[Federal Register Volume 74, Number 56 (Wednesday, March 25, 2009)]
[Rules and Regulations]
[Pages 12540-12544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-6502]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 37

[Docket Nos. RM05-17-004 and RM05-25-004; Order No. 890-C]


Preventing Undue Discrimination and Preference in Transmission 
Service

March 19, 2009.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Order on Rehearing and Clarification.

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SUMMARY: The Federal Energy Regulatory Commission affirms its basic 
determinations in Order Nos. 890, 890-A and 890-B, granting rehearing 
and clarification regarding certain revisions to its regulations and 
the pro forma open-access transmission tariff, or OATT, adopted in 
Order Nos. 888 and 889 to ensure that transmission services are 
provided on a basis that is just, reasonable, and not unduly 
discriminatory. The Commission grants clarification of the degree of 
consistency required in the calculation of available transfer 
capability by transmission providers and denies rehearing regarding the 
requirement to undesignate network resources used to serve off-system 
sales

DATES: Effective Date: This rule will become effective March 25, 2009.

FOR FURTHER INFORMATION CONTACT: W. Mason Emnett, Office of the General 
Counsel--Energy Markets, Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426, (202) 502-6540.

SUPPLEMENTARY INFORMATION:
    Before Commissioners: Jon Wellinghoff, Acting Chairman; Suedeen G. 
Kelly, Marc Spitzer, and Philip D. Moeller.
    1. On February 16, 2007, the Commission issued Order No. 890,\1\ 
addressing and remedying opportunities for undue discrimination under 
the pro forma Open Access Transmission Tariff (OATT) adopted in Order 
No. 888.\2\ The pro forma OATT was intended to foster greater 
competition in wholesale power markets by reducing barriers to entry in 
the provision of transmission service. In the ten years since Order No. 
888, however, flaws in the pro forma OATT undermined its ability to 
realize the core objective of remedying undue discrimination. The 
Commission acted in Order No. 890 to correct these flaws by reforming 
the terms and conditions of the pro forma OATT in several critical 
areas, including the calculation of available transfer capability 
(ATC), the planning of transmission facilities, and the conditions of 
services offered by each transmission provider.
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    \1\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12,266 (March 15, 2007), 
FERC Stats. & Regs. ] 31,241, order on reh'g, Order No. 890-A, 73 FR 
2984 (January 16, 2008), FERC Stats. & Regs. ] 31,261 (2007), order 
on reh'g, Order No. 890-B, 123 FERC ] 61,299 (2008).
    \2\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 61 FR 21,540 (May 10, 1996), FERC Stats. & Regs. ] 
31,026 (1996), order on reh'g, Order No. 888-A, 62 FR 12,274 (Mar. 
14, 1997), FERC Stats. & Regs. ] 31,048 (1997), order on reh'g, 
Order No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 
888-C, 82 FERC ] 61,046 (1998, aff'd in relevant part sub nom. 
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (DC 
Cir. 2000)(TAPS v. FERC), aff'd sub nom. New York v. FERC, 535 U.S. 
1 (2002).
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    2. In Order Nos. 890-A and 890-B, the Commission largely affirmed 
the reforms adopted in Order No. 890. The Commission concluded that, 
taken together, these reforms will better enable the pro forma OATT to 
achieve the core objective of remedying undue discrimination in the 
provision of transmission service. The Commission did, however, grant 
rehearing and clarification regarding certain revisions to its 
regulations and the pro forma OATT. NorthWestern Corporation 
(NorthWestern) and South Carolina Electric and Gas Co. (SCE&G) have 
requested further rehearing and clarification of Order No. 890-B on 
certain discrete issues, which we address below.

I. Reforms of the OATT

A. Consistency and Transparency of ATC Calculations

    3. In Order No. 890-B, the Commission among other things affirmed a 
clarification provided in Order No. 890-A that adjacent transmission 
providers must coordinate and exchange data and assumptions to achieve 
consistent available transfer capability (ATC) values on either side of 
a single interface.\3\ The Commission stated that it disagreed with 
petitioners arguing that consistent ATC values

