[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Notices]
[Pages 47138-47140]
[FR Doc No: 2012-19294]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67569; File No. SR-NYSEMKT-2012-23]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of
Proposed Rule Change Amending the Members' Schedule of NYSE Amex
Options LLC in Order To Reflect Changes to the Capital Structure of the
Company

August 1, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 25, 2012, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the Members' Schedule (as defined in
the Limited Liability Company Agreement of NYSE Amex Options LLC (the
``Company'') dated as of June 29, 2011 (the ``LLC Agreement'')) in
order to reflect changes to the capital structure of the Company based
on three transactions (such amendment, the ``Proposed Rule Change'').
The first transaction involved the admission of NYSE Market, Inc.
(``NYSE Market'') as a Member (as defined below) of the Company on
September 19, 2011 pursuant to Sections 10.4 and 11.1 of the LLC
Agreement and Section 3.2 of that certain Members Agreement, dated as
of June 29, 2011, by and among the Company, NYSE MKT, NYSE Euronext,
Banc of America Strategic Investments Corporation (``BAML''), Barclays
Electronic Commerce Holdings Inc. (``Barclays''), Citadel Securities
LLC (``Citadel''), Citigroup Financial Strategies, Inc.
(``Citigroup''), Goldman, Sachs & Co. (``Goldman Sachs''), Datek Online
Management Corp. (``TD Ameritrade'') and UBS Americas Inc. (``UBS'')
(collectively, excluding the Company, NYSE MKT and NYSE Euronext, the
``Founding Firms'') (the ``Members Agreement''). The second transaction
involved the issuance of Annual Incentive Shares (as defined in the
Members Agreement) to the Founding Firms pursuant to Section 2.1 of the
Members Agreement. The third transaction will involve the transfer of
Interests (as defined below) by the Founding Firms to NYSE Market on or
around September 25, 2012 pursuant to Article XI of the LLC Agreement
and Section 3.1 of the Members Agreement. The text of the Proposed Rule
Change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, on the Commission's Web site at
www.sec.gov, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
Proposed Rule Change and discussed any comments it received on the
Proposed Rule Change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Members' Schedule as set forth
herein. The amendment reflects changes to the capital structure of the
Company due to (i) The admission of NYSE Market as a Member of the
Company on September 19, 2011 pursuant to Sections 10.4 and 11.1 of the
LLC Agreement and Section 3.2 of the Members Agreement, (ii) the
issuance of Annual Incentive Shares to the Founding Firms on February
29, 2012 pursuant to Section 2.1 of the Members Agreement and (iii) the
upcoming transfer of Interests by the Founding Firms to NYSE Market on
or around September 25, 2012 pursuant to Article XI of the LLC
Agreement and Section 3.1 of the Members Agreement.
Admission of NYSE Market
    Pursuant to Section 3.2 of the Members Agreement, each Founding
Firm has the right, subject to certain conditions and limitations, to
cause NYSE MKT (or an affiliate thereof that NYSE MKT designates) to
purchase a portion of such Founding Firm's equity interest in the
Company (such right, the ``Founding Firm Right''). On September 19,
2011, each of the Founding Firms exercised its Founding Firm Right and

