[Federal Register Volume 72, Number 58 (Tuesday, March 27, 2007)]
[Proposed Rules]
[Pages 14254-14256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-5285]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

[Docket No. RM07-11-000]


Applicability of Federal Power Act Section 215 to Qualifying 
Small Power Production and Cogeneration Facilities

March 16, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
proposing to amend its regulations governing qualifying small power 
production and cogeneration facilities, to eliminate the exemption from 
the requirements of section 215 of the Federal Power Act. From a 
reliability perspective, there does not appear to be a meaningful 
distinction between QF and non-QF generators that would warrant 
exemption of QFs from mandatory Reliability Standards.

DATES: Comments are due April 17, 2007.

ADDRESSES: You may submit comments, identified by Docket No. RM07-11-
000, by one of the following methods:
     Agency Web site: http://ferc.gov. Follow the instructions 
for submitting comments via the eFiling link found in the Comment 
Procedures section of the Preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to: Federal Energy Regulatory Commission, Secretary of the Commission, 
888 First Street, NE., Washington, DC, 20426. Refer to the Comment 
Procedures section of the preamble for additional information on how to 
file paper comments.

FOR FURTHER INFORMATION CONTACT:

Paul Singh (Technical Information), Office of Energy Markets and 
Reliability, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8576.
Samuel Higginbottom (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8561.

SUPPLEMENTARY INFORMATION:

Introduction

    1. The Commission is proposing to amend the exemptions available to 
qualifying facilities (QFs) so that they would no longer be exempt from 
newly-added section 215 of the Federal Power Act (FPA).\1\ From a 
reliability perspective, there does not appear to be a meaningful 
distinction between QF and non-QF generators that would warrant 
exemption of QFs from mandatory Reliability Standards. The benefit of 
this proposal will be increased reliability of the North American Bulk-
Power System.
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    \1\ 16 U.S.C. 824o.
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Background

    2. On August 8, 2005, the Electricity Modernization Act of 2005, 
which is Title XII, Subtitle A, of the Energy Policy Act of 2005 (EPAct 
2005), was enacted into law.\2\ EPAct 2005 adds a new section 215 to 
the Federal Power Act (FPA),\3\ which requires a Commission-certified 
Electric Reliability Organization (ERO) to develop mandatory and 
enforceable Reliability Standards, which are subject to Commission 
review and approval. Once approved, the Reliability Standards may be 
enforced by the ERO, subject to Commission oversight.
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    \2\ Energy Policy Act of 2005, Pub. L. No 109-58, Title XII, 
Subtitle A, 119 Stat. 594, 941 (2005).
    \3\ 16 U.S.C. 824o.
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    3. On February 3, 2006, the Commission issued Order No. 672, which 
implements newly-added section 215 and provides specific processes for 
the certification of an entity as the ERO, the development and approval 
of mandatory Reliability Standards, and the compliance with and 
enforcement of approved Reliability Standards.\4\ On April 4, 2006, 
North American Electric Reliability Corporation (NERC) made two 
filings: (1) An application for certification of NERC as the ERO; and 
(2) a petition for Commission approval of Reliability Standards, with 
eight regional differences and a glossary of terms. On July 20, 2006, 
the Commission issued an order certifying NERC as the ERO.\5\ On 
October 20, 2006, the Commission issued a Notice of Proposed Rulemaking 
proposing to approve 83 of 107 proposed Reliability Standards.\6\
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    \4\ Rules Concerning Certification of the Electric Reliability 
Organization; Procedures for the Establishment, Approval and 
Enforcement of Electric Reliability Standards, Order No. 672, 71 FR 
8662 (Feb. 17, 2006), FERC Stats. & Regs. ] 31,204 (2006), order on 
reh'g, Order No. 672-A, 71 FR 19814 (Apr. 18, 2006), FERC Stats. & 
Regs. ] 31,212 (2006).
    \5\ North American Electric Reliability Corporation, 116 FERC ] 
61,062 (2006).
    \6\ Mandatory Reliability Standards for the Bulk-Power Market, 
72 FR 64770 (Oct. 20, 2006), FERC Stats. & Regs. ] 32,608 (2006) 
(Reliability NOPR).
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    4. In response to the Reliability NOPR, Cogeneration Association of 
California and the Energy Producers and Users Coalition (CAC/EPUC) 
filed comments pointing out that QFs are exempt from section 215 by 
virtue of section 292.601(c) of the Commission's regulations.\7\ CAC/
EPUC suggest that the Commission intentionally exempted QFs from 
section 215. CAC/EPUC explain that in Order No. 671 issued on February 
2, 2006,\8\ the Commission stated that it saw no reason to exempt QFs 
from the newly added FPA sections 220, 221 and 222,\9\ and explicitly 
excluded those sections of the FPA from the QF exemptions contained in 
section 292.601 of its regulations, while making no similar mention of 
section 215.
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    \7\ 18 CFR 292.601(c).
    \8\ Revised Regulations Governing Small Power Production and 
Cogeneration Facilities, Order No. 671, 71 FR 7852 (Feb. 2, 2006), 
FERC Stats. & Regs. ] 31,203 (2006), order on rehearing, Order No. 
771-A, 71 FERC 30583 (May 22, 2006), FERC Stats. & Regs. ] 31.219 
(2006).
    \9\ 16 U.S.C. 824t-v.
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    5. Section 215(b) grants the Commission jurisdiction over ``all 
users, owners, and operators of the bulk-power system'' for ``purposes 
of approving