[[Page 12541]]

should not be interpreted to mean identical ATC values, but 
acknowledged that factors such as timing of reservation requests, 
acceptances, and confirmations, and multiple interfaces between and 
among transmission providers, can make it difficult to achieve 
coincidental, identical postings of ATC values on both sides of an 
interface. The Commission reiterated that, if all of the ATC components 
and certain data inputs and assumptions are consistent, the ATC 
calculation methodologies being finalized by the North American 
Electric Reliability Corporation (NERC) through the reliability 
standards development process should produce predictable and 
sufficiently accurate, consistent, equivalent, and replicable results.
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    \3\ Order No. 890-B at P 15.
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Requests for Clarification and Rehearing
    4. NorthWestern contends that, while requiring two adjacent 
transmission providers to post identical ATC at a single interface 
appears on its face to be reasonable, that requirement can have 
unintended and negative consequences. NorthWestern states the 
requirement may allow transmission customers to be able to block other 
market participants from requesting ATC without placing a transmission 
service request or following OATT requirements. NorthWestern offers an 
example of two transmission providers with a single interface and a 
customer that requests service on that interface from only one of the 
transmission providers. NorthWestern contends that the requirement to 
make ATC postings on either side of an interface identical would force 
the second transmission provider to reduce ATC on its side of the 
interface if the first transmission provider grants service to the 
customer, even though no request for service was submitted on the 
second transmission system, circumventing the first-come, first-served 
nature of transmission service under the pro forma OATT.
    5. NorthWestern contends that how transmission providers account 
for capacity benefit margin (CBM) and transmission reliability margin 
(TRM) on either side of an interface can have the same impact as a 
transmission service request. If one transmission provider sets aside 
capacity for CBM or TRM, NorthWestern contends that those set asides 
will force the transmission provider to decrement ATC on the other side 
of the interface. While NorthWestern understands the Commission's 
desire to remove the potential for undue discrimination by requiring 
ATC calculations to be consistent and transparent, it contends that 
directing transmission providers to have identical ATC postings on 
either side of an interface will allow transmission providers and 
customers to block access to transmission service, either intentionally 
or not.
    6. NorthWestern therefore asks the Commission to grant rehearing to 
require that ATC on either side of an interface be consistent, rather 
than identical. NorthWestern suggests that a consistency requirement 
could be structured such that the transmission providers posting ATC 
for a single interface be able to transparently provide all necessary 
information that allows interested parties to determine why differences 
in ATC exist.
Commission Determination
    7. The Commission clarifies that it did not intend in Order No. 
890-B to require transmission providers to post identical ATC values on 
either side of an interface in every instance and at all times. While 
ATC values on either side of an interface may be identical in some 
instances, in others they may not. To the extent necessary, the 
Commission grants rehearing of Order No. 890-B to eliminate reference 
to the posting of identical ATC values on either side of an interface.
    8. In Order No. 890-A, the Commission clarified that adjacent 
transmission providers must coordinate and exchange data and 
assumptions to achieve consistent ATC values on either side of a single 
interface.\4\ The Commission explained that this requirement is 
applicable to any neighboring transmission providers no matter whether 
they use the same or different ATC methodologies. Several petitioners 
requested rehearing and clarification of this requirement, generally 
raising two arguments. First, they suggested that it would be more 
appropriate to require consistency of total transfer capability (TTC) 
on either side of an interface instead of consistency of ATC values.\5\ 
Second, they argued that any requirement to achieve consistent ATC 
values on either side of an interface should not be interpreted to mean 
identical ATC values.\6\ In response, the Commission stated that it 
disagreed with petitioners arguing that consistent ATC values should 
not be interpreted as identical, but went on to acknowledge that 
various factors (such as timing of reservation requests, acceptances 
and confirmation, or multiple interfaces between transmission 
providers) could make it difficult for transmission providers to 
achieve coincidental, identical postings of ATC values on either side 
of an interface.\7\ The Commission therefore reiterated that the ATC 
calculation methodologies being finalized by NERC ``should produce 
predictable and sufficiently accurate, consistent, equivalent, and 
replicable results.'' \8\
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    \4\ Order No. 890-A at P 52. The Commission noted that the 
anticipated consistency is for available capability in the same 
direction across an interface.
    \5\ See Order No. 890-B at P 9.
    \6\ See id. P 9-10.
    \7\ Id. P 15.
    \8\ Id.
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    9. The requirement, then, is not to achieve identical postings of 
ATC values on either side of an interface, as NorthWestern contends. 
The requirement is, instead, to achieve consistency in such values 
through the development of ATC calculation methodologies that produce 
sufficiently accurate, consistent, equivalent, and replicable results. 
In some instances, it may be possible for transmission providers under 
these methodologies to achieve identical ATC values on either side of 
an interface. In others, such as when there are differences in 
reservation status or when there are multiple interfaces between the 
transmission providers, it may not be possible or even practical to 
achieve identical values.
    10. Since the issuance of Order No. 890-B, NERC has submitted to 
the Commission six proposed Reliability Standards governing the 
calculation of ATC. In a companion order issued today, the Commission 
proposes to approve these Reliability Standards as just, reasonable, 
not unduly discriminatory or preferential, and in the public 
interest.\9\ The Commission will address in that proceeding whether the 
proposed Reliability Standards satisfy the requirements of Order No. 
890, as clarified above.
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    \9\ Mandatory Reliability Standards for the Calculation of 
Available Transfer Capability, Capacity Benefit Margins, 
Transmission Reliability Margins, Total Transfer Capability, and 
Existing Transmission Commitments and Mandatory Reliability 
Standards for the Bulk-Power System, Notice of Proposed Rulemaking, 
Docket No. RM08-19-000, et al. (March 19, 2009). 126 FERC ] 61,249 
(2009).
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B. Designation of Network Resources

