[Federal Register Volume 72, Number 125 (Friday, June 29, 2007)]
[Rules and Regulations]
[Pages 35872-35892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-12553]



[[Page 35871]]

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Part VI





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Part 292



New PURPA Section 210(m) Regulations Applicable to Small Power 
Production and Cogeneration Facilities; Final Rule

  Federal Register / Vol. 72, No. 125 / Friday, June 29, 2007 / Rules 
and Regulations  

[[Page 35872]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

[Docket No. RM06-10-001; Order No. 688-A]


New PURPA Section 210(m) Regulations Applicable to Small Power 
Production and Cogeneration Facilities

Issued June 22, 2007.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on rehearing.

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SUMMARY: In this order on rehearing, the Federal Energy Regulatory 
Commission (Commission) denies rehearing on most major issues decided 
in Order No. 688, which amended its regulations governing small power 
production and cogeneration in response to section 1253 of the Energy 
Policy Act of 2005 (EPAct 2005), which added section 210(m) to the 
Public Utility Regulatory Policies Act of 1978 (PURPA). The Commission 
also clarifies certain aspects of the rule and adopts some additional 
filing requirements.

DATES: Effective Date: The revisions to our regulations in this order 
on rehearing will become effective July 30, 2007.

FOR FURTHER INFORMATION CONTACT: Susan G. Pollonais (Technical 
Information), Office of Energy Markets and Reliability, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6011.
    Marka Shaw (Technical Information), Office of Energy Markets and 
Reliability, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8641.
    Samuel Higginbottom (Legal Information), Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8561.
    Mason Emnett (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6540.
    Eric Winterbauer (Legal Information), Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8329.

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

Order on Rehearing and Clarification

I. Introduction

    1. On October 20, 2006, the Federal Energy Regulatory Commission 
(Commission) issued Order No. 688,\1\ in which the Commission revised 
its regulations governing the purchase requirement for electric energy 
produced by qualifying cogeneration and small power production 
facilities (QFs). This rulemaking proceeding was initiated to implement 
section 210(m) of the Public Utility Regulatory Policies Act of 1978 
(PURPA),\2\ which mandates termination of the requirement that an 
electric utility enter into a new contract or obligation to purchase 
electric energy from QFs \3\ if the Commission finds that the QF has 
nondiscriminatory access to one of three categories of markets defined 
in section 210(m)(1)(A), (B), or (C) of PURPA, as amended.
    2. As relevant here, section 210(m) provides for the following:
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    \1\ New PURPA Section 210(m) Regulations Applicable to Small 
Power Production and Cogeneration Facilities, Order No. 688, 71 FR 
64342 (Nov. 1, 2006), FERC Stats. & Regs. ] 31,233 (2006) (Final 
Rule).
    \2\ Section 210(m) was added to PURPA by section 1253 of the 
Energy Policy Act of 2005 (EPAct 2005). See Pub. L. 109-58, 1253, 
119 Stat. 594, 967 (2005).
    \3\ The requirement that an electric utility enter into a new 
contract or obligation to purchase electric energy from QFs is 
referred to herein as either the mandatory purchase obligation or, 
more simply, the purchase requirement.

    (i) Termination of the requirement that an electric utility 
enter into a new contract or obligation to purchase electric energy 
from a QF after certain specified findings are made by the 
Commission;
    (ii) Reinstatement of the purchase requirement upon a showing 
that the conditions for terminating the requirement are no longer 
met;
    (iii) Termination of the requirement that an electric utility 
enter into new contracts to sell electric energy to QFs after 
certain specified findings are made by the Commission;
    (iv) Reinstatement of the sale requirement upon a showing that 
the conditions for terminating the requirement are no longer met; 
and,
    (v) Preservation of existing contracts and obligations to 
purchase electric energy or capacity from, or to sell electric 
energy or capacity to, a QF.

    The Final Rule amended Part 292 of the Commission's regulations, 
pertaining to electric utilities' obligation to purchase electric 
energy from or sell electric energy to a QF, to address these 
provisions of section 210(m) and also to provide a process for applying 
for the reinstatement of the requirements to purchase electric energy 
from or to sell electric energy to QFs upon a showing that the 
conditions for the removal of those requirements are no longer met.
    3. New Sec.  292.309 of the Commission's regulations describes the 
findings that the Commission must make to justify relieving an electric 
utility's obligation to enter into new QF purchase contracts. If the 
Commission finds that the QF has nondiscriminatory access to one of 
three types of wholesale markets described in subparagraphs (A), (B), 
and (C) of section 210(m)(1), the requirement that the electric utility 
enter into new contracts or obligations is terminated. In the Final 
Rule, the Commission concluded that the four existing ``Day 2'' markets 
\4\ satisfy the requirements of subparagraph (A). The Commission found 
that the ``Day 1'' markets \5\ satisfy some, but not all, of the 
requirements of subparagraph (B). Finally, the Commission found that 
the markets operated by the Electric Reliability Council of Texas 
(ERCOT) satisfy the requirements of subparagraph (C). All of these 
markets are administered by regional transmission organizations (RTOs) 
or independent system operators (ISOs).
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    \4\ The four existing ``Day 2'' markets are those auction based 
day-ahead and real-time markets operated by the Midwest Independent 
Transmission System Operator Corp. (MISO), PJM Interconnection, LLC 
(PJM), New York Independent System Operator, Inc. (NYISO), and ISO 
New England, Inc. (ISO-NE).
    \5\ The existing ``Day 1'' markets are those real-time markets 
operated by the California Independent System Operator Corporation 
(CAISO) and the Southwest Power Pool (SPP).
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    4. With regard to analyzing whether a QF has nondiscriminatory 
access to one of these markets, the Commission adopted three rebuttable 
presumptions. First, the Final Rule concluded that the existence of an 
open access transmission tariff (OATT), or a reciprocity tariff filed 
by a non-public utility pursuant to the Commission's open access 
regulations,\6\ justified a rebuttable presumption that QFs have 
nondiscriminatory access to the markets in the transmission provider's 
service territory. Second, the Commission adopted a rebuttable 
presumption that QFs located within one of the four existing ``Day 2'' 
markets also have nondiscriminatory access to those markets. Third, the 
Commission concluded that QFs with a net capacity no greater than 20 MW 
may not have nondiscriminatory access to any market, notwithstanding 
the availability of service under an OATT or their location within a 
``Day 2'' market. The Commission therefore adopted a rebuttable 
presumption that such small

[[Page 35873]]

QFs do not have nondiscriminatory access to any market.
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    \6\ 18 CFR 35.28(e). An OATT provides interconnection as well as 
transmission services on a nondiscriminatory basis.
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    5. Requests for rehearing and/or clarification of these rulings, 
and the procedure implementing them, were received from the American 
Forest and Paper Association (American Forest & Paper) and California 
Cogeneration Council (CCC), Central Vermont Public Service Corporation 
(Central Vermont), Cogeneration Association of California and the 
Energy Producers and Users Coalition (Cogeneration Association of 
California), the Council of Industrial Boiler Owners (CIBO), Deere & 
Company (Deere), Edison Electric Institute (EEI), Oklahoma Gas and 
Electric Company (OG&E), jointly from the Electricity Consumers 
Resource Council (ELCON), the American Iron and Steel Institute, the 
American Chemistry Council, and the Council of Industrial Boiler Owners 
(Industrial Parties), National Rural Electric Cooperative Association, 
(NRECA), Occidental Chemical Corporation (Occidental), PacifiCorp, and 
Public Interest Organizations (PIOs). Southern California Edison (SCE) 
and PJM Interconnection, Inc. (PJM) filed answers to the requests for 
rehearing. ELCON and Cogeneration Association of California filed 
answers those answers.\7\
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    \7\ Rule 713(d) of the Commission's Rules of Practice and 
Procedure, 18 CFR 383.713(d), provides that the Commission will not 
permit answers to requests for rehearing. We will, accordingly, 
reject SCE and PJM's answers to the requests for rehearing. Rule 
213(a)(2) of the Commission's Rules of Practice and Procedure, 18 
CFR 385.213(a)(2), prohibits an answer to an answer unless otherwise 
ordered by the decisional authority. We are not persuaded to accept 
the answers of ELCON and Cogeneration Association of California and 
will, therefore, reject them. The alternative motions to reject of 
ELCON and Cogeneration Association of California are rejected as 
moot.
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    6. As discussed below, the Commission generally denies the requests 
for rehearing of the Final Rule. The Commission continues to believe 
that the Final Rule appropriately implements section 210(m) by 
identifying what type of markets satisfy the requirements of sections 
210(m)(1)(A), (B), and (C) and the criteria that will be used to 
determine whether a QF has nondiscriminatory access to one of those 
markets. We therefore do not disturb the basic implementation structure 
established in that order. We do, however, grant clarification 
regarding certain specific matters. The Commission addresses each of 
these issues in turn.

II. Discussion

A. Three Types of Markets

    7. Section 210(m)(1) identifies three types of markets, 
nondiscriminatory access to which will satisfy the findings the 
Commission must make to terminate an electric utility's purchase 
requirement. As the Commission explained in the Final Rule, the 
statutory language of sections 210(m)(1)(A), (B), and (C) requires us 
to differentiate among distinct types of markets when analyzing whether 
an electric utility will be relieved of its purchase obligation. The 
Commission must terminate the mandatory purchase obligation if we find 
that a QF has nondiscriminatory access to:

    (A) ``independently administered, auction-based day ahead and 
real time wholesale markets for the sale of electric energy'' and 
``wholesale markets for long-term sales of capacity and electric 
energy'';
    (B) ``transmission and interconnection services that are 
provided by a Commission-approved regional transmission entity and 
administered pursuant to an open access transmission tariff that 
affords nondiscriminatory treatment to all customers'' and 
``competitive wholesale markets that provide a meaningful 
opportunity to sell capacity, including long-term and short-term 
sales, and electric energy, including long-term, short-term and 
real-time sales, to buyers other than the utility to which the [QF] 
is interconnected''; \8\ or,
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    \8\ In determining whether a meaningful opportunity to sell 
exists, section 210(m)(1)(B) directs the Commission to consider, 
among other factors, evidence of transactions within the relevant 
market.
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    (C) ``wholesale markets for the sale of capacity and electric 
energy that are, at a minimum, of comparable competitive quality as 
markets described in subparagraphs (A) and (B).''

    8. In the Final Rule, the Commission considered the specific 
criteria set forth in these statutory provisions and concluded that 
certain markets in the United States satisfied some or all of the 
requirements of each. The Commission rejected proposals to adopt a 
single standard for relief, which in effect would interpret sections 
210(m)(1)(A), (B), and (C) as collectively defining a single type of 
market, access to which would require termination of the purchase 
requirement. The Commission found that the most reasonable 
interpretation of section 210(m)(1) is that Congress, in separately 
describing three different types of markets, was requiring the 
Commission to differentiate among each type of market when determining 
whether to terminate the purchase requirement.
1. Section 210(m)(1)(A)
    9. Section 210(m)(1)(A) of PURPA requires the Commission to 
terminate an electric utility's obligation to purchase from a QF if the 
QF has nondiscriminatory access to (i) independently administered, 
auction-based, day ahead and real time wholesale markets for the sale 
of electric energy; and (ii) wholesale markets for long-term sales of 
capacity and electric energy. In the Final Rule, the Commission found 
that the four existing ``Day 2'' markets, MISO, PJM, ISO-NE and NYISO, 
satisfy the first prong of section 210(m)(1)(A) because the markets 
administered by these RTO/ISOs are, as required by the statute, 
independently administered, auction-based day ahead and real time 
wholesale markets for electricity.\9\ The Commission further found that 
the existence of bilateral long-term contracts for long-term sales of 
capacity and energy in these markets satisfies the second prong of 
section 210(m)(1)(A). Since both of these requirements are satisfied, 
the Commission concluded that a showing of nondiscriminatory access to 
any of these ``Day 2'' markets would terminate the purchase 
requirement.
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    \9\ The Commission stated that any future determinations of 
whether a new ``Day 2'' market satisfies the requirements of section 
210(m)(1)(A) would be considered on a case-by-case basis, either in 
response to an application for termination of the mandatory purchase 
obligation or a petition for declaratory order.
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Requests for Rehearing
    10. No petitioner challenges the Commission's determination that 
the existing ``Day 2'' RTO/ISO markets satisfy the requirements of the 
first prong of section 210(m)(1)(A), i.e., that they are independently 
administered, auction-based day ahead and real time wholesale 
electricity markets. Requests for rehearing instead focus on the second 
prong, regarding whether a wholesale market for long-term sales of 
capacity and electric energy also exists in these regions. PIOs argue 
that the mere existence of some bilateral long-term contracts does not 
demonstrate the existence of a competitive wholesale market for long-
term sales or actual ``meaningful opportunities'' for QFs to sell 
energy or capacity long-term to multiple buyers. PIOs therefore contend 
that the Commission erred in finding that the ``Day 2'' markets satisfy 
the requirements of section 210(m)(1)(A). Cogeneration Association of 
California agrees that the existence of a ``Day 2''

[[Page 35874]]

market does not equate to a long-term market, arguing that access to a 
long-term market is essential to provide the assurance of long-term 
revenue necessary to provide incentives for construction of new 
resources.
    11. American Forest & Paper and CCC argue that there has never been 
a time in the history of the power industry when some bilateral 
contracts did not exist. They contend that there is no evidentiary 
basis that shows such contracts are available to QFs on a 
nondiscriminatory basis or that there is a market for such contracts. 
They argue that the word ``market'' presumes more than an occasional, 
isolated transaction. American Forest & Paper and CCC argue that in the 
Final Rule the Commission not only fails to explain why the existence 
of bilateral contracts constitutes a meaningful competitive market, but 
also fails to establish any standard for what constitutes a ``long term 
sale,'' examine any of the bilateral contracts it believes exist to 
determine if they meet any such standard, or consider whether bilateral 
contracts are in fact available to QFs in any meaningful sense.
    12. Cogeneration Association of California adds that the 
insufficiency of the bilateral markets is also demonstrated by the lack 
of meaningful participation in utility requests for offers. 
Cogeneration Association of California argues that the current practice 
of bilateral contracting is not indicative of a competitive market, nor 
is it proof that QFs have a meaningful opportunity to participate in 
whatever markets are there. It argues that there is significant 
discrimination against QFs when they attempt to enter into bilateral 
contracts.
    13. American Forest & Paper and CCC also argue that the Final Rule 
errs as a matter of law by determining generically that ``Day 2'' 
markets satisfy section 210(m)(1)(A) rather than requiring utilities to 
demonstrate, on a case-by-case basis, the factual basis upon which 
relief is requested, which they argue is required by section 210(m)(3). 
American Forest & Paper and CCC contend that the Commission simply 
presumed adequate wholesale markets existed in the ``Day 2'' markets, 
rendering the language of section 210(m)(1)(A)(ii) of the statute a 
nullity by not requiring applicants to set forth the factual basis on 
which relief is requested. American Forest & Paper and CCC complain 
that QFs have been denied the opportunity to challenge the specific 
findings after sufficient notice of the factual claims being made.
    14. American Forest & Paper and CCC cite Alliant Energy Corporate 
Services Inc.\10\ as support for its belief that section 210(m)(3) 
requires notice to each affected QF prior to the Commission making a 
determination under section 210(m)(1). American Forest & Paper and CCC 
compare the Commission's generic treatment of ``Day 2'' markets with 
its case-by-case procedures for the reinstatement of the obligation, 
despite the almost identical statutory language in sections 210(m)(3) 
and 210(m)(4). American Forest & Paper argues that ``regulations cannot 
alter the statutory scheme,'' \11\ stating that the procedural 
requirements have been inappropriately interpreted away in the Final 
Rule.
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    \10\ 113 FERC ] 61,024 (2005).
    \11\ American Forest & Paper Request for Rehearing at 13 (citing 
P. Gioso & Sons, Inc. v. Occupational Safety and Health Review 
Commission, 115 F.3d 100, 105 (1st Cir. 1997)).
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    15. In American Forest & Paper and CCC's view, Congressional intent 
to encourage QF development supports interpreting section 
210(m)(1)(A)(ii) as requiring the Commission to find, based on specific 
evidence, that there is a meaningfully competitive market prior to 
terminating the mandatory purchase obligation. American Forest & Paper 
and CCC note, for example, that EPAct 2005 did not repeal PURPA and 
provided for termination of the purchase requirement only if a very 
particular demonstration is made.
    16. Industrial Parties similarly argue that the Commission erred in 
categorically finding that ``Day 2'' markets provide QFs with access to 
long-term wholesale markets. Industrial Parties contend that the 
Commission has ignored evidence that establishes that these markets are 
in their infancy. While acknowledging that suppliers will offer QFs a 
bilateral contract in the organized markets, Industrial Parties argue 
that the rates and terms and conditions of such contracts typically are 
not truly long-term and are discriminatory. Industrial Parties state 
that the long-term markets that exist are predominantly for resale--
generators selling to load serving entities that in many cases have 
divested generation--and that these contracts are typically for a 
period of 6 to 18 months.
    17. Industrial Parties also argue that the Commission incorrectly 
assumed that access to short-term ``Day 2'' markets is equivalent to a 
finding of access to long-term markets under section 210(m)(1)(A)(ii). 
Industrial Parties contend that the Commission must address the 
definition of ``long-term,'' arguing that the Commission appears to 
view a market in excess of one year as long-term. Industrial Parties 
contend that a long-term market is a market of several years' duration 
or at least the timeframe for planning a new generator, which they 
state is three to five years for a gas-fired combined cycle unit. 
Industrial Parties ask that the Commission require utility applicants 
to present information on the short- and long-term capacity obligations 
of load-serving entities in the relevant markets, their practices for 
meeting such obligations, and any barriers to entry into such markets.
    18. Finally, American Forest & Paper and CCC argue that the 
Commission's interpretation of section 210(m)(1)(A)(ii) violates rules 
of statutory construction. Because subparagraph (C) specifically refers 
to markets for the sale of capacity under both subparagraphs (A) and 
(B), defining a third type of market that is ``similar'' to 
subparagraphs (A) and (B), American Forest & Paper and CCC argue it is 
nonsensical to conclude that the markets for capacity referenced in 
subparagraphs (A)(ii) and (B)(ii) are not similar as between 
themselves. American Forest & Paper and CCC therefore argue that the 
Commission erred by not interpreting subparagraph (A)(ii) as imposing 
qualitative requirements comparable to those imposed under subparagraph 
(B)(ii). In American Forest & Paper and CCC's view, otherwise the 
inclusion of a requirement that the Commission review specific 
``evidence of transactions'' in subparagraph (B)(ii) would require the 
Commission to ignore evidence of transactions when applying 
subparagraph (A)(ii), which the Commission did not do in the Final 
Rule.
Commission Determination
    19. The Commission denies rehearing of the determination that the 
four existing ``Day 2'' markets (MISO, PJM, NYISO, and ISO-NE) satisfy 
the requirements of the second prong of section 210(m)(1)(A). 
Petitioners on rehearing essentially argue that the Commission should 
have imposed a standard higher than what the statutory language 
literally requires, i.e., nondiscriminatory access to ``wholesale 
markets for long-term sales of capacity and electric energy.'' The 
Commission declined to do so in the Final Rule and we affirm that 
determination here.
    20. The Commission did not simply assume the existence of long-term 
markets in the ``Day 2'' markets, as some petitioners argue. Rather, 
the Commission found that the existence of bilateral long-term 
contracts for long-term sales of capacity and energy is a sufficient 
indication of a market. The Commission continued that it is reasonable 
to conclude that the

