[Federal Register: June 29, 2007 (Volume 72, Number 125)]
[Rules and Regulations]
[Page 35871-35892]
[DOCID:fr29jn07-19]

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Part VI

Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 292

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

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

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

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

Issued June 22, 2007.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on rehearing.

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

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

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

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

Order on Rehearing and Clarification

I. Introduction

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

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

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

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

II. Discussion

A. Three Types of Markets

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

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

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

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

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

term of one year or more and, thus, the Commission's findings regarding
long-term contracts in the Final Rule incorporated that definition.
While some petitioners argue that a longer-term should have been used,
we continue to believe that contracts of a year or more are
sufficiently long-term to meet the statutory requirement that there be
``wholesale markets for long-term sales of capacity and energy'' within
the meaning of section 210(m)(1)(A)(ii).\17\
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    \17\ Although the statute contrasts real-time, day-ahead, and
long-term wholesale sales, it provides no definition of those
categories of transactions. Nevertheless, the terms real-time and
day-ahead markets were well known with respect to ISOs and RTOs at
the time EPAct 2005 was enacted and definitions of these markets
were well understood, i.e., Congress knew the meaning the terms as
used with respect to ISOs and RTOs existing at the time of enactment
of EPAct 2005. Additionally, the Commission at the time of enactment
of EPAct 2005 had for years defined long-term contracts under the
OATT as one year or longer. Similarly, the Commission has treated
power sales with a contract term of greater than one year to be
``long-term'' for reporting purposes. See, e.g., Revised Public
Utility Filing Requirements, Order No. 2001, 67 FR 31043, FERC
Stats. & Regs. ] 31,127 (2002), Order No. 2001-A, 100 FERC ] 61,074,
reconsideration and clarification denied, Order No. 2001-B, 100 FERC
] 61,342 (2002). We thus believe it is reasonable to use the
convention of treating contracts of a year or more as ``long-term''
consistent with our longstanding practice.
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    28. We note that the Commission has initiated a proceeding to
explore ways to improve the operation of wholesale organized electric
markets administered by RTOs and ISOs, including actions the Commission
might take to further improve opportunities for long-term contracting
in RTO and ISO regions.\18\ While we disagree with petitioners who
argue that QFs above 20 MW do not have access to long-term contracting
opportunities in organized markets, or that section 210(m)(1)(A)
requires us to find ``competitive'' or ``robust'' contracting
opportunities, we are taking steps to facilitate additional
opportunities for long-term contracting.
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    \18\ Wholesale Competition in Regions with Organized Electric
Markets, 119 FERC ] 61,306.
---------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B. Nondiscriminatory Access to a Market

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

entities have nondiscriminatory access to qualifying markets. We
believe that the best place to consider such arguments is in the
individual cases that electric utilities bring to the Commission.
    102. Petitioners arguing that the Commission has inappropriately
waived the effects of section 210(m) for small QFs mischaracterize the
Final Rule. The Commission made clear in the Final Rule that no class
of QFs had been shown to uniformly lack nondiscriminatory access based
on a single factor and, as such, no justification existed for exempting
any category of QFs from any future orders which may terminate a
utility's purchase requirement. The Commission did, however, create a
rebuttable presumption that small QFs may not have nondiscriminatory
access to markets because of their small size. As we explain above, the
use of such rebuttable presumptions is fully consistent with the
Commission's obligation under section 210(m) and the Commission's need
to identify ways to expedite processing of applications.
    103. To be clear, the use of a rebuttable presumption does not
prevent a utility from seeking to terminate the obligation to purchase
power from small QFs, as would be the case if the Commission
implemented a waiver. Instead, the use of the rebuttable presumption
simply leaves the burden on the utility to show that these smaller
entities indeed have nondiscriminatory access. This approach recognizes
that, more often than not, a small QF will have greater difficulty
obtaining nondiscriminatory access to markets due to the tendency for
small QFs to be interconnected to lower voltage radial lines, and the
consequent need to overcome other potential obstacles to
nondiscriminatory access, such as local distribution access rules that
are not within the Commission's jurisdiction, pancaked delivery rates
and additional administrative burdens to obtain access to buyers other
than the interconnected utility. It is therefore appropriate in the
first instance to place on the electric utility the burden of
demonstrating that a small QF does in fact have nondiscriminatory
access to the types of markets identified in sections 210(m)(1)(A), (B)
or (C). Similarly, the rebuttable presumption that QFs above 20 MWs do
have nondiscriminatory access to markets does not prevent a QF from
providing evidence to the contrary.
    104. With regard to the request to clarify how the 20 MW threshold
will be measured, the Commission explained in the Final Rule that a QF
is required to state its size in terms of ``net capacity'' when
certifying its status as a QF.\45\ Net capacity is the maximum amount
of power that the facility is able to produce (gross capacity) less any
auxiliary load for devices that are necessary and integral to the power
production process (station power). Any power consumed by on-site load
at the location of the QF for purposes unrelated to the power
production process should not be subtracted from gross capacity for
purposes of reporting net capacity. Whether the facility is a
Commission-certified facility or a self-certified facility, both are
certified at net capacity. Therefore, a QF's Commission-certified (or
self-certified) net capacity would determine whether the QF qualifies
for the ``small size'' rebuttable presumption.
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    \45\ Final Rule at P 72, n.41.
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C. Filing Requirements