    11. In Order No. 890-B, the Commission among other things clarified 
that the requirement for a network customer and the transmission 
provider's merchant function to undesignate each portion of each 
resource used to support a sale of system power does not apply in the 
event the buyer and seller are located on the same transmission system 
and the buyer designates the system power as a network resource. The 
Commission explained that, when a seller's network

[[Page 12542]]

resources are used to support an on-system sale, the buyer meets the 
informational requirements of section 29.2(v) of the pro forma OATT 
simply by identifying the seller's system as the resource. In 
comparison, when a buyer does not designate a system purchase as a 
network resource, the point-to-point transmission reservation for 
taking delivery of the purchase and the corresponding resource-specific 
undesignation by the seller provide the transmission provider with the 
information it needs to accurately model the effect of the transaction 
on its transmission system and set aside ATC accordingly.
Requests for Clarification and Rehearing
    12. SCE&G argues on rehearing that the Commission has unreasonably 
restricted the types of system sales that can be made from network 
resources without undesignation. SCE&G argues that, for purposes of 
performing transmission modeling and ATC calculations in conjunction 
with a given third-party sale, the transmission provider has all of the 
information that it needs regardless of whether the buyer is located 
on-system or off-system. According to SCE&G, transmission modeling 
relating to off-system sales is a routine matter in the industry and 
the practice of supporting such sales via slice-of-system 
undesignations has presented no obstacles to the execution of such 
modeling or any associated calculations. SCE&G contends that, when 
modeling transmission flows associated with an off-system sale, the 
neighboring systems (of the buyer and the seller) are evaluated on a 
system-wide basis and calculations reflecting the amount of the sale 
are properly performed in modeling the flow from the system of the 
seller to that of the buyer.
    13. SCE&G contends that modeling for slice-of-system sales, whether 
on-system or off-system, is designed to ensure not only accuracy, but 
also economic efficiency. SCE&G states that the modeling for such sales 
takes into account load forecasts for the relevant time period and, on 
the basis of such data, includes projections of which specific plants 
are likely to be involved in generating the incremental power that 
supports the sale, which in turn is reflected in the relevant economic 
dispatch plan. Because load forecasts invariably differ to at least 
some degree from the actual load that ultimately materializes, SCE&G 
contends that the modeling of any system sale includes appropriate 
alternate dispatch scenarios, to ensure that unit dispatch is performed 
in the correct economic order no matter what the actual load may 
eventually prove to be. For off-system sales, SCE&G states, the 
transmission provider takes the additional steps of recalculating ATC 
for the relevant interface and ensuring proper adjustment to posted ATC 
values.
    14. If sellers are denied the ability to use a slice-of-system 
undesignation to support an off-system sale, SCE&G states that their 
only alternative is to make unit-by-unit undesignations, which SCE&G 
contends is unworkable and inaccurate and could result in units having 
to be dispatched out of economic order. SCE&G states that purchasers 
often use such off-system firm transactions as a tool for ensuring 
their compliance with NERC and regional reliability council reserve 
requirements and related reliability requirements and that these 
transactions garner greater reliability benefits by virtue of being 
based on a share of an entire portfolio of generating units, rather 
than a single unit. SCE&G therefore asks the Commission to revisit its 
determination in Order No. 890-B and safeguard the ability to access 
and rely on off-system system sales.
