[Federal Register Volume 60, Number 137 (Tuesday, July 18, 1995)]
[Proposed Rules]
[Pages 36752-36755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17523]



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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket Nos. RM95-8-000 and RM94-7-001]


Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities; Recovery of 
Stranded Costs by Public Utilities and Transmitting Utilities; Notice 
of Intent to Prepare an Environmental Impact Statement for the Notice 
of Proposed Rulemaking and Request for Comments on Environmental Issues

July 12, 1995.
AGENCY: Federal Energy Regulatory Commission, DOE.


[[Page 36753]]

ACTION: Notice of intent to prepare an environmental impact statement 
for the notice of proposed rulemaking and request for comments on 
environmental issues.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) has 
directed staff to prepare an environmental impact statement to assess 
the environmental impacts of the proposed rule ``Promoting Wholesale 
Competition Through Open Access Non-discriminatory Transmission 
Services by Public Utilities/Recovery of Stranded Costs by Public 
Utilities and Transmitting Utilities''.1 The notice requests 
commenters to send relevant information that will assist the Commission 
in conducting an accurate and thorough analysis of the potential 
impacts of the proposed rule. The notice also provides for a public 
scoping meeting.

    \1\ 60 FR 17662, Apr. 7, 1995.

DATES: Scoping comments are due on or before August 11, 1995; the 
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public scoping meeting will be held on September 8, 1995.

FOR FURTHER INFORMATION CONTACT:

Willam Meroney, Office of Economic Policy, Federal Energy Regulatory 
Commission, 825 North Capitol Street, N.E., Washington, D.C. 20426, 
Telephone: (202) 208-1069, Fax: (202) 208-1010
Leon Lowry, Office of Electric Power Regulation, Federal Energy 
Regulatory Commission, 825 North Capitol Street, N.E., Washington, D.C. 
20426, Telephone: (202) 208-0919, Fax: (202) 208-0180

ADDRESSES: Comments should be filed with the Office of the Secretary, 
Federal Energy Regulatory Commission, 825 North Capitol Street, N.E., 
Washington, D.C. 20426; the scoping meeting will be held in Hearing 
Room 1, 810 First St., N.E., Washington, D. C.

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, or 1200, 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.

SUPPLEMENTARY INFORMATION: The Commission has directed staff to prepare 
an environmental impact statement (EIS) to assess the environmental 
impacts of the proposed rule ``Promoting Wholesale Competition Through 
Open Access Non-discriminatory Transmission Services by Public 
Utilities/Recovery of Stranded Costs by Public Utilities and 
Transmitting Utilities''. In general, the proposed rule would require 
all public utilities owning or controlling facilities used for 
transmitting electric energy in interstate commerce to file non-
discriminatory, open access wholesale transmission tariffs and to take 
transmission service (including ancillary services) for their own 
wholesale sales and purchases of electric energy under the open access 
tariffs. In addition, the proposed rule would allow public utilities to 
recover legitimate and verifiable stranded costs associated with 
transmission access. The EIS will satisfy the requirements of the 
National Environmental Policy Act of 1969 (NEPA).

Introduction

    The Commission's goal in the proposed rule is to encourage lower 
electricity rates by reducing impediments to wholesale transmission 
access and to promote the development of competitive bulk power 
markets. A key to competitive bulk power markets is the availability of 
transmission services on an open and non-discriminatory basis. 
Transmission is the vital link between buyers and sellers of 
electricity. All traders of bulk power must have equal access to the 
transmission grid if the Nation is to achieve the benefits of robust, 
competitive power markets. Market power over transmission service is 
the single greatest impediment to such competition. Limitations on 
transmission access by transmission owners is preventing efficient 
trading from taking place, resulting in consumers paying unnecessarily 
high electricity prices.
    The Commission intends to manage the transition to competition in 
an orderly fashion. Moving to competitive power markets will change 
long-standing commercial and regulatory relationships. Utilities have 
invested billions of dollars to meet their existing obligations. These 
investments have been made under a regulatory compact whereby utility 
shareholders expect to recover prudently incurred costs. Competition 
may render some of these prudent investments uneconomic. The Commission 
believes that past contractual and regulatory practices must be 
recognized and past investment decisions made under a regulatory 
compact should be honored in the interim during the transition to 
competition.

