[Federal Register Volume 69, Number 112 (Thursday, June 10, 2004)]
[Rules and Regulations]
[Pages 32440-32444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12919]


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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 141, 260 and 357

[Docket No. RM03-8-001; Order No. 646-A]


Quarterly Financial Reporting and Revisions to the Annual Reports

Issued: June 2, 2004.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule; order on rehearing.

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

SUMMARY: The Federal Energy Regulatory Commission (Commission) 
reaffirms its determinations in Order No. 646 and clarifies certain 
provisions in this order on rehearing. Order No. 646 establishes 
quarterly financial reporting requirements for respondents that file 
FERC Annual Reports and modifies certain filing requirements contained 
in the FERC Annual Report Form Nos. 1, 1-F, 2, 2-A and 6.

EFFECTIVE DATE: The revisions made in this order on rehearing are 
effective July 12, 2004.

FOR FURTHER INFORMATION CONTACT: Mark Klose (Project Manager), Office 
of the Executive Director, Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426, (202) 502-8283.
    Julie Kuhns (Technical Information), Office of the Executive 
Director, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6287.
    Christopher Bublitz (Technical Information), Office of 
Administrative Litigation, Federal Energy Regulatory Commission, 888 
First Street, NE, Washington, DC 20426, (202) 502-8542.
    Julia Lake (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE, Washington, 
DC 20426, (202) 502-8370.

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

I. Introduction

    1. On February 11, 2004, the Commission issued a Final Rule (Order 
No. 646) \1\ amending its financial reporting regulations by 
establishing new quarterly financial reporting for respondents that 
file FERC Annual Reports. Order No. 646 requires all FERC 
jurisdictional entities filing a FERC Annual Report Form No. 1, 1-F, 2, 
2-A or 6 to file supplemental quarterly financial reports. These 
quarterly financial reports are the FERC Form No. 3-Q, Quarterly 
Financial Report of Electric Companies, Licensees, and Natural Gas 
Companies, and the FERC Form No. 6-Q, Quarterly Financial Report of Oil 
Pipeline Companies. Additionally, Order No. 646 made certain changes to 
the FERC Annual Reports including adding new reporting schedules for 
monthly transmission peak load data and ancillary services, updating 
the corporate officer's certification requirements, and accelerating 
the filing dates for the FERC Annual Reports.
---------------------------------------------------------------------------

    \1\ Quarterly Financial Reporting and Revisions to the Annual 
Reports, Order No. 646, 69 FR 9030 (Feb. 26, 2004), III FERC Stats. 
& Regs. ]31,158 (Feb. 11, 2004).
---------------------------------------------------------------------------

    2. Financial accounting and reporting provides needed information 
concerning a company's past performance and its future prospects. 
Without reliable financial information prepared in accordance with the 
Commission's Uniform Systems of Accounts and related regulations, the

[[Page 32441]]

Commission would be unable to accurately determine the costs that 
relate to a particular time period, service, or line of business.\2\ 
Additionally, it would be difficult to determine whether a FERC 
jurisdictional entity has previously been given the opportunity to 
recover its costs through rates, or to compare how the financial 
performance and results of operations of one regulated entity relates 
to that of another.
---------------------------------------------------------------------------

    \2\ Part 101 Uniform System of Accounts Prescribed for Public 
Utilities Subject to the Provisions of the Federal Power Act. See 18 
CFR Part 101 (2003). Part 201 Uniform System of Accounts Prescribed 
for Natural Gas Companies Subject to the Provisions of the Natural 
Gas Act. See 18 CFR Part 201 (2003). Part 352 Uniform System of 
Accounts Prescribed for Oil Pipeline Companies Subject to the 
Provisions of the Interstate Commerce Act. See 18 CFR Part 352 
(2003).
---------------------------------------------------------------------------

    3. The Commission concluded in Order No. 646 that there is a 
pressing need for reporting more timely, relevant and reliable 
financial information to the Commission. Adoption of quarterly 
financial reporting and the other modifications to the FERC Annual 
Reports will provide more transparent financial information for this 
Commission and other users of the data. The information contained in 
these financial reports filed with the Commission identifies the 
economic effects of significant transactions and events, allows staff 
to evaluate the adequacy of existing cost-based rates, and aids in the 
development of needed changes to existing regulatory initiatives. 
Additionally, instituting quarterly financial reporting strengthens the 
Commission's ongoing activities by identifying emerging trends, 
identifying changes in existing accounting standards, and identifying 
the impacts of new accounting standards on a more frequent basis.
    4. In summary, we reaffirm here the legal and policy conclusions on 
which Order No. 646 is based. Therefore, the Commission denies the 
requests for rehearing or blanket exemptions from certain filing 
requirements contained in Order No. 646. However, we will provide 
clarifications and corrections on certain matters raised as discussed 
below.

