[Federal Register Volume 60, Number 16 (Wednesday, January 25, 1995)]
[Rules and Regulations]
[Pages 4831-4860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1449]



=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 2, 34, 35, 41, 131, 292, 294, 382, and 385

[Docket No. RM92-12-000]


Streamlining of Regulations Pertaining to Parts II and III of the 
Federal Power Act and the Public Utility Regulatory Policies Act of 
1978; Order No. 575

Issued January 13, 1995.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
amending its regulations governing public utilities and qualifying 
facilities. The final rule revises and clarifies Commission policies 
regarding: Rate filings by public utilities under the Federal Power 
Act; issuances of securities and assumptions of liabilities by public 
utilities, licensees and others; and procedural and technical rules 
governing qualifying facilities. The final rule is intended to 
streamline the Commission's processing of its workload and reduce 
regulatory burdens on the electric utility and qualifying facility 
industries.

EFFECTIVE DATE: This rule is effective February 24, 1995.

FOR FURTHER INFORMATION CONTACT:

Andre Goodson (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 825 North Capitol St., N.E., 
Washington, D.C. 20426, Telephone: (202) 208-2167;
Joseph C. Lynch (Legal Information), Federal Energy Regulatory 
Commission, Office of the General Counsel, 825 North Capitol Street, 
N.E., Washington, D.C. 20426, Telephone: (202) 208-2128;
Wayne McDanal (Technical information concerning Part 34 matters), 
Office of Chief Accountant, 825 North Capitol Street, N.E., Washington, 
D.C. 20426, Telephone: (202) 219-2622;
Howard B. Forman (Technical information concerning Part 35 matters), 
Office of Electric Power Regulation, 825 North Capitol Street, N.E., 
Washington, D.C. 20426, Telephone: (202) 208-0545;
Qualifying Facilities Desk Officer (Technical information concerning 
Part 292 matters), Office of Electric Power Regulation, 825 North 
Capitol Street, N.E., Washington, D.C. 20426, Telephone: (202) 208-
0571;
James K. Newton (Technical information concerning Part 294 matters), 
Office of Electric Power Regulation, 825 North Capitol Street, N.E., 
Washington, D.C. 20426, Telephone: (202) 208-0578; or
William C. Booth (Technical information concerning Part 382 matters), 
Office of Electric Power Regulation, 825 North Capitol Street, N.E., 
Washington, D.C. 20426, Telephone: (202) 208-0849.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document in the Federal Register, the Commission also provides all 
interested persons an opportunity to inspect or copy the contents of 
this document during normal business hours in Room 3401, at 941 North 
Capitol Street, N.E., Washington, D.C. 20426.
    The Commission Issuance Posting System (CIPS), an electronic 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397. To access CIPS, set your communications 
software to 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or 
300bps, full duplex, no parity, 8 data bits and 1 stop bit. The full 
text of this document will be available on CIPS for 60 days from the 
date of issuance in ASCII and WordPerfect 5.1 format. After 60 days the 
document will be archived, but still accessible. The complete text on 
diskette in WordPerfect format may also be purchased from the 
Commission's copy contractor, La Dorn Systems Corporation, also located 
in Room 3104, 941 North Capitol Street, N.E., Washington, D.C. 20426.

Table of Contents

I. Introduction
II. Public Reporting Burden
III. Discussion
    A. Part 2--General Policy and Interpretations: Section 2.4(d)--
Initial Rate Schedules
    B. Part 34--Application for Authorization of the Issuance of 
Securities or the Assumption of Liabilities
    1. Section 34.1(c)(1)--Exemption if State Regulates Security 
Prior to Issuance
    2. Section 34.1(c)(2)--Exemption for Short Term Notes or Drafts
    3. Section 34.2--Placement of Securities
    4. Section 34.3--Contents of Application for Issuance of 
Securities
    5. Section 34.4--Required Exhibits
    6. Section 34.10--Reports
    7. Section 34.11--Unopposed Applications to Issue Securities 
and/or Assume Liabilities
    8. Part 131--Forms: Section 131.50
    C. Part 35--Filing of Rate Schedules
    1. Sections 35.13(a)(2)(i)(A) and (B)--Rate Increases of Less 
Than $200,000, Regardless of Customer Consent, and Rate Increases 
Below $1,000,000, With Customer Consent
    2. Other Changes to Section 35.13
    D. Part 41--Accounts, Records and Memoranda: Sections 41.3 and 
41.7
    E. Proposed Procedural Modifications and Revised Definitions 
Under Part 292--Regulations Under Sections 201 and 210 of the Public 
Utility Regulatory Policies Act of 1978 (PURPA) With Regard to Small 
Power Production and Cogeneration
    1. Administration of the 90-Day Certification Period
    2. Improvements in the Self-Certification Process
    3. Revocation of Qualifying Status
    4. Pre-Authorized Recertification [[Page 4832]] 
    5. Qualifying Transmission and Interconnection Equipment
    6. Maximum Net Power Production Capacity
    7. Increased Specificity of the Qualifying Facility 
Certification Application Filing Requirements: Form 556
    F. Proposed Technical Modifications for Qualifying Small Power 
Production and Cogeneration Facilities Under Part 292
    1. Calendar Year Operating and Efficiency Value Calculations
    2. Clarification of the Sequential Use of Energy Requirement
    3. Section 292.204(a)--Criteria for Small Power Production 
Facilities
    4. Waste
    G. Part 294--Procedures for Shortages of Electric Energy and 
Capacity Under Section 206 of the Public Utility Regulatory Policies 
Act of 1978
    H. Part 382--Annual Charges: Sections 382.102 and 382.201
    I. Part 385--Rules of Practice and Procedure
IV. Environmental Statement
V. Regulatory Flexibility Certification
VI. Information Collection Statement
List of Subjects

    Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. 
Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa, 
Jr.

I. Introduction

    On November 16, 1992, the Federal Energy Regulatory Commission 
(Commission) issued a Notice of Proposed Rulemaking (NOPR) in which the 
Commission proposed to revise its regulations regarding: (a) Rate 
filings by public utilities under the Federal Power Act (FPA); (b) 
assumptions of liabilities and issuances of securities by public 
utilities, licensees, and certain other entities; and (c) procedural 
and technical rules governing qualifying facilities.1 The 
Commission requested that interested persons submit written comments no 
later than January 15, 1993. Forty entities submitted comments.2

    \1\Streamlining of Regulations Pertaining to Parts II and III of 
the Federal Power Act and the Public Utility Regulatory Policies Act 
of 1978, Notice of Proposed Rulemaking, 57 FR 55176 (Nov. 24, 1992), 
IV FERC Stats. & Regs. 32,489 (1992), errata adding Appendix, 57 FR 
58168 (Dec. 9, 1992), IV FERC Stats. & Regs. 32,491 (1992).
    \2\The commenters are: American Cogeneration Association 
(American Cogen); American Forest and Paper Association (American 
Forest and Paper); American Gas Association (AGA); American Iron and 
Steel Institute (American Iron and Steel); Anthracite Region 
Independent Power Producers Association (Anthracite IPPs); Applied 
Energy Services Corporation (Applied Energy); Arizona Public Service 
Company (Arizona Public Service); Atlantic City Electric Company 
(Atlantic Electric); Baltimore Gas & Electric Company (Baltimore Gas 
& Electric); Public Utilities Commission of the State of California 
(CPUC); Consumers Power Company (Consumers Power); Curran, Corbett & 
Stiles; Delmarva Power & Light Company (Delmarva); Detroit Edison 
Company (Detroit Edison); Steven A. Duff; Duke Power Company (Duke 
Power); Edison Electric Institute (EEI); Electric Generation 
Association; Florida Power & Light Company (Florida P&L); General 
Electric Company (General Electric); Gulf States Utilities Company 
(Gulf States); Long Island Lighting Company (LILCO); National 
Independent Energy Producers (Independent Energy Producers); New 
England Power Company (NEP); New York State Electric & Gas Company 
(NYSEG); Niagara Mohawk Power Corporation (Niagara Mohawk); Oxbow 
Power Corporation (Oxbow); Pennsylvania Power & Light Company 
(Pennsylvania P&L); Ridgewood Power Corporation (Ridgewood); RW 
Power Partners, L.P. (RW Partners); San Diego Gas & Electric Company 
(SDG&E); Southern California Edison Company (Southern California 
Edison); Southern Company Services, Inc. (Southern Companies); 
Tenaska, Inc. (Tenaska); Texaco Cogeneration and Power Company 
(Texaco); Texas-New Mexico Power Company (Texas-New Mexico); United 
States Small Business Administration (Small Business 
Administration); UtiliCorp United, Inc. (UtiliCorp); Utility Systems 
Florida; and Donald L. Warner.
---------------------------------------------------------------------------

    The Commission is now adopting a final rule revising its 
regulations to streamline the processing of the Commission's workload 
and to reduce regulatory burdens on the electric utility and qualifying 
facility industries.

II. Public Reporting Burden

    The final rule establishes new reporting requirements, modifies 
existing reporting requirements and eliminates those requirements that 
are now obsolete. On balance, the Commission believes that the overall 
burden on industry and individuals will be lessened over time by these 
proposed changes. The Commission seeks to simplify and streamline its 
requirements to reduce the burden on respondents including 
utilities,3 and/or persons seeking the following: Obtaining 
Commission certification or filing a notice of the qualifying status of 
their cogeneration facilities and small power producers; obtaining 
Commission approval to issue securities or assume obligations or 
liabilities; responding to the Commission's audits of their financial 
records; filing in response to the assessment of Commission's annual 
charges; submitting contingency plans in preparation of energy 
shortages.

    \3\As used in reference to the part 34 regulations, the term 
``utility'' means public utility, licensee and other entities 
subject to the provisions of the FPA.
---------------------------------------------------------------------------

    The current public reporting burden for these information 
collections is estimated to average the following number of hours per 
response: FERC-516 976 hours for the 234 respondents that complete a 
filing; FERC-523 120 hours for the 60 respondents that complete a 
filing; FERC-525 193.25 hours per response for the 83 respondents that 
respond to audit review; FERC Form 556 6.2 hours for 332 respondents 
that complete an application for certification; FERC-582 4 hours for 
179 respondents who prepare and submit remuneration for annual charges 
assessed on them by the Commission; and FERC-585 76 hours per response 
for average of 6 respondents who annually have submitted changes to 
contingency plans (out of the 110 utilities with plans on file). These 
estimates include the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information.
    The changes in Part 34 (FERC-523) will reduce the reporting burden 
by 10 hours per filing. The changes in Part 35 (FERC-516) will increase 
the reporting burden by 0.1 hours per filing. The changes in Part 292 
(FERC-556) will increase the reporting burden by 0.77 hours per filing 
for notices of self-certification. However, these changes will reduce 
the reporting burden for applications for Commission certification by 
2.5 hours per filing. This reflects a reduction in the amount of 
analysis to determine whether the facility is a qualifying facility. 
The results from the changes in Parts 294 (FERC-585) and 382 (FERC-582) 
on the reporting burden are difficult to quantify, but should, over 
time, result in a reduction of the reporting burden. The changes in 
Part 41 (FERC-525) will not affect the reporting burden.
    With respect to the utilities and persons filing information under 
FERC-523, the Commission believes that there will be an average burden 
decrease due to the elimination of several requirements and increases 
in the thresholds for the reporting of information to meet other 
requirements. For the additional information that will be required 
there should be a minimal burden increase as a result, because much of 
the information is already collected by industry in other contexts. The 
final rule simplifies the provisions for the issuance of short-term 
notes and drafts with maturities of a year or less and deletes an 
after-the fact filing requirement. Further, the final rule simplifies 
the procedures for the placement of securities thereby streamlining the 
regulatory process.
    Likewise, the final rule deletes the requirement to include a copy 
of the corporate charter or articles of incorporation, because a 
statement of corporate purposes will provide the necessary information. 
However, the final rule will require the submission of a Statement of 
Cash Flows and Interest Coverage containing data on an actual basis for 
the same twelve-month period. This information is to be submitted in a 
format already prescribed in FERC Form No. 1. The Commission has 
[[Page 4833]] instituted this requirement to facilitate the preparation 
of financial statements to be submitted as part of the application 
because the utilities already prepare quarterly financial statements 
and may use such statements as the basis for the information required 
to be submitted. The use of the FERC Form No. 1 format will relieve 
utilities of the necessity of compiling data in a format that has 
limited applicability.
    For the information to be filed in Part 35 and collected under the 
heading FERC-516, the Commission will require more information than is 
currently required on small rate increases for requirements services. 
However, the Commission believes that the additional information will 
allow for more efficient processing of applications and, by reducing or 
eliminating the need for extensive discovery, eliminate protracted 
proceedings. The final rule creates a new abbreviated filing option for 
small increases in rates for non-coordination, firm power and 
transmission services.
    Concerning FERC-525, the final rule modifies shortened procedures 
for hearings on a utility's accounts, records and memoranda. The 
Commission seeks to reduce the amount of litigation, particularly the 
number of hearings when the material facts are not in dispute.
    The Commission estimates that the public reporting burden for the 
other filing requirements under this proposed final rule will reduce 
the existing reporting burden. The requirements for the certification 
of small power production and cogeneration facilities as qualifying 
facilities under Part 292 of the regulations has been revised and 
clarified to reflect changing industry conditions and the Commission's 
experience with the qualifying facilities program. In particular, the 
Commission intends to act within 90 days on the filing of an 
application for certification, or within 90 days of the filing of the 
supplement or amendment to the application. This will allow the 
application process to be conducted in a timely fashion and with some 
certainty to the applicant as to when the Commission deems an 
application complete.
    In the NOPR, the Commission proposed a standardized application 
form, FERC Form 556, to facilitate successful applications for 
Commission certification of qualifying status. Form 556 allows 
cogenerators and small power producers to report the specific 
characteristics of their facilities and provides a step-by-step 
application of pertinent regulations to their facilities. To provide 
greater assurance to lenders, electric utilities and state regulatory 
institutions, the final rule also adopts the use of the FERC Form 556 
information requirement format for notices of self-certification. 
Through the use of Form 556, the self-certification process will be 
similar to the Commission certification process, for it will 
incorporate sufficient substantive information. But the notice of self-
certification will remain a simple procedure that is both quick and 
economical. There will be no Commission review or filing fee, and the 
process should promote discussions between the applicants, electric 
utilities and affected regulatory commissions to resolve any problems. 
To make Form 556 easier to use, the Commission is eliminating 
redundancies and, wherever possible, cross-referencing items to related 
sections of the Commission's regulations or stating the underlying 
Federal Power Act (FPA) or Commission requirement.
    In the proposed rule, the Commission also sought to make it easier 
to determine the energy sources that certain qualifying small power 
production facilities may use. To make it easier to certify a 
qualifying facility, the Commission also proposed to list specific 
energy sources that it had previously approved for treatment as waste. 
In the final rule, the Commission publishes a list of waste energy 
inputs already approved by the Commission. In addition, the Commission 
is also streamlining its waste determination process for those energy 
inputs that do not appear on the list by changing its approach to 
require that the proposed waste fuel source only have little or no 
commercial value.
    In its changes to Part 382 of the regulations concerning the 
submission of annual charges and the information collected under FERC-
582, the final rule clarifies the Commission's requirements by making 
the calculation of annual charges consistent with the classification of 
transaction volumes as reported on the FERC Form 1.
    For the information collected under FERC-585 under Part 294 of the 
Commission's regulations, the final rule provides a public utility with 
the option of not separately reporting its contingency plans if it 
already includes certain provisions in its wholesale rate schedules. 
Otherwise, the public utility must file a brief statement, summarizing 
its contingency plans. In the event the public utilities avail 
themselves of this option, it would reduce the number of annual 
respondents and total burden.
    Comments regarding these burden estimates or any other aspects of 
these collections of information, including suggestions for reducing 
the burden, can be sent to the Federal Energy Regulatory Commission, 
941 North Capitol Street, N.E. Washington, D.C. 20426 [Attention: 
Michael Miller, Information Services Division, (202) 208-1415]; and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget [Attention: Desk Officer for Federal Energy Regulatory 
Commission], FAX: (202) 395-5167.

III. Discussion

    For the reasons discussed below, the Commission hereby deletes or 
revises the following regulations:

A. Part 2--General Policy and Interpretations: Section 2.4(d)--Initial 
Rate Schedules

    The Commission noted in the NOPR that Sec. 2.4(d) provides that an 
initial rate schedule can be suspended and an interim rate established, 
and that both can be made subject to refund. However, the United States 
Court of Appeals for the District of Columbia Circuit has held that the 
Commission does not have authority to suspend initial rate 
filings.4 Accordingly, in the NOPR the Commission proposed to 
delete this provision from the regulations. Only Southern Companies 
commented on this proposed change, and they agree that the deletion of 
the provision is appropriate.5 For the reasons given in the NOPR, 
and described above, the final rule will delete this provision from the 
Commission's regulations.

    \4\Middle South Energy, Inc. v. FERC, 747 F.2d 763 (D.C. Cir. 
1984).
    \5\Southern Companies also disagrees with the Commission's 
interpretation of what constitutes an initial rate; however, that 
issue is beyond the scope of this proceeding.
---------------------------------------------------------------------------

B. Part 34--Application for Authorization of the Issuance of Securities 
or the Assumption of Liabilities

1. Section 34.1(c)(1)--Exemptions if State Regulates Security Prior to 
Issuance
    Under sections 19, 20 and 204 of the FPA,6 utilities, 
licensees, and certain other entities are required to obtain Commission 
authorization to issue securities or to assume any obligation or 
liability with respect to the securities of another person.7 The 
NOPR proposed [[Page 4834]] revising Sec. 34.1(c)(1) by clarifying that 
section. No one commented on this proposed change; we will incorporate 
the proposed change in the final rule to make it clear that if an 
agency of a state in which a utility is organized and operating 
approves or authorizes, in writing, the issuance of securities prior to 
their issuance, the utility is exempt from the provisions of sections 
19, 20 and 204 of the FPA and the regulations under 18 CFR part 34 with 
respect to the issuance of such securities.

    \6\16 U.S.C. 812, 813, 824c.
    \7\There are certain exceptions to this requirement. Under 
section 204(e) of the FPA, a public utility does not require 
Commission authorization to issue, renew, or assume debt with a 
maturity date of not more than one year, if the debt, together with 
all of the other debt having a maturity of one year or less that the 
utility has then outstanding, does not exceed five percent of the 
par value of the utility's securities then outstanding.
    Under section 204(f) of the FPA, a public utility does not 
require Commission authorization to issue securities or assume debt 
if the State commission in which it is organized and operating 
regulates the issuance of its securities.
    Under section 318 of the FPA, a utility that is subject to the 
requirements of the Public Utility Holding Company Act is not 
subject to the requirements of the FPA with respect to the issue, 
sale, or guarantee of a security, or assumption of obligation or 
liability.
---------------------------------------------------------------------------

2. Section 34.1(c)(2)--Exemptions for Short-Term Notes or Drafts
    The NOPR proposed amending Sec. 34.1(c)(2), which relates to 
exempting from the Commission's requirements the issuance or renewal of 
short-term notes or drafts, to simplify the provisions and to delete an 
unnecessary, after-the-fact filing requirement. The Commission proposed 
to revise the language of this regulation to read as follows:

    Under section 204(e) of the FPA, the issuance, renewal or 
assumption of liability on a note or draft maturing not more than 
one year after such issuance, renewal or assumption of liability is 
not subject to the provisions of this Part if the note or draft 
aggregates, along with all other then-outstanding notes and drafts, 
not more than five percent of the:
    (A) Par value of the then-outstanding securities of the utility 
and,
    (B) In the case of no par value securities, the fair market 
value of such securities.

    Baltimore Gas & Electric, EEI, Gulf States, and Pennsylvania P&L 
commented on the proposed change. Baltimore Gas & Electric, EEI and 
Gulf States suggest revising the proposed language to make it clear 
that the exemption does not apply to notes and drafts with maturities 
of more than one year.
    We agree with these comments and will amend the text of 
Sec. 34.1(c)(2) to avoid any confusion as to the securities to which 
the regulations apply.
    EEI and Gulf States suggest that the regulations not use the ``par 
value'' of the then-outstanding securities in determining the value of 
a company's then-outstanding securities because the par value may be 
significantly lower than the issue price or current market value of 
securities. Pennsylvania P&L also recommends that the Commission 
provide a valuation date.
    The arguments with regard to the use of par value are not 
persuasive. Section 204(e) of the FPA refers to ``par value of the 
other securities then outstanding.''8 It is clear from this 
language that the statute requires the use of ``par value'' if the 
security has a par value. We have no authority to recognize current 
market value or issue price as the measure of the amount of securities 
``then outstanding'' if there is a par value stated. However, in the 
case of securities having no par value, we believe that fair market 
value is appropriate.

    \8\16 U.S.C. 824c(e).
---------------------------------------------------------------------------

    As to a specific date for the 5 percent measurement, although the 
precise timing of the issuance of securities is wholly within the 
purview of utility management, we will clarify the language to indicate 
that the 5 percent test would be applied as of the date of the issuance 
or renewal of the securities or assumption of the liabilities.
3. Section 34.2--Placement of Securities
    The NOPR proposed amending Sec. 34.2, to rename the section and to 
allow for the placement of securities by either competitive bid or 
negotiated placement. The proposed amendment recognized exemptions from 
these requirements, simplified the placement procedures and streamlined 
the regulatory process. The Commission proposed to revise the title and 
language of this regulation as follows:

Section 34.2--Placement of Securities

    (a) Method of issuance. Upon obtaining authorization from the 
Commission, utilities may issue securities by either a competitive bid 
or negotiated placement, provided that:
    (i) Competitive bids are obtained from at least two prospective 
dealers, purchasers or underwriters; or
    (ii) Negotiated offers are obtained from at least three prospective 
dealers, purchasers or underwriters; and
    (iii) The utility:
    (A) Accepts the bid or offer that provides the utility with the 
lowest cost of money for fixed or variable interest or dividend rate 
securities, or
    (B) Accepts the bid or offer that provides the utility with the 
greatest net proceeds for securities with no specified interest or 
dividend rates or,
    (C) Has filed for and obtained authorization from the Commission to 
accept bids or offers other than those specified in (iii)(A) or 
(iii)(B) above.
    (b) Exemptions. (i) Multiple bids or offers are not required for 
the issuance of securities:
    (A) To existing holders of securities on a pro rata basis;
    (B) When the utility receives an unsolicited proposal to purchase 
its securities; or
    (C) With maturities of one year or less.
    (ii) The utility may request exemption from the multiple bid or 
offer rule when the utility believes such an exemption is appropriate, 
based on the facts and circumstances of the particular issuance.
    (c) Prohibitions. No securities shall be placed with any person 
who:
    (i) Has performed any service or accepted any fee or compensation 
with respect to the proposed issuance of securities; or
    (ii) Would be in violation of section 305(a) of the FPA.
    Baltimore Gas & Electric suggests that we change Sec. 34.2(b) so 
that this section will clearly provide exemptions from the multiple bid 
or offer requirements of Sec. 34.2(a). EEI, Gulf States and UtiliCorp 
suggest that we include within the exemptions from negotiated bid and 
placement requirements particular types of securities (treasury stock 
and securities ``backing up'' pollution control debt issued by a third 
party, for instance).
    These comments have merit, and we will modify the final rule 
accordingly. We will not, however, include treasury stock among the 
list of exempted securities; we are not persuaded that a blanket 
exemption is justified for treasury stock. For all practical purposes, 
the issuance of treasury stock is not substantially different from the 
issuance of new shares of common stock.
    EEI and Gulf States suggest that we delete the prohibition in 
Sec. 34.2(c)(1) against accepting bids from or entering into 
negotiations with persons that have accepted a fee for services 
performed in connection with the proposed issuance of securities. We 
reject this recommendation. However, we note that proposed 
Sec. 34.2(c)(1) did not include language (which is currently in this 
paragraph of our regulations) indicating that it involves services 
performed prior to the submission of bids or the beginning of 
negotiations. The proposed rule, like the existing rule, should contain 
this language. Upon further consideration, the final rule will include 
this language in the regulations.
    EEI and Gulf States suggest that we codify the Commission's policy 
of allowing utilities to issue securities or assume obligations or 
liabilities over a two-year period. EEI and Gulf States are correct 
that it is the Commission's policy to allow companies to issue 
securities at any time within a two-year [[Page 4835]] period, without 
any additional authorization from the Commission.9 Our policy 
regarding the two-year authorization period is clear and working well. 
We do not think that the requested codification is necessary. The 
matter is best dealt with through the Commission's authorization 
process, leaving the Commission the flexibility to address the facts 
and circumstances in the filings on a case-by-case basis and, where 
appropriate, to grant authorizations for periods different than the 
basic two-year period. Accordingly, we will not adopt the suggestion.

