[Federal Register Volume 73, Number 143 (Thursday, July 24, 2008)]
[Notices]
[Pages 43222-43224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16914]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[ Docket Nos. ER91-195-051; EL07-69-001]


 Western Systems Power Pool; Western Systems Power Pool 
Agreement; Order Addressing Request for Reconsideration and Providing 
An Opportunity for Further Comments

Issued July 17, 2008.
    Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.
    1. On February 21, 2008, the Commission issued an order on the 
Western System Power Pool (WSPP) Agreement rates, finding that it is 
not just and reasonable to allow a seller to use the WSPP-wide ``up 
to'' demand charge as a ceiling rate in markets where the seller does 
not have market-based rate authority, unless such a seller can cost-
justify the use of the ``up to'' demand charge based on its own fixed

[[Page 43223]]

costs.\1\ On March 24, 2008, Arizona Public Service Company (APS) and 
Xcel Energy Services Inc. (Xcel) filed a joint request for 
reconsideration of the WSPP Agreement Order, requesting that the 
Commission adopt an alternative implementation of the WSPP Agreement 
Order by incorporating company-specific demand charge caps into the 
WSPP Agreement, either by cross-reference to a specific cost-based 
tariff, or by incorporation of company-specific rate schedules into the 
WSPP Agreement itself.\2\ In this order, we address the request for 
reconsideration. We deny APS's and Xcel's request with respect to the 
cross-reference proposal, and provide an opportunity for WSPP and other 
interested parties to comment on the proposal for incorporating 
company-specific rate schedules, as discussed below.
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    \1\ Western Sys. Power Pool, 122 FERC ] 61,139 (2008) (February 
21 Order).
    \2\ APS and Xcel describe this proposal as incorporating into 
the WSPP Agreement company-specific schedules of demand charge cost 
caps. Under APS and Xcel's second proposal, they would continue to 
use the non-rate terms and conditions of service under the WSPP 
Agreement.
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I. Background

    2. The WSPP Agreement was initially accepted by the Commission on a 
non-experimental basis in 1991,\3\ and provided for flexible pricing 
for coordination sales and transmission services. In accepting the WSPP 
Agreement, the Commission rejected WSPP's proposed system of price caps 
based on the costs of its highest cost participants, and instead 
developed energy and transmission rate ceilings based on the costs of a 
subset (18 sellers) of the original parties to the WSPP Agreement.\4\ 
The U.S. Court of Appeals for the District of Columbia Circuit upheld 
the Commission's acceptance of the WSPP Agreement.
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    \3\ Western Sys. Power Pool, 55 FERC ] 61,099, order on reh'g, 
55 FERC ] 61,495 (1992) (Initial Order), aff'd in relevant part and 
remanded in part sub nom. Environmental Action and Consumer 
Federation of America v. FERC, 996 F.2d 401 (DC Cir. 1992), order on 
remand, 66 FERC ] 61,201 (1994) (Environmental Action). Prior to 
1991, the WSPP Agreement was used for three years on an experimental 
basis. See Western Sys. Power Pool, 50 FERC ] 61,339 (1990) 
(extending the initial two-year period for an additional year).
    \4\ See Initial Order, 55 FERC ] 61,099 at 61,321-25.
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    3. On June 21, 2007, the Commission instituted a section 206 
proceeding to investigate whether the WSPP Agreement ceiling rate 
continued to be just and reasonable for a public utility seller in 
markets in which such seller was found to have or was presumed to have 
market power.\5\ The Commission limited the investigation to: (1) the 
justness and reasonableness of WSPP Agreement cost-based ceiling rates 
for coordination energy sales by public utility sellers that are found 
to have, or are presumed to have, market power; and (2) if the existing 
WSPP Agreement rates are unjust and unreasonable for such sellers, how 
the Commission should establish a just and reasonable rate. The 
Commission sought comment on whether the Commission should set a just 
and reasonable ``up to'' rate based on: (1) Individual sellers'' costs; 
(2) a new agreement-wide ``up to'' rate based on the costs of a 
representative group of WSPP sellers (including how such agreement-wide 
rate should be calculated); or (3) or a different methodology.
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    \5\ Western Sys. Power Pool, 119 FERC ] 61,302 at P 9 (2007) 
(Order Instituting Hearing).
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    4. In the February 21 Order, the Commission found that it is not 
just and reasonable to allow such a seller to continue to use the WSPP-
wide ``up to'' demand charge as a ceiling rate unless such a seller can 
cost-justify the use of the ``up to'' demand charge based on its own 
fixed costs. Accordingly, the Commission directed all sellers under the 
WSPP Agreement that lack market-based rate authorization, or that have 
lost or relinquished their market-based rate authority (including those 
sellers currently using the WSPP Agreement as mitigation), who wish to 
continue transacting under the WSPP Agreement, to make a filing within 
60 days of the date of issuance of that order providing cost 
justification \6\ to demonstrate that use of the WSPP Agreement ``up 
to'' demand charge is just and reasonable for that particular seller. 
The Commission stated that, if a seller provides cost support 
demonstrating that the ``up to'' demand charge under the WSPP Agreement 
does not exceed the demand charge that the seller can cost-justify 
based on its own fixed costs, the seller may continue to use the WSPP 
Agreement.
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    \6\ The Commission stated that such changes should be filed 
pursuant to section 35.13 of the Commission's regulations. 18 CFR 
35.13 (2008).
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    Otherwise, such seller must file a separate stand-alone rate 
schedule, to be effective as of the date of the compliance filing that 
is cost-justified based on the individual seller's own costs. In the 
latter case, such seller could propose to use the non-rate terms and 
conditions of the WSPP Agreement, but would have to include those 
provisions as part of its stand-alone rate schedule.

