In its reply, Duke indicates that it would support a three-year minimum
term for rollover, but only if the notice period is required to match
project lead time.
---------------------------------------------------------------------------

    \744\ E.g., EPSA, Exelon, Reliant, and MISO/PJM States.
---------------------------------------------------------------------------

    1227. In their replies, several commenters dispute the assertion
that customers may not be able to obtain generation supplies for five-
year periods. They contend that generators in a competitive market will
have to offer five-year contracts or risk losing their sales if LSEs
begin requesting five-year contract terms in order to obtain rollover
rights.\745\ SPP states on reply that it has not been its experience
that suppliers have refused to enter into power supply agreements in
excess of three years. EEI also argues that, even if a transmission
customer has to accept the risk that its term of service exceeds the
term of its power purchase in order to obtain rollover rights, the cost
of the transmission service that is at risk is small in comparison to
the cost of the power because the cost of transmission service is only
a small portion of the delivered price of energy. EEI and Bonneville
also note in their replies that unneeded transmission service can be
sold in the secondary market.
---------------------------------------------------------------------------

    \745\ E.g., EEI Reply and Southern Reply.
---------------------------------------------------------------------------

    1228. NCEMC opposes the increase in contract term because it would
inhibit the ability to pursue its prudent portfolio approach to
mitigate price risks by providing for a mix of shorter and longer-term
power supply contracts. If the Commission increases the minimum term,
NCEMC argues that all existing rollover contracts should be
grandfathered. EPSA also believes that existing one-year contracts
should be grandfathered, otherwise it argues that market participants
that relied on the current policy will be harmed. In its reply, EEI
urges the Commission to reject EPSA's proposal that all currently
effective one-year power supply contracts be grandfathered because, in
EEI's view, it would interfere with good utility planning. EEI also
argues that extending the minimum term to five years does not abrogate
a customer's power supply contract because transmission and supply are
unbundled and, therefore, changing the terms of transmission service
does not interfere with contract rights under power sales agreements.
    1229. Exelon argues that limiting rollover rights to contracts that
are five years or greater will discriminate against merchant generators
that do not have load linked to generation, lead to stranded generation
investments that were based on the current rules, and unfairly
advantage local utilities wanting to build their own generation as
opposed to seeking competitive alternatives. Exelon suggests that an
approach similar to that utilized in PJM be adopted, in which PJM
evaluates new requests for service that cannot be granted without
utilizing an existing customer's service by notifying the existing
customer and requiring it to match the new request within thirty days
or release the service. PJM explains further that its approach would
allow transmission customers two rollover options: long-term service
for less than five years with no rollover right, or service for one
year with indefinite rollover rights conditioned on either future
limitations or an agreement to pay for necessary upgrades to maintain
the rollover. In its reply, TAPS opposes the PJM approach stating that
it would invite discrimination by transmission owners.
    1230. Other commenters that oppose the increase to five years
assert that they are already long-term customers that simply take
service year-to-year and should therefore already be included in
planning, based on the fact that they are either a generator or load
and cannot simply pick up and leave the system.\746\ Several other
commenters likewise oppose the increase to five years because they do
not believe that it will result in an increase in long-term contracting
and planning as suggested by the Commission.\747\ For example, Williams
notes that it currently has a ten-year transmission contract and argues
that its transmission provider has done nothing to improve the grid in
its area. TransAlta believes that a five-year minimum contract term
will limit market participation to deep-pocketed market participants
who can afford long

contracts. TransAlta also believes that the current option to contract
for just one year and obtain a rollover right is often the benefit that
prompts market participants to buy yearly service instead of shorter-
term products and, therefore, is an incentive to purchase longer-term
service. Alberta Intervenors believe that a longer minimum term will
provide a disincentive for long-term trading since the increased time
commitment of five years will significantly increase the trading
party's risk.\748\ The Organizations of MISO and PJM States believe
that the current rollover policy generally results in an increase in
investment in transmission and is only detrimental if service is
terminated and the capacity goes unused.
---------------------------------------------------------------------------

    \746\ e.g., Morgan Stanley and Manitoba Hydro.
    \747\ e.g., Alberta Intervenors, TransAlta, and Williams.
    \748\ See also Morgan Stanley.
---------------------------------------------------------------------------

Commission Determination
    1231. The Commission finds that the current rollover policy is no
longer just, reasonable, and not unduly discriminatory. The rights and
obligations of a rollover customer should bear a rational relationship
to the planning and construction obligations imposed on the
transmission provider by the rollover rights. We find, for the reasons
explained below, that the current policy no longer meets this standard
and that a five-year term will ensure greater consistency between the
rights and obligations of customers and the corresponding planning and
construction obligations of transmission providers. We also believe
that an increase to a five-year term is consistent with the native load
protections contained in new section 217 of the FPA, primarily because
requiring longer-term agreements ensures that the rollover right is
used by transmission customers with long-term obligations to purchase
capacity.\749\ Accordingly, the Commission adopts a five-year minimum
contract term in order for a customer to be eligible for a rollover
right. At the end of its initial five-year contract term, a
transmission customer must, within the one-year notice period
(discussed more fully below), agree to another five-year contract term
or match any longer-term competing request in order to be eligible for
a subsequent rollover.
---------------------------------------------------------------------------

    \749\ See EPAct 2005 sec. 1233(a) (to be codified at section
217(b)(4) of the FPA, 16 U.S.C. 824q), which provides that ``[t]he
Commission shall exercise the authority of the Commission under [the
FPA] in a manner that facilitates the planning and expansion of
transmission facilities to meet the reasonable needs of load-serving
entities to satisfy the service obligations of the load-serving
entities, and enables load-serving entities to secure firm
transmission rights (or equivalent tradable or financial rights) on
a long term basis for long term power supply arrangements made, or
planned, to meet such needs.''
---------------------------------------------------------------------------

    1232. Our decision to adopt a five-year minimum term will remedy
many of the problems associated with the current policy. Under our
current policy, a customer can secure transmission service for one year
and, in so doing, require the transmission provider to plan and upgrade
its system on the assumption the rollover right will be continually
renewed. For example, if a transmission provider's planning horizon is
10 years, a one-year reservation would require the transmission
provider to plan and upgrade the system as if the customer had
purchased 10 years' service (i.e., would exercise its rollover right
every year during that 10-year period). Because of this, the customer
receives a guarantee of service beyond what it has contracted to pay
for and the transmission provider must plan for service that may not
actually be used.
    1233. By failing to link the customer's rights and obligations with
those of the transmission provider, the current policy can have several
detrimental effects. For example, it requires the transmission provider
to plan and construct facilities that may not be necessary to serve
load. Given the difficulty of siting new transmission, it is
inappropriate to require transmission providers to use finite resources
to finance and construct facilities that may not be necessary.
Additionally, the current policy harms OATT customers by allowing
rollover customers to tie up capacity that may be needed by other
customers. This is because the current policy allows a rollover
customer to lock up existing capacity, regardless of whether the
rollover customer intends to use that capacity. This reduces the
availability of existing capacity for other customers and, in turn,
reduces competitive alternatives for customers.
    1234. Some commenters have argued that the Commission should use a
shorter period, such as three years, that is more aligned with auctions
in retail access markets or existing commercial practices. We disagree.
The purpose of our reform of the rollover rights policy is to ensure
that the rights and obligations of the customer are better aligned with
the planning and construction obligations of the transmission provider.
It is not to link the term of the rollover right to any particular
commercial practice in any particular region. We do not believe that
such a policy could be fairly implemented in any event. Commercial
practices vary between the regions and change over time, and it would
therefore be impractical to tailor the rollover rights in the OATT to
the varying commercial practices across the country.
    1235. We also do not believe that adopting a five-year minimum term
will have an adverse effect on participation in retail auctions that
use three-year solicitations. At the outset, we note that retail
auctions use solicitations of varying length and, hence, the fact that
some states may use three-year auctions does not provide a basis to
establish a generic standard for rollover rights under the OATT. Some
states use shorter term auctions (e.g., one year) and, as indicated, we
cannot reasonably tailor an OATT rollover obligation to the varying
commercial practices across the country. We also do not believe that
our policy will have an adverse effect on any such auctions. The
winners in a retail solicitation are determined anew in each auction,
based on the bids submitted in that auction. A prospective bidder
therefore does not need a ``rollover right'' to compete in an auction.
It only needs transmission service over the term of the solicitation
(e.g., three years). The fact that it may not have an automatic right
to transmission capacity in the next auction simply places it on the
same footing as any other bidder.
    1236. In response to those commenters who argue that transmission
customers making this long-term commitment must also be permitted to
change their designated resources and receipt points as their power
supply needs change, we believe that such an approach is unworkable.
Allowing rollover customers to change their designated resources and
receipt points in this manner would inappropriately result in rollover
customers having priority over other transmission customers in the
queue that may have already requested service over a given transmission
path. This could result in substantial disruptions to transmission
service to higher-queued customers requesting long-term service over
these paths.\750\ Moreover, transmission customers are not currently
guaranteed the ability to turn to other suppliers at other designated
resources and receipt points and, therefore, we do not understand how
simply increasing the minimum contract term to five years should

necessarily result in allowing transmission customers this increased
flexibility. Likewise, we do not understand why an increase in the
minimum contract term should result, as argued by APPA, TAPS, and
others, in a transmission customer not having to compete with other
transmission customers for firm capacity whenever its contract comes up
for renewal. As discussed below, we will continue to require
transmission customers to match competing requests for service as to
term and rate, ensuring that transmission customers that value the
service the most receive it.
---------------------------------------------------------------------------

    \750\ We agree with EEI that requiring transmission providers to
ensure rollover customers the ability to change their designated
resources and receipt points without disrupting service to other
customers would, taken to its logical conclusion, require
transmission providers to construct the transmission system with
sufficient redundancy to permit any customer to take service from
any resource.
---------------------------------------------------------------------------