transferred Common Interests (as defined below) representing an
aggregate equity interest of 5.28% in the Company to NYSE Market, an
affiliate of NYSE MKT (the ``Transaction''). NYSE Market, rather than
NYSE MKT, acquired the Common Interests for non-substantive business
reasons related to the corporate structure of NYSE MKT. As a result of
the Transaction, pursuant to Sections 10.4 and 11.1 of the LLC
Agreement, NYSE Market was admitted as a Member of the Company on
September 19, 2011. Notwithstanding NYSE Market's acquisition of Common
Interests, the governance structure of the Company following the
Transaction did not change: The number of directors on the Company's
board has not changed; NYSE MKT continues to appoint a majority (7 of
13) of these directors; and, NYSE Market does not have the right to
appoint a separate director to the board.
    Initially, the Exchange intended to file this amendment to the
Members' Schedule as part of a longer, forthcoming technical filing.
Due to the Founding Firm Transfer (as defined below), however, the
Exchange deems it appropriate, at present, to amend the Members'
Schedule in order to reflect NYSE Market's membership in the Company.
    As a limited liability company, ownership of the Company is
represented by limited liability company interests in the Company
(``Interests''). The holders of Interests are referred to as the
members of the Company (the ``Members''). The LLC Agreement designates
Members as either Class A Members or Class B Members. Currently, the
Class A Members are NYSE MKT and NYSE Market, and the Class B Members
are Citadel, Goldman Sachs, BAML, Citigroup, TD Ameritrade, UBS and
Barclays. Generally, Class A Members and Class B Members are
distinguishable in that Class A Members hold Class A Common Interests
and Class B Members hold Class B Common Interests.\3\ Although both
classes of Common Interests entitle Members to some measure of voting
and economic entitlements, the two classes of Common Interests are not
fungible. In fact, a Member's voting and economic entitlements are
determined by reference to both that Member's holdings of Common
Interests and the aggregate economic and voting power of the Class A
Members relative to the Class B Members. Prior to the Transaction, NYSE
MKT owned an equity interest of 47.20% in the Company, while the
Founding Firms collectively owned the remaining equity interest of
52.80%. Immediately following the Transaction, NYSE MKT owned an equity
interest of 47.20% in the Company, NYSE Market owned an equity interest
of 5.28%, and the Founding Firms collectively owned the remaining
equity interest of 47.52%.
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    \3\ Common Interests consist of Class A Common Interests and
Class B Common Interests.
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    Because NYSE Market is an Affiliate of NYSE MKT, pursuant to
Section 11.2(c) of the LLC Agreement, the Class B Common Interests
transferred by the Founding Firms to NYSE Market automatically
converted into Class A Common Interests upon their acquisition by NYSE
Market. In connection with this transfer, NYSE Market became a Member
of the Company holding Class A Common Interests representing an equity
interest of 5.28% in the Company. As a Member, NYSE Market is bound by
all of the provisions of the LLC Agreement (including Article XVI) and
the Members Agreement. The Exchange proposes to amend the Members'
Schedule as set forth in Exhibit 5-A attached hereto \4\ (marked
against Schedule A to the LLC Agreement) to reflect NYSE Market's
membership and the concomitant reduction in the Interests held by the
Founding Firms.
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    \4\ The Commission notes that the Exhibit 5 is attached to the
filing, not to this Notice.
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Issuance of Annual Incentive Shares
    Pursuant to Section 2.1 of the Members Agreement, each year (until
2015, unless extended by the Board) the Company must issue a number of
Class B Common Interests equal to thirty percent (30%) of the then-
outstanding Class B Common Interests as Annual Incentive Shares. These
Annual Incentive Shares are allocated among the Class B Members based
on each Class B Member's contribution to the volume of the Exchange
relative to such Class B Member's Individual Target. The Annual
Incentive Shares may change the relative economic and voting rights
among the Class B Members but have no affect on the relative economic
and voting rights as between Class A Members and Class B Members.
    On February 29, 2012, the Company issued 14.2560 Annual Incentive
Shares in the aggregate to the Founding Firms (the ``Issuance of Annual
Incentive Shares''). Because each Founding Firm achieved or exceeded
its Individual Target, the Issuance of Annual Incentive Shares did not
result in any change to any Member's economic or voting interest in the
Company. The Exchange proposes to amend the Members' Schedule as set
forth in Exhibit 5-B attached hereto \5\ (marked against the Members'
Schedule following the Transaction) to reflect the Issuance of Annual
Incentive Shares.
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    \5\ See supra note 4.
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Founding Firm Transfer
    Pursuant to Article XI of the LLC Agreement and Section 3.1 of the
Members Agreement, a Member may transfer Interests to a third party or
to another Member in accordance with the conditions and limitations set
forth therein. The Exchange is filing this amendment, in part, to
provide notice that all of the Founding Firms collectively intend to
transfer an aggregate equity interest of 5.28% in the Company to NYSE
Market (the ``Founding Firm Transfer''). Upon consummation of the
Founding Firm Transfer and the acquisition by NYSE Market of the Class
B Common Interests transferred by the Founding Firms, such Class B
Common Interests will automatically convert into an appropriate number
of Class A Common Interests. Immediately following the Founding Firm
Transfer, NYSE MKT will own an equity interest of 47.20% in the
Company, NYSE Market will own an equity interest of 10.56%, and the
Founding Firms, collectively, will own the remaining equity interest of
42.24%. The Exchange proposes, upon consummation of the Founding Firm
Transfer, to amend the Members' Schedule as set forth in Exhibit 5-C
attached hereto \6\ (marked against the Members' Schedule following the
Issuance of Annual Incentive Shares) to reflect the Founding Firm
Transfer.
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    \6\ See supra note 4.
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2. Statutory Basis
    The Proposed Rule Change is consistent with Section 6(b) \7\ of the
Securities Exchange Act,\8\ as amended (the ``Act''), in general, and
furthers the objectives of Section 6(b)(1) \9\ of the Act, which
requires a national securities exchange to be so organized and have the
capacity to carry out the purposes of the Act and to comply, and to
enforce compliance by its members and persons associated with its
members, with the provisions of the Act, the rules and regulations
promulgated thereunder and the rules of the Exchange. The Proposed Rule
Change does not modify the Company's trading or compliance rules and
preserves the existing mechanisms for ensuring the Exchange's and the
Company's compliance with the Act, the rules and regulations
promulgated

thereunder and the rules of the Exchange. The proposed amendments do
not change the structure of the joint venture which retains NYSE MKT's
regulatory control over the Company or the provisions specifically
designed to ensure the independence of its self-regulatory function and
to ensure that any regulatory determinations by NYSE MKT, as the
Company's SRO, are controlling with respect to the actions and
decisions of the Company.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78.
    \9\ 15 U.S.C. 78f(b)(1).
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    Additionally, the Proposed Rule Change continues to require the
Company, its Members and its directors to comply with the federal
securities laws and the rules and regulations promulgated thereunder
and to engage in conduct that fosters and does not interfere with the
Exchange's or the Company's ability to carry out its respective
responsibilities under the Act.
    The Proposed Rule Change is also consistent with, and furthers the
objectives of Section 6(b)(5) \10\ of the Act, in that it preserves all
of NYSE MKT's existing rules and mechanisms to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the Proposed Rule Change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
Proposed Rule Change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register, or within such longer period up to 90 days as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or as to which the
self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove such Proposed Rule Change; or
    B. Institute proceedings to determine whether the Proposed Rule
Change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2012-23 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2012-23. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make publicly available. All
submissions should refer to File Number SR-NYSEMKT-2012-23 and should
be submitted on or before August 28, 2012.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19294 Filed 8-6-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: October 1, 2007 (Volume 72, Number 189)]
[Notices]
[Page 55762-55765]
[DOCID:fr01oc07-44]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM07-20-000]

Fuel Retention Practices of Natural Gas Companies

September 20, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of Inquiry.