[[Page 35875]]

subparagraph (A)(ii) requirement for long-term markets is met because 
bilateral long-term contracts are available to participants in the 
footprints of the MISO, PJM, ISO-NE, and NYISO. The Commission noted 
that long-term contracts were to be expected in these markets because 
of the nature of these markets. In this regard, the transmission access 
offered by RTOs allows suppliers (including QFs) the opportunity to 
enter into long-term bilateral contracts. RTOs have no incentive to 
favor one set of suppliers over others in providing transmission 
access. By eliminating pancaked rates, eliminating problems with 
internal loop flows, and improving the reliability of transmission 
operations over a broad multi-utility region, an RTO offers regional 
transmission service which facilitates longer-term contracting 
practices. This is because an RTO's footprint encompasses many 
different wholesale buyers, providing significant opportunity for a 
seller to reach many potential wholesale buyers.
    21. In addition, organized markets operated by an RTO facilitate 
long-term bilateral contracts between sellers (including QFs) and 
wholesale buyers by reducing the costs to sellers of making long-term 
bilateral supply commitments. In the event a seller is unable to 
produce the energy required under a bilateral contract (for example, 
because of an outage), the seller can easily acquire replacement energy 
from the organized market at a transparent and competitive price. Even 
when the seller is physically capable of producing its contractually-
required energy, the seller can acquire the energy from the RTO's 
market whenever it is cheaper to do so. Both of these factors reduce 
the cost to a seller of entering into a long-term bilateral 
contract.\12\
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    \12\ Final Rule at P 120.
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    22. With respect to bilateral long-term markets in these RTO/ISOs, 
the Commission noted that no commenters argued that long-term contracts 
do not exist in these markets or that QFs are precluded from entering 
into them with willing buyers.\13\ The Commission also pointed out that 
electronic quarterly report (EQR) filings indicate that there are in 
fact contracts for long-term sales of capacity and energy in each of 
the ``Day 2'' markets. The Commission concluded that the existence of 
these long-term contracts is a sufficient indication that long-term 
wholesale markets exist in those regions. It is telling that no 
petitioner on rehearing challenges (indeed, several petitioners 
concede) that long-term contracts exist in the ``Day 2'' markets. 
Instead, petitioners argue that existence of such contracts does not 
necessarily indicate that an adequate market for long-term energy and 
capacity exists. Yet the very fact that buyers and sellers of long-term 
energy and capacity have found each other, evidenced by the contracts 
they have entered into, demonstrates that a market for such products 
does in fact exist, which is all that the statute requires.
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    \13\ Final Rule at P 117-20.
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    23. The thrust of many of the arguments on rehearing is that the 
Commission should have considered whether these long-term markets were 
competitive or as robust as QFs would like. That is not the standard 
set forth by Congress in section 210(m)(1)(A)(ii), which requires only 
that a long-term market is present, not that it be competitive or that 
it meet the subjective preferences of all QFs. As the Commission noted 
in the Final Rule, Congress knew how to impose a more specific level of 
review regarding the quality of the relevant long-term market since, in 
contrast to the language it used in section 210(m)(1)(A)(ii), it 
expressly used prescriptive language in section 210(m)(1)(B)(ii).
    24. Section 210(m)(1)(A)(ii) requires only that we find access to 
``wholesale markets for long-term sales of capacity and electric 
energy.'' The term ``market'' is not defined with respect to any 
particular number of purchasers or sellers or the quality of the 
contracts available. One definition is ``the action or business of 
buying and selling; an instance of this, a commercial transaction; a 
(good or bad) bargain.'' \14\ Another definition is ``a meeting 
together of people for the purpose of trade by private purchase and 
sales and usually not by auction.'' \15\ These standard definitions 
support the Commission's finding that the ability of QF sellers to 
reach purchasers and the existence of long-term contracts for capacity 
and energy are sufficient to determine that ``markets'' exist for 
purposes of section 210(m)(1)(A)(ii). In contrast to section 
210(m)(1)(A)(ii), section 210(m)(1)(B)(ii) requires us to find access 
to ``competitive wholesale markets that provide a meaningful 
opportunity to sell capacity, including long-term and short-term sales, 
and electric energy, including long-term, short term and real-time 
sales.'' Under this statutory directive, the Commission must not only 
find that markets exist, but it must assess the quality of the markets 
and find that they are ``competitive.'' Congress chose not to require a 
finding of ``competitive'' long-term markets as a condition of invoking 
section 210(m)(1)(A)(ii) and we have given reasonable meaning to this 
difference in language.\16\
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    \14\ The New Oxford English Dictionary Vol. 1 A-M (1993 ed.).
    \15\ Webster's New Collegiate Dictionary (1979 ed.).
    \16\ Some petitioners argue that the Commission's reliance on 
EQR reports to find the existence of a long-term market in ``Day 2'' 
regions is contradicted by Congress' reference to ``evidence of 
transactions'' in section 210(m)(1)(B), but not in section 
210(m)(1)(A). The requirement in subparagraph (B) for evidence of 
transactions does not bar the use of such evidence in subparagraph 
(A), but merely indicates that such evidence is not required under 
subparagraph (A).
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    25. Congress's decision to establish different standards in 
subparagraphs (A) and (B) makes sense in light of the ultimate question 
of whether a QF has nondiscriminatory access to potential purchasers 
other than the host utility, sufficient to justify terminating the 
purchase requirement, which is the overarching theme of section 
210(m)(1). In the ``Day 2'' markets, which were in existence when EPAct 
2005 was enacted and of which Congress was aware when it was 
considering PURPA reform, energy sold under bilateral long-term 
contracts as well as in the competitive day-ahead and real-time energy 
markets is simply scheduled as a delivery to the RTO and ISO grid. 
These market conditions make it possible for parties to enter into 
long-term contracts with confidence that electric energy sold pursuant 
to these contracts will be delivered. It is reasonable to conclude, 
therefore, that Congress considered the criteria specified for long-
term contracts in section 210(m)(1)(B) unnecessary for section 
210(m)(1)(A). This explains the distinctions embedded in the standards 
set forth in sections 210(m)(1)(A) and 210(m)(1)(B).
    26. It is true, as petitioners point out, that in some ``Day 2'' 
markets there is no formalized market for long-term sales of energy and 
capacity. It may also be true that such long-term markets are nascent 
and that the sales that do occur are predominantly to load serving 
entities for resale. All that is required by section 210(m)(1)(A)(ii), 
however, is that there be a market, not that it has particular market 
attributes desired by petitioners. Petitioners have offered no 
reasonable alternative to our interpretation of section 210(m)(1).
    27. Petitioners are correct to point out that the Commission did 
not expressly define what length of contract it considered ``long-
term'' within the meaning of section 210(m)(1)(A)(ii). The Commission 
explained, however, that it was relying on EQR data to find that long-
term contracts existed in the ``Day 2'' markets. Long-term contracts 
are defined for EQR purposes as having a

[[Page 35876]]

term of one year or more and, thus, the Commission's findings regarding 
long-term contracts in the Final Rule incorporated that definition. 
While some petitioners argue that a longer-term should have been used, 
we continue to believe that contracts of a year or more are 
sufficiently long-term to meet the statutory requirement that there be 
``wholesale markets for long-term sales of capacity and energy'' within 
the meaning of section 210(m)(1)(A)(ii).\17\
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    \17\ Although the statute contrasts real-time, day-ahead, and 
long-term wholesale sales, it provides no definition of those 
categories of transactions. Nevertheless, the terms real-time and 
day-ahead markets were well known with respect to ISOs and RTOs at 
the time EPAct 2005 was enacted and definitions of these markets 
were well understood, i.e., Congress knew the meaning the terms as 
used with respect to ISOs and RTOs existing at the time of enactment 
of EPAct 2005. Additionally, the Commission at the time of enactment 
of EPAct 2005 had for years defined long-term contracts under the 
OATT as one year or longer. Similarly, the Commission has treated 
power sales with a contract term of greater than one year to be 
``long-term'' for reporting purposes. See, e.g., Revised Public 
Utility Filing Requirements, Order No. 2001, 67 FR 31043, FERC 
Stats. & Regs. ] 31,127 (2002), Order No. 2001-A, 100 FERC ] 61,074, 
reconsideration and clarification denied, Order No. 2001-B, 100 FERC 
] 61,342 (2002). We thus believe it is reasonable to use the 
convention of treating contracts of a year or more as ``long-term'' 
consistent with our longstanding practice.
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    28. We note that the Commission has initiated a proceeding to 
explore ways to improve the operation of wholesale organized electric 
markets administered by RTOs and ISOs, including actions the Commission 
might take to further improve opportunities for long-term contracting 
in RTO and ISO regions.\18\ While we disagree with petitioners who 
argue that QFs above 20 MW do not have access to long-term contracting 
opportunities in organized markets, or that section 210(m)(1)(A) 
requires us to find ``competitive'' or ``robust'' contracting 
opportunities, we are taking steps to facilitate additional 
opportunities for long-term contracting.
---------------------------------------------------------------------------

    \18\ Wholesale Competition in Regions with Organized Electric 
Markets, 119 FERC ] 61,306.
---------------------------------------------------------------------------

    29. The Commission also rejects arguments that it may not make 
generic findings in this rulemaking as to the ``Day 2'' markets 
satisfying the requirements of section 210(m)(1)(A). The Commission has 
broad discretion to adopt generic policy or make generic findings 
through the rulemaking process rather than case-by-case 
adjudications.\19\ Establishing generic findings in this rulemaking 
provides all parties, including electric utilities and QFs alike, a 
reasonable chance to be heard on common issues that arise in various 
market structures and involving classes of QFs. Indeed, no party has 
sought rehearing of the Commission's conclusion that the ``Day 2'' 
markets satisfy the first prong of section 210(m)(1)(A). It is just as 
appropriate for the Commission to find generically, in this rulemaking, 
that long-term markets exist in the ``Day 2'' RTO/ISOs as it is to find 
that those RTO/ISOs operate independently administered, auction-based 
day ahead and real time wholesale markets within the meaning of section 
210(m)(1)(A)(i).
---------------------------------------------------------------------------

    \19\ Securities and Exchange Comm'n v. Chenery, 332 U.S. 194, 
202-03, reh'g denied, 332 U.S. 747 (1947).
---------------------------------------------------------------------------

    30. These generic findings do not violate the requirements of 
section 210(m)(3), as some petitioners argue. Under section 210(m)(1), 
the Commission must terminate the purchase requirement if it makes 
certain findings regarding nondiscriminatory access to specified 
markets. That provision of the statute does not specify the particular 
procedural mechanism the Commission must use in making those findings 
and, thus, the Commission has discretion to act through a rulemaking, 
case-by-case determinations, or some combination thereof. Section 
210(m)(3) does not, as the petitioners appear to assume, require the 
Commission to await an application from an electric utility in order to 
make any of the particular findings specified in section 210(m)(1). 
While the Commission made certain generic findings in the Final Rule, 
it also required electric utilities (including those in the ``Day 2'' 
markets) that seek relief from the obligation to enter into new 
contracts or obligations with QFs to file an application pursuant to 
regulations implementing section 210(m)(3).\20\ Thus, the Commission 
has incorporated the application process into its implementing 
regulations, combining the application procedures with generic findings 
and rebuttable presumptions to streamline the Commission's review. The 
resulting structure is fully consistent with the requirements of both 
sections 210(m)(1) and 210(m)(3).\21\
---------------------------------------------------------------------------

    \20\ Final Rule at P 102.
    \21\ The comparative structures of sections 210(m)(3) and 
210(m)(4) do not support a different outcome. Section 210(m)(4) 
specifies the procedural requirements for reinstating the purchase 
requirement after the Commission has entered an order terminating 
that requirement and, thus, does not govern the Commission's initial 
procedures for acting to terminate the requirement.
---------------------------------------------------------------------------

2. Section 210(m)(1)(B)
    31. Section 210(m)(1)(B) requires termination of the purchase 
obligation if a QF has nondiscriminatory access to (i) transmission and 
interconnection services provided by a Commission-approved regional 
transmission entity pursuant to an open access tariff and (ii) 
competitive wholesale markets providing a meaningful opportunity to 
sell long-term and short-term capacity and electricity to buyers other 
than the interconnecting electric utility. The Commission concluded in 
the Final Rule that the CAISO and SPP are regional transmission 
entities within the meaning of the first prong of section 210(m)(1)(B), 
but made no findings as to the second prong for any market, including 
those operated by CAISO and SPP. The Commission also stated that any 
future determinations of what transmission providers qualify as a 
regional transmission entity within the meaning of the first prong will 
be made on a case-by-case basis. The Commission provided examples of 
factors it may consider in making that determination, such as 
sufficient regional scope or configuration of the multiple discrete 
transmission systems the regional transmission entity controls.
Requests for Rehearing
    32. Occidental argues that the Commission erred in reserving the 
discretion to deem an entity a ``Commission-approved regional 
transmission entity'' in the context of a section 210(m) proceeding. 
Because section 210(m)(1)(B)(i) refers to a ``Commission-approved'' 
entity, Occidental argues that a transmission provider must have been 
deemed by the Commission to be a ``regional transmission entity'' prior 
to the filing of an application for relief from the purchase 
requirement.
    33. PacifiCorp argues that evidence of robust bilateral markets or 
actual sales by a QF to wholesale non-PURPA purchasers should be 
considered when the Commission determines whether QFs have the 
requisite ``meaningful opportunity'' to sell capacity and energy to 
other buyers within the meaning of section 210(m)(1)(B)(ii). PacifiCorp 
offers factual examples of QF plans to participate in wholesale 
markets, depending on market prices, although it acknowledges that the 
examples it used are extreme and did not materialize. PacifiCorp asks 
the Commission to establish a rebuttable presumption that evidence of a 
robust bilateral market featuring liquid trading points, or actual 
sales by QFs, should be adopted for purposes of implementing section 
210(m)(1)(B)(ii). Alternatively, PacifiCorp asks the Commission to 
provide further guidance as to how the standards of that section will 
be applied.