    \9\See Montana-Dakota Utilities Company, 21 FERC 62,358 (1982).
---------------------------------------------------------------------------

4. Sec. 34.3--Contents of Application for Issuance of Securities
    The NOPR proposed amending Sec. 34.3, which governs the contents of 
an application to issue securities. No one commented on this aspect of 
the proposed rule, and we will adopt the proposed change.
    UtiliCorp suggests that an application also include a draft order, 
prepared by the applicant. We will reject this suggestion. The 
inclusion of a requirement that applications include a draft order will 
increase the burden on the applicants without substantially aiding the 
Commission in its processing of filings.
5. Sec. 34.4--Required Exhibits
    a. Section 34.4(a), Exhibit A. The Commission proposed to delete 
the current language in paragraph (a) and to substitute the following:
    The applicant must file the statement of corporate purposes from 
its articles of incorporation.
    The Commission stated that it has found that the information 
currently required in paragraph (a) is not necessary for the processing 
of a securities application. A statement of corporate purposes will 
provide the information necessary without the need for applications to 
include the entire corporate charter or articles of incorporation. No 
one commented on the proposed change to Exhibit A; we will adopt the 
change as proposed.
    b. Sections 34.4 (c) and (d), Exhibits C, D and E. The Commission 
proposed to delete paragraph (c), and to redesignate paragraphs (d) and 
(e) as paragraphs (c) and (d), respectively. The Commission also 
proposed to revise newly-designated paragraphs (c) and (d) and to add a 
new paragraph (e).
    The Commission noted that current paragraph (c) requires a 
statement of control over the utility by firms issuing securities or 
supplying electrical equipment and that the Commission can obtain this 
information from other existing sources.
    The NOPR proposed that the newly-designated and revised paragraphs 
(c) and (d) would require that a balance sheet and income statement be 
submitted for the twelve-month period ending with the most recent 
calendar quarter. New paragraph (e) would require the submission of a 
four-column Statement of Cash Flows and Interest Coverage, containing 
data on an actual basis for the same twelve-month period, and on a pro-
forma basis for each of the next two succeeding 12-month periods.
    The Commission proposed these changes to facilitate the preparation 
of financial statements to be submitted as part of the application 
because the utilities already prepare quarterly financial statements 
and may use such statements as the basis for the information required 
to be submitted. The Commission expected that the addition of the 
statement of cash flows and interest coverage would facilitate the 
processing of applications under Part 34.
    Baltimore Gas & Electric and Consumers Power suggest that we change 
the proposed regulations to allow for the submission, for Exhibits C, 
D, and E, of financial statements for periods other than those ending 
with the latest calendar quarter, if such statements are the latest 
available statements. We agree with this suggestion and will, in large 
part, adopt it. We recognize that financial statements other than for 
the latest calendar year quarter may be available, and we will revise 
the proposed language to require the filing of financial statements for 
the most recent 12-month period, provided that the period ended no more 
than 4 months prior to the date of the filing of the application.
    Consumers Power suggests that we allow utilities to present their 
financial statements to us in the format required by the Securities and 
Exchange Commission (SEC). We will not adopt this suggestion. The 
Commission's information needs are different than the information needs 
of the SEC. The use of information prepared in a SEC format presents 
problems from a number of perspectives: for instance, the consolidation 
of certain majority-owned subsidiaries, the aggregation of detailed 
financial information and the use of different reporting standards. 
Information reported to the SEC may include the utility and certain 
consolidated, majority-owned subsidiary companies. As a result, the 
financial statements would include mixtures of financial information on 
the regulated utility and the consolidated, majority-owned 
subsidiaries, as if it were financial information of the utility. The 
Income Statement would not, therefore, present the utility's stand-
alone results of operations. Further, information reported to the SEC 
is aggregated in a summary fashion without the detailed financial 
information presented on a basis consistent with the classifications in 
the Uniform System of Accounts. (For instance, the Commission requires 
that accumulated deferred income taxes be classified among four 
accounts depending on the type of the deferral; the SEC, however, 
allows deferred income taxes to be netted in a single amount.) Another 
area of concern is the reliance upon different reporting standards. For 
instance, the SEC allows currently maturing long-term debt to be 
classified as a current liability; the Commission requires that long-
term debt, regardless of the maturity, to be classified as long-term 
debt until retired. We have configured our information formats, which 
include FERC Form No. 1, to meet our regulatory responsibilities. 
Utilities reporting to us must submit their information to us in a form 
more suited to our needs.10 Accordingly, we will continue to 
require that utilities prepare the required financial statements 
consistent with this Commission's FERC Form No. 1 and Uniform System of 
Accounts.

    \10\See Electronic Filing of FERC Form No. 1 and Delegation to 
Chief Accountant; Notice of Intent to Act and Response to Comments, 
59 FR 1687, 1689 (Jan. 12, 1994).
---------------------------------------------------------------------------

    Baltimore Gas & Electric, Consumers Power, EEI, Pennsylvania P&L, 
Gulf States, Texas-New Mexico and UtiliCorp object to the submission of 
the proposed projected cash flow statement in Exhibit E. These 
commenters assert that these forecasts are unreliable and that the 
filing of such information would expose utilities to potential 
liability. They also note that the SEC allows but does not require the 
filing of projected financial statements. Pennsylvania P&L suggests 
that we change proposed Exhibit E by adding a line entitled either 
``Interest Coverage'' or ``Times Interest Earned'' to provide a 
location for the coverage ratio.
    We agree with these comments. We will delete the requirement for 
the projected cash flow statement. We will also revise Exhibit E, 
Statement of Cash Flows and Interest Coverage, to require the 
submission of a Statement of Cash Flows in the form prescribed in the 
FERC Form No. 1, followed by the interest coverage calculation as 
proposed in the NOPR. Adoption of the [[Page 4836]] FERC Form No. 1 
format will relieve utilities of the necessity of compiling data in a 
format that has limited applicability. Further, utilities may be able 
to use the Statement as included in the FERC Form No. 1, depending upon 
the timing of the filings, thus further reducing the burden of 
compliance.
    The final rule clarifies the interest coverage calculation 
worksheet required in Exhibit E by adding a line entitled ``Interest 
Coverage'' as suggested and a ``division'' sign at the end of the line 
entitled ``Total Interest Expense'' and an ``equals'' sign at the end 
of the line entitled ``Income Before Interest and Income Taxes.''
    c. Sections 34.4 (g) and (h), Exhibits G and H.   The NOPR proposed 
to delete paragraphs (g) and (h). The Commission noted that the 
information currently required by Sec. 34.4(g) is directed toward 
competitively-bid securities placements, which the Commission intends 
that its regulations should no longer require. The pre-issuance filing 
contemplated by Sec. 34.4(h) will no longer be necessary, since the 
Commission intends to authorize applicants to issue securities under 
conditions specified under proposed Sec. 34.2. The Commission pointed 
out that it will, therefore, only be necessary that applicants provide 
the Commission with a report of their securities issuances after the 
fact under the provisions of existing Sec. 131.43 and revised 
Sec. 131.50.
    No one commented on the proposed changes to Exhibits G and H; we 
will adopt those changes as proposed.
6. Sec. 34.10--Reports
    In the NOPR, the Commission proposed to revise its rules to require 
applicants to file reports under Sec. 131.43 and Sec. 131.50 no later 
than 30 days after the sale or placement of long-term debt or equity 
securities or the entry into guarantees or assumptions of liabilities. 
The Commission has received no comments regarding this proposal and 
will adopt it unchanged.
7. Sec. 34.11--Unopposed Applications to Issue Securities and/or Assume 
Liabilities
    In the NOPR, the Commission proposed to revise part 34 by adding a 
new Sec. 34.11 to provide for authorization of unopposed applications 
for authorization of the issuance of securities or assumption of 
liabilities upon the terms and conditions and for the purposes set 
forth in the application unless, within 90 days after the date of the 
application, the Commission issues an order delaying the effectiveness 
of the transaction, setting the matter for hearing or taking other 
action. The NOPR proposed the rule in order to eliminate needless 
regulation and aid the processing of unopposed applications, while 
preserving the right of interested parties to oppose the applications.
    Baltimore Gas & Electric, Consumers Power, Detroit Edison, EEI, 
Gulf States and Utilicorp commented on the proposed 90-day period for 
automatic approval of security issuances (i.e., without Commission 
action). Several commenters11 suggested different periods--30, 45 
or 60 days after the date of the application, or 15 days after 
publication of the notice. Utilicorp noted that the proposal more than 
doubled the time presently taken to process most applications. 
Utilicorp also noted that, if the Commission adopts an automatic 
mechanism for the processing of these applications, utilities will have 
to obtain written assurances for their lenders that the Commission has 
a ``self executing'' rule, provide copies of the rule to the lenders 
and then provide a ``date stamped'' copy of the filing made with the 
Commission. The utilities would then have to prove that no one had 
protested their applications and that the Commission did not issue an 
order within the 90-day period that would preclude the automatic 
issuance.

    \11\The commenters are Baltimore Gas & Electric, Consumers 
Power, Detroit Edison, EEI, Gulf States.
---------------------------------------------------------------------------

    Utilicorp's comments concerning an automatic approval mechanism are 
well taken. Utilities and their lenders rely on the certainty that a 
Commission order confers. The proposed automatic approval would 
introduce an element of uncertainty into the approval process and place 
a greater burden upon utilities to provide adequate assurances to their 
lenders. At this juncture, we believe the uncertainty and the 
concomitant burden upon lenders and utilities outweigh the time and 
resources that the Commission would save in preparing and issuing 
orders. Accordingly, we will not adopt the proposed automatic approval 
mechanism.
8. Part 131--Forms
    Section 131.50. The NOPR proposed to rename Sec. 131.50 to read 
``Report of proposals received.'' The NOPR also proposed to delete the 
current language of Sec. 131.50 and to revise the language of 
Sec. 131.50 to read as follows:
    Section 131.50 Report of Proposals Received. No later than 30 days 
after the sale or placement of long-term debt or equity securities or 
the entry into guarantees or assumptions of liabilities (collectively 
referred to as ``placement'') pursuant to authority granted under part 
34, the applicant shall file a summary of each proposal received for 
the placement. Each proposal accepted shall be indicated. The 
information to be filed shall include:
    (a) Par or stated value of securities;
    (b) Number of units (shares of stock, number of bonds) issued;
    (c) Total dollar value of the issue;
    (d) Life of the securities, including maximum life and average life 
of sinking fund issues;
    (e) Dividend or interest rate;
    (f) Call provisions;
    (g) Sinking fund provisions;
    (h) Offering price;
    (i) Discount or premium;
    (j) Commission or underwriter's spread;
    (k) Net proceeds to company for each unit of security and for the 
total issue;
    (l) Net cost to the company for securities with a stated interest 
or dividend rate.
    The revision of this regulation represents a reclassification of 
information previously reported as Exhibit H under Sec. 34.4. The NOPR 
noted that this information is necessary to analyze compliance with the 
Commission's regulations and orders authorizing placement. No one 
commented on this proposed revision, and we will adopt it.

C. Part 35--Filing of Rate Schedules

1. Sections 35.13(a)(2)(i) (A) and (B)--Rate Increases of Less Than 
$200,000, Regardless of Customer Consent, and Rate Increases Below 
$1,000,000, with Customer Consent
    The Proposed Rule. The NOPR proposed revising the abbreviated 
filing requirements of Secs. 35.13(a)(2)(i)(A) and (B), involving 
certain rate increases of less than $200,000, regardless of customer 
consent, and rate increases below $1,000,000, with customer consent. 
The revised sections would require public utilities filing relatively 
small rate increases for requirements services to submit more 
information than the regulations currently require. This new 
information would include, inter alia, a cost of service analysis for 
an historical test year, a complete derivation of all allocation 
factors and special assignments, and a complete calculation of revenues 
for the test period and for the first twelve months after the proposed 
effective date. The Commission's preliminary view was that the proposed 
filing requirements would allow the Commission to process these 
applications more efficiently and would eliminate unnecessarily 
protracted proceedings (including, e.g., [[Page 4837]] extensive 
discovery in proceedings set for trial-type hearing) that are 
attributable solely to the fact that the existing filing requirements 
for these applications require insufficient data from which to 
determine whether the proposed rates are cost-justified.
    The NOPR also proposed to afford filing utilities an opportunity to 
file additional cost data and supporting testimony in the event that 
the Commission suspends the proposed rate increase and orders a 
hearing.
    The NOPR retained the existing abbreviated filing requirements for 
short-term and non-firm coordination sales rates in 
Sec. 35.13(a)(2)(ii).
    The NOPR also proposed to revise Sec. 35.13(h)(24) to require that 
companies submit Statement AX (other recent and pending rate changes) 
only if the proposed rate design tracks retail rates. This proposed 
change was intended to streamline the public utility's rate 
presentation and expedite Commission review by eliminating submission 
of information not generally needed for Commission review.
    Comments: Several commenters12 express concern that the 
proposed regulations will increase the time and costs associated with 
preparing rate filings, and thereby discourage utilities from entering 
into small transactions for the sale or transmission of power, which 
will in turn result in a less competitive bulk power market.

    \12\Arizona Public Service, Atlantic Electric, Baltimore Gas & 
Electric, Delmarva, LILCO, NEP, Pennsylvania P&L, Southern 
Companies.
---------------------------------------------------------------------------

    Many commenters also express concerns or uncertainty about the 
number and variety of filings subject to the proposed regulations.\13\ 
The commenters recommend that the Commission narrowly define the class 
of rate filings subjects to the proposed rule to include only those 
filings for which the Commission must have additional information to 
properly and expeditiously perform its duties under the FPA.\14\

    \13\E.g., Delmarva, Detroit Edison, NEP.
    \14\Some commenters infer that a large number and variety of 
filings would be subject to the new rules. EEI asserts that the 
changed regulations would greatly increase the regulatory burden of 
all applicants, while saving time and effort in only a small number 
of cases. Some commenters conclude that the Commission proposed to 
modify the abbreviated filing requirements for coordination rates. 
Commenters such as NEP and Southern Companies focus on the increased 
filing requirements for small rate increases.
---------------------------------------------------------------------------

    Other commenters express the view that the new filing requirements 
are vague.15 EEI recommends that the regulations state with 
greater specificity the information that public utilities must file.

    \15\EEI and several other commenters infer that the Commission 
is now requiring companies to submit Statements AA through BM. 
Detroit Edison argues that it would be burdensome and expensive to 
calculate thirteen-month average plant balances, and Southern 
Companies interprets the proposed regulations to require the use of 
end-of-year balances instead of thirteen-month averages.
---------------------------------------------------------------------------

    With respect to filings based on retail rate decisions, NYSEG 
asserts that it is unclear what calculations would have to be provided 
to show how all retail rate treatments are factored into the cost of 
service. If the Commission changes the abbreviated filing requirements, 
NYSEG requests that the Commission clarify its specific requirements 
regarding information to be provided for filings based on retail rates.
    The Commission's Response: We agree with the commenters that the 
Commission should attempt to minimize regulatory burdens and improve 
the flexibility accorded public utilities covered by its rules. 
However, contrary to the statements of many commenters, the proposed 
regulations do not change the abbreviated filing requirements for most 
proposed rate increases. Neither do the proposed regulations require 
companies to file comprehensive cost of service statements (Statements 
AA-BM). Rather, the proposed regulations require only that a company 
that files a small rate increase for non-coordination services support 
the calculations it makes, explain why it makes those calculations, and 
show the revenue impact of the proposed rates on its customers.
    Based on concerns expressed, however, we will make several changes 
to the proposed regulations to more clearly define the class of filings 
subject to the rule and the information that must be submitted in order 
for the Commission to perform its preliminary analyses of small, non-
coordination filings. Finally, the Commission reiterates that any 
company may request waiver of the filing requirements for good cause.
    Filings Covered by the Rule: Many of the commenters express 
uncertainty concerning the types of rate increase filings that are 
affected by the proposed regulations.
    We agree with the commenters that the Commission should more 
clearly define the class of filings subject to the new rule. The 
Commission's intent is to create a new, abbreviated filing option for 
small increases in rates for non-coordination, firm power and 
transmission services, particularly small requirements rate increase 
filings that are based on a fully distributed cost of service analysis 
(sometimes known as a ``net plant'' cost of service).16 The 
Commission will revise the regulations to identify the class of filings 
covered by new Sec. 35.13(a)(2)(i) as power or transmission services 
that are: (1) not covered by the filing requirements of 
Sec. 35.13(a)(2)(ii); and (2) for which the rate increase being sought 
is less than $200,000 (without customer consent) or less than $1 
million (with customer consent).

    \16\In most but not all cases, rates developed under a net plant 
approach are customer-specific, in that costs are first allocated to 
each wholesale customer group based on the demand and energy loads 
it imposes on the company, after which customer group-specific rates 
are developed based on the customer group's projected billing 
determinants. See generally Southern Company Services, Inc., 61 FERC 
61,339 at 62,337-38 (1992), reh'g denied, 63 FERC 61,217 (1993), 
appeal pending, No. 93-1165 (D.C. Cir. filed Feb. 11, 1993).
---------------------------------------------------------------------------

    We will also change our regulations to permit utilities to file 
under Sec. 35.13(a)(2)(ii) rate increases, without regard to the size 
of the proposed increase, for firm coordination and interchange 
services.
    Filing Requirements: EEI maintains that if the Commission decides 
to adopt new filing requirements for small rate increases, then greater 
clarity and specificity in the filing requirements is needed to avoid 
confusion and errors in responding to the changes. We agree. However, 
we disagree with EEI that the Commission should or must explain, at the 
level of detail used in the current Sec. 35.13(h), what is expected. 
Such specificity would unduly increase the regulatory burden on most 
utilities that file under this subparagraph. To meet EEI's concerns and 
those of other commenters, we will make the following changes.
    First, the final rule provides that filing utilities should submit 
cost of service, allocation, revenue, fuel clause and rate design data 
that are ``consistent with the requirements'' of other paragraphs of 
part 35 that require similar information. The final rule also requires 
filing utilities to explain in narrative form how and why various 
calculations are made to develop the proposed rates.17

    \17\Narrative statements should address the rate design and 
allocation factors employed in the filing, explain all pro forma 
adjustments to test period data, and describe specific costs or rate 
components that are drawn from retail rate decisions.
---------------------------------------------------------------------------

    Second, the NOPR proposed to make Sec. 35.13(a)(2)(i) mandatory 
rather than optional, thereby precluding utilities from electing to 
file comprehensive Period I statements, as allowed under 
Sec. 35.13(a)(1). The revised regulation makes clear that the filing 
utility may elect to file under either paragraph.
    Third, the revised regulation clarifies the two-stage filing 
process proposed in the NOPR. A utility that elects to file 
[[Page 4838]] under revised Sec. 35.13(a)(2)(i) need not submit a 
comprehensive filing when it makes its initial submittal, but it must 
support all calculations that are not derived directly from Form 1, and 
explain how it has functionalized, classified and allocated its costs. 
Should the Commission set the proposed increase for hearing, the filing 
utility will be afforded a reasonable opportunity to file testimony and 
exhibits to fully support the reasonableness of its proposed rates. 
This approach minimizes regulatory burdens while allowing the applicant 
to balance the expense of preparing a comprehensive filing versus the 
risk of not initially sustaining its burden of proof with an 
abbreviated filing.
    Fourth, the NOPR used the terms ``historical test year'' and ``test 
period'' interchangeably and without reference to the definition of 
Period I applicable to other paragraphs of Sec. 35.13. The revised 
regulation adds a definition for ``Test Period,'' deletes references to 
the ``historical test year'' and provides that utilities that file 
under this subparagraph must use as the test period the most recent 
calendar year for which actual data are available. Utilities that elect 
to use a non-calendar year test period must file rate increases under 
Sec. 35.13(d).
    The Commission notes that proposed Sec. 35.13(a)(2)(i) 
inadvertently eliminated the requirement that utilities submit rate 
design information and the general information now required for all 
abbreviated rate change filings. The final rule requires submission of 
the general information specified in paragraphs (b), (c)(2) and (c)(3) 
of Sec. 35.13 and in Sec. 35.12(b)(2), while the information required 
by Sec. 35.13(c)(1), Sec. 35.12(b)(5) and Sec. 35.13(h)(37) is elicited 
as part of the revenue data, allocation data and rate design 
information requirements.
    The final rule also requires that filings under Secs. 35.13(a)(2) 
(i) and (ii) comply with Commission precedent and policy.
2. Other Changes to Sec. 35.13
    The Commission will eliminate Sec. 35.13(a)(2)(ii)(B) of the 
proposed regulations\18\ and make corresponding editorial changes to 
Sec. 35.13(a)(2)(iii)(A). Section 35.13(a)(2)(ii)(B) cross-references 
rate decrease filings made under Sec. 35.27 pursuant to the 1987 
reduction in federal corporate income tax rates under the Tax Reform 
Act of 1986. However, Sec. 35.27 was eliminated in a previous 
rulemaking.\19\ Therefore, this section is now superfluous.

    \18\It is Sec. 35.13(a)(2)(iii)(B) in the proposed regulations.
    \19\Eliminating Unnecessary Regulation, Order No. 541, 57 FR 
21730 (May 22, 1992), III FERC Stats. & Regs. 30,943 (1992).
---------------------------------------------------------------------------

    A cross-reference to Sec. 35.13(a)(2)(ii) has been added to 
Sec. 35.13(d)(1), mirroring the existing reference to subparagraph 
(a)(2)(i). In addition, existing paragraph (d)(1), as printed in the 
1994 Code of Federal Regulations, omits the word ``this'' prior to 
``section'' as shown by brackets in the text below:
    (d) Cost of service information--(1) Filing of Period I data. Any 
utility that is required under Section (a)(1) of [  ] section to submit 
cost of service information * * * The final rule corrects these 
omissions.