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SUMMARY: The Federal Energy Regulatory Commission is seeking comments
on its policy regarding the in-kind recovery of fuel and lost and
unaccounted-for gas by natural gas pipeline companies. The Commission
is inviting interested persons to submit comments, and other
information on the matters, issues and specific questions identified in
this notice.

DATES: Comments are due November 30, 2007.

ADDRESSES: You may submit comments, identified by Docket No. RM07-20-
000. by one of the following methods:
    [cir] Agency Web Site: http://www.ferc.gov. Follow the instructions

for submitting comments via the eFiling link found in the Comment
Procedures Section of the preamble.
    [cir] Mail: Commenters unable to file comments electronically must
mail an original and 14 copies of their comments to: Federal Energy
NE., Washington, DC, 20426. Please refer to the Comment Procedure
Section of the preamble for additional information on how to file paper
comments.

FOR FURTHER INFORMATION CONTACT: Ingrid M. Olson, Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Notice of Inquiry

September 20, 2007.
    1. In this Notice of Inquiry, the Commission is seeking comments on
its policy regarding the in-kind recovery of fuel and lost and
unaccounted-for gas by natural gas pipeline companies. Current policy,
described below, gives pipelines two options for recovering these
costs, and pipelines follow a variety of practices regarding fuel and
lost and unaccounted-for gas. The Commission is seeking comments on
whether it should change its current policy and prescribe a uniform
method for all pipelines to use in recovering these costs.\1\
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    \1\ In this proceeding, the Commission is seeking comments on
several specific proposals for rate recovery of fuel and lost and
unaccounted-for gas, as well as answers to specific questions. It
also should be noted that the Commission has initiated a separate
proceeding in Docket No. RM07-9-000 inquiring about the need for
changes or revisions in the Commission's reporting requirements for
its financial forms including the Form Nos. 2 and 2-A, Annual
Reports of Major and Nonmajor Natural Gas Companies. Assessment of
Information Requirements for FERC Financial Forms, Notice of
Inquiry, FERC Stats & Regs. ] 35,554 (February 15, 2007). The
Commission received a number of comments and suggestions in that
proceeding regarding the adequacy of information reported in the
Form No. 2 concerning gas retained, used for compression, and lost
and unaccounted-for. Accordingly, the reporting requirements related
to gas retained, used for compression, and lost and unaccounted-for
will be addressed in the Notice of Proposed Rulemaking which the
Commission is concurrently issuing in Docket No. RM07-9-000, 120
FERC ] 61,256.
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I. Current Commission Policy on Fuel Retention

    2. Interstate natural gas pipelines frequently require that
customers contribute a small percentage of the volumes of natural gas
tendered for transportation service to provide fuel for compressors and
to make up for lost and unaccounted-for gas.\2\ Each pipeline states
the percentage it retains in its open access tariff. Currently
effective tariff fuel retention rates range from fractions of a percent
to as high as 13 percent.\3\
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    \2\ Some pipelines do not require shippers to contribute in-kind
a portion of the gas tendered to the pipeline for transportation for
the pipeline's use.
    \3\ See, e.g., MIGC, Inc., FERC Gas Tariff, First Revised Volume
No. 1, Eleventh Revised Sheet No. 6 (fuel retention percentages up
to 13 percent); Gas Transmission Northwest, FERC Gas Tariff, Third
Revised Volume No. 1-A, Seventh Revised Sheet No. 6 (0.005 percent
fuel retention).
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    3. The Commission established its current policy concerning the in-
kind recovery of fuel and unaccounted-for gas in ANR Pipeline Company
(ANR).\4\ In its January 2005 order in the ANR case,\5\ the Commission
stated that pipelines have two options to recover these costs. The
first option is to establish a fixed fuel retention percentage in a
general section 4 rate case, and leave that percentage unchanged until
the pipeline files its next general section 4 rate case. The second
option allows the pipeline to include in its tariff a mechanism
permitting periodic changes in its fuel retention percentage outside of
a general section 4 rate case, as allowed by section 154.403 of the
Commission's regulations.\6\ ANR held that, if a pipeline chooses the
second option, it must include in its tariff a mechanism to true-up any
over- and under-recoveries of fuel, absent agreement otherwise by all
interested parties.
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    \4\ ANR Pipeline Co., order on compliance filing, 108 FERC ]
61,050 (2004), order inviting comments, 109 FERC ] 61,038 (2004),
order on reh'g and compliance filing, 110 FERC ] 61,069 (2005),
order on reh'g and compliance filing, 111 FERC ] 61,290 (2005).
    \5\ 110 FERC ] 61,069, at P18-28.
    \6\ 18 CFR 154.403.
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    4. In ANR, the Commission explained that its general ratemaking
policy, established in Order No. 436, is that pipelines must design
their rates based on estimated units of service without any type of
true-up mechanism.\7\ This means that the pipeline is at risk for
under-recovery of its costs between rate cases and may retain any over-
recovery. This gives pipelines an incentive both to minimize their
costs and maximize the service they provide. A cost tracker undercuts
these incentives by guaranteeing the pipeline revenues sufficient to
recover its costs regardless of the level of costs or services
provided.
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    \7\ 18 CFR 284.10(c)(2).
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    5. However, as the Commission explained in ANR, it had permitted an
exception to this policy for a few cost items that are subject to
significant changes from year to year and thus are difficult to
predict. Among these cost items is fuel. The Commission explained that
section 154.403 of its regulations permits a pipeline to adjust its
fuel retention percentages in periodic limited section 4 rate filings
pursuant to a methodology set forth in the pipeline's tariff. The
Commission stated that section 154.403 does not expressly require that
pipelines include true-up mechanisms as part of the tariff provision
permitting periodic adjustments to their fuel retention percentages.
Instead, the Commission stated, it had addressed this issue on a case-
by-case basis and required a true-up when the facts of a particular
case so warranted.
    6. In ANR, the Commission changed this approach and held that, if a
pipeline wishes to take full advantage of the incentives underlying our
general ratemaking policy with respect to in-kind fuel recovery, then
it can choose the first option which requires establishing a fixed fuel
retention percentage. However, if the pipeline chooses the second
option and tracks its fuel costs, then there must be an assurance that
the fuel costs are tracked accurately so that the pipeline does not
over-recover its fuel costs under any