[[Page 14255]]

reliability standards. . . . and enforcing compliance with [section 
215]'', and further provides that ``[a]ll users, owners and operators 
of the bulk-power system shall comply with reliability standards that 
take effect under this section.'' \10\ Given the statutory directive 
that all users, owners and operators of the bulk-power system must 
comply with the reliability standards that take effect under section 
215, it may no longer be appropriate to allow QFs a continued exemption 
from compliance with the newly-adopted mandatory and enforceable 
Reliability Standards that apply to generator owners and operators.\11\ 
Moreover, from a reliability perspective, there would seem to be no 
meaningful distinction between QF and non-QF generators that would 
warrant exemption of QFs from the newly-adopted mandatory Reliability 
Standards. Indeed, QF generators would seem to affect the reliability 
of the Bulk-Power System as much as non-QF generators, and so QF 
generators should be subject to the newly-adopted mandatory Reliability 
Standards. In this regard, we note that while many QFs are small 
facilities, others are quite large. We see no justification for large 
facilities to be exempt from the newly-adopted mandatory and 
enforceable Reliability Standards. Accordingly, we are proposing to 
amend Sec.  292.601(c)(3) to add section 215 to the list of FPA 
sections from which QFs are not exempt.
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    \10\ 16 U.S.C. 824o(b). Section 215(b) also states that entities 
described in section 201(f), entities that are otherwise exempt from 
Part II of the FPA unless a provision is specifically applicable to 
those entities, are subject to section 215. Id.
    \11\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, FERC Stats. & Regs. ] 31,242 (2007) (issued 
concurrently with this NOPR).
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    6. The threshold for applicability of the Reliability Standards to 
generating units is 20 MVA (gross nameplate rating) for an individual 
generating unit, or 75 MVA (gross nameplate rating) in aggregate for a 
generating plant.\12\ In addition, the Reliability Standards are 
applicable to: any generator, regardless of size that is a blackstart 
unit material to and designated as part of a transmission operator 
entity's restoration plan; or any generator, regardless of size, that 
is material to the reliability of the bulk-power system; the 
determination to include an otherwise exempt facility would be made on 
a facility-by-facility basis by the ERO or Regional Entity. However, an 
entity that disagrees with NERC's determination to place it in the 
compliance registry may submit a challenge in writing to NERC and, if 
still not satisfied, may lodge an appeal with the Commission. 
Therefore, a small entity may appeal to the Commission if it believes 
it should not be required to comply with the Reliability Standards. 
According to the Energy Information Administration (EIA), the total 
universe of qualifying facilities is 3,265 entities. Of these, 2,423 
entities are below 20 MW (which, as noted above, roughly corresponds to 
the 20 MVA standard for applicability of the reliability standards), 
which leaves 842 entities that could be potentially impacted by the 
reliability standards. Of these 842 entities, only 745 are listed by 
EIA as being interconnected to the grid. Thus, out of a total of 3265 
QFs, only 745, or 23 percent of all QFs would meet the generally 
applicable threshold of 20 MVA (although some other QFs may be 
specified as either blackstart units material to and designated as part 
of a transmission operator entity's restoration plan or as generators 
material to the reliability of the bulk-power system). In sum, while 
there would seem to be no basis to exempt all QFs from the mandatory 
and enforceable Reliability Standards, as a result of the threshold for 
applicability of the Reliability Standards to generating units, and 
based on EIA data, it appears that less than a quarter of all QFs will, 
in fact, be affected by our proposal to eliminate the QF exemption from 
the requirements of section 215 of the FPA.
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    \12\ Id. A 20 MVA threshold corresponds to 20 MW, if a unit is 
operating at a unity power factor.
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Information Collection Statement

    7. The Paperwork Reduction Act (PRA) \13\ requires each Federal 
agency to seek and obtain OMB approval before undertaking a collection 
of information directed to ten or more persons, or continuing a 
collection for which the Office of Management and Budget (OMB) approval 
and validity of the control number are about to expire.\14\ The PRA 
defines the phrase ``collection of information'' to be the ``obtaining, 
causing to be obtained, soliciting, or requiring the disclosure to 
third parties or the public, of facts or opinions by or for an agency, 
regardless of form or format, calling for either--(i) answers to 
identical questions posed to, or identical reporting or recordkeeping 
requirements imposed on ten or more persons, other than agencies, 
instrumentalities, or employees of the United States; or (ii) answers 
to questions posed to agencies, instrumentalities, or employees of the 
United States which are to be used for general statistical purposes.'' 
\15\ OMB regulations require approval of certain information collection 
requirements imposed by agency rules.\16\
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    \13\ 44 U.S.C. 3501-3520.
    \14\ 44 U.S.C. 3502(3)(A)(i), 44 U.S.C. 3507(a)(3).
    \15\ 44 U.S.C. 3502(3)(A).
    \16\ 5 CFR 1320.11.
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    8. As noted above, the Commission is proposing to amend the 
exemption available to qualifying facilities from the requirements of 
section 215 of the FPA. Because the Commission is not proposing 
information collections in this rulemaking, it is not subject to OMB 
review under the PRA. However, the Commission will submit for 
informational purposes only a copy of this rulemaking to OMB.