    1237. We reject TAPS' proposal to exempt all small customers from
the five-year minimum, since this would interfere with transmission
providers' ability to plan their systems to meet their customers'
needs. As EEI points out, the aggregated loads of several small
customers can have a substantial impact on the system. We therefore
believe it would be inappropriate to categorically exempt small
customers. We also reject TAPS' proposal to exempt all full and near-
full requirements customers, because it would force transmission
providers to provide preferential service to certain groups of
customers. Additionally, we reject TAPS' proposal to allow customers to
exercise rollover rights with only one-year contracts if there is no
competing request. Without a competing request, a rollover right is not
necessary in order to continue service as long as capacity remains
available. Additionally, allowing a rollover for a one-year contract
would continue to impose planning and construction obligations on the
transmission provider that bear no reasonable relation to the rights
and obligations of the rollover rights customer. We further reject TDU
Systems' proposal that transmission providers demonstrate the
availability of long-term supplies before moving to a five-year term.
To do so would effectively require transmission providers to engage in
the business of procuring supplies for their transmission customers,
which is clearly outside the scope of their obligation to provide
transmission service, and could implicate Standards of Conduct issues.
    1238. We also reject the proposal of EPSA and others that all
currently effective one-year power supply contracts be grandfathered
because this would disrupt transmission planning. For example, such an
approach would require that a large portion of existing capacity be
planned for on a significantly different timeline than that subject to
the reformed rollover right. This also would detract from one of the
primary goals of rollover reform, which is to improve transmission
planning and encourage longer-term contracting. As discussed below,
existing transmission contracts will be permitted to roll over under
their existing terms until the first such rollover opportunity
following the effectiveness of the reforms required by this Final Rule.
    1239. Lastly, we note that many of the reforms adopted elsewhere in
this Final Rule will be beneficial to customers that no longer receive
rollover rights, as well as to customers with rollover rights that wish
to use their rollover rights to turn to alternative suppliers using
different transmission paths. First, greater consistency and
transparency in ATC calculations will provide greater assurance of
nondiscriminatory access to existing transmission capacity. Second, our
reforms relating to conditional firm and redispatch service will help
to maximize the use of existing capacity, consistent with reliability,
thereby providing customers without rollover rights greater flexibility
to purchase existing transmission capacity. Third, our clarifications
regarding our policy on redirects should improve the ability of
transmission customers to redirect their service to new receipt or
delivery points. Fourth, lifting the price cap on reassigned
transmission capacity should assist transmission customers in
reassigning any capacity that may not be needed on a given path because
of a change in suppliers that requires service over new transmission
paths. This will also necessarily result in the unneeded capacity being
freed up for use by other transmission customers, thereby further
assisting them in obtaining capacity that they need to access
alternative suppliers. Lastly, and most importantly, greater openness
and coordination in transmission planning should provide all customers
better information regarding future resource options and access to
competitive alternatives. We also believe that improved transmission
planning should help to address allegations made by certain
transmission customers (e.g., Williams) that even though they have
signed up for ten years of service, they have not seen their needs
planned for adequately.
b. One-Year Notice Provision
Comments
    1240. Many commenters support an increase in the notice period to
one year or some other greater time period.\751\ Most support the
increase based on the argument that the current 60-day notice period
makes it very difficult to plan the system, because transmission
providers often do not know until 60 days before the end of a contract
whether a transmission customer will roll over its service, resulting
in potential overbuilding of the system (e.g., because a transmission
provider must plan its system assuming a transmission customer will
roll over but sometimes it does not). They also argue that it is
difficult to re-market capacity in only 60 days if rollover is not
sought and that potential transmission customers are often
unnecessarily turned away because transmission providers are unaware of
the availability of capacity until 60 days before the end of a contract
subject to a rollover right. In general, these commenters view a one-
year notice period as an improvement. However, many of these same
commenters do not believe one-year notice is appropriate if the
transmission provider must construct facilities to accommodate a
rollover and, therefore, the notice should instead be tied to the start
date for any necessary upgrades.\752\
---------------------------------------------------------------------------

    \751\ E.g., Ameren, Barrick Reply, Bonneville, Community Power
Alliance, Constellation, Dominion, Duke, East Texas Cooperatives,
EEI, E.ON, Entegra, Entergy, FirstEnergy, Great Northern, Imperial,
LDWP, LPPC, MidAmerican, MISO, MISO Transmission Owners, Nevada
Commission, Nevada Companies, North Carolina Commission Reply,
NorthWestern, Northwest IOUs, NRECA, PGP, Pinnacle, PNM-TNMP,
Progress Energy, Public Power Council, Salt River, Santa Clara,
Southern, South Carolina E&G, SPP, Tacoma, TranServ, TVA, Utah
Municipals, and Xcel. Both APPA and TAPS support a one-year notice
provision, but only on the condition that the clarifications and
modifications they suggest are made.
    \752\ E.g., Barrick Reply, Duke, EEI, Entergy, Indianapolis
Power Reply, LPPC, Nevada Commission, Nevada Companies, Pinnacle,
Progress Energy, South Carolina E&G Reply, Southern, and TVA.
---------------------------------------------------------------------------

    1241. EEI, for example, believes that notice should be tied to the
start date of any necessary transmission upgrades, because the
transmission provider may be left with stranded transmission capacity
if it must begin construction on upgrades necessary to accommodate a
rollover before the transmission customer has even indicated whether it
will in fact seek a rollover. EEI also argues that a competing customer
could be required to pay an incremental rate for network upgrades that
could have been avoided if the rollover customer had provided earlier
notice of its intention not to seek a rollover. EEI further contends
that some state commissions will not allow upgrades where there is only
the potential for a rollover. Finally, EEI states that a one-year
notice period does not ensure that the transmission provider will be
able to re-market the capacity, forcing other

transmission customers to bear the increased costs associated with the
newly constructed transmission facilities. EEI proposes that a date be
included in the initial service agreement by which the transmission
customer must exercise its rollover rights if upgrades are needed to
accommodate the rollover. If there is a pre-confirmed competing request
or newly projected growth in native load, EEI suggests that the
rollover customer must exercise its rollover and match by the later of
the project start date for any new transmission facilities needed or 60
days after the transmission provider notifies the transmission customer
of the competing request.\753\ Additionally, if more than one-year
notice is required because of the need for upgrades, EEI proposes that
the transmission provider be required to notify the transmission
customer if subsequent events delay the project start date, in which
case the notice period would be revised. EEI asserts that any disputes
can be dealt with by protesting the filing of an unexecuted agreement.
EEI stresses that better, more inclusive planning, and more transparent
ATC calculations, will provide transmission customers with greater
assurances that project start dates are accurate.
---------------------------------------------------------------------------

    \753\ Ameren, Pinnacle, Southern, and TranServ agree that the
submission of a competing request should trigger an accelerated
timeline for the original customer to exercise or release its
rollover rights.
---------------------------------------------------------------------------

    1242. Southern suggests that partial rollover be permitted if
notice is not given in time for construction of an upgrade needed to
provide full service. Duke, Nevada Commission, and Southern suggest
that providing for one-year notice without a link to the start date for
any upgrades falls short of the native load protections found in
section 217 of the FPA. As an alternative, the Nevada Commission
suggests tying the notice requirement to the amount of capacity subject
to rollover, i.e., below a certain threshold, one year would be deemed
per se sufficient.
    1243. APPA argues in reply that many customers may not know even
one year in advance if they will have firm power supplies under
contract that would enable them to roll over their corresponding firm
transmission agreement and, therefore, requiring them to exercise their
rollover rights even earlier in the contract term would only exacerbate
an already impossible situation. In their replies, NRECA, TAPS, TDU
Systems, and Utah Municipals urge the Commission to reject the
recommendation that notice periods be expanded to be commensurate with
construction lead times. They argue, among other things, that LSE
transmission customers need a reasonable amount of certainty so that
they may plan their power supply arrangements without fear that they
may become unraveled due to unforeseeable circumstances. Utah
Municipals also assert that the proffered justification for the
proposal--to prevent overbuilding--is questionable at best as even the
current policy which requires only a one-year contract minimum for
rollover and 60-days notice has not resulted in wasteful overbuilding
of the system. TDU Systems also point out that under section 28.2 of
the pro forma OATT, transmission providers should be planning and
expanding their systems to accommodate their network customers' current
and future needs.
    1244. The one-year notice provision is opposed by several
commenters, who argue that having to give one-year notice constitutes
an undue burden.\754\ In general, these commenters argue that under
current market conditions, transmission customers do not typically
renew supply contracts one year in advance of expiration.\755\ Alberta
Intervenors argue that a one-year notice provision does not aid in re-
marketing capacity, as any unused long-term firm service is already re-
marketed as short-term firm or non-firm service. Alberta Intervenors
also argue that the increased lead time increases risk and creates
uncertainty making it less likely that customers will enter into long-
term contracts. EPSA and Exelon suggest a flexible notice rule that
depends on the length of the underlying contract or requiring more than
60-days notice if there is insufficient capacity for a new long-term
firm transmission service request, as is done in PJM. They also suggest
PJM's approach whereby a transmission customer must inform PJM whether
it will roll over within thirty days of being notified of a competing
request. PPM and Wisconsin Electric suggest a six-month notice period,
which complements their alternative suggestion of a three-year minimum
contract term.
---------------------------------------------------------------------------

    \754\ E.g., Alberta Intervenors, Alcoa, Arkansas Municipal,
EPSA, Exelon, Manitoba Hydro, Morgan Stanley, PPM, TransAlta,
Williams, and Wisconsin Electric.
    \755\ E.g., Arkansas Municipal, Williams, and Wisconsin
Electric.
---------------------------------------------------------------------------

Commission Determination
    1245. The Commission finds that the current 60-day notice period
should be modified to reflect the longer term (five years) of the
rollover rights. Currently, a customer with a one-year rollover right
has 60 days to provide notice of whether it intends to rollover its
capacity. This 60-day period was reasonable for a rollover right of
short duration (one year), but it is no longer reasonable for a
rollover right with a minimum five-year term.
    1246. In selecting a new notice period, the Commission has
attempted to balance the circumstances faced by customers in renewing
power supply contracts and the interests of transmission providers in
attempting to plan their system. The Commission recognizes that no
single notice period can perfectly balance these considerations, but
chooses the one-year notice period as most appropriate under the
circumstances. Given that the minimum rollover term has been lengthened
to five years, it is reasonable to expect that customers will consider
renewing such long term obligations in advance of 60 days prior to the
expiration of their current obligation. We do not believe it is
reasonable to fashion our notice period for customers that wait until
the last minute to evaluate whether to extend their long-term
contracts.
    1247. Many transmission providers argue that a one-year notice
period is too short because it is not consistent with the transmission
provider's planning horizon. We disagree. The Commission is extending
the minimum term for rollover rights to five years to ensure greater
consistency between the customer's rights and obligations and the
planning and construction obligations of the transmission provider. We
believe that this modification satisfies the principal concerns of
transmission providers regarding the current policy on rollover rights.
We recognize that a one-year notice period is shorter than the typical
planning horizon, but we decline to extend the notice period to a time
that coincides with the typical planning horizon or the time it takes
to construct new facilities. Doing so would effectively eliminate
rollover rights altogether, given that the resulting notice period
could be three-to-five years. We do not believe it is reasonable to
expect customers to have decided on new sources of supply three years
in advance of the expiration of their current contracts. We therefore
find that a one-year notice period most appropriately balances the
interests of customers and transmission providers.
c. Matching and Rollover Restrictions Based On Native and Network Load
Growth
Comments
    1248. As noted above, the Commission proposed to maintain the
requirement that an existing rollover

transmission customer match competing offers as to term and rate. Some
commenters argue that a competing customer be required to execute a
contingent service agreement that becomes effective if the rollover
customer does not match.\756\ Given the increase in the minimum
contract term to five years in order to be eligible for a rollover
right, TAPS argues that matching must be structured to recognize that a
network customer must extend its power supply by at lease five years as
well, in order to match a competing point-to-point customer that can
simply extend its reservation. To ensure that network customers are not
disadvantaged by matching, TAPS suggests that the Commission restrict
reservations qualified to compete against a network customer's
reservation to customers with long-term power contracts, so they are on
more equal footing with network customers. TAPS also proposes a cut-off
for requests with which the network customer will need to compete, such
as three months prior to when the network customer exercises its
rollover right, so that the network customer can structure its power
supply commitments with some degree of advance knowledge of the
competing requests. In its reply, Bonneville suggests allowing network
transmission customers to compete based on the duration of their
network transmission service request rather than on the duration of
their resource commitments. As such, the transmission provider would
assume that existing designated resources would continue to be used
after the rollover unless informed otherwise.
---------------------------------------------------------------------------

    \756\ E.g., MidAmerican and Powerex.
---------------------------------------------------------------------------