circumstances. Therefore, the second option requires a true-up
mechanism. The Commission explained that allowing a particular cost
item to be tracked gives the pipeline the opportunity to increase that
cost item without regard to the possibility of any offsetting cost
reductions. The Commission stated that in return for this opportunity,
there should be an assurance that the individual cost item is tracked
accurately, and the pipeline should not in any circumstances be
permitted to over-recover those costs.
    7. In reaching this conclusion, the Commission rejected ANR's
contention that it should be permitted to retain its existing tracker
without a true-up mechanism because the existing tracker provided it
with an incentive to reduce fuel costs and a true-up mechanism would
eliminate this incentive. ANR argued that because its fuel recovery
mechanism bases each year's fuel retention percentage on the average of
fuel use on its system during the three preceding years, ANR was able
to retain a portion of any over-recoveries of fuel resulting from a
downward trend in fuel use and, on the other hand, must absorb a
portion of any under-recoveries if fuel use trends upward. ANR argued
that with this tracker in place, it had in fact reduced its fuel use
which resulted in savings to its customers.
    8. The Commission rejected ANR's argument, stating that allowing
ANR to over-recover fuel from its customers is not a necessary
incentive to encourage the company to minimize its use of fuel gas. The
Commission concluded, with regard to fuel use and lost and unaccounted-
for gas, that the benefits of requiring a true-up outweigh any
disadvantages.
    9. While ANR established a general policy of requiring pipelines
such as ANR that have a fuel tracker to include true-up mechanisms, the
Commission has only enforced that policy in individual cases where
parties raise the issue. Thus, pipelines continue to follow a variety
of practices regarding fuel and lost and unaccounted-for gas which can
be described as fitting into one of three categories.
     The first category is the stated-rate approach, where a
fixed percentage is stated in the tariff as a non-negotiable fee-in-
kind retained from the volumes tendered for shipment by each shipper
and changed only in a general section 4 rate case. Of 70 major
pipelines, 24 have a stated rate.\8\
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    \8\ These categories and the number of pipelines noted within
each category were identified in a Commission staff analysis of the
FERC tariffs of 70 major pipelines.
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     The second category is the tracker approach, where
provisions in a pipeline's tariff allow the pipeline to make
prospective adjustments to its fuel retention rates from time-to-time,
but do not include a mechanism to allow the pipeline to reconcile past
over-or under-recoveries of fuel. Eight pipelines have tracker
mechanisms without true-up requirements.
     The third category is the tracker with a true-up approach,
where provisions in a pipeline's tariff allow for periodic adjustments
to its fuel retention rates, and also provide for a true-up of past
over- and under-recoveries of fuel and lost and unaccounted-for gas.
Thirty-eight pipelines have tracker mechanisms with true-ups in their
tariffs.

II. Discussion

    10. Pipeline customers have expressed concerns that in-kind gas
retained by pipelines for fuel and unaccounted-for gas requirements is
excessive, and provides pipelines with significant profits. For
example, the Natural Gas Supply Association, in its recent study of
pipeline returns, estimated that in aggregate 32 pipelines,
representing 80 percent of interstate throughput, generated about $2.1
billion in excess retained fuel over the five-year period ending in
2005.\9\ In a recent complaint against National Fuel Gas Supply
Corporation, the principal concern was excessive fuel retention.\10\
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    \9\ Natural Gas Supply Association, Pipeline Cost Recovery of 32
Major Pipelines, FERC Form No. 2 Data (2001-2005) at 4, available
upon request at Natural Gas Supply Association, 805 15th Street,
N.W., Suite 510, Washington, D.C. 20005.
    \10\ Pub. Serv. Comm'n of N.Y. v. National Fuel Gas Supply
Corp., 115 FERC ] 61,299, reconsideration granted in part, 115 FERC
] 61,368 (2006), order on settlement, 118 FERC ] 61,091 (2007).
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    11. The Commission's review of information filed by pipelines in
their 2005 Form No. 2 filings indicates that major pipelines appear to
have retained or carried over in their accounts a net sum of over 97
Bcf in fuel beyond what was consumed, lost, or unaccounted-for.\11\ At
average 2005 prices, this represents over $711 million in value.\12\ Of
that amount, 58 Bcf, with a value of $427 million, is attributable to
those pipelines that do not have a tracker mechanism in their tariff,
and nearly 39 Bcf, with a value of over $285 million, is attributable
to pipelines with a tracker and no true-up or a tracker with a true-up
mechanism.
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    \11\ Commission staff examined available Form No. 2 data for
2005 to derive the sum of the net fuel retained (the amount received
from shippers minus the amount consumed for operations or lost or
unaccounted-for).
    \12\ The Energy Information Administration (EIA) reports the
average wellhead price of natural gas for 2005 was $7.33 per MMBtu.
(http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_a.htm).

