......................           53
V. Document Availability...................................           54
VI. Effective Date.........................................           57

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

Order No. 697-D

Order on Rehearing and Clarification

I. Introduction

    1. In this order, the Federal Energy Regulatory Commission 
(Commission) addresses requests for rehearing and clarification of 
Order No. 697-C.\1\ Specifically, the Commission provides additional 
clarification on the requirement that sellers file a notification of 
change in status when they acquire sites for new generation capacity 
development.\2\ The Commission denies the requests for rehearing of the 
tariff provision governing mitigated sales at the metered boundary and 
reaffirms its determination in Order No. 697-B to revise the mitigated 
sales tariff provision in order to ensure that a mitigated seller 
making market-based rate sales at the metered boundary does not sell 
power into the mitigated market either directly or through its 
affiliates.\3\
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    \1\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, Order No. 697-
C, FERC Stats. & Regs. ] 31,291 (2009).
    \2\ 18 CFR 35.42.
    \3\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, Order No. 697-
B, FERC Stats. & Regs. ] 31,285 (2008).
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II. Background

    2. On June 21, 2007, the Commission issued Order No. 697,\4\ 
codifying and, in certain respects, revising its standards for 
obtaining and retaining market-based rates for public utilities. In 
order to accomplish this, as well as streamline the administration of 
the market-based rate program, the Commission modified its regulations 
at 18 CFR Part 35, subpart H, governing market-based rate 
authorization. Order No. 697 became effective on September 18, 2007.
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    \4\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, Order No. 697, 
FERC Stats. & Regs. ] 31,252 (Order No. 697 or Final Rule), 
clarified, 121 FERC ] 61,260 (2007), order on reh'g, Order No. 697-
A, FERC Stats. & Regs. ] 31,268 (2008); clarified, 124 FERC ] 61,055 
(2008) (July 17 Clarification Order), order on reh'g, Order No. 697-
B, FERC Stats. & Regs. ] 31,285 (2008), order on reh'g, Order No. 
697-C, FERC Stats. & Regs. ] 31,291 (2009).
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    3. The Commission issued an order clarifying four aspects of Order 
No. 697 on December 14, 2007.\5\ Specifically, that order addressed: 
(1) The effective date for compliance with the requirements of Order 
No. 697; (2) which entities are required to file updated market power 
analyses for the Commission's regional review; (3) the data required 
for horizontal market power analyses; and (4) what constitute ``seller-
specific terms and conditions'' that sellers may list in their market-
based rate tariffs in addition to the standard provisions listed in 
Appendix C to Order No. 697.
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    \5\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, 121 FERC ] 
61,260 (2007) (December 14 Clarification Order).

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[[Page 14343]]

    4. On April 21, 2008, the Commission issued Order No. 697-A,\6\ 
which, in most respects, affirmed the determinations made in Order No. 
697 and denied rehearing of the issues raised. However, with respect to 
several issues, the Commission granted rehearing or provided 
clarification.
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    \6\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 (2008).
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    5. On July 17, 2008, the Commission issued an order clarifying 
certain aspects of Order No. 697-A related to the allocation of 
simultaneous transmission import capability for purposes of performing 
the indicative screens.\7\
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    \7\ July 17 Clarification Order, 124 FERC ] 61,055.
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    6. On December 19, 2008, the Commission issued Order No. 697-B \8\ 
in which it clarified and affirmed the determinations made in Order No. 
697-A. Specifically, the Commission provided clarification regarding 
the allocation of seasonal and longer transmission reservations and 
also clarified that it will require a seller making an affirmative 
statement as to whether a contractual arrangement transfers control to 
seek a ``letter of concurrence'' from other affected parties 
identifying the degree to which each party controls a facility, and to 
submit these letters with its filing. The Commission denied the request 
that it clarify that only sites for which necessary permitting for a 
generation plant has been completed and/or sites on which construction 
for a generation plant has begun apply under the definition of ``inputs 
to electric power production'' in Sec.  35.36(a)(4) of the Commission's 
regulations. Order No. 697-B also revised the definition of 
``affiliate'' in Sec.  35.36(a)(9) of its regulations to delete the 
separate definition for exempt wholesale generators. The Commission 
also provided a number of other clarifications with regard to, among 
others, the pricing of sales of non-power goods and services and the 
tariff provision governing sales at the metered boundary.
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    \8\ Order No. 697-B, FERC Stats. & Regs. ] 31,285.
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    7. On January 28, 2009, in response to Tampa Electric Company's 
(Tampa Electric) request for extension of time to comply with the 
tariff provision on mitigated sales at the metered boundary as revised 
in Order No. 697-B, the Commission issued an order granting the 
extension requested by Tampa Electric until such time as the Commission 
issued an order on rehearing of Order No. 697-B.\9\ That order 
clarified that affected entities must continue to comply with the 
mitigated sales tariff provision adopted in Order No. 697-A \10\ (which 
became effective on June 6, 2008), until the Commission acted on the 
requests for rehearing of Order No. 697-B.
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    \9\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity, and Ancillary Services by Public Utilities, 126 FERC ] 
61,072 (2009) (Order Granting Extension of Time to Comply).
    \10\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 at Appendix 
C.
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    8. On June 18, 2009, the Commission issued Order No. 697-C \11\ in 
which it clarified the requirement that sellers file a notification of 
change in status when they acquire sites for new generation capacity 
development. The Commission denied the requests for rehearing of the 
tariff provision governing mitigated sales at the metered boundary and 
affirmed its determination in Order No. 697-B to revise the mitigated 
sales tariff provision in order to ensure that a mitigated seller 
making market-based rate sales at the metered boundary does not sell 
power into the mitigated market either directly or through its 
affiliates.
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    \11\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity, and Ancillary Services by Public Utilities, Order No. 697-
C, FERC Stats. & Regs. ] 31,291 (2009).
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    9. The American Wind Energy Association (American Wind), the Edison 
Electric Institute (EEI), and Progress Energy, Inc.\12\ (Progress), and 
AES Corporation (AES) request rehearing and/or clarification of Order 
No. 697-C. American Wind, EEI and AES request clarification of the 
requirement to report the acquisition of sites for new generation 
capacity development. EEI and Progress request rehearing and 
clarification of the Commission's determination in Order No. 697-C to 
deny the requests for rehearing of the mitigated sales tariff 
provision, and to affirm the Commission's determination in Order No. 
697-B to revise the mitigated sales tariff provision in order to ensure 
that a mitigated seller making market-based rate sales at the metered 
boundary does not sell power into the mitigated market either directly 
or through its affiliates.
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    \12\ Progress Energy, Inc. submits its request for rehearing and 
technical conference on behalf of its subsidiaries Carolina Power & 
Light Company, doing business as Progress Energy Carolinas, Inc., 
and Florida Power Corporation, doing business as Progress Energy 
Florida.
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III. Discussion