    1249. The Commission also discussed in the NOPR whether native load
restrictions should be reevaluated with each rollover and, if so,
whether native load should then be required to compete with rollover
customers for the capacity. Several commenters argue that a
transmission provider's native and network loads should not be forced
to compete with other transmission customers, as opposed to allowing
the transmission provider to continue to reserve capacity for its
native and network load at the time of granting a rollover.\757\ Most
also stress that requiring a transmission provider to compete would
violate the native load protections in section 217 of the FPA. LDWP
contends that there should be no limitation on a transmission
provider's right to recall capacity based on revised forecasts of
native load growth.
---------------------------------------------------------------------------

    \757\ E.g., Allegheny, Entergy, FirstEnergy, Imperial, Nevada
Companies, Progress Energy, Salt River, Santa Clara, and Seattle.
---------------------------------------------------------------------------

    1250. APPA contends on reply that transmission customers could find
it very difficult to line up a new firm power supply of a term long
enough to match the power supply arrangements of its vertically-
integrated investor-owned transmission provider (which is likely to
have owned, rate-based generation in its power supply portfolio and,
therefore, could agree to a very long-term transmission agreement). TDU
Systems argue that transmission providers should be forced to compete
for capacity and that this is, in fact, required by section 217 of the
FPA, as the native load preference does not distinguish between the
retail native loads of transmission providers and the native loads of
other LSEs dependent on their systems. Powerex and PPM also support
requiring transmission providers to compete. NorthWestern and Southern
support requiring transmission providers to compete, but only when a
restriction is not included in the original agreement. APPA also notes
in its reply comments that, if Southern included LSEs' loads in its
transmission planning and construction program along with its own
native load, there would be no need to reclaim the LSEs' capacity at
the close of the initial contract term or the renewal terms.
    1251. Several commenters also addressed the Commission's request
for comment on whether there is a sufficiently clear, consistent, and
transparent method that could be implemented on a generic basis to
address the need for a transmission provider to demonstrate its
forecast of native load growth and its effect on capacity reserved by
rollover customers. Many of these commenters support the development of
a clear and transparent method for demonstrating native load
growth.\758\ Some commenters point to the need for accurate and
transparent ATC calculations to aid in this process.\759\ If the
transmission provider's calculation of ATC is consistent with the
requirements the Commission adopts in this proceeding yet there is
insufficient capacity to accommodate the customer's rollover, EEI
recommends that the provider may include in the service agreement a
limitation of rollover rights. AWEA recommends that transmission
providers adopt the same transparent and consistent methods used to
compute the Existing Transmission Capacity component of ATC to develop
native load growth reservations that support rollover restrictions.
AWEA, NorthWestern, and TAPS suggest posting forecast information on
the OASIS, and TAPS goes on to stress that this information should be
included in state planning documents as well as the transmission
provider's coordinated and regional planning process. EPSA stresses
that native load capacity must follow native load and not only be made
available for the transmission provider and its affiliates. EPSA
believes this is required by the native load protections found in FPA
section 217.
---------------------------------------------------------------------------

    \758\ E.g., AWEA, Duke, EEI, Entergy, EPSA, Imperial, Nevada
Commission, Powerex, Salt River, Seattle, South Carolina E&G,
Southern, SPP Reply, and TAPS.
    \759\ E.g., AWEA, EEI, EPSA, and MISO.
---------------------------------------------------------------------------

    1252. Duke asks the Commission to address the possibility that
capacity subject to a rollover right might be needed to serve native
load outside of the ten-year planning horizon. The Nevada Commission
and Southern suggest that the Commission give deference to state
resource planning processes in attempting to verify native load growth
forecasts. Southern also asks that the Commission clarify that rollover
rights can be restricted based on rollover rights belonging to higher-
queued transmission customers. If transmission studies show no problems
without the presence of a rollover, but then problems are identified
with the rollover included, Southern contends that placing a
corresponding limitation in the service agreement would be appropriate.
Pinnacle requests clarification that when rollover rights are
restricted based on native load growth, the transmission customer must
pay for upgrades to continue its service.
    1253. Several commenters also suggest that transmission providers
should be permitted to evaluate rollover restrictions at the time of
each rollover.\760\ These commenters argue that it is impossible to
identify all potential limitations upfront as system conditions change
in unforeseeable ways (e.g., fluctuations in fuel prices can change
dispatch decisions). They also argue that allowing a re-evaluation is
consistent with the native load protections in FPA section 217.
---------------------------------------------------------------------------

    \760\ E.g., Nevada Companies, South Carolina E&G, and Southern.
---------------------------------------------------------------------------

    1254. In its reply, TAPS argues that a transmission provider should
not be permitted to avoid its planning and expansion obligations by
treating load growth not anticipated and documented in the original
service agreement as a competing request to be matched. TAPS points out
that section 217 of the FPA treats all LSEs--whether they are
transmission providers or transmission-dependent utilities--the same,
without

distinction, and therefore provides no basis to allow one LSE to claim
transmission rights currently used by another LSE.\761\ Lastly, TAPS
argues that when a provider is reclaiming capacity for load growth
reserved in the initial service agreement, rollover customers should be
allowed to match the request, thereby imposing an additional
requirement on the provider.
---------------------------------------------------------------------------

    \761\ See also APPA Reply and TDU Systems Reply.
---------------------------------------------------------------------------

Commission Determination
    1255. The Commission will not adopt any changes to its matching
policies at this time. At the time of rollover of their contracts,
transmission customers will continue to be required to match competing
requests for service as to term and rate in order to roll over their
service. This preserves the current policy goal of providing a
mechanism for awarding capacity to those who value it most, as well as
providing for a tie-breaking mechanism when needed that gives priority
to existing customers so that they may continue to receive transmission
service.\762\ Absent the requirement that the customer match the
contract term of a competing request, transmission providers could be
forced to enter into shorter-term arrangements that could be
detrimental from both an operational standpoint (i.e., system planning)
and a financial standpoint.\763\ We clarify, however, that transmission
customers must also enter into a transmission contract of at least five
years in order to obtain a subsequent rollover right in the absence of
a competing request for a longer term.
---------------------------------------------------------------------------

    \762\ See Order No. 888-A at 30,197.
    \763\ Id.
---------------------------------------------------------------------------

    1256. The Commission will continue to require rollover restrictions
based on reasonable forecasts of native load growth or preexisting
contracts that commence in the future to be included in the initial
transmission service agreement. This will remain the only appropriate
way to restrict a rollover right. We also will continue to evaluate a
transmission provider's native load growth forecasts on a case-by-case
basis, as no commenter has provided us with a sufficiently clear,
consistent, and transparent method that could be implemented on a
generic basis that ensures that the demonstration of native load growth
is accurate and is tied to a need for the specific capacity reserved by
a rollover customer.\764\ Because we will continue to require rollover
restrictions to be included in the initial transmission service
agreement, we necessarily reject the suggestion that transmission
providers be permitted to restudy for rollover restrictions at the time
of each rollover. Accordingly, it is unnecessary for us to address
whether it would be appropriate for a transmission provider's native or
network load to compete with a rollover customer if a new study at the
time of the rollover indicated a native or network need for the
capacity.
---------------------------------------------------------------------------

    \764\ While the Commission has not to date accepted any native
load growth showing made by a transmission provider, it has recently
set for hearing several such showings. See, e.g., Southern Co.
Servs., Inc., 116 FERC ] 61,050 (2006); Nevada Power Co., 116 FERC ]
61,093 (2006).
---------------------------------------------------------------------------

    1257. In response to the suggestions of some commenters, we believe
that consideration should be given in our case-by-case evaluations of
native load growth forecasts to state-approved integrated resource
plans that show a native load need for the capacity.\765\ Moreover, we
believe that the ATC and planning reforms that we are adopting in this
Final Rule will provide greater transparency and assurance that
transmission providers' forecasts of native load growth are accurate.
We emphasize that we expect the forecasts utilized in transmission
planning to be consistent with the forecasts utilized to support a
rollover restriction. Lastly, the coordinated and regional planning
process required by this Final Rule is designed to improve the
availability of transmission service by, among other things, increasing
transparency and providing customers a meaningful opportunity to
participate in the planning process. Accordingly, we believe that
improved planning should help to reduce the need to restrict rollovers
in the future.
---------------------------------------------------------------------------

    \765\ We note that this is consistent with the Commission's
evaluation of rollover restrictions proposed by transmission
providers in the past. See, e.g., Nevada Power Co., 97 FERC ] 61,324
at 62,493 n.17 (2001).
---------------------------------------------------------------------------

d. Other Issues
Comments
    1258. A number of comments relate to the applicability of the
rollover-related reforms to RTOs and ISOs. CAISO asks the Commission to
confirm that the rollover reforms do not apply to CAISO as its current
tariff does not have such a provision and rollover is, in fact,
incompatible with CAISO's transmission service model. Sacramento,
however, asks the Commission to clarify that rollover rights apply to
long-term firm service provided by RTOs and ISOs under Order No. 681
under what it terms the ``as good as or superior to'' standard.\766\
Organization of MISO and PJM States assert that any changes for RTOs
should be made through the stakeholder process. In its reply, Williams
opposes permitting RTO stakeholders to determine changes in rollover
rights policy in RTO regions, as it would result in disparate rules and
practices and increased opportunities for discrimination, and
therefore, the Commission should adopt a single policy applicable to
all rollover rights.
---------------------------------------------------------------------------

    \766\ In its reply, CAISO argues that this request to expand the
requirements of Order No. 681 is inappropriate both because the
Commission and courts have already recognized that rollover rights
under the pro forma OATT do not apply to entities like CAISO that do
not offer traditional Order No. 888 network and point-to-point
transmission services and because the Commission has already
rejected such a requirement in Order No. 681 itself.
---------------------------------------------------------------------------

    1259. Other commenters raise different discrete issues. Morgan
Stanley asks the Commission to amend pro forma OATT section 2.2 to
include existing policy determinations with respect to the manner in
which a transmission provider can curtail or, alternatively, must honor
and accommodate rollover requests. Duke asks the Commission to abandon
its existing policy prohibiting the restriction of rollover rights
based on the potential exercise of other customers' rollover rights.
Salt River asks the Commission to clarify that the proposal to extend
the minimum term to five years does not change the definition in
section 1.20 of the pro forma OATT that one year constitutes a long-
term contract. AWEA, Constellation, and EPSA ask the Commission to
allow transmission customers to waive their rollover rights.
Commission Determination
    1260. As we explain in section IV.C above, RTOs and ISOs must
submit a filing showing that their practices are consistent with or
superior to the modifications made in the Final Rule. This does not
necessarily mean that entities such as CAISO must create rollover
rights if they do not have them already. Arguments regarding the
applicability of rollover reform may be raised pursuant to the process
described in section IV.C. We also clarify that our decision to extend
the minimum term to five years does not change the definition in
section 1.20 of the pro forma OATT that one year constitutes a long-
term contract. Commenters have not offered sufficient justification for
further clarifications to our rollover policies or amendments to
section 2.2 at this time.
e. Effectiveness Upon Acceptance of Coordinated and Regional Planning
Process and Transition
Comments
    1261. Several transmission customers and other commenters support a
linkage

between rollover reform and planning, but do not support making
rollover reforms effective upon acceptance of a transmission provider's
coordinated and regional planning process, but rather on successful
implementation of that process.\767\ While both TAPS and TDU Systems
support the link to planning generally, TAPS goes further and advocates
holding transmission providers accountable for failing to plan and
construct facilities needed to meet transmission customer needs. TDU
Systems point out that the linkage to planning does not remedy concerns
that the current market does not generally provide for five-year supply
contracts.
---------------------------------------------------------------------------

    \767\ E.g., AWEA, Constellation, EPSA, Exelon, PGP, and PPM.
---------------------------------------------------------------------------