    105. In the Final Rule, the Commission found that a utility
electing to file for relief from the purchase requirement must submit
an application with the Commission providing certain information,
including transmission constraints within its service territory in
order to give potentially affected QFs information that may be useful
in rebutting the presumption that they have access to all aspects of
the applicable ``Day 2'' markets.\46\ The filing requirements are
contained in new Sec.  292.310(d) of the Commission's regulations.
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    \46\ Final Rule at P 102.
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Requests for Rehearing
    106. Industrial Parties contend that the Commission is not
sufficiently prescriptive as to the level of detail on transmission
availability that utilities should provide in their applications.
Industrial Parties argue that the Commission should require the same
information on transmission access as in UniSource Energy
Corporation.\47\ Industrial Parties also argue that to enable effective
input by QFs and other interested parties, any information provided to
support an electric utility's application to terminate its purchase
obligation must be provided to all affected QFs at the time of filing.
Industrial Parties continue that if a QF later seeks to reinstate the
purchase obligation, the electric utility needs to provide current
data, and not rely on the data it used to justify termination of the
purchase obligation.
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    \47\ UniSource Energy Corporation, 109 FERC ] 61,047 (2004)
(UniSource) (reviewing a market monitoring plan submitted in support
of a request for Commission authorization of the disposition of
jurisdictional facilities for purposes of identifying
anticompetitive conduct).
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    107. EEI, however, believes the filing requirements in Sec.
292.310(d)(3) of the Commission's regulations are unduly broad and
potentially burdensome. EEI urges the Commission to exempt utilities
operating within the footprint of Commission-approved RTO/ISOs that
have financial, rather than physical, transmission rights models and
ERCOT (which likewise operates under a financial transmission rights
model) from the information submission requirements in Sec.
292.310(d)(3). Since a QF has the right to interconnect to transmission
within an RTO/ISO that operates under a financial transmission rights
model, EEI contends that the QF has access to that market regardless of
whether a physical path exists for electric sales. As a result, EEI
argues that interconnection and other transmission constraint and
congestion studies are of little relevance in determining whether a QF
has nondiscriminatory access to transmission in any market with a
financial rights transmission model.
    108. EEI argues that even in markets without financial transmission
rights, all new QFs have nondiscriminatory access if they are willing
to fund on an up-front basis the transmission upgrades necessary to
receive network resource status, i.e., if they are willing to comply
with Order Nos. 2003 and 2006. Despite the fact that any upgrade costs
for firm transmission service are typically rolled into rates, EEI
contends that the Commission's transmission pricing policy could
require that existing QFs bear the incremental cost of upgrades if firm
transmission service is not available and the costs of the upgrades
exceed the rolled-in rate. As a result, EEI argues that the only
grounds for rebuttal of the presumption of nondiscriminatory access
when OATT service is available should be related to unique operational
characteristics of the specific QF or in the rare circumstance in which
there is not a sufficient opportunity to relieve a transmission
constraint because of unique factors, such as the inability to secure
regulatory approval for upgrades or otherwise to remedy physical system
limitations. EEI therefore asks the Commission to limit the
informational filing requirements to those particular circumstances.
    109. In addition, EEI requests the Commission to clarify what is
intended by ``[r]elevant system impact studies for the generation
interconnections, already completed'' for both non-RTO/ISO and RTO/ISO
regions. EEI states that it is unclear what studies, and what time
frames, are contemplated by this