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    12. Moreover, with the tightening in natural gas supplies in recent
years, there have been substantial increases in the price of natural
gas. As a result, the pipeline's fuel charges now make up a
significantly greater percentage of the overall cost of transporting
natural gas.\13\
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    \13\ A comparison between 2002 and 2006 data for Texas Eastern
Transmission Corporation (Texas Eastern) illustrates this point.
According to EIA, the average wellhead natural gas price rose from
$2.95 per MMBtu in 2002, to $6.42 per MMBtu in 2006. Texas Eastern's
maximum rate for interruptible transportation through the full
length of the system (Zone STX to Zone M3) in 2002 was $0.6639 per
MMBtu, and Texas Eastern retained 8.94 percent of the gas for fuel
use, at an additional cost to the shipper of $0.2637 (fuel retention
rate times the wellhead price). FERC Gas Tariff, Seventh Revised
Volume No. 1, Seventh Revised Sheet No. 49. Thus, the shipper's
total cost was $0.9276 per MMBtu. The fuel cost equaled 28.4 percent
of the total. In 2006, the maximum rate for interruptible
transportation was $0.6231, and Texas Eastern retained 7.94 percent
of the gas for fuel, at an additional cost to the shipper of
$0.5097. FERC Gas Tariff, Seventh Revised Volume No. 1, Thirty-
Second Revised Sheet No. 49. Thus, in 2006, the shipper's total cost
was $1.1328 per MMBtu. Here, the fuel cost equaled 45 percent of the
total, an increase of about 17 percentage points over the 2002
figure.
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    13. The increasing significance of pipeline fuel charges in the
overall cost of transportation and the concerns about pipeline cost
over-recoveries suggest that further investigation of in-kind fuel
retention practices is warranted. Therefore, the Commission is seeking
comments on whether its current policy with regard to the in-kind
recovery of fuel and unaccounted for gas should be modified, both for
the purpose of providing pipelines a greater incentive to reduce their
fuel use and lost gas and for the purpose of minimizing pipeline over-
recoveries of these costs. Specifically the Commission is requesting
comments on the following questions:

(1) Should the Commission Continue to Allow Recovery of Pipeline Fuel
Costs Through Fixed Fuel Retention Percentages?

    14. As described above, the Commission's review of pipeline Form
No. 2 data indicates that some pipelines, particularly those with fixed
fuel retention percentages, are over-recovering their fuel costs. By
contrast, a properly designed fuel tracker and true-up mechanism would
ensure that a pipeline does not over-recover its fuel costs. However,
allowing pipelines to establish a fixed in-kind fuel retention
percentage in a general section 4 rate case is consistent with the
Commission's general ratemaking

policies and section 154.403 of the Commission's regulations. In ANR,
the Commission continued to permit pipelines to use that recovery
method, stating that the method gives pipelines an incentive to
minimize their fuel use through more efficient operations. These
efficiencies could benefit customers when the pipeline files its next
general section 4 rate case, although until the pipeline does file a
new section 4 rate case it would retain the benefit from any savings.
Also, a fixed in-kind fuel retention percentage avoids potentially
disruptive changes in the pipeline's fuel rates outside a general
section 4 rate case, thereby giving customers the benefit of greater
certainty as to the pipeline's fuel rates. For that reason, shippers
may favor fixed fuel retention percentages.
    15. Do the benefits of a fixed retention percentage for recovery of
fuel in-kind outweigh the potential for cost over-recovery? Have
pipelines with fixed retention percentages reduced their fuel use? If
so, provide specific examples. Have pipelines with fixed in-kind
retention percentages that have reduced their fuel use filed section 4
rate cases, thereby passing through to customers the benefit of any
prospective fuel cost savings? Do pipelines with fixed fuel retention
percentages have less incentive to file new section 4 rate cases, such
that shippers are not receiving the benefit of any reduced fuel use?
Are there barriers that make it difficult for shippers to file section
5 complaints to police over-recovery of fuel costs?
    Does the benefit to shippers of greater rate certainty from a fixed
fuel percentage justify continuing to permit pipelines to use a fixed
fuel retention rate? If pipelines were to be allowed to continue using
the fixed fuel retention rate approach, should the Commission consider
imposing explicit incentive requirements, such as the application of an
RPI-X methodology \14\ on either a generic or case-specific basis? If
the Commission were to adopt incentive provisions to encourage
pipelines to reduce fuel use and lost and unaccounted-for gas, should
the Commission adopt a standardized incentive approach, such as the
sharing between the pipeline and its shippers of any fuel cost over-
recoveries and/or under-recoveries? If so, which standardized incentive
approach should the Commission consider?
---------------------------------------------------------------------------