    1262. Some commenters, however, oppose linking the effectiveness of
rollover reform to planning, arguing that rollover reform is needed as
quickly as possible.\768\ For example, Duke, Progress Energy, and
Southern argue that FPA section 217 provides no indication that the
native and network load protections inherent in rollover reform should
be subject to conditions such as waiting for the Commission to accept a
planning process. Moreover, Duke argues that developing a planning
process will be time-consuming and that holding rollover reform hostage
to it could motivate stakeholders with contracts shorter than five
years to endlessly try to convince the Commission to delay acceptance
of a transmission provider's planning process.
---------------------------------------------------------------------------

    \768\ E.g., Bonneville, Duke, EEI Reply, North Carolina
Commission Reply, Northwest IOUs, PNM-TNMP Reply, Progress Energy,
Public Power Council, South Carolina E&G Reply, and Southern.
---------------------------------------------------------------------------

    1263. Some commenters contend that linking planning and rollover
reform will create differences in tariffs, with each transmission
provider having a different effective date for rollover reforms.\769\
MISO argues in its reply that the Commission should clarify in the
Final Rule that its requirement that the new policy becomes effective
upon acceptance of the transmission provider's coordinated and regional
planning process is already met in regions where RTOs or ISOs provide
service, as they already have Commission-approved regional transmission
planning mechanisms in place. Bonneville argues in its reply for a
consistent implementation date across all transmission providers so as
to avoid another degree of complexity for customers requiring rollover
capacity across multiple transmission providers' systems.
---------------------------------------------------------------------------

    \769\ E.g., Northwest IOUs, Duke Reply and EEI Reply.
---------------------------------------------------------------------------

    1264. As for the transition period proposed in the NOPR, a variety
of commenters point out that, depending on the status of any given
contract, making the one-year notice provision effective on acceptance
of a transmission provider's planning process could leave some
transmission customers unable to provide one-year notice if there is
less than one year remaining on their contracts.\770\ FirstEnergy,
Exelon, Great Northern, and TAPS emphasize that existing transmission
customers should be permitted one more rollover under the current
rules, because the parties to such agreements have relied on the
current rules in meeting their transmission needs. APPA and TAPS point
out that transmission customers will need a sufficient amount of time
to secure five-year power agreements to meet the new requirements. AWEA
argues generally for a transition period during which existing
customers can maintain or relinquish their existing rollover rights
under current rules and become subject to new requirements only at the
end of the transition period.
---------------------------------------------------------------------------

    \770\ E.g., APPA, FirstEnergy, Northwest IOUs, PGP, and Public
Power Council.
---------------------------------------------------------------------------

Commission Determination
    1265. The Commission adopts the NOPR proposal to make rollover
reform effective at the time of acceptance by the Commission of a
transmission provider's coordinated and regional planning process also
required by this Final Rule. We believe that rollover reform and
transmission planning are closely related, because according to our
longstanding policy, transmission service eligible for a rollover right
must be set aside for rollover customers and included in transmission
planning. We believe that it is necessary that reforms in both areas
proceed together, and therefore, we reject the suggestion of some
commenters that rollover reform proceed independent of transmission
planning reform. We understand that our approach may result in
differences in transmission providers' OATTs, with some having a
different effective date for rollover reforms. However, because the
effectiveness of rollover reform will be tied to acceptance of a
transmission provider's coordinated and regional transmission planning
process, rollover reforms in any given region generally should be
effective within the same time period.
    1266. We reject the arguments by some commenters that rollover
reform be made effective upon the ``successful'' implementation, as
opposed to acceptance by the Commission, of a transmission provider's
coordinated and regional planning process. We believe that utilizing a
subjective deadline, such as the successful implementation of the
planning process, could result in significant confusion in the industry
as to when rollover reforms should be effective. Furthermore, an
existing filed and accepted transmission planning process, such as
those that may be on file for RTOs and ISOs, does not trigger the
effectiveness of rollover reform for transmission providers using the
process. Such RTOs and ISOs and their transmission-owning members must,
as discussed elsewhere in this Final Rule, comply with the planning
reforms required by the Final Rule through the compliance filing
procedures identified in section IV.C. It is Commission acceptance of
these compliance filings that will trigger effectiveness of rollover
reform for these transmission providers, assuming rollover reform is
applicable to their tariff services in the first instance.
    1267. In response to commenters' concerns that, depending on the
effective date of rollover reform, certain customers may not have a
year or more left on their contracts such that they can comply with the
one-year notice provision, we emphasize that existing contracts with a
rollover right at the time of effectiveness of rollover reform may
exercise their next rollover based on the existing notice rules. It is
only a rollover contract entered into or renewed after the
effectiveness of rollover reform that must comply with the new rollover
provisions, including the one-year notice requirement.
4. Modification of Receipt or Delivery Points
    1268. Section 22 of the pro forma OATT provides that a transmission
customer taking firm point-to-point service may modify its receipt and
delivery points, i.e., redirect its service, on either a non-firm or a
firm basis. Section 22.1 (Modifications on a Non-Firm Basis) provides
that, subject to certain conditions, a firm point-to-point customer may
request transmission service on a non-firm basis over receipt and
delivery points other than those specified in its service agreement
(known as secondary receipt and delivery points) in amounts not to
exceed its firm capacity reservation, without incurring an additional
non-firm point-to-point service charge or executing a new service
agreement. Section 22.2 (Modifications on a Firm Basis) provides that
any request to modify receipt and delivery points on a firm basis shall
be treated as a new request for service in accordance with

section 17 of the pro forma OATT (Procedures for Arranging Firm Point-
to-Point Transmission Service), except that the transmission customer
shall not be obligated to pay any additional deposit if the capacity
reservation does not exceed the amount reserved in the existing service
agreement. While such new request is pending, the transmission customer
retains its priority for service at the existing firm receipt and
delivery points specified in its service agreement.
    1269. In Order No. 676, the Commission adopted the ``Standards for
Business Practices and Communication Protocols for Public Utilities''
developed by the NAESB's Wholesale Electric Quadrant (WEQ).\771\ Order
No. 676 incorporated the aforementioned standards by reference into the
Commission's regulations, required public utilities to implement the
standards by July 1, 2006, and required public utilities to file
revisions to their OATTs to include these standards.\772\ The WEQ
Standards include a number of standards addressing requirements for
dealing with redirects on both a firm and non-firm basis.\773\ All of
the WEQ Standards dealing with redirects were adopted by the Commission
in Order No. 676, except for WEQ Standard 001-9.7, which addresses the
impact of a firm redirect on a long-term firm transmission customer's
rollover rights under section 2.2 of the pro forma OATT. The Commission
directed the WEQ to reconsider WEQ Standard 001-9.7 and to adopt a
revised standard consistent with the Commission's policies.\774\ The
Commission also offered guidance to assist the WEQ in developing a
standard that is consistent with Commission policy.\775\
---------------------------------------------------------------------------

    \771\ The WEQ was established by NAESB in response to a
Commission order requesting the wholesale electric power industry to
develop business practice standards and communication protocols by
establishing a single consensus, industry-wide standards
organization for the wholesale electric industry. See Order No. 676
at P 3-4.
    \772\ The standards will hereinafter be referred to as the WEQ
Standards. The Commission adds a reference to the WEQ Standards in
section 4 of the pro forma OATT, which identifies the Commission's
regulations containing the terms and conditions relevant to the
OASIS and standards of conduct.
    \773\ The requirements for dealing with redirects on a firm
basis are found at WEQ Standard 001-9, et seq., and the requirements
for dealing with redirects on a non-firm basis are found at 001-10,
et seq.
    \774\ Order No. 676 at P 52.
    \775\ Id. at P 53-61.
---------------------------------------------------------------------------

NOPR Proposal
    1270. In response to the NOI, commenters raised various concerns
regarding redirects. Among other things, customers complained of
difficulties obtaining redirected service, while transmission providers
complained of a lack of clarity in the rules governing redirects. In
the NOPR, the Commission stated its belief that a number of these
concerns appeared to have been resolved by the adoption of the WEQ
Standards in Order No. 676, which was issued after the NOI. The
Commission sought comment on whether parties believed the WEQ Standards
in fact addressed those concerns adequately.
    1271. The Commission also stated its expectation that a number of
other concerns raised in response to the NOI, while perhaps not yet
addressed (or addressed fully) by a WEQ Standard, are nevertheless the
types of issues that are appropriate for the WEQ process. The
Commission therefore proposed that each commenter that continued to
believe additional reform is necessary with regard to redirects
evaluate whether its concerns would more appropriately be addressed by
the WEQ as it considers its next version of its standards.\776\ The
Commission noted that WEQ was in the process of reevaluating WEQ
Standard 001-9.7, dealing with redirects and rollovers, so that it is
consistent with the Commission's guidance given in Order No. 676. The
Commission requested comment on whether the WEQ process, along with the
guidance provided by the Commission in Order No. 676, is sufficient to
address the concerns of commenters that seek clarification on the
interplay between redirects and rollovers.
---------------------------------------------------------------------------

    \776\ The Commission noted in this regard that the WEQ's
procedures ensure that all industry members can have input into the
development of a business practice standard, whether or not they are
members of NAESB, and each standard it adopts is supported by a
consensus of the five industry segments: transmission, generation,
marketers/brokers, distribution/load-serving entities, and end-
users. See Order No. 676 at P 5 & n.5.
---------------------------------------------------------------------------

    1272. In the NOPR, the Commission acknowledged that there were
additional, more fundamental concerns with regard to section 22 raised
in response to the NOI. Customers generally argued that their ability
to redirect to new points is stymied by a lack of ATC at the new points
or the need for major upgrades, or that transmission providers take too
long to process the redirect request. Transmission providers, on the
other hand, complained of the administrative burdens and complexity
(particularly with regard to reliability) of processing transmission
customers' short-term changes in service and that there is often not
enough time for the market to respond to capacity made available on a
customer's original path. The Commission stated its belief that other
proposed reforms in the areas of process, transmission planning, and
ATC calculation should address transmission customer concerns regarding
redirects. The Commission encouraged interested parties to submit a
specific proposal, along with proposed revised pro forma OATT language,
to the extent they believe the proposed reforms will not adequately
address their concerns.
    1273. The Commission also noted in the NOPR that several
transmission providers had posted business practices that allow network
customers either to substitute an off-system non-designated resource
for a designated resource or to redirect the point of receipt
associated with an existing network resource. The Commission proposed
that network customers not be permitted to redirect network
transmission service because network service involves no identified
contract path and therefore should not be treated as a directable
service.
a. Proposed Reliance on WEQ Process and Other OATT Reforms
Comments
    1274. Commenters generally agree with the Commission that issues
with respect to redirects of firm and non-firm transmission service are
best addressed through the WEQ as established by NAESB, in accordance
with Order No. 676 and the WEQ process for creating new standards.\777\
Seattle argues that the NAESB standard setting process has worked well
thus far and, as a result, other redirect issues should be first
referred to NAESB as a standard-setting request. MISO states that it
has serious concerns with the WEQ process and the Commission's
unwarranted deference to NAESB to develop what will become binding
business standards and practices.
---------------------------------------------------------------------------

    \777\  E.g., EEI, Imperial, NorthWestern, Southern, and Suez
Energy NA.
---------------------------------------------------------------------------