requirement and whether this language is intended to refer to the
interconnection studies for existing QFs or for all generator
interconnections. EEI requests clarification that ``relevant'' studies
will be limited to studies that are the most recent regarding the QF's
impact on the system or the most recent generic studies of the
applicable control area. EEI states that, for the last several decades,
interconnection studies for QFs not selling to the market have been
performed under state oversight. EEI requests that the Commission
clarify whether the equivalent of system impact studies performed for
QFs pursuant to state regulation should be provided.
    110. Lastly, if the Commission chooses to maintain the requirements
in Sec.  292.310(d)(3) of the Commission's regulations, EEI requests
that the requirements identified in paragraph (iii) of Sec.
292.310(d)(3), regarding system impact studies for generator
interconnections, be clarified to require all Commission-approved RTO/
ISOs to identify and make available to their member transmission owners
confidential and public versions of each interconnection study it
performs for submission to the Commission. They argue that it is not
clear how electric utilities that have transferred operational control
of their transmission to RTO/ISOs could fulfill the requirement to
provide ``relevant system impact studies'' without imposing certain
requirements on the RTO/ISO. EEI urges the Commission to clarify that
submitting studies conducted by the RTO/ISO will be sufficient to meet
the informational requirements.
Commission Determination
    111. In order to ensure that a potentially affected QF has an
adequate opportunity to evaluate potential obstacles to
nondiscriminatory access, despite the existence of an OATT or the QF's
location in a ``Day 2'' market, the Commission will maintain the
requirement for applicants to submit transmission-related information
relevant to a QF's evaluation of this question. Information about the
applicant's long-term transmission plan, the location of transmission
constraints, levels of congestion, system impact studies, and links to
applicant's Open Access Same Time Information System (OASIS) for ATC
information will allow a potentially affected QF to detect whether it
might be located on a portion of a utility's system where limited
transfer capability may constrain its ability to transfer power into
the wholesale market. In response to Industrial Parties' concerns that
QFs be provided any information used to support an electric utility's
application, our rules currently provide that an electric utility must
identify with names and addresses all potentially affected QFs.\48\
Electric utilities serve potentially affected QFs with a copy of the
application. In addition, the Commission by letter provides notice of
the application to the potentially affected QFs and explains comment
procedures and how the QFs can access the electric utility's
filings.\49\ An interested potentially affected QF should intervene in
the proceeding and would then receive any subsequent information
provided by an electric utility.
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    \48\ 18 CFR 292.310.
    \49\ In the unlikely event a potentially affected QF is
intentionally or unintentionally omitted by the electric utility and
not served notice of an application, the Commission will take
remedial steps as appropriate.
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    112. We disagree with EEI that the filing requirements are unduly
broad or burdensome. It is reasonable to place those obligations on the
petitioning electric utility, the party requesting the Commission to
make the findings required by section 210(m)(1) of PURPA. These filing
requirements will facilitate timely processing of the application by
the Commission, while also providing QFs with the information necessary
for their own evaluation of nondiscriminatory access to wholesale
markets. We find that EEI's claim of burden is overstated, since we do
not require anything which has not already been developed. It is our
experience that most of this documentation is in electronic format and
available through online resources.\50\ We clarify, moreover, that an
applicant can provide a hyperlink to the relevant studies, if
available, rather than submitting complete studies and reports.\51\ We
therefore believe that the burden on a utility of providing existing
information is minimal and that the benefits to the QFs and the
Commission of providing this information readily in one filing will
outweigh any such minimal burdens.
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    \50\ We note that the following public and non-public sources
contain transmission information: RTO websites for links to publicly
available regional transmission plans; OASIS websites for system
impact studies including various transmission service requests,
available through confidentiality agreements; OASIS websites for
posted ATC values, available through an OASIS certificate; and, FERC
Form 715 for the Annual Transmission Planning and Evaluation Report
submitted to the Commission, available on the FERC website through
the Critical Energy Infrastructure Information (CEII) process.
    \51\ The filing should identify the relevance of the material in
the hyperlink. And to the extent that the filing discusses
particular portions of such studies and reports, the electric
utility should clearly identify those portions by page, paragraph,
or similar reference.
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    113. We deny EEI's request to exempt utilities operating within the
footprint of a Commission-approved RTO/ISOs from submitting the
information to the extent it is otherwise available from or provided by
the RTO or ISO. The fact that electric utilities in RTO/ISO regions may
be able to access information required in those filings on an equal
basis as other parties, i.e., through the RTO/ISO website or databases,
does not eliminate the Commission's underlying need for the information
to process the application in a timely manner. Furthermore, we
emphasize that Sec.  202.310(d)(3) of the Commission's regulations
requires the submission of non-publicly available information to the
extent it is the only relevant available resource responsive to this
requirement. Any need to maintain confidentiality can be addressed in
the context of the particular application.
    114. We also disagree that the information required in Sec.
292.310(d)(3) is not necessary in RTO/ISO markets with financial
transmission rights models. This information is relevant even in the
context of financial RTO markets as it will help potentially affected
QFs understand the transmission market circumstances they would face if
the Commission approves the utility's application. The filing
requirements will, in this regard, therefore not be changed for any
electric utility seeking termination of the purchase requirement.
    115. As to the argument that transmission-related information is
unnecessary since new QFs have nondiscriminatory access if they fund
transmission upgrades necessary to receive network resource status, we
disagree. Information about transmission system constraints will allow
a potentially affected QF to evaluate the impact of a utility's request
on the QF. Transmission constraints also provide valuable information
about the scope and geographic reach of the market a potentially
affected QF may reach as an alternative to selling to the local
utility.
    116. With regard to EEI's request to explain the phrase
``[r]elevant system impact studies for the generation interconnections,
already completed,'' we clarify that the studies we consider relevant
are the most recent system impact studies, already completed, that
analyze the generation interconnection to the applicant's transmission
substation that is ``electrically close'' to