Proposed Action and Principal Alternative

    Two cases are proposed to be examined. The proposed rule includes a 
generic requirement for public utilities to provide open access non-
discriminatory transmission service, and a framework to govern recovery 
of stranded costs. The alternative case involves the Commission 
pursuing similar policies on transmission access and stranded cost 
recovery, but through a case-by-case approach. The discussion below 
will serve as the basis for preparing the EIS. Comments are solicited 
on specific analytic elements of the outlined study. The proposed rule 
is described below along with the principal alternative to the rule. 
This is followed by a discussion of a study to assess the environmental 
impacts of the proposed rule and the alternative.
Proposed Rule

    The Commission seeks to achieve increased economic efficiency in 
wholesale power markets through competition and to allow recovery of 
prudently incurred costs stranded by the use of transmission access. 
Increased efficiency is promoted through the requirement that all 
public utilities file non-discriminatory, open access transmission 
tariffs to make transmission service available to all wholesale market 
participants. The Commission intends to require all public utilities to 
take transmission service for their own wholesale power transactions 
under this tariff. Recovery of transition costs is addressed by 
proposing that public utilities be allowed to recover prudent, 
legitimate, and verifiable stranded costs and to assign directly such 
costs to certain departing wholesale customers. 

[[Page 36754]]

    Through the combination of open access and stranded cost policies, 
the Commission intends to provide a smooth transition period that takes 
the electricity industry from traditional regulation of localized 
wholesale power transactions to competitive power markets that have a 
regional, or perhaps national, scope. The Commission does not expect 
that power markets will become competitive overnight. How rapidly 
competition evolves will be determined, in part, by the markets 
themselves. The Commission cannot dictate such progress--it can only 
accommodate the needed changes. Consequently, the Commission believes 
that progress toward efficient power trading will not happen all at 
once and that any environmental consequences of changed trading 
patterns will occur at a corresponding pace.
    The Commission's proposed rule will not unilaterally bring 
competition to an industry where it otherwise would be absent. Rather, 
the proposed rule will hasten and rationalize the progress toward 
competitive power markets already under way. Congress endorsed 
competition in wholesale power markets in the Energy Policy Act of 1992 
(EPAct). To some extent, evolving competition is being accommodated 
under the Commission's authority to order transmission service under 
Section 211 of the Federal Power Act as modified by EPAct, and under 
case-by-case exercise of the Commission's authority under section 205 
of the FPA to ensure that rates, terms and conditions of service are 
not unduly discriminatory. The proposed rule is intended to make this 
transition in a more consistent and non-discriminatory manner than 
would be possible under a case-by-case application of our authority 
under Section 211 or other provisions of the Federal Power Act. In 
addition, power markets are becoming more competitive through actions 
of customers desiring cheaper power. These factors must be considered 
when examining the environmental consequences of the proposed rule.
    The proposed rule has the potential to increase the availability, 
diversity, and competitiveness of power. The potential benefits 
include:
     Reducing the cost of electricity to consumers by promoting 
access of buyers and sellers to one another;
     Promoting the efficient use of facilities and resources by 
electric utilities;
     Avoiding wasteful investments under the current system of 
regulation of generation; and
     Providing a number of indirect benefits, such as reducing 
administrative burdens and costly litigation.

Principal Alternative

    The principal alternative to the proposed rule is that of no-
action, i.e., case-by-case implementation by the Commission. That is, 
the Commission could choose not to address generically the issues 
raised in the proposed rule. Under this alternative, transmission users 
would seek transmission access under section 211 or through open access 
tariffs filed under Section 205. The resulting patchwork of 
transmission service conditions could inhibit the development of 
regional bulk power markets. And under this alternative, the Commission 
would consider whether to allow public utilities to recover stranded 
costs on a case-by-case basis, should they seek such recovery. Compared 
to a generic rule on stranded cost recovery, this could increase 
uncertainty for market participants.

Proposed Study and Analytic Issues

    The basic approach of the analysis will be to postulate likely 
market responses to the proposed rule and then to analyze the resulting 
effects on utility decisionmaking, institutions, and the environment. 
The results of the analysis will be used to assess the economic and 
environmental impacts of the proposed rule. The analysis will have a 
national scope--but with significant regional detail--to assess 
potential environmental impacts of the proposed rule.
    The principal effect of the proposed rule could be to change 
historical patterns of wholesale electricity trade in the United 
States. Buyers and sellers of bulk power will have expanded 
opportunities to trade with market participants that were previously 
not available because of a lack of transmission access. In the near 
term, the proposed rule may cause changes in the dispatch and operation 
of generators. Some regions may experience changes in fuel use. This 
would have certain economic consequences, as well as certain 
environmental consequences. In the long term, a different pattern of 
newly constructed generation plants and transmission lines may emerge 
as a result of the proposed rule.
    The analysis will assess the consequences of the proposed rule in 
two main areas:
     Socioeconomic impacts.
     Environmental impacts of changes in fuel mix of power 
generation (coal, oil, gas, nuclear, wind, solar, etc.).
    Potentially, the most significant of the impacts will be the level, 
type, and location of air emissions. Selected regions will be 
identified to indicate the types of changes in environmental risks 
attributable to the proposed rule. The analysis would be designed to 
assess the environmental impacts of the kinds of fuel mix changes that 
might result from more open generating markets.