    \14\ An ``RPI-X'' methodology would allow fuel costs to rise
with inflation minus some X-factor deduction to provide a strong
incentive towards efficiency and an implicit sharing of future
efficiencies with ratepayers. Such methods, if employed in fuel
retention provisions, would need to be adapted to fit the
circumstances of in-kind retention requirements, rather than
monetary payments.
---------------------------------------------------------------------------

    16. New compressor stations can be designed to minimize fuel use
through, for example, motor selection (size, fuel efficiency,
throughput flexibility) as well as minimizing pressure drops through
the station (yard pipe and facility sizing). Existing compressors
stations can also be redesigned to reduce fuel by minimizing pressure
drops through the station or installing gas coolers to reduce the need
for compression. How does the type of fuel cost recovery mechanism
(fixed fuel retention percentages, tracker with no true-up or tracker
with true-up) affect these decisions, if any? Similarly, is the fuel
cost recovery or other mechanism a factor when deciding whether to
construct a larger diameter pipe instead of compression or use advanced
SCADA/control systems to manage line pack?
    17. As stated above, if the Commission were to adopt incentive
provisions to encourage pipelines to reduce fuel use and lost and
unaccounted-for gas, one option would be a mechanism for sharing
between the pipeline and its shippers of any fuel cost recoveries and/
or under-recoveries. How could such a cost-and-benefit-sharing
mechanism affect the decisions discussed immediately above? Could a
cost-and-benefit-sharing mechanism between the pipeline and its
customers ameliorate any concerns that fuel efficient investment is
``gold plating'' rate base, i.e., making an investment that increases
the rate base and the corresponding return without necessarily creating
a corresponding benefit to the pipeline's customers?
    18. What are the barriers to cost effective, fuel efficient
investment, it any? If barriers exist, how does the Commission remove
such barriers? What factors, including, if applicable, the type of fuel
cost recovery mechanism, affect the amount of research and development
(R&D) being done to advance technology in these areas? How could a
cost-and-benefit-sharing mechanism between the pipeline and its
customers affect the level of R&D? Could fuel efficiency measures
impact either directly or indirectly throughput or reliability on the
pipeline grid, and if so, in what manner?
    19. Some fixed fuel retention provisions were established through
settlements. How important are fixed fuel retention provisions to these
settlements? If the Commission adopts a new generic policy, should it
modify these existing settlements to apply its new policy? If the
Commission adopts a generic fuel retention policy, should it permit
pipelines and shippers to reach settlements thereafter that provide for
recovery of fuel costs in a manner different from that policy?

(2) Should the Commission Mandate That All Pipelines Must Have a
Tracker Mechanism for the Recovery of Fuel?

    20. While the Commission's general policy is that rates should be
based on projections of future costs based on test period experience,
the Commission permits certain costs that are volatile and thus
particularly difficult to project, to be tracked. Is fuel use and lost
and unaccounted-for gas difficult to predict with precision? If so,
does the volatility of pipeline fuel use and the experience with the
fixed retention percentage justify a blanket requirement that all
pipelines recover their fuel costs through a tracker? If not, should
the Commission continue the exception that permits pipelines to make
limited section 4 filings tracking their fuel costs? Do the recent
increases in the cost of fuel further justify use of a tracker?
    21. In Order No. 637, the Commission established a principle that
pipelines should not profit from the penalty provisions in their
tariffs for imbalances, unauthorized overruns, scheduling violations,
etc.\15\ This was intended to eliminate any incentive for pipelines to
propose unnecessary penalties that hinder efficiency.\16\ Does
permitting pipelines to profit from fuel retention also create
undesirable incentives for pipelines? For example, do the profits from
excess fuel retention lead some pipelines to avoid updating their base
tariff rates because, on balance, they are receiving an adequate cash
flow in aggregate?
---------------------------------------------------------------------------

    \15\ 18 CFR 284.12(b)(v).
    \16\ Order No. 637, FERC Stats. & Regs. ] 31,091 at 31,315.
---------------------------------------------------------------------------

(3) If the Commission Requires Pipelines To Use a Tracker, Should It
Require a True-Up Mechanism?

    As stated above, in ANR, the Commission concluded that if a
pipeline has a tracker and is therefore able to recover its fuel costs
outside of a general section 4 proceeding, it should track those costs
accurately and not be permitted to over-recover its fuel costs in any
circumstances. Accordingly, the Commission required all pipelines with
trackers to include a true-up mechanism. With both a tracker and a
true-up mechanism, the pipeline simply passes through its fuel costs to
its customers, and, therefore, there may in

fact be little incentive for the pipeline to try to reduce those costs.
    22. In ANR, the Commission found that the inclusion of a true-up
mechanism in a tracker does not remove all incentives for the pipeline
to reduce its fuel use. The Commission explained that pipelines do face
some competitive pressures in obtaining marginal throughput, for
example, obtaining customers with access to alternative fuels. Because
the Commission has held that pipelines may not discount their fuel use
percentages since those costs are variable, the only way a pipeline can
reduce its fuel percentages in order to help obtain marginal business
is by reducing its fuel usage.
    23. Was the Commission's conclusion in ANR, that the benefits of
requiring a true-up as part of a tracker outweigh the disadvantages of
reduced incentives for efficient operation accurate? What impact does a
true-up mechanism have on a pipeline's incentive to reduce fuel costs?
Is there evidence that pipelines with tracker and true-up mechanisms
operate less efficiently than pipelines without such mechanisms?
    24. Is there a benefit to giving pipelines an incentive to reduce
fuel use, such as the inclusion in the tracker of a profit or loss
sharing mechanism? If the pipeline could retain some benefit of fuel
cost reductions, would it have a greater incentive to reduce those
costs? Would customers benefit from the reduced costs and from sharing
in any cost over-recoveries? How important are fuel costs relative to
total transportation costs?