A. Vertical Market Power Other Barriers to Entry

Background
    10. Order No. 697 adopted the proposal in the notice of proposed 
rulemaking (NOPR) to consider a seller's ability to erect other 
barriers to entry as part of the vertical market power analysis, but 
modified the requirements when addressing other barriers to entry.\13\ 
It also provided clarification regarding which inputs to electric power 
production the Commission will consider as other barriers to entry, and 
modified the proposed regulatory text in that regard.\14\
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    \13\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 440.
    \14\ Id.
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    11. On rehearing in Order No. 697-A, the Commission clarified that 
``inputs to electric power production'' encompasses physical coal 
sources and ownership of or control over who may access transportation 
of coal via barges and railcar trains,\15\ and revised its definition 
of ``inputs to electric power production'' in Sec.  35.36(a)(4) to 
reflect this clarification.\16\
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    \15\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 176 
(emphasis in original).
    \16\ Id.
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    12. In Order No. 697-B, with respect to the definition of ``inputs 
to electric power production,'' the Commission rejected the Electric 
Power Supply Association's (EPSA) proposal that the term ``sites for 
new generation capacity development'' means only sites with respect to 
which permits for new generation have been obtained or where 
construction of new generation is underway, and not encompass land that 
could potentially be used for generation. The Commission clarified that 
``sites for new generation capacity development'' should be construed 
to include ownership of land that could potentially be used for 
generation, not just sites for which permits for new generation have 
been obtained or where construction of new generation is under way. The 
Commission also clarified that ``sites for new generation capacity 
development'' does not include land that cannot be used for generation 
capacity development.\17\
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    \17\ Order No. 697-B, FERC Stats. & Regs. ] 31,285 at P 38.
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    13. In Order No. 697-C, in order to address the Commission's 
regulatory concerns and the concerns of the American Wind, the 
Commission granted rehearing in order to revise the change in status 
reporting requirement in Sec.  35.42 of its regulations to require 
market-based rate sellers to report the acquisition of control of sites 
for new generation capacity development on a quarterly basis instead of 
within 30 days of the acquisition. In particular, Sec.  35.42(d) 
requires quarterly reporting of a seller's acquisition of a site or 
sites for new generation capacity development for which site control 
has been demonstrated in the interconnection

[[Page 14344]]

process and for which the potential number of megawatts that are 
reasonably commercially feasible on the site or sites for new 
generation capacity development is equal to 100 megawatts or more.\18\
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    \18\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 18.
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    14. Separate and apart from this reporting requirement, and in 
order to address its concern that sellers may acquire land that is not 
used for the development of new generation capacity, and that is 
instead acquired for the purpose of preventing new generation capacity 
from being developed on that land, in Order No. 697-C the Commission 
stated that a seller must also report any land it has acquired, taken a 
leasehold interest in, obtained an option to purchase or lease, or 
entered into an exclusivity or other arrangement to acquire for the 
purpose of developing a generation site and for which site control has 
not yet been demonstrated during the prior three years (triggering 
event), and for which the potential number of megawatts that are 
reasonably commercially feasible on the land for new generation 
capacity development is equal to 100 megawatts or more. The Commission 
stated that a seller must report each such triggering event in a single 
report by January 1 of the year following the calendar year in which 
the triggering event occurred.\19\ This reporting requirement is set 
forth in Sec.  35.42(e).
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    \19\ Id. P 20.
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    15. On December 10, 2009, the Commission granted an extension of 
time to comply with the requirement to report sites for which site 
control has not been demonstrated during the prior three years, until 
30 days after the Commission issues an order on the requests for 
clarification and rehearing of Order No. 697-C.\20\
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    \20\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, Docket No. 
RM04-7-006, December 10, 2009 Notice of Extension of Time.
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Requests for Clarification
    16. On rehearing of Order No. 697-C, American Wind states that it 
applauds the Commission for modifying the change in status reporting 
requirements, but nevertheless seeks clarification on certain 
issues.\21\ In particular, American Wind requests clarification 
regarding the deadline for the first quarterly filing. American Wind 
points out that Order No. 697-C states that ``quarterly filings must be 
submitted within 30 days of the end of each quarter'' and it assumes 
that since Order No. 697-C becomes effective on July 29, 2009, the 
first quarterly filings will be due by October 30, 2009 thirty days 
after the end of the first full quarter after the effective date. 
American Wind also asks whether the initial quarterly report must 
include only new site control changes from the prior quarter, or must 
include all changes since the prior triennial filing (or the initial 
market-based rate filing by the seller), and, because the new reporting 
requirement is taking effect in the middle of the triennial filing 
cycle, American Wind seeks clarification on the period that should be 
covered in the first quarterly report.
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    \21\ American Wind July 20, 2009 Request for Clarification at 2-
3.
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    17. American Wind also seeks clarification regarding the 
interaction between the three-year triggering event reporting 
requirement and the quarterly reporting requirement. It requests that 
the Commission clarify that market-based rate sellers are not required 
to submit a quarterly report for a site that they have previously 
reported in accordance with the reporting requirement for sites for 
which site control has not been demonstrated during the prior three 
years. In support of this argument, American Wind argues that requiring 
sellers to submit a quarterly report upon demonstration of site control 
for a site that they may have previously reported in accordance with 
the reporting requirement for sites for which site control has not been 
demonstrated during the prior three years will not give the Commission 
any additional insight about the seller's market power and could lead 
to the mistaken belief that a seller has more land under its control 
than is actually the case.\22\
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    \22\ Id. at 3-4.
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    18. AES asks that the Commission clarify whether the first 
quarterly report submitted under revised Sec.  35.42 of the 
Commission's regulations (i.e., the report for the third quarter of 
2009) is ``cumulative'' and must address ``all sites meeting the 
requisite criteria that were acquired by a seller and its affiliates in 
the prior periods (including the third quarter of 2009) and had not 
been previously reported to the Commission,'' and whether all 
subsequent quarterly reports under Sec.  35.42 are ``limited to the 
incremental number of sites and potential capacity for development 
acquired during the quarter in question.'' \23\
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    \23\ AES November 11, 2009 Request for Clarification at 2.
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    19. Both American Wind and the EEI request that the date for 
reporting sites for which site control has not been demonstrated during 
the prior three years be changed from January 1 to January 30 of the 
year following the calendar year in which the triggering event 
occurred.\24\ American Wind and EEI argue that adjusting the deadline 
from January 1 to January 30 would reflect deadlines for other reports, 
and in particular, the Commission's fourth quarter report for 
generation sites for which site control has been demonstrated in the 
interconnection process. They also state that the January 1 reporting 
date poses challenges given the end-of-year holiday schedules of 
employees. EEI states that companies must prepare a significant number 
of financial and operational reports at the end of each year, not only 
for submission to the Commission, but also for submission to state 
regulatory commissions, the Securities and Exchange Commission, and the 
Energy Information Administration, among others.
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    \24\ American Wind July 20, 2009 Rehearing Request at 4-5; EEI 
July 20, 2009 Rehearing Request at 18.
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    20. With respect to the requirement that a seller report any land 
it has acquired for the purpose of developing new generation capacity 
and for which site control has not yet been demonstrated during the 
prior three years, and for which the potential number of megawatts that 
is reasonably commercially feasible on the land for new generation 
capacity development is 100 megawatts or more, EEI seeks clarification 
of the term ``reasonably commercially feasible'' in the context of 
sites that are acquired for the purpose of developing a thermal 
generation facility, such as a natural gas plant, and for which site 
control has not yet been demonstrated in the interconnection process. 
EEI states that unlike wind and solar generating plants, where the size 
of a site will have a direct impact on the number of megawatts that may 
be commercially developable, a single site for a thermal generation 
plant could theoretically accommodate an almost infinite array of 
possible megawatts that might be commercially developable.\25\ EEI 
argues that the Commission should clarify that a seller may base its 
determination on a planning horizon that is consistent with its state-
regulated resource planning process (if it is subject to such a 
process), and should provide clarification by identifying some of the 
commercial and system factors that sellers can take into account such 
as current market prices, expected new regulatory requirements 
affecting the type of generation for which the site was acquired, and/
or current system