[[Page 35877]]

    34. With regard to the SPP market, OG&E argues that the Commission 
erred in declining to find that utilities operating in SPP also satisfy 
the second prong of section 210(m)(1)(B) or to provide guidance with 
respect to the information required for utilities to make such a 
showing. OG&E argues that its comments on the NOPR adequately 
demonstrated that QFs have nondiscriminatory access to competitive 
markets within SPP. If the evidence it submitted was insufficient, OG&E 
claims the Commission erred by failing to provide guidance as to what 
type of information would satisfy the Commission's requirements. OG&E 
contends that such guidance would reduce the costs and burdens 
associated with preparing an application under section 210(m).
    35. With regard to the CAISO market, Cogeneration Association of 
California argues that the lack of new construction in California, 
despite a clear supply shortage, is evidence that competitive long-term 
markets do not exist in that region. Cogeneration Association of 
California also argues that competitive markets must have price 
transparency, including both pricing terms and non-price terms, 
contending that there is virtually no disclosure to any market 
participant of prices secured or approved for capacity or energy 
purchased by utilities. Industrial Parties point to other 
characteristics of the California market that, in their view, would 
preclude a finding of access to sufficiently competitive markets, such 
as exit fees, the lack of direct access, and the dominance of utility 
generation in an otherwise thinly traded market.
Commission Determination
    36. We disagree with Occidental's assertion that a transmission 
entity must have been deemed by the Commission to be a ``regional 
transmission entity'' prior to the filing of an application for relief 
from the purchase requirement. As we explained in the Final Rule, 
section 210 does not define regional transmission entity and, 
therefore, the Commission has discretion in interpreting that term. At 
the time of enactment of section 210(m), Congress was aware of the 
existence of Commission-approved RTOs and ISOs with varying degrees of 
regional scope (some spanning many states and some covering only large 
individual states), as well as the continuing voluntary development of 
various types of transmission organizations.\22\ It is reasonable to 
conclude that Congress, by using the generic term ``regional 
transmission entity'' in section 210(m)(1)(B)(i), intended to leave it 
to the Commission's discretion to determine on a case-be-case basis 
whether or not an entity is regional within the meaning of the 
statute.\23\
---------------------------------------------------------------------------

    \22\ Indeed Congress, in EPAct 2005 incorporated into the 
Federal Power Act (FPA) definitions of RTO and ISO, with the RTO 
definition specifically recognizing that such an entity must be of 
sufficient ``regional'' scope, whereas the ISO definition does not 
contain a sufficient regional scope element. Pub. L. 109-58, 1291, 
119 Stat. 594, 984 (2005) (codified at 16 U.S.C. 796(27), (28)). Cf. 
Pub. L. 109-58, 1286, 119 Stat. 594, 981 (2005) (adding section 
206(a)(2) to the FPA, allowing Commission to order refunds for 
certain sales in ``organized'' markets).
    \23\ Congress in section 210(m) did not use the term ``regional 
transmission organization'' and thus presumably did not intend to 
limit a ``regional transmission entity'' to the regional scope 
requirements of Order No. 2000. Regional Transmission Organizations, 
Order No. 2000, 65 FR 809 (Jan. 6, 2000), FERC Stats. & Regs. ] 
31,089 (1999), order on reh'g, Order No. 2000-A, 65 FR 12088 (Mar. 
8, 2000), FERC Stats. & Regs. ] 31,092 (2000), dismissed sub nom. 
Pub. Util. Dist. No. 1 of Snohomish County, Washington v. FERC, 272 
F.3d 607 (D.C. Cir. 2001).
---------------------------------------------------------------------------

    37. We also deny rehearing of the decision not to find in the 
context of this rulemaking that the SPP market satisfies the second 
prong of section 210(m)(1)(B). While OG&E claims to have provided in 
its initial comments evidence demonstrating the quality of the SPP 
market,\24\ what OG&E provided was little more than cursory comments 
and a description of bidding procedures that are being adopted in 
Oklahoma. Section 210(m)(1)(B)(ii) requires a showing of ``competitive 
wholesale markets that provide a meaningful opportunity to sell 
capacity, including long-term and short-term sales, and electric 
energy, including long-term, short-term and real-time sales, to buyers 
other than the utility to which the qualifying facility is 
interconnected.'' This provision also provides that ``[i]n determining 
whether a meaningful opportunity to sell exists the Commission shall 
consider, among other factors, evidence of transactions within the 
relevant market.'' We do not find OG&E's cursory submission sufficient 
to meet the statutory requirements. Moreover OG&E did not include any 
evidence of transactions in the SPP market. There was, and continues to 
be, an insufficient record in this proceeding to find that the SPP 
market satisfies the second prong of section 210(m)(1)(B).
---------------------------------------------------------------------------

    \24\ OG&E Comments at 4-6.
---------------------------------------------------------------------------

    38. With regard to OG&E's and PacifiCorp's requests for further 
guidance, we believe that the statutory language requiring that a QF 
have a meaningful opportunity to sell capacity and energy to buyers 
other than the interconnected utility means an actual, and not just 
theoretical, opportunity. Concrete evidence of transactions would 
further that finding, as the statutory language implies. To the extent 
such evidence is not available, we would expect at a minimum a 
petitioning electric utility to explain any lack of evidence of 
transactions and to provide a reasoned explanation of how the 
Commission could find that a meaningful opportunity to sell to buyers 
other than the interconnected utility exists in the absence of a 
history of transactions.\25\ PacifiCorp's evidence of QF proposals that 
never reached fruition does not provide an adequate basis for the 
Commission to make any presumptions regarding whether particular 
markets satisfy the requirements of section 210(m)(1)(B)(ii). We 
continue to believe that it is best to address on a case-by-case basis 
whether non-RTO/ISOs and RTO/ISOs that do not have both auction-based 
real-time and day-ahead markets satisfy those statutory 
requirements.\26\
---------------------------------------------------------------------------

    \25\ The Commission is aware that certain types of evidence of 
transactions may contain information that an electric utility 
considers to be confidential. If information is considered 
confidential by the electric utility, procedures exist to maintain 
its confidentiality.
    \26\ Final Rule at P 145.
---------------------------------------------------------------------------

    39. The claims of Cogeneration Association of California and the 
Industrial Parties regarding the lack of a sufficiently competitive 
market in California can be addressed in any individual cases 
concerning California. We note that the CAISO has been found only to 
satisfy section 210(m)(1)(B)(i) and that a separate finding of 
``competitive wholesale markets'' is required under section 
210(m)(1)(B)(ii). Thus, if a California utility makes a filing pursuant 
to section 210(m)(3) and Sec.  292.310 of the Commission's regulations, 
and claims that it satisfies the section 210(m)(1)(B) criteria for 
relief from the purchase obligation, the issue of whether ``competitive 
wholesale markets'' exist will be an issue in that proceeding and the 
burden will be on the applicant to make the required demonstration.\27\
---------------------------------------------------------------------------

    \27\ The Commission also left open the option of California 
utilities seeking a determination that the California market 
satisfies section 210(m)(1)(A) by filing requests for declaratory 
orders, after there is a functioning ``Day 2'' RTO/ISO in 
California. Final Rule at P 157.
---------------------------------------------------------------------------

3. A Single Standard of Relief
    40. As explained above, the Commission concluded in the Final Rule 
that the most reasonable interpretation of section 210(m)(1) is that 
Congress, in setting forth three discrete tests for three different 
types of markets, was directing the Commission to differentiate among 
three different

[[Page 35878]]

markets, access to which would require termination of the purchase 
requirement provided such access is available on a nondiscriminatory 
basis. A number of petitioners had advocated a different interpretation 
of section 210(m)(1), arguing that subparagraphs (A), (B), and (C), 
when read together, establish a single standard for relief from the 
purchase requirement. In their view, these separate provisions together 
require electric utilities to demonstrate that a QF would remain 
economically viable or would otherwise have access to the technical 
equivalent of the purchase requirement in order to terminate the 
purchase requirement. The Commission rejected that view by interpreting 
section 210(m)(1) as establishing different standards for each of the 
three types of markets identified in subparagraphs (A), (B), and (C).
Requests for Rehearing
    41. American Forest & Paper and CCC again challenge the 
Commission's determination that the three standards of relief described 
in section 210(m)(1) were intended to be different in terms of the 
organization and competitiveness of the relevant market or the 
evidentiary showings required for each. They argue that EPAct 2005 did 
not repeal PURPA or the Commission's obligation to encourage QF 
development and, therefore, the Commission's interpretation of section 
210(m)(1) is unreasonable. American Forest & Paper and CCC suggest that 
section 210(m)(1)(C) clearly requires markets under subparagraphs (A), 
(B) and (C) to be of similar competitive quality since markets that 
satisfy subparagraph (C) must be ``similar'' to those described in 
subparagraphs (A) and (B). American Forest & Paper and CCC conclude 
that the Commission has adopted an unreasonable statutory construction 
by interpreting section 210(m)(1) as referring to three distinct types 
of markets.
Commission Determination
    42. The Commission denies requests for rehearing of the 
determination not to adopt a single test to evaluate whether the 
requirements of section 210(m)(1) are met. We continue to believe, as 
we found in the Final Rule, that the most reasonable interpretation of 
section 210(m)(1) is that Congress, in setting forth discrete tests for 
three different types of markets, was requiring the Commission to 
differentiate among these markets and the differing circumstances they 
present in determining whether a utility is relieved of the purchase 
requirement. As discussed above, this interpretation is supported by 
the different language Congress used in subparagraphs (A) and (B) and 
the consequent need to make meaningful distinctions in the explicit 
statutory language Congress used. Otherwise, subparagraphs (A) and (B) 
presumably would have been collapsed by Congress into one test.
    43. We agree the reference in section 210(m)(1)(C) to markets that 
are of ``comparable competitive quality as markets described in 
subparagraphs (A) and (B)'' indicates Congress' belief that those two 
types of markets share a certain set of competitive qualities. It does 
not follow, however, that the Commission should disregard the specific 
statutory tests in each of those subparagraphs when applying section 
210(m)(1). The structure of section 210(m)(1), which separately 
describes different types of markets, makes clear that Congress was 
establishing a particular set of tests for the Commission to apply. In 
the Final Rule, the Commission adopted the most reasonable 
interpretation of subparagraph (C)--that Congress believed the two 
types of markets identified in subparagraphs (A) and (B), while 
distinct between themselves, contain certain competitive qualities that 
justify termination of the purchase requirement for any QF with 
nondiscriminatory access to those markets. Subparagraph (C) directs the 
Commission to consider these competitive qualities when analyzing 
whether there are other markets that, while not meeting the specific 
requirements of subparagraphs (A) and (B), are sufficiently competitive 
to justify termination of the purchase requirement.
    44. The fact that the markets identified in subparagraphs (A) and 
(B) contain certain competitive qualities does not mean that they are 
the same type of market, or that a single test must be adopted for 
determining whether a particular market satisfies the requirements of a 
particular subparagraph. Such an interpretation would undermine 
Congress's decision to separately identify the two types of markets 
that it believes are sufficiently competitive to justify termination of 
the purchase requirement. It would also conflict with the particular 
determinations to be made under each of the subparagraphs. Subparagraph 
(A) explicitly refers to both ``day ahead and real time'' (i.e., ``Day 
2'') organized markets. RTO/ISO day-ahead and real time markets are 
operated pursuant to Commission tariffs containing market rules and 
market mitigation aimed at preventing exercises of market power. It is 
reasonable to conclude that Congress assumed these markets to be 
sufficiently competitive, in combination with markets for long-term 
contracts, to justify termination of the mandatory purchase obligation.
    45. As we noted in the Final Rule, ``Day 2'' markets are generally 
recognized as providing greater opportunities for QFs and other 
independent generators to make sales to a large number of buyers than 
other markets because the existence of day-ahead and real-time energy 
markets allows all competing generators to submit bids to participate 
on a nondiscriminatory basis in a market from which many buyers over a 
large area make purchases. While the ``Day 1'' markets also provide 
opportunities for independent generators to compete, the markets are 
more limited. It is therefore not surprising that the factual showing 
required under section 210(m)(1)(B) is more difficult relative to 
section 210(m)(1)(A), which enjoys the benefit of the ``Day 2'' market 
structures. These different standards support, rather than undermine, 
the Commission's interpretation that subparagraphs (A) and (B) 
separately identify the particular markets that Congress has deemed 
sufficiently competitive to justify termination of the purchase 
requirement.
    46. The Commission's task under section 210(m)(1)(C) is, therefore, 
to determine the set of competitive qualities that are shared by 
markets satisfying the requirements of subparagraphs (A) and (B). 
Recognizing this task, the Commission declined in the Final Rule to 
adopt any bright line tests when applying subparagraph (C). Simply put, 
the common objective of subparagraphs (A) and (B), and therefore 
subparagraph (C), is the identification of a wholesale marketplace 
where QFs have alternatives to their local utility to sell their 
electric energy. We believe the three-tiered structure of section 
210(m)(1) indicates a finding by Congress that two particular market 
designs provide those alternatives, while directing the Commission to 
consider whether other market designs might as well.
    47. Congress could have stated a broad, general finding to be made 
by the Commission such as ``workably competitive markets.'' Instead, 
Congress tailored subparagraphs (A) and (B) to establish criteria 
specific to each market design that, in its view, provide sufficient 
sales alternatives for QFs. Under these circumstances, we believe it 
appropriate to use the market designs identified in subparagraphs (A) 
and (B) as guides when analyzing whether an alternative market design 
satisfies the

[[Page 35879]]

requirements of subparagraph (C). For example, the Commission found in 
the Final Rule that the markets in ERCOT satisfy the statutory 
requirements of subparagraph (C) because they are of comparable quality 
to those described in subparagraph (A). We continue to believe that 
finding is appropriate and note that no petitioner challenges it on 
rehearing.
    48. Finally, while it is true that EPAct 2005 did not repeal PURPA 
or the Commission's obligation to encourage QF development, enactment 
of section 210(m) of PURPA clearly changed the rights of QFs under 
PURPA. The Commission has no discretion other than to terminate the 
purchase requirement if it finds that a QF has nondiscriminatory access 
to any of the markets described in section 210(m)(1)(A), (B) or (C). It 
would be inappropriate for the Commission to ignore this mandate by 
implementing section 210(m)(1) in a way that undermines the specific 
standards of relief Congress chose to establish in the statute.

