Document ID: FERC-2007-0507-0001
Agency: ferc
Document Type: Rule
Title: Revision of Annual Charges to Public Utilities (Westar Energy, Inc. and Kansas Gas and Electric Company)
Posted Date: 2007-03-22T04:00Z

[Federal Register: March 22, 2007 (Volume 72, Number 55)]
[Rules and Regulations]               
[Page 13442-13444]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr07-11]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 382

[Docket No. RM00-7-012]

 
Revision of Annual Charges to Public Utilities (Westar Energy, 
Inc. and Kansas Gas and Electric Company)

Issued March 15, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on remand and announcement of policy.

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SUMMARY: In this order, the Federal Energy Regulatory Commission 
(Commission) addresses issues raised by the United States Court of 
Appeals for the District of Columbia Circuit (D.C. Circuit) on remand 
in Westar Energy Inc., Docket No. RM87-3-000. The Commission here 
affirms its regulation at 18 CFR 382.201 (2006), adopted in Order No. 
641, allowing correction of transmission volumes, but in response to 
the remand allows Westar Energy, Inc. to submit corrected transmission 
volumes out-of-time.
    The Commission clarifies going forward that it will accept timely 
FERC Reporting Requirement No. 582 (FERC 582) corrections but will 
accept only those late-filed FERC 582 corrections that are discovered 
through a Commission-conducted audit and that correct previously under-
reported transmission volumes. When a public utility underreports, it 
is assessed comparatively smaller annual charges, and other public 
utilities are assessed relatively larger annual charges thereby 
subsidizing those utilities who underreport.

DATES: Effective Date: This order on remand is effective March 15, 
2007.

FOR FURTHER INFORMATION CONTACT: Jennifer Rinker, Office of the General 
Counsel--Energy Markets, Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426, (202) 502-6563.

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

Order on Remand and Announcing Policy on Submission of Corrected 
Electric Annual Charge-Related Data

    1. This order addresses issues raised by the United States Court of 
Appeals for the District of Columbia Circuit (D.C. Circuit) on 
remand.\1\ The Commission here affirms its regulation allowing 
correction of transmission volumes,\2\ adopted in Order No. 641,\3\ but 
in response to the remand allows Westar Energy, Inc. (Westar) to submit 
corrected transmission volumes out-of-time. The Commission clarifies 
going forward that it will accept timely FERC Reporting Requirement No. 
582 (FERC 582) corrections but will accept only those late-filed FERC 
582 corrections that are discovered through a

[[Page 13443]]

Commission-conducted audit and that correct previously under-reported 
transmission volumes.\4\
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    \1\ Westar Energy Inc., Docket No. RM87-3-000 (Apr. 8, 2004) 
(unpublished letter order), reh'g denied sub nom. Revision of Annual 
Charges to Public Utilities (Westar Energy, Inc. and Kansas Gas and 
Electric Company), 111 FERC ] 61,086 (2005), remanded sub nom. 
Westar Energy, Inc. v. FERC, 473 F.3d 1239 (D.C. Cir. 2007).
    \2\ 18 CFR 382.201 (2006).
    \3\ Revision of Annual Charges to Public Utilities, Order No. 
641, FERC Stats. & Regs. ] 31,109 (2000), reh'g denied, Order No. 
641-A, 94 FERC ] 61,290 (2001).
    \4\ When a public utility underreports, it is assessed 
comparatively smaller annual charges, and other public utilities are 
assessed relatively larger annual charges. The effect is that the 
underreporting utility pays less than its fair share of the 
Commission's costs, and is effectively subsidized by other utilities 
who will pay more than their fair share of the Commission's costs.
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Background