[[Page 14345]]

conditions.\26\ EEI states that providing these clarifications will 
ensure that the Commission is receiving adequate information to meet 
its needs, while also preserving Commission resources.
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    \25\ EEI July 20, 2009 Rehearing Request at 17.
    \26\ Id.
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Commission Determination
    21. In response to the requests for clarification regarding the 
requirement that a seller report on a quarterly basis the acquisition 
of a site or sites for new generation capacity development for which 
site control has been demonstrated in the interconnection process, we 
clarify that if no sites have been acquired during a quarter, then a 
seller should not file a report for that quarter.\27\ As with other 
types of change in status filings, a seller need only submit a change 
in status notification with the Commission if there is a change that 
may affect the conditions relied upon by the Commission since it 
initially granted the seller market-based rate authorization, or since 
the Commission accepted a seller's updated market power analysis. Thus, 
a seller should not submit change in status reports to notify the 
Commission that it has not acquired any sites for new generation 
capacity development.
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    \27\ Because the first quarterly report was due October 30, 2009 
(30 days after the end of the first full quarter following the 
effective date of Order No. 697-C), American Wind's request for 
clarification regarding the deadline for the first quarterly filing 
is now moot.
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    22. We also clarify that a seller is required only to report the 
acquisition of sites for new generation capacity development that have 
not previously been reported. That is, the change in status reporting 
obligation for sites for new generation capacity development is not 
cumulative; rather, only sites that have not been reported previously 
must be included in the quarterly reports.
    23. With respect to EEI's request for clarification of the term 
``reasonably commercially feasible'' in the context of sites acquired 
for the purpose of developing a thermal generation facility and for 
which site control has not yet been demonstrated in the interconnection 
process, we appreciate the concerns raised by EEI regarding the 
difficulty sellers may have in providing information on the potential 
number of megawatts that are reasonably commercially feasible on such 
sites, and we believe that some of the same concerns may arise with 
respect to the requirement that a seller report any land it has 
acquired, taken a leasehold interest in, obtained an option to purchase 
or lease, or entered into an exclusivity or other arrangement to 
acquire for the purpose of developing a generation site and for which 
site control has not yet been demonstrated during the prior three years 
(triggering event), and for which the potential number of megawatts 
that are reasonably commercially feasible on the land for new 
generation capacity development is equal to 100 megawatts or more. In 
addition, as American Wind points out, because sellers are required to 
submit a quarterly report with the Commission for sites for new 
generation capacity development for which site control has been 
demonstrated in the interconnection process, also requiring the report 
for sites for which site control has not been demonstrated during the 
prior three years could lead to the mistaken belief that a seller has 
more land under its control than is actually the case. Further, since 
the issuance of Order No. 697-C, two rounds of quarterly reports have 
been filed with the Commission. These quarterly reports provide the 
Commission and interested entities with information to evaluate a 
seller's ability to erect barriers to entry through its acquisition of 
sites for new generation capacity development. Given the filing of the 
quarterly reports, and in light of EEI's request for clarification of 
the term ``reasonably commercially feasible'' in the context of sites 
acquired for the purpose of developing a thermal generation facility 
and for which site control has not yet been demonstrated in the 
interconnection process, we recognize the difficulty of determining the 
potential number of megawatts that are reasonably commercially feasible 
on sites for which site control has not yet been demonstrated in the 
interconnection process, and we have reconsidered the basis for the 
requirement imposed in Sec.  35.42(e) that a seller report any land it 
has acquired, taken a leasehold interest in, obtained an option to 
purchase or lease, or entered into an exclusivity or other arrangement 
to acquire for the purpose of developing a generation site and for 
which site control has not yet been demonstrated during the prior three 
years (triggering event), and for which the potential number of 
megawatts that are reasonably commercially feasible on the land for new 
generation capacity development is equal to 100 megawatts or more. We 
have assessed the difficulty and burden of complying with this 
reporting requirement for both the industry and the agency against the 
Commission's need to obtain the information necessary to evaluate a 
seller's ability to erect barriers to entry, and have concluded that it 
is reasonable to gain more experience with regard to the quarterly 
filings before requiring the additional filing for sites for which site 
control has not been demonstrated during the prior three years. After 
careful consideration, we conclude that elimination of this reporting 
requirement is reasonable, and we therefore will revise Sec.  35.42 of 
our regulations to remove subsection (e). Should we determine based on 
experience over a number of quarterly cycles that the quarterly reports 
may not be providing sufficient information, we can reconsider our 
determination here. In any event, the Commission always reserves the 
right to require additional information, including an updated market 
power analysis, from a seller. As a result, if there is a concern that 
a particular seller may be acquiring land for the purpose of preventing 
new generation capacity from being developed on that land, the 
Commission can request additional information from the seller at any 
time.
    24. Because we are eliminating the reporting requirement for sites 
for which site control has not been demonstrated during the prior three 
years, EEI's request for clarification of the term ``reasonably 
commercially feasible'' in the context of sites that are acquired for 
the purpose of developing a thermal generation facility, such as a 
natural gas plant, and for which site control has not yet been 
demonstrated in the interconnection process is moot. The requests of 
American Wind and EEI that the deadline for the reports under Sec.  
35.42(e) be moved from January 1 to January 30 of each year to coincide 
with the filing date for the quarterly reports required under Sec.  
35.42(d) is similarly rendered moot by virtue of the elimination of the 
three-year triggering event reporting requirement.

B. Mitigation

Protecting Mitigated Markets
Sales at the Metered Boundary Background
    25. The Commission explained in Order No. 697 that it would 
continue to apply mitigation to all sales in the balancing authority 
area in which a seller is found, or presumed, to have market power. 
However, the Commission explained that it would permit mitigated 
sellers to make market-based rate sales at the metered boundary between 
a balancing authority area in which a seller is found, or presumed, to 
have market power and a balancing authority area in which the seller 
has market-based rate authority, under

[[Page 14346]]

certain circumstances.\28\ The Commission also adopted a requirement 
that mitigated sellers wishing to make such market-based rate sales at 
the metered boundary maintain sufficient documentation and include a 
specific mitigated sales tariff provisions.\29\
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    \28\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 817 
(citing North American Electric Reliability Corporation) Glossary of 
Terms Used in Reliability Standards at 2 (2007), available at ftp://
www.nerc.com/pub/sys/all_updl/standards/rs/Glossary_02May07.pdf.
    \29\ Id. P 830.
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    26. In Order No. 697-A, after considering comments regarding the 
difficulty of determining and documenting intent, the Commission 
decided to eliminate the intent element of the mitigated sales tariff 
provision, which stated that ``any power sold hereunder is not intended 
to serve load in the seller's mitigated market.'' In eliminating the 
seller's intent requirement, the Commission modified this provision to 
require that ``the mitigated seller and its affiliates do not sell the 
same power back into the balancing authority area where the seller is 
mitigated.'' \30\ In this regard, the Commission noted that ``[t]o 
provide additional regulatory certainty for mitigated sellers, the 
Commission clarified that once the power has been sold at the metered 
boundary at market-based rates, the mitigated seller and its affiliates 
may not sell that same power back into the mitigated balancing 
authority area, whether at cost-based or market-based rates.'' \31\ The 
Commission also stated that because it was eliminating the intent 
requirement, it need not address issues raised regarding documentation 
necessary to demonstrate the mitigated seller's intent.
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    \30\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 334. In 
Order No. 697-A, the Commission revised the tariff language 
governing market-based rate sales at the metered boundary to conform 
with the discussion in the December 14 Clarification Order regarding 
use of the term ``mitigated market.'' The Commission stated that, as 
explained in the December 14 Clarification Order, ``balancing 
authority area in which a seller is found, or presumed, to have 
market power'' is a more accurate way to describe the area in which 
a seller is mitigated. Id. P 333.
    \31\ Id. n.464.
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    27. Further, in response to a request for clarification submitted 
by the Pinnacle West Companies (Pinnacle), the Commission reiterated in 
Order No. 697-A \32\ that an affiliate of a mitigated seller is 
prohibited from selling power that was purchased at a market-based rate 
at the metered boundary back into the balancing authority area in which 
the seller has been found, or presumed, to have market power. The 
Commission explained that to the extent that the mitigated seller or 
its affiliates believe that it is not practical to track such power, 
they can either choose to make no market-based rate sales at the 
metered boundary or limit such sales to sales to end users of the 
power, thereby eliminating the danger that they will violate their 
tariff by re-selling the power back into a balancing authority in which 
they are mitigated.\33\
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    \32\ Id. P 335.
    \33\ Id. P 336.
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    28. In Order No. 697-B, in response to the rehearing request of 
E.ON U.S. LLC (E.ON), the Commission explained that it appreciated 
concerns regarding the difficulty of defining the term ``same power'' 
that it introduced in Order No. 697-A. For this reason, the Commission 
revised the mitigated sales tariff provision to state that ``if the 
Seller wants to sell at the metered boundary of a mitigated balancing 
authority area at market-based rates, then neither it nor its 
affiliates can sell into that mitigated balancing authority area from 
the outside.'' The Commission explained that this revised tariff 
language prohibits a mitigated seller making market-based rate sales at 
the metered boundary from selling power into the mitigated market 
through its affiliates. The Commission again explained that sellers may 
either refrain from making market-based rate sales at the metered 
boundary, or limit such sales to end users of the power.\34\
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    \34\ Order No. 697-B, FERC Stats. & Regs. ] 31,285 at P 77 
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 336).
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    29. In Order No. 697-C, the Commission denied the requests for 
rehearing concerning the revised mitigated sales tariff provision. 
However, the Commission agreed with E.ON that the tariff provision 
should be revised to state ``if the Seller sells'' instead of ``if the 
Seller wants to sell * * *.'' The Commission clarified that it is not 
the seller's intent, but rather the seller's action that triggers the 
limitation set forth in the mitigated sales tariff provision. The 
Commission also affirmed its determination to revise the mitigated 
sales tariff provision in Order No. 697-B in order to ensure that a 
mitigated seller making market-based rate sales at the metered boundary 
does not re-sell power into the mitigated market either directly or 
through its affiliates.\35\ The Commission also denied petitioners' 
requests that the Commission return to the intent-based concept first 
used in Order No. 697.\36\
---------------------------------------------------------------------------