II. Discussion

A. Ancillary Services Schedule

    5. Order No. 646 adds a new Ancillary Services Schedule in the FERC 
Annual Report Form Nos. 1 and 1-F that details the amount of ancillary 
services purchased and sold during the year. The new Ancillary Services 
Schedule also collects information concerning the amount of services 
internally used by the respondent. The new schedule is included in the 
FERC Annual Reports to be filed with the Commission beginning with the 
calendar year ending December 31, 2004.
    6. Arizona Public Service Company (APS) seeks clarification, or in 
the alternative, rehearing regarding the reporting of purchases and 
sales of ancillary services when the respondent is a vertically 
integrated utility that has separate divisions or units providing 
merchant or transmission functions. APS claims it is possible for the 
same megawatt hour of ancillary service to be reported more than once. 
It questions how a respondent should report ancillary service activity 
between units or divisions within a reporting entity and between a 
wholesale merchant unit and a third-party supplier. Additionally, APS 
seeks clarification regarding the reporting of transactions outside 
APS's service territory that do not use APS's generation or 
transmission facilities. Further, APS asks how the Commission would use 
such data for ratemaking purposes. Finally, APS requests that the 
Commission clarify Instruction No. 1 of the Ancillary Services Schedule 
to specify that companies report the amount of scheduling, system 
control and dispatch services.
Commission Conclusion
    7. The Commission clarifies that the activity reported in this 
schedule should be reported from the respondent's point of view as a 
whole, without regard to interdepartmental activity. All purchases and 
sales of ancillary services by the utility associated with the 
provision of transmission service should be reported, including service 
to native load. Therefore, in addition to reporting purchases and sales 
of ancillary services, the respondent should report on this schedule 
the volumes for ancillary services that it self-provides from its own 
facilities together with the related dollar values imputed as if the 
respondent took these services under its own tariff. The primary 
purpose of this data is to reflect the ancillary services related to 
the use of the respondent's generation or transmission facilities. 
Therefore, on this schedule, APS should not report transactions with 
entities located on third-party systems that do not involve use of 
APS's generation or transmission facilities.
    8. Finally, the Commission agrees with APS that Instruction No. 1 
to the Ancillary Services Schedule should specify that companies report 
the amount of scheduling, system control and dispatch services and is 
making conforming changes as needed to the Ancillary Services Schedule.

B. Monthly Transmission Peak Load Schedule

    9. Order No. 646 adds a new Monthly Transmission Peak Load Schedule 
to the FERC Annual Report Form Nos. 1 and 1-F, and also requires this 
information to be reported in the quarterly financial reports. This new 
schedule collects information concerning the respondent's transmission 
system including the respondent's own use of its transmission system. 
The Commission noted in Order No. 646 that the peak load is the monthly 
transmission peak as defined in the pro forma Open Access Transmission 
Tariff (OATT) and respondents may use estimates to complete the 
schedule as long as that fact is noted on the schedule and the 
respondent fully describes the estimation method in a footnote.
    10. Southern California Edison Company (SCE) seeks an exemption, 
clarification, or in the alternative, rehearing concerning the 
reporting requirements contained in the Monthly Transmission Peak Load 
Schedule. Specifically, SCE states that, with the restructuring of the 
energy market in California and SCE's transfer of operational control 
of its transmission system to the California Independent System 
Operator Corporation, SCE no longer operates under its own pro forma 
OATT. SCE states it does not have access to the type of transmission 
system information sought in the new schedule. SCE, therefore requests 
an exemption from the Monthly Transmission System Peak Load Schedule or 
clarification as to how utilities in California, such as SCE, are to 
comply with this reporting requirement.
Commission Conclusion
    11. We are not persuaded that SCE is unable to obtain the 
information to be reported in the Monthly Transmission Peak Load 
Schedule. The monthly peak load data is useful in analyzing SCE's usage 
of transmission facilities under the control of the California ISO, and 
in analyzing the transmission revenues SCE reports in the annual and 
quarterly financial reports. Pursuant to section 17, Records and 
Information Sharing of the California ISO Transmission Control 
Agreement, the California ISO shall keep records relevant to the 
efficient operation of the ISO controlled grid and make appropriate 
records available to a participating transmission owner upon request. 
Therefore, if SCE does not have direct access to the required 
information, it should obtain the data from the California ISO. In the 
event

[[Page 32442]]

SCE and the California ISO working together are unsuccessful in 
obtaining the information required by the new schedule, SCE may file a 
request for a waiver of the requirement to report information required 
on the Monthly Transmission Peak Load Schedule with the Commission 
providing full details and particulars as to why it is unable to obtain 
and report the data.