Limits on the Analysis

    We do not plan to address site-specific impacts such as cultural 
resources, noise levels, geology and soils, EMF effects or specific 
terrestrial or aesthetic resource issues. It is impossible to identify 
the location of individual powerplants or transmission lines that might 
be built as a consequence of the proposed rule. Moreover, any site-
specific issues associated with siting such facilities will be subject 
to required environmental reviews by state and local agencies. The 
siting issues are not within the Commission's jurisdiction and thus are 
excluded from the analysis. However, if commenters believe that such 
impacts are identifiable and significant, the Commission requests 
specific information that would aid in the evaluation of such impacts.

The EIS Scoping Process

    NEPA requires the Commission to review and address concerns the 
public may have about proposals that could result from a major Federal 
action having a potential for significant impact on the quality of the 
human environment. The main goal of issuing this ``scoping'' document 
is to focus the analysis in the EIS on the important issues, and to 
separate those issues that are insignificant and do not require 
detailed study.
    The EIS will discuss impacts that could occur as a result of 
implementing the proposed rule. The Commission requests comments on the 
environmental impacts that may result from implementing the proposed 
rule. If commenters believe mitigation is necessary, commenters should 
recommend specific mitigation to lessen or avoid impacts.

Preparation of the EIS

    Our independent analysis of the issues will result in the 
publication of a Draft EIS which will be mailed to federal, state and 
local resource agencies, industry, other interested groups and 
individuals, and the Commission's official service list for these 
proceedings.
    A 45-day comment period will be provided for reviewing the Draft 
EIS. We will consider all comments on the Draft EIS and revise the 
document, as 

[[Page 36755]]
necessary, before issuing a Final EIS. The Final EIS will include our 
response to each comment received. We expect the Final EIS to be 
completed by March 1996.

Public Participation and Scoping Meeting

    All commenters should send relevant information that will assist us 
in conducting an accurate and thorough analysis of the potential 
environmental impacts of the proposed rule. You should comment on the 
identified environmental issues, the potential environmental effects 
and alternatives of the proposed rule, and measures to avoid or lessen 
environmental impact. The more specific your comments, the more useful 
they will be.
    Please file your comment letter and only relevant studies or 
reports as noted below. In addition, commenters are requested to submit 
a copy of their comments on a 3\1/2\ inch diskette formatted for MS-DOS 
based computers. In light of our ability to translate MS-DOS based 
materials, the text need only be submitted in the format and version 
that it was generated (i.e., MS Word, WordPerfect, ASCII, etc.). It is 
not necessary to reformat word processor generated text to ASCII. For 
Macintosh users, it would be helpful to save the documents in Macintosh 
word processor format and then write them to files on a diskette 
formatted for MS-DOS machines. All comments should be submitted to the 
Office of the Secretary, Federal Energy Regulatory Commission, 825 
North Capitol Street, N.E., Washington, D.C. 20426, and should refer to 
Docket Nos. RM95-8-000 and RM94-7-001.
     Send a copy of the letter to the following individuals:

William Meroney, Office of Economic Policy, Federal Energy Regulatory 
Commission, 825 North Capitol Street, N.E., Washington, D.C. 20426, 
Telephone: (202) 208-1069, Fax: (202) 208-1010
Leon Lowery, Office of Electric Power Regulation, Federal Energy 
Regulatory Commission, 825 North Capitol Street, N.E., Washington, D.C. 
20426, Telephone: (202) 208-0919, Fax: (202) 208-0180

     Scoping comments must be received no later than August 11, 
1995.
    In addition to asking for written comments, we invite you to attend 
our public scoping meeting. This meeting will be held at 10:00 am, 
Friday, September 8, 1995 in Hearing Room 1, 810 First Street, N.E., 
Washington, D.C.
    The public meeting will provide another opportunity to offer 
scoping comments. Those wanting to speak at the meeting can call the 
EIS Project Manager, William Meroney, to pre-register their names on 
the speaker list. Only those people on the speaker list prior to the 
date of the meeting will speak. Priority will be given to people 
representing groups. A transcript of the meeting will be made to 
accurately record your comments.

Environmental Mailing List

    If you do not want to send comments at this time but still want to 
receive copies of the Draft and Final EIS, please return the 
Information Request (see appendix 1 2) to either William Meroney 
or Leon Lowery by mail or fax. If you do not return the Information 
Request, you will be taken off the mailing list.

    \2\ This appendix is not being published in the Federal 
Register, but is available from the Commission's Public Reference 
Room.
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Lois D. Cashell,
Secretary.
[FR Doc. 95-17523 Filed 7-17-95; 8:45 am]
BILLING CODE 6717-01-P