    \35\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 42 
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 336).
    \36\ Id. P 44.
---------------------------------------------------------------------------

Requests for Rehearing
    30. EEI and Progress (collectively, Petitioners) request rehearing 
and clarification of the Commission's determination in Order No. 697-C 
to deny the requests for rehearing of the mitigated sales tariff 
provision, and to affirm the Commission's determination in Order No. 
697-B to revise the mitigated sales tariff provision in order to ensure 
that a mitigated seller making market-based rate sales at the metered 
boundary does not sell power into the mitigated market either directly 
or through its affiliates. EEI requests that the Commission grant 
rehearing, clarification and/or a technical conference on the mitigated 
sales tariff provision, and requests that the Commission grant its 
motion for extension of time to delay the deadline for complying with 
the mitigated sales tariff provision until the Commission issues an 
order responding to EEI's request for rehearing of Order No. 697-C, or 
following a technical conference if the Commission intends to retain 
the constraints contained in the mitigated sales tariff provision.\37\ 
Progress supports EEI's request for rehearing, clarification and/or 
technical conference, and motion for an extension of time.\38\
---------------------------------------------------------------------------

    \37\ EEI July 20, 2009 Rehearing Request at 3, 15.
    \38\ Progress July 20, 2009 Rehearing Request at 2.
---------------------------------------------------------------------------

    31. EEI contends that the final tariff language adopted in Appendix 
C to Order No. 697-C prohibits mitigated sellers who make market-based 
rate sales at the metered boundary, and their affiliates, from selling 
power back into the mitigated market, and that this constraint will 
require mitigated sellers to reform their participation in markets 
substantially.\39\ EEI requests that the Commission grant rehearing or 
clarification, and reconsider the need for and scope of any constraints 
placed on mitigated sellers who make market-based rate sales at the 
metered boundary. It argues that mitigated sellers should be permitted 
to make sales at the metered boundary without subsequent restrictions 
on the mitigated seller's ability to make sales into the balancing 
authority area in which it is mitigated.\40\ It asserts that if the 
Commission believes that some additional constraints are needed on 
border sales by mitigated sellers, the Commission should grant 
rehearing and/or clarification to ensure that constraints imposed are 
reasonable, focus narrowly on the underlying

[[Page 14347]]

problem, and do not prevent legitimate transactions.\41\
---------------------------------------------------------------------------

    \39\ Id. at 14.
    \40\ EEI July 20, 2009 Rehearing Request at 12.
    \41\ Id.
---------------------------------------------------------------------------

    32. EEI argues that if the Commission ``intends to retain 
constraints on mitigated sellers and/or their affiliates in the wake of 
a market-based rate sale at the metered boundary between a mitigated 
market and a non-mitigated market, beyond a requirement that the 
original market-based rate sale involve title transfer to an 
unaffiliated entity,'' the Commission should hold a technical 
conference to address these issues so that the ultimate constraints are 
appropriate.\42\ Progress argues that a technical conference on this 
issue is needed to ``provide the Commission and the industry with a 
forum to test its views as to what the specific market power concerns 
are'' and it asserts that such a technical conference should address 
the following questions: (1) Should the market power concern regarding 
a market-based rate sale at the metered boundary of a mitigated 
balancing authority be limited to the concern that the seller or its 
affiliate will obtain or re-obtain title to that same power and re-sell 
it at market-based rates into the mitigated balancing authority area; 
(2) if the seller makes a market-based rate sale at the metered 
boundary, is there a market power concern if the seller or affiliate 
resells that same power back into the mitigated market under a 
Commission-approved system operating agreement or cost-based agreement 
that the Commission has determined to be just and reasonable; and (3) 
if the seller makes a market-based rate sale at the metered boundary, 
is there a market power concern if the seller or affiliate resells 
different power back into the mitigated market under a Commission-
approved system operating agreement or cost-based agreement that the 
Commission has determined to be just and reasonable.\43\
---------------------------------------------------------------------------

    \42\ Id. at 14.
    \43\ Progress July 20, 2009 Rehearing Request at 4-5.
---------------------------------------------------------------------------

    33. EEI contends that the Commission has not clearly articulated 
the problem that the current metered boundary tariff text is intended 
to address, nor demonstrated the need for a ban on all sales by a 
mitigated seller and its affiliates into a mitigated market from 
outside following any market-based rate sale at the metered boundary. 
Progress argues that the text of the mitigated sales provision is 
arbitrary and capricious because it is not premised on specific 
statements of the harm to be prevented, is not tailored to prevent 
those harms, and would prohibit many legitimate transactions.\44\ 
Specifically, Progress asserts that under the mitigated sales tariff 
provision, as soon as its subsidiaries Progress Energy Carolinas, Inc. 
and Progress Energy Florida, Inc. sell capacity and energy at market-
based rates at the metered boundary to a third party, they would be 
precluded from selling capacity and energy to each other under their 
Commission-approved system operating agreement, and therefore would be 
required to choose between making sales under Progress' system 
operating agreement and making sales at market-based rates at the 
metered boundary. Progress states that the Commission in Order No. 697-
C ``appears to respond to this concern by stating that entities, like 
[Progress Energy Carolinas, Inc. and Progress Energy Florida, Inc.], 
would simply choose not to make market-based sales at the metered 
boundary so that they would continue [to] have the right to make sales 
into the mitigated balancing authority.'' \45\ Progress argues that the 
Commission fails to explain why such a choice is necessary to prevent 
the exercise of market power, i.e., why a market-based rate seller or 
its affiliate's sales into the mitigated balancing authority area under 
a Commission-approved system operating agreement or a cost-based tariff 
suddenly are unjust and unreasonable as a result of a seller making a 
market-based rate sale at the metered boundary.\46\
---------------------------------------------------------------------------

    \44\ Id. at 2.
    \45\ Id. at 4.
    \46\ Id. at 3-4.
---------------------------------------------------------------------------

    34. Similarly, EEI asserts that the Commission has not explained 
why such sales by a mitigated seller, when title transfers to an 
unaffiliated entity at the metered boundary, need to be further 
constrained at all.\47\ EEI also argues that the Commission has not 
explained why, if a seller is mitigated in a given market, it should 
not be permitted to sell into that market at the seller's mitigated 
rates from outside simply because the seller has engaged in a market-
based rate sale at the metered boundary.\48\
---------------------------------------------------------------------------