B. Nondiscriminatory Access to a Market

    49. The Commission also must determine that a QF has 
nondiscriminatory access to a PURPA section 210(m)(1) market in order 
to terminate the purchase requirement. In the Final Rule, the 
Commission adopted several presumptions to be used in determining 
whether access to a particular market is available on a 
nondiscriminatory basis in order to streamline processing of 
applications for termination of the purchase requirement.
    50. First, the Final Rule found that a QF's eligibility for service 
under an OATT, or a reciprocity tariff filed by a non-public utility, 
creates a rebuttable presumption that the QF has nondiscriminatory 
access to the relevant market. Second, the Commission adopted a 
rebuttable presumption that QFs interconnected with electric utility 
members of a ``Day 2'' RTO/ISO have nondiscriminatory access to the 
``Day 2'' market. Finally, regardless of available transfer capability 
(ATC) under an OATT or location within a ``Day 2'' market, the Final 
Rule establishes an additional rebuttable presumption that QFs with a 
net capacity no greater than 20 MW do not have nondiscriminatory access 
to wholesale markets.
    51. These rebuttable presumptions were designed to work together to 
facilitate prompt Commission review of requests to terminate the 
purchase requirement within the 90-day time frame mandated in the 
statute. Various petitioners challenge the adoption of these 
presumptions on rehearing, which we address below.
1. The OATT
    52. The Commission first established a rebuttable presumption that 
a QF has nondiscriminatory access to a market if it is eligible for 
service under a Commission-approved OATT, or Commission-filed 
reciprocity tariff, and Commission-approved interconnection rules.\28\ 
If the Commission determines that a particular market meets the 
criteria of section 210(m)(1)(A), (B), or (C), and a QF in that market 
is eligible for service under an OATT or reciprocity tariff, a QF may 
seek to rebut the presumption of access to the market by providing 
specific and credible evidence that the QF does not have 
nondiscriminatory access due to operational characteristics or 
transmission constraints. If the QF is unable to make this 
demonstration, the purchase requirement will be terminated.
---------------------------------------------------------------------------

    \28\ Transmission providers are required to provide 
interconnection as well as transmission services on a 
nondiscriminatory basis under their OATTs.
---------------------------------------------------------------------------

    53. In the Final Rule, the Commission determined that only issues 
other than issues related to the provision of open access transmission 
under the OATT would be considered when analyzing whether the 
presumption of nondiscriminatory access to markets has been rebutted. 
The Commission rejected requests to allow a QF to litigate open access 
implementation issues in the context of these 90-day applications, 
concluding that complaint proceedings are the appropriate forum for 
such disputes. The Commission also rejected arguments that it is 
unreasonable to rely on a presumption that a Commission-approved OATT 
provides nondiscriminatory access to markets in light of the then-
pending NOPR in the OATT reform rulemaking, Docket Nos. RM05-17, et 
al., in which reforms to the pro forma OATT had been proposed.
Requests for Rehearing
    54. Occidental challenges the Commission's reliance on an OATT to 
create a rebuttable presumption that QFs have nondiscriminatory access 
to the relevant wholesale markets. Occidental argues that the 
Commission's actions in the OATT reform rulemaking have demonstrated 
that, notwithstanding the existence of an OATT, there remain continuing 
opportunities for undue discrimination by transmission entities. 
Occidental contends that the Commission's statement in the Final Rule 
that it had not found actual discrimination in the OATT reform 
rulemaking is inconsistent with findings in the OATT reform NOPR that 
deficiencies in the OATT needed to be addressed. In Occidental's view, 
the Commission's determination in the OATT reform NOPR that there are 
remaining opportunities for undue discrimination bear directly on the 
finding that the Commission must make under section 210(m) that a 
utility is administering its OATT in a nondiscriminatory manner.
    55. Occidental argues that the Commission's determination that only 
issues not related to the provision of open access transmission under 
the OATT may be raised to rebut the presumption of nondiscriminatory 
access is inconsistent with the statutory language of section 210(m) 
and is a violation of due process. Industrial Parties assert that the 
Commission must consider evidence of discrimination when analyzing 
whether the presumption has been rebutted. Failure to do so would, in 
their view, violate the Commission's statutory obligation to eradicate 
discrimination.
    56. Occidental further argues that the Commission should clarify 
that QFs under section 210(m)(1)(B) and (C) have the same opportunity 
to rebut the presumption of nondiscriminatory access as QFs under 
section 210(m)(1)(A). Occidental notes that the Commission lists 
several factors in the Final Rule as a possible rebuttal to a finding 
of nondiscriminatory access to the markets set forth in subparagraph 
(A), but that it is not clear if the factors are also relevant to the 
question of whether the purchase obligation should be terminated under 
subparagraphs (B) and (C). If the Commission does not grant 
clarification, Occidental requests rehearing on this issue.
    57. Cogeneration Association of California argues that existence of 
an OATT is insufficient to guarantee nondiscriminatory access since it 
may not provide physical transmission rights. Because QFs generate 
electricity as a necessary by-product of their service to their thermal 
hosts, Cogeneration Association of California contends that a 
cogenerator must have a physical location to deliver the electricity. 
Cogeneration Association of California argues that this requires 
physical transmission rights that recognize the operating requirements 
of cogeneration operations. In its view, the lack of physical delivery 
rights places a cogeneration QF in the untenable situation of either 
ceasing operation or violating ISO tariff and scheduling protocols, 
thereby incurring penalties or sanctions. Cogeneration Association of

[[Page 35880]]

California goes on to illustrate its concern using the California 
market redesign effort as an example. Because the congestion revenue 
rights are allocated first to load-serving entities, and the remainder 
are auctioned to other market participants, Cogeneration Association of 
California fears that existing QFs would be unable to hedge congestion 
and that new projects would be unable to obtain long-term rights 
necessary to support long-term contacts, a prerequisite for financing.
    58. Occidental adds that, if the Commission does not reject the 
OATT presumption on rehearing, it should require applicants to submit 
at a minimum additional information such as clear and specific 
definitions and descriptions of each real-time, short- and long-term 
market the utility claims in its section 210(m) application that the QF 
is able to access on a nondiscriminatory basis.
    59. Multiple petitioners argue that the Commission erred by 
establishing any form of rebuttable presumption. Industrial Parties 
contend that the Administrative Procedure Act requires that the 
applicant for relief--in this case an electric utility--has the burden 
of proof.\29\ Industrial Parties argue that an agency may not use a 
presumption to shift the burden of proof if the result is not in 
keeping with the statutory purpose and, in their view, it runs counter 
to section 210(m) to impose on QFs the burden to prove a lack of 
nondiscriminatory access to markets since the relevant information 
concerning transmission and access to markets is most likely in the 
possession of the utility rather than the QF.
---------------------------------------------------------------------------

    \29\ Industrial Parties Request for Rehearing at 7 (citing Hi-
Tech Furnace Sys. v. FCC, 224 F. 3d 781 (D.C. Cir. 2000); Pub. Serv. 
Comm'n of New York v. FERC, 866 F.2d 487 (D.C. Cir. 1989)).
---------------------------------------------------------------------------

    60. PIOs argues that creating rebuttable presumptions that electric 
utilities meet section 210(m) requirements is contrary to the plain 
language of section 210(m)(3). PIOs argues that, when a utility seeks 
relief from the mandatory purchase obligation, the Commission is 
required by section 210(m)(3) to consider evidence of the assertion 
that the required access and markets are actually available to QFs in 
the utility's service territory, including a utility in an RTO. In 
PIOs' view, the Commission is not authorized to permit utilities to 
escape the obligation to set forth facts that demonstrate that the 
conditions provided in section 210(m)(1)(A), (B) or (C) have been met 
for the QFs in its territory.
    61. American Forest & Paper and CCC agree, citing NICOR Exploration 
Co. v. FERC \30\ for the proposition that the Commission incorrectly 
shifts the burden of proof away from electric utilities through 
adoption of rebuttable presumptions. American Forest & Paper and CCC 
state that NICOR found that the Commission erred by shifting the burden 
for a natural gas producer to prove that an area rate clause authorized 
incentive based rates.\31\ American Forest & Paper and CCC argue that 
that situation is directly analogous to the issue in this proceeding, 
where the Commission has relieved electric utilities of proving that 
QFs have non-discriminatory access to wholesale markets and, instead, 
forced QFs to prove the absence of such access.
---------------------------------------------------------------------------

    \30\ NICOR Exploration Co. v. FERC, 50 F.3d 1341 (5th Cir. 1995) 
(NICOR).
    \31\ American Forest & Paper and CCC Request for Rehearing at 
25.
---------------------------------------------------------------------------

Commission Determination
    62. The Commission denies rehearing of the adoption of a rebuttable 
presumption that eligibility for service under a Commission-approved 
OATT, or Commission-filed reciprocity tariff, provides 
nondiscriminatory access to the market. We first address arguments 
against the use of any form of rebuttable presumption and then turn to 
arguments against relying on the OATT in particular.
    63. The Commission denies rehearing regarding the use of rebuttable 
presumptions in processing requests to terminate the purchase 
requirement. As discussed in paragraph 30 above, under the plain 
language of section 210(m)(1), it is the Commission's responsibility to 
find that there is nondiscriminatory access to certain specified 
markets prior to terminating the purchase requirement. The use of 
rebuttable presumptions serves to identify, in advance, the 
Commission's preliminary analysis, subject to future evidentiary 
submissions, thereby streamlining the application review process. The 
Commission believes this will facilitate prompt processing of 
applications under section 210(m), which is required by section 
210(m)(3), and ultimately benefit QFs and electric utilities alike by 
providing advance notice of how the Commission will consider certain 
issues. Abandoning the use of rebuttable presumptions, as some 
petitioners advocate, would unduly complicate the application process 
and impair the Commission's ability to act within the 90-day timeframe 
required by section 210(m)(3). Moreover, these rebuttable presumptions 
were not created in a vacuum. They are based on the Commission's 
experience in implementing non-discriminatory open access transmission 
over the past 11 years, its experience with QF issues (including 
interconnection issues) over the past 29 years, and its experience with 
RTO/ISO markets over almost 10 years.
    64. The cases cited by petitioners, which taken together stand for 
the proposition that the proponent of a rate change bears the burden of 
proving that change satisfies the relevant statutory or regulatory 
requirements, are therefore inapposite.\32\ The rebuttable presumptions 
do not relieve the Commission of its ultimate responsibility to make 
findings under section 210(m)(1) prior to relieving an electric utility 
of the purchase requirement. Instead, they simply provide advance 
notice of how the Commission will carry out that responsibility.
---------------------------------------------------------------------------

    \32\ See Hi-Tech Furnace Sys. v. FCC, 224 F.3d 781 (D.C. Cir. 
2000); Pub. Serv. Comm'n of New York v. FERC, 866 F.2d 487 (D.C. 
Cir. 1989); NICOR Exploration Co. v. FERC, 50 F.3d 1341 (5th Cir. 
1995).
---------------------------------------------------------------------------

    65. The rebuttable presumptions are also consistent with the 
requirements of section 210(m)(3), which establishes the procedures to 
be followed when an electric utility requests that the Commission make 
the finding of nondiscriminatory access to a market identified in 
section 210(m)(1)(A), (B), or (C). As required in section 210(m)(3), 
the regulations promulgated in the Final Rule clearly require a 
petitioning electric utility to state the factual basis on which it 
relies and describe why the conditions set forth in subparagraphs (A), 
(B), or (C) are met.\33\ That factual basis could include the factual 
determinations made in the Final Rule regarding certain markets 
satisfying the criteria of those subparagraphs, the presumptions 
adopted in the Final Rule regarding nondiscriminatory access, or any 
other factor the electric utility considers relevant to the 
determination the Commission must make under section 210(m)(1). There 
is no conflict between the use of rebuttable presumptions and the 
procedural requirements of section 210(m)(3).
---------------------------------------------------------------------------

    \33\ See 18 CFR 292.310.
---------------------------------------------------------------------------

    66. We reiterate that the rebuttable presumptions adopted in the 
Final Rule--some of which are presumptions in favor of the electric 
utility and some of which are in favor of the QF--are not final 
determinations. Each of these presumptions is expressly rebuttable. 
Electric utilities and QFs alike will have the opportunity to present 
case-specific evidence in support of or against

[[Page 35881]]

application of the presumption on review of a request to terminate the 
purchase requirement. For example, regarding the OATT presumption in 
particular, there may be circumstances unique to a particular QF that 
interfere with that QF's nondiscriminatory access notwithstanding its 
eligibility for service under an OATT. The QF might have operational 
characteristics that effectively prevent its participation in a market. 
The QF might lack access to a mechanism to schedule transmission 
service or make advance sales on a consistent basis. Each QF will be in 
the best position to have knowledge of the particular circumstances 
that interfere with its ability to access the market through the OATT 
and, thus, requiring the QF to submit evidence of its lack of 
nondiscriminatory access is entirely reasonable. The Commission 
clarifies that the ability to rebut the presumption of 
nondiscriminatory access applies regardless of the market in which the 
QF is located.
    67. The Commission was nonetheless sensitive to the QFs' potential 
need for information relevant to rebutting the presumption of 
nondiscriminatory access. The Commission therefore required petitioning 
electric utilities to submit information regarding transmission 
constraints, levels of congestion, and interconnections in order to 
give potentially affected QFs data that may be relevant to rebutting 
the presumption that they have access to the market. With these 
informational safeguards in place, we believe that reliance on a 
rebuttable presumption regarding nondiscriminatory access to the market 
is reasonable.
    68. We also reject arguments on rehearing that the Commission 
failed to justify reliance on the OATT in particular when formulating 
its rebuttable presumptions. Since issuance of the Final Rule, the 
Commission has issued Order No. 890, adopting reforms to the OATT to 
ensure that transmission customers continue to have nondiscriminatory 
access to transmission service.\34\ The Commission's findings in Order 
No. 890 do not, however, conflict with the rebuttable presumption 
adopted in this proceeding, as petitioners claim. The Commission did 
not find in Order No. 890 that any transmission provider actually 
discriminated against a particular customer and, instead, found that 
there remained opportunities for such discrimination that needed to be 
remedied.\35\ The fact that opportunities remained for discrimination 
in the provision of transmission service (which, we add, we have now 
addressed) would conflict with an irrebuttable presumption of 
nondiscriminatory access, not a rebuttable presumption. The rebuttable 
nature of the presumption acknowledges that a QF may not actually have 
nondiscriminatory access and leaves that determination for case-by-case 
review by the Commission.
---------------------------------------------------------------------------

    \34\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12266 (Mar. 15, 2007), 
FERC Stats. & Regs. ] 31,241 at P 443 (2007).
    \35\ Id. at P 42.
---------------------------------------------------------------------------

    69. At the same time, the underlying structure of the OATT, even 
before the reforms adopted in Order No. 890 are implemented, and 
certainly after, counsels in favor of the rebuttable presumption that 
eligibility for service under an OATT provides nondiscriminatory access 
to markets. Under the OATT, transmission providers must make 
transmission capacity available to all customers on a nondiscriminatory 
basis, thereby ensuring a level playing field for all market 
participants attempting to access supplies. That requirement by 
definition satisfies the nondiscriminatory access criteria of section 
210(m). To the extent a QF believes that it in fact is not receiving 
nondiscriminatory access to the market, however, it can make that 
demonstration in response to an electric utility's application to 
terminate the purchase requirement.
    70. In response to arguments by Cogeneration Association of 
California that the existence of an OATT is insufficient to guarantee 
nondiscriminatory access because it may not provide physical rights, we 
note that in organized markets which offer financial transmission 
rights, these financial rights are in addition to, not in place of, 
physical rights. In essence, the Cogeneration Association of California 
is arguing that the Commission should provide a QF with transmission 
services superior to those available to other generators in the 
organized markets. However, section 210(m)(1) requires that a QF have 
nondiscriminatory access to one of the markets specified in section 
210(m)(1)(A), (B), or (C); it does not guarantee a QF preferential 
access to transmission service. To the extent that Cogeneration 
Association of California also argues that a QF that has contractual 
obligations to thermal hosts does not have the flexibility to 
participate in markets where the access is provided by financial, 
rather than physical, transmission rights, the Commission in its 
regulations has provided each QF the opportunity to argue that its 
operational characteristics prevent the qualifying facility's 
participation in a market. Thus any QF that believes it does not have 
nondiscriminatory access to the market (regardless of whether access is 
provided by physical or financial rights) has the right to rebut the 
OATT presumption of access in response to an electric utility filing 
seeking termination of the mandatory purchase obligation.
    71. The Commission also declines to adopt Occidental's 
recommendation to require additional information from electric 
utilities relying on the OATT presumption. The filing requirements of 
Sec.  292.310 of the Commission's regulations, as modified below, are 
sufficient to provide the Commission with the information necessary to 
promptly process applications for termination of the purchase 
requirement.
    72. Finally, the Commission grants clarification of its 
determination in the Final Rule that only issues other than issues 
related to the provision of open access transmission under the OATT 
will be considered when analyzing whether the presumption of 
nondiscriminatory access to markets has been rebutted. The Commission 
continues to believe that complaint proceedings are the appropriate 
forum for such disputes. However, where there are pending complaints 
raising credible issues concerning a transmission provider's 
implementation or administration of its OATT, the Commission will also 
consider that fact, as appropriate, when evaluating whether a QF does 
in fact have nondiscriminatory access to the market.
2. ``Day 2'' Markets
    73. The Final Rule provided for a second rebuttable presumption 
specific to QFs operating in a ``Day 2'' market. Because members of the 
``Day 2'' RTO/ISOs have turned over the operation of their transmission 
facilities to an independent entity that has no stake in the 
marketplace and that ensures all users of the transmission system are 
treated on a nondiscriminatory basis and are provided access to their 
markets, the Commission established a rebuttable presumption that QFs 
interconnected with electric utility members of a ``Day 2'' RTO/ISO 
have nondiscriminatory access to that ``Day 2'' market. Since the 
Commission found that the existing ``Day 2'' markets satisfied the 
requirements of section 210(m)(1)(A), this creates a rebuttable 
presumption that electric utility members of the existing ``Day 2'' 
RTO/ISOs are relieved of the purchase requirement.