the QF's substation.\52\ With respect to EEI's question whether the
equivalent of system impact studies performed for QFs pursuant to state
regulation should be provided, we clarify that these studies must be
submitted if they provide responsive information relevant to the filing
requirements.
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    \52\ By ``electrically close'' we mean any interconnection to
the same substation where the QF is connected or to any adjacent
substation or interconnection point where power injection to the
transmission system has the same or similar impact on the
transmission facilities' loadings, as the QF's power injection.
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    117. We also clarify, as requested by EEI, that submitting studies
conducted by an RTO/ISO will be sufficient to meet the informational
requirements, provided the submission is complete, i.e., the applicant
submits every study required (or hyperlinks to the relevant studies)
and all related information listed in Sec.  292.310(d). However, we
deny EEI's request that the Commission require RTO/ISOs to identify and
make available confidential and public versions of each interconnection
study it performs. We believe this request is unnecessary. It is our
understanding that the current practice within the RTO/ISOs is that the
electric utility receives the confidential version of the study from
the RTO/ISO, and likely has participated at least in an advisory role
in the performance of the study. Therefore, we expect that these
studies would already be in the applicant's possession or could be made
available to them without placing any extra requirements or burdens on
the RTO/ISOs. It is the utility who is filing an application seeking
relief from the purchase requirement and, therefore, we believe it is
their responsibility to gather and submit the information to the
Commission. Additionally, while the publicly available reports are
available through the OASIS websites, an applicant still needs to
identify those studies that are relevant, and provide them (either
physically or by hyperlink) with the filing.\53\
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    \53\ See supra note 51.
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    118. In response to the Industrial Parties' argument that the
Commission is not sufficiently prescriptive as to the level of detail
regarding transmission availability required under the Commission's
regulations, we deny rehearing in part. As a general matter, we believe
the information identified in Sec.  292.310(d)(3) is sufficient to give
potentially affected QFs information relevant to evaluate whether there
is adequate transmission available for new selling arrangements,
subsequent to termination of the utility's purchase requirement.\54\ In
addition, the information on processes to be followed to access the
markets, identified in Sec.  292.310(d)(4) and (5), is sufficient to
give affected QFs information relevant to evaluating nondiscriminatory
access to the markets described in section 210(m)(1) of PURPA. The
relevant transmission information referred to by Industrial Parties in
the UniSource proceeding is thus embedded in the studies we require to
be filed. We do not agree that the other elements offered by UniSource
in the market monitoring plan for its proposed merger are either
relevant or necessary to evaluating nondiscriminatory access in this
context.
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    \54\ However, we note, in order for a QF to evaluate potential
ATC on an applicant's OASIS, the QF will need to determine the type,
firmness and duration of transmission service that the affected QF
will need for the power it intends to sell on a prospective basis.
While this information will provide a potentially affected QF with
information about current ATC, it is no guarantee that service from
a particular source to a particular load can be provided on a firm
basis. Only submission of a request and subsequent reservation of
transmission service can provide that level of certainty to any
prospective customer.
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    119. We do, however, believe that Sec.  292.310 of the Commission's
regulations lacks certain information that will facilitate the
Commission's processing of section 210(m) applications. The Commission
has processed applications in Docket Nos. QM07-2-000 and QM07-4-000 and
as a result of its experience in those dockets finds that additional
information from electric utilities would help avoid the need to issue
``deficiency'' letters or send additional information requests,
ultimately slowing down the processing of requests for relief. The
Commission therefore amends its regulations to require that the
following additional information be submitted: the docket number
assigned to each potentially affected QF if it filed for self-
certification of QF status or an application for Commission-
certification of QF status; the net capacity of each potentially
affected QF; the location of each potentially affected QF depicted by
state and county and the name and location of the substation where each
potentially affected QF is interconnected; the interconnection status
of each potentially affected QF including whether the QF is
interconnected as an energy or a network resource; and the expiration
date of the energy and/or capacity agreement between the applicant
utility and each potentially affected QF. The introductory paragraph of
Sec.  292.310(c) is thus amended to read as follows:

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