    2. As required by Section 3401 of the Omnibus Budget Reconciliation 
Act of 1986,\5\ the Commission's regulations provide for the payment of 
annual charges by public utilities.\6\ The Commission intends that its 
electric annual charges in any fiscal year will recover the 
Commission's estimated electric regulatory program costs (other than 
the costs of regulating Federal Power Marketing Agencies (PMAs) and 
electric regulatory program costs recovered through electric filing 
fees) for that fiscal year. In the next fiscal year the Commission 
adjusts the annual charges up or down, as appropriate, both to 
eliminate any over-or under-recovery of the Commission's actual costs 
and to eliminate any over-or under-charge of any particular public 
utility. The Commission accomplishes this by recalculating the annual 
charges and carrying over any over-or under-charge from the prior year 
as a credit or debit on the next fiscal year's annual charges bill.\7\
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    \5\ 42 U.S.C. 7178 (2000).
    \6\ 18 CFR 382.201 (2006).
    \7\ 18 CFR 382.201 (2006); see, e.g., Order No. 641, FERC Stats. 
& Regs. ] 31,109 at 31,841-42; accord Annual Charges under the 
Omnibus Budget Reconciliation Act of 1986 (CNG Power Services), 87 
FERC ] 61,074 at 61,302 (1999) (CNG); Annual Charges Under the 
Omnibus Budget Reconciliation Act of 1986 (Phibro Inc.), 81 FERC ] 
61,308 at 62,424-25 (1997).
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    3. In calculating annual charges, the Commission determines its 
total electric regulatory program costs and subtracts all PMA-related 
costs and electric filing fee collections to determine its collectible 
electric regulatory program costs. That amount is charged to public 
utilities that provide transmission service. Public utilities that 
provide transmission service and thus are subject to annual charges 
must submit FERC 582 to the Office of the Secretary by April 30 of each 
year, providing data for the previous calendar year.\8\ The reports 
include their transmission of electric energy in interstate commerce, 
as measured by: (1) Unbundled wholesale transmission; (2) unbundled 
retail transmission; and (3) bundled wholesale power sales which, by 
definition, include a transmission component, where the transmission 
component is not separately reported as unbundled transmission.
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    \8\ 18 CFR 382.201 (2006).
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    4. Importantly, the Commission uses that data to allocate its 
collectible electric regulatory program costs among all public 
utilities that provide transmission service; changing the amount owed 
by one public utility has an effect on the amount owed by all of the 
others. The Commission issues bills for annual charges based on each 
public utility's transmission service (as reported in the FERC 582) as 
compared to the total of all public utilities' transmission service, 
and the bills must be paid within 45 days of the date on which the 
Commission issues the bills.\9\ The regulations allow public utilities 
to make corrections to their previously filed FERC 582s, but they must 
do so within a specified time:
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    \9\ See, e.g., Order No. 641, FERC Stats. & Regs. ] 31,109 at 
31,848-20; Order No. 641-A, 94 FERC at 62,037.

    Corrections to the information reported on [FERC] 582, as of 
January 1, 2002, must be submitted under oath to the Office of the 
Secretary on or before the end of each calendar year in which the 
information was originally reported (i.e., on or before the last day 
of the year that the Commission is open to accept such filings).\10\
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    \10\ 18 CFR 382.201(c)(2) (2006).

    The Commission adjusts the annual charges in the following fiscal 
year (FY), using this corrected information, in order to eliminate any 
over or under recovery both of the Commission's actual costs and of the 
charges to each public utility.\11\
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    \11\ See Order No. 641, FERC Stats & Regs. ] 31,109 at 31,857; 
Revision of Annual Charges to Public Utilities (California 
Independent System Operator, Inc.), 101 FERC ] 61,043 at 61,163, 
reh'g dismissed, 101 FERC ] 61,326 at P 9 (2002) (CAISO); accord 
CNG, 87 FERC at 61,303.
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Earlier Filings and Orders