[[Page 35882]]

    74. The Commission declined to apply this presumption of 
nondiscriminatory access to entities that are not members of the ``Day 
2'' RTO/ISOs. In order for such entities to obtain relief of the 
purchase requirement, the Commission stated that they must file an 
application pursuant to either section 210(m)(1)(B) or (C), to be 
reviewed on a case-by-case basis by the Commission.
Requests for Rehearing
    75. Industrial Parties argue that the Commission does not have 
sufficient experience to impose a presumption of access in the ``Day 
2'' markets. In their view, these markets are nascent and the 
Commission does not have the ability to determine whether QFs have 
sufficient access to competitive alternatives to justify relieving 
electric utilities within those markets of the mandatory purchase 
obligation.
    76. NRECA, on the other hand, argues that it is arbitrary and 
capricious to deny to non-member utilities within or adjacent to the 
footprint of a ``Day 2'' RTO/ISO the same presumption accorded to RTO/
ISO members. NRECA contends that there is no basis for denying non-RTO 
member utilities adjacent to an RTO the same presumption where the non-
RTO member utilities have a Commission-approved OATT or reciprocity 
tariff. NRECA also argues that the Final Rule appears inconsistent as 
to which standard a non-RTO member within a ``Day 2'' RTO footprint 
must satisfy in order to obtain a waiver from the purchase requirement. 
Although the Final Rule provides that non-RTO members, if they are 
located within or adjacent to the footprint of a ``Day 2'' RTO, must 
satisfy the section 210(m)(1)(B) or (C) standards in order to remove 
the purchase obligation, NRECA notes that the Final Rule also states 
that any electric utility may file an application for relief from the 
purchase requirement by showing nondiscriminatory access to any of the 
section 210(m)(1)(A), (B) or (C) markets.\36\
---------------------------------------------------------------------------

    \36\ NRECA Request for Rehearing at 8 (citing Final Rule at P 
125, 151).
---------------------------------------------------------------------------

    77. NRECA also argues the Final Rule effectively allows QFs 
interconnected to an RTO member that has had its purchase requirement 
terminated to have the option of participating in that RTO market or 
requesting wheeling service to whichever non-member utility within or 
adjacent to the RTO's footprint has the highest avoided cost. NRECA 
expresses concern that the QF in this circumstance could seek to 
consummate a mandatory purchase agreement with a distant utility, 
notwithstanding termination of the purchase obligation for its 
interconnected utility. NRECA therefore asks the Commission to address 
this unintended consequence on rehearing.
    78. Even if Congress assumed that QFs in RTO regions have access to 
nondiscriminatory transmission services, as well as meaningful 
opportunities to sell long-term capacity/energy in competitive markets, 
PIOs argues that it does not follow that Congress intended to permit 
utilities in those regions to bypass section 210(m)(3) requirements or 
to authorize the Commission not to consider evidence of actual QF 
access to required services and markets when utilities in those regions 
seek to end their PURPA obligations.
Commission Determination
    79. The Commission denies rehearing of its decision to adopt a 
rebuttable presumption that QFs interconnected with electric utility 
members of a ``Day 2'' market have nondiscriminatory access to that 
``Day 2'' market. Arguments that the ``Day 2'' markets do not provide 
QFs sufficient competitive alternatives are rejected above.\37\ The 
Commission has sufficient experience with the four ``Day 2'' markets to 
determine that QFs have nondiscriminatory access to those markets. 
Industrial Cogenerators offers no reason to depart from the statutory 
language and impose a more rigorous standard.
---------------------------------------------------------------------------

    \37\ See supra P 19-30, 41-48.
---------------------------------------------------------------------------

    80. The Commission also denies rehearing of its decision to limit 
application of the ``Day 2'' presumption only to member utilities of 
the particular ``Day 2'' RTO/ISO. Member utilities have turned over 
control of their transmission to the regional organization. As a 
result, QFs interconnected with a member utility may offer their energy 
into the RTO/ISO day ahead and real time energy markets without any 
additional concerns about securing transmission capacity. These QFs 
face few, if any, barriers to be able to sell energy and capacity to 
any willing purchaser within the RTO/ISO region, subject to the 
purchaser's willingness to pay any relevant congestion charges.
    81. In contrast, non-member utilities have retained control over 
their transmission facilities and, thus, control the only access 
interconnected QFs have to the market. While an OATT or reciprocity 
tariff will provide a QF interconnected with a non-member utility with 
access to the market within that particular utility's subregion, the QF 
must compete with the non-member utility to secure transmission service 
in order to access the nearby regional market. Issues may arise 
concerning ATC and a range of other open access, commercial, and 
coordination (with the RTO or ISO) matters that are more appropriately 
examined on a case-specific basis.\38\ Accordingly, it is reasonable 
for the Commission to limit application of the rebuttable presumption 
that the four RTO/ISOs meet the statutory standards under PURPA 
210(m)(1)(A) only to member utilities of those regional organizations. 
Non-member utilities remain free, though, to seek termination of the 
obligation to purchase from QFs in individual cases.
---------------------------------------------------------------------------

    \38\ For example, QFs interconnected with member utilities would 
not experience rate pancaking for transmission service to access the 
market, additional risks and costs of possible curtailment outside 
of the locational marginal price (LMP) managed market, or increased 
scheduling burdens associated with taking service over an 
intervening transmission system under the OATT (in comparison to 
directly scheduling energy deliveries in the day-ahead and real-time 
LMP markets).
---------------------------------------------------------------------------

    82. NRECA is correct that any electric utility may file an 
application for relief of the purchase obligation under any 
subparagraph of section 210(m)(1). We clarify that the Commission's 
conclusion not to apply a presumption of nondiscriminatory access to 
non-member utilities of a ``Day 2'' RTO/ISOs does not preclude such 
utilities from seeking to satisfy the requirements of subparagraphs 
(A), (B), or (C), as the regulations in Part 292 of the Commission's 
regulations expressly provide.
    83. In response to NRECA's concern that a QF interconnected with a 
member utility of a ``Day 2'' market will seek PURPA contracts with 
adjacent utilities, using QF wheeling rights, we do not interpret 
section 210(m) to permit this. Section 210(m)(1) provides that ``no 
electric utility'' shall be subject to the purchase requirement if the 
Commission finds that the QF has nondiscriminatory access to one of the 
specified markets. Thus, once the Commission makes a finding that a 
particular QF has nondiscriminatory access to one of the specified 
markets, no electric utility shall be required to enter into a new 
contract or obligation with that QF. The QF would therefore no longer 
be able to impose the purchase requirement on any electric utility. If 
a QF that has been found to have nondiscriminatory access to one of the 
specified markets pursuant to the request of a particular electric 
utility seeks to enforce the purchase obligation against another 
electric utility, the

[[Page 35883]]

second electric utility may file an application to terminate its 
purchase obligation with respect to that QF, and the Commission would 
consider its findings in the first proceeding to be determinative, 
absent a showing by the QF that circumstances, either nondiscriminatory 
access or the state of the markets, have changed.
3. Small Size
    84. Notwithstanding the presumption of nondiscriminatory access 
afforded by the OATT or the structure of the ``Day 2'' markets, the 
Commission concluded in the Final Rule that certain QFs may nonetheless 
have difficulty accessing the market due to their small size. The 
Commission, therefore, adopted an additional rebuttable presumption 
that small QFs do not have nondiscriminatory access to the market, 
regardless of whether the QF is an eligible customer under an OATT or 
interconnected with a member utility of a ``Day 2'' RTO/ISO. Although 
the Commission did not specify in the Final Rule what evidence would be 
sufficient to rebut this presumption, it did note that relevant 
evidence could include the extent to which the small QF has been 
participating in the market or is owned by, or is an affiliate of, an 
entity that has been participating in the relevant market. The 
Commission also found that a reasonable and administratively workable 
definition of ``small'' is 20 MW net capacity or smaller.
Requests for Rehearing
    85. On rehearing, petitioners raise several issues regarding the 
rebuttable presumption for small QFs. Some utilities argue that there 
should be no special treatment of small QFs and that the rebuttable 
presumption is an impermissible waiver of section 210(m). Some QFs, 
however, argue that small QFs should be completely exempt from 
termination of the mandatory purchase obligation. Various petitioners 
argue that the Commission should set the threshold for ``small'' lower 
or higher.
    86. Central Vermont argues that making exceptions for certain QFs 
because of their small size goes against the plain language of the 
statute, contending that the statute says nothing about allowing the 
Commission to consider whether it is practical or economical for the QF 
to reach the wholesale market in question. Central Vermont argues that 
the Commission's findings with respect to QFs interconnected with 
member utilities of the ``Day 2'' RTO/ISO should apply equally to all 
QFs regardless of size. NRECA similarly argues that Congress did not 
establish exceptions for size, characterizing the Commission's 
standards for overcoming this presumption as insurmountable and, 
therefore, arbitrary and capricious.
    87. Deere argues, however, that the purchase requirement for small 
QFs should be retained in full in any market in which that obligation 
is otherwise lifted for large generators. Otherwise, Deere contends, 
the rebuttable presumption will be an invitation for expensive 
litigation. Deere argues that the Commission should treat small QFs in 
a manner that prevents the costs of defending the rebuttable 
presumption from becoming a discouragement to the development of small 
renewable projects.
    88. CIBO argues that the Commission should expand the size 
presumption to apply to QFs with a net capacity of 80 MW or less. CIBO 
contends such treatment would be consistent with the Commission's 
obligation under EPAct 2005 to issue a rule that ensures continuing 
progress in the development of efficient electric energy generating 
technology. CIBO argues that Congress defined ``small'' in PURPA as 80 
MW for small biomass, waste, renewable resources and geothermal 
resource power generation and, therefore, the Commission's defining of 
small QFs at 20 MW contravenes Congress's longstanding support of QFs, 
creates obstacles for some but not all small QFs and upsets capital 
investment. CIBO argues that the Commission makes no attempt to explain 
how 20 MW QFs differ from 80 MW QFs and that any differentiation for 
purposes of unequal statutory treatment must have a rational basis.
    89. CIBO further argues that the orders cited by the Commission in 
favor of a 20 MW threshold, such as Order No. 671 \39\ and Order No. 
2006,\40\ do not address the operational limits or difficulties that 
larger QFs have in accessing ``Day 2'' markets, such as widely 
fluctuating steam-host demand, siting issues and transmission versus 
distribution interconnection access issues. Without guaranteed access 
to markets, CIBO contends that many QFs in the 20-80 MW range will 
simply stop cogenerating and new industrial cogeneration will not be 
developed.
---------------------------------------------------------------------------

    \39\ Revised Regulations Governing Small Power Production and 
Cogeneration Facilities, Order No. 671, 71 FR 7852 (Feb. 15, 2006), 
FERC Stats. & Regs. ] 31,203 (2006), order on reh'g, Order No. 671-
A, 71 FR 30585 (May 30, 2006), FERC Stats. & Regs. ] 31,219 (2006).
    \40\ Standardization of Small Generator Interconnection 
Agreements and Procedures, Order No. 2006, 70 FR 34189 (June 13, 
2005), FERC Stats. & Regs. ] 31,180 (2005), order on reh'g, Order 
No. 2006-A, 70 FR 71760 (Nov. 30, 2005), FERC Stats. & Regs. ] 
31,196 (2005).
---------------------------------------------------------------------------

    90. Finally, CIBO argues that increasing the threshold to 80 MW 
adds a very small number of QFs and would add little to the amount of 
capacity compared to total nationwide capacity. In CIBO's view, the 
Final Rule already requires utilities to purchase power from QFs that 
are less than 20 MW and, thus, there would not be any material increase 
in administrative burden for electric utilities to use an 80 MW 
threshold.
    91. Industrial Parties argue that the Commission should expand the 
small size presumption to include any QF that is unable to sell power 
in 50 MW blocks, regardless of the particular capacity of the facility. 
Industrial Parties contend that certain over the counter bilateral 
contracts stipulate a minimum lot increment of 50 MW, which can be a 
problem for larger QFs (i.e., above the 20 MW threshold) because their 
intermittent production of surplus power cannot always or easily be 
packaged in 50 MW x 16 hour increments. Industrial Parties state that 
QFs that cannot sell 50 MW blocks have only very limited access to 
financial markets, at disadvantageous terms.
    92. NRECA argues that the Commission's 20 MW threshold is too 
generous. NRECA states there is evidence in the record that RTOs are 
capable of transacting with generators with capacities as small as one 
or two MW depending on the RTO. NRECA contends that no party has 
demonstrated that the existing RTO processes for utilities between one 
and 20 MW are ineffective, unduly complicated or overly burdensome. 
NRECA also suggests that the Commission's earlier decision to simplify 
interconnection for generators with capacities of less than 20 MW is 
unrelated to the question of whether QFs have access to markets or, if 
related, demonstrates that they have such access.
    93. With regard to how the Commission measures the size of a QF for 
purposes of applying the rebuttable presumption, the Cogeneration 
Association of California requests the Commission to clarify it is by 
reference to capacity delivered to the grid. The Cogeneration 
Association of California state that cogenerators often supply 
electricity to on-site load and only supply a portion of their maximum 
electrical output to the grid. In its view, electricity used to supply 
on-site load should not be counted for purposes of applying the size 
presumption.

[[Page 35884]]

Commission Determination
    94. The Commission denies the requests for rehearing regarding the 
rebuttable presumption that small QFs do not have nondiscriminatory 
access to the market. We continue to believe it is appropriate to adopt 
a rebuttable presumption that certain QFs do not have nondiscriminatory 
access to markets because of their small size. The purchase requirement 
will therefore remain in effect, in all markets, for all QFs with a net 
capacity of 20 MW or smaller, although electric utilities will have the 
opportunity to rebut the presumption by showing that a small QF does in 
fact have nondiscriminatory access to the relevant market.
    95. We share CIBO's goal of continuing progress in the development 
of efficient electric generating technology, but disagree with CIBO and 
other petitioners that we have unreasonably differentiated ``small'' 
from ``large'' QFs. There is no perfect bright line that can be drawn 
and we have reasonably exercised our discretion in adopting a 20 MW or 
below demarcation for purposes of determining which QFs are unlikely to 
have nondiscriminatory access to markets. Moreover, any QF above 20 MW 
is permitted to demonstrate an inability to access the markets, and any 
electric utility is permitted to demonstrate that a QF 20 MW or smaller 
is able to access the markets. The Commission's development of 
rebuttable presumptions is based on its experience with QFs, 
transmission interconnections and related market issues, and is 
designed to provide a reasoned and fair approach for processing 
applications within the 90-day time frame dictated by the statute.
    96. While the Final Rule does not make a generic finding that QFs 
interconnected at a distribution level lack nondiscriminatory access to 
markets, we believe that it is reasonable to conclude that some, 
perhaps most, small QFs at or below the 20 MW level can be 
distinguished from larger QFs by the type of delivery facilities to 
which they typically interconnect. Most QFs larger than 20 MW are 
interconnected to higher voltage lines, typically considered to be 
transmission lines, while smaller QFs tend to be interconnected to 
lower voltage radial lines, frequently considered to be 
distribution.\41\ Many lower voltage facilities are radial systems 
designed to carry power from the high-voltage grid downstream to loads, 
and there may be technical enhancements required to move power injected 
into such facilities upstream to the transmission grid to access the 
broader wholesale market. Smaller QFs are also more likely to have to 
overcome other obstacles, such as jurisdictional differences, pancaked 
delivery rates, and perhaps additional administrative procedures, to 
obtain access to distant buyers.\42\ Taken together, these factors 
support a rebuttable presumption that smaller QFs have substantially 
less ability to access wholesale markets than do larger QFs.
---------------------------------------------------------------------------

    \41\ See, e.g., Standardization of Small Generator 
Interconnection Agreements and Procedures, Order No. 2006-A, 70 FR 
71760 (Nov. 30, 2005), FERC Stats. & Regs. 31,196 at P 105 (2005), 
(``We expect the vast majority of small generator interconnections 
will be with state interconnection programs.''); Id. at P 102 (``a 
QF selling at retail is not eligible to interconnect under either 
Order No. 2003 or Order No. 2006. Under the Public Utility 
Regulatory Policies Act of 1978, such interconnections are governed 
by state law.'') (citations omitted).
    \42\ See, e.g., Standardization of Small Generator 
Interconnection Agreements and Procedures, Notice of Proposed 
Rulemaking, 68 FR 49974 (Aug. 19, 2003), FERC Stats. & Regs. ] 
32,572 (2003) at P 23-25.
---------------------------------------------------------------------------

    97. Although there is no unique and distinct megawatt size that 
uniquely determines if a generator is small, in other contexts the 
Commission has used 20 MW, based on similar considerations to those 
presented here, to determine the applicability of its rules and 
policies. Indicative of this is the Commission's reliance in the Final 
Rule on its findings in Order No. 671, where the Commission retained 
exemptions for QFs that are 20 MW or smaller from sections 205 and 206 
of the FPA, and Order Nos. 2006 and 2006-A, where the Commission 
recognized that generators 20 MW or smaller should have different 
standards for interconnection than large generators. We continue to 
believe that 20 MW is the appropriate level at which to apply this 
rebuttable presumption.
    98. We disagree with CIBO that the Commission's small QF threshold 
of 20 MW contradicts Congress's 80 MW definition of small power 
producers in PURPA section 210(a).\43\ The 80 MW threshold in section 
210(a) of PURPA defines the qualification of small power producers 
eligible for the rights, privileges and protections of QFs. The use of 
20 MW in the Commission's implementation of section 210(m) of PURPA 
serves a fundamentally different purpose. The Commission is 
distinguishing between small and large facilities to reflect the 
ability of particular QFs to access markets. Categorically applying the 
presumption to all small power production facilities, through adoption 
of a 80 MW threshold, would not appropriately take into account the 
different considerations that affect a QF's ability to access markets.
---------------------------------------------------------------------------