Environmental Analysis

    9. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\17\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. As explained above, this proposed rule carries out the 
intent of legislation, specifically section 215 of the FPA. It lifts an 
exemption and thus makes section 215 of the FPA applicable to QFs; it 
does not substantially change the effect of the legislation. 
Accordingly, no environmental consideration is necessary.\18\
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    \17\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
] 30,783 (1987).
    \18\ 18 CFR 380.4(a)(2)(ii).
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Regulatory Flexibility Act Analysis

    10. The Regulatory Flexibility Act of 1980 (RFA) \19\ generally 
requires a description and analysis of rules that will have significant 
economic impact on a substantial number of small entities. The total 
universe of qualifying facilities is 3,265 entities. Of these, 2,423 
entities are below 20 MW (the threshold for applicability of the 
Reliability Standards is 20 MVA for an individual generating unit, or 
75 MVA in aggregate for a generating plant \20\) which leaves 842 
entities that could be potentially impacted by the reliability 
standards. Of these 842 entities, only 745 are listed as being 
interconnected to the grid. Accordingly, we estimate that out of a 
total of 3265 QFs, only 745, or 23 per cent of all QFs would likely be 
affected by the change in regulations proposed here. Thus, most, if not 
all, QFs affected by this rule do not fall

[[Page 14256]]

within the definition of small entities,\21\ nor do they meet the 
threshold criteria for applicability of the RFA to electric utilities 
established by the Small Business Administration, which is based on a 
size standard of 4 million MWh.\22\
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    \19\ 5 U.S.C. 601-12.
    \20\ The 20 MVA threshold corresponds to 20 MW, if a unit is 
operating at a unity power factor.
    \21\ The RFA definition of ``small entity'' refers to the 
definition provided in the Small Business Act, which defines a 
``small business concern'' as a business that is independently owned 
and operated and that is not dominant in its field of operation. See 
15 U.S.C. 632.
    \22\ The Small Business Size Standard component of the North 
American Industry Classification System (NAICS) defines a small 
utility as one that, including its affiliates, is primarily engaged 
in generation, transmission, and/or distribution of electric energy 
for sale and whose total electric output for the preceding fiscal 
years did not exceed 4 million MWh. 13 CFR 121.201.
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Comment Procedures

    11. The Commission invites interested persons to submit comments on 
the change proposed in this notice to be adopted, including any related 
matters or alternative proposals that commenters may wish to discuss. 
Comments are due April 16, 2007. Comments must refer to Docket No. 
RM07-11-000, and must include the commenter's name, the organization 
they represent, if applicable, and their address in their comments. 
Comments and reply comments may be filed either in electronic or paper 
format.
    12. Comments and reply comments may be filed electronically via the 
eFiling link on the Commission's Web site at http://www.ferc.gov. The 
Commission accepts most standard word processing formats and commenters 
may attach additional files with supporting information in certain 
other file formats. Commenters filing electronically do not need to 
make a paper filing. Commenters that are not able to file comments and 
reply comments electronically must send an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Secretary of 
the Commission, 888 First Street, NE., Washington, DC, 20426.
    13. All comments and reply comments will be placed in the 
Commission's public files and may be viewed, printed, or downloaded 
remotely as described in the Document Availability section below. 
Commenters on this proposal are not required to serve copies of their 
comments and reply comments on other commenters.

Document Availability

    14. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through the Commission's Home Page (http://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, 
Washington DC 20426.
    15. From the Commission's Home Page on the Internet, this 
information is available in the Commission's document management 
system, eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    16. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours. For assistance, please contact 
FERC Online Support at 1-866-208-3676 (toll free) or (202) 502-8222 (e-
mail at [email protected]), or the Public Reference Room at 
(202) 502-8371, TTY (202) 502-8659 (e-mail at 
[email protected]).

List of Subjects in 18 CFR Part 292

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

    By direction of the Commission.
Philis J. Posey,
Acting Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
part 292, Chapter I, Title 18, Code of Federal Regulations, to read as 
follows.

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

    1. The authority citation for part 292 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.

    2. In Sec.  292.601 paragraph (c)(3) is revised to read as follows:


Sec.  292.601  Exemption to qualifying facilities from the Federal 
Power Act.

* * * * *
    (c) * * *
    (3) Sections 202(c), 210, 211, 212, 213, 214, 215, 220, 221 and 
222;
* * * * *
 [FR Doc. E7-5285 Filed 3-26-07; 8:45 am]
BILLING CODE 6717-01-P