D. Part 41--Accounts, Records and Memoranda: Sections 41.3 and 41.7

    In the NOPR the Commission proposed to change its regulations to 
provide that if a utility consents to a matter's being handled under 
the shortened procedure under Sec. 41.3, that utility has waived any 
right to subsequently request a hearing under Sec. 41.7 and may not 
later request such a hearing. The Commission also re-stated its policy 
that it will not assign proceedings for hearings when there are no 
material facts in dispute.
    Baltimore Gas & Electric, Duke Power, EEI and Southern Companies 
commented on this proposed change. Baltimore Gas & Electric recognizes 
that the proposed change would eliminate redundancy in the Commission's 
regulations and supports the proposed change. Duke Power and EEI argue 
that, rather than streamlining the Commission's procedures, the 
proposed change will encourage utilities to contest more issues under 
Sec. 41.7 in order to preserve the right to a full hearing.
    We disagree. Persons subject to the Commission's accounting 
requirements have the right of election under the Commission's 
procedures and, under Sec. 41.7, have a right to seek a hearing on any 
issue that they wish to contest. The proposed change in the 
Commission's regulations would merely prevent such persons from 
changing their minds in mid-proceeding and deciding to contest an issue 
that they had previously recognized involved no disputed issue of 
material fact. We do not think that requiring persons to make their 
election of procedure at the outset of a proceeding will necessarily 
lead to more hearings. Rather, it will more likely reduce the number of 
hearings, because public utilities will no longer have the election to 
bring to hearing an issue that they had previously considered not to be 
worthy of a hearing.
    Southern Companies challenges the Commission's reiteration of its 
policy that it will not assign proceedings for hearings where no 
material facts are in dispute. Southern Companies fears that the 
Commission may use this policy to deprive a person of the due process 
right to a hearing. Southern Companies' concern is misplaced. The 
proposed change will not deprive anyone of the right to a trial-type 
evidentiary hearing when such a hearing is warranted. However, as 
Southern Companies recognizes, a trial-type evidentiary hearing is not 
necessary if no material facts are in dispute.\20\

    \20\See, e.g., General Motors Corp. v. FERC, 656 F.2d 791 (D.C. 
Cir. 1981); Citizens for Allegan County, Inc. v. Federal Power 
Commission, 414 F.2d 1125 (D.C. Cir. 1969).
---------------------------------------------------------------------------

E. Proposed Procedural Modifications and Revised Definitions Under Part 
292--Regulations Under Sections 201 and 210 of the Public Utility 
Regulatory Policies Act of 1978 (PURPA)\21\ With Regard to Small Power 
Production and Cogeneration

    \21\16 U.S.C. 796(17)-(23), 824a-3.
---------------------------------------------------------------------------

    The Commission is revising and clarifying its procedural and 
technical rules to reflect its experience with the qualifying 
facilities (QF) program. By adopting these clarifying changes, the 
Commission is satisfying its continuing PURPA obligation to review its 
policies and rules that encourage cogeneration and small power 
production, energy conservation, efficient use of facilities and 
resources by electric utilities and equitable rates for electric 
consumers.
1. Administration of the 90-Day Certification Period
    When an applicant files an application for Commission certification 
of qualifying status with the Secretary under Sec. 292.207 of the 
Commission's regulations, Sec. 292.207(b)(5) provides that within 90 
days of the filing of an application the Commission will issue an order 
granting or denying the application, setting the matter for hearing, or 
``tolling'' the time for issuance of an order. In the NOPR, the 
Commission noted some confusion on the part of many applicants as to 
when the 90-day period starts. The Commission proposed to codify its 
practice by revising Sec. 292.207(b)(3)(ii) to provide that the 90-day 
period for issuance of an order granting or denying an application for 
Commission certification of the qualifying status of a facility does 
not begin until an applicant has submitted all the information 
[[Page 4839]] necessary to complete the application, along with the 
appropriate filing fee.
    Comments: Tenaska contends that the proposed clarification 
perpetuates uncertainty, since there is no provision to notify an 
applicant when the Commission considers the filing complete. Electric 
Generation Association points out that, without an explicitly announced 
beginning point for each application, no party can know when, if ever, 
the 90-day period will expire. It suggests that setting a clear date 
for determining when the Commission deems an application complete would 
be consistent with the 60-day ``deficiency'' notification process for 
electric rate filings under Sec. 35.2(c) of the Commission's 
regulations. Independent Energy Producers suggests that the Commission 
establish a maximum period for staff to send to an applicant any 
questions regarding the application.\22\

    \22\Some commenters advocate an initial period ending 10 to 30 
days after the filing of the application, after which the 
application would be treated as complete and no notification of a 
deficiency could be made. Some commenters further suggest that the 
number of deficiency inquiries be limited to two. NEP also suggests 
that a copy of the deficiency letter be served on the utilities with 
which the QF is expected to deal.
    American Cogen, American Forest and Paper, American Iron and 
Steel, Electric Generation Association, Independent Energy 
Producers, SDG&E, Tenaska, and Texaco express concern that repeated 
requests for additional information by the Commission's staff have 
the effect of extending the process indefinitely. These commenters 
suggest that the Commission treat an application for Commission 
certification as automatically complete when a completed Form 556 
has been filed and/or the application is otherwise literally 
responsive to the Commission's regulations.
---------------------------------------------------------------------------

    SDG&E suggests that the Commission's Federal Register notice of 
each supplemental filing that responds to a staff inquiry identify the 
project, its location, when the Commission deems the application 
complete, when the Commission will issue a decision or tolling order on 
the application, or when the Commission will deem the application 
granted by virtue of the passage of time.\23\

    \23\Atlantic Electric and EEI want the Commission to issue 
notices of all responses to deficiency inquiries. Electric 
Generation Association also proposes that the Commission delete the 
reference to the Commission's tolling the time for issuance of an 
order. Electric Generation Association contends that tolling has 
caused unnecessary delay in the processing of applications and that 
the only basis for tolling the operation of the 90-day period should 
be an incomplete application. As noted above, in this regard, 
proposed Sec. 292.207(b)(3)(i) merely corresponds to the 
Commission's existing 90-day action regulation at 
Sec. 292.207(b)(5). Electric Generation Association's tolling policy 
proposal is outside the scope of the instant proceeding.
---------------------------------------------------------------------------

    Commission Response: While the Commission intends to process a 
pending application for Commission certification of qualifying status 
as rapidly as possible, the Commission will not further restrict its 
ability to evaluate such applications by providing a maximum period for 
considering the sufficiency of the application.\24\ Likewise, the 
Commission will not adopt the practice of formally notifying an 
applicant with respect to deficiencies by a date certain;\25\ nor will 
the Commission indicate by notice in the Federal Register when a filing 
is complete.\26\

    \24\This is also consistent with the Commission's policy 
applicable to electric rate filings of not providing a maximum 
period (within the 60-day statutory review period) for considering 
the sufficiency of the application. Regarding the 60-day statutory 
review period, see Duke Power Company, 57 FERC 61,215 at 61,713 
(1991); see also Southern Company Services, Inc., 60 FERC 61,297 at 
61,065-66 & n.12 (1992), aff'd sub nom. Alabama Power Company v. 
FERC, 22 F.3d 270 (11th Cir. 1994) (any amendment or supplemental 
filing establishes a new filing date for the filing in question).
    The steps the Commission has taken elsewhere in this proceeding 
to improve the QF application process, through clarifications and 
the establishment of step-by-step procedures to follow in Form 556, 
should result in more complete applications being filed in the first 
place. However, in the end, the speed with which the Commission 
processes an application depends, in addition to staff availability, 
primarily on the quality of the submittal, its complexity, its 
novelty, whether it is opposed, and the response time of the 
applicant to any information inquiries.
    \25\In uncontested proceedings, staff informally requests 
additional information by telephone in order to speed the processing 
of an application. In contested applications, staff must resort to 
formal deficiency letters to obtain additional information.
    \26\The Commission will continue to notice responses to 
deficiencies in the Federal Register.
---------------------------------------------------------------------------

    However, the Commission will amend its regulations to provide that 
the Commission will act within 90 days of the filing of the 
application, or, if the application is supplemented or amended, within 
90 days of the filing of the supplement or amendment. Commission action 
may include finding the application deficient, granting or denying the 
application, or tolling the time for action.
2. Improvements to the Self-Certification Process
    In the NOPR, the Commission proposed to amend Sec. 292.207(a)(1) to 
require that notices of self-certification be in the form of an 
affidavit signed by the facility's owner, operator or authorized 
representative. The Commission's intention was to provide interested 
financing institutions, electric utilities and state regulatory 
authorities with greater assurance that a self-certified cogeneration 
or small power production facility conforms to the Commission's 
ownership and technical criteria. The NOPR also proposed that a self-
certifying facility provide a copy of its notice of self-certification 
to the utility with which the cogenerator or small power producer 
intends to deal. These proposed revisions were intended to reduce 
reliance on the alternative process through which the cogenerator or 
small power producer submits an application for Commission 
certification accompanied by a filing fee.
    Comments: Southern Companies maintains that, in order for lenders 
and investors to derive comfort from the affidavit requirement, the 
Commission must ensure that a notice of self-certification with an 
affidavit is accurate and reliable.\27\ SDG&E suggests that the reason 
that more facilities have not taken advantage of the self-certification 
process is that the process is inadequate.\28\ SDG&E does not think 
that an affidavit is sufficient to provide the requisite level of 
comfort to lenders and to utilities with which the self-certifying 
facilities intend to interact.\29\ SDG&E points out that even under the 
proposed self-certification procedure, there is no substantive 
information requirement, no guarantee that submittals will contain the 
minimum information required, and no expectation that any party or the 
Commission will ensure that a self-certified facility meets the QF 
criteria.\30\

    \27\Among other comments, SDG&E asserts that it is reasonable, 
in the absence of Commission review, to require greater specificity 
as to what the affidavit and notice of self-certification should 
pertain to. SDG&E also suggests that an affidavit requirement 
implies that a prior self-certification submitted without an 
affidavit is of dubious legal value. Electric Generation Association 
maintains that there is no reason to require an affidavit, since 
even a Commission determination on qualifying status is considered 
void if it is based on erroneous facts. Electric Generation 
Association further contends that the current regulations do not 
suggest that a notice of self-certification signed by an officer or 
partner of the developer is less trustworthy or less legally binding 
than a Commission certification of qualifying status. NEP observes 
that an affidavit will underscore the importance to the owner or 
operator of accurately describing its facility. The CPUC suggests 
that, in fairness to all interested parties, including the signatory 
to the affidavit, the Commission should set forth more clearly the 
contents of the notice of self-certification.
    \28\Ridgewood observes that it is disputes about the 
interpretation of the Commission's regulations by lenders, state 
commissions and utilities that have prevented greater reliance on 
the existing self-certification process.
    \29\Florida P&L observes that a utility, before seriously 
undertaking any negotiations for integrating a QF into the utility's 
system, needs something more concrete than a notice of self-
certification with an affidavit. Niagara Mohawk proposes that a 
notice of self-certification describe how a facility meets the QF 
criteria.
    \30\Southern California Edison notes that the affidavit does not 
provide ongoing assurance that a facility will continue to meet the 
QF criteria. In this regard, Florida P&L suggests that the 
Commission adopt a standardized annual or biennial affidavit 
reporting requirement. Niagara Mohawk also proposes that the 
Commission allow a utility to periodically inspect the QF's 
operations. These monitoring proposals are outside the scope of the 
instant rulemaking proceeding. [[Page 4840]] 
---------------------------------------------------------------------------

    Similarly, Curran, Corbett & Stiles submits that, since the 
proposed self-certification process will continue to involve nothing 
more than file-stamping a submittal, lenders, government agencies and 
utilities will continue to demand proof of qualifying status for loan 
approvals and other crucial transactions, and cogenerators and small 
power producers will continue to apply for Commission 
certification.\31\

    \31\American Forest and Paper maintains that the affected 
utility also will likely continue to want a Commission 
certification. Tenaska predicts that lenders will not rely on an 
affidavit, as long as the alternative, Commission certification 
process is available. AGA and Utilicorp state that lenders will not 
assume the risk to finance QF projects that do not undergo a full 
Commission certification process.
---------------------------------------------------------------------------

    SDG&E suggests that the self-certification process would be more 
meaningful if it were more like the full Commission certification 
process. SDG&E urges the Commission to require that a notice of self-
certification incorporate the Form 556 information as the Commission 
has proposed for applications for Commission certification.32 
SDG&E also asks the Commission to amend Sec. 292.207 to provide that, 
unless a person files an objection with the Commission within 90 days, 
the utility must meet its QF obligations under Sec. 292.303.\33\

    \32\Atlantic Electric and EEI also favor a requirement to 
include Form 556 information. SDG&E contends that, contrary to what 
the Commission had anticipated when it issued its existing QF 
regulations, there has not always been a free flow of information 
between utilities and potential QFs.
    SDG&E also maintains that a utility which does not believe that 
a self-certified facility is qualified does not have to purchase the 
electrical output from the facility.
    \33\Curran, Corbett & Stiles asks the Commission to state that a 
notice of self-certification constitutes prima facie evidence that 
the facility is a QF. Curran, Corbett & Stiles also suggests that 
the Commission either indicate that the application conforms to the 
requirements of Sec. 292.203 or, within a certain time period, issue 
a specific finding to the contrary. American Cogen and Electrical 
Generation Association suggest that the Commission reinforce the 
self-certification process by stating in the preamble to this rule 
and/or in Sec. 292.207 that self-certification has the equivalent 
legal effect of a Commission certification. Independent Energy 
Producers suggests that the Commission delineate what situations 
call for Commission certification, in order to convince lenders to 
rely more on self-certification.
---------------------------------------------------------------------------

    Arizona Public Service and SDG&E suggest that the Commission 
require self-certifying cogenerators and small power producers to 
provide copies of their submittals to electric utilities (a) with which 
they intend to interconnect for the purpose of transmitting and selling 
electric power; and (b) from which they intend to purchase 
supplementary, standby, backup and maintenance power.\34\ Arizona 
Public Service also suggests that self-certifying cogeneration and 
small power producers specify their anticipated service needs so that 
utilities may better plan and prepare their local and system 
facilities, and obtain any necessary regulatory approvals.\35\

    \34\Florida P&L notes that the Commission's current regulations 
at Sec. 292.207(c)(1) require that a cogenerator or small power 
producer that chooses to self-certify must provide the electric 
utility purchaser with at least 90 days' advance notice of the 
transaction.
    \35\Detroit Edison suggests that a notice of self-certification 
include a notice, suitable for publication in the Federal Register, 
that sets out the pertinent data regarding the application. Detroit 
Edison submits that publication of such a notice would allow 
interested parties to bring errors in the application to the 
Commission's attention. Detroit Edison also suggests that the 
applicant provide the appropriate state commission and the affected 
utility with a copy of any notice of self-certification, or 
application for Commission certification or recertification filed 
with the Commission. Similarly, Atlantic Electric, Arizona Public 
Service, EEI, Florida P&L, LILCO, NEP and SDG&E suggest that either 
the Commission or the applicant apprise affected parties (including 
the regulatory commission of each state where the QF and the 
affected utility is located) of any QF submittal or any Commission 
deficiency letter, through Federal Register notice and/or by sending 
each a copy of the document.
---------------------------------------------------------------------------

    Commission Response: As the commenters observe, some lenders, 
regulators and utilities appear to have been unwilling to rely on the 
self-certification process because they did not think that the process 
provided them with sufficient information to independently verify the 
qualifying status of the subject facility. Many of the commenters have 
argued that simply adding an affidavit to the notice of self-
certification would not instill enough confidence to make the self-
certification process more authoritative.
    The Commission continues to believe that self-certification should 
be retained as an option; it is unnecessary to conduct a full review of 
each facility, even in instances where outside lenders and investors 
will be involved. However, in consideration of the various comments, 
and in recognition of the various other clarifications being made in 
this final rule, the Commission will not adopt the proposed affidavit 
requirement. Instead, the Commission will modify the self-certification 
process to: (a) Incorporate the Form 556 information requirement that 
the Commission is also adopting for applications for Commission 
certification; and (b) require that cogenerators and small power 
producers provide copies of the notice of self-certification to each 
affected state commission and to each affected electric utility.\36\ 
The self-certifying cogenerator or small power producer must also 
specify the utility services that it intends to request (see item 3b of 
Form 556).

    \36\Affected state commissions are the regulatory commissions of 
the states where the QF and any affected electric utilities are 
located. An affected utility is an electric utility to which the QF 
intends to interconnect, transmit and sell electric energy, or from 
which the QF intends to purchase supplementary, standby, back-up or 
maintenance power.
---------------------------------------------------------------------------

    If electric utilities do not agree that a notice of self-
certification is valid, they may challenge QF status by filing a 
petition for a declaratory order. If lenders, etc. are not convinced, 
they will continue to require that the potential QF facility obtain 
Commission certification of QF status before financing a project.
    The formal completion and submission of Form 556 to demonstrate 
that a facility conforms with the Commission's QF criteria will not 
constitute a substantive burden on those selecting the self-
certification process. A cogenerator or small power producer submitting 
a notice of self-certification under the current regulations already 
must analyze the characteristics of its facility to determine whether 
it meets the Commission's qualifying criteria. The completion of Form 
556 will assist both novice and experienced cogenerators and small 
power producers. It will serve as a step-by-step guide to determining 
whether a proposed facility qualifies for certification. Many notices 
of self-certification recently filed with the Commission have 
incorporated similar documentation.
    Through the use of Form 556, the self-certification process will be 
similar to the Commission certification process, because it will 
incorporate sufficient substantive information to allow an affected 
commission or electric utility to challenge the notice of self-
certification.
    The self-certification process will largely remain a simple, quick 
and economical procedure. There will continue to be no Commission 
review or filing fee, and the process should promote discussions 
between self-certifying cogenerators or small power producers and the 
affected electric utilities and regulatory commissions. These 
discussions should provide the parties an opportunity to timely and 
informally resolve any problems. The final rule revises proposed 
Sec. 292.207(a)(1)(ii) accordingly.
3. Revocation of Qualifying Status
    Proposed Sec. 292.207(d)(1) provided that the Commission may revoke 
the [[Page 4841]] qualifying status of a QF that it has certified under 
Sec. 292.207, if the facility fails to comply with any of the facts or 
representations that it presented in its application for Commission 
certification.\37\ The NOPR further provided that, before undertaking 
any substantial alteration or modification of a qualifying facility 
that has been certified under Sec. 292.207, a small power producer or 
cogenerator may apply to the Commission for a determination that the 
proposed alteration or modification will not result in a revocation of 
qualifying status. The NOPR provided that the small power producer or 
cogenerator should accompany the application for recertification with 
supporting material, notice and a filing fee.

    \37\The Commission's regulations do not provide for revocation 
of a notice of self-certification. Other entities (e.g., electric 
utilities) may: (1) Move for revocation of a Commission 
certification of QF status; or (2) file a petition for a declaratory 
order that a self-certified or Commission-certified facility does 
not comply with all applicable QF requirements. See, e.g., UNIGAS 
Corp., 67 FERC 61,142 (1994).
---------------------------------------------------------------------------

    Comments: American Forest and Paper maintains that revocation of 
qualifying status under proposed Sec. 292.207(d)(1) pertains only to 
material facts or representations, and even then, only to reliance on 
the Commission's order on qualifying status. It notes that the 
Commission has held on a number of occasions that the failure of a 
facility to operate in accordance with any of the facts or 
representations presented in an application for Commission 
certification does not necessarily affect the continued qualifying 
status of the facility. Rather, the failure affects only the legal 
force of the Commission's certification order that relied on those 
facts and representations.\38\

    \38\See, e.g., Sithe/Independence Power Partners, L.P., 61 FERC 
 61,212 at 61,786 (1992).
---------------------------------------------------------------------------

    EEI reads proposed Sec. 292.207(d)(1) as allowing any person to 
request that the Commission revoke the qualifying status of a facility. 
NEP suggests that the owners of qualifying facilities should provide 
filings under Sec. 292.207(d)(2) to the utilities with which they 
interconnect.
    Finally, NYSEG and Niagara Mohawk argue that the Commission should 
make it clear that a utility may deem a facility to be ineligible for 
PURPA benefits even if the Commission has not decertified the facility. 
They reason that, if a notice of self-certification is sufficient to 
qualify facilities for PURPA benefits, and Commission certification is 
not necessary, then utilities should be able to declare facilities 
ineligible for PURPA benefits without any action on the Commission's 
part. NYSEG and Niagara Mohawk also suggest that the Commission amend 
Sec. 292.207(d)(1) to provide that, after gathering sufficient data 
demonstrating that a facility is not a QF, a utility may file an 
affidavit to that effect with the Commission.
    Commission Response: The Commission agrees with American Forest and 
Paper's assessment of the consequences of a facility's failing to 
operate as represented in the cogenerator's or small power producer's 
application for Commission certification. The Commission will amend 
proposed Sec. 292.207(d)(1) to make it clear that a facility may 
continue to be qualified despite changed circumstances, provided that 
the facility continues to meet the qualifying criteria.\39\

    \39\Under proposed Sec. 292.207(d)(1) any person with standing 
to do so may request the Commission to revoke the qualifying status 
of a facility. See Liquid Carbonic Industries Corp. v. FERC, 29 F.3d 
697 (D.C. Cir. 1994) with regard to standing to contest a QF 
certification.
---------------------------------------------------------------------------

    The Commission will not require owners of facilities to provide a 
copy of a filing made under Sec. 292.207(d)(2) directly to each utility 
that transacts business with the facility because the Commission will 
publish notice of such filings in the Federal Register. The final rule 
clarifies and revises Sec. 292.207(d)(1) accordingly.
    Regarding Niagara Mohawk and NYSEG's argument that a utility may 
deem a facility to be ineligible for PURPA benefits, we note that, in 
Independent Energy Producers Association, Inc. v. California Public 
Utilities Commission, 36 F.3d 848 (9th Cir. 1994), the court struck 
down, as preempted by federal law, a CPUC program that allowed electric 
utilities to suspend payment of contractually-authorized rates in favor 
of lower, alternative rates when QFs do not meet the applicable 
operating and efficiency standards. The court found that the Commission 
has exclusive authority to determine whether a QF is in compliance with 
the applicable operating and efficiency standards. Id. at 853-59. The 
court added that it is the Commission's responsibility to decertify 
QFs--not the state's responsibility. Id. at 855, 859. While the 
Commission may take up this matter in the future, we will not delay 
this proceeding in order to address it at this time.
4. Pre-Authorized Recertification
    The Commission proposed at Sec. 292.207(a)(2) to provide for 
streamlined Commission recertification of certain minor changes to 
those facilities which the Commission had already accorded qualifying 
status under Sec. 292.207(b). The NOPR proposed that a cogenerator or 
small power producer would simply report such a change in the form of a 
letter describing the change in sufficient detail to enable the 
Commission to readily determine that the modification falls within the 
scope of a list of pre-approved minor changes. A report of a pre-
authorized change would not require a filing fee.40

    \40\The Commission proposed that if it approves the change(s), 
it would return the report stamped ``approved.'' The proposed rule 
further provided that if the Commission does not approve the 
proposed change(s), it would treat the report as a full 
Sec. 292.207(b) filing and assess a filing fee.
---------------------------------------------------------------------------

    Comments: Detroit Edison requests that the pre-authorized 
recertification procedure provide for notice in the Federal Register 
and/or service of the application for recertification upon each 
affected utility and state commission. Detroit Edison submits that this 
would provide state commissions and utilities with information for 
system planning and would allow state commissions and utilities to 
bring to the Commission's attention special circumstances regarding a 
particular facility and/or factual errors in an application for 
recertification. EEI, Atlantic Electric and NEP also recommend 
publishing notices of recertification in the Federal Register and 
request that the Commission direct cogenerators and small power 
producers to provide copies of the notice directly to all affected 
parties.41

    \41\NEP also suggests that applicants also provide a copy of any 
filing under Sec. 292.207(d)(2) to each of the utilities with which 
the QF is expected to transact business.
---------------------------------------------------------------------------

    SDG&E would limit pre-authorized changes to those changes involving 
name, installation or operation date, or change to power generation 
equipment. It argues that, except for these changes, meaningful 
evaluation of a facility's continued adherence to the Commission's 
standards cannot occur unless the owner or operator of the facility 
supplies sufficient information to conduct an analysis. Based on this 
reasoning, SDG&E contends that the Commission should generally require 
a cogenerator or a small power producer to apply for a Commission 
determination under Sec. 292.207(d)(2) that a change to its facility 
will not result in revocation of qualifying status. Alternatively, 
SDG&E suggests that the cogenerator or small power producer provide 
notice to the Commission of the change in the form of an affidavit. In 
either case, SDG&E recommends that the cogenerator or small power 
producer provide an updated Form 556 and a copy of the filing to each 
affected utility.
    EEI contends that some of the proposed pre-authorized changes can 
[[Page 4842]] have a significant effect on purchasing and wheeling 
utilities. EEI states, for example, that a change in the maximum net 
power production capacity of a QF can affect utility obligations 
regarding the amount of power to be purchased and the amount of backup 
and maintenance power that the utility must provide to the QF; that a 
location change can affect a utility's point of interconnection with 
the QF, as well as a utility's transmission and distribution system 
requirements; or that a change in the QF's fuel could affect the 
facility's performance and reliability.
    Southern California Edison is concerned that some of the proposed 
pre-authorized changes (i.e., changes with regard to site, thermal 
load, fuel use, plant size, cogeneration thermal host or prime-mover 
technology) may result in a new QF project and may have a significant 
effect on a contracting utility. It urges the Commission to delete 
these changes from the Commission's list of automatically approved, 
pre-certified changes.42

    \42\Southern California Edison notes that the CPUC has 
instructed utilities not to accept certain modifications under 
existing power purchase contracts in the absence of corresponding 
concessions from the cogenerator or small power producer. Southern 
California Edison is concerned that the Commission's treatment will 
conflict with the CPUC's directive.
---------------------------------------------------------------------------