    15. SCE&G argues that it is particularly ironic that the 
Commission's initial clarification regarding the use of network 
resources to supply system sales is the outgrowth of a clarification 
sought by SCE&G in comments on the NOPR in this proceeding. In those 
comments, SCE&G requested that the Commission clarify ``exactly how to 
undesignate and redesignate [network resources] when the Transmission 
Provider/Network Customer is selling a block of firm power out of the 
system.'' \10\ SCE&G argues that, in responding to the request in Order 
No. 890, the Commission expressly acknowledged the off-system nature of 
the sales at issue and, therefore, its statement that ``firm third-
party sales may be made from an undesignated portion of [network 
resources]'' appeared to apply to off-system sales.\11\ SCE&G contends 
that the Commission's determination in Order No. 890-B therefore cannot 
be squared with either the history of the Commission's express 
treatment of the issue or standard industry practice.
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    \10\ Reply Comments of South Carolina Electric & Gas Co. at 15, 
Docket No. RM05-25-000, et al. (Sep. 20, 2006) (emphasis added).
    \11\ Citing Order No. 890 at PP 1567 and 1582.
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    16. Should the Commission decline to grant rehearing as requested, 
SCE&G argues that the Commission at a minimum should grandfather long-
term, still-continuing off-system sales sourced from designated network 
resources that were entered into prior to Order No. 890-B in reliance 
of the Commission's prior policy.
Commission Determination
    17. The Commission affirms the requirement that network resources 
used to supply sales of system power to off-system buyers must first be 
undesignated.\12\ As we explained in Order No. 890, transactions in 
which a buyer and seller are both network customers located on the same 
transmission system are distinct from transactions involving sales of 
energy from a network customer to an off-system buyer. In the latter 
circumstance, the off-system buyer will not be using network service to 
take delivery from the host transmission provider and, instead, must 
identify the points of receipt and delivery for the transaction on the 
host transmission provider's system, i.e., the points where capacity 
and energy will be received from the seller and delivered to the buyer. 
The point-to-point transmission reservation and the corresponding 
resource-specific undesignation provide the transmission provider with 
the information it needs regarding the location of particular resources 
being used by the seller to source the transaction in order to model 
the effect of the transaction on its transmission system and set aside 
ATC accordingly.
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    \12\ See Order No. 890-B at P 206.
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    18. SCE&G contends that a resource-specific undesignation of 
resources is unnecessary for a transmission provider to model an 
economic dispatch of resources to determine which specific plants are 
likely to be involved in generating the incremental power to support an 
off-system sale. Even if that is true in some circumstances, whether or 
not the transmission provider is able to analytically determine the 
likely units used to support a power sale does not affect the need of 
the buyer to identify the points of receipt and delivery on the host 
transmission system where capacity and energy will be received from the 
seller and delivered to the buyer. Because the buyer is not a network 
customer of the host transmission provider, it cannot use network 
service to take delivery. In order for the buyer to schedule point-to-
point service to take delivery, the transmission customer must identify 
the point of receipt and delivery for the transaction. Even if the 
transmission provider has accurately modeled the seller's optimal use 
of resources to supply the transaction, it is unclear how the buyer and 
seller would reflect that dispatch in the point-to-point