    1275. Nevada Companies recommend the following improvements for the
NAESB process: use of a professional facilitator to keep discussions
focused and moving; and mandatory surveys breaking down the sections on
proposed NAESB standards after the first round of comments are received
to determine if consensus exists on the proposed standards, since it
appears that there are relatively few participants at NAESB meetings
where standards are being drafted and relatively few commenters on
those draft standards.
    1276. Several commenters state that they agree with the
Commission's proposal to rely on other proposed

reforms in the NOPR to resolve the remaining redirect issues.\778\
Seattle generally agrees that the reforms proposed in the NOPR should
improve the ability to assign and use transmission on a firm basis. EEI
and NorthWestern state that the NOPR proposal to increase transparency
in the calculation of ATC should assist transmission customers in both
selecting transmission paths that may be available for redirect and
understanding why certain paths cannot accommodate redirect
transactions.
---------------------------------------------------------------------------

    \778\ E.g., EEI, NorthWestern, and Seattle.
---------------------------------------------------------------------------

Commission Determination
    1277. The Commission concludes that the proposed method for
addressing remaining concerns with redirects--i.e., relying on other
reforms adopted in this Final Rule and in the Order No. 676
proceeding--is adequate to ensure that transmission providers do not
engage in undue discrimination when a customer seeks to modify its
receipt and delivery points on a firm basis. As explained throughout
this Final Rule, the reforms adopted herein address the remaining
opportunities for undue discrimination. Planning and ATC reforms will
give transmission customers more accurate and complete ATC information
when evaluating their redirect options. Increased transparency will
give transmission customers the information they need to evaluate a
transmission provider's denial of a request to redirect. Modifications
to the process for requesting and securing firm point-to-point service
will improve the ability to redirect transmission service to new points
pursuant to section 22 and ensure complete and timely responses from
transmission providers. The Commission therefore concludes that no
further reforms specific to redirects are necessary at this time.
    1278. The Commission also concludes that the NAESB WEQ is the
appropriate standard-setting body for developing business practices and
implementing the Commission's redirect policy. The Commission will
refrain from commenting here on the NAESB process itself because we
believe that the industry is best situated to determine how to
structure the standard-setting process to provide for the widest
possible participation and consensus. We nevertheless clarify that,
consistent with precedent, NAESB is charged with implementing
Commission policy through business practices.\779\ The Commission finds
that the NAESB WEQ is an acceptable standards development process,
representing a cooperative effort by industry participants to develop
business practices that enhance the efficiency of the electric
grid.\780\ Where necessary, NAESB participants may seek clarification
of Commission policy so that NAESB may develop the appropriate
standards.
---------------------------------------------------------------------------

    \779\ See Standards for Business Practices of Interstate Natural
Gas Pipelines, Order No. 587-N, FERC Stats. & Regs. ] 31,125 at P 23
(2002).
    \780\ See Order No. 676 at P 12.
---------------------------------------------------------------------------

b. Redirects and Rollovers Rights
Comments
    1279. Regarding the interaction between redirects and rollovers,
some commenters request that the Commission clarify what they view as
an inconsistency between Order No. 676, the Commission's existing pro
forma OATT, and the rollover proposal in the NOPR. Specifically,
Bonneville, MISO, and Southern argue that, contrary to the pro forma
OATT and NOPR, Order No. 676 improperly suggested in an example that a
short-term redirect of a long-term service agreement gives the customer
rollover rights for the new path. TranServ supports placing the
following two conditions on the receipt of rollover rights for
redirects: a redirect on a firm basis must be for one year or longer,
and the redirect must be for the entire remaining term of the parent
(original) request.\781\ If these conditions are met, TranServ contends
that the customer will be granted rollover rights on the redirect path
and lose the rollover rights held on the original path. If the customer
wishes to retain rollover rights on the original path, TranServ
continues, it will have the option to submit multiple redirect requests
of less than one year in duration for the term desired. With respect to
WEQ Standard 001.9.7, MISO incorporates by reference its opposition to
the Commission's adoption of the proposed transfer of rollover rights
on the redirected path in its request for rehearing of Order No. 676.
There MISO argued that there should be no rollover rights on a redirect
path and that the guidance in Order No. 676 requiring the transmission
provider ``to offer rollover rights to a customer requesting a firm
redirect if rollover rights are available on the redirect path'' was
inconsistent with the pro forma OATT.
---------------------------------------------------------------------------

    \781\ TranServ explains that these are two primary features in a
revised WEQ 001-9.7 standard that was open for public comment.
---------------------------------------------------------------------------

Commission Determination
    1280. Commission policy allows a redirect of firm, long-term
service to retain rollover rights, even if the redirect is requested
for a shorter period. In other words, the rollover right follows the
redirect, regardless of the duration of the redirect. Contrary to the
comments of Bonneville, MISO, and Southern, the Commission did not
impose this requirement for the first time in Order No. 676, but merely
provided guidance to the industry by restating Commission policy on
this matter. The Commission has explained in prior orders that a
transmission customer making a firm redirect request does not convert
its original long-term firm transmission service to short-term service,
nor does it lose its rollover rights under its long-term firm
transmission service agreement. The Commission's concern underlying
this policy is that long-term customers should not need to choose
between redirecting on a firm basis and maintaining rollover rights,
rather their rollover rights should be retained consistent with the
long-term nature of their service.
    1281. In Commonwealth Edison Co., the Commission explained that a
``request to change a delivery point on a firm basis for one month and
then to revert to its original delivery point does not convert its
existing long-term firm transmission service agreement into two
separate short-term transmission service agreements.'' \782\ The
Commission stated that section 22.2 was intended to provide flexibility
to transmission customers to permit them to react in a competitive
market and that some amount of this flexibility would be lost if a
long-term firm transmission customer seeking to modify its delivery
points would lose its rollover rights.\783\
---------------------------------------------------------------------------

    \782\ 95 FERC ] 61,027 at 61,083 (2001).
    \783\ The Commission, however, recognized that this flexibility
was not unlimited--any change to a delivery point is treated as a
new request for service for purposes of the availability of
capacity.
---------------------------------------------------------------------------

    1282. The Commission affirmed this policy in American Electric
Power Service Corp.\784\ In that case, a long-term transmission
customer (Exelon) had been granted a short-term redirect, but denied
rollover rights on the redirected path. The Commission found the denial
of rollover rights was improper, since the ``redirect request made by
Exelon did not convert Exelon's long-term firm transmission service to
short-term service, and, therefore, did not affect Exelon's rollover
rights under its long-term firm transmission service agreement.'' \785\
Thus, there is no inconsistency between the Commission's redirect
policy and Order No. 676.
---------------------------------------------------------------------------

    \784\ 97 FERC ] 61,207 at 61,905-06 (2001).
    \785\ Id.

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

c. Redirects as New Requests for Service
Comments
    1283. With respect to the provision in section 22.2 of the pro
forma OATT specifying that requests to redirect on a firm basis be
considered new requests for service, LPPC and NPPD ask that this
provision be modified to ensure that a customer redirecting its service
will retain a higher priority for service in the transmission
provider's queue than new customers. LPPC argues that it is inequitable
to require customers to compete for capacity as though their loads were
incremental to the system when they are simply changing their receipt
points as a matter of necessity (since suppliers may commence serving
other loads or cease doing business). EEI argues on reply that, if
LPPC's proposal would give customers priority at new points of receipt
and delivery regardless of whether the redirected service creates
system impacts different from the old service, the proposal would
replace ``first-come, first-served'' priority with a system in which
customers would never know for sure whether their own requests for
service would be displaced by subsequent requests for redirected
service. EEI cautions that the transmission system simply cannot be
planned and constructed with enough spare capacity to allow any
customer to redirect service to any point that it chooses at any time.
    1284. Bonneville similarly argues that a redirect request should
meet the same term and notice requirements as a new request given that
the transmission provider's planning horizon and the amount of time
needed to remarket unused capacity is no different for a redirect and a
new transmission service request. APPA argues on reply that it is
unclear how Bonneville's request would affect load-serving transmission
customers that cannot obtain power supply agreements of a term
sufficient to dovetail with the term requirements for a new request.
Imperial recommends that redirects be evaluated using ATC at the time
of the redirect request, like any other new request for service, but
that the transmission provider be given additional time to determine
whether native load growth will prevent rollover rights for the
redirects.
Commission Determination
    1285. Section 22.2 of the pro forma OATT provides that redirects
``shall be treated as a new request for service in accordance with
section 17,'' except that the transmission customer may not be required
to pay an additional deposit in certain circumstances. Therefore, a
redirect right does not grant the customer access to system capacity or
queue position different from other customers submitting new requests
for service. A redirect request must be evaluated in accordance with
section 17 using the same system assumptions and analysis applicable to
any other new request for service, including whether sufficient ATC
exists to accommodate the request. The Commission concludes it would be
inappropriate, and contrary to the pro forma OATT, to grant redirects
special queue treatment.
    1286. Regarding Imperial's request that transmission providers be
given additional time to determine whether native load growth will
prevent rollover rights for the redirects, we find that redirects
should be studied like any other new request for firm point-to-point
service. Transmission providers must examine whether any request, a
firm redirect request or a new service request, would be affected by
future native load growth resulting in possible rollover rights
restrictions, so we see no need to provide additional time for
transmission provider analysis of firm redirect request.
d. Pricing for Redirects
Comments
    1287. TranServ requests that the Commission resolve a disagreement
among WEQ participants regarding the pricing of redirects as requests
for new service. TranServ asks whether the failure to charge an
incremental uplift between the original and redirected rate (e.g.,
respectively, the monthly rate and daily on-peak rate) would constitute
the offering of a discount for daily service that in turn must be
posted for all other paths to the same point of delivery. TranServ
argues that it is reasonable to charge an incremental uplift such that
the rate paid by the redirect customer would be on par with that paid
by any other transmission customer reserving (daily) short-term firm
service of like duration (i.e., a ``new request for service''), and the
customer would pay the difference between the daily on-peak rate and 1/
30th of the monthly rate.
    1288. Southern argues that, with respect to the price for
redirects, if redirected hourly firm service is more valuable than firm
service, economic theory would dictate that customers should be
required to pay for that added value.
Commission Determination
    1289. The Commission has not established a single, industry-wide
pricing policy for redirects and did not propose a pricing policy in
the NOPR. As a result, a uniform pricing method for redirects is beyond
the scope of this proceeding. Nevertheless, we note that the Commission
explained in a recent order that its policy does not allow transmission
providers to collect additional charges when a firm point-to-point
customer redirects on a non-firm basis.\786\ The Commission concluded
that it would not subject non-firm redirects to the Appalachian Method
of pricing,\787\ which is premised on the assumption that a customer
using the transmission system for the 16 peak hours of the day should
pay the same contribution to fixed costs as a customer who has reserved
capacity on a daily basis. This is because the redirecting customer
already would have paid for firm service over all on-peak and off-peak
hours during the reservation period of its service, therefore, there is
no need to ensure that the customer pays a premium for the opportunity
to cherry pick the best hours each day. Furthermore, because the
Commission is not requiring the provision of hourly firm service,
Southern's argument regarding redirected hourly firm service is now
moot.
---------------------------------------------------------------------------

    \786\ Midwest Independent Transmission System Operator, Inc.,
118 FERC ] 61,095 at P 79-85(2007).
    \787\ See Appalachian Power Co., 39 FERC ] 61,296 (1987).
---------------------------------------------------------------------------

e. Other Issues
Comments
    1290. EEI agrees with the Commission's proposal to clarify that
network customers may not redirect network transmission service.
Alberta Intervenors contend that undue discrimination remains because
the flexibility to modify points of receipt and delivery that the
network customer enjoys through ``parking'' and ``hubbing'' is not
likewise granted to a point-to-point customer. Alberta Intervenors
recommends that the pro forma OATT either make a common service
available to all participants (not just network customers) or prohibit
network customers from using point-to-point services for parking and
hubbing.
    1291. Imperial asks the Commission to clarify that a transmission
customer should not be able to make multiple redirects. Imperial
explains that this clarification would address two concerns: multiple
short-term changes raise reliability concerns and often there is
insufficient time for the released capacity to be used by another
customer; and the burden on properly scheduling for reliability
increases exponentially when there are redirects of redirects.