    Southern Companies is concerned about the effects that a change in 
location may have on utility planning, and on transmission and 
distribution systems, in the absence of adequate notice to the utility. 
Detroit Edison points out that a change in location of a QF may affect 
the local utility's ability to accommodate the facility, especially 
since the Commission's pre-authorized change proposal seems to 
contemplate that a QF may move from the service territory of one 
utility to that of another, or even move from one state to another.
    On the other hand, Tenaska suggests that the Commission's list of 
automatically approved, pre-certified changes should be even more 
expansive. It proposes that the Commission permit a change in power 
generation equipment whenever there is no material or substantial 
change in capacity or operating characteristics of the facility. 
Tenaska also urges that the Commission extend to coal, other fossil 
fuels, and waste the pre-authorized changes permitted for oil and 
natural gas usage by a cogeneration facility.
    American Cogen and Electric Generation Association propose 
additional pre-approvals: (a) For changes within an existing corporate 
structure; (b) for changes in the equity interests (to ensure that the 
facility continues to comply with the ownership requirements of 
Sec. 292.206); and (c) for changes in the steam host that do not affect 
levels of thermal output or the operating and efficiency values of the 
facility.
    EEI recommends that the Commission clarify that a self-certified 
cogenerator or small power producer also may file a notice of self-
recertification with regard to the Commission's pre-authorized changes 
and that such minor changes will not result in a self-certified 
facility's losing its qualifying status.43

    \43\EEI observes that proposed Sec. 292.207(a)(2)(i) limits 
reports of pre-authorized minor changes to those QFs previously 
certified by the Commission, and that this seems to suggest that a 
self-certified facility might be subject to revocation of qualified 
status as a consequence of the institution of similar minor changes. 
In addition, EEI states that Sec. 292.207(a)(2)(ii) is confusing 
because of its reference to the term ``application.'' According to 
EEI, the term makes it appear to require that a Sec. 292.207(d)(2) 
filing, which pertains to a change that will not result in the 
revocation of qualifying status, is mandatory for a Commission 
certified facility but discretionary for a self-certified facility. 
Yet, EEI argues, Sec. 292.207(d)(2) seems to suggest that a filing 
under that section is discretionary for all QFs.
---------------------------------------------------------------------------

    Commission Response: In consideration of the comments, the 
Commission will adopt the proposed rule with the modifications 
discussed below. The Commission will pre-authorize ownership changes 
within a corporate family that do not affect the ultimate upstream 
derivative ownership in the facility (Sec. 292.207(a)(2)(i)(A)).44 
The Commission will also pre-authorize changes in the steam host when 
there is no change in the thermal application or process 
(Sec. 292.207(a)(2)(i)(M)), and extend its pre-authorization of changes 
in oil and natural gas use by a cogeneration facility to other fuels 
(Sec. 292.207(a)(2)(i)(E)).45

    \44\We encourage applicants to describe such ownership changes 
with the aid of a corporate relationship chart.
    \45\Because there is no efficiency standard applicable to the 
use of other fuels by a cogeneration facility, any change in the use 
of such fuels also warrants pre-authorization.
---------------------------------------------------------------------------

    The Commission will not adopt EEI's suggestion that the Commission 
extend the pre-authorized changes to the self-certification procedure. 
The Pre-authorized Commission recertification procedure is not 
available to a self-certified facility because, under self-
certification, the owner or operator of the facility is free to report 
any change.
    We are also deleting the proposed regulatory text which stated that 
the Commission would return these submittals stamped ``approved.'' The 
deleted text is inconsistent with the new procedure that pre-approves 
certain types of changes.
    Finally, because of concerns about the effect on utility planning 
and utility systems, the Commission will require that cogenerators and 
small power producers provide affected utilities and state commissions 
a copy of any report of pre-authorized changes filed under 
Sec. 292.207(a)(2).
    The Commission declines to adopt the CPUC's proposal that it 
indicate which modifications the Commission considers too fundamental 
to include in a list of pre-approved changes. The intent of adopting a 
list of pre-authorized changes in the final rule is to authorize 
changes that are sufficiently minor for purposes of QF status that it 
is unnecessary to obtain specific Commission approval each time such 
changes are made. If a change is not included on the list, then the 
pre-authorized change procedure cannot be used, and the cogenerator or 
small power producer must apply for recertification or file a notice of 
self-recertification.
    The final rule revises Sec. 292.207(a)(2) accordingly.
5. Qualifying Transmission and Interconnection Equipment
    The Commission proposed to amend the definition of the term 
``qualifying facility'' to include transmission lines, transformers and 
switchyards to reflect Commission precedent.46 As proposed, 
cogenerators, small power producers and utilities could use such 
equipment only to transmit qualifying power from the QF to the 
purchasing electric utility and to transmit supplementary, standby, 
backup and maintenance power from an electric utility to the QF.

    \46\See, e.g., Clarion Power Company (Clarion), 39 FERC 61,317 
(1987); Kern River Cogeneration Company, 31 FERC 61,183 (1985) 
(Kern River); Malacha Power Project, Inc. (Malacha), 41 FERC 61,350 
(1987); see also, Oxbow Geothermal Corporation, 67 FERC 61,193 
(1994) (Oxbow) (granting recertification when the QF leased spare 
transmission capacity to an adjacent QF and disclaiming FPA 
jurisdiction over the lease).
---------------------------------------------------------------------------

    Comments: NEP contends that a generic rule that allows transmission 
equipment to be a component of a QF is ill-advised. NEP and 
Pennsylvania P&L suggest that the Commission should continue to 
consider this issue on a case-by-case basis. NEP is concerned that, 
under a generic rule, electric utilities may find themselves in the 
difficult situation of needing to tap into QF transmission lines and 
obtain wheeling in order to serve load growth in their own service 
territories. NEP is also concerned that the presence of qualifying 
transmission facilities might affect: (a) A utility's transmission and 
distribution plans; (b) public safety; and (c) the environment.
    Pennsylvania P&L is concerned that codification of the QF 
transmission line [[Page 4843]] and interconnection lines precedent 
could result in the exemption of more transmission lines from state 
environmental siting review. It notes that the State of Pennsylvania 
does not regulate QF-owned transmission lines.47 Southern 
California Edison is concerned that the proposed definition may cause 
conflicts with state and local authorities that regulate the 
construction, ownership and/or operation of transmission facilities, 
despite the Commission's clarification in the NOPR with respect to the 
continued applicability of Federal, state and local siting and 
environmental requirements to such equipment. Edison, Arizona Public 
Service and EEI ask the Commission to clearly state in the final rule 
that Federal, state and local siting requirements continue to apply to 
QF-owned transmission lines.

    \47\This is Pennsylvania's choice. Certification does not exempt 
QFs from environmental siting requirements.
---------------------------------------------------------------------------

    EEI also observes that the proposed reference to the use of 
qualifying transmission and interconnection equipment for ``qualified 
power'' sales by QFs is ambiguous, since the term is undefined. EEI 
further observes that the reference is unnecessary because the 
Commission is only concerned about power sales by the QF portion of a 
facility. Finally, EEI submits that one could interpret the proposed 
definition of qualifying facility to prohibit a QF's use of qualifying 
transmission and interconnection facilities to purchase power other 
than supplementary, standby, maintenance and backup power for the non-
qualifying portions of a facility. EEI suggests that the Commission did 
not intend to be so restrictive in its definition.
    American Cogen, American Iron and Steel, General Electric, 
Independent Energy Producers, and Texaco want to expand the permitted 
uses of qualifying transmission and interconnection facilities to 
include transmission and wheeling of a QF's power to other parties. 
Texaco suggests that the Commission should include in the definition of 
a qualifying facility any facilities that deliver electric energy to 
third parties, such as thermal hosts or other entities, and any 
facilities that provide transmission access under the provisions of the 
Energy Policy Act of 1992.
    American Cogen contends that, whether a QF is selling electric 
energy at retail to industrial customers is irrelevant for the purpose 
of determining QF status. American Cogen argues that it would make no 
sense to deny qualifying status to the transmission and/or 
interconnection portion of a facility merely because the facility is 
engaged in power sales to end users. American Cogen says that the 
Commission's inquiry has been focused on and should continue to focus 
on whether a facility meets the fuel use standard, operating and 
efficiency standards and ownership criteria. American Iron and Steel 
contends that restricting the use of qualifying transmission and 
interconnection equipment to transactions with utilities would be 
contrary to precedent.48

    \48\American Iron and Steel refers to PRI Energy Systems, Inc., 
(PRI Energy), 26 FERC 61,177 (1984); Oxbow Geothermal Corporation, 
36 FERC 61,398 (1986); and Union Carbide Corp., 48 FERC 61,130, 
reh'g denied, 49 FERC 61,209 (1989), affirmed sub nom., Gulf States 
Utilities Co. v. FERC, 922 F.2d 873 (D.C. Cir. 1991) (Union 
Carbide).
---------------------------------------------------------------------------

    American Iron and Steel also suggests that, since PURPA does not 
bar retail sales where such sales are permissible under state law, the 
Commission should clarify the definition of a QF to provide for 
qualifying status of transmission and interconnection facilities and 
similar facilities that provide power to non-utility parties. 
Otherwise, American Iron and Steel argues, by precluding qualifying 
transmission and interconnection facilities where a QF transmits 
electric energy to retail customers, the Commission would place 
restrictions on state authority over retail sales, a restriction that 
Congress sought to prevent under PURPA.
    AGA counters that the Commission should not permit the transmission 
and wheeling of electric energy for and to third parties over 
qualifying transmission facilities, because Sec. 210 of PURPA only 
encourages the local generation of alternative energy. According to 
AGA, PURPA does not encourage the transmission of alternative sources 
of electric energy to third parties.
    Commission Response: The Commission will codify its precedent 
concerning qualifying transmission lines and interconnection equipment 
at Sec. 292.101(b)(1). The Commission is not changing the case-by-case 
disposition of applications for the certification of qualifying 
facility status that include transmission lines and interconnection 
facilities.
    The Commission also agrees with the suggestions of several 
commenters that it should more fully codify Commission precedent by 
clarifying or expanding the defined uses of transmission lines and 
interconnection facilities. PURPA does not preclude QFs from selling at 
retail.49 However, transmission lines or interconnection 
facilities that are found to be part of a QF--whether used for 
wholesale or retail sales--may be used only for the purpose of 
effectuating the QF's sale of power; transmitting other QFs' power; 
transmitting standby, maintenance, supplementary and backup power to 
other QFs; 50 or transmitting back-up power, etc. to the QF or its 
thermal users in appropriate circumstances.51 In other words, the 
final rule will allow the transmission and interconnection components 
of the QF to serve the same users that are served by the power 
production components of QFs, to serve other QFs, and to serve the 
backup, etc. needs of the QF, and its thermal host, in appropriate 
circumstances. The Commission's modified definition of qualifying 
facility will, accordingly, recognize that QFs may use transmission 
lines and interconnection facilities to exchange electric power without 
regard to the nature of the purchaser of the QF's power.52

    \49\See PRI Energy, supra, n.48.
    \50\See Oxbow, supra, n.46.
    \51\See Union Carbide, supra, n.48.
    \52\Purchasers that receive electric energy over the QF's 
transmission lines and interconnection facilities may be directly or 
indirectly interconnected purchasing utilities as contemplated in, 
e.g., Kern River; Western Massachusetts Electric Company, 59 FERC 
61,091, reh'g denied, 61 FERC 61,182 (1992), and Sec. 292.303 (a) 
and (d) of the Commission's regulations; they may also be affiliated 
and unaffiliated thermal hosts in accord with, e.g., Kern River; 
Alcon (Puerto Rico), 38 FERC 61,301 (1987), affirmed, Puerto Rico 
Elec. Power Auth. v.FERC, 848 F.2d 243 (D.C. Cir. 1988); and Union 
Carbide; or they may be retail customers, when permitted by state 
law, in accord with PRI Energy.
---------------------------------------------------------------------------

    EEI's reference to the qualifying ``portion'' of an entire facility 
is unclear. It is, therefore, difficult to evaluate EEI's concern that 
the proposed revised definition of a QF may overly restrict the 
allowable types of power purchases that qualifying transmission lines 
and interconnection facilities may transmit. In any event, the 
Commission, in this proceeding, is simply codifying its practice and 
precedent concerning the transmission lines and interconnection 
facilities of a QF.
    With respect to Texaco's suggestion to expand the facilities 
covered in the definition to those used to provide transmission access 
under the provisions of the Energy Policy Act,53 the suggestion is 
beyond the scope of this rulemaking.54

    \53\The Energy Policy Act became effective on October 24, 1992. 
Public Law No. 102-486, 106 Stat 2776 (1992). The Commission issued 
the NOPR in this proceeding on November 16, 1992.
    \54\However, the Commission's preliminary view is that a QF that 
is a transmitting utility, see 16 U.S.C. 793(23), would not lose its 
qualifying status if the Commission ordered the QF to provide 
transmission services under FPA section 211.
---------------------------------------------------------------------------

    The Commission agrees with Southern California Edison, EEI and 
[[Page 4844]] Arizona Power that it is appropriate to modify the 
definition of qualifying facility to make it clear that Federal, state 
and local siting and environmental requirements apply to such 
transmission lines and interconnection facilities.
    The final rule revises Sec. 292.101(b)(1) accordingly.
6. Power Production Capacity
    In the NOPR, the Commission proposed to add a new Sec. 292.202(s), 
which would codify Commission precedent regarding the power production 
capacity of a QF. The Commission proposed to determine a QF's maximum 
net sendout based on the safe and reliable operation of the facility. 
The Commission also proposed to measure the QF's power production 
capacity at the point of delivery to the transmission system of the 
interconnected utility.55

    \55\Net output determines whether small power production 
facilities that are not eligible solar, wind, waste or geothermal 
facilities as defined by section 3(17)(E) of the FPA, conform to the 
80 MW size limit of Sec. 292.204(a) and whether their owners and 
operators are eligible for regulatory exemptions provided at 
Secs. 292.601 and 292.602 of the Commission's regulations. See, 
e.g., Malacha Power Project, Inc., 41 FERC 61,350 (1987); 
Massachusetts Refusetech, Incorporated, 25 FERC 61,406 (1983); Power 
Developers, Inc., 32 FERC 61,101 (1985), rehearing denied, 34 FERC 
61,136 (1986); and Penntech Papers, Inc., 48 FERC 61,120 (1989).
---------------------------------------------------------------------------

    Comments: Commenters recommended that the Commission measure power 
production capacity at each point of interconnection with each 
purchaser,56 or at the first point of interconnection with the 
transmitting utility.57 The CPUC suggests that electric power 
output must be net of any parasitic loads.

    \56\Comments of American Cogen.
    \57\Comments of Independent Energy Producers.
---------------------------------------------------------------------------

    Southern California Edison suggests that the Commission define 
power production capacity in terms of the expected operating conditions 
during the period when the purchasing utility most needs power, taking 
into account factors such as ambient temperature at the time of system 
peak load and the QF's power commitment.58 Southern California 
Edison is also concerned that one could construe the proposed 
Sec. 292.202(s) language to allow the owners and operators of QFs to 
choose to purchase power to meet a facility's auxiliary load 
requirements in order to artificially increase the amount of power 
sendout.

    \58\According to Southern California Edison, its QF power 
purchase contracts specify the amount of electric power which it can 
rely on at the time of its maximum system peak demands. Southern 
California uses such contract capacity in its long-term system 
planning because the QF capacity amount reflects expected operating 
conditions rather than the most favorable operating conditions.
---------------------------------------------------------------------------

    General Electric suggests case-specific treatment for cogeneration 
facilities that employ gasifiers.59

    \59\A gasification system converts coal, waste and other by-
product materials to fuel gas, which may be burned in a power 
production facility.
---------------------------------------------------------------------------

    On November 29, 1993, as supplemented on December 3, 1993, Granite 
State Hydropower Association (Granite State Hydropower), whose members 
own or operate approximately 40 small hydroelectric projects in New 
Hampshire, filed an ``emergency'' motion for clarification or to reopen 
this proceeding and rescind the proposal to codify decisions.60 
Granite State Hydropower opposes codification of the Commission's 
decisions in Power Developers, Inc.,61 and Turners Falls Limited 
Partnership,62 at least insofar as it might apply to hydroelectric 
small power production facilities that are in operation when such 
codification might take effect.63 Granite State Hydropower 
requests that the Commission either rescind the proposed rule or 
clarify that it would apply such a change in eligibility requirements 
to future hydroelectric small power production facilities only.

    \60\We shall treat their motion as a comment on the NOPR.
    \61\32 FERC 61,101 (1985) (Power Developers).
    \62\55 FERC 61,136 (1991) (Turners Falls).
    \63\According to Granite State Hydropower, the New Hampshire 
Public Utility Commission (New Hampshire Commission) has interpreted 
the eligibility restrictions of Turners Falls to have, in effect, 
overruled the New Hampshire Commission's 1981 regulations 
implementing PURPA and certain of this Commission's Part 292 
regulations.
---------------------------------------------------------------------------

    Commission Response: The Commission notes that in two pending 
proceedings 64 issues have been raised concerning the policy set 
forth in Turners Falls. The Commission is reviewing those issues and 
will address them in those proceedings. The Commission is not prepared 
at this time to issue a final rule regarding the policy set forth in 
Turners Falls. The Commission may, in the future, codify its policy on 
this matter after it has had more experience with the issue. The 
Commission will not adopt the proposed definition of power production 
capacity at this time.

    \64\Carolina Power & Light Company, v. Stone Container Corp., 
Docket Nos. EL94-62-000 and QF85-102-005; Connecticut Valley Light & 
Power Company v. Wheelabrator Claremont Company, Docket Nos. EL94-
10-000 and QF86-177-001.
---------------------------------------------------------------------------

7. Increased Specificity of the Qualifying Facility Filing 
Requirements: Form 556
    In the NOPR, the Commission proposed a standardized application 
form (Form 556) to facilitate successful applications for Commission 
certification of qualifying status. The Commission intended that Form 
556 would also make small power producers and cogenerators more aware 
of the QF standards that apply to their facilities; under the current 
regulations one must examine the history of related cases and the 
language of the pertinent regulations to be sure of the specific 
standards that apply to particular facilities. To make this effort less 
burdensome to applicants, Form 556 allows cogenerators and small power 
producers to report the specific characteristics of their facilities. 
The form also provides for the step-by-step application of pertinent 
regulations to their facilities. When accurately completed, Form 556 
should readily reveal whether a facility substantially complies with 
the applicable criteria, and reduce the number of Staff inquiries for 
more information from applicants.
    Comments: With respect to the general requirement for Form 556, 
SDG&E suggests changing the title of Form 556 to make it clear that it 
applies to proposed, as well as to existing facilities. American Cogen 
cautions that verifying the useful thermal output of proposed 
facilities (item 14a): (a) Will be an extremely cumbersome procedure; 
(b) will, of necessity, be based on approximations; and (c) may raise 
utility concerns, prompt premature interventions, and cause 
administrative difficulties.
    Southern California Edison recommends that applicants include an 
updated Form 556 with each filing submitted under Sec. 292.207(d)(2) in 
connection with a substantial modification to a facility. AGA urges the 
Commission to dispense with the detailed information requirements and 
request only the most basic technical information.65 American 
Forest and Paper maintains that identification of the utility that will 
purchase and/or wheel the facility's qualified power (item 3b) is 
unnecessary, since that information has nothing to do with qualifying 
status.

    \65\While the Commission notes that AGA's suggestion that the 
Commission change its policy and rely on minimal information is 
beyond the scope of this proceeding, its proposal would undercut the 
Commission's efforts to reduce the incidence of incomplete filings.
---------------------------------------------------------------------------

    Arizona Public Service proposes that the QF specify the name of 
each affected utility customer, as well as the magnitude of its 
displaced load. SDG&E proposes that the applicant describe in writing 
the operation of the principal components of the facility, and that the 
applicant also address supplementary firing devices and incorporate a 
detailed [[Page 4845]] thermodynamic heat balance diagram.66 SDG&E 
recommends that Form 556 require an applicant to more narrowly specify 
the facility's electric power production capacity in terms of the 
qualified portion of the facility instead of simply on a stand-alone 
basis (item 4b).

    \66\This information should be provided in Form 556, items 4a 
and 10.
---------------------------------------------------------------------------

    American Forest and Paper asks the Commission to delete the 
proposed inquiry into the total energy input of a facility (items 4d 
and 5). It notes that, for a small power production facility, item 7 
addresses compliance with the fossil fuel use limits and that, for a 
cogeneration facility, the fuel used is relevant only for compliance 
with the efficiency standard. According to American Forest and Paper, 
item 11, concerning operating and efficiency values for cogeneration, 
should apply only to oil or natural gas fueled cogeneration facilities.
    EEI recommends that the Commission broaden its consideration of 
waste energy input (item 4d) to include the Commission's ``no current 
commercial value'' test or a United States Department of the Interior, 
Bureau of Land Management (BLM) waste determination. SDG&E recommends 
that the Commission add new item 4e, which would require a description 
of the QF's point of delivery with the purchasing utility. It also 
suggests that Form 556 require an applicant to present the facility's 
energy input (item 5) in terms of ``lower heating value.''67

    \67\Lower heating value refers to the amount of useful heat 
energy that can be obtained during the combustion process, since the 
latent heat of water vaporization in the combustion of hydrocarbon 
fuels is not recoverable. Order No. 69, FERC Stats. and Regs., 
Regulations Preambles 1977-1981 30,134 at 30,937. Section 
292.202(m) requires that one use lower heating value to measure the 
energy input of oil or natural gas. SDG&E also asks the Commission 
to require an applicant to specify the conversion factor that it 
uses to convert the higher heating value to the lower heating value.
---------------------------------------------------------------------------

    EEI suggests that the Commission make its determination of the 
amount of total energy input into a small power production facility 
(Item 7) in terms of Btu/lb. or Btu/cubic ft. of gas at standard 
temperature and pressure and that Form 556 require an applicant to 
specify the annual Btu consumption of primary fuel. EEI notes that Form 
556 does not define eligible and non-eligible small power production 
facilities (Item 8).\68\

    \68\Under section 3(17)(E) of the FPA, eligible facilities are 
certain solar, wind, waste and geothermal powered small power 
production facilities that are not capped at the PURPA 80 MW size 
limit, for which a filing regarding QF status had been submitted to 
the Commission by the end of 1994 and for which the construction 
must generally commence before the end of 1999.
---------------------------------------------------------------------------

    American Cogen maintains that a cogeneration system cycle diagram 
depicting the physical arrangement of system components (item 10) is 
often premature and burdensome, since certification often occurs before 
selecting a general contractor and completing the detailed layout. 
American Cogen also contends that small facilities, under 2 MW, should 
be exempt from the cycle diagram requirement. The CPUC, observing that 
items 10 and 14 address cogeneration system input and output values, 
suggests that it would be useful to directly relate each input and 
output value to the cycle diagram to show more clearly what each value 
represents.\69\ SDG&E suggests that, for absorption chiller thermal 
applications, there should be specification of the heat that will be 
sent to the chiller's cooling tower, and any factor converting the 
chilled water in terms of net Btu cooling output to net heat input to 
the chiller, as well as the relevant flow rates, temperature, pressure, 
and enthalpy.