C. Changes to the FERC Annual Report Form No. 2

    12. The Industry Coalition requests rehearing on its proposed 
changes to the FERC Annual Report Form No. 2. The Industry Coalition 
requested that the Annual Report Form No. 2 be modified to obtain 
additional detailed cost-of-service rate information. For example the 
Industry Coalition requests that natural gas pipelines provide 
information concerning its rate base, its earned return on equity 
investment based on a predetermined formula rate of return calculation, 
its revenues and expenses associated with at-risk facilities, its 
revenues associated with negotiated rate contracts, and other details 
for various other items included in cost-of-service accounts. The 
Industry Coalition requests that its changes, at a minimum, be 
incorporated into the Commission's Information Assessment Team's 
current, on-going review of information necessary to understand and 
oversee energy markets. In the alternative, the Industry Coalition 
requests the Commission establish a new rulemaking proceeding to 
address its proposed changes to the FERC Annual Report Form No. 2.
Commission Conclusion
    13. As stated in Order No. 646, the changes proposed by the 
Industry Coalition to the FERC Annual Report Form No. 2 are outside the 
scope of this rulemaking. The Commission finds that the Industry 
Coalition has not provided any new additional arguments to reverse our 
decision on these changes in the context of this quarterly financial 
reporting rulemaking. The changes proposed by the Industry Coalition 
would require additional input and comment before the changes may be 
implemented. While the Commission declines to consider Industry 
Coalition's request for additional changes to the FERC Annual Report 
Form No. 2 at this time, the Industry Coalition, as well as all other 
interested parties, will be given the opportunity to provide input and 
comment on improvements to the quarterly and annual financial reporting 
requirements after a full reporting cycle as provided in Order No. 
646.\3\
---------------------------------------------------------------------------

    \3\ See Order No. 646, III FERC Stats. & Regs. ] 31,158 at P 
105.
---------------------------------------------------------------------------

D. Blanket Reporting Exemption for Electric Cooperatives

    14. The National Rural Electric Cooperative Association (NRECA) 
requests rehearing of the Commission's decision in Order No. 646 not to 
provide a blanket exemption or waiver for electric distribution 
cooperatives that are classified as ``small utilities'' from the 
reporting requirements of Order No. 646.\4\ NRECA also requests that 
the Commission clarify what an entity seeking a waiver may request a 
wavier of, and what it must show in order to satisfy the waiver 
requirement.
---------------------------------------------------------------------------

    \4\ A small utility as defined by the Small Business Association 
is one ``that disposes of 4 million MWh or less per year.''
---------------------------------------------------------------------------

    15. NRECA argues that the reporting requirements in Order No. 646 
will pose a hardship on small electric cooperatives. NRECA notes that, 
as it explained in its comments to the NOPR, thirty-four of the forty 
FERC-jurisdictional electric cooperatives are capitalized without 
publicly traded securities and are not subject to the Securities and 
Exchange Commission's periodic reporting requirements. NRECA argues 
that, since these cooperatives do not prepare and submit filings to the 
SEC, the Commission's imposition of such a periodic reporting 
requirement will add a new compliance burden on these cooperatives. 
According to the NRECA, the Commission did not address why the 
quarterly financial reporting requirements needed for electric 
cooperatives which are different from large publicly traded, investor-
owned utility companies.
Commission Conclusion
    16. As NRECA points out, there are nearly forty rural electric 
cooperatives that are public utilities subject to the Commission's 
ratemaking and accounting jurisdiction because they sell power at 
wholesale and/or provide transmission service. It is, therefore, 
important for the Commission to obtain timely and relevant financial 
information from these jurisdictional entities in order to make 
informed ratemaking and accounting decisions affecting these entities. 
However, as provided in Order No. 646, if the reporting requirements of 
this order represent an undue burden, individual electric cooperatives 
may seek a waiver from the Commission. Each respondent requesting a 
waiver from the reporting requirements must establish undue burden 
based on its individual fact situation. Any Commission decision to 
grant a waiver from all or part of the reporting requirements contained 
in Order No. 646 will depend on the particular facts and circumstances 
affecting a respondent's operations. Since the particular facts and 
circumstances may be unique to each electric cooperative, the 
Commission declines to provide a predetermined set of conditions that 
must be met to obtain a waiver.