    5. On December 18, 2003, Westar submitted a corrected FERC 582 for 
both 2002 and 2003, correcting the data reported for the years 2001 and 
2002, respectively. Westar explained that its internal review, prompted 
by a change in the Commission's reporting requirements, revealed that 
it had over-reported transmission in several particulars. Westar 
requested a waiver of the Commission's regulations, observing that the 
Commission had permitted another company, Kansas City Power and Light 
Company (KCPL), to file a correction for calendar year 2001 in 
2003.\12\
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    \12\ Kansas City Power & Light, Docket No. FA03-17-000 (August 
14, 2003).
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    6. By letter order dated April 8, 2004, the Director of the 
Commission's Division of Financial Services, Office of the Executive 
Director, accepted Westar's corrections for FY 2003 (reporting 
corrected calendar year 2002 transmission data), but rejected Westar's 
proposed corrections for FY 2002 (reporting corrected calendar year 
2001 transmission data) on the ground that it was untimely under 
section 382.201(c)(2) of the Commission's regulations. On May 7, 2004, 
Westar sought rehearing.
    7. The Commission subsequently denied rehearing for four reasons: 
first, the Commission's regulations expressly provided that corrections 
be made by the end of the calendar year in which the information was 
originally filed; second, the broader interest in preserving the 
finality of annual charges weighed against Westar's individual interest 
in allowing an untimely correction; third, the Commission had offered 
no assurances that it would correct erroneously filed information 
beyond the deadline for filing corrected information expressly spelled 
out in the regulations; and fourth, Westar and KCPL were not similarly 
situated because the Commission itself caused KCPL's late filing and it 
would, therefore, have been inequitable to reject KCPL's out-of-time 
corrections to the detriment of the company.\13\
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    \13\ 111 FERC ] 61,086 at P 10-12.
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    8. Westar filed a petition for review with the D.C. Circuit, and on 
January 16, 2007, the D.C. Circuit vacated and remanded the 
Commission's not allowing Westar's corrected FERC 582 for FY 2002, 
finding the Commission's order provided no basis ``in fact or in logic 
for the Commission's refusal to treat Westar as it had treated KCPL.'' 
\14\
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    \14\ 473 F.3d. at 1243.
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Discussion

    9. In light of the D.C. Circuit's finding, and to bring this matter 
to an expeditious conclusion, the Commission will allow Westar to 
submit the corrected FY 2002 transmission volumes that the Commission 
had previously rejected because they had been filed out-of-time.
    10. The Commission does, however, reiterate its continued 
commitment to the policy reflected in part 382 of the Commission's 
regulations, namely that corrected transmission volumes must be filed 
by the end of the calendar year in which the transmission volumes were 
originally filed. This is what the Commission's regulations 
require.\15\ The court found, while vacating and remanding the 
Commission's determination as to Westar, that the first three of the 
Commission's four reasons

[[Page 13444]]