    \43\ 16 U.S.C. 796(17)(A)(ii).
---------------------------------------------------------------------------

    99. We also disagree that use of a 20 MW threshold defeats 
Congressional intent to foster small power production. The purchase 
requirement remains in place for small power producers that do not have 
nondiscriminatory access to one of the markets identified in section 
210(m)(1)(A), (B), or (C). The purchase requirement can be terminated 
only if the Commission finds nondiscriminatory access to such markets, 
which in turn means the small power producers will have the ability to 
sell their energy and capacity into the wholesale marketplace.
    100. We reject the request that the Commission expand the small 
size presumption to include any QF that is unable to sell power in 50 
MW blocks, regardless of the particular capacity of the facility. While 
it may be true that certain over-the-counter bilateral contracts 
stipulate a minimum lot increment of 50 MW, and while also it may be 
true that such a contractual requirement may be a problem for some QFs 
that are larger than 20 MW because of their intermittent production of 
surplus power, the Commission has provided these larger QFs the 
opportunity to rebut the presumption of access to the ``Day 2'' market 
by showing, among other things, operational characteristics that 
effectively prevent the QF's participation in a market or that the QF 
has no access to a mechanism to schedule transmission service or make 
sales in advance on a consistent basis because of variability of the 
QF's electric energy production or because of market rules that prevent 
the QF from scheduling transmission service or participating in 
organized markets.\44\ The effect of needing to sell in 50 MW blocks 
may therefore be presented to the Commission in the context of a 
particular request to terminate the purchase requirement. Expansion of 
the small size rebuttable presumption to reflect this concern, which 
may not be relevant in all cases, is thus neither necessary nor 
appropriate.
---------------------------------------------------------------------------

    \44\ Final Rule at P 82-84; 18 CFR 292.309(e)(1).
---------------------------------------------------------------------------

    101. The Commission rejects requests to apply the small size 
presumption only to much smaller QFs, such as those with a net capacity 
of one or two MW. We set the rebuttable presumption at an appropriate 
level, reflecting our understanding of the general nature of QFs' 
interconnection practices and the relative capabilities of small 
entities. However, we again stress that the presumption is rebuttable. 
Electric utilities are free to argue that smaller

[[Page 35885]]

entities have nondiscriminatory access to qualifying markets. We 
believe that the best place to consider such arguments is in the 
individual cases that electric utilities bring to the Commission.
    102. Petitioners arguing that the Commission has inappropriately 
waived the effects of section 210(m) for small QFs mischaracterize the 
Final Rule. The Commission made clear in the Final Rule that no class 
of QFs had been shown to uniformly lack nondiscriminatory access based 
on a single factor and, as such, no justification existed for exempting 
any category of QFs from any future orders which may terminate a 
utility's purchase requirement. The Commission did, however, create a 
rebuttable presumption that small QFs may not have nondiscriminatory 
access to markets because of their small size. As we explain above, the 
use of such rebuttable presumptions is fully consistent with the 
Commission's obligation under section 210(m) and the Commission's need 
to identify ways to expedite processing of applications.
    103. To be clear, the use of a rebuttable presumption does not 
prevent a utility from seeking to terminate the obligation to purchase 
power from small QFs, as would be the case if the Commission 
implemented a waiver. Instead, the use of the rebuttable presumption 
simply leaves the burden on the utility to show that these smaller 
entities indeed have nondiscriminatory access. This approach recognizes 
that, more often than not, a small QF will have greater difficulty 
obtaining nondiscriminatory access to markets due to the tendency for 
small QFs to be interconnected to lower voltage radial lines, and the 
consequent need to overcome other potential obstacles to 
nondiscriminatory access, such as local distribution access rules that 
are not within the Commission's jurisdiction, pancaked delivery rates 
and additional administrative burdens to obtain access to buyers other 
than the interconnected utility. It is therefore appropriate in the 
first instance to place on the electric utility the burden of 
demonstrating that a small QF does in fact have nondiscriminatory 
access to the types of markets identified in sections 210(m)(1)(A), (B) 
or (C). Similarly, the rebuttable presumption that QFs above 20 MWs do 
have nondiscriminatory access to markets does not prevent a QF from 
providing evidence to the contrary.
    104. With regard to the request to clarify how the 20 MW threshold 
will be measured, the Commission explained in the Final Rule that a QF 
is required to state its size in terms of ``net capacity'' when 
certifying its status as a QF.\45\ Net capacity is the maximum amount 
of power that the facility is able to produce (gross capacity) less any 
auxiliary load for devices that are necessary and integral to the power 
production process (station power). Any power consumed by on-site load 
at the location of the QF for purposes unrelated to the power 
production process should not be subtracted from gross capacity for 
purposes of reporting net capacity. Whether the facility is a 
Commission-certified facility or a self-certified facility, both are 
certified at net capacity. Therefore, a QF's Commission-certified (or 
self-certified) net capacity would determine whether the QF qualifies 
for the ``small size'' rebuttable presumption.
---------------------------------------------------------------------------

    \45\ Final Rule at P 72, n.41.
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C. Filing Requirements

    105. In the Final Rule, the Commission found that a utility 
electing to file for relief from the purchase requirement must submit 
an application with the Commission providing certain information, 
including transmission constraints within its service territory in 
order to give potentially affected QFs information that may be useful 
in rebutting the presumption that they have access to all aspects of 
the applicable ``Day 2'' markets.\46\ The filing requirements are 
contained in new Sec.  292.310(d) of the Commission's regulations.
---------------------------------------------------------------------------

    \46\ Final Rule at P 102.
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Requests for Rehearing
    106. Industrial Parties contend that the Commission is not 
sufficiently prescriptive as to the level of detail on transmission 
availability that utilities should provide in their applications. 
Industrial Parties argue that the Commission should require the same 
information on transmission access as in UniSource Energy 
Corporation.\47\ Industrial Parties also argue that to enable effective 
input by QFs and other interested parties, any information provided to 
support an electric utility's application to terminate its purchase 
obligation must be provided to all affected QFs at the time of filing. 
Industrial Parties continue that if a QF later seeks to reinstate the 
purchase obligation, the electric utility needs to provide current 
data, and not rely on the data it used to justify termination of the 
purchase obligation.
---------------------------------------------------------------------------

    \47\ UniSource Energy Corporation, 109 FERC ] 61,047 (2004) 
(UniSource) (reviewing a market monitoring plan submitted in support 
of a request for Commission authorization of the disposition of 
jurisdictional facilities for purposes of identifying 
anticompetitive conduct).
---------------------------------------------------------------------------

    107. EEI, however, believes the filing requirements in Sec.  
292.310(d)(3) of the Commission's regulations are unduly broad and 
potentially burdensome. EEI urges the Commission to exempt utilities 
operating within the footprint of Commission-approved RTO/ISOs that 
have financial, rather than physical, transmission rights models and 
ERCOT (which likewise operates under a financial transmission rights 
model) from the information submission requirements in Sec.  
292.310(d)(3). Since a QF has the right to interconnect to transmission 
within an RTO/ISO that operates under a financial transmission rights 
model, EEI contends that the QF has access to that market regardless of 
whether a physical path exists for electric sales. As a result, EEI 
argues that interconnection and other transmission constraint and 
congestion studies are of little relevance in determining whether a QF 
has nondiscriminatory access to transmission in any market with a 
financial rights transmission model.
    108. EEI argues that even in markets without financial transmission 
rights, all new QFs have nondiscriminatory access if they are willing 
to fund on an up-front basis the transmission upgrades necessary to 
receive network resource status, i.e., if they are willing to comply 
with Order Nos. 2003 and 2006. Despite the fact that any upgrade costs 
for firm transmission service are typically rolled into rates, EEI 
contends that the Commission's transmission pricing policy could 
require that existing QFs bear the incremental cost of upgrades if firm 
transmission service is not available and the costs of the upgrades 
exceed the rolled-in rate. As a result, EEI argues that the only 
grounds for rebuttal of the presumption of nondiscriminatory access 
when OATT service is available should be related to unique operational 
characteristics of the specific QF or in the rare circumstance in which 
there is not a sufficient opportunity to relieve a transmission 
constraint because of unique factors, such as the inability to secure 
regulatory approval for upgrades or otherwise to remedy physical system 
limitations. EEI therefore asks the Commission to limit the 
informational filing requirements to those particular circumstances.
    109. In addition, EEI requests the Commission to clarify what is 
intended by ``[r]elevant system impact studies for the generation 
interconnections, already completed'' for both non-RTO/ISO and RTO/ISO 
regions. EEI states that it is unclear what studies, and what time 
frames, are contemplated by this

[[Page 35886]]

requirement and whether this language is intended to refer to the 
interconnection studies for existing QFs or for all generator 
interconnections. EEI requests clarification that ``relevant'' studies 
will be limited to studies that are the most recent regarding the QF's 
impact on the system or the most recent generic studies of the 
applicable control area. EEI states that, for the last several decades, 
interconnection studies for QFs not selling to the market have been 
performed under state oversight. EEI requests that the Commission 
clarify whether the equivalent of system impact studies performed for 
QFs pursuant to state regulation should be provided.
    110. Lastly, if the Commission chooses to maintain the requirements 
in Sec.  292.310(d)(3) of the Commission's regulations, EEI requests 
that the requirements identified in paragraph (iii) of Sec.  
292.310(d)(3), regarding system impact studies for generator 
interconnections, be clarified to require all Commission-approved RTO/
ISOs to identify and make available to their member transmission owners 
confidential and public versions of each interconnection study it 
performs for submission to the Commission. They argue that it is not 
clear how electric utilities that have transferred operational control 
of their transmission to RTO/ISOs could fulfill the requirement to 
provide ``relevant system impact studies'' without imposing certain 
requirements on the RTO/ISO. EEI urges the Commission to clarify that 
submitting studies conducted by the RTO/ISO will be sufficient to meet 
the informational requirements.
Commission Determination
    111. In order to ensure that a potentially affected QF has an 
adequate opportunity to evaluate potential obstacles to 
nondiscriminatory access, despite the existence of an OATT or the QF's 
location in a ``Day 2'' market, the Commission will maintain the 
requirement for applicants to submit transmission-related information 
relevant to a QF's evaluation of this question. Information about the 
applicant's long-term transmission plan, the location of transmission 
constraints, levels of congestion, system impact studies, and links to 
applicant's Open Access Same Time Information System (OASIS) for ATC 
information will allow a potentially affected QF to detect whether it 
might be located on a portion of a utility's system where limited 
transfer capability may constrain its ability to transfer power into 
the wholesale market. In response to Industrial Parties' concerns that 
QFs be provided any information used to support an electric utility's 
application, our rules currently provide that an electric utility must 
identify with names and addresses all potentially affected QFs.\48\ 
Electric utilities serve potentially affected QFs with a copy of the 
application. In addition, the Commission by letter provides notice of 
the application to the potentially affected QFs and explains comment 
procedures and how the QFs can access the electric utility's 
filings.\49\ An interested potentially affected QF should intervene in 
the proceeding and would then receive any subsequent information 
provided by an electric utility.
---------------------------------------------------------------------------

    \48\ 18 CFR 292.310.
    \49\ In the unlikely event a potentially affected QF is 
intentionally or unintentionally omitted by the electric utility and 
not served notice of an application, the Commission will take 
remedial steps as appropriate.
---------------------------------------------------------------------------

    112. We disagree with EEI that the filing requirements are unduly 
broad or burdensome. It is reasonable to place those obligations on the 
petitioning electric utility, the party requesting the Commission to 
make the findings required by section 210(m)(1) of PURPA. These filing 
requirements will facilitate timely processing of the application by 
the Commission, while also providing QFs with the information necessary 
for their own evaluation of nondiscriminatory access to wholesale 
markets. We find that EEI's claim of burden is overstated, since we do 
not require anything which has not already been developed. It is our 
experience that most of this documentation is in electronic format and 
available through online resources.\50\ We clarify, moreover, that an 
applicant can provide a hyperlink to the relevant studies, if 
available, rather than submitting complete studies and reports.\51\ We 
therefore believe that the burden on a utility of providing existing 
information is minimal and that the benefits to the QFs and the 
Commission of providing this information readily in one filing will 
outweigh any such minimal burdens.
---------------------------------------------------------------------------

    \50\ We note that the following public and non-public sources 
contain transmission information: RTO websites for links to publicly 
available regional transmission plans; OASIS websites for system 
impact studies including various transmission service requests, 
available through confidentiality agreements; OASIS websites for 
posted ATC values, available through an OASIS certificate; and, FERC 
Form 715 for the Annual Transmission Planning and Evaluation Report 
submitted to the Commission, available on the FERC website through 
the Critical Energy Infrastructure Information (CEII) process.
    \51\ The filing should identify the relevance of the material in 
the hyperlink. And to the extent that the filing discusses 
particular portions of such studies and reports, the electric 
utility should clearly identify those portions by page, paragraph, 
or similar reference.
---------------------------------------------------------------------------

    113. We deny EEI's request to exempt utilities operating within the 
footprint of a Commission-approved RTO/ISOs from submitting the 
information to the extent it is otherwise available from or provided by 
the RTO or ISO. The fact that electric utilities in RTO/ISO regions may 
be able to access information required in those filings on an equal 
basis as other parties, i.e., through the RTO/ISO website or databases, 
does not eliminate the Commission's underlying need for the information 
to process the application in a timely manner. Furthermore, we 
emphasize that Sec.  202.310(d)(3) of the Commission's regulations 
requires the submission of non-publicly available information to the 
extent it is the only relevant available resource responsive to this 
requirement. Any need to maintain confidentiality can be addressed in 
the context of the particular application.
    114. We also disagree that the information required in Sec.  
292.310(d)(3) is not necessary in RTO/ISO markets with financial 
transmission rights models. This information is relevant even in the 
context of financial RTO markets as it will help potentially affected 
QFs understand the transmission market circumstances they would face if 
the Commission approves the utility's application. The filing 
requirements will, in this regard, therefore not be changed for any 
electric utility seeking termination of the purchase requirement.
    115. As to the argument that transmission-related information is 
unnecessary since new QFs have nondiscriminatory access if they fund 
transmission upgrades necessary to receive network resource status, we 
disagree. Information about transmission system constraints will allow 
a potentially affected QF to evaluate the impact of a utility's request 
on the QF. Transmission constraints also provide valuable information 
about the scope and geographic reach of the market a potentially 
affected QF may reach as an alternative to selling to the local 
utility.
    116. With regard to EEI's request to explain the phrase 
``[r]elevant system impact studies for the generation interconnections, 
already completed,'' we clarify that the studies we consider relevant 
are the most recent system impact studies, already completed, that 
analyze the generation interconnection to the applicant's transmission 
substation that is ``electrically close'' to

[[Page 35887]]

the QF's substation.\52\ With respect to EEI's question whether the 
equivalent of system impact studies performed for QFs pursuant to state 
regulation should be provided, we clarify that these studies must be 
submitted if they provide responsive information relevant to the filing 
requirements.
---------------------------------------------------------------------------

    \52\ By ``electrically close'' we mean any interconnection to 
the same substation where the QF is connected or to any adjacent 
substation or interconnection point where power injection to the 
transmission system has the same or similar impact on the 
transmission facilities' loadings, as the QF's power injection.
---------------------------------------------------------------------------

    117. We also clarify, as requested by EEI, that submitting studies 
conducted by an RTO/ISO will be sufficient to meet the informational 
requirements, provided the submission is complete, i.e., the applicant 
submits every study required (or hyperlinks to the relevant studies) 
and all related information listed in Sec.  292.310(d). However, we 
deny EEI's request that the Commission require RTO/ISOs to identify and 
make available confidential and public versions of each interconnection 
study it performs. We believe this request is unnecessary. It is our 
understanding that the current practice within the RTO/ISOs is that the 
electric utility receives the confidential version of the study from 
the RTO/ISO, and likely has participated at least in an advisory role 
in the performance of the study. Therefore, we expect that these 
studies would already be in the applicant's possession or could be made 
available to them without placing any extra requirements or burdens on 
the RTO/ISOs. It is the utility who is filing an application seeking 
relief from the purchase requirement and, therefore, we believe it is 
their responsibility to gather and submit the information to the 
Commission. Additionally, while the publicly available reports are 
available through the OASIS websites, an applicant still needs to 
identify those studies that are relevant, and provide them (either 
physically or by hyperlink) with the filing.\53\
---------------------------------------------------------------------------

    \53\ See supra note 51.
---------------------------------------------------------------------------