[[Page 12543]]

reservation used to deliver the energy other than by identifying the 
particular point(s) of receipt for the transaction, which is tantamount 
to a resource-specific undesignation of associated network resources.
    19. Transactions in which the buyer of system energy is a network 
customer located on-system are clearly distinguishable from those in 
which the buyer and seller are located on different systems. In the 
former circumstance, the host transmission provider knows the normal 
operating levels and variable energy costs for both network customers' 
resources, the load forecasts for both network customers' network 
loads, and any transmission constraints requiring redispatch. Section 
29.2(v) of the pro forma OATT requires such information to be submitted 
for each of the two designations (the original designation of the 
capacity by the seller, and the subsequent designation of the capacity 
by the buyer) such that the local transmission provider is able to use 
such information to simultaneously determine the expected dispatches 
for each network customer. From these predictions, reasonable operating 
and contingency scenarios can be modeled in order to accurately 
determine what transmission capacity should be reasonably set aside to 
accommodate both network customers. That is not the case when one party 
to the transaction is located in another transmission system.
    20. As noted above, NERC recently submitted for Commission review 
proposed Reliability Standards to govern the calculation of ATC. One of 
the issues the Commission directed transmission providers to address in 
those Reliability Standards is the effect on ATC of designating and 
undesignating network resources.\13\ Although the Commission proposes 
in Docket Nos. RM08-19-000, et al., to approve the proposed Reliability 
Standards, the Commission notes that NERC failed to address the 
modeling of network resources and its impact on ATC calculations. The 
Commission proposes to direct NERC to develop a modification to the 
Reliability Standards to address this requirement. We encourage SCE&G 
and any other interested party to provide comments in that proceeding 
regarding the interaction of network resource designations and the 
calculation of ATC. Upon review of those comments and final action in 
that proceeding, the Commission may revisit its network resource 
policies as necessary to reflect the Reliability Standards implemented 
by NERC.
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    \13\ See Mandatory Reliability Standards for the Bulk-Power 
System, Order No. 693, FERC Stats. & Regs. ] 31,242, at P 1041, 
order on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
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    21. In the meantime, we disagree with SCE&G that the Commission's 
network resource policies unreasonably impair the ability of network 
customers to meet reserve requirements or related reliability 
requirements. In Order Nos. 890-A and 890-B, the Commission made clear 
that network customers could use designated resources to fulfill 
obligations under a reserve sharing program.\14\ In other proceedings, 
the Commission has permitted transmission providers to amend their 
OATTs to allow network customers to use designated resources to supply 
power to other control areas during system emergencies.\15\ Moreover, 
the Commission has stated repeatedly that transmission providers are 
free to propose additional variations to the pro forma OATT to 
accommodate more flexible network resource policies if the particular 
ATC methodology used by a transmission provider allows for such 
flexibility.\16\
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    \14\ See Order No. 890-A at P 948; Order No. 890-B at P 215.
    \16\ See Arizona Public Service Co., 121 FERC ] 61,246 at P 42 
(2007).
    \16\ See Order No. 890-A at P 951; Order No. 890-B at P 210.
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    22. We also disagree with SCE&G that it would be appropriate to 
grandfather all long-term, still-continuing off-system sales sourced 
from designated network resources that were entered into prior to Order 
No. 890-B. In response to SCE&G's NOPR comments, the Commission clearly 
stated that firm third-party sales may be made only from an 
undesignated portion of network resources and that a network customer 
must submit undesignations for each portion of each resource supporting 
the third-party sale.\17\ A number of petitioners sought rehearing and 
clarification of that statement, which led the Commission to conclude 
in Order No. 890-A that system sales could be supplied by network 
resources without undesignation if the system sale is itself designated 
as a network resource by the buyer.\18\ The Commission, however, did 
not specifically state that the buyer had to be a network customer on 
the same transmission system as the seller in order to qualify for this 
exception from the undesignation requirement. As a result, confusion 
arose regarding Order No. 890-A that was resolved in Order No. 890-
B.\19\
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    \17\ See Order No. 890 at P 1582.
    \18\ See Order No. 890-A at P 947.
    \19\ See Order No. 890-B at P 205.
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    23. It would therefore only be appropriate to allow an exception to 
the undesignation requirement for off-system system sales that occurred 
after the issuance of Order No. 890-A, but before the clarification in 
Order No. 890-B. During that six-month period, it may have been 
reasonable for a network customer to interpret the Commission's 
statement in Order No. 890-A as allowing for off-system sales from 
network resource capacity undesignated on a general (as opposed to 
resource-specific) basis if the buyer designated the purchase as an 
external network resource with its own transmission provider. Prior to 
issuance of Order No. 890-A, however, there was no indication that such 
sales would be permitted without undesignation on a resource-specific 
basis.
    24. As such, we agree that a power sale initiated on or after the 
issuance date of Order No. 890-A, but before the effective date of 
Order No. 890-B, may be accommodated with capacity undesignated on a 
general basis, as described in paragraph 947 of Order No. 890-A. Any 
network customer making such power sales, and which submitted a general 
undesignation for such power sales between those dates, is not 
considered to be in violation of section 30.4 as a result of operation 
of such resources. Network customers may rely on such undesignation(s) 
until the redesignation date (for resources temporarily terminated) or 
the expiration of the current term of the power sales contract (for 
resources indefinitely terminated).

II. Information Collection Statement

    25. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain information collection requirements imposed by 
an agency.\20\ The revisions to the information collection requirements 
for transmission providers adopted in Order No. 890 were approved under 
OMB Control Nos. 1902-0233. This order does not substantively alter 
those requirements. OMB approval of this order is therefore 
unnecessary. However, the Commission will send a copy of this order to 
OMB for informational purposes only.
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    \20\ 5 CFR 1320 (2007).
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III. Document Availability

    26. 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)

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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.
    27. 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.
    28. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from 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, TTY (202) 502-8659. E-mail the Public Reference Room at 
[email protected].

IV. Effective Date and Congressional Notification

    29. This order does not substantively alter the requirements of 
Order Nos. 890, 890-A or 890-B and, therefore, will become effective as 
of the date of publication in the Federal Register.

    By the Commission.
Kimberly D. Bose,
Secretary.
 [FR Doc. E9-6502 Filed 3-24-09; 8:45 am]
BILLING CODE 6717-01-P