    \69\The Commission agrees that there should be a correlation 
between the input and output information provided in items 10 and 
14.
---------------------------------------------------------------------------

    SDG&E suggests that the Commission should require an applicant to 
specify the entity that will purchase the useful thermal energy output 
from the facility and any affiliation such entity may have with the 
cogenerator (item 12). SDG&E further recommends that the description of 
any heat dump, exhaust bypass or other such device for dumping, 
transferring or applying heat to something other than the designated 
useful thermal energy output application, be provided in writing along 
with a simple diagram (item 13). AGA contends that, since distribution 
heat losses are an inherent and unavoidable characteristic of thermal 
consumption and are not a function of how thermal energy is created, 
Form 556 should not call for calculations of distribution heat losses.
    EEI proposes that, if the Commission decides that applicants must 
include a completed Form 556 with all QF related filings, the 
Commission specify the type of filing that the Form 556 submission 
pertains to (e.g., Commission recertification, self-recertification, or 
pre-authorized change). EEI also suggests a requirement that, at all 
times, proper and accurate metering or other measuring and recording 
will be conducted to verify continuing compliance with the operating 
and efficiency standards. American Forest and Paper contends that the 
routine Federal Register notice accorded applications for Commission 
certification should be sufficient to alert nearby utilities and other 
interested parties about potential QF obligations.
    Commission Response: Applications for Commission certification 
under Sec. 292.207(b) must include Form 556. Further, because the final 
rule will require filings under Sec. 292.207(d)(2) to conform to the 
requirements of Sec. 292.207(b), filings under Sec. 292.207(d)(2) will 
include a completed and current Form 556. The Commission will also 
require that notices of self-certification under Sec. 292.207(a)(1) 
include a completed Form 556. However, the final rule does not require 
applicants to include Form 556 with preauthorized change filings under 
Sec. 292.207(a)(2). To do so would be inconsistent with the notion that 
preauthorized changes do not require additional Commission review.
    Concerning EEI's comments about verification of compliance with 
operating and efficiency standards, the Commission notes that 
cogenerators and small power producers are responsible for installing 
adequate monitoring equipment to ensure compliance with the 
Commission's regulations.
    In response to American Forest and Paper's comment that Federal 
Register notice should suffice for applications for Commission 
certification, as we noted above, the adoption of Form 556 is intended 
to benefit QFs by facilitating successful applications for Commission 
certification and making cogenerators and small power producers more 
aware of QF standards. American Forest and Paper's comments concerning 
notice to affected utilities does not account for these benefits. 
Moreover, as discussed elsewhere in this final rule, the Commission is 
requiring a completed Form 556 for each self-certification filing, 
which, at revised item 3b, will specify the purchasing and wheeling 
utilities, if known. Since the Commission does not publish notices of 
self-certification in the Federal Register, the Commission will require 
that applicants provide copies of notices of self-certification to each 
affected utility and state commission.
    We decline to adopt American Cogen's proposal to exempt facilities 
under 2 MW from the cycle diagram requirement. A cycle diagram is a 
minimal showing of the operation of the cogeneration process.
    We decline to adopt SDG&E's suggestion that applicants specify 
several factors related to absorption chiller thermal applications. The 
Commission has held that PURPA does not require the thermal use to be 
the [[Page 4846]] most efficient; the requirement is that it be 
``useful.''\70\

    \70\See Bayside Cogeneration, L.P., 67 FERC  61,290 at 62,007 & 
n. 7 (1994).
---------------------------------------------------------------------------

    Concerning AGA's comment that Form 556 should not require 
calculations of distribution heat losses, the Commission recognizes 
that accounting for inefficiencies of heating and cooling equipment is 
burdensome and unnecessary. Form 556 will not require that applicants 
specify this information.
    The Commission will publish Form 556 in Part 131 of the 
Commission's regulations. To help focus attention on the relevant 
standards, the Commission will divide the form into three parts. Part 
A, entitled ``General Information To Be Submitted By All Applicants'' 
(items 1-6), covers: (a) The identity of the applicant; (b) the type of 
facility (small power or cogeneration); (c) the expected or actual 
installation and operation dates, (d) the fuel input and power output; 
and (e) the identity of the relevant utilities with which the facility 
will transact business. Part B, entitled ``Description Of the Small 
Power Production Facility'' (items 7-8), concerns certain restrictions 
on use of oil, natural gas and coal and the one-mile limit on common 
fuel supplies shared by multiple facilities. Part C, entitled 
``Description Of the Cogeneration Facility'' (items 9-15), concerns 
compliance with, inter alia, the operating and/or efficiency standards, 
and contains sections that specifically pertain to topping-cycle (items 
13-14b) and bottoming-cycle (item 15) facilities.
    To make Form 556 easier to use, the Commission is eliminating 
redundancies and, wherever possible, cross-referencing items to related 
sections of the Commission's regulations or stating the underlying FPA 
or Commission requirement.
    The Commission is also modifying the title of Form 556 to indicate 
that applicants must complete up-to-date Forms 556 for both existing 
and proposed facilities.\71\ The Commission is requiring a description 
of the operation of the principal components of the facility (item 4a). 
The Commission is clarifying the reference to eligible small power 
production facilities (item 8) with an explanation and a reference to 
section 3(17)(E) of the Federal Power Act. The Commission is also 
requiring that an applicant specify the identity of the thermal host; 
but the Commission is not requiring that in all cases applicants must 
divulge their affiliation with the cogenerator (item 13).\72\

    \71\The Commission is not requiring owners and/or operators of 
facilities that have applications for certification pending before 
the Commission, or that the Commission has already certified, or 
that have already filed a notice of self-certification to file Form 
556 unless they file for Commission recertification or self-
recertification after the effective date of this final rule.
    With respect to facilities not yet built or operating, small 
power producers and cogenerators must present the relevant 
information, to the extent possible, in the form of planned 
compliance. If the small power producer or cogenerator does not 
supply sufficient information, the Commission will not be able to 
certify the facility, or the information in a notice of self-
certification will not be adequate to ensure that the facility is a 
QF.
    \72\The affiliate relationship between the cogenerator and the 
thermal host is not relevant unless the thermal application or 
process, or the end product produced with the aid of the thermal 
output from the facility, is not common. Since most thermal 
applications or processes, and/or the end products produced with the 
aid of such, are common, this information is usually not necessary.
---------------------------------------------------------------------------

    The Commission is also not requiring applicants to specify the 
utility load that a QF will displace, since it is sufficient for 
utility planning and system operating purposes that applicants identify 
all of the utilities with which they expect to transact business. The 
Commission's practice has long required that applicants provide 
information on thermal delivery losses and any thermal energy return, 
in order to determine the amount of the useful thermal energy output of 
the facility (item 14a). Experienced cogenerators have routinely 
provided this information. The Commission is not eliminating this 
critical requirement.\73\ The final rule clarifies Form 556 
accordingly.

    \73\Section 292.202(h), as revised in this final rule, defines 
thermal energy in terms of thermal energy: (1) Which is made 
available to an industrial or commercial process (net of any heat 
contained in condensate return and/or makeup water); (2) which is 
used in a heating application (e.g., space heating, domestic hot 
water heating); or (3) which is used in a space cooling application 
(i.e., steam or hot water used by an absorption chiller). Item 14a 
will contain these three categories.
    Line losses and heat exchanging equipment losses must be 
deducted from the total thermal energy actually consumed. For 
example, any thermal energy rejected by an absorption system at the 
input to the chiller must be deducted from the useful thermal 
output, since what is rejected is not used for cooling purposes. 
Also, the proper location of the metering equipment at the host site 
can eliminate the need to calculate line losses.
---------------------------------------------------------------------------

F. Proposed Technical Modifications for Qualifying Small Power 
Production and Cogeneration Facilities Under Part 292

1. Calendar Year Fossil Fuel Use and Operating and Efficiency Value 
Calculations
    The Commission's current rules require cogeneration facilities to 
meet the operating and efficiency standards on a calendar year 
basis.\74\ Small power production facilities must meet a similar 
requirement with respect to the proportion of fossil fuel use.

    \74\See, e.g., Everett Energy Corporation, 45 FERC  61,314 
(1988).
---------------------------------------------------------------------------

    The NOPR proposed to convert the existing calendar year operating 
and efficiency standards (for cogeneration facilities\75\) and the 
current calendar year fossil fuel standard (for small power production 
facilities\76\) to 12-month standards, because many QFs have 
experienced difficulty meeting the standards during the first calendar 
year of operation. For example, if a cogeneration facility first 
produces electric energy late in the year, it may not have enough time 
under normal operation during the remainder of the calendar year to 
meet the Commission's operating and/or efficiency standards. Likewise, 
it may miss the peak thermal usage of its host(s), and so may be unable 
to comply with the Commission's operating and/or efficiency standards 
for that calendar year.

    \75\The current operating standard requires all topping-cycle 
cogeneration facilities to have at least a 5 percent operating value 
with regard to useful thermal energy output (Sec. 292.205(a)). Oil 
or gas-fired topping-cycle cogeneration facilities are also subject 
to an efficiency standard (Sec. 292.205(a)). The useful electric 
power output of the facility plus one-half the useful thermal energy 
output must be no less than 42.5 percent of the total energy input 
of natural gas or oil. If the useful thermal energy output is less 
than 15 percent of the total energy output (i.e., the operating 
value is less than 15 percent), the efficiency value must be 45 
percent rather than 42.5 percent. For supplementary fired bottoming-
cycle facilities, the useful electric power output must be at least 
45 percent of the total oil and natural gas input 
(Sec. 292.205(b)(1)).
    \76\The use of coal, oil and natural gas by qualifying small 
power production facilities is limited to certain purposes and 
cannot exceed 25 percent of the total fuel input 
(Sec. 292.204(b)(2)).
---------------------------------------------------------------------------

    In the NOPR, the Commission proposed to base its determination of 
whether a QF meets the Commission's technical standards in its first 
year of operation by examining the facility's operation for a period of 
12 consecutive months beginning with the date on which the QF first 
produces electric energy. The Commission proposed to base subsequent 
determinations upon each ensuing 12-month period. Accordingly, the 
Commission proposed to replace the phrase ``during any calendar year'' 
in Secs. 292.204(b)(2), 292.205(a) and 292.205(b) with the phrase ``on 
a consecutive 12-month basis beginning with the date the facility first 
produces electric energy.''
    Comments: American Forest and Paper suggests a 60 to 90-day grace 
period beginning with the first production of electric energy to permit 
the completion of facility testing. Upon commercial operation, the 12-
month standard would apply. Independent Energy Producers suggests that 
the Commission apply the new 12-month [[Page 4847]] standard to 
consecutive 12-month periods, rather than to rolling 12-month periods 
beginning with each month.
    Pennsylvania P&L suggests that the Commission apply the 12-month 
standard only to new QFs in order to minimize administrative problems 
with existing QFs whose power purchase contracts may be based on 
calendar year periods. SDG&E and Southern California Edison suggest 
that the Commission continue to apply the existing calendar year 
standard, beginning with the first full calendar year of a QF's 
operation and apply the new 12-month standard only to the initial 
period of operation.\77\ SDG&E and Southern California Edison believe 
that this would respond to the Commission's concern about the 
difficulties QFs initially encounter in their operation and make it 
easier for utilities to monitor the operation of a large number of 
QFs.\78\

    \77\Southern California Edison also suggests that, since certain 
combined-cycle configurations have characteristics of both topping-
cycle and bottoming-cycle facilities, the Commission should make the 
operating and efficiency standards for combined-cycle facilities the 
same as for topping-cycle facilities. The Commission considers 
combined-cycle installations to be topping-cycle facilities subject 
to the operating and efficiency standards applicable to such 
facilities.
    Southern California Edison suggests that the Commission should 
also require combined cycle facilities to calculate the efficiency 
value to take into account total energy input. The Commission 
includes the total energy input of only oil or natural gas to such 
topping cycle facilities in the calculation of the efficiency value.
    \78\SDG&E also contends that the current operating and 
efficiency standards have failed to encourage alternative energy 
development and conservation and suggests that the Commission should 
initiate a new rulemaking proceeding to raise the operating and the 
efficiency standards. At this juncture, however, the Commission is 
primarily concerned with codifying QF precedent and otherwise 
streamlining its QF regulations. It is not prepared to initiate 
another generic QF proceeding at this time.
---------------------------------------------------------------------------

    Commission Response: American Forest and Paper's proposal to 
establish a 60-90 day grace period for new facilities is beyond the 
scope of this proceeding and the Commission will not adopt it.
    The Commission is revising its regulations to require that the 
technical standards be measured during the first year of operation, on 
a consecutive 12-month basis beginning with the date the facility first 
produces electric energy. A new facility can fail to meet the technical 
standards in any period from one to 11 months as long as the facility 
meets the technical standards for the 12-month period. Compliance with 
the technical standards will be required on a calendar year basis 
beginning with the first full calendar year of operation following the 
date of initial electric power production.\79\ This should simplify 
compliance with contracts and regulations. The final rule revises the 
Commission's operating, efficiency and small power fuel use standards 
accordingly.

    \79\Under this approach, small power producers and cogenerators 
will account for the early period of a QF's operation under both the 
12-month standard and the calendar year standard. For example, with 
respect to a facility that first produces power on July 1, 1994, 
conformance with the 12-month standard will be necessary for the 12-
month period ending June 30, 1995. In addition, conformance with the 
calendar year standard will be necessary for that facility for the 
calendar year ending December 31, 1995.
---------------------------------------------------------------------------

2. Clarification of the Sequential Use of Energy Requirement
    In the NOPR, the Commission proposed to clarify its requirements 
pertaining to cogeneration facilities' sequential use of energy and 
useful thermal energy output. The Commission, therefore, proposed to 
define sequential use of energy in a new Sec. 292.202(t); in the final 
rule, this new section is designated Sec. 292.202(s). The NOPR also 
proposed to codify Commission precedent that: (a) A topping-cycle 
installation must subsequently use some of the reject heat from the 
electric power production process for a useful thermal purpose; and (b) 
that the useful portion of thermal energy output refers to the heat 
used in a heating or cooling application or made available to a 
commercial or industrial process.\80\ In the case of a bottoming-cycle 
cogeneration installation, where all of the energy is first used for a 
commercial or industrial process, the Commission proposed that the 
facility must subsequently use some of the reject heat to produce 
electric power.

    \80\Under the Commission's proposal, a topping-cycle cogenerator 
applicant would provide a mass, heat balance (cycle) diagram to 
demonstrate sequentiality, an adequate level of useful thermal 
energy output, and conformance with the operating and efficiency 
standards. Cycle diagrams delineate average annual hourly energy 
flows at various points of the cogeneration facility (including 
points of fuel input and working fluid input), accounting for hourly 
and seasonal variations, and conditions such as temperature, 
pressure and enthalpy (heat content) at these inputs, at the outputs 
of the prime movers, and at delivery points to the thermal 
application/process, and account for losses between the cogenerator 
and the host.
---------------------------------------------------------------------------

    Comments: EEI refers to a multiple turbine cogeneration 
configuration in which some of the turbines are sequentially producing 
electric power and useful thermal output, and other turbines are only 
producing electric power. EEI contends that the latter turbines should 
not qualify because they do not save fuel. Southern Companies also 
maintains that sequential energy use must remain central to the 
qualifying cogeneration facility concept. AGA approves of the 
Commission's discussion in the NOPR on this matter, because it 
contemplates that useful thermal energy will be extracted at any point 
along a chain of linked turbines rather than from every turbine in a 
multi-turbine topping-cycle installation.
    SDG&E asks the Commission to specify a minimum percentage threshold 
for sequentially produced useful thermal energy output. It submits that 
the setting of a minimum threshold would better promote the 
conservation and efficiency goals of PURPA. SDG&E also recommends that 
the Commission exclude from the operating and efficiency values of a 
facility the incremental electrical and thermal output related to any 
supplementary firing in a combined-cycle (topping-cycle) extraction 
turbine configuration. SDG&E contends that to allow supplementary 
firing when only a token portion of the thermal input is converted to 
useful thermal energy output is not an efficient use of energy.
    American Cogen suggests that the Commission require facilities to 
account for inefficiencies in the thermal host's equipment with greater 
specificity. However, if the Commission's intent is to net out such 
inefficiencies from the useful thermal energy output at each point of 
interconnection with the thermal process or application, American Cogen 
contends that accounting for such inefficiencies is onerous and should 
not be adopted. Electric Generation Association raises similar 
concerns. Independent Energy Producers suggests that the Commission use 
an approach similar to that proposed for waste fuels and provide a non-
exclusive list of useful thermal purposes to help reduce any 
uncertainty.
    SDG&E is concerned that the proposed revised definition of useful 
thermal energy output does not exclude heat dumped or rejected after 
delivery to the process, and that space and domestic water heating and 
cooling uses have not been included in useful thermal energy 
output.\81\ SDG&E also suggests that a modified independent business 
purpose test be applied to determine the usefulness of novel thermal 
applications or processes.

    \81\(See Electrodyne Research Corporation, 32 FERC  61,102 
(1985) (Electrodyne)).
---------------------------------------------------------------------------

    Commission Response: With regard to the concerns of EEI, Southern 
Companies and American Cogen, the Commission's final rule both 
maintains the sequential use of energy concept and permits a QF to 
extract useful thermal energy at any point along a chain of 
[[Page 4848]] turbines as long as the turbines are linked in a 
sequential energy flow. While SDG&E believes that the proposed 
definition of sequential use of energy was too vague, the Commission 
notes that the new definition explicitly considers the operating 
standard with respect to topping-cycle cogeneration facilities. Under 
the operating standard, 5 percent of the total energy output of a 
topping-cycle cogeneration facility must be useful thermal energy 
output in order for a facility to meet the sequentiality requirement.
    The Commission agrees with American Cogen and Electric Generation 
Association that it is unduly burdensome for cogenerators to compile 
data on net useful thermal energy output that accounts for host 
equipment inefficiencies, and that this requirement would not be 
consonant with streamlining the QF regulations. It is not practical to 
account for inefficiencies related to each piece of host equipment. The 
Commission, however, agrees with SDG&E's proposal to clarify the 
definition of useful thermal energy output to clearly account for such 
common applications as space heating and space cooling, and domestic 
water heating.
    The Commission declines to adopt Independent Energy Producers' 
proposal to create a non-exclusive list of useful thermal energy output 
applications and processes similar to the proposed list for waste 
fuels. Since, by design, most thermal applications and processes are 
common and, therefore, presumptively useful, a listing of permitted 
thermal applications/processes would be virtually impossible to 
compile. Also, any such list would likely exclude unforeseen variations 
of previously allowed thermal applications/processes that would also 
fall within the presumptively useful category.
    SDG&E has raised a concern about separate firing in combined cycle 
facilities, in which fuel is used to produce steam, some of which is 
directly used in the thermal application/process and some of which is 
used in an extraction turbine generator to produce additional electric 
energy and subsequently additional thermal output. As long as the 
direct and indirect use of thermal output amounts to 5 percent of the 
facility's total energy output, the facility meets the operating 
standard and the sequential use of energy requirement. The Commission 
does not allow the use of duct burners (i.e., separate firing of heat 
recovery boilers) solely to produce electric power in condensing 
turbine configurations.\82\ In response to SDG&E's suggestion to modify 
the independent business purpose test, the Commission, has not proposed 
to modify its Electrodyne standard in this proceeding. Thus, SDG&E's 
proposal is beyond the scope of the instant proceeding.

    \82\See Adolf Coors Company, 34 FERC  61,209 (1986).
---------------------------------------------------------------------------

    The final rule adopts Sec. 292.202(s) accordingly.
3. Section 292.204(a)--Criteria for Small Power Production Facilities
    In the NOPR, the Commission proposed to amend Sec. 292.204(a) of 
its regulations to reflect the addition by Congress of subsection 
3(17)(E) of the Federal Power Act (FPA) pursuant to the Solar, Wind, 
Waste, and Geothermal Power Production Incentives Act of 1990, as 
subsequently amended in 1991 (the Incentives Act). Subsection 3(17)(E) 
temporarily removed the otherwise applicable subsection 3(17)(A) 80 MW 
size limitation on eligible small power production facilities.
    Eligible facilities are those solar, wind, waste and geothermal 
powered small power production facilities for which either a notice of 
self-certification, or an application for Commission certification, was 
submitted to the Commission by December 31, 1994. In addition, 
construction of eligible facilities must commence not later than 
December 31, 1999, or, if not by then, reasonable diligence must be 
exercised toward the completion of such facilities taking into account 
all factors relevant to their construction.
    Comments: EEI suggests that the Commission require that operators 
of eligible facilities provide evidence that they have made a good 
faith effort toward the timely completion of such facilities by 
December 31, 1999, taking into account all factors relevant to their 
construction, in order to maintain eligibility for exemption from the 
size restriction.
    Independent Energy Producers expresses concern that under the 
Incentives Act, as amended, existing small power production facilities 
of greater than 80 MW may lose their qualifying status if they must be 
recertified subsequent to December 31, 1994. They request that the 
Commission clarify that recertification of an existing eligible solar, 
wind, waste or geothermal small power production facility larger than 
80 MW after December 31, 1994, will not endanger that project's 
qualifying status. Independent Energy Producers asserts that it would 
be unreasonable to interpret the Incentives Act, as amended, to take 
away existing benefits from a project which otherwise meets all 
eligibility requirements simply because it undergoes modification or 
some other change in circumstances, not related to the size cap, 
requiring a subsequent filing some time during the project's useful 
life. Such modifications include minor changes in a project's size, 
transmission routing, or ownership and occur frequently, according to 
Independent Energy Producers.
    Commission Response: In adding Subsection 3(17)(E) to the FPA, 
Congress only required that applicants exercise reasonable diligence 
toward the completion of construction of eligible small power 
production facilities, in those instances when construction has not 
commenced by December 31, 1999. In deciding to allow eligible small 
power producers to start construction after December 31, 1999, Congress 
obviously considered the potential for delays, yet, notably, it did not 
establish a requirement that construction be completed by any 
particular date. Therefore, it would not be appropriate for the 
Commission to adopt EEI's suggestion to require in all cases eligible 
small power producers to demonstrate reasonable diligence to complete 
construction of eligible facilities by December 31, 1999.
    In response to Independent Energy Producers, we do not believe that 
an eligible solar, wind waste or geothermal facility will lose QF 
status if, subsequent to December 31, 1994, such facility either files 
a notice of self-recertification or an application for Commission 
recertification, as long as the project is not fundamentally altered 
from the project described in the notice of self-certification or 
application for Commission certification filed prior to January 1, 
1995.\83\

    \83\At this juncture, the Commission believes it is appropriate 
to determine whether a project has been fundamentally altered on a 
case-by-case basis.
---------------------------------------------------------------------------

    The Commission will retain the proposed regulatory text for 18 CFR 
292.204(a).
4. Waste
    In the NOPR the Commission proposed to drop the existing definition 
of ``waste'' as a by-product material.\84\ [[Page 4849]] The Commission 
intended to make it easier to determine the energy sources that certain 
qualifying small power production facilities can use. To make it easier 
to certify a qualifying facility, the Commission also proposed to list 
specific energy sources that it had previously approved for treatment 
as waste.\85\

    \84\PURPA does not define the term ``waste.'' In the preamble to 
its final rule implementing PURPA, the Commission defined waste as 
``by-product materials other than biomass.'' FERC Stats. and Regs., 
Regulations Preambles, 1977-1981  30,134 at 30,934. In Kenvil 
Energy Corporation (Kenvil), 23 FERC  61,139 (1983), the Commission 
found that, to be waste, an energy source must be both a by-product 
and have no commercial value. Subsequently, the Commission found 
that applying the by-product test is not only cumbersome, but also 
is not needed to address the issue of what constitutes waste. For 
example, in Big Horn Energy Partners, 38 FERC  61,265, order on 
rehearing, 40 FERC  61,305 (1987) (Big Horn), the Commission 
certified as waste, coal which was not a true by-product of the coal 
mining operation but was simply not extracted because it was 
unwanted.
    Section 292.202(a) defines ``biomass'' as any organic material 
not derived from fossil fuels.
    \85\The Commission intended that its waste list not be 
exclusive.
---------------------------------------------------------------------------