E. Miscellaneous

    17. Order No. 646 provides for a phase-in period for respondents to 
file their FERC quarterly financial reports. The phase-in filing dates 
for the 2005 quarterly financial reports, however, were not included in 
the regulatory text in Sec. Sec.  141.400, 260.300 and 357.4 of the 
Commission's regulations. Therefore, the Commission will make the 
necessary conforming changes to its quarterly financial reporting 
filing regulations to include the phase-in periods contained in Order 
No. 646 for quarterly financial report filings made during 2005.

III. Regulatory Flexibility Act Certification

    18. The Regulatory Flexibility Act (RFA) requires rulemakings to 
contain either (1) a description and analysis of the effect that the 
proposed or Final Rule will have on small entities or (2) a 
certification that the rule will not have a significant economic effect 
on a substantial number of small entities.\5\ In Order No. 646, the 
Commission certified that the Final Rule would not have a significant 
economic effect on a substantial number of small entities.
---------------------------------------------------------------------------

    \5\ See 5 U.S.C. 601-612 (2000).
---------------------------------------------------------------------------

Rehearing Request
    19. NRECA challenges this certification. According to NRECA, there 
are nearly forty rural electric cooperatives that are public utilities 
subject to the Commission's ratemaking and accounting jurisdiction 
because they sell power at wholesale and/or provide transmission 
service. NRECA argues that, approximately thirty of the jurisdictional 
electric cooperatives are distribution cooperatives with very limited 
Federal Power Act (FPA) regulation. NRECA argues, further, that all but 
about six of these electric cooperatives meet the definition of a 
``small utility'' set out by the Small Business Administration. To 
avoid undue burden, NRECA recommends that the Commission provide a 
blanket waiver of quarterly financial reporting

[[Page 32443]]

to all electric cooperatives that are ``small'' public utilities.
Commission Conclusion
    20. We disagree with NRECA. The question is whether Order No. 646 
has a significant economic effect on a substantial number of small 
entities. The Commission correctly determined in Order No. 646 that the 
number of such entities is not substantial. The thirty-four electric 
cooperatives are only a small subset of the entities considered in 
determining a significant impact on a substantial number of small 
entities. Additionally, these electric cooperatives already maintain 
the necessary accounting records under the Commission's Uniform System 
of Accounts and report this financial information on an annual basis 
through the filing of a FERC Annual Report. Therefore, quarterly 
financial reporting from accounting records that already exist should 
not as a whole pose an undue burden or have a significant economic 
effect on the electric cooperatives. However, as stated in Order No. 
646 and earlier in the order, any respondents, including an electric 
cooperative, may file a request for a waiver of all or part of the 
reporting requirements based upon individual facts and circumstances.

IV. Document Availability

    21. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to obtain this document from the Public Reference Room 
during normal business hours (8:30 a.m. to 5 p.m. Eastern Time) at 888 
First Street, NE., Room 2A, Washington, DC 20426. The full text of this 
document is also available electronically from the Commission's 
eLibrary system in PDF and Microsoft Word format for viewing, printing, 
and downloading. ELibrary may be accessed through the Commission's Web 
page at http://www.ferc.gov. To access this document in eLibrary, type 
``RM03-8-001'' in the docket number field and specify a date range that 
includes this document's issuance date. User assistance is available by 
contacting FERC Online Support at [email protected] or toll-
free at (866) 208-3676 or for TTY (202) 502-8659.

VI. Effective Date

    22. Revisions to Order No. 646 made in this order on rehearing will 
become effective on July 12, 2004.

List of Subjects

18 CFR Part 141

    Electric power, Reporting and recordkeeping requirements.

18 CFR Part 260

    Natural gas, Reporting and recordkeeping requirements.

18 CFR Part 357

    Pipelines, Reporting and recordkeeping requirements.

    By the Commission.
Linda Mitry,
Acting Secretary.

0
In consideration of the foregoing, the Commission amends parts 141, 
260, and 357, Chapter I, Title 18, Code of Federal Regulations, as 
follows:

PART 141--STATEMENTS AND REPORTS (SCHEDULES)

0
1. The authority citation for part 141 continues to read as follows:

    Authority: 15 U.S.C. 79; 16 U.S.C. 791a-828c, 2601-2645; 31 
U.S.C. 9701; 42 U.S.C. 7101-7352.