II. Request for Reconsideration

    5. APS and Xcel state that they are not seeking to reverse the 
Commission's ruling in the February 21 Order that sellers may not 
automatically rely upon the capped rates in the WSPP Agreement in 
markets where they do not have market-based rate authority. Rather, APS 
and Xcel request that the Commission reconsider how this ruling is to 
be implemented, so as to preserve the numerous benefits of transacting 
under the WSPP Agreement for those mitigated sellers that might require 
company-specific cost caps, and for their counterparties.
    6. APS and Xcel argue that the February 21 Order eliminates the 
efficiencies inherent in the WSPP Agreement for certain WSPP members, 
because a seller that is unable to provide cost justification for the 
``up-to'' demand charge included in the WSPP Agreement would be 
precluded from selling under the WSPP Agreement. APS and Xcel contend 
that, even though a seller could seek to mimic the benefits of the WSPP 
Agreement by filing a separate agreement that contains the same terms 
and conditions, the seller would still need to enter into bilateral 
agreements with each WSPP member with which it would want to transact. 
APS and Xcel argue that each of the counterparties would then need to 
familiarize itself with the terms and conditions of the seller's stand-
alone rate schedule and confirm that the terms and conditions included 
in the stand-alone rate schedule mirror those contained in the WSPP 
Agreement. APS and Xcel further state that other process adjustments 
would be required, such as making advance bilateral arrangements prior 
to transactions taking place under a stand-alone rate schedule. They 
also contend that additional credit obligations would necessarily be 
required by stand-alone rate schedules, as well as possible additional 
collateral postings. APS and Xcel maintain that such additional steps 
could take more time than a potential buyer is willing to spend, which 
they argue could limit the number of potential trading partners.
    7. APS and Xcel also argue that the Commission's remedy in the 
February 21 Order results in inefficient use of company and Commission 
resources and may result in inconsistent conditions of sales for power 
and energy. They contend that, in the event revisions are made to the 
terms and conditions of the WSPP Agreement, each WSPP member that 
utilizes those terms under a stand-alone rate schedule will be required 
to propose and file similar conforming revisions to keep the terms and 
conditions consistent. APS and Xcel further maintain that the 
Commission could be required to process and evaluate numerous rate

[[Page 43224]]

schedule changes. Additionally, they argue that there may be a lag 
between the effective date of the revisions to the WSPP Agreement and 
the effective date of revisions in a company's stand-alone rate 
schedule, which they claim will create confusion between 
counterparties. APS and Xcel contend that confusion may also result in 
transactions between parties if a WSPP member does not incorporate each 
and every revision to the WSPP Agreement in the company-specific stand-
alone rate schedule. They explain that a prospective buyer may have the 
mistaken impression that the seller has implemented every term and 
condition of the WSPP Agreement in the stand-alone rate schedule, when, 
in fact, a seller has not proposed certain revisions.
    8. APS and Xcel suggest what they describe as less procedurally 
complex, alternative approaches to implement the February 21 Order, 
including allowing cross-referencing of company-specific cost-based 
demand charges in a separate cost-based tariff. Alternatively, they 
suggest that the Commission could permit company-specific rate 
schedules to be incorporated into the WSPP Agreement itself.