    Comments: EEI and Southern Companies are concerned that eliminating 
the by-product test in the revised definition of waste may encourage 
the deliberate creation of a waste material. Each recommends that an 
energy source not qualify as waste unless it would otherwise exist in 
the absence of the QF that will rely on it.
    American Iron and Steel, Utility Systems Florida, Anthracite IPPs 
and Independent Energy Producers suggest that whether the owner or 
operator of a QF pays for the energy source, incurs costs associated 
with its removal and transportation to the QF, and adds value by way of 
upgrade, should not affect the determination of commercial value. 
American Iron and Steel proposes that the Commission consider 
commercial value in the context of its value to potential purchasers 
other than owners and operators of QFs. Anthracite IPPs observes that 
upgrades, such as cleaning and washing, might be necessary before a QF 
can use a waste. Utility Systems Florida notes that almost everything 
has some commercial value after it is cleaned, and suggests that the 
Commission define waste in terms of an energy source that is both an 
environmental hazard and has little or no commercial value.
    American Iron and Steel, EEI and Southern Companies urge the 
Commission to state that, once the Commission determines that a QF's 
energy source is waste, the Commission will continue to treat that 
energy source as waste even if the waste subsequently acquires 
commercial value. They maintain that this approach is necessary to 
maintain the QF's qualifying status.
    The CPUC, EEI and Southern Companies propose that the Commission 
periodically review and update its list of waste materials.86 
Anthracite IPPS and Applied Energy argue that it is unnecessary to 
limit petroleum coke and used rubber tires to that which cannot be 
commercially marketed, since the Commission has already listed each 
item as waste.87 American Iron and Steel suggests that the 
Commission specifically list coke oven gas and blast furnace gas as 
waste.88

    \86\The CPUC notes that the proposed waste list is based upon 
market data for the period 1987 through 1991. EEI is concerned that 
technology may quickly cause a listed waste to acquire some economic 
value. Southern Companies, concerned about delay, recommends that 
the Commission establish a list of wastes but not include the list 
in the Commission's regulations. Southern Companies suggests that 
the Commission invite public comment on the list and update the list 
periodically.
    \87\Anthracite IPPs cites Sunlaw Energy Corp., 37 FERC 62,255 
(1986) and Exeter Energy Limited Partnership, 48 FERC 62,135 
(1985). Applied Energy cites Ultrapower, Inc., 34 FERC 62,144 
(1986), GWF Power Systems Company, Inc., 45 FERC 62,159 (1988), and 
the Commission's discussion of petroleum coke without regard to its 
commercial value at FERC Stats. and Regs., Regulations Preambles 
1977-1981 30,134 at 30,934. In that latter discussion, the 
Commission also referred to refinery gas and plastics as additional 
examples of waste.
    \88\American Iron and Steel states that these gases cannot be 
marketed outside the steel industry due to low Btu content, 
intermittent production, and capture and storage problems. It also 
suggests that the Commission consider including as waste steel 
industry process gases such as Corex off-gas and direct steel making 
off-gas.
---------------------------------------------------------------------------

    Ridgewood and RW Partners suggest that the Commission include on 
the list of waste environmentally problematic substances such as used 
crankcase oil and other used petroleum products.89 Anthracite IPPs 
recommends that the Commission include on the waste list coal 
``fines,'' regardless of their BTU content.90 It argues that fines 
are extremely difficult to handle because of their small particle size 
and their tendency to become difficult to handle when wet.91 
Anthracite IPPs also proposes that the list be expanded to include 
subbituminous coal or blends of bituminous and subbituminous coal, 
regardless of whether such material is in place or is a refuse.92

    \89\Ridgewood, RW Partners, Utility Systems Florida, Donald L. 
Warner and Steven Anthony Duff maintain that listing used crankcase 
oil as waste would provide an incentive for its proper disposal, 
reduce its role as an environmental nuisance, encourage its 
recycling for use in electric generation, help reduce oil imports, 
and remove skepticism among lenders as to the status of self-
certified facilities that rely on it.
    \90\Fines are small or powdery-sized particles of coal that 
result from coal mining, sizing or processing operations.
    \91\Anthracite IPPs further states that utilities do not 
specifically purchase fines, and that fines are typically in the 
form of silt comprised of coal fines and ash materials from coal 
washing operations and are disposed of in settling or slurry ponds.
    \92\Subbituminous coal has a lower heat content than bituminous 
coal, averaging 9,000 Btu/lb.
    Anthracite IPPs also proposes that the Commission regard as 
waste: (1) Top or bottom anthracite coal, and (2) subbituminous and 
bituminous coal that the United States Department of the Interior's 
Bureau of Land Management (BLM) has determined to be waste, 
including any of this coal with the same characteristics that may 
extend onto non-Federal or Indian land not under the BLM's 
jurisdiction. Anthracite IPPs notes that, since BLM jurisdiction 
only extends to Federal or Indian lands, the waste list's reference 
to BLM approved wastes on such lands is redundant.
    Anthracite IPPs also wants the Commission to provide in its 
regulations that any coal source not listed as a waste in the 
Commission's regulations may qualify as waste upon a showing that it 
has no commercial value. Anthracite IPPs also wants all references 
to Btu or ash content to refer to average values so that variations 
in Btu or ash content will not preclude a potential fuel source from 
qualifying.
---------------------------------------------------------------------------

    Commission Response: The Commission is simplifying the qualifying 
status determination of facilities that use waste energy inputs in two 
ways. First, the Commission is publishing a list of waste energy inputs 
that the Commission has previously approved. Second, the Commission is 
streamlining its waste determination process for those energy inputs 
that do not appear on the list, by changing its two-part Kenvil 
approach (i.e., application of a ``by-product test'' in conjunction 
with a ``little or no current commercial value'' test) to require only 
that the proposed waste fuel source have little or no current 
commercial value.
    Section 292.204(b) requires that, for a waste-fueled qualifying 
small power production facility, 75 percent or more of the total energy 
input to the facility must be waste.93 Determining whether a 
facility meets this criterion will entail an evaluation of the average 
quality characteristics of the fuel, if the fuel is a waste fossil fuel 
energy input to a facility, or a description of the facility's energy 
input if it is not using a waste fossil fuel.

    \93\Section 292.204 reads in relevant part, as follows:
    (b) Fuel use. (1)(i) The primary energy source of the facility 
must be biomass, waste, renewable resources, geothermal resources, 
or any combination thereof, and 75 percent or more of the total 
energy input must be from these sources.
---------------------------------------------------------------------------

    The final rule will provide that even if the owner and/or operator 
of a QF pays for a material and incurs expenses to transport and 
upgrade it, the material is a waste if no other sector of the Nation's 
economy uses the material; but, if there is a demand for the material, 
other than in the QF industry, the material is considered to have 
commercial value and is, therefore, not waste under the ``little or no 
commercial value'' test. The Commission will not consider value to the 
cogenerator or small power producer as commercial value. Should a waste 
material acquire commercial value after the Commission has certified a 
facility that uses such material, or after a small power 
[[Page 4850]] producer or cogenerator has filed a notice of self-
certification referring to such material, the facility will not lose 
its qualifying status because the material from which it generates 
electric energy has acquired commercial value.94

    \94\The Commission rejects Southern Companies' suggestion that 
the Commission publish updated lists of waste materials without 
revising its regulations. Under Southern Companies' recommended 
procedure, there would still be notice and comments and the 
Commission would still frequently have to update its list of waste 
materials. The Commission would be taking on an additional 
administrative burden without saving any time.
    It would be impractical to establish a special update procedure 
for the waste list. Since various materials may gain or lose 
commercial value over time, a detailed listing of waste materials 
could require frequent revisions of the Commission's regulations.
---------------------------------------------------------------------------

    The requirement that the waste energy input exist in the absence of 
the QF industry will allow the Commission to regard as waste those 
materials that are not by-products of industrial processes but are 
nevertheless unwanted, while precluding the creation of contrived 
energy inputs for the sole purpose of having the Commission view them 
as ``waste.''
    It is virtually impossible to develop a simplified determination 
procedure that will work perfectly to determine what is waste. There 
may, for example, be substances that the Commission has not listed as 
waste and do not qualify as waste under the ``no commercial value'' 
component of the test that, nevertheless, may truly be waste. The 
Commission will consider reasonable proposals for the special treatment 
of specific materials as ``waste,'' on a case-by-case basis.
    The Commission will list petroleum coke and used rubber tires as 
waste, without reference to their commercial marketability.95 The 
Commission will also add refinery off-gas and plastic to the list of 
those materials that it regards as waste. The Commission will consider 
the average Btu and ash content of coal located in refuse ponds when 
determining whether it is waste.

    \95\Petroleum coke is a by-product of the oil refining process 
that is very low in volatile matter, usually high in sulfur content, 
and an environmentally hazardous waste. Used rubber tires, while 
high in heat content, are not burned in conventional boilers, do not 
represent an energy source for electric utilities, and are 
detrimental to the environment.
---------------------------------------------------------------------------

    The Commission notes that it currently accepts BLM determinations 
regarding waste coal located both within BLM's jurisdiction and located 
on non-Federal or non-Indian lands outside of BLM's jurisdiction, 
provided that applicants show that the latter refuse is an extension of 
a portion of the relevant coal seam (e.g., top or bottom coal) or other 
refuse source (e.g., refuse pile) determined to be waste by BLM. 
However, since reference to Federal or Indian lands serves to clarify 
the extent of BLM's jurisdiction for all applicants, the Commission 
sees no reason to modify the regulatory text in this regard.96

    \96\See Big Horn.
---------------------------------------------------------------------------

    The Commission will not list as waste: Anthracite and bituminous 
coal fines; subbituminous coal; blends of bituminous and subbituminous 
coal having an average heat value greater than 9,500 Btu per pound with 
an average of 25 percent or more ash content; or used crankcase oil or 
other used petroleum products.97

    \97\Some Anthracite and bituminous coal fines, when dried and 
where transportation distances are short, have a high Btu content 
and commercial value. Some public utilities and various other 
entities use anthracite silt ponds as a source of fuel. See 
Electrodyne. Form 423 data for 1992 suggest that electric utilities 
purchase subbituminous coal with a heat content of 9,500 Btu per 
pound and an ash content of more than 25 percent.
    Used crankcase oil is currently reprocessed for use as an 
industrial boiler fuel, in asphalt production and cement kilns. It 
is also refined for use in lubricants and for reuse as motor oil.
    The Commission lacks sufficient information to support a generic 
finding that hot gases, such as oxygen furnace off-gas and hot blast 
furnace air, have no commercial value.
---------------------------------------------------------------------------

    In this proceeding, the Commission does not intend to make generic 
rulings on specific materials that it has not previously considered. 
With respect to materials which the Commission has not listed as 
``waste,'' an applicant is always free to submit a showing that in a 
particular case the material has little or no current commercial value 
and would not exist in the absence of the QF industry.
    Finally, in light of the Commission's treatment of waste natural 
gas for cogeneration purposes,98 the final rule will provide that 
a cogeneration facility may use a waste that meets the definition of 
Sec. 292.202(b) as an energy input without considering the waste fuel's 
energy input to the cogeneration facility in computing its efficiency 
value under Sec. 292.205.

    \98\Red Top Cogeneration Project, L.P., 62 FERC 61,205, reh'g 
denied, 65 FERC 61,044 (1993).
---------------------------------------------------------------------------

    The Commission agrees with Anthracite IPPs' suggestions that any 
coal source not listed as a waste in the Commission's regulations may 
qualify as waste upon a showing that it has little or no commercial 
value and that all references to Btu or ash content refer to average 
values.
    The final rule revises and clarifies Secs. 292.202(b) and 292.205 
accordingly.

G. Part 294--Procedures for Shortages of Electric Energy and Capacity 
Under Section 206 of Public Utilities Regulatory Policies Act

    In the NOPR, the Commission proposed to modify Sec. 294.101(b) to 
provide that a public utility need not file with the Commission a 
contingency plan for accommodating shortages of electric energy or 
capacity affecting its firm power wholesale customers, or modify such a 
contingency plan already on file with the Commission, if the public 
utility includes certain provisions in the appropriate wholesale rate 
schedule. The Commission also proposed to modify Sec. 294.101 by adding 
a new paragraph (f), which would provide that, if a public utility 
includes in its rate schedule provisions that it will report 
anticipated shortages of electric energy or capacity to appropriate 
state regulators and to its wholesale customers, then the public 
utility need only report to the Commission the nature and projected 
duration of the anticipated capacity or energy supply shortage and 
furnish a list of the firm power or wholesale supply customers likely 
to be affected by the shortage.
    EEI, NEP and Southern Companies support the proposed revisions to 
the Commission's reporting requirements. Baltimore Gas & Electric asks 
the Commission to eliminate the requirement to report to the Commission 
anticipated shortages of electric energy and/or capacity for those 
public utilities that file an Integrated Resource Plan or least-cost 
plan containing the required information with their State regulatory 
authorities.
    The Commission declines to adopt Baltimore Gas & Electric's 
suggestion. As the Commission noted in the NOPR, section 202(g) of the 
FPA requires that public utilities file contingency plans for shortages 
with the Commission as well as with any appropriate state regulatory 
authority. To satisfy section 202(g), it is not enough for public 
utilities to file contingency plans with state regulatory authorities 
only; they must also file with this Commission contingency plans that 
affect wholesale customers.
    The proposed rule simply gives a public utility the option of not 
separately reporting its contingency plans if it already includes 
certain provisions in its wholesale rate schedules. Otherwise, the 
public utility must file a brief statement, summarizing the public 
utility's contingency plans. If a public utility does not avail itself 
of the new rate schedule option, it will merely have to summarize how, 
under [[Page 4851]] the plan that it files with the state, it will 
treat its wholesale customers in the event of a shortage of electric 
energy. The Commission does not consider this requirement burdensome, 
and the requirement will satisfy the Commission's obligation to ensure 
that a public utility will treat its wholesale customers in a fair and 
non-discriminatory manner in the event of a shortage of electric 
energy. Accordingly, the Commission adopts the changes to part 294 as 
proposed in the NOPR.

H. Part 382--Annual Charges

    The proposed rule would modify Secs. 382.102 and 382.201, which 
pertain to the requirement that public utilities report total annual 
adjusted sales for resale megawatt-hours and total annual coordination 
sales megawatt-hours for the purposes of computing annual charges. 
Under the proposed rule, public utilities that are exempt from filing 
Form 1 would be subject to the annual charge regulations and would be 
assessed annual charges.99 The proposed rule also would change 
definitions in the annual charge regulations to allow for calculation 
of annual charges consistent with the classification of transactions 
volumes as reported on Form 1. The proposed rule would also revise the 
regulations to state how the Commission proposes to calculate annual 
charges.

    \99\The Commission has determined that the annual charge 
obligation also applies to all public utility power marketers. 
Morgan Stanley Capital Group, Inc., 69 FERC 61,175 (1994), reh'g 
pending.
---------------------------------------------------------------------------

    Comments: EEI requests a fuller explanation of the Commission's 
proposed changes in the calculation of annual charges and of how those 
contemplated changes will interact with the elimination of certain 
filing fees proposed in Docket No. RM92-17-000.100 EEI also 
recommends that the Commission bill applicants directly for filings 
that are unusually extensive or that require an extraordinary amount of 
the Commission's time and effort to process.

    \100\Subsequent to the filing of EEI's comments, the Commission 
issued a final rule in Docket No. RM92-17-000 revising its filing 
fee structure. See Elimination of Filing Fees, Order No. 548, 58 FR 
2968 (Jan. 7, 1993), III FERC Stats. & Regs. 30,960 (1993).
---------------------------------------------------------------------------

    NEP expresses concern that the proposed change in the formula for 
calculating utilities' annual charges may produce dramatic increases in 
the assessments on individual public utilities. NEP asks the Commission 
to defer adoption of the proposed change in the annual charge formula 
until the utilities have an opportunity to assess the likely effect of 
the change.
    Southern Companies comments that public utilities, whether or not 
they file a Form 1, should pay annual charges.
    Commission's Response: With respect to EEI's comments, the rule 
eliminating certain filing fees does not affect the fact that utilities 
are assessed annual charges. With respect to EEI's and NEP's comments, 
the proposed rule changed some definitions and explained how 
transaction volumes would be reported. However, the proposed rule does 
not change the formula for calculating annual charges. The proposed 
rule is clarifying in nature, linking the reporting of transaction 
volumes to specific statistical classifications on Form 1.
    We will deny NEP's request that we defer adopting the change in the 
annual charge regulations. Public utilities have had approximately two 
years since the issuance of the NOPR to assess the effect of the 
change. Further deferral of action is unwarranted.
    Accordingly, we will adopt the final rule as proposed.

I. Part 385--Rules of Practice and Procedure

    The proposed rule deleted Rule 717, Sec. 385.717, which expired by 
its own terms on May 21, 1986, and deleted cross-references to Rule 717 
contained in other rules. EEI supports the deletion of Rule 717, and 
there were no comments opposing the deletion of Rule 717. Accordingly, 
we will adopt the final rule as proposed.

IV. Environmental Statement

    Commission regulations require that an environmental assessment or 
an environmental impact statement be prepared for any Commission action 
that may have a significant adverse effect on the human 
environment.101 The Commission has categorically excluded certain 
actions from this requirement as not having a significant effect on the 
human environment.102 No environmental consideration is necessary 
for the promulgation of a rule that is clarifying, corrective, or 
procedural or that does not substantially change the effect of 
legislation or regulations being amended or applies to accounting 
orders, the establishment of just and reasonable rates, the issuance 
and purchase of corporate securities or corporate regulation.103 
The final rule is clarifying and procedural in nature. It merely makes 
clerical and clarifying changes and deletes reporting requirements and 
regulations that the Commission has decided are no longer necessary or 
that refer only to: (a) The establishment of just and reasonable rates; 
or (b) the issuance and purchase of corporate securities.

    \101\Regulations Implementing National Environmental Policy Act, 
52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs., Regulations 
Preambles 1987-1990, 30,783 (1987).
    \102\18 CFR 380.4.
    \103\18 CFR 380.4(a)(2)(ii), 380.4(a)(15)-(16).
---------------------------------------------------------------------------

    Section 201 of PURPA includes ``waste'' as an allowable primary 
energy source for qualifying small power production facilities. To the 
extent the Commission is revising the definition of ``waste,'' 
incorporating an illustrative list of waste energy sources, this action 
merely codifies current Commission practice; it does not substantially 
change the effect of the underlying legislation.
    Accordingly, neither an environmental assessment nor an 
environmental impact statement is necessary.

V. Regulatory Flexibility Certification

    The Regulatory Flexibility Act104 requires rulemakings to 
either contain a description and analysis of the impact the proposed 
rule will have on small entities or to certify that the rule will not 
have a substantial economic impact on a substantial number of small 
entities. The final rule removes unnecessary and obsolete regulations. 
The only additional reporting requirements that the Commission is 
adopting will serve to reduce discovery burdens and improve processing 
of filings. The Commission's newly adopted regulations governing QFs 
merely clarify and codify Commission precedent. Finally, since the 
final rule is designed to reduce regulatory burdens, the Commission 
expects that any impact on small entities affected by the final rule 
will be beneficial. Accordingly, the Commission certifies that these 
proposed rules, if adopted, will not have ``a significant economic 
impact on a substantial number of small entities.''

    \104\5 U.S.C. 601-612.
---------------------------------------------------------------------------

    The Small Business Administration supports the substance of the 
proposed rule and, specifically, agrees that the proposed rule will be 
beneficial to QFs. However, the Small Business Administration maintains 
that the Commission should perform a regulatory flexibility analysis 
under the Regulatory Flexibility Act. According to the Small Business 
Administration, unless the Commission can demonstrate that the 
beneficial effects of the rule will not be significant, the Commission 
must prepare a final regulatory flexibility analysis pursuant to 
section 604 of the Regulatory Flexibility Act. The Small Business 
Administration contends that such an analysis may lead to further 
[[Page 4852]] methods of reducing the regulatory burdens imposed on 
small generators of electricity.
    The Commission finds that the proposed rules will assist small 
businesses in a significant but unquantifiable manner and that further 
regulatory flexibility analysis is unnecessary.

VI. Information Collection Statement

    The Office of Management and Budget's (OMB) regulations105 
require that OMB approve certain information collection requirements 
imposed by an agency. The information collection requirements in the 
final rule are contained in FERC-516 ``Electric Rate Filings'' (1902-
0096), FERC-523 ``Applications to Issue Securities'' (1902-0043), FERC 
525 ``Financial Audits'' (1902-0092), FERC-556 ``Application for 
Certification of Qualifying Status as a Small Power Production Facility 
or Cogeneration Facility'' (1902-0075), FERC-582 ``Oil, Gas and 
Electric Fees and Annual Charges'' (1902-0132) and FERC-585 ``Reports 
on Electric Energy Shortages and Contingency Plans Under PURPA 206'' 
(1902-0138).

    \105\5 CFR 1320.12.
---------------------------------------------------------------------------

    The respondents are: Utilities and persons wishing to issue 
securities, or assume obligations or liabilities as a guarantor, 
endorser, or surety, in accordance with sections 19, 20 and 204 of the 
FPA; to file rate schedules showing all rates and charges pertaining to 
any transmission or sale of electric energy in interstate commerce in 
accordance with sections 15, 19, 20, 205, 206 and 207 of the FPA; 
ensure their financial records comply with accounting, financial 
reporting and other regulations established under mandates of the FPA; 
submit contingency plans with regard to shortages of electric energy or 
capacity: submit payment for charges of costs incurred by the 
Commission to process industry filings; and to obtain Commission 
certification or file a notice of the qualifying status of their small 
power production and cogeneration facilities.
    The Commission uses the data collected in these information 
requirements to carry out its regulatory responsibilities pursuant to 
the Federal Power Act, Public Utility Regulatory Policies Act of 1978, 
and the Interstate Commerce Act. The Commission's Office of Electric 
Power Regulation uses the data for determination of electric rate 
filings submitted by industry, applications for certification of 
qualifying cogeneration and small power production facilities and 
appropriate procedures in the event of shortages of electric energy. 
The Office of Financial Management uses the data for compilation of 
annual charges. The Office of the Chief Accountant uses the data to 
ensure that industry has followed the appropriate procedures for 
issuing securities or assumptions of liabilities obligations and to 
ensure that jurisdictional companies comply with the Uniform System of 
Accounts. Respondents would be public utilities, licensees or QF 
applicants who desire certification of their facility.
    The Commission is submitting to the Office of Management and Budget 
a notification of these changes. Interested persons may obtain 
information on these reporting requirements by contacting the Federal 
Energy Regulatory Commission, 941 North Capitol Street NE., Washington, 
DC 20426 (Attention: Michael Miller, Information Services Division, 
(202) 208-1415). Comments on the requirements of this final rule can 
also be sent to the Office of Information and Regulatory Affairs of OMB 
(Attention: Desk Officer for Federal Energy Regulatory Commission). 
FAX: (202) 395-5167.

List of Subjects

18 CFR Part 2

    Administrative practice and procedure, Electric power, Natural gas 
pipelines, Reporting and recordkeeping requirements.

18 CFR Part 34

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

18 CFR Part 35

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

18 CFR Part 41

    Administrative practice and procedure, Electric utilities, 
Reporting and recordkeeping requirements, Uniform System of Accounts.

18 CFR Part 131

    Electric power.

18 CFR Part 292

    Electric power plants, Electric utilities, Natural gas, Reporting 
and recordkeeping requirements.

18 CFR Part 294

    Electric utilities, Reporting and recordkeeping requirements.

18 CFR Part 382

    Administrative practice and procedure, Electric power, Pipelines, 
Reporting and recordkeeping requirements.

18 CFR Part 385

    Administrative practice and procedure, Electric power, Penalties, 
Reporting and recordkeeping requirements.

    By the Commission.
Lois D. Cashell,
Secretary.

    In consideration of the foregoing, the Commission is amending parts 
2, 34, 35, 41, 131, 292, 294, 382, and 385, Chapter I, Title 18, Code 
of Federal Regulations, as set forth below.

PART 2--GENERAL POLICY AND INTERPRETATIONS

    1. The authority citation for Part 2 is revised to read as follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791a-825r, 
2601-2645; 42 U.S.C. 4321-4361, 7101-7352.

    2. In Sec. 2.4, paragraph (d) is removed and paragraphs (e), (f), 
(g) and (h) are redesignated paragraphs (d), (e), (f) and (g), 
respectively.

PART 34--APPLICATION FOR AUTHORIZATION OF THE ISSUANCE OF 
SECURITIES OR THE ASSUMPTION OF LIABILITIES

    3. The authority citation for Part 34 is revised to read as 
follows:

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

    4. In Sec. 34.1, paragraphs (c)(1) and (c)(2) are revised to read 
as follows:


Sec. 34.1  Applicability; definitions; exemptions in case of certain 
State regulation, certain short-term issuances and certain qualifying 
facilities.