    1292. MISO/PJM States argue that because RTOs are not likely to
engage in discrimination with respect to redirects, the Commission
should not modify RTO redirect policies in the instant rulemaking
proceeding.
Commission Determination
    1293. The Commission adopts the NOPR proposal and finds that
network customers may not redirect network service in a manner
comparable to the way customers redirect point-to-point service. Unlike
point-to-point service, network service involves no identified contract
path and thus is not a directable service. A network customer seeking
to substitute one resource for another already has the ability under
the pro forma OATT to terminate its existing designation and designate
a new resource on an as-available basis. If necessary, the network
customer may then request to redesignate its original network resource
by making a request to designate a new network resource. Alternatively,
the network customer could use secondary network service if it wants to
substitute a non-designated network resource for a designated network
resource on an as-available basis.
    1294. For similar reasons, the Commission denies Alberta
Intervenors' request. The Commission has explained that customers must
choose between point-to-point and network services, each of which has
its own advantages and risks.\788\ The Commission declined to implement
a single form of transmission service in Order No. 888, concluding that
point-to-point and network services are the appropriate base-line
services under the pro forma OATT, and Alberta Intervenors offer no
justification for departing from that approach now. Alberta Intervenors
parking and hubbing related arguments alleging that network service is
commonly used to purchase power intended for sales to third parties is
addressed in section V.D.7 of this Final Rule. Although we deny Alberta
Intervenors' request, we expect that the reforms adopted in this Final
Rule will provide point-to-point customers with increased service
options and flexibility.
---------------------------------------------------------------------------

    \788\ Order No. 888-A at 30,260.
---------------------------------------------------------------------------

    1295. Implementing Imperial's proposal would prevent customers from
redirecting for a short period or periods of time and then redirecting
back to their original points, making redirects a less valuable option
for customers. Multiple redirects are allowed only if the customer can
meet the scheduling and other requirements for new requests for service
under the pro forma OATT. As long as the customer meets these
requirements, the Commission believes that the ability to redirect
service does not present an unreasonable burden to transmission
providers. As for applicability to RTOs and ISOs, we explain our
compliance requirements in section IV.C of this Final Rule. To the
extent an RTO's or ISO's redirect policy does not conform to the pro
forma OATT, as amended by this Final Rule, the RTO or ISO must
demonstrate that its policy is consistent with or superior to the pro
forma provisions in accordance with the compliance procedures set forth
in that section.
5. Acquisition of Transmission Service
a. Processing of Service Requests
    1296. The pro forma OATT includes requirements that transmission
providers process requests for transmission service in a timely
fashion. Section 17.5 (Response to a Completed Application) and section
18.4 (Determination of Available Transmission Capability) of the pro
forma OATT provide that following the receipt of a completed
application for service, the transmission provider must respond to
transmission customer requests for determinations of the availability
of firm and non-firm transmission capacity on a timely basis. The
transmission provider must make the determination as soon as reasonably
practicable after receipt but no later than certain specified time
periods (or such time periods generally accepted in the region).
    1297. Section 19 (Additional Study Procedures for Firm Point-to-
Point Transmission Service Requests) of the pro forma OATT provides
deadlines that transmission providers must adhere to in issuing system
impact study agreements and facilities studies agreements and that
transmission customers must abide by in responding to these study
agreements. Section 19 requires transmission providers to use due
diligence to complete system impact studies and facilities studies
within 60 days. Section 32 of the pro forma OATT (Additional Study
Procedures for Network Integration Transmission Service Requests)
contains similar due diligence deadlines for completing system impact
studies and facilities studies associated with requests for network
service.
(1) Posting Performance Metrics
NOPR Proposal
    1298. In the NOPR, the Commission proposed to require transmission
providers to post on their OASIS sites metrics that track their
performance in processing system impact studies and facilities studies
associated with requests for transmission service. The Commission
proposed that transmission providers calculate the proposed performance
metrics separately for affiliates and non-affiliates and for requests
for short-term and long-term transmission service.
    1299. In addition, the Commission proposed to require a
notification filing and the posting of additional metrics if a
transmission provider completes more than 20 percent of non-affiliates'
studies outside of the 60-day due diligence deadline in the pro forma
OATT for two consecutive quarters. Starting the quarter after a
notification filing, the transmission provider would be required to
post the following information on OASIS: (1) The average, across
completed system impact studies, of the employee-hours expended per
completed system impact study, (2) the average, across completed
facilities studies, of employee-hours expended per completed facilities
study, (3) the number of employees devoted to processing system impact
studies, and (4) the number of employees devoted to processing
facilities studies. The Commission proposed that transmission providers
post these additional performance metrics until they process at least
90 percent of all system impact and facilities studies within 60 days
after the study agreement has been executed. The additional performance
metrics also would be calculated separately for affiliates' and non-
affiliates' requests for transmission service and for short-term and
long-term transmission service.
Comments
Standard Performance Metrics
    1300. Transmission customers and a number of other commenters
generally support or do not oppose the Commission's proposal to require
transmission providers to post performance metrics.\789\
---------------------------------------------------------------------------

    \789\ E.g., ELCON, Suez Energy NA, Powerex, Seattle, TAPS,
Constellation, Entegra, NRECA, TDU Systems, Regional Electricity
Committee, MISO, MidAmerican, FirstEnergy, Tacoma, EEI, Nevada
Companies, and TranServ.
---------------------------------------------------------------------------

    1301. Southern and Salt River oppose the proposal, arguing that
most of the data needed to compute the metrics is already available on
OASIS. Southern asserts that the NOPR does not explain why the
currently available information is inadequate or how the proposed
metrics would not be duplicative and, thus, does not fully justify the
need for reform. Southern also argues that the Commission's proposal
will impose

costs and burdens on transmission providers, and ultimately those who
use their services, that do not correspond with the limited benefits
that might be gained. Salt River believes that performance tracking
requirements should be established on a case-by-case basis in response
to complaints. NorthWestern believes the 60 days should be a target,
but not a deadline, and, as such, transmission providers should not be
required to report performance metrics that summarize the time they
take to perform the studies.
    1302. Several commenters requested clarification on certain
features of the Commission's proposal. Nevada Companies asks the
Commission to be very specific as to what statistical data items are to
be reported on the OASIS so that transmission providers do not
inadvertently violate the confidentiality of their transmission
customers. PNM-TNMP requests clarification that the standards set out
in the NOPR are solely applicable to processing of transmission
delivery service requests, and not to interconnection service requests.
Insofar as the Commission determines that performance metrics should be
posted, Southern asks the Commission to clarify that the proposed
posting of performance metrics also would be required of RTOs and ISOs.
    1303. A number of commenters suggest that the Commission modify the
performance metrics that transmission providers are required to post.
EEI suggests that NAESB develop the metrics that transmission providers
are required to post, using the metrics contained in the NOPR as
guidance. EEI and MidAmerican suggest that the performance metrics
include information about the degree to which transmission customers
delay the study process. MISO suggests that transmission providers post
metrics related to the time transmission customers take to respond to
the results of completed system impact studies and facilities studies.
Southern asserts that fewer metrics should be required and that they
should relate directly to the study-timing concerns raised in the NOPR.
Bonneville and MISO argue that transmission providers should not have
to post information about the cost of transmission system upgrades
recommended in the request studies. Bonneville believes that the
average cost of recommended upgrades is misleading because it will mask
the wide variation in such costs. MISO suggests that transmission
providers also report the standard deviation for study completion
times. Southern asserts further that the OATT does not specifically
provide for a system impact study or facilities study to be performed
on a short-term basis, so any metrics required as part of OATT reform
should not include short-term requests. CREPC suggests that performance
metrics be calculated separately for renewable resources.
    1304. Several commenters suggest that transmission providers post
additional information to further enhance transparency. A number of
commenters suggest that the Commission require the posting of the
disposition of all transmission service requests, including those not
requiring studies.\790\ TDU Systems suggest that the Commission require
transmission providers to post the parameters of each denied request.
MISO suggests that transmission providers provide a narrative to
explain any anomalous study costs that may affect the posted average
cost. If a transmission provider anticipates that it will miss the
study deadline date, NRECA suggests that it should post that
information, the expected finish date, and a reason for not being able
to meet the deadline.
---------------------------------------------------------------------------

    \790\ E.g., CREPC, MISO, Constellation, and TDU Systems.
---------------------------------------------------------------------------

    1305. EEI recommends that the Commission delegate to NAESB the
responsibility for developing the Standard and Communications
Protocols, business practices and OASIS modifications that will be
necessary to provide the metrics.
Additional Performance Metrics (After Two Quarters of Late Studies)
    1306. EEI and Southern oppose the Commission's proposal to require
transmission providers that fail to complete studies in a timely manner
to post additional performance metrics that measure the labor input
used to complete studies. EEI asserts that there is little value to be
gained from posting the additional information that the Commission
proposes. EEI believes the information concerning the number of
employees who perform studies will not be determinative of
responsibility for the delay because the significant issue is whether
the number of studies that the transmission provider is required to
perform or the total amount of time needed to perform studies has
increased significantly or whether customers caused the delays.
Southern questions the Commission's legal authority to require
transmission providers that do not complete studies in a timely manner
to post additional performance metrics, citing Cal. Ind. Sys. Operator
Corp. v. FERC.\791\ Southern characterizes the Commission's proposal as
a punishment for delays in processing request studies.
---------------------------------------------------------------------------

    \791\ 372 F.3d 395, 404 (D.C. Cir. 2004).
---------------------------------------------------------------------------

    1307. Several other commenters suggest changes to the Commission's
proposal. Southern believes the submission of a notification of
extenuating circumstances should suspend the obligation to post the
additional metrics proposed in the NOPR. EEI and Southern argue that
the Commission should be certain that it is collecting such information
only from those transmission providers that, for no other reason except
themselves, fail to consistently evaluate studies within the 60-day due
diligence period. Therefore, if a transmission provider demonstrates
that delays in completing studies are due to extenuating circumstances,
then EEI and Southern believe the Commission should not require the
transmission provider to post the additional metrics. MISO believes the
Commission should exempt RTOs from the additional employee performance
metrics proposed in the NOPR for the same reason that the Commission
proposed to exempt RTOs from operational penalties for untimely
completion of studies, as MISO claims the additional posting
requirements are in the nature of penalty. Bonneville believes the
proposed metrics will be misleading whenever a transmission provider
employs outside consultants to perform or assist with studies.
Therefore, Bonneville suggests that the Commission add two other
metrics, the number of studies performed entirely by consultants and,
in the case of studies performed by a combination of employees and
consultants, the average percentage of the study performed by
consultants.
Commission Determination
Standard Performance Metrics
    1308. The Commission will require transmission providers to post
the performance metrics proposed in the NOPR, as modified by this Final
Rule. The proposed metrics will enhance the transparency of the study
process and shed light on whether transmission providers are processing
request studies in a non-discriminatory manner. We also agree with
comments by MidAmerican and EEI that transmission providers should be
able to track delays in the study process caused by transmission
customers. Doing so will allow the Commission and market participants
to determine the extent to which delays by transmission customers are
causing transmission providers to process request studies on an
untimely basis, which will add needed transparency to the study
process.