III. Commission Determination

    9. In the Order Instituting Hearing, the Commission emphasized that 
it was not investigating whether sellers that are found to have market 
power, or are presumed to have market power, may continue to use the 
non-rate terms and conditions under the WSPP Agreement; nor was the 
Commission investigating the transmission rates under the WSPP 
Agreement. Moreover, in the February 21 Order, the Commission 
emphasized that the finding reached would affect only a limited number 
of sellers. The Commission specifically stated that it was not 
requiring each WSPP member public utility to cost-justify the use of 
the WSPP Agreement demand charge or to file an individual cost-based 
rate. Instead, the Commission required only those jurisdictional 
sellers that lack market-based rate authorization, or those sellers 
that lose or relinquish their market-based rate authority (including 
those sellers currently using the WSPP Agreement as mitigation), to 
provide cost justification to demonstrate that use of the WSPP ``up 
to'' demand charge is just and reasonable for those particular sellers. 
Only if such sellers cannot justify the demand charge would they need 
to file a separate, stand-alone rate schedule that could mirror the 
non-rate terms and conditions of the WSPP Agreement. Thus, only a 
limited number of utilities are affected by the February 21 Order.\7\
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    \7\ We note that two sellers have filed cost justification for 
continued use of the WSPP Agreement demand charge. Those filings are 
pending before the Commission. Three others, including APS, filed 
letters stating that they would not use the WSPP Agreement in 
balancing authority areas in which they are mitigated.
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    10. The proposal by APS and Xcel to cross-reference company-
specific cost-based demand charges in the WSPP Agreement is not 
consistent with Commission requirements. The Commission requires public 
utilities to post full and complete rate schedules and tariffs, rather 
than incorporating rates by reference.\8\ Accordingly, we will deny 
APS' and Xcel's request for reconsideration on this proposal.
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    \8\ See 18 CFR 35.1(a) (2008); see also Louisville Gas and 
Electric Co., 114 FERC ] 61,282, at P 186 (2006).
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    11. APS and Xcel alternatively propose that the Commission permit 
company-specific rates in rate schedules to be incorporated into the 
WSPP Agreement. They argue that the requirement in the February 21 
Order that sellers who cannot justify the demand charge must file a 
separate, stand-alone rate schedule will reduce efficiencies for 
certain WSPP members and cause potential waste of Commission resources. 
APS and Xcel cite the need for additional credit checks and postings, 
as well as potential numerous rate schedule changes, as examples of 
requirements that will discourage potential trading partners from 
entering into agreements with WSPP members.
    12. The proposal to allow the incorporation of company-specific 
rates in rate schedules in the WSPP Agreement would require amendment 
of the WSPP Agreement. To assist us in our analysis of this proposal, 
we will provide WSPP and any other interested party the opportunity to 
submit comments on the proposal to incorporate company-specific rate 
schedules into the WSPP Agreement within 30 days of the date of 
issuance of this order, with reply comments due 15 days thereafter.
    The Commission orders:
    (A) APS' and Xcel's request for reconsideration is hereby denied 
with respect to the proposal to cross-reference company-specific demand 
charges in the WSPP Agreement, as discussed in the body of this order.
    (B) The Commission hereby provides WSPP and interested parties an 
opportunity to comment on the proposal to incorporate company-specific 
rate schedules in the WSPP Agreement within 30 days of the date of 
issuance of this order, and reply comments within 15 days, as discussed 
above.
    (C) The Secretary is directed to publish a copy of this order in 
the Federal Register.

    By the Commission.
Kimberly D. Bose,
Secretary.
[FR Doc. E8-16914 Filed 7-23-08; 8:45 am]
BILLING CODE 6717-01-P