* * * * *
    (c) Exemptions. (1) If an agency of the State in which the utility 
is organized and operating approves or authorizes, in writing, the 
issuance of securities prior to their issuance, the utility is exempt 
from the provisions of sections 19, 20 and 204 of the Federal Power Act 
and the regulations under this part, with respect to such securities.
    (2) This part does not apply to the issue or renewal of, or 
assumption of liability on, a note or draft maturing one year or less 
after the date of such issue, renewal, or assumption of liability, if 
the aggregate of such note or draft and all other then-outstanding 
notes and drafts of a maturity of one year or less on which the utility 
is primarily or [[Page 4853]] secondarily liable, is not more than 5 
percent of the par value of the other then-outstanding securities of 
the utility as of the date of issue or renewal of, or assumption of 
liability on, the note or draft. In the case of securities having no 
par value, the par value for the purpose of this part is the fair 
market value, as of the date of issue or renewal of, or assumption of 
liability on, the note or draft.
* * * * *
    5. Section 34.2 is revised to read as follows:


Sec. 34.2  Placement of securities.

    (a) Method of issuance. Upon obtaining authorization from the 
Commission, utilities may issue securities by either a competitive bid 
or negotiated placement, provided that:
    (1) Competitive bids are obtained from at least two prospective 
dealers, purchasers or underwriters; or
    (2) Negotiated offers are obtained from at least three prospective 
dealers, purchasers or underwriters; and
    (3) The utility:
    (i) Accepts the bid or offer that provides the utility with the 
lowest cost of money for securities with fixed or variable interest or 
dividend rates, or
    (ii) Accepts the bid or offer that provides the utility with the 
greatest net proceeds for securities with no specified interest or 
dividend rates, or
    (iii) The utility has filed for and obtained authorization from the 
Commission to accept bids or offers other than those specified in 
paragraphs (a)(3)(i) or (a)(3)(ii) of this section.
    (b) Exemptions. The provisions of paragraph (a) of this section do 
not apply where:
    (1) The securities are to be issued to existing holders of 
securities on a pro rata basis;
    (2) The utility receives an unsolicited offer to purchase the 
securities;
    (3) The securities have a maturity of one year or less; or
    (4) The securities are to be issued in support of or to guarantee 
securities issued by governmental or quasi-governmental bodies for the 
benefit of the utility.
    (c) Prohibitions. No securities will be placed with any person who:
    (1) Has performed any service or accepted any fee or compensation 
with respect to the proposed issuance of securities prior to submission 
of bids or entry into negotiations for placement of such securities; or
    (2) Would be in violation of section 305(a) of the Federal Power 
Act with respect to the issuance.
    6. In Sec. 34.3, the heading and introductory text are revised, the 
word ``and'' is added at the end of paragraph (e)(5), the phrase ``; 
and'' is removed at the end of paragraph (e)(6), and replaced by a 
period, paragraphs (e)(7), (f) and (g) are removed and paragraphs (h), 
(i), (j), (k), (l), (m) and (n) are redesignated as paragraphs (f), 
(g), (h), (i), (j), (k) and (l), respectively to read as follows:


Sec. 34.3  Contents of application for issuance of securities.

    Each application to the Commission for authority to issue 
securities shall contain the information specified in this section. In 
lieu of filing the information required in paragraphs (e), (i) and (j) 
of this section, a specific reference may be made to the portion of the 
registration statement filed under Sec. 34.4(f), which includes the 
information required in these paragraphs.
* * * * *
    7. In Sec. 34.4, paragraph (a) is revised, paragraphs (c), (g) and 
(h) are removed, paragraphs (d) and (e) are redesignated as paragraphs 
(c) and (d), respectively, and revised, and a new paragraph (e) is 
added to read as follows:


Sec. 34.4  Required exhibits.

    (a) Exhibit A. The applicant must file the statement of corporate 
purposes from its articles of incorporation.
* * * * *
    (c) Exhibit C. The Balance Sheet and attached notes for the most 
recent 12-month period for which financial statements have been 
published, provided that the 12-month period ended no more than 4 
months prior to the date of the filing of the application, on both an 
actual basis and a pro forma basis in the form prescribed for the 
``Comparative Balance Sheet'' of FERC Form No. 1, ``Annual Report for 
major electric utilities, licensees and others.'' Each adjustment made 
in determining the pro forma basis must be clearly identified.
    (d) Exhibit D. The Income Statement and attached notes for the most 
recent 12-month period for which financial statements have been 
published, provided that the 12-month period ended no more than 4 
months prior to the date of the filing of the application, on both an 
actual basis and a pro forma basis in the form prescribed for the 
``Statement of Income for the Year'' of FERC Form No. 1, ``Annual 
Report for major electric utilities, licensees and others.'' Each 
adjustment made in determining the pro forma basis must be clearly 
identified.
    (e) Exhibit E. A Statement of Cash Flows and Computation of 
Interest Coverage on an actual basis and a pro forma basis for the most 
recent 12-month period for which financial statements have been 
published, provided that the 12-month period ended no more than 4 
months prior to the date of the filing of the application. The 
Statement of Cash Flows must be in the form prescribed for the 
``Statement of Cash Flows'' of the FERC Form No. 1, Annual Report for 
major electric utilities, licensees and others,'' followed by a 
computation of interest coverage, in the form of the following 
worksheet:

------------------------------------------------------------------------
                                                                  OMB   
                                                                control 
                                                     Actual    No. 1902-
  Federal Energy Regulatory Commission worksheet    for the    0043, pro
       for computation of interest coverage           year     forma for
                                                   ended mm-   the year 
                                                     dd-yy     ended mm-
                                                                 dd-yy  
------------------------------------------------------------------------
Net income                                                              
Add: Interest on Long-Term Debt, Interest on                            
 Short-Term Debt, Other Interest Expense, Total                         
 Interest Expense                                                       
  Federal and State Income Taxes                                        
Income Before Interest and Income Taxes                                 
                                                                        
         Computation of Interest Coverage                               
                                                                        
Total Interest Expense  Income Before                           
 Interest and Income Taxes = Interest Coverage                          
------------------------------------------------------------------------

* * * * *
    8. Section 34.10 is revised to read as follows:


Sec. 34.10  Reports.

    The applicant must file reports under Sec. 131.43 and Sec. 131.50 
of this chapter no later than 30 days after the sale or placement of 
long-term debt or equity securities or the entry into guarantees or 
assumptions of liabilities pursuant to authority granted under this 
part.

PART 35--FILING OF RATE SCHEDULES

    9. 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.

    10. In Sec. 35.13, paragraph (a)(2)(i) is revised, paragraphs 
(a)(2)(ii) and (a)(2)(iii) are redesignated as paragraphs (a)(2)(iii) 
and (a)(2)(iv) and newly designated (a)(2)(iii) is revised, a new 
paragraph (a)(2)(ii) is added, paragraph (d)(1) introductory text is 
revised and paragraph (h)(24) is amended to add a 
[[Page 4854]] sentence at the end of the paragraph, to read as follows:


Sec. 35.13  Filing of changes in rate schedules.

    (a) General rule. * * *
    (2) Abbreviated filing requirements--(i) For certain small rate 
increases. Any utility that files a rate increase for power or 
transmission services not covered by paragraph (a)(2)(ii) of this 
section may elect to file under this paragraph instead of paragraph 
(a)(1) of this section, if the proposed increase for the Test Period, 
as defined in paragraph (a)(2)(i)(A) of this section, is equal to or 
less than $200,000, regardless of customer consent, or equal to or less 
than $1 million if all wholesale customers that belong to the affected 
rate class consent.
    (A) Definition: The Test Period, for purposes of paragraph 
(a)(2)(i) of this section, means the most recent calendar year for 
which actual data are available, the last day of which is no more than 
fifteen months before the date of tender for filing under Sec. 35.1 of 
the notice of rate schedule.
    (B) Any utility that elects to file under this subparagraph must 
file the following information, conforming its submission to any rule 
of general applicability and to any Commission order specifically 
applicable to such utility:
    (1) A complete cost of service analysis for the Test Period, 
consistent with the requirements of paragraph (h)(36), Statement BK, of 
this section.
    (2) A complete derivation and explanation of all allocation factors 
and special assignments, consistent with the information required in 
Sec. 35.12(b)(5).
    (3) A complete calculation of revenues for the Test Period and for 
the first 12 months after the proposed effective date, consistent with 
the requirements of paragraph (c)(1) of this section.
    (4) If the proposed rates contain a fuel cost or purchased economic 
power adjustment clause, as defined in Sec. 35.14, the company must 
provide the derivation of its base cost of fuel (Fb) and its monthly 
fuel factors (Fm) for the Test Period and the resulting fuel adjustment 
clause revenues. If any pro forma adjustments affect the fuel clause in 
any way, the company must show the impact on Fm, kWh sales in the base 
period (Sm), Fb and kWh sales in the current period (Sb), as well as on 
fuel adjustment clause revenues.
    (5) Rate design calculations and narrative consistent with the 
information required in paragraph (h)(37) of this section and in 
Sec. 35.12(b)(5).
    (6) The information required in paragraphs (b), (c)(2) and (c)(3) 
of this section and in Sec. 35.12(b)(2).
    (C) Data shall be reconciled with the utility's most recent FERC 
Form 1. If the utility has not yet submitted Form 1 for the Test 
Period, the utility shall submit the relevant Form 1 pages in draft 
form.
    (D) The utility may make pro forma adjustments for post-Test Period 
changes that occur before the proposed effective date and that are 
known and measurable at the time of filing. The utility shall provide a 
narrative statement explaining all pro forma adjustments.
    (E) If the utility models its filing in whole or in part on retail 
rate decisions or settlements, the utility must provide detailed 
calculations and a narrative statement showing how all retail rate 
treatments are factored into the cost of service.
    (F) If the Commission sets the filing for hearing, the Commission 
will allow the company a specific time period in which to file 
testimony, exhibits, and supplemental workpapers to complete its case-
in-chief. While not required under this subpart, a utility may elect to 
submit Statements AA through BM for the Test Period in accord with the 
requirements of paragraphs (d), (g) and (h) of this section.
    (ii) Rate increases for service of short duration or for 
interchange or coordination service. Any utility that files a rate 
increase for any service of short duration and of a type for which the 
need and usage cannot be reasonably forecasted (such as emergency or 
short-term power), or for service that is an integral part of a 
coordination and interchange arrangement, may submit with its filing 
only the information required in paragraphs (b), (c) and (h)(37) of 
this section and in Sec. 35.12(b)(2) and (b)(5), conforming its 
submission to any rule of general applicability and to any Commission 
order specifically applicable to such utility.
    (iii) For rate schedule changes other than rate increases. Any 
utility that files a rate schedule change that does not provide for a 
rate increase or that provides for a rate increase that is based solely 
on a change in delivery points, a change in delivery voltage, or a 
similar change in service, must submit with its filing only the 
information required in paragraphs (b) and (c) of this section.
* * * * *
    (d) Cost of service information--(1) Filing of Period I data. Any 
utility that is required under paragraph (a)(1) of this section to 
submit cost of service information, or that is subject to the 
exceptions in paragraphs (a)(2)(i) and (a)(2)(ii) of this section but 
elects to file such information, shall submit Statements AA through BM 
under paragraph (h) of this section using:
* * * * *
    (h) Cost of service statements. * * *
    (24) Statement AX--Other recent and pending rate changes. * * * 
Notwithstanding any other provision of this section, Statement AX is 
required to be filed only if the proposed rate design tracks retail 
rates.
* * * * *

PART 41--ACCOUNTS, RECORDS AND MEMORANDA

    11. The authority citation for Part 41 is revised to read as 
follows:

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

    12. Section 41.3 is amended by adding a sentence at the end of the 
section to read as follows:


Sec. 41.3  Facts and argument.

    * * * If a person consents to the matter being handled under the 
shortened procedure, that person has waived any right to subsequently 
request a hearing under Sec. 41.7 and may not later request such a 
hearing.
    13. Section 41.7 is revised to read as follows:


Sec. 41.7  Assignment for oral hearing.

    Except when there are no material facts in dispute, when a person 
does not consent to the shortened procedure, the Commission will assign 
the proceeding for hearing as provided by subpart E of part 385 of this 
chapter. Notwithstanding a person's not giving consent to the shortened 
procedure, and instead seeking assignment for hearing as provided for 
by subpart E of part 385 of this chapter, the Commission will not 
assign the proceeding for a hearing when no material facts are in 
dispute. The Commission may also, in its discretion, at any stage in 
the proceeding, set the proceeding for hearing.

PART 131--FORMS

    14. The authority section for Part 131 is revised to read as 
follows:

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

    15. Subchapter D is amended by revising the heading of the 
subchapter, by revising Sec. 131.50 and by adding Sec. 131.80, to read 
as follows: [[Page 4855]] 
Subchapter D--Approved Forms, Federal Power Act and Public Utility 
Regulatory Policies Act of 1978

PART 131--FORMS

* * * * *


Sec. 131.50  Reports of proposals received.

    No later than 30 days after the sale or placement of long-term debt 
or equity securities or the entry into guarantees or assumptions of 
liabilities (collectively referred to as ``placement'') pursuant to 
authority granted under Part 34 of this chapter, the applicant must 
file a summary of each proposal or proposals received for the 
placement. The proposal or proposals accepted must be indicated. The 
information to be filed must include:
    (a) Par or stated value of securities;
    (b) Number of units (shares of stock, number of bonds) issued;
    (c) Total dollar value of the issue;
    (d) Life of the securities, including maximum life and average life 
of sinking fund issue;
    (e) Dividend or interest rate;
    (f) Call provisions;
    (g) Sinking fund provisions;
    (h) Offering price;
    (i) Discount or premium;
    (j) Commission or underwriter's spread;
    (k) Net proceeds to company for each unit of security and for the 
total issue;
    (l) Net cost to the company for securities with a stated interest 
or dividend rate.


Sec. 131.80  FERC Form No. 556, Certification of qualifying facility 
status for an existing or a proposed small power production or 
cogeneration facility.

(See Sec. 292.207 of this chapter.)
FERC FORM 556, OMB No. 1902-0075 Expires ________

Certification of Qualifying Facility Status for an Existing or a 
Proposed Small Power Production or Cogeneration Facility

(To be completed for the purpose of demonstrating up-to-date 
conformance with the qualification criteria of Section 292.203(a)(1) or 
Section 292.203(b), based on actual or planned operating experience)

    General instructions: Part A of the form should be completed by all 
small power producers or cogenerators. Part B applies to small power 
production facilities. Part C applies to cogeneration facilities. All 
references to sections are with regard to Part 292 of Title 18 of the 
Code of Federal Regulations, unless otherwise indicated.

Part A--General Information To Be Submitted by all Applicants

    1a. Full name:
    Docket Number assigned to the immediately preceding submittal filed 
with the Commission in connection with the instant facility, if any: 
QF______-______-______.
    Purpose of instant filing (self-certification or self-
recertification (Section 292.207(a)(1)), or application for Commission 
certification or recertification (Sections 292.207 (b) and (d)(2))):
    1b. Full address of applicant:
    1c. Indicate the owner(s) of the facility (including the percentage 
of ownership held by any electric utility or electric utility holding 
company, or by any persons owned by either) and the operator of the 
facility. Note that any combination of direct and/or indirect electric 
utility or electric utility holding company ownership cannot exceed 50 
percent of the total ownership (Sections 292.206 and 292.202(n)). For 
non-electric utility owners, identify the upstream owners, including 
owners holding 10 percent or more of the equity interest of such non-
electric utility owners. Additionally, state whether or not any of the 
non-electric utility owners or their upstream owners are engaged in the 
generation or sale of electric power, or have any ownership or 
operating interest in any electric facilities other than qualifying 
facilities. In order to facilitate review of the application, the 
applicant may also provide an ownership chart identifying the upstream 
ownership of the facility. Such chart should indicate ownership 
percentages where appropriate.
    1d. Signature of authorized individual evidencing accuracy and 
authenticity of information provided by applicant:
    2. Person to whom communications regarding the filed information 
may be addressed:

Name:
Title:
Telephone number:
Mailing address:

    3a. Location of facility to be certified:

State:
County:
City or town:
Street address (if known):

    3b. Indicate the electric utilities that are contemplated to 
transact with the qualifying facility (if known) and describe the 
services those electric utilities are expected to provide: utilities 
interconnecting with the facility and/or providing wheeling service 
(Section 292.303(c) and (d)): utilities purchasing the useful electric 
power output (Sections 292.101(b)(2), 292.202(g) and 292.303(a)): 
utilities providing supplementary power, backup power, maintenance 
power, and/or interruptible power service (Sections 292.101(b) (3) and 
(8), 292.303(b) and 292.305(b)):
    4a. Describe the principal components of the facility including 
boilers, prime movers and electric generators, and explain their 
operation. Include transmission lines, transformers and switchyard 
equipment, if included as part of the facility.
    4b. Indicate the maximum gross and maximum net electric power 
production capacity of the facility at the point(s) of delivery and 
show the derivation.
    4c. Indicate the actual or expected installation and operation 
dates of the facility, or the actual or expected date of completion of 
the reported modification to the facility:
    4d. Describe the primary energy input (e.g., hydro, coal, oil 
(Section 292.202(l)), natural gas (Section 292.202(k)), solar, 
geothermal, wind, waste, biomass (Section 292.202(a)), or other). For a 
waste energy input that does not fall within one of the categories on 
the Commission's list of previously approved wastes, demonstrate that 
such energy input has little or no current commercial value and that it 
exists in the absence of the qualifying facility industry (Section 
292.202(b)).
    5. Provide the average annual hourly energy input in terms of Btu 
for the following fossil fuel energy inputs, and provide the related 
percentage of the total average annual hourly energy input to the 
facility (Section 292.202(j)). For any oil or natural gas fuel, use 
lower heating value (Section 292.202(m)):

Natural gas:
Oil:
Coal (applicable only to a small power production facility):

    6. Discuss any particular characteristic of the facility which the 
cogenerator or small power producer believes might bear on its 
qualifying status.

Part B--Description of the Small Power Production Facility

    7. Describe how fossil fuel use will not exceed 25 percent of the 
total annual energy input limit (Sections 292.202(j) and 292.204(b)). 
Also, describe how the use of fossil fuel will be limited to the 
following purposes to conform to Federal Power Act Section 3(17)(B): 
Ignition, start-up, testing, flame stabilization, control use, and 
minimal amounts of fuel required to alleviate or prevent unanticipated 
equipment outages and emergencies directly affecting the 
public. [[Page 4856]] 
    8. If the facility reported herein is not an eligible solar, wind, 
waste or geothermal facility, and if any other non-eligible facility 
located within one mile of the instant facility is owned by any of the 
entities (or their affiliates) reported in Part A at item 1c. above and 
uses the same primary energy input, provide the following information 
about the other facility for the purpose of demonstrating that the 
total of the power production capacities of these facilities does not 
exceed 80 MW (Section 292.204(a)):

Facility name, if any (as reported to the Commission):
Commission Docket Number: QF______-______-______
Name of common owner:
Common primary energy source used as energy input:
Power production capacity (MW):

    An eligible solar, wind, waste or geothermal facility, as defined 
in Section 3(17)(E) of the Federal Power Act, is a small power 
production facility that produces electric energy solely by the use, as 
a primary energy input, of solar, wind, waste or geothermal resources, 
for which either an application for Commission certification of 
qualifying status (Section 292.207(b)) or a notice of self-
certification of qualifying status (Section 292.207(a)) was submitted 
to the Commission not later than December 31, 1994, and for which 
construction of such facility commences not later than December 31, 
1999, or if not, reasonable diligence is exercised toward the 
completion of such facility, taking into account all factors relevant 
to construction of the facility.

Part C--Description of the Cogeneration Facility

    9. Describe the cogeneration system (Sections 292.202(c) and 
292.203(b)), and state whether the facility is a topping-cycle (Section 
292.202(d)) or bottoming-cycle (Section 292.202(e)) cogeneration 
facility.
    10. To demonstrate the sequentiality of the cogeneration process 
(Section 292.202(s)) and to support compliance with other requirements 
such as the operating and efficiency standards (item 11 below), provide 
a mass and heat balance (cycle) diagram depicting average annual hourly 
operating conditions. Also, provide:
    Using lower heating value (Section 292.202(m)), all fuel flow 
inputs in Btu/hr., separately indicating fossil fuel inputs for any 
supplementary firing in Btu/hr. (Section 292.202(f)):
    Average net electric output (kW or MW) (Section 292.202(g));
    Average net mechanical output in horsepower (Section 292.202(g));
    Number of hours of operation used to determine the average annual 
hourly facility inputs and outputs; and
    Working fluid (e.g., steam) flow conditions at input and output of 
prime mover(s) and at delivery to and return from each useful thermal 
application:

Flow rates (lbs./hr.):
Temperature (deg.F):
Pressure (psia):
Enthalpy (Btu/lb.):

    11. Compute the operating value (applicable to a topping-cycle 
facility under Section 292.205(a)(1)) and the efficiency value 
(Sections 292.205(a)(2) and Section 292.205(b)), based on the 
information provided in and corresponding to item 10, as follows:

Pt=Average annual hourly useful thermal energy output
Pe=Average annual hourly electrical output
Pm=Average annual hourly mechanical output
Pi=Average annual hourly energy input (natural gas or oil)
Ps=Average annual hourly energy input for supplementary firing 
(natural gas or oil)
Operating standard=5% or more
 Operating value=Pt/(Pt+Pe+Pm)

    Efficiency standard applicable to natural gas and oil fuel used in 
a topping-cycle facility:

=45% or more when operating value is less than 15%, or 42.5% or more 
when operating value is equal to or greater than 15%.
Efficiency value=(Pe+Pm+0.5Pt)/(Pi+Ps)

    Efficiency standard applicable to natural gas and oil fuel used for 
supplementary firing component of a bottoming-cycle facility:

=45% or more
Efficiency value=(Pe+Pm)/Ps

For Topping-Cycle Cogeneration Facilities

    12. Identify the entity (i.e., thermal host) which will purchase 
the useful thermal energy output from the facility (Section 
292.202(h)). Indicate whether the entity uses such output for the 
purpose of space and water heating, space cooling, and/or process use.
    13. In connection with the requirement that the thermal energy 
output be useful (Section 292.202(h)):
    For process uses by commercial or industrial host(s), describe each 
process (or group of similar processes using the same quality of steam) 
and provide the average annual hourly thermal energy made available to 
the process, less process return. For a complex system, where the 
primary steam header at the host-side is divided into various sub-uses, 
each having different pressure and temperature characteristics, 
describe the processes associated with each sub-use and provide the 
average annual hourly thermal energy delivered to each sub-use, less 
process return from such sub-use. Provide a diagram showing the main 
steam header and the sub-uses with other relevant information such as 
the average header pressure (psia), the temperature (deg.F), the 
enthalpy (Btu/lb.), and the flow (lb./hr.), both in and out of each 
sub-use. For space and water heating, describe the type of heating 
involved (e.g., office space heating, domestic water heating) and 
provide the average annual hourly thermal energy delivered and used for 
such purpose. For space cooling, describe the type of cooling involved 
(e.g., office space cooling) and provide the average annual hourly 
thermal energy used by the chiller.

For Bottoming-Cycle Facilities

    14. Provide a description of the commercial or industrial process 
or other thermal application to which the energy input to the system is 
first applied and from which the reject heat is then used for electric 
power production.

PART 292--REGULATIONS UNDER SECTIONS 201 AND 210 OF THE PUBLIC 
UTILITY REGULATORY POLICIES ACT OF 1978 WITH REGARD TO SMALL POWER 
PRODUCTION AND COGENERATION

    16. The authority citation for Part 292 is revised to read as 
follows:

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

    17. In Sec. 292.101, paragraph (b)(1) is revised to read as 
follows:


Sec. 292.101  Definitions.