Therefore, we will revise the performance metrics transmission
providers are required to post to include metrics that track delays by
transmission customers.
    1309. Transmission providers will be required to post the
performance metrics, outlined below, for each calendar quarter.
Transmission providers will be required to begin tracking their
performance upon the effective date of this Final Rule and keep the
quarterly performance metrics posted on their OASIS sites for three
calendar years. The transmission provider will be required to post the
quarterly performance metrics within 15 days of the end of the quarter.
The performance metrics outlined below must be calculated separately
for affiliates' and non-affiliates' requests, in order to identify
potential instances when the transmission provider is processing
requests on a discriminatory basis. The transmission provider is
required to aggregate studies associated with requests for short-term
and long-term transmission service when calculating the metrics defined
below. While a transmission provider could offer to study a request for
short-term firm point-to-point transmission service, we acknowledge
that the transmission customer often is unwilling to pay for such a
study. Therefore, to ease the reporting burden, the transmission
provider is not required to report the performance metrics defined
below separately for requests for short-term and long-term firm point-
to-point transmission service. A transmission provider is also required
to post performance metrics for studies that it conducts for RTOs.
    1310. A transmission provider is required to post the following set
of performance metrics on a quarterly basis:
     Process time from initial service request to offer of
system impact study agreement pursuant to sections 17.5, 19.1 and 32.1
of the pro forma OATT

    [cir] Number of new system impact study agreements delivered to
transmission customers
    [cir] Number of new system impact study agreements delivered to the
transmission customer more than 30 days after the transmission customer
submitted its request
    [cir] Average time (days) from request submittal to change in
request status
    [cir] Average time (days) from request submittal to delivery of
system impact study agreement
    [cir] Number of new system impact study agreements executed

     System impact study processing time pursuant to sections
19.3 and 32.3 of the pro forma OATT

    [cir] Number of system impact studies completed
    [cir] Number of system impact studies completed more than 60 days
after receipt of executed system impact study agreement
    [cir] Average time (days) from receipt of executed system impact
study agreement to date when completed system impact study made
available to the transmission customer
    [cir] Average cost of system impact studies completed during the
period

     Service requests withdrawn from system impact study queue
    [cir] Number of requests withdrawn from the system impact study
queue
    [cir] Number of system impact studies withdrawn more than 60 days
after receipt of executed system impact study agreement
    [cir] Average time (days) from receipt of executed system impact
study agreement to date when request was withdrawn from the system
impact study queue

     For all system impact studies completed more than 60 days
after receipt of executed system impact study agreement, average number
of days study was delayed due to transmission customer's actions (e.g.,
delays in providing needed data)
     Process time from completed system impact study to offer
of facilities study pursuant to sections 19.4 and 32.4 of the pro forma
OATT

    [cir] Number of new facilities study agreements delivered to
transmission customers
    [cir] Number of new facilities study agreements delivered to
transmission customers more than 30 days after the completion of the
system impact study
    [cir] Average time (days) from completion of system impact study to
delivery of facilities study agreement
    [cir] Number of new facilities study agreements executed

     Facilities study processing time pursuant to sections 19.4
and 32.4

    [cir] Number of facilities studies completed
    [cir] Number of facilities studies completed more than 60 days
after receipt of executed facilities study agreement
    [cir] Average time (days) from receipt of executed facilities study
agreement to date when completed facilities study made available to the
transmission customer
    [cir] Average cost of facilities studies completed during the
period
    [cir] Average cost of recommended upgrades for facilities studies
completed during the period

     Service requests withdrawn from facilities study queue

    [cir] Number of requests withdrawn from the facilities study queue
    [cir] Number of facilities studies withdrawn more than 60 days
after receipt of executed facilities study agreement
    [cir] Average time (days) from receipt of executed facilities study
agreement to date when request was withdrawn from the facilities study
queue

     For all facilities studies completed more than 60 days
after receipt of executed facilities study agreement, average number of
days study was delayed due to transmission customer's actions (e.g.,
delays in providing needed data).
    1311. In response to Nevada Companies request that we clarify the
statistical data items that are to be reported on OASIS pursuant to the
Commission's proposal, we reiterate that transmission providers are
required to provide summary data as defined above. We do not believe
these data will violate the confidentiality of any transmission
customer, even in the event the transmission provider has worked on a
limited number of studies. We clarify that the performance metrics
posting requirement discussed above is solely applicable to processing
of transmission delivery service requests, and not to interconnection
service requests. Finally, we clarify that RTOs and ISOs also are
required to post the performance metrics described above. As we discuss
below, we believe all transmission providers should be subject to the
same reporting requirements.
    1312. We disagree with Southern and Salt River which argue that the
data already on OASIS is sufficient to accomplish our goal to enhance
transparency of the transmission provider's request study processing.
First, the data available on the OASIS template transstatusaudit does
not contain the information necessary to calculate all of the
performance metrics proposed in the NOPR.\792\ For instance,

transstatusaudit allows one to determine when a request was moved from
``received'' to ``study'' and then to ``accepted'' or ``counteroffer''.
Depending on when the transmission provider moves the request into
``study,'' this information does not allow one to determine either
whether the transmission provider provided a system impact study
agreement within 30 days or whether the transmission provider completed
the system impact study within 60 days. In addition, the transmission
provider is required to make the data in transstatusaudit available on
OASIS for only 90 days and available by request for three years.\793\
As a result, market participants would be required to calculate the
performance metrics they desire on a quarterly basis if they want to
use just the data posted on OASIS. Finally, downloading
transstatusaudit data for specific OASIS requests that required a
system impact study or feasibility study can be cumbersome due to the
manual nature of the download process. The transmission provider has
the data necessary to calculate the proposed performance metrics
readily available. We believe it is more efficient for a single
transmission provider to calculate the performance metrics for its
system rather than have multiple interested parties calculate the
performance statistics for each transmission provider of interest.
---------------------------------------------------------------------------

    \792\ The OASIS template transstatusaudit is defined in the
Standards and Communications Protocols section of NAESB's WEQ
Business Practice Standards. The template transstatusaudit is the
audit component to OASIS template transstatus and, as such, contains
information regarding the type of transmission service requested,
affiliate status, date and time the transmission service was
requested, and the date and time of all changes in request status
(e.g., place in study mode, confirmed or withdrawn).
    \793\ 18 CFR 37.7(b).
---------------------------------------------------------------------------

    1313. We also disagree with Southern's assertion that the costs and
burdens to transmission providers are not justified by the benefits
that might be gained. We are concerned that, under the existing pro
forma OATT, transmission providers do not have adequate incentives to
conduct studies on a timely and nondiscriminatory basis. First,
transmission providers have incentives to discriminate against third
parties and in favor of their affiliates (i.e., to delay the study
requests of nonaffiliates, but act more quickly on those of its
affiliates). Second, transmission providers also can lack incentives to
provide sufficient staff resources to support increasing demands in the
study process. Given that most of the costs associated with the study
process are operational, transmission providers, at most, will recover
those costs without profit (i.e., a return) and, if the demands of the
study process are increasing, fail to recover such cost increases if
the transmission provider is between rate cases. We therefore believe
that there are several reasons that greater transparency is required to
provide the correct incentives to comply with the pro forma OATT
provisions respecting studies.
    1314. We also note that virtually all commenters agree with our
proposal to require transmission providers to calculate the above
performance metrics. This support stems, in part, from transmission
customers' perception that transmission providers do not exert
sufficient effort to complete requests in a timely manner.\794\ Delays
in processing study requests can cause customers to incur material
financial damage. Moreover, the data needed to calculate the required
performance statistics is readily available to the transmission
provider and, therefore, the cost to the transmission provider will be
small relative to the benefits of enhanced transparency and assurance
that the transmission provider is processing request studies in a
timely and non-discriminatory fashion.
---------------------------------------------------------------------------

    \794\ E.g., Constellation, EPSA NOI Comments, Arkansas Cities
NOI Comments, APPA NOI Reply Comments, and Powerex NOI Reply
Comments 795 As noted in P 1318, we direct public utilities working
through NAESB to develop protocols for posting the performance
metrics required here so they will be posted in a consistent
fashion.
---------------------------------------------------------------------------

    1315. Based on our experience and the comments received in response
to the NOI and NOPR, the Commission believes the steps we take here are
necessary to increase transparency for the processing of service
requests by all transmission providers. It would be inappropriate, as
some commenters suggest, to wait for specific complaints about specific
transmission providers before requiring the transmission provider to
calculate the performance metrics defined above. We conclude that the
reporting requirements adopted in this Final Rule must be applied to
all transmission providers in order to enhance the transparency of the
study process and ensure that transmission provider processes study
requests in a timely and non-discriminatory fashion for all
transmission customers. The fact that the 60-day timeframe in the pro
forma OATT is a target and not a deadline does not change the fact that
requiring all transmission providers to post the performance metrics
defined above will enhance the transparency of the study process.
    1316. We will not adopt any of the changes to the proposed
performance metrics requested by commenters, other than adding metrics
to track delays by customers as discussed above. The Commission is in a
better position to determine the specific performance metrics that will
achieve our policy goals and thus we will not request that NAESB
develop the metrics to be posted.\795\ We believe the set of
performance metrics we have chosen strike the appropriate balance
between requiring information that will enhance transparency and help
ensure that the transmission provider is processing request studies in
a timely and non-discriminatory fashion while limiting the burden the
transmission provider faces. For instance, we believe the performance
metrics that address the cost of system impact studies and facilities
studies as well as the cost of any proposed transmission upgrades can
be calculated with relatively little effort by the transmission
provider and should provide meaningful benefits to transmission
customers. The transmission provider readily knows the cost of studies
it completes and the costs of proposed system upgrades and summaries of
this information should enhance the transmission customer's ability to
decide whether to submit a request for service that may result in a
study offer.
---------------------------------------------------------------------------

    \795\ As noted in P 1318, we direct public utilities working
through NAESB to develop protocols for posting the performance
metrics required here so they will be posted in a consistent
fashion.
---------------------------------------------------------------------------

    1317. We do not believe the relative benefits and burdens justify
requiring the transmission provider to post performance metrics beyond
those adopted in this Final Rule. For instance, requiring the
transmission provider to calculate additional summary information or
post long narratives to explain anomalous upgrade costs do not appear
necessary at this time to achieve our stated policy goals, particularly
since transmission customers can request data associated with completed
system impact studies and facilities studies pursuant to section
37.6(b)(2)(iii) of the Commission's regulations.\796\ In addition, we
do not believe transmission customers, beyond the transmission customer
directly affected, would benefit from the information NRECA suggests
the transmission provider should be required to post when it
anticipates that it will not complete a study within the 60-day due
diligence timeframe. Section 19.3 of the pro forma tariff already
requires the transmission provider to notify the affected transmission
customer when it will not be able to complete a study within the 60-day
due diligence timeframe, provide an expected completion date, and
explain why additional time is needed. We do

not believe other transmission customers would benefit enough from this
information to justify requiring the transmission provider to post it.
Similarly, we do not believe the benefit to market participants
justifies the burden of requiring transmission providers to calculate
performance metrics separately for renewable resources.
---------------------------------------------------------------------------

    \796\ 18 CFR 37.6(b)(2)(iii).
---------------------------------------------------------------------------