0
2. In Sec.  141.400, paragraph (b)(2)(iv) is redesignated as paragraph 
(b)(2)(vii) and new paragraphs (b)(2)(iv), (b)(2)(v), (b)(2)(vi) are 
added to read as follows:


Sec.  141.400  FERC Form No. 3-Q, Quarterly financial report of 
electric utilities, licensees, and natural gas companies.

* * * * *
    (b) * * *
    (2) * * *
    (iv) The quarterly financial report for the period January 1 
through March 31, 2005, must be filed on or before May 31, 2005.
    (v) The quarterly financial report for the period April 1 through 
June 30, 2005, must be filed on or before August 29, 2005.
    (vi) The quarterly financial report for the period July 1 through 
September 30, 2005 must be filed on or before November 29, 2005.
* * * * *

0
3. In Sec.  141.400, paragraph (b)(3)(iv) is redesignated as paragraph 
(b)(3)(vii) and new paragraphs (b)(3)(iv), (b)(3)(v), (b)(3)(vi) are 
added to read as follows:


Sec.  141.400  FERC Form No. 3-Q, Quarterly financial report of 
electric utilities, licensees, and natural gas companies.

* * * * *
    (b) * * *
    (3) * * *
    (iv) The quarterly financial report for the period January 1 
through March 31, 2005, must be filed on or before June 13, 2005.
    (v) The quarterly financial report for the period April 1 through 
June 30, 2005, must be filed on or before September 12, 2005.
    (vi) The quarterly financial report for the period July 1 through 
September 30, 2005 must be filed on or before December 13, 2005.
* * * * *

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

0
4. The authority citation for part 260 continues to read as follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.


0
5. In Sec.  260.300, paragraph (b)(2)(iv) is redesignated as paragraph 
(b)(2)(vii) and new paragraphs (b)(2)(iv), (b)(2)(v), (b)(2)(vi) are 
added to read as follows:


Sec.  260.300  FERC Form No. 3-Q, Quarterly financial report of 
electric utilities, licensees, and natural gas companies.

* * * * *
    (b) * * *
    (2) * * *
    (iv) The quarterly financial report for the period January 1 
through March 31, 2005, must be filed on or before May 31, 2005.
    (v) The quarterly financial report for the period April 1 through 
June 30, 2005, must be filed on or before August 29, 2005.
    (vi) The quarterly financial report for the period July 1 through 
September 30, 2005 must be filed on or before November 29, 2005.
* * * * *

0
6. In Sec.  260.300, paragraph (b)(3)(iv) is redesignated as paragraph 
(b)(3)(vii) and new paragraphs (b)(3)(iv), (b)(3)(v), (b)(3)(vi) are 
added to read as follows:


Sec.  260.300  FERC Form No. 3-Q, Quarterly financial report of 
electric utilities, licensees, and natural gas companies.

* * * * *
    (b) * * *
    (3) * * *
    (iv) The quarterly financial report for the period January 1 
through March 31, 2005, must be filed on or before June 13, 2005.
    (v) The quarterly financial report for the period April 1 through 
June 30, 2005, must be filed on or before September 12, 2005.
    (vi) The quarterly financial report for the period July 1 through 
September 30, 2005 must be filed on or before December 13, 2005.
* * * * *

[[Page 32444]]

PART 357--ANNUAL SPECIAL OR PERIODIC REPORTS: CARRIERS SUBJECT TO 
PART I OF THE INTERSTATE COMMERCE ACT

0
7. The authority citation for part 357 continues to read as follows:

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 
1-85 (1988).


0
8. In Sec.  357.4, paragraph (b)(2)(iv) is redesignated as paragraph 
(b)(2)(vii) and new paragraphs (b)(2)(iv), (b)(2)(vi), (b)(2)(viii) are 
added to read as follows:
* * * * *
    (b) * * *
    (2) * * *
    (iv) The quarterly financial report for the period January 1 
through March 31, 2005, must be filed on or before June 13, 2005.
    (v) * * *
    (vi) The quarterly financial report for the period April 1 through 
June 30, 2005, must be filed on or before September 12, 2005.
    (vii) * * *
    (viii) The quarterly financial report for the period July 1 through 
September 30, 2005 must be filed on or before December 13, 2005.
* * * * *
[FR Doc. 04-12919 Filed 6-9-04; 8:45 am]
BILLING CODE 6717-01-P