    \47\ EEI July 20, 2009 Rehearing Request at 6.
    \48\ Id. at 7.
---------------------------------------------------------------------------

    35. EEI contends that the tariff text's prohibition on subsequent 
sales by a mitigated seller are overbroad and over-inclusive, and will 
have unreasonable negative consequences for mitigated sellers, their 
customers, and competitive markets. According to EEI, the tariff 
provision is overbroad because: (1) The prohibition does not clearly 
apply only if the seller is originally selling from within the 
mitigated market at the metered boundary; and (2) the prohibition does 
not include any temporal or other limits to ensure that the subsequent 
prohibited sales into the mitigated market are linked to the original 
outbound border sales.\49\
---------------------------------------------------------------------------

    \49\ Id.
---------------------------------------------------------------------------

    36. EEI argues that this prohibition on subsequent sales could 
interfere with the ability of mitigated sellers to meet their 
obligations under reliability arrangements, and would unnecessarily 
restrict their ability to transact for the benefit of customers and 
ensure reliability during peak-demand periods or under emergency 
conditions. EEI contends that where must-offer requirements apply, 
companies must post available capacity on a daily basis, and that ``if 
companies subject to these obligations are not permitted to make sales 
into a mitigated area or are effectively prohibited from making sales 
at border points because they have made a single market-based rate 
border sale, must-offer postings may be less effective because 
companies may have to withhold available generation from their listings 
as a result of these constraints on sales in certain areas, including 
areas that may be resource-deficient in peak load months.'' \50\ EEI 
also alleges that this prohibition could prevent companies from 
entering into Commission-approved purchased power agreements to provide 
load-following service to wholesale customers within mitigated markets, 
resulting in potential negative impacts on markets and reliability 
during periods of high demand when the purchaser's load may outstrip 
the seller's ability to serve it without using purchased power.\51\ 
Further, EEI contends that companies will be forced to either pancake 
another transmission wheel for any market-priced power transaction in 
order to move it beyond the border, ``adding costs that will ultimately 
be borne by customers, or simply to sell at cost-based rates at the 
metered boundary, reducing the availability of power competing at 
market-based rates at the border.'' \52\
---------------------------------------------------------------------------

    \50\ Id. at 8.
    \51\ Id. at 9.
    \52\ Id.
---------------------------------------------------------------------------

    37. EEI argues that because the tariff provision effectively 
prohibits a mitigated seller and its affiliates from making other sales 
that bring power from outside the mitigated area to the border, the 
mitigated seller and its affiliates would not be able to compete in the 
adjacent market, which could lower market liquidity and increase price 
volatility in the adjacent non-

[[Page 14348]]

mitigated markets.\53\ In addition, EEI contends that the mitigated 
sales tariff provision could potentially enable non-mitigated 
competitors to purchase from mitigated sellers at capped day-ahead 
rates, and then to sell the power back to the mitigated sellers the 
following day at higher prices when loads are higher than expected or 
power or transmission is in short supply, resulting in the mitigated 
sellers' wholesale and retail ratepayers incurring higher costs, given 
the pass-through feature of typical fuel adjustment clauses.\54\
---------------------------------------------------------------------------

    \53\ Id. at 10.
    \54\ Id.
---------------------------------------------------------------------------

    38. In addition, EEI asserts that the Commission should 
affirmatively authorize types of transactions that are clearly 
independent of market-based rate sales at the metered boundary, such as 
blocks of power to be delivered at dates and times other than the 
metered boundary sale block of power, power made available under must-
offer requirements, and load-following power.\55\ EEI also argues that 
in order to protect reliability, the Commission should clarify that 
limitations on sales at the metered boundary do not require a mitigated 
seller or its affiliate, if otherwise precluded from selling power into 
the mitigated area from the outside, to withhold making those sales 
during times at which the seller or its affiliates are called on to act 
to maintain system reliability. In addition, EEI requests clarification 
that these limitations will not prevent sales that are otherwise 
authorized by the Commission, either generically or on a case-by-case 
basis. Further, with respect to the Commission's statement in Order No. 
697-C reiterating that ``mitigated sellers may choose to make no 
market-based rate sales at the metered boundary, or to limit such sales 
to end users, thereby eliminating the risk that they will re-sell power 
back to the balancing authority area where they are mitigated'' \56\ 
EEI requests that the Commission clarify that end users include load-
serving entities such as investor-owned utilities, municipalities, and 
cooperatives that service retail load.\57\
---------------------------------------------------------------------------

    \55\ Id. at 13.
    \56\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 42 
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 336).
    \57\ EEI July 20, 2009 Rehearing Request at 13-14.
---------------------------------------------------------------------------

    39. EEI also argues that the tariff text, which provides that if a 
mitigated seller ``sells at the metered boundary of a mitigated 
balancing authority area at market-based rates, then neither it nor its 
affiliates can sell into that mitigated balancing authority area from 
the outside'' is effectively limitless in that the prohibition is not 
limited to the quantity, date, and time-of-day of the power or services 
originally sold, but extends to all subsequent sales by the mitigated 
seller and its affiliates, and that it applies to all subsequent sales 
by the mitigated seller and its affiliates into the mitigated area, 
even at mitigated rates which are typically cost-based and pre-approved 
by the Commission.
    40. Further, EEI argues that the Commission's statements in 
paragraphs 42 and 43 of Order No. 697-C should be incorporated in the 
tariff text in Appendix C to Order No. 697-C. Specifically, EEI states 
that the Commission's statement at the end of paragraph 42 that 
``mitigated sellers may choose to make no market-based rates sales at 
the metered boundary, or to limit such sales to end users, thereby 
eliminating the risk that they will re-sell power back to the balancing 
authority area where they are mitigated'' \58\ should be incorporated 
in the tariff text in Appendix C. EEI also argues that the Commission's 
statement in paragraph 43 that ``[a] mitigated seller can perform each 
of the above-enumerated functions either by selling at cost-based rates 
within its restricted balancing authority area, selling at cost-based 
rates at the metered boundary of its restricted balancing authority 
area, or by selling at market-based rates at the metered boundary as 
long as it makes sure that title to the power sold transfers at or 
beyond the metered boundary'' \59\ should be incorporated in the tariff 
text. The Commission's statement in this regard was made in response to 
petitioners' concerns that the mitigated sales tariff provision 
interferes with must-offer and reliability requirements, reserve 
sharing agreements, and cost-based requirement contracts. EEI asserts 
that the tariff text as written does not allow mitigated sellers to 
exercise these ``options,'' which, according to EEI, ``allow market-
based rate sales by a mitigated seller at the metered boundary without 
such subsequent constraints, provided title transfers to the power or 
service sold at or beyond the metered boundary, or the power or service 
is sold to an end user'' and that, as a result, the tariff text does 
not address the concerns that paragraphs 42 and 43 appear to 
address.\60\ EEI therefore concludes that the tariff text and 
paragraphs 42 and 43 of the preamble are in direct conflict, ``creating 
ambiguity and nullifying the options that the Commission purports to 
provide mitigated sellers who make market-based rate sales at the 
metered boundary.'' \61\ EEI therefore requests that the Commission 
modify the mitigated sales tariff provision to include the options it 
alleges are set forth in paragraphs 42 and 43.\62\
---------------------------------------------------------------------------

    \58\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 42 
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 336).
    \59\ Id. P 43.
    \60\ EEI July 20, 2009 Rehearing Request at 5.
    \61\ Id. at 10.
    \62\ Id. at 13.
---------------------------------------------------------------------------