(4) Should the Commission Retain Its Current Policy?

    25. Finally, the Commission seeks comments on whether it should
retain its current policy which gives pipeline discretion over whether
to have a tracker mechanism governing the recovery of fuel costs. What
are the benefits and/or costs of retaining the current policy? What
factors should the Commission consider in deciding whether a change in
fuel retention policy is warranted at this time?

III. Procedure for Comments

    26. The Commission invites interested persons to submit comments,
and other information on the matters, issues and specific questions
identified in this notice. Comments are due 60 days from the date of
publication in the Federal Register. Comments must refer to Docket No.
RM07-20-000, and must include the commenter's name, the organization it
represents, if applicable, and its address.
    27. To facilitate the Commission's review of the comments,
commenters are requested to provide an executive summary of their
position. Commenters are requested to identify each specific question
posed by the Notice of Inquiry that their discussion addresses and to
use appropriate headings. Additional issues the commentors wish to
raise should be identified separately. The commenters should double
space their comments.
    28. Comments may be filed on paper or electronically via the
eFiling link on the Commission's Web site at http://www.ferc.gov. The

Commission accepts most standard word processing formats and commentors
may attach additional files with supporting information in certain
other file formats. Commentors filing electronically do not need to
make a paper filing. Commenters that are not able to file comments
electronically must send an original and 14 copies of their comments
to: Federal Energy Regulatory Commission, Secretary of the Commission,
888 First Street, NE., Washington, DC 20426.
    29. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters are not required to
serve copies of their comments on other commenters.

IV. Document Availability

    30. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and

in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
    31. From the Commission's Home Page on the Internet, this
information is available in the Commission's document management
system, eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number (excluding the last three digits) in the docket number field.
    32. User assistance is available for eLibrary and the Commission's
Web site during normal business hours. For assistance, please contact
the Commission's Online Support at 1-866-208-3676 (toll free) or 202-
502-6652 (e-mail at<EMAIL_ADDRESS>or the Public Reference
Room at<PHONE_NUMBER>, TTY<PHONE_NUMBER> (e-mail at
public.referenceroom@ferc.gov).

    By direction of the Commission.
 Nathaniel J. Davis, Sr.,
 Acting Deputy Secretary.
 [FR Doc. E7-19386 Filed 9-28-07; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Page 77996]
[FR Doc No: 2011-32127]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 14288-000]

FFP Project 9 LLC; Notice of Preliminary Permit Application
Accepted for Filing and Soliciting Comments, Motions To Intervene, and
Competing Applications

    On September 15, 2011, FFP Project 9 LLC filed an application for a
preliminary permit, pursuant to section 4(f) of the Federal Power Act
(FPA), proposing to study the feasibility of a hydropower project at
the Ross Barnett Dam, owned and operated by the Pearl River Valley
Water Supply District, located on the Pearl River, in Rankin and Hinds
Counties, Mississippi. The sole purpose of a preliminary permit, if
issued, is to grant the permit holder priority to file a license
application during the permit term. A preliminary permit does not
authorize the permit holder to perform any land-disturbing activities
or otherwise enter upon lands or waters owned by others without the
owners' express permission.
    The proposed project would consist of: (1) A 23,400-foot-long, 64-
foot-high earthen dam; (2) a reservoir with a surface area of 32,000
acres and a storage capacity of 341,000 acre-feet; (3) a 100-foot-long,
40-foot-wide intake structure; (4) three 14-foot-diameter, 400-foot-
long steel penstocks; (5) a powerhouse, constructed in a lock chamber,
containing three generating units with a total capacity of 21.0
megawatts; (6) a 125-foot-long, 100-foot-wide tailrace; (7) a 4.16/69.0
kilo-Volt (kV) substation; and (8) a 75-foot-long, 69.0 kV transmission
line. The proposed project would have an average annual generation of
50.0 gigawatt-hours.
    Applicant Contact: Ms. Ramya Swaminathan, Free Flow Power Corp.,
239 Causeway Street, Suite 300, Boston, MA 02114,<PHONE_NUMBER>.
    FERC Contact: Michael Spencer<EMAIL_ADDRESS>(202) 502-
6093.
    Deadline for filing comments, motions to intervene, competing
applications (without notices of intent), or notices of intent to file
competing applications: 60 days from the issuance of this notice.
Competing applications and notices of intent must meet the requirements
of 18 CFR 4.36. Comments, motions to intervene, notices of intent, and
competing applications may be filed electronically via the Internet.
See 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's
Web site http://www.ferc.gov/docs-filing/efiling.asp. Commenters can
submit brief comments up to 6,000 characters, without prior
registration, using the eComment system at http://www.ferc.gov/docs-filing/ecomment.asp. You must include your name and contact information
at the end of your comments. For assistance, please contact FERC Online
Support at<EMAIL_ADDRESS>or toll free at 1-(866) 208-3676,
or for TTY,<PHONE_NUMBER>. Although the Commission strongly encourages
electronic filing, documents may also be paper-filed. To paper-file,
mail an original and seven copies to: Kimberly D. Bose, Secretary,
Federal Energy Regulatory Commission, 888 First Street NE., Washington,
DC 20426.
    More information about this project, including a copy of the
application, can be viewed or printed on the ``eLibrary'' link of
Commission's Web site at http://www.ferc.gov/docs-filing/elibrary.asp.
Enter the docket number (P-14288-000) in the docket number field to
access the document. For assistance, contact FERC Online Support.