for denying Westar's request both alone and together justify this 
policy: (1) The regulations expressly required filing of corrections by 
a date certain; (2) waiving the deadline would undermine the certainty 
that the annual charges would not be indefinitely subject to change; 
and (3) the Commission has never suggested it would ignore the deadline 
spelled out in its regulations.\16\
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    \15\ 18 CFR 382.201(c)(2) (2006).
    \16\ 473 F.3d. at 1241-42. As noted above, it was the 
Commission's failure to adequately explain the fourth reason that 
led to the remand.
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    11. We also announce a policy, going forward, as to when we will 
waive the regulation and allow untimely submissions. The Commission's 
policy going forward will be to grant waiver and accept only those 
late-filed corrections discovered through a Commission-conducted audit 
in order to remedy an underreporting of transmission volumes (and thus 
where other utilities have subsidized the underreporting utility).
    12. As stated above, the Commission allocates its collectible 
electric regulatory program costs among public utilities. A reduction 
in the amount owed by one utility necessarily has an effect, an 
increase, on the amount owed by all of the others. Therefore, if a 
utility does not accurately report its transmission volumes, the 
Commission cannot charge it appropriately.\17\ The allocation of costs 
based on transmission volumes creates a natural incentive for utilities 
to underreport their transmission volumes in a given year. Just as 
public utilities have a natural incentive to ``abuse their market 
power,'' \18\ so, by analogy, public utilities subject to reporting 
transmission volumes for purposes of calculating their proportionate 
share of the Commission's collectible electric regulatory program costs 
have similar incentives to underreport their transmission volumes and 
thereby reduce the costs allocated to them. The effect of such 
underreporting is an inequitable subsidization by other utilities of 
any utility that underreported. The agency's audit process provides a 
check on that natural incentive. Therefore, the Commission will allow 
late-filed corrections resulting from an audit revealing that a utility 
has underreported its transmission volumes and consequently forced 
other utilities to bear costs that should have been borne by the 
underreporting utility. The Commission thus retains its ability to make 
right the situation where the remainder of the industry has paid 
amounts which rightfully were owed by another.\19\
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    \17\ As we have noted, the transmission volumes utilities report 
are the utilities' data. These data are, moreover, filed under oath. 
18 CFR 382.201(c)(1) (2006); see Revision of Annual Charges to 
Public Utilities (PJM Interconnection), 105 FERC ] 61,093 at P 8 
(2003); Midwest Independent Transmission System Operator, Inc., 103 
FERC ] 61,048 at P 13-14, reh'g denied, 104 FERC ] 61,060 (2003); 
CAISO, 101 FERC ] 61,326 at P 9; CAISO, 101 FERC ] 61,043 at P 10. 
While utilities are thus required to report complete and accurate 
data (by April 30 of each year), we nevertheless recognize that 
utilities may err in their reporting, and so we allow corrections to 
be filed up to eight months following their original filing, i.e., 
by the end of the calendar year.
    \18\ Pennsylvania Elec. Co. v. FERC, 11 F.3d 207, 211 n.5 (D.C. 
Cir. 1993); Nat'l Fuel Gas Supply Corp. v. FERC, 468 F.3d 831, 834-
835 (D.C. Cir. 2006); United Distribution Cos. v. FERC, 88 F.3d 
1105, 1122 & n.4 (D.C. Cir. 1996); Associated Gas Distribs. v. FERC, 
824 F.2d 981, 1010 (D.C. Cir. 1987).
    \19\ If the Commission finds that the underreporting was 
intentional, it may seek to invoke its civil penalty authority as 
well.
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    13. However, the reverse is not true. Overreporting does not raise 
the same concerns as underreporting; if a company overreports its 
transmission volumes and fails to file corrections by the deadline, it 
does so to its detriment and harms no one but itself. Errors of 
overreporting discovered after the deadline, by Commission-conducted 
audit or otherwise, thus may not be corrected. The D.C. Circuit 
acknowledged that any one of the first three justifications provided by 
the Commission, described above, justify a Commission policy of not 
accepting a corrected FERC 582 after the deadline. Indeed, the 
Commission need not have structured its regulation to allow corrections 
at all. The data the utilities must report is, after all, the 
utilities' data, and that data must be filed under oath; in other 
words, full and complete reporting at the outset should be the norm. 
The Commission, however, elected to build leniency into its requirement 
to submit transmission volumes, in the form of an 8-month window from 
the April 30 filing deadline to the December 31 corrections deadline. 
That 8-month window provides more than sufficient time for utilities to 
identify and correct their overreporting.
    The Commission orders:
    (A) The Commission hereby grants waiver of the annual charges 
reporting requirement, FERC 582, to allow Westar to submit corrected 
information for FY 2002 (reporting corrected calendar year 2001 
transmission data). The upcoming annual charges will be calculated to 
reflect this corrected information.
    (B) The Secretary is hereby directed to publish this order in the 
Federal Register.

    By the Commission.
Philis J. Posey,
Acting Secretary.
 [FR Doc. E7-5052 Filed 3-21-07; 8:45 am]

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