    41. EEI references the Commission's statement in paragraph 43 that 
the ``restrictions on sales at the border only apply to new agreements 
that the seller enters into prospective from the date that Order No. 
697-B became effective. No existing agreements are upset or need to be 
revised in any way provided that the seller abides by our restrictions 
on any new agreements that it enters into prospectively.'' EEI asserts 
that ``[w]hile some of these agreements already exist * * *, sales 
under such agreements are not executed until there is a requirement for 
such service.'' \63\ EEI states that ``[i]f these sales are permitted 
because the agreement already exists, by the same logic, any sales 
under the WSPP tariff, for example would be permitted because the 
agreement already exists and the sales are executed under it.'' \64\ 
EEI therefore requests ``that the Commission clarify whether such sales 
would be permitted in the mitigated area after a market-based rate 
border sale occurred[,]'' and ``[i]f not, which sales were the 
Commission referring to that would be permitted because the agreements 
already existed.'' \65\
---------------------------------------------------------------------------

    \63\ Id. at 11.
    \64\ Id. at 11-12.
    \65\ Id. at 12.
---------------------------------------------------------------------------

Commission Determination
    42. On rehearing of Order No. 697-C, petitioners have not provided 
any new arguments that persuade us that the Commission should permit 
mitigated sellers making market-based rate sales at the metered 
boundary to sell power into the mitigated market, either directly or 
through their affiliates. Petitioners repeat many of the same arguments 
in their requests for rehearing that the Commission responded to in 
Order Nos. 697-B and 697-C. For the reasons discussed below, we deny 
petitioners' requests that mitigated sellers be permitted to make sales 
at the metered boundary without subsequent restrictions on a mitigated 
seller's ability to make sales into the balancing authority area in 
which it is mitigated,\66\ and we re-affirm the Commission's 
determination to revise the mitigated sales tariff provision in Order 
No. 697-B to ensure that mitigated sellers making market-based rate 
sales at the

[[Page 14349]]

metered boundary do not subsequently sell power into the mitigated 
market either directly or through their affiliates.
---------------------------------------------------------------------------

    \66\ See id.
---------------------------------------------------------------------------

    43. We disagree with petitioners' arguments that the Commission has 
not clearly articulated the problem that the tariff text governing 
sales at the metered boundary is intended to address, and that the 
tariff text is not tailored to address the harms the mitigated sales 
tariff provision seeks to prevent. Contrary to petitioners' arguments 
in this regard, the Commission has explained repeatedly why mitigated 
sellers and their affiliates are prohibited from making market-based 
rate sales anywhere within the balancing authority area in which the 
seller is mitigated. Specifically, in Order No. 697 the Commission 
explained that:

    Allowing market-based rate sales by a seller that has been found 
to have market power, or has so conceded, in the very market in 
which market power is a concern is inconsistent with the 
Commission's responsibility under the FPA to ensure that rates are 
just and reasonable and not unduly discriminatory. While we 
generally agree that it is desirable to allow market-based rate 
sales into markets where the seller has not been found to have 
market power, we do not agree that it is reasonable to allow a 
mitigated seller to make market-based rate sales anywhere within a 
mitigated market. It is unrealistic to believe that sales made 
anywhere in a balancing authority area can be traced to ensure that 
no improper sales are taking place. Such an approach would also 
place customers and competitors at an unreasonable disadvantage 
because the mitigated seller has dominance in the very market in 
which it is making market-based rate sales.\67\
---------------------------------------------------------------------------

    \67\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 819.

    Thus, the Commission prohibited mitigated sellers and their 
affiliates from selling power at market-based rates in the balancing 
authority area in which the seller is found, or presumed, to have 
market power, and, because sales cannot be traced to ensure that no 
improper sales are taking place, the Commission placed restrictions on 
mitigated sellers' market-based rate sales at the metered boundary.\68\
---------------------------------------------------------------------------

    \68\ Id. P 821; see also Order No. 697-A, FERC Stats. & Regs. ] 
31,268 at P 335.
---------------------------------------------------------------------------

    44. We also reject petitioners' assertions that the Commission has 
failed to explain why, as a result of a mitigated seller making market-
based rate sales at the metered boundary, such seller or its 
affiliate's sales into the mitigated balancing authority area under a 
Commission-approved cost-based tariff are unjust and unreasonable. As 
explained in Order Nos. 697-B and 697-C, petitioners' arguments on 
rehearing of Order No. 697-A effectively conceded that they cannot 
guarantee that market-based rate sales at the metered boundary 
ultimately serve load beyond the balancing authority area where the 
seller is mitigated.\69\ Not only is it unrealistic to believe that 
power sold by mitigated sellers at the metered boundary can be 
traced,\70\ these petitioners have failed to explain or demonstrate how 
the Commission could effectively monitor to ensure that power sold by a 
mitigated seller at cost-based rates into the mitigated balancing 
authority area did not originate from that mitigated seller's sale at 
market-based rates at the metered boundary. Therefore, in order to 
ensure that mitigated sellers are not making market-based rate sales 
anywhere within a balancing authority area in which they are mitigated, 
once a mitigated seller sells power at the metered boundary at market-
based rates, the mitigated seller and its affiliates may not sell power 
into the balancing authority area in which the seller is found, or 
presumed, to have market power, whether at cost-based or market-based 
rates.\71\ As the Commission has explained, this prohibition is 
necessary to ensure that no improper sales are taking place, and to 
enable the Commission to ensure market power is not being exercised in 
the balancing authority area in which a seller is mitigated.
---------------------------------------------------------------------------

    \69\ Order No. 697-B, FERC Stats. & Regs. ] 31,285 at P 66-67, 
69; E.ON May 21, 2008 Rehearing Request at 12-14, Pinnacle May 21, 
2008 Rehearing Request at 4-6. See also Westar Energy, Inc. v. FERC, 
568 F.3d 985, 988 (DC Cir. 2009) (stating that in Order No. 697 the 
Commission concluded that ``it `is unrealistic to believe that' such 
sales `can be traced to ensure that no improper sales are taking 
place.' '') (citation omitted); Order No. 697-A, FERC Stats. & Regs. 
] 31,268 at P 321.
    \70\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 818 and 
n.963 (citing to utility comments critical of tagging for monitoring 
market transactions).
    \71\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 at n.464.
---------------------------------------------------------------------------

    45. We deny petitioners' request that we modify the mitigated sales 
tariff provision to include the options in paragraphs 42 and 43, and 
their request that the Commission clarify that the tariff text 
governing sales at the metered boundary ``will not prevent sales that 
are otherwise authorized by the Commission, either generically or on a 
case-by-case basis in individual agreements.'' \72\ Petitioners' 
arguments that the tariff text governing sales at the metered boundary 
does not allow mitigated sellers to exercise the options discussed in 
paragraphs 42 and 43 of Order No. 697-C, and that paragraphs 42 and 43 
are therefore in direct conflict with the tariff text, is premised on a 
misreading of paragraphs 42 and 43. Petitioners are incorrect that 
paragraphs 42 and 43 ``purport to allow market-based rate sales at the 
metered boundary without [the] subsequent constraints [contained in the 
tariff text], provided title transfers to the power or service at or 
beyond the metered boundary, or the power or service is sold to an end 
user.'' \73\ The Commission's statement at the end of paragraph 42 that 
`` mitigated sellers may choose to make no market-based rates sales at 
the metered boundary, or to limit such sales to end users, thereby 
eliminating the risk that they will re-sell power back to the balancing 
authority area where they are mitigated'' \74\ does not conflict with 
the mitigated sales tariff provision, which states that ``if the Seller 
sells at the metered boundary of a mitigated balancing authority area 
at market-based rates, then neither it nor its affiliates can sell into 
that mitigated balancing authority area from the outside.'' \75\ 
Because a mitigated seller making market-based rate sales at the 
metered boundary and its affiliates cannot make sales into the 
mitigated balancing authority area from the outside under the options 
provided in paragraph 42, both options in paragraph 42 are consistent 
with the text of the mitigated sales tariff provision.
---------------------------------------------------------------------------