    Dated: December 8, 2011.
 Kimberly D. Bose,
 Secretary.
[FR Doc. 2011-32127 Filed 12-14-11; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 85, Number 20 (Thursday, January 30, 2020)]
[Notices]
[Pages 5417-5418]
[FR Doc No: 2020-01678]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings #1

    Take notice that the Commission received the following exempt
wholesale generator filings:
    Docket Numbers: EG20-68-000.
    Applicants: Oberon Solar IB, LLC.
    Description: Notice of Self-Certification of Exempt Wholesale
Generator Status of Oberon Solar IB, LLC.
    Filed Date: 1/22/20.
    Accession Number: 20200122-5161.
    Comments Due: 5 p.m. ET 2/12/20.

    Docket Numbers: EG20-69-000.
    Applicants: Prospero Energy Project, LLC.
    Description: Notice of Self-Certification of Exempt Wholesale
Generator Status of Prospero Energy Project, LLC.
    Filed Date: 1/24/20.
    Accession Number: 20200124-5027.
    Comments Due: 5 p.m. ET 2/14/20.

    Take notice that the Commission received the following electric
rate filings:
    Docket Numbers: ER12-1383-002.
    Applicants: Diamond State Generation Partners, LLC.
    Description: Notification of Non-Material Change in Status of
Diamond State Generation Partners, LLC.
    Filed Date: 1/22/20.
    Accession Number: 20200122-5162.
    Comments Due: 5 p.m. ET 2/12/20.

    Docket Numbers: ER16-1969-006; EL13-88-002.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Compliance Filing of Midcontinent Independent System
Operator, Inc.
    Filed Date: 1/23/20.
    Accession Number: 20200123-5152.
    Comments Due: 5 p.m. ET 2/13/20.

    Docket Numbers: ER19-2717-000.
    Applicants: Madison ESS, LLC.
    Description: Report Filing: Madison ESS, LLC Refund Report to be
effective N/A.
    Filed Date: 1/24/20.
    Accession Number: 20200124-5129.
    Comments Due: 5 p.m. ET 2/14/20.

    Docket Numbers: ER20-289-001.
    Applicants: AEP Ohio Transmission Company, Inc., Ohio Power
Company, PJM Interconnection, L.L.C.
    Description: Compliance filing: AEP submits compliance per
Commission's 12/30/2019 order re: ILDSA SA No. 1336 to be effective 12/
31/2019.
    Filed Date: 1/23/20.
    Accession Number: 20200123-5075.
    Comments Due: 5 p.m. ET 2/13/20.

    Docket Numbers: ER20-511-001.
    Applicants: Wilderness Line Holdings, LLC.
    Description: Tariff Amendment: Request to Hold Proceedings in
Abeyance--OATT to be effective 12/31/9998.
    Filed Date: 1/23/20.
    Accession Number: 20200123-5103.

    Comments Due: 5 p.m. ET 2/13/20.

    Docket Numbers: ER20-529-001.
    Applicants: Wilderness Line Holdings, LLC.
    Description: Tariff Amendment: Request to Hold Proceedings in
Abeyance--LGIA & TSA to be effective 12/31/9998.
    Filed Date: 1/23/20.
    Accession Number: 20200123-5104.
    Comments Due: 5 p.m. ET 2/13/20.

    Docket Numbers: ER20-868-000.
    Applicants: Lake Benton Power Partners II, LLC.
    Description: Tariff Cancellation: Lake Benton Power Partners II,
LLC Notice of Cancellation of MBR Tariff to be effective 1/24/2020.
    Filed Date: 1/23/20.
    Accession Number: 20200123-5107.
    Comments Due: 5 p.m. ET 2/13/20.

    Docket Numbers: ER20-870-000.
    Applicants: Panda Liberty LLC.
    Description: Compliance filing: compliance 2020 information to be
effective N/A.
    Filed Date: 1/24/20.
    Accession Number: 20200124-5150.
    Comments Due: 5 p.m. ET 2/14/20.

    Docket Numbers: ER20-871-000.
    Applicants: Panda Patriot LLC.
    Description: Compliance filing: compliance 2020 information to be
effective N/A.
    Filed Date: 1/24/20.
    Accession Number: 20200124-5153.
    Comments Due: 5 p.m. ET 2/14/20.

    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00
p.m. Eastern Time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, service, and qualifying
facilities filings can be found at: http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other information, call<PHONE_NUMBER>
(toll free). For TTY, call<PHONE_NUMBER>.

    Dated: January 24, 2020.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2020-01678 Filed 1-29-20; 8:45 am]
 BILLING CODE 6717-01-P