* * * * *
    (b) Definitions. * * *
    (1) Qualifying facility means a cogeneration facility or a small 
power production facility that is a qualifying facility under Subpart B 
of this part.
    (i) A qualifying facility may include transmission lines and other 
equipment used for interconnection purposes (including transformers and 
switchyard equipment), if:
    (A) Such lines and equipment are used to supply power output to 
directly and indirectly interconnected electric utilities, and to end 
users, including thermal hosts, in accordance with state law; or
    (B) Such lines and equipment are used to transmit supplementary, 
standby, maintenance and backup power to the qualifying facility, 
[[Page 4857]] including its thermal host meeting the criteria set forth 
in Union Carbide Corporation, 48 FERC 61,130, reh'g denied, 49 FERC 
61,209 (1989), aff'd sub nom., Gulf States Utilities Company v. FERC, 
922 F.2d 873 (D.C. Cir. 1991); or
    (C) If such lines and equipment are used to transmit power from 
other qualifying facilities or to transmit standby, maintenance, 
supplementary and backup power to other qualifying facilities.
    (ii) The construction and ownership of such lines and equipment 
shall be subject to any applicable Federal, state, and local siting and 
environmental requirements.
* * * * *
    18. In Sec. 292.202, paragraphs (b), (d), (e) and (h) are revised 
and paragraph (s) is added to read as follows:


Sec. 292.202  Definitions.

* * * * *
    (b) Waste means an energy input that is listed below in this 
subsection, or any energy input that has little or no current 
commercial value and exists in the absence of the qualifying facility 
industry. Should a waste energy input acquire commercial value after a 
facility is qualified by way of Commission certification pursuant to 
Sec. 292.207(b), or self-certification pursuant to Sec. 292.207(a), the 
facility will not lose its qualifying status for that reason. Waste 
includes, but is not limited to, the following materials that the 
Commission previously has approved as waste:
    (1) Anthracite culm produced prior to July 23, 1985;
    (2) Anthracite refuse that has an average heat content of 6,000 Btu 
or less per pound and has an average ash content of 45 percent or more;
    (3) Bituminous coal refuse that has an average heat content of 
9,500 Btu per pound or less and has an average ash content of 25 
percent or more;
    (4) Top or bottom subbituminous coal produced on Federal lands or 
on Indian lands that has been determined to be waste by the United 
States Department of the Interior's Bureau of Land Management (BLM) or 
that is located on non-Federal or non-Indian lands outside of BLM's 
jurisdiction, provided that the applicant shows that the latter coal is 
an extension of that determined by BLM to be waste.
    (5) Coal refuse produced on Federal lands or on Indian lands that 
has been determined to be waste by the BLM or that is located on non-
Federal or non-Indian lands outside of BLM's jurisdiction, provided 
that applicant shows that the latter is an extension of that determined 
by BLM to be waste.
    (6) Lignite produced in association with the production of montan 
wax and lignite that becomes exposed as a result of such a mining 
operation;
    (7) Gaseous fuels, except:
    (i) Synthetic gas from coal; and
    (ii) Natural gas from gas and oil wells unless the natural gas 
meets the requirements of Sec. 2.400 of this chapter;
    (8) Petroleum coke;
    (9) Materials that a government agency has certified for disposal 
by combustion;
    (10) Residual heat;
    (11) Heat from exothermic reactions;
    (12) Used rubber tires;
    (13) Plastic materials; and
    (14) Refinery off-gas.
* * * * *
    (d) Topping-cycle cogeneration facility means a cogeneration 
facility in which the energy input to the facility is first used to 
produce useful power output, and at least some of the reject heat from 
the power production process is then used to provide useful thermal 
energy;
    (e) Bottoming-cycle cogeneration facility means a cogeneration 
facility in which the energy input to the system is first applied to a 
useful thermal energy application or process, and at least some of the 
reject heat emerging from the application or process is then used for 
power production;
* * * * *
    (h) Useful thermal energy output of a topping-cycle cogeneration 
facility means the thermal energy:
    (1) That is made available to an industrial or commercial process 
(net of any heat contained in condensate return and/or makeup water);
    (2) That is used in a heating application (e.g., space heating, 
domestic hot water heating); or
    (3) That is used in a space cooling application (i.e., thermal 
energy used by an absorption chiller).
* * * * *
    (s) Sequential use of energy means:
    (1) For a topping-cycle cogeneration facility, the use of reject 
heat from a power production process in sufficient amounts in a thermal 
application or process to conform to the requirements of the operating 
standard; or
    (2) For a bottoming-cycle cogeneration facility, the use of reject 
heat from a thermal application or process, at least some of which is 
then used for power production.
    19. In Sec. 292.204, paragraphs (a)(1) and (b)(2) are revised to 
read as follows:


Sec. 292.204  Criteria for qualifying small power production 
facilities.

    (a) Size of the facility.--(1) Maximum size. There is no size 
limitation for an eligible solar, wind, waste or facility, as defined 
by section 3(17)(E) of the Federal Power Act. For a non-eligible 
facility, the power production capacity for which qualification is 
sought, together with the power production capacity of any other non-
eligible small power production facilities that use the same energy 
resource, are owned by the same person(s) or its affiliates, and are 
located at the same site, may not exceed 80 megawatts.
* * * * *
    (b) Fuel use. * * *
    (2) Use of oil, natural gas and coal by a facility, under section 
3(17)(B) of the Federal Power Act, is limited to the minimum amounts of 
fuel required for ignition, startup, testing, flame stabilization, and 
control uses, and the minimum amounts of fuel required to alleviate or 
prevent unanticipated equipment outages, and emergencies, directly 
affecting the public health, safety, or welfare, which would result 
from electric power outages. Such fuel use may not, in the aggregate, 
exceed 25 percent of the total energy input of the facility during the 
12-month period beginning with the date the facility first produces 
electric energy and any calendar year subsequent to the year in which 
the facility first produces electric energy.
    20. In Sec. 292.205, paragraphs (a)(1), (a)(2)(i) introductory 
text, and (b)(1) are revised to read as follows:


Sec. 292.205  Criteria for qualifying cogeneration facilities.

    (a) Operating and efficiency standards for topping-cycle 
facilities.
    (1) Operating standard. For any topping-cycle cogeneration 
facility, the useful thermal energy output of the facility must be no 
less than 5 percent of the total energy output during the 12-month 
period beginning with the date the facility first produces electric 
energy, and any calendar year subsequent to the year in which the 
facility first produces electric energy.
    (2) Efficiency standard. (i) For any topping-cycle cogeneration 
facility for which any of the energy input is natural gas or oil, and 
the installation of which began on or after March 13, 1980, the useful 
power output of the facility plus one-half the useful thermal energy 
output, during the 12-month period beginning with the date the facility 
first produces electric energy, and any calendar year subsequent to the 
year in which the facility first produces electric energy, must:
* * * * *
    (b) Efficiency standards for bottoming-cycle facilities. (1) For 
any bottoming-cycle cogeneration facility for which [[Page 4858]] any 
of the energy input as supplementary firing is natural gas or oil, and 
the installation of which began on or after March 13, 1980, the useful 
power output of the facility during the 12-month period beginning with 
the date the facility first produces electric energy, and any calendar 
year subsequent to the year in which the facility first produces 
electric energy must be no less than 45 percent of the energy input of 
natural gas and oil for supplementary firing.
* * * * *
    21. In Sec. 292.207, paragraphs (a), (b) and (d) are revised to 
read as follows:


Sec. 292.207  Procedures for obtaining qualifying status.

    (a) Self-certification and pre-authorized Commission 
recertification.--(1) Self-certification. (i) A small power production 
facility or cogeneration facility that meets the applicable criteria 
established in Sec. 292.203 is a qualifying facility.
    (ii) The owner or operator of a facility or its representative 
self-certifying under this section must file with the Commission, and 
concurrently serve on each electric utility with which it expects to 
interconnect, transmit or sell electric energy to or purchase 
supplementary, standby, back-up and maintenance power, and the State 
regulatory authority of each state where the facility and each affected 
utility is located, a notice of self-certification which contains a 
completed Form 556.
    (iii) Subsequent notices of self-recertification for the same 
facility may reference prior notices or prior Commission 
certifications, and need only refer to changes which have occurred with 
respect to the facility since the prior notice or the prior Commission 
certification.
    (iv) Notices of self-certification or self-recertification will not 
be published in the Federal Register.
    (2) Pre-authorized Commission recertification. (i) For purposes of 
paragraph (b) of this section, the following alterations or 
modifications are not considered substantial alterations or 
modifications and will not result in revocation of qualifying status 
previously granted by the Commission pursuant to paragraph (b) of this 
section:
    (A) A change which does not affect the upstream ownership of the 
facility;
    (B) A change in the installation or operation date;
    (C) A change in the manufacturer of the power generation equipment 
selected for the facility's installation when there is no change in 
capacity or operating characteristics;
    (D) A change in the location of a cogeneration facility, or a small 
power production facility, if the new location would not cause the 
facility to violate the 80 MW limitation of Sec. 292.204(a)(1);
    (E) A decrease in the amount of natural gas or oil or any change in 
the amount of other fuel used by a cogeneration facility, provided that 
the efficiency value and the operating value calculation for the 
facility remain at or above the values stated when the certification or 
recertification order was issued;
    (F) A decrease in the amount of fossil fuel used by a small power 
production facility;
    (G) A change in the primary energy source of a small power 
production facility, provided that the facility continues to comply 
with the requirements of Sec. 292.204;
    (H) An additional use of a cogeneration facility's thermal output, 
if the original uses are as stated when the certification order was 
issued;
    (I) An increase in the efficiency value of a cogeneration facility 
or an increase in the operating value of a cogeneration facility 
determined in accordance with Sec. 292.205;
    (J) A decrease in the power production capacity of a small power 
production facility;
    (K) A change in the power production capacity of a cogeneration 
facility if the efficiency value and the operating value calculation 
for the facility remain at or above the values stated when the 
certification or recertification order was issued; or
    (L) A change in the purchaser of the cogeneration facility's 
thermal output, when there is no change in the specified thermal 
application or process.
    (ii) The owner or operator of a qualifying facility that has been 
certified under paragraph (b) of this section must file with the 
Commission notice of each change listed in this subsection, and must 
concurrently serve a copy of such notice on each electric utility with 
which it expects to interconnect, transmit or sell electric energy to, 
or purchase supplementary, standby, back-up and maintenance power, and 
the State regulatory authority of each state where the facility and 
each affected electric utility is located.
    (b) Optional procedure--(1) Application for Commission 
certification. In lieu of the certification procedures in paragraph (a) 
of this section, an owner or operator of a facility or its 
representative may file with the Commission an application for 
Commission certification that the facility is a qualifying facility. 
The application must be accompanied by the fee prescribed by part 381 
of this chapter.
    (2) General contents of application. The application must include a 
completed Form 556.
    (3) Commission action. (i) Within 90 days of the later of the 
filing of an application or the filing of a supplement, amendment or 
other change to the application, the Commission will either: inform the 
applicant that the application is deficient; or issue an order granting 
or denying the application; or toll the time for issuance of an order. 
Any order denying certification shall identify the specific 
requirements which were not met. If the Commission does not act within 
90 days of the date of the latest filing, the application shall be 
deemed to have been granted.
    (ii) For purposes of paragraph (b) of this section, the date an 
application is filed is the date by which the Office of the Secretary 
has received all of the information and the appropriate filing fee 
necessary to comply with the requirements of this Part.
    (4) Notice. (i) Applications for certification filed under 
paragraph (b) of this section must include a copy of a notice of the 
request for certification for publication in the Federal Register. The 
notice must state the applicant's name, the date of the application, a 
description of the facility for which qualification is sought and, if 
known, the names of the electric utilities to which the facility 
expects to interconnect, transmit or sell electric energy, or from 
which the facility expects to purchase supplementary, standby, back-up 
and maintenance power. This description must include:
    (A) A statement indicating whether such facility is a small power 
production facility or a cogeneration facility;
    (B) The primary energy source used or to be used by the facility;
    (C) The power production equipment and capacity of the facility; 
and
    (D) The location of the facility.
    (ii) The notice must be in the following form:

(Name of Applicant)

Docket No. QF-

NOTICE OF APPLICATION FOR COMMISSION CERTIFICATION OF QUALIFYING STATUS 
OF A (SMALL POWER PRODUCTION) (COGENERATION) FACILITY

    On (date application was filed), (name and address of applicant) 
filed with the Federal Energy Regulatory Commission an application 
for certification (or recertification) of a facility as a qualifying 
(small power production) (cogeneration) facility pursuant to 
Sec. 292.207(b) of the [[Page 4859]] Commission's regulations. No 
determination has been made that the submittal constitutes a 
complete filing.

[Description of facility.]

[Names of the electric utilities with which the facility expects to 
interconnect, transmit or sell electric energy to, or purchase 
supplementary, standby, back-up and maintenance power (if known).]

    Any person who wishes to be heard or to object to granting 
qualifying status should file a motion to intervene or protest with 
the Federal Energy Regulatory Commission, 825 North Capitol Street, 
NE., Washington, DC 20426, in accordance with rules 211 and 214 of 
the Commission's Rules of Practice and Procedure. A motion or 
protest must be filed within ______ days after the date of 
publication of this notice and must be served on the applicant. 
Protests will be considered by the Commission in determining the 
appropriate action to be taken but will not serve to make 
protestants parties to the proceeding. A person who wishes to become 
a party must file a motion to intervene. Copies of this application 
are on file with the Commission and are available for public 
inspection.
* * * * *
    (d) Revocation of qualifying status (1)(i) If a qualifying facility 
fails to conform with any material facts or representations presented 
by the cogenerator or small power producer in its submittals to the 
Commission, the notice of self-certification of the qualifying status 
of the facility, pre-authorized Commission re-certification notice, or 
Commission order certifying the qualifying status of the facility may 
no longer be relied upon. At that point, if the facility continues to 
conform to the Commission's qualifying criteria under this part, the 
cogenerator or small power producer may file either a notice of self-
recertification of qualifying status pursuant to the requirements of 
paragraph (a)(1) of this section, a pre-authorized Commission 
recertification notice pursuant to the requirements of paragraph (a)(2) 
of this section, or an application for Commission recertification 
pursuant to the requirements of paragraph (b) of this section, as 
appropriate.
    (ii) The Commission may, on its own motion or on the motion of any 
person, revoke the qualifying status of a facility that has been 
certified under paragraph (b) of this section, if the facility fails to 
conform to any of the Commission's qualifying facility criteria under 
this part.
    (iii) The Commission may revoke the qualifying status of a self-
certified qualifying facility upon the filing of a petition for a 
declaratory order that the self-certified qualifying facility does not 
meet applicable requirements for qualifying facilities.
    (2) Prior to undertaking any substantial alteration or modification 
of a qualifying facility which has been certified under paragraph (b) 
of this section, a small power producer or cogenerator may apply to the 
Commission for a determination that the proposed alteration or 
modification will not result in a revocation of qualifying status. This 
application for Commission recertification of qualifying status should 
be submitted in accordance with paragraph (b) of this section.

PART 294--PROCEDURES FOR SHORTAGES OF ELECTRIC ENERGY AND CAPACITY 
UNDER SECTION 206 OF THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 
1978

    22. The authority citation for Part 294 is revised to read as 
follows:

    Authority: 5 U.S.C. 553; 16 U.S.C. 791a-825r; 42 U.S.C. 7107-
7352.

    23. In Sec. 294.101, paragraphs (b)(5) and (f) are added as 
follows:


Sec. 294.101  Shortages of electric energy and capacity.

* * * * *
    (b) Accommodation of shortages. * * *
    (5) Notwithstanding any other provision of this section, a public 
utility need not file the statement with the Commission if the public 
utility provides in its rate schedules to firm power wholesale 
customers that:
    (i) During electric energy and capacity shortages it will treat 
without undue discrimination or preference, prejudice, or disadvantage 
firm power wholesale customers; and
    (ii) It will report any modifications to its contingency plans for 
accommodating shortages within 15 days to:
    (A) The appropriate State regulatory agency and
    (B) To the affected wholesale customers.
* * * * *
    (f) Report of anticipated shortage. Notwithstanding any other 
provision of this part, if a public utility provides in its rate 
schedule that it will make such reports to the appropriate state 
regulatory agency and to its firm power wholesale requirements 
customers, then it need only report to the Commission the nature and 
projected duration of the anticipated capacity or energy supply 
shortage and supply a list of the firm power wholesale customers 
affected or likely to be affected by the shortage. Upon receiving the 
public utility's report of anticipated shortage of electric energy or 
capacity, the Commission will decide what further reports, if any, to 
require.

PART 382--ANNUAL CHARGES

    24. The authority citation for part 382 is revised to read as 
follows:

    Authority: 5 U.S.C 551-557; 15 U.S.C 717-717w, 3301-3432; 16 
U.S.C. 791a-825r, 2601-2645; 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 
49 App. U.S.C. 1-85.

    25. In Sec. 382.102, paragraphs (h), (i), (j) and (k) are revised, 
paragraphs (l), (m) and (n) are removed, and paragraphs (o), (p), (q), 
(r) and (s) are redesignated (l), (m), (n), (o) and (p), respectively 
to read as follows:


Sec. 382.102  Definitions.

* * * * *
    (h) Long-term firm sales and transmission activities means the 
portion of the Commission's electric regulatory program devoted to the 
regulation of long-term firm sales and transmission.
    (1) Long-term firm sales are the jurisdictional sales of capacity 
and energy under contracts that do not anticipate service 
interruptions, and are of five years or more duration. The capacity and 
energy must be available to a resale customer at all times during the 
period covered by a commitment, even under adverse conditions. This 
includes sales supplying the full requirements or partial requirements 
of a customer, and sales of energy from unit or system capacity of a 
long-term duration (five years or more) under contracts that do not 
anticipate service interruptions when capacity is operationally 
available. These sales are those reported in the FERC Form No. 1 in 
Account 447 as Sales-for-Resale transactions with statistical 
classifications of RQ, LF or LU or sales determined on a basis 
consistent with FERC Form No. 1 reporting for those public utilities 
exempt from Sec. 141.1 of this chapter.
    (2) Long-term firm transmission is jurisdictional transmission of 
capacity and energy under contracts that do not anticipate service 
interruptions, and are of one year or more duration. This transmission 
is that reported in the FERC Form No. 1 in Account 456 as Transmission 
for Others transactions with the statistical classification of LF or 
transmission for others determined on a basis consistent with FERC Form 
No. 1 reporting for those public utilities exempt from Sec. 141.1 of 
this chapter. All MWhs attributable to sales and transmission 
transactions are to be reported in their respective accounts on the 
FERC Form No. 1 irrespective of the method of billing. [[Page 4860]] 
    (i) Short-term sales and transmission and exchange activities means 
the portion of the Commission's electric regulatory program consisting 
of the regulation of all jurisdictional sales, exchange and 
transmission of capacity and energy except those described in paragraph 
(h) of this section. This includes exchange delivered as reported in 
the FERC Form No. 1 in Account 555 as Gross Exchange Delivered 
transactions with the statistical classification of EX or gross 
exchange delivered determined on a basis consistent with FERC Form No. 
1 reporting for those public utilities exempt from Sec. 141.1 of this 
chapter. All MWhs attributable to sales and transmission transactions 
are to be reported in their respective accounts in the FERC Form No. 1 
irrespective of the method of billing.
    (j) Long-term firm sales and transmission megawatt-hours means the 
number of megawatt-hours of electrical energy associated with the 
transactions described in paragraph (h) of this section, and the rates, 
charges, terms and conditions of which are regulated by the Commission.
    (k) Short-term sales and transmission and exchange megawatt-hours 
means the number of megawatt-hours of electrical energy associated with 
the transactions described in paragraph (i) of this section, the rates, 
charges, terms and conditions of which are regulated by the Commission.
* * * * *
    26. In Sec. 382.201, paragraph (a) and (b) are revised and the 
worksheet in paragraph (b)(4)(ii) is removed, to read as follows:


Sec. 382.201  Annual charges under Parts II and III of the Federal 
Power Act and related statutes.

    (a) Determination of costs to be assessed against public utilities. 
The adjusted costs of administration of the electric regulatory 
program, excluding the costs of regulating the Power Marketing Agencies 
and any electrical programs for which separate application fees are 
collected, will be apportioned between long-term firm sales and 
transmission activities and short-term sales and transmission and 
exchange activities in proportion to the total staff time dedicated to 
each. The amount apportioned to long-term firm sales and transmission 
activities will constitute long-term firm sales and transmission costs, 
and the amount apportioned to short-term sales and transmission and 
exchange activities will constitute short-term sales and transmission 
and exchange costs.
    (b) Determination of annual charges to be assessed against public 
utilities. (1) The long-term firm sales and transmission costs 
determined under paragraph (a) of this section will be assessed against 
each public utility based on the proportion of the long-term firm sales 
and transmission megawatt-hours of each public utility in the 
immediately preceding reporting year (either a calendar year or fiscal 
year, depending on which accounting convention is used by the public 
utility to be charged) to the sum of the long-term firm sales and 
transmission megawatt-hours in the immediately preceding reporting year 
of all public utilities being assessed annual charges.
    (2) The short-term sales and transmission and exchange costs 
determined under paragraph (a) of this section will be assessed against 
each public utility based on the proportion of the short-term sales and 
transmission and exchange megawatt-hours of each public utility in the 
immediately preceding reporting year (either a calendar year or fiscal 
year, depending on which accounting convention is used by the public 
utility to be charged) to the sum of the short-term sales and 
transmission and exchange megawatt-hours in the immediately preceding 
reporting year of all public utilities being assessed annual charges.
    (3) The annual charges assessed against each public utility will be 
the sum of the amounts determined in paragraphs (b)(1) and (b)(2) of 
this section.
    (4) Reporting requirement. For purposes of computing annual 
charges, a public utility, as defined in Sec. 382.102(b) must submit 
under oath to the Office of the Secretary by April 30 of each year an 
original and conformed copies of the following information (designated 
as FERC Reporting Requirement No. 582):
    (i) The total annual long-term firm sales for resale and 
transmission megawatt-hours as defined in Sec. 382.102(j); and
    (ii) The total annual short-term sales, transmission and exchange 
megawatt-hours as defined in Sec. 382.102(k).
* * * * *

PART 385--RULES OF PRACTICE AND PROCEDURE

    27. The authority citation for Part 385 continues to read as 
follows:

    Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16 
U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352; 49 
U.S.C. 60502; 49 App. U.S.C. 1-85.


Sec. 385.702  [Amended]

    28. In Sec. 385.702, paragraph (b) is removed, and paragraph (c) is 
redesignated paragraph (b).


Sec. 385.708  [Amended]

    29. In Sec. 385.708, in paragraph (b)(1), the phrase ``and, if 
appropriate under Rule 717, a written revised initial decision'' is 
removed; in paragraph (b)(2)(i), the phrase ``or oral revised initial'' 
is removed; in paragraph (b)(3), the phrase ``or, if appropriate under 
Rule 717, any revised initial decision'' is removed; in paragraph 
(b)(4), the phrase ``as appropriate'' is removed and the phrase ``or 
revised initial'' is removed in both places where it appears; in 
paragraph (c), in the heading the phrase ``and revised initial'' is 
removed; in paragraph (c)(1), the phrase ``or, if appropriate, the 
revised initial decision'' is removed; in paragraph (c)(2), the phrase 
``or revised initial'' is removed; and in paragraph (d), in the heading 
the phrase ``and revised initial'' and in the text the phrase ``or, if 
appropriate under Rule 717, a revised initial decision'' are removed.
    30. In Sec. 385.711, in the heading the phrase ``or revised 
initial'' is removed, and in paragraph (a)(1)(i), the phrase ``In 
proceedings not subject to Rule 717,'' is removed, and the word ``Any'' 
is capitalized.


Sec. 385.712  [Amended]

    31. In Sec. 385.712, in the heading the phrase ``and revised 
initial'' is removed and in paragraph (a) the phrase ``or revised 
initial'' is removed.


Sec. 385.713  [Amended]

    32. In Sec. 385.713, in paragraph (a)(2)(i), the phrase ``or, if 
appropriate under Rules 717 and 711, to a revised initial decision'' is 
removed; in paragraph (a)(2)(iv), the phrase ``or revised'' is removed; 
and in paragraph (a)(3), the phrase ``or any revised initial decision 
under Rule 717'' is removed.


Sec. 385.717  [Removed]

    33. Section 385.717 is removed.

[FR Doc. 95-1449 Filed 1-24-95; 8:45 am]
BILLING CODE 6717-01-P