    \72\ EEI July 20, 2009 Rehearing Request at 13.
    \73\ Id. at 5.
    \74\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 42 
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 336).
    \75\ Id. at Appendix C.
---------------------------------------------------------------------------

    46. We further reject petitioners' argument that the options set 
forth in paragraph 43 of Order No. 697-C are in conflict with the 
tariff text. In responding to petitioners' arguments that the mitigated 
sales tariff provision interferes with must-offer and reliability 
requirements, reserve sharing agreements, and cost-based requirement 
contracts, the Commission explained at paragraph 43 that ``if a 
mitigated seller does not make market-based rate sales at the border, 
either that mitigated seller or its affiliates may make sales at cost-
based rates into the balancing authority area in which it is 
mitigated.'' \76\ The Commission stated that ``[a] mitigated seller can 
perform each of the above-enumerated functions either by selling at 
cost-based rates within its restricted balancing authority area, 
selling at cost-based rates at the metered boundary of its restricted 
balancing authority area, or by selling at market-based rates at the 
metered boundary as long as it makes sure that title to the power sold 
transfers at or beyond the metered boundary.'' \77\

[[Page 14350]]

Thus, the mitigated seller can fulfill any obligations it has under 
must-offer and reliability requirements, reserve sharing agreements, 
and cost-based requirement contracts by making sales at cost-based 
rates into the balancing authority area in which it is mitigated, as 
long as a mitigated seller does not make market-based rate sales at the 
metered boundary. It could also fulfill such obligations by selling at 
cost-based rates at the metered boundary of its restricted balancing 
authority area. Or, the mitigated seller could fulfill such obligations 
by making sales at the metered boundary of a mitigated balancing 
authority area at market-based rates, as long as neither it nor its 
affiliates sell into that mitigated balancing authority area from the 
outside.
---------------------------------------------------------------------------

    \76\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 43 
(emphasis in original).
    \77\ Id. (emphasis added).
---------------------------------------------------------------------------

    47. Because a mitigated seller can fulfill any obligations it has 
under must-offer and reliability requirements, reserve sharing 
agreements, and cost-based requirement contracts under one of these 
options, we reject petitioners' argument that the tariff text's 
prohibition on subsequent sales by a mitigated seller are overbroad and 
over-inclusive. To the contrary, the mitigated sales tariff provision 
enables the Commission to ensure that no improper sales are taking 
place, and thereby enables the Commission to ensure market power is not 
being exercised in the balancing authority area in which a seller is 
mitigated. Moreover, the Court of Appeals for the District of Columbia 
Circuit recently confirmed that ``a wholesaler * * * can easily comply 
with the [Commission] rule and still make sales into other regions at 
market-based rates. A wholesaler simply needs to ensure that title 
passes at or beyond the metered boundary between the mitigated and non-
mitigated areas, instead of inside a mitigated area.'' \78\ Thus, we 
reject EEI's argument that the tariff text's prohibition on subsequent 
sales by a mitigated seller are overbroad and over-inclusive.
---------------------------------------------------------------------------

    \78\ Westar Energy, Inc. v. FERC, 568 F.3d 985, 988 (DC Cir. 
2009) (citation omitted).
---------------------------------------------------------------------------

    48. Petitioners' argument that the tariff provision is overbroad 
because it does not clearly apply only if the seller is originally 
selling from within the mitigated market at the metered boundary and 
because it does not include any temporal or other limits to ensure that 
the subsequent prohibited sales into the mitigated market are linked to 
the original outbound border sales \79\ was previously raised in the 
requests for rehearing of Order No. 697-B.\80\ The Commission rejected 
that argument in Order No. 697-C and affirmed its determination to 
revise the mitigated sales tariff provision in Order No. 697-B to 
ensure that a mitigated seller making market-based rate sales at the 
metered boundary does not sell power into the mitigated market either 
directly or through its affiliates.\81\ In addition, petitioners' 
requests that the Commission: (1) Clarify whether end users include 
load-serving entities such as investor-owned utilities, municipalities, 
and cooperatives that service retail load; (2) authorize ``sales of 
blocks of power to be delivered at dates and times other than the 
border sale block of power, power made available under must offer 
requirements, and load-following power'', and (3) ``clarify that the 
border sale constraints do not require a mitigated seller or its 
affiliate, if otherwise precluded from selling power into the mitigated 
area from the outside, to withhold making those sales during times at 
which the seller or affiliates are called on to maintain system 
reliability'' \82\ were also previously raised by EEI in its request 
for rehearing of Order No. 697-B as part of its argument that the 
Commission should return to the intent-based concept adopted in Order 
No. 697, wherein EEI identified five types of transactions that it 
suggested should be permitted without first needing to demonstrate 
intent, even if a mitigated seller does make market-based rate sales at 
the metered boundary.\83\ The Commission responded to this argument in 
Order No. 697-C, explaining that it would not return to the intent 
based concept as requested by EEI because, as it stated in Order No. 
697-A, the Commission agreed with petitioners that it would be 
difficult to determine and document intent, and therefore decided to 
eliminate the intent element of the tariff provision.\84\ The 
Commission does not allow rehearing of an order denying rehearing.\85\ 
Therefore, we dismiss petitioners' argument that the tariff provision 
is overbroad, and their requests that the Commission authorize 
mitigated sellers to make the same types of sales that EEI previously 
asked the Commission to permit, as these arguments are an attempt to 
re-litigate the determinations made by the Commission in Order No. 697-
C.
---------------------------------------------------------------------------

    \79\ EEI July 20, 2009 Rehearing Request at 7.
    \80\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 28 
(stating that ``E.ON contends that the revised tariff provision is 
overbroad and prohibits legitimate transactions'' and ``E.ON argues 
that the mitigated sales tariff provision should contain a `temporal 
limitation' so that it cannot be read to prohibit a mitigated seller 
or its affiliates from ever selling from the outside into the 
mitigated balancing authority area.'').
    \81\ Id. P 42.
    \82\ EEI July 20, 2009 Rehearing Request at 13-14.
    \83\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 36. 
Specifically, EEI argued that the Commission should permit sales to 
load-serving entities such as investor-owned utilities, 
municipalities, and cooperatives that serve retail load outside the 
mitigated market, even if those entities may at times need to sell 
power back into the mitigated market if their supply is too great. 
EEI January 22, 2009 Corrected Rehearing Request at 7-9. It also 
argued that the Commission should permit other types of transactions 
that are independent of the border sales, such as sales of blocks of 
power to be delivered at dates and times other than the border sale 
block of power, power made available under must offer requirements, 
and load-following power, and should clarify that the border sale 
constraints do not require a mitigated seller or its affiliates, 
which otherwise would be precluded from selling power into the 
mitigated area from the outside, to withhold making those sales 
during times at which the seller or affiliates are called on to 
maintain system reliability. EEI January 22, 2009 Corrected 
Rehearing Request at 8-9.
    \84\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 44.
    \85\ Southwestern Public Service Co., 65 FERC ] 61,088, at 
61,533 & n.14 (1993).
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    49. In response to petitioners' request that the Commission clarify 
whether end users include load-serving entities such as investor-owned 
utilities, municipalities, and cooperatives that service retail load, 
we clarify that for the purposes of the mitigated sales tariff 
provision adopted in this rulemaking proceeding, end users of power 
could include, but are not limited to, buyers that serve end-use 
customers, which as suggested by EEI, could include load serving 
entities serving their retail load, such as investor-owned utilities, 
municipalities, and cooperatives. However, end users do not include 
entities that sell power into the balancing authority area in which the 
seller is mitigated.\86\
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    \86\ See Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 36 
(summarizing the argument in EEI's request for rehearing of Order 
No. 697-B that, even if a mitigated seller does engage in border 
sales, the Commission should permit ``sales to load-serving entities 
such as investor-owned utilities, municipalities, and cooperatives 
that serve retail load outside the mitigated market, even if those 
entities may at times need to sell power back into the mitigated 
market if their supply is too great (since the timing and occurrence 
of such excess-power sales back into the mitigated market will be 
beyond the control of the mitigated seller'') (citing EEI January 
22, 2009 Corrected Rehearing Request at 8-9).
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    50. With respect to petitioners' request for clarification 
concerning the applicability of the mitigated sales tariff provision, 
as the Commission explained in Order No. 697-C, the restrictions on 
market-based rate sales at the metered boundary only apply to new 
agreements that the seller enters into prospectively from the date that 
Order No. 697-B became effective, and no existing agreements are upset 
or need to be revised in any way provided that the seller abides by our 
restrictions on any