    118. In response to the Industrial Parties' argument that the 
Commission is not sufficiently prescriptive as to the level of detail 
regarding transmission availability required under the Commission's 
regulations, we deny rehearing in part. As a general matter, we believe 
the information identified in Sec.  292.310(d)(3) is sufficient to give 
potentially affected QFs information relevant to evaluate whether there 
is adequate transmission available for new selling arrangements, 
subsequent to termination of the utility's purchase requirement.\54\ In 
addition, the information on processes to be followed to access the 
markets, identified in Sec.  292.310(d)(4) and (5), is sufficient to 
give affected QFs information relevant to evaluating nondiscriminatory 
access to the markets described in section 210(m)(1) of PURPA. The 
relevant transmission information referred to by Industrial Parties in 
the UniSource proceeding is thus embedded in the studies we require to 
be filed. We do not agree that the other elements offered by UniSource 
in the market monitoring plan for its proposed merger are either 
relevant or necessary to evaluating nondiscriminatory access in this 
context.
---------------------------------------------------------------------------

    \54\ However, we note, in order for a QF to evaluate potential 
ATC on an applicant's OASIS, the QF will need to determine the type, 
firmness and duration of transmission service that the affected QF 
will need for the power it intends to sell on a prospective basis. 
While this information will provide a potentially affected QF with 
information about current ATC, it is no guarantee that service from 
a particular source to a particular load can be provided on a firm 
basis. Only submission of a request and subsequent reservation of 
transmission service can provide that level of certainty to any 
prospective customer.
---------------------------------------------------------------------------

    119. We do, however, believe that Sec.  292.310 of the Commission's 
regulations lacks certain information that will facilitate the 
Commission's processing of section 210(m) applications. The Commission 
has processed applications in Docket Nos. QM07-2-000 and QM07-4-000 and 
as a result of its experience in those dockets finds that additional 
information from electric utilities would help avoid the need to issue 
``deficiency'' letters or send additional information requests, 
ultimately slowing down the processing of requests for relief. The 
Commission therefore amends its regulations to require that the 
following additional information be submitted: the docket number 
assigned to each potentially affected QF if it filed for self-
certification of QF status or an application for Commission-
certification of QF status; the net capacity of each potentially 
affected QF; the location of each potentially affected QF depicted by 
state and county and the name and location of the substation where each 
potentially affected QF is interconnected; the interconnection status 
of each potentially affected QF including whether the QF is 
interconnected as an energy or a network resource; and the expiration 
date of the energy and/or capacity agreement between the applicant 
utility and each potentially affected QF. The introductory paragraph of 
Sec.  292.310(c) is thus amended to read as follows:

    (c) An electric utility must submit with its application for 
each potentially affected qualifying facility: the docket number 
assigned if a qualifying facility filed for self-certification or an 
application for Commission certification of qualifying facility 
status; the net capacity of the qualifying facility; the location of 
the qualifying facility depicted by state and county, and the name 
and location of the substation where each qualifying facility is 
interconnected; the interconnection status of each potentially 
affected qualifying facility including whether the qualifying 
facility is interconnected as an energy or a network resource; and, 
the expiration date of the energy and/or capacity agreement between 
the applicant utility and each potentially affected qualifying 
facility. All potentially affected qualifying facilities shall 
include:
* * * * *

    120. Additionally, in reviewing the regulations adopted in the 
Final Rule, we have discovered a mistake in Sec.  292.310(d)(3) that we 
will correct here. The applicant's ``long-term transmission plan'' 
referred to in Sec.  292.310(d)(3) was intended to be information 
required to be filed with an application. Therefore the applicant's 
``long-term transmission plan'' is redesignated as Sec.  
292.310(d)(3)(i). Also, in Sec.  292.310(d)(3)(vi), the term 
``available transmission capacity (ATC)'' will be corrected to state 
``available transfer capability (ATC).'' The new Sec.  292.310(d)(3) is 
amended to read as follows:

    (3) Transmission Studies and related information, including:
    (i) The applicant's long-term transmission plan, conducted by 
applicant, or the RTO, ISO or other relevant entity;
    (ii) Transmission constraints by path, element or other level of 
comparable detail that have occurred and/or are known and expected 
to occur, and any proposed mitigation including transmission 
construction plans;
    (iii) Levels of congestion, if available;
    (iv) Relevant system impact studies for the generation 
interconnections, already completed;
    (v) Other information pertinent to showing whether transfer 
capability is available; and
    (vi) The appropriate link to applicant's OASIS, if any, from 
which a qualifying facility may obtain applicant's available 
transfer capability (ATC) information.

    121. Finally, Industrial Parties asks us to clarify that if a QF 
later seeks to reinstate the purchase obligation pursuant to Sec.  
292.311, the electric utility, if it chooses to answer the QF's 
petition to reinstate, needs to provide current data, and not rely on 
the data it used to originally justify termination of the mandatory 
purchase obligation. We decline to make a generic determination here on 
this matter. If an electric utility answers the QF's petition, it is 
free to

[[Page 35888]]

decide what information to file so as to present its best arguments, 
based on the content of the QF's filing, the amount of time since the 
prior proceeding and any indications of changed circumstances in the 
interim. Our decision on whether to reinstate the purchase obligation 
will be based on all of the information presented.

D. Obligation To Sell

    122. Section 210(m)(5) of PURPA removes the requirement that an 
electric utility sell electric energy to any QF if the Commission finds 
that: ``Competing retail electric suppliers are willing and able to 
sell and deliver electric energy to the qualifying cogeneration 
facility or qualifying small power production facility; and the 
electric utility is not required by State law to sell electric energy 
in its service territory.''
    123. In the Final Rule, the Commission clarified that lifting the 
obligation from a particular utility to purchase electric energy from a 
QF did not relieve such utility of its obligation to sell supplemental, 
backup, standby and maintenance power to the QF. The Commission 
explained that any finding under section 210(m)(5) would be made under 
a separate standard and in a separate proceeding pursuant to Sec.  
292.312 of the Commission's regulations. The Commission emphasized that 
it would strictly interpret the statutory language in such proceedings, 
noting in particular the reference to ``competing retail electric 
providers'' in section 210(m)(5). The Commission concluded that the 
reference required a finding that the QF has available at least two 
competing suppliers who are not affiliated with the interconnecting 
utility.
Requests for Rehearing
    124. Industrial Parties request that the Commission condition 
releasing electric suppliers from their obligation to sell standby and 
backup power on a finding that a competitive market for power exists. 
Although utilities in the organized markets may assert that there are 
multiple retail providers, Industrial Parties contend that in many 
cases the providers have little capacity to serve the QF profile or 
would attach a large premium to the price given their interest in 
serving a stable load. They argue that some utility or other supplier 
being willing to sell a QF power at some exorbitant price does not 
satisfy the Commission's duty under PURPA to see that QFs are not 
exploited and under the FPA to ensure that rates are just and 
reasonable rates. Industrial Parties also assert one or two suppliers 
do not make a competitive market and that rates paid by QFs cannot be 
just and reasonable unless the Commission finds that market power 
cannot be exercised by those suppliers.\55\
---------------------------------------------------------------------------

    \55\ Industrial Parties at P 19-20.
---------------------------------------------------------------------------

Commission Determination
    125. We deny Industrial Parties' request to condition termination 
of the sales obligation on the existence of a competitive market for 
replacement power. We continue to believe a strict interpretation of 
section 210(m)(5) is appropriate in response to requests to terminate 
the obligation to sell standby and backup power to QFs. All the statute 
requires is a finding that ``competing retail electric suppliers are 
willing and able to sell and deliver electric energy to'' the QF. 
Competing retail electric suppliers implies two or more sellers, and 
the word competing suggests some level of competition between them. The 
requirement that the suppliers be willing and able to deliver also 
appears to require sufficient capacity to actually make sales.
    126. In proceedings on applications requesting termination of the 
sales obligation under Sec.  292.312 of the Commission's regulations, 
QFs opposing termination of an electric utility's obligation to sell 
may certainly argue that current practices in a particular market may 
provide a basis for the Commission to find that there are no 
``competing retail electric suppliers'' in some instances. We will 
decline to rule generically on such issues in this rulemaking.
    127. We also reject the Industrial Parties' request to condition 
relief under section 210(m)(5) on a finding that rates for replacement 
power are reasonable. We affirm our decision in the Final Rule that the 
rates for retail service are beyond the Commission's jurisdiction. The 
Industrial Parties are simply wrong to imply that the Commission must 
first find a competitive retail market before terminating an electric 
utility's obligation to sell power to a QF. That argument is based on 
the same false premise that this Commission is responsible for setting 
retail rates. Section 210(m) does not shift responsibility for setting 
or maintaining appropriate retail rates from the States to this 
Commission. Rather, section 210(m)(5) requires the Commission, before 
it terminates an electric utility's obligation to sell electric energy 
to a QF, to find that ``competing retail electric suppliers are willing 
and able to sell and deliver electric energy to the'' QF, and that 
``the electric utility is not required by State law to sell electric 
energy in its service territory.'' Section 210(m)(5) does not require 
this Commission to pass judgment on State-approved retail rates.

E. Existing Rights and Remedies

Background
    128. Section 210(m)(6) of PURPA protects the rights and remedies 
under a contract or obligation in effect or pending approval before a 
state regulatory authority. In the Final Rule, the Commission 
interpreted the term ``obligation'' as a ``legally enforceable 
obligation,'' which is established through a state's implementation of 
PURPA. The Commission stated that a QF that had initiated, prior to 
date of enactment of section 210(m) (i.e., August 8, 2005), a state 
PURPA proceeding that may result in a contract or legally enforceable 
obligation would be considered to have triggered an ``obligation'' with 
an electric utility regarding section 210(m)(6).
    129. The Commission found that, when a QF contract terminates by 
its own accord, an electric utility would not be compelled to enter 
into a new, successor contract with the QF if the purchase requirement 
has been terminated for the QF. As long as there is mutual agreement 
between a QF and the electric utility to terminate a contract, the 
electric utility is not compelled to enter into another contract with 
the QF. The Commission stated that nothing in the Final Rule was 
intended to abrogate existing contracts. The Commission noted, however, 
that there may be contracts containing provisions that provide that 
legislation such as EPAct 2005, or a Final Rule such as this one, 
trigger termination of the contract. To the extent the parties to a 
contract cannot agree whether a termination clause has been triggered, 
the Commission determined that the issue would be best determined in an 
individual case-specific proceeding in which the particulars of the 
contract can be examined.
Requests for Rehearing
    130. Deere argues that clarification is required to preserve state 
law processes as creating legally enforceable obligations in the 
context of section 210(m)(1). Deere contends that language in paragraph 
213 of the Final Rule indicates that an obligation is triggered prior 
to the utility applying for relief of the PURPA purchase requirement if 
a QF ``has initiated a state's PURPA proceeding that may result in a 
contract or legally enforceable contract or obligation.'' Deere argues 
that the phrase ``state's PURPA proceeding'' is too narrow and should 
be broadened

[[Page 35889]]

because it does not recognize that a ``legally enforceable obligation'' 
can be created under state law processes which do not involve a 
docketed state proceeding, such as issuance of regulations.
    131. Deere also notes that some states have adopted PURPA 
implementation approaches that require QFs to first start construction, 
if not complete it, before an obligation is created in connection with 
section 210(m). Deere argues that the Commission should therefore 
clarify that a QF located in a ``build first'' state triggers a legally 
enforceable obligation if, prior to the time of the utility PURPA 
relief application, it has already begun construction. Deere argues 
that otherwise, QFs that are nearly complete in the construction will 
be unfairly penalized and the significant capital resources they have 
committed will be impaired.
    132. OG&E asks the Commission to clarify that it is not prejudging 
when--or if--a QF's state PURPA application gives rise to a legally 
enforceable obligation under PURPA. OG&E contends that the Commission 
has consistently held that it is for the states, not the Commission, to 
determine ``the specific parameters of individual QF power purchase 
agreements, including the date at which a legally enforceable 
obligation is incurred under state law.'' \56\ OG&E states that 
presuming that a section 210(m)(1) ``obligation'' exists as of the date 
a QF files a state application that ``may'' lead to a legally 
enforceable obligation is inconsistent with how many states address 
this issue. OG&E adds that the Commission should also clarify that it 
is not dictating what factors the states can consider when evaluating 
whether a QF has established a legally enforceable obligation.
---------------------------------------------------------------------------

    \56\ OG&E Request for Rehearing at 5 (citing Metropolitan Edison 
Co., 72 FERC ] 61,015 at 61,050 (1995)).
---------------------------------------------------------------------------

    133. OG&E asks that the Commission clarify that a utility has the 
opportunity to respond to a purported legally enforceable obligation by 
making a section 210(m) filing particularly if the state legally 
enforceable obligation filing was made between August 8, 2005 and the 
effective date of the Final Rule, as may be revised on rehearing. OG&E 
contends that the utility should be able to respond by filing a section 
210(m)(1) application with the Commission.
    134. OG&E also asks that the Commission establish a formal process 
that allows section 210(m)(1) issues to be evaluated in response to a 
state PURPA ``obligation'' filing. It argues that a QF attempting to 
establish a legally enforceable obligation should be required to 
provide the utility with formal notice of such a filing, and that 
within sixty days of such notice, the utility must file the necessary 
application to satisfy the market criteria. OG&E argues that this 
opportunity to rebut an obligation is essential where a QF seeks to 
establish a state-mandated obligation between January 19, 2006 and the 
effective date of the Final Rule. OG&E states that the Commission made 
clear in the NOPR that a utility would not be able to submit a section 
210(m) application until after a final rule in this rulemaking. OG&E 
contends that it is therefore unreasonable for the Commission to 
require utilities to delay submitting section 210(m)(1) applications, 
and then hold that it is too late to avoid obligations purportedly 
incurred during the Commission-mandated delay.
    135. With regard to termination of contracts with a QF, Industrial 
Parties note that many utility contracts have a change-in-law clause 
that allows them to terminate current contracts. To the extent that the 
parties to a contract cannot agree whether a termination clause has 
been triggered, the Industrial Parties agree that the issue will be 
best determined in an individual case-specific proceeding in which the 
particulars of the contract can be examined. Industrial Parties argue, 
however, that the Commission should clarify that utilities may not use 
such clauses to terminate their purchase obligation without obtaining a 
Commission determination pursuant to the processes set out in the Final 
Rule.
Commission Determination
    136. Section 210(m)(6) provides:

    NO EFFECT ON EXISTING RIGHTS AND REMEDIES.--Nothing in this 
subpart affects the rights or remedies of any party under any 
contract or obligation, in effect or pending approval before the 
appropriate State regulatory authority or non-regulated electric 
utility on the date of enactment of this subsection, to purchase 
electric energy or capacity from or to sell electric energy or 
capacity to a qualifying cogeneration facility or qualifying small 
power production facility under this Act (including the right to 
recover costs of purchasing electric energy or capacity).