    1318. We agree, however, with EEI's recommendation that the
Commission delegate to NAESB the responsibility for developing the
Standard and Communications Protocols, business practices and OASIS
modifications that will be necessary to provide the performance metrics
adopted above. NAESB is in the best position to develop the standards
and the processes by which the performance metrics are posted.
Additional Performance Metrics (after two quarters of late studies)
    1319. The Commission also adopts the NOPR proposal to require
transmission providers to submit a notification filing with the
Commission in the event the transmission provider processes more than
20 percent of non-affiliates' studies outside of the 60-day due
diligence deadlines in the pro forma OATT for two consecutive quarters.
This filing must be filed within 30 days of the end of the second
quarter during which the transmission provider processes more than 20
percent of non-affiliates' studies outside of the 60-day due diligence
deadlines in the pro forma OATT. For the purposes of calculating this
notification trigger, the transmission provider is required to
aggregate all system impact studies and facilities studies that it
completes during the quarter for non-affiliates.\797\ The transmission
provider may explain in its notification filing that it believes there
are extenuating circumstances that prevented it from meeting the
deadlines in the pro forma OATT.
---------------------------------------------------------------------------

    \797\ For instance, if the transmission provider completes 4
non-affiliates' system impact studies during the quarter with 2
completed more than 60 days after the system impact study agreement
was executed and completes 2 non-affiliates' facilities studies
during the quarter with none completed more than 60 days after the
facilities study agreement was executed, then the transmission
provider will be deemed to have completed 2 out of 6 (33 percent)
studies outside of the deadlines in the pro forma OATT.
---------------------------------------------------------------------------

    1320. As the Commission proposed in the NOPR, starting the quarter
following a notification filing, the transmission provider will be
required to post: (1) The average, across completed system impact
studies, of the employee-hours expended per completed system impact
study; (2) the average, across completed facilities studies, of
employee-hours expended per completed facilities study; (3) the number
of employees devoted to processing system impact studies; and (4) the
number of employees devoted to processing facilities studies. The
transmission provider is not required to post these additional
performance metrics separately for affiliates' and non-affiliates'
requests for transmission service and for short-term and long-term
transmission service. The transmission provider is instead required to
aggregate studies associated with requests for short-term and long-term
transmission service when calculating these additional metrics. The
transmission provider is not required to post the additional metrics if
the Commission concludes that delays in completing studies are due to
extenuating circumstances. However, the transmission provider is
required to post the additional metrics while the Commission considers
the transmission provider's notification filing arguing that
extenuating circumstances prevented it from processing request studies
on a timely basis. Based on the timing described in this Final Rule,
the transmission provider will be required to post the additional
performance metrics approximately two months after the provider makes
its notification filing. The Commission will have this time to evaluate
the transmission provider's contention that it was unable to complete
request studies due to extenuating circumstances. As a result, we
expect the transmission provider with legitimate extenuating
circumstances typically will not have to post any additional metrics.
    1321. We disagree with those arguing that information concerning
the number of employees who perform studies will not be determinative
of responsibility for the delay. The transmission provider will have
the right to establish that it is unable to perform studies in a timely
manner because of factors outside its control. We received a number of
comments to the NOPR and NOI that suggest that transmission customers
believe transmission providers fail to complete studies on a timely
basis because they do not have sufficient staff to perform the
studies.\798\ As explained above, this is one of the concerns that has
led us to adopt these reforms. The additional metrics will serve to
shed light on the transmission provider's resource commitment, enhance
the transparency of the study process, and increase the transmission
provider's incentive to staff its study function appropriately.
---------------------------------------------------------------------------

    \798\ E.g., Constellation, EPSA NOI Comments, Arkansas Cities
NOI Comments, APPA NOI Reply Comments, and Powerex NOI Reply
Comments.
---------------------------------------------------------------------------

    1322. The additional posting requirement is not a penalty or a
punishment. We opted not to require the transmission provider to post
these additional performance metrics on a regular basis out of a desire
to limit the transmission provider's reporting burden. However, once
the transmission provider has stopped completing studies on a timely
basis, we believe the enhanced transparency justifies the additional
reporting burden. As a result, ISOs and RTOs also will be required to
post the additional performance metrics described above. We disagree
with Southern's argument that we lack jurisdiction to require
additional posting. The posting requirements are directly related to
pro forma OATT obligations that are necessary to remedy undue
discrimination and, hence, necessarily derive from our broad discretion
in fashioning remedies to undue discrimination. We are not attempting
to dictate a transmission provider's internal staffing decisions;
rather, we illuminate the transmission provider's compliance with its
pro forma OATT obligations to perform studies within certain deadlines
and on a nondiscriminatory basis.
    1323. We will not add the two other metrics suggested by Bonneville
regarding the number of studies performed entirely by consultants and,
in the case of studies performed by a combination of employees and
consultants, the average percentage of the study performed by
consultants. Rather, transmission providers should include the time
spent by consultants on studies in the performance metrics defined
above.
(2) Operational Penalties for Late Studies
NOPR Proposal
    1324. The Commission proposed to impose operational penalties when
transmission providers routinely fail to meet the 60-day due diligence
deadlines prescribed in sections 19.3, 19.4, 32.3 and 32.4 of the pro
forma OATT. Under the proposal, a transmission provider who processes
more than 20 percent of non-affiliates' studies outside of the 60-day
due diligence deadlines in the pro forma OATT for two consecutive
quarters would be required to notify the Commission. In this
notification filing, the transmission provider may explain that it
believes there are extenuating circumstances that prevented it from
meeting the deadlines in the pro forma OATT. The transmission provider

would be subject to an operational penalty if it continues to be out of
compliance \799\ with the deadlines prescribed in the pro forma OATT
for each of the two quarters following its notification filing.
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    \799\ The transmission provider would be deemed to be out of
compliance if it completes 10 percent or more of non-affiliates'
system impact studies and facilities studies outside of the
deadlines prescribed in the pro forma OATT.
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    1325. The Commission proposed that the operational penalty be
assessed on a quarterly basis, starting with the quarter following the
notification filing and continuing until the transmission provider
completes at least 90 percent of all studies within 60 days after the
study agreement has been executed. For any system impact study or
facilities study completed during that quarter and more than 60 days
after the study agreement was executed, the Commission proposed a
penalty equal to $500 for each day the transmission provider takes to
complete the study beyond 60 days. For any system impact study or
facilities study that is still pending at the end of the quarter and
that has been in the study queue for more than 60 days, the Commission
proposed a penalty equal to $500 for each day the study has been in the
study queue beyond 60 days.
    1326. In addition to the proposed operational penalties, the
Commission indicated that it would order other remedial actions,
consistent with the Policy Statement on Enforcement, to be determined
on a case-by-case basis. The Commission proposed that RTOs not be
subject to this penalty regime because of the RTOs' independence.
Comments
    1327. Transmission providers generally oppose the Commission's
proposal.\800\ Some opponents argue that, to the extent the Commission
is going to impose penalties, it should do so on a case-by-case
basis.\801\ Opponents cite a number of reasons the Commission should
not impose the proposed operational penalty regime. Several opponents
caution that imposing a penalty may lead transmission providers to
either prematurely deny a request or accept a request to the detriment
of system reliability.\802\ Several opponents argue that many
transmission requests introduce unique complexities into the study
process, so a firm 60-day deadline is not workable in practice.\803\
Several opponents argue that the Commission's proposed penalty regime
is inconsistent with the new requirements the Commission has proposed
for regional planning and requirements to consider redispatch in the
system impact study.\804\ In its reply comments, EEI argues that due
process requires that the Commission not impose penalties on
transmission providers for study delays because, in EEI's view, it is
highly likely that the delays will have been caused by factors or
events that were beyond the transmission provider's control. Southern
asserts that any scheme of operational penalties associated with the
processing of studies cannot be implemented fairly unless and until the
problem surrounding the submission of multiple requests is addressed.
Southern argues that the Commission would violate a transmission
provider's due process rights if it were to impose penalties for delays
caused by transmission customers. CREPC proposes that transmission
projects that cross seams not be subject to penalties, arguing that
such an exception will create a level playing field for those
transmission providers in the West working with the CAISO and foreign
transmission owners to resolve transmission service requests.
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    \800\ E.g., EEI, MidAmerican, Entergy, Southern, Imperial,
NorthWestern, PNM-TNMP, Salt River, and Bonneville Reply.
    \801\ E.g., EEI, Southern, and PNM-TNMP Reply.
    \802\ E.g., MidAmerican, Southern, Imperial, and EEI Reply.
    \803\ E.g., MidAmerican, Southern, NorthWestern, Northwest IOUs,
and PNM-TNMP Reply.
    \804\ E.g., MidAmerican, Southern, and EEI Reply.
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    1328. A number of commenters ask the Commission to clarify specific
elements of the proposed operational penalty regime. Several commenters
argue that the proposal does not clearly provide for an exemption from
operational penalties if the failure to meet the timeliness criteria is
a result of extenuating circumstances or customer caused delays,
thereby denying transmission providers due process.\805\ Several
commenters ask the Commission to clarify that a transmission provider
is not subject to operational penalties if the transmission provider's
failure to meet the compliance threshold following its notification
filing is due to extenuating circumstances.\806\ Southern asks that the
Commission clarify that the submission of a notification of extenuating
circumstances would suspend the obligation of a transmission provider
to process at least 90 percent of the study requests within the
proposed deadlines, until such time as the Commission issues a final
determination on the notification of extenuating circumstances. Tacoma
asks the Commission to ensure that the processing time is measured from
the point that the customer provides complete information.
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    \805\ E.g., EEI, Southern, Northwest IOUs, and MidAmerican.
    \806\ E.g., EEI and MidAmerican.
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    1329. EEI recommends that the Commission hold a technical
conference to determine the extent to which studies are not being
completed within 60 days, the principal causes of delays in completing
studies within 60 days and whether the increased planning and
coordination requirements proposed by the Commission will result in
additional time being needed to complete the studies. EEI believes the
Commission is far more likely to arrive at a reasonable conclusion
concerning these issues after a technical conference than if it simply
imposes penalties for failures to complete all studies within 60 days.
Seattle believes the proposed penalties should not be implemented until
providers and customers have had at least one year of experience
working with the performance metrics.
    1330. Transmission customers generally support the Commission's
proposal to impose operational penalties when a transmission provider
routinely fails to meet the 60-day due diligence deadlines.\807\ In its
reply comments, Entegra argues that the question is not whether a
transmission provider has sufficient margins of flexibility, but
whether the transmission provider has any stake in meeting the
deadlines. Occidental argues that transmission providers may have
little incentive to meaningfully address customers' issues without the
prospect of a prospective remedy. Responding to EEI's due process
argument, TDU Systems in reply assert that imposition of penalties in
this instance raises no more due process concerns than those
operational penalties that transmission customers are routinely
subjected to under the OATT. TDU Systems argue that, should the
Commission determine that transmission providers are entitled to
challenge any operational penalty for failure to process service
requests in a timely manner, then those challenges must be on terms and
conditions that are comparable to those available to transmission
customers--a complaint pursuant to FPA section 206. TDU Systems believe
that the proposed ``explanatory statement'' contemporaneous with any
notification filing is a form of expedited review that is clearly not
comparable to the treatment of customers under the tariff.
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    \807\ E.g., Suez Energy NA, TAPS, Constellation, Entegra, TDU
Systems, CREPC, and Nevada Companies.

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    1331. Several transmission customers question whether the proposed
penalty level is sufficient to ensure compliance.\808\ Constellation