[[Page 14351]]

new agreements that it enters into prospectively.\87\ EEI's 
interpretation that if ``sales [under existing agreements] are 
permitted because the agreement already exists'' then the mitigated 
sales tariff provision does not apply to ``any sales under the WSPP 
tariff, for example * * * because the agreement already exists and the 
sales are executed under it[,]'' \88\ is incorrect. Although EEI fails 
to describe the specific circumstances that give rise to its concerns, 
as EEI acknowledges, sales under such agreements are not executed until 
there is a requirement for service. Thus, the terms and conditions of 
an agreement executed under a generally applicable tariff are subject 
to the Commission's rules and regulations in force at the time that 
such an agreement is executed. Accordingly, the mitigated sales tariff 
provision applies to sales under the WSPP tariff that are entered into 
prospectively from July 29, 2009, the date that Order No. 697-B became 
effective. We therefore clarify that the restrictions in the mitigated 
sales tariff provision apply to agreements and transactions pursuant to 
them, that a seller enters into prospectively from July 29, 2009, the 
date that Order No. 697-B became effective.\89\
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    \87\ Order No. 697-C, FERC Stats. & Regs. ] 31,291 at P 43.
    \88\ EEI July 20, 2009 Rehearing Request at 11-12.
    \89\ In this regard, we note that in accepting a utility's 
proposed mitigation, the Commission explained that such mitigation 
is accepted on a prospective basis, and that it is appropriate for 
existing long-term agreements to remain in effect until terminated 
pursuant to their terms. See South Carolina Electric and Gas Co., 
114 FERC ] 61,143, at P 18 (2006).
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    51. We deny petitioners' request that the Commission hold a 
technical conference to address issues related to the mitigated sales 
tariff provision. The Commission has provided extensive opportunity for 
comment on this issue, and has considered four rounds of comments, 
including the petitioners' requests for rehearing of Order No. 697-C. 
As discussed above, contrary to petitioners' argument that the 
Commission has not articulated the problem that this tariff provision 
is intended to address, the Commission explained in Order Nos. 697-B 
and 697-C that the tariff text adopted in Order No. 697-B enables the 
Commission to ensure that mitigated sellers, once they have made a 
market-based rate sale at the metered boundary of the mitigated 
balancing authority area, are not making such sales anywhere within a 
balancing authority area in which they are mitigated.
    52. We also deny petitioners' request that the Commission delay the 
deadline for compliance with the mitigated sales tariff provision until 
the Commission issues an order responding to EEI's request for 
rehearing of Order No. 697-C, or following a technical conference. The 
Commission has already granted an extension of time to comply with the 
revised mitigated sales tariff provision in response to the requests 
for rehearing of Order No. 697-B.\90\ In its January 28, 2009 order 
granting an extension of time to comply, the Commission explained that 
it was granting an extension of time to comply with the mitigated sales 
tariff provision as set forth in Order No. 697-B ``until such time as 
the Commission issues an order on rehearing of Order No. 697-B.'' \91\ 
Accordingly, we find that entities affected by the mitigated sales 
tariff provision as revised in Order No. 697-B have been on notice 
since January 28, 2009 that they should be prepared to comply with this 
tariff provision upon the issuance of the Commission's order on 
rehearing of Order No. 697-B. Moreover, petitioners have not provided 
any basis for a further extension of time to comply with the mitigated 
sales tariff provision; rather, petitioners repeat the same arguments 
in their requests for rehearing that the Commission responded to in 
Order Nos. 697-B and 697-C.
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    \90\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity, and Ancillary Services by Public Utilities, 126 FERC ] 
61,072 (2009) (Order Granting Extension of Time to Comply).
    \91\ Id.
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IV. Information Collection Statement

    53. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain information collection requirements imposed by 
an agency.\92\ The Final Rule's revisions to the information collection 
requirements for market-based rate sellers were approved under OMB 
Control Nos. 1902-0234. While this order clarifies aspects of the 
existing information collection requirements for the market-based rate 
program, it does not add to these requirements. Accordingly, a copy of 
this order will be sent to OMB for informational purposes only.
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    \92\ 5 CFR 1320.11.
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V. Document Availability

    54. 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.
    55. 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.
    56. 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 e-mail at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at 
public.referenceroom@ferc.gov.

VI. Effective Date

    57. Changes adopted in this order on rehearing will become 
effective April 26, 2010.

List of Subjects in 18 CFR Part 35

    Electric power rates, Electric utilities, Reporting and 
recordkeeping requirements.

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

0
In consideration of the foregoing, the Commission amends Part 35 
Chapter I, Title 18, Code of Federal Regulations, as follows:

PART 35--FILING OF RATE SCHEDULES AND TARIFFS

0
1. The authority citation for Part 35 continues to read as follows:

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

0
2. Section 35.42 is revised to read as follows:

Sec.  35.42  Change in status reporting requirement.

    (a) As a condition of obtaining and retaining market-based rate 
authority, a Seller must timely report to the Commission any change in 
status that would reflect a departure from the characteristics the 
Commission relied upon in granting market-based rate authority. A 
change in status includes, but is not limited to, the following:
    (1) Ownership or control of generation capacity that results in net 
increases of 100 MW or more, or of inputs to electric power production, 
or ownership, operation or control of transmission facilities, or
    (2) Affiliation with any entity not disclosed in the application 
for market-based rate authority that owns or

[[Page 14352]]

controls generation facilities or inputs to electric power production, 
affiliation with any entity not disclosed in the application for 
market-based rate authority that owns, operates or controls 
transmission facilities, or affiliation with any entity that has a 
franchised service area.
    (b) Any change in status subject to paragraph (a) of this section, 
other than a change in status submitted to report the acquisition of 
control of a site or sites for new generation capacity development, 
must be filed no later than 30 days after the change in status occurs. 
Power sales contracts with future delivery are reportable 30 days after 
the physical delivery has begun. Failure to timely file a change in 
status report constitutes a tariff violation.
    (c) When submitting a change in status notification regarding a 
change that impacts the pertinent assets held by a Seller or its 
affiliates with market-based rate authorization, a Seller must include 
an appendix of assets in the form provided in Appendix B of this 
subpart.
    (d) A Seller must report on a quarterly basis the acquisition of 
control of a site or sites for new generation capacity development for 
which site control has been demonstrated in the interconnection process 
and for which the potential number of megawatts that are reasonably 
commercially feasible on the site or sites for new generation capacity 
development is equal to 100 megawatts or more. If a Seller elects to 
make a monetary deposit so that it may demonstrate site control at a 
later time in the interconnection process, the monetary deposit will 
trigger the quarterly reporting requirement instead of the 
demonstration of site control. A notification of change in status that 
is submitted to report the acquisition of control of a site or sites 
for new generation capacity development must include:
    (1) The number of sites acquired;
    (2) The relevant geographic market in which the sites are located; 
and
    (3) The maximum potential number of megawatts (MW) that are 
reasonably commercially feasible on the sites reported.
    (e) For the purposes of paragraph (d) of this section, ``control'' 
shall mean ``site control'' as it is defined in the Standard Large 
Generator Interconnection Procedures (LGIP).

[FR Doc. 2010-6480 Filed 3-24-10; 8:45 am]
BILLING CODE 6717-01-P