    In the Final Rule, the Commission adopted the statutory language 
into its regulations \57\ and pointed out that it had previously 
addressed the meaning of section 210(m)(6) in Midwest Renewable Energy 
Projects, LLC.\58\ In Midwest Renewable, we rejected the notion that 
``contract'' and ``obligation'' are synonymous terms. When a utility 
refuses to enter into a contract with a QF, and the QF seeks state 
regulatory authority assistance to enforce its PURPA regulations, a 
non-contractual but still legally enforceable obligation may be created 
pursuant to the state's implementation of PURPA. The Commission 
explained in the Final Rule that such obligations do not necessarily 
involve a single writing containing all material terms and that how QFs 
may initiate the process varies from state to state. As a result, 
narrowly defining an ``obligation'' to encompass only a specific legal 
arrangement with all the relevant and material rates, terms and 
conditions established could be at odds with a state's implementation 
of PURPA. The Commission therefore concluded in the Final Rule that the 
term ``obligation'' means a ``legally enforceable obligation'' which is 
established through a state's implementation of PURPA.\59\ We affirm 
the Commission's determination in the Final Rule that a QF that 
initiated, prior to August 8, 2005, a state PURPA proceeding that may 
result in a contract or legally enforceable obligation would be 
considered to have triggered an ``obligation'' with the electric 
utility subject to section 210(m)(6) pending the state's determination 
of whether an enforceable obligation exists. If the state determines 
that no enforceable obligation exists, then relief from the utility's 
purchase obligation with respect to that QF may be granted.
    137. The Commission clarifies that the date when an ``obligation'' 
under PURPA is established is the date such obligation is established 
by each state regulatory authority or nonregulated utility. In the 
Final Rule, the Commission noted that the statute grandfathered 
contracts and obligations entered into before the effective date of 
EPAct 2005 in section 210(m)(6) of PURPA, but that section 210(m)(1) of 
PURPA only gives the Commission authority to terminate the obligation 
to enter into new contracts or obligations. The Commission determined 
that a QF that has initiated a state PURPA proceeding that may result 
in a legally enforceable contract or obligation prior to the applicable 
electric utility filing its petition for relief pursuant to Sec.  
292.310 of the Commission's regulations will be entitled to have any 
contract or obligation that may be established by state law 
grandfathered.\60\ We see no

[[Page 35890]]

reason to change this determination, as the grandfathering of only pre-
August 8, 2005 contracts or obligations would undermine any subsequent 
QF investments.
    138. We do note, however, that if a QF argues that any contract or 
obligation was ``pending approval before the appropriate State 
regulatory authority or non-regulated electric utility,'' and thus 
argues that the utility's obligation to purchase from the QF ought not 
be terminated pursuant to a Sec.  292.310 proceeding, the Commission 
will consider those claims in the individual proceedings as they arise. 
Whether a contract or obligation exists would depend on state law. What 
we do not expect to see is a race to make filings either to be 
grandfathered, or to negate a potential obligation filed after August 
8, 2005, but prior to a utility's filing for relief from the obligation 
to enter new contracts or obligations.
    139. Deere requests that we clarify that a legally enforceable 
obligation may be created not just by a state PURPA proceeding, but 
also by other means such as by a state issuing regulations or taking 
other action reasonably designed to give effect to the Commission's 
rules. We find that the language ``or pending approval'' in section 
210(m)(6) implies that there has been a filing before a state 
regulatory authority. As we stated in Midwest Renewable, ``the phrase 
`or pending approval' [is] quite significant, as it ensures that 
contracts or obligations that had not yet been entered into but were 
being pursued in the context of the state commission proceedings that 
were pending on the date of enactment of EPAct 2005 will fall within 
the savings clause.'' \61\ We therefore find that, under most 
circumstances, there must be some sort of filing before a state 
regulatory authority for a QF to be ``pending approval.'' Even under 
these circumstances, we emphasize, however, that in the division of 
responsibilities of administering PURPA between this Commission and 
state regulatory authorities (and non-regulated utilities), it is the 
state regulatory authorities (or non-regulated utilities) that 
determine whether and when a legally enforceable obligation is created, 
and the procedures for obtaining approval of such an obligation. QFs 
that believe that some other sort of state proceeding has created a 
legally enforceable obligation under state law may argue their claim 
before the Commission, and we will make such determinations on a case-
by-case basis based on state law.
    140. Accordingly, while we agree with Deere that QFs that have 
begun but not yet completed physical construction, and therefore that 
have not been able to complete the process for creating a legally 
enforceable obligation under a ``build first'' state law, may have 
utilized a particular state's implementation of PURPA in a way that 
results in a legally enforceable obligation, such a determination would 
need to be made on a case-specific basis. Whether the state regulatory 
authority's process for creating a legally enforceable obligation has 
begun, and thus there is a contract or obligation pending, depends on 
state law. A QF may argue that an obligation or contract is pending 
approval as provided by state law in any proceedings seeking 
termination of the purchase obligation, or pursuant to a petition for 
declaratory order.
    141. The Commission denies OG&E's request to establish a new 
process by which a utility could use a section 210(m) application to 
nullify a state proceeding to establish a new QF purchase obligation. 
OG&E complains that the Commission prevented utility section 210(m) 
filings from January 19, 2006, when the NOPR issued, until issuance of 
the Final Rule, and should not now find that QFs initiating state 
``obligation'' proceedings during that interim period, or thereafter, 
are grandfathered under section 210(m)(6) of PURPA. Under OG&E's 
proposal, a QF seeking a new state ``obligation'' determination would 
be required to notify the utility and the utility would have 60 days to 
file a section 210(m) application with the Commission; this application 
would be addressed in a final determination within 90 days. This final 
determination could then be taken into account by the state in deciding 
whether to grant the QF's application to create a new ``obligation'' 
for the local utility to purchase power from the QF.
    142. We decline to create the new process requested by OG&E. We 
continue to believe that the Commission's determination to adopt the 
language of section 210(m)(6) and to look to state law to determine 
whether a contract or obligation is pending approval provides a 
sufficient balance between the rights of the electric utilities seeking 
relief from the obligation to enter into new contracts or obligations, 
and the rights of QFs under existing contracts or obligations.
---------------------------------------------------------------------------

    \57\ Final Rule at P 210-11.
    \58\ Midwest Renewable Energy Projects, LLC, 116 FERC ] 61,017 
(2006) (Midwest Renewable).
    \59\ Final Rule at P 211-13.
    \60\ As we noted above, once the Commission has made a finding 
that a particular QF has nondiscriminatory access to one of the 
specified markets, this conclusion would be binding in proceedings 
involving the same QF and other electric utilities, absent a showing 
of changed circumstances. Accordingly, as of the date of the first 
electric utility's filing seeking termination of the obligation to 
purchase from a particular QF, any subsequent state filing that a QF 
makes will not result in a grandfathered obligation.
    \61\ Midwest Renewable at P 14 (emphasis added).
---------------------------------------------------------------------------

    143. We will grant clarification with regard to the termination of 
existing contracts. Industrial Parties' request is consistent with our 
other findings with regard to contract termination in the Final Rule. 
In the Final Rule, in response to comments by AEP, we stated that an 
electric utility will not be compelled to enter into a new contract as 
long as there is mutual agreement between a QF and the electric utility 
to terminate the existing contract. We made clear, however, that ``a QF 
contract is to remain in effect until it terminates by mutual agreement 
or by its own terms.'' \62\ The Commission also recognized that some 
contracts contain clauses stating that legislation, such as EPAct 2005, 
or a Commission action, such as the Final Rule in this docket, may be 
grounds for termination of the contract. If an electric utility and a 
QF disagree as to the meaning of a termination clause, either the 
electric utility or the QF may seek a determination regarding its 
rights under the termination clause in the appropriate state forum 
since the issue of whether a QF has a continuing right to sell is a 
matter of contract interpretation.

F. Implementation Procedures

    144. Section 210(m)(3) of PURPA provides in part that ``[a]ny 
electric utility may file an application with the Commission for relief 
from the mandatory purchase obligation pursuant to this subsection on a 
service territory-wide basis.'' The Commission essentially incorporated 
this language into Sec.  292.310 of its regulations. The Commission 
also determined that an electric utility's mandatory purchase 
obligation would be suspended upon the filing of its PURPA petition. 
When an electric utility files its PURPA petition, that electric 
utility will not be obligated to enter into new contracts or 
obligations with QFs as of the date its PURPA petition is filed. If the 
Commission finds that the requirements of section 210(m)(1) of PURPA 
have been met, then the purchase requirement for that electric utility 
ends as of the date of the PURPA petition. However, if the Commission 
finds that the requirements of section 210(m)(1) have not been met, 
then the electric utility's obligation to enter into new contracts or 
obligations is reinstated as of the date of the Commission order.

[[Page 35891]]

Requests for Rehearing
    145. PacifiCorp and EEI argue that the Commission should clarify 
the procedures for utilities requesting termination of the mandatory 
purchase obligation on a ``service territory-wide'' basis. PacifiCorp 
notes that the term ``service territory-wide'' is not defined in PURPA 
or in the Final Rule and could refer to a portion of a utility's 
electric infrastructure located in a specific state or could be 
understood to be synonymous with the control area operated by the 
applicant. PacifiCorp argues that a single entity (such as PacifiCorp) 
owning transmission facilities and operates multiple control areas 
should be able to file separate applications for each control area. 
PacifiCorp and EEI argue that such clarification would facilitate the 
processing of applications by the Commission within the time 
limitations established by Congress. PacifiCorp and EEI request that 
the Commission clarify that it will interpret ``service territory'' to 
be the particular control area or areas identified in the application 
when the applicant operates multiple control areas spanning several 
states.
    146. If the Commission retains the small QF rebuttable presumption, 
Deere requests that the Commission grant rehearing of its decision to 
temporarily suspend a utility's PURPA obligation once a request for 
relief has been filed. Deere argues that the Commission should instead 
apply the utility's PURPA relief to small QFs only after the Commission 
makes the required findings with regard to the small QF issue. Deere 
contends that this would protect small QFs who, at the time of the 
utility's PURPA relief application, have already begun preliminary 
development work but have not yet been able to begin utilization of the 
applicable state law process for creating a legally enforceable 
obligation.
Commission Determination
    147. We clarify that an electric utility may specify in its 
application the territory within which it seeks to have its purchase 
obligation terminated.
    148. We grant Deere's request to distinguish between particular 
types of QFs for purpose of suspending the mandatory purchase 
obligation once an application for relief has been filed under section 
210(m)(3). The rebuttable presumption that small QFs do not have access 
to markets will remain in effect and, thus, it is reasonable to retain 
the mandatory purchase obligation from small QFs pending consideration 
a PURPA petition. We clarify that to the extent that an electric 
utility seeks to be relieved of the obligation to purchase from a small 
QF, the electric utility must rebut the presumption that the small QF 
does not have nondiscriminatory access to the applicable market prior 
to the termination of the purchase requirement as applied to that QF, 
and that the purchase obligation remains in effect until, and if, the 
Commission makes the finding that the small QF does have 
nondiscriminatory access to markets that warrant termination of the 
purchase obligation.

III. Information Collection Statement

    149. The regulations of the Office of Management and Budget (OMB) 
\63\ require that OMB approve certain information requirements imposed 
by an agency. OMB has approved the information requirements contained 
in Order No. 688. Specifically, OMB approved the following information 
collections and assigned the corresponding OMB control numbers: Small 
Power Production and Cogeneration Facilities (FERC-556) (1902-0075).
    150. On rehearing EEI argues that the filing requirements in Sec.  
292.310(d)(3) are unduly broad and burdensome. We have addressed those 
arguments elsewhere in this order.\64\
    151. This order on rehearing adopts a change. Specifically, we are 
requiring electric utilities filing an application with the Commission 
for relief from the mandatory purchase requirement to provide more 
information about the potentially affected QFs, including the docket 
number assigned if the QF filed for self-certification or Commission 
certification of qualifying facility status, the location of the QF 
depicted by state and county, and by the name and location of the 
substation where the QF is interconnected, and whether the QF is 
interconnected as an energy or network resource. We do not anticipate 
that this new requirement to provide additional information about the 
potentially affected QFs will impose a significant additional burden on 
electric utilities; the additional information we are requiring is 
readily available to electric utilities. Accordingly, we will allow the 
original projected burden estimates expressed in Order No. 688 to 
stand.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426 [Attention: 
Michael Miller, Office of the Executive Director, Phone (202) 502-8415, 
fax: (202) 273-0873, e-mail: [email protected]]
    152. To submit comments concerning the collection of information(s) 
and the associated burden estimates, please send your comments to the 
contact listed above and to the Office of Management and Budget, Office 
of Information and Regulatory Affairs, Washington, DC 20503, Attention: 
Desk Officer for the Federal Energy Regulatory Commission; Phone: (202) 
395-4650, fax: (202) 395-7285.

IV. Document Availability

    153. 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 FERC's Home Page (http://www.ferc.gov) and in FERC'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.
---------------------------------------------------------------------------

    \62\ Final Rule at P 219.
    \63\ 5 CFR 1320.12.
    \64\ See supra P 112-17.
---------------------------------------------------------------------------

    154. From FERC's Home Page on the Internet, this information is 
available on 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.
    155. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from our FERC Online Support at 202-
502-6652 (toll-free at 1-866-208-3676) or e-mail at 
[email protected], or the Public Reference Room at (202) 502-
8371 Press 0, TTY (202) 502-8659. E-Mail the Public Reference Room at 
public.referenceroom @ferc.gov.

V. Effective Date

    156. These revisions in this order on rehearing are effective July 
30, 2007.

    By the Commission.

    Commissioner Kelly concurring with a separate statement 
attached.
Kimberly D. Bose,
Secretary.

0
In consideration of the foregoing, the Commission amends part 292, 
Chapter I, Title 18, Code of Federal Regulations, as follows:

[[Page 35892]]

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

0
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.

0
2. In Sec.  292.310, paragraphs (c) introductory text and (d)(3) are 
revised to read as follows:


Sec.  292.310  Procedures for utilities requesting termination of 
obligation to purchase from qualifying facilities.

* * * * *
    (c) An electric utility must submit with its application for each 
potentially affected qualifying facility: The docket number assigned if 
the qualifying facility filed for self-certification or an application 
for Commission certification of qualifying facility status; the net 
capacity of the qualifying facility; the location of the qualifying 
facility depicted by state and county, and the name and location of the 
substation where the qualifying facility is interconnected; the 
interconnection status of each potentially affected qualifying facility 
including whether the qualifying facility is interconnected as an 
energy or a network resource; and the expiration date of the energy 
and/or capacity agreement between the applicant utility and each 
potentially affected qualifying facility. All potentially affected 
qualifying facilities shall include:
* * * * *
    (d) * * *
    (3) Transmission Studies and related information, including:
    (i) The applicant's long-term transmission plan, conducted by 
applicant, or the RTO, ISO or other relevant entity;
    (ii) Transmission constraints by path, element or other level of 
comparable detail that have occurred and/or are known and expected to 
occur, and any proposed mitigation including transmission construction 
plans;
    (iii) Levels of congestion, if available;
    (iv) Relevant system impact studies for the generation 
interconnections, already completed;
    (v) Other information pertinent to showing whether transfer 
capability is available; and
    (vi) The appropriate link to applicant's OASIS, if any, from which 
a qualifying facility may obtain applicant's available transfer 
capability (ATC) information.
* * * * *
    KELLY, Commissioner, concurring:
    Under PURPA section 210(m)(1)(A), no electric utility shall be 
required to enter into a new contract or obligation to purchase 
electric energy from a QF under section 210(m) if the Commission 
finds that the QF has nondiscriminatory access to: ``(i) 
independently administered, auction-based day ahead and real time 
wholesale markets for the sale of electric energy; and (ii) 
wholesale markets for long-term sales of capacity and electric 
energy.'' This order affirms the finding in Order No. 688 that the 
four ``Day 2'' markets (MISO, PJM, NYISO and ISO-NE) satisfy both 
requirements of section 210(m)(1)(A).
    By contrast to section 210(m)(1)(A)(ii), section 
210(m)(1)(B)(ii) requires that a QF have nondiscriminatory access to 
``competitive wholesale markets that provide a meaningful 
opportunity to sell capacity, including long-term and short-term 
sales, and electric energy, including long-term, short-term and 
real-time sales, to buyers other than the utility to which the 
qualifying facility is interconnected.'' Section 210(m)(1)(B)(ii) 
also provides that ``[i]n determining whether a meaningful 
opportunity to sell exists, the Commission shall consider, among 
other factors, evidence of transactions within the relevant 
market.'' In Order No. 688, the Commission interpreted the use of 
the terms ``competitive,'' ``meaningful opportunity'' and ``evidence 
of transactions'' in section 210(m)(1)(B)(ii) to mean that Congress 
intended for termination of the purchase requirement in a ``Day 1'' 
market, such as CAISO and SPP, only if it could be demonstrated that 
QFs had opportunities to make long-term and short-term sales of 
capacity and long-term, short-term and real-time sales of energy 
into competitive wholesale markets. This order clarifies that, based 
on the specific language contained in section 210(m)(1)(B)(ii), a 
petitioning electric utility located in a ``Day 1'' market must 
demonstrate an actual, not just theoretical, opportunity to meet 
this requirement. Accordingly, this order affirms Order No. 688 in 
finding that the ``Day 1'' markets, SPP and CAISO, have not been 
shown to meet the requirements of section 210(m)(1)(B)(ii).
    On rehearing, petitioners dispute the Commission's finding in 
Order No. 688 that the four ``Day 2'' markets meet the second prong 
of section 210(m)(1)(A). They argue that the mere existence of long-
term bilateral contracts for sales of capacity and energy in these 
markets is not sufficient to demonstrate that there is a competitive 
market for capacity and energy sales or meaningful opportunities for 
QFs to sell energy or capacity long-term to multiple buyers.
    I sympathize with petitioners' argument, and in fact I believe 
that section 210(m)(1)(A)(ii) logically should have required a 
demonstration of a competitive long-term market that provides a 
meaningful opportunity for QFs to sell energy or capacity long-term 
to buyers other than the utility to which the QF is interconnected, 
as is required under section 210(m)(1)(B)(ii). However, the less 
specific language in section 210(m)(1)(A)(ii) used to describe the 
quality of the relevant long-term market that would satisfy this 
requirement indicates that either this was not Congress's intent, or 
that perhaps there was a drafting oversight. In any event, we must 
look to the plain language of the statute. Thus, in my view, the 
Commission has reasonably interpreted section 210(m)(1)(A)(ii) to 
require only that there be a ``market'' for long-term sales of 
capacity and energy with respect to electric utilities located in 
``Day 2'' markets. Accordingly, I concur with this order.

Suedeen G. Kelly
 [FR Doc. E7-12553 Filed 6-28-07; 8:45 am]
BILLING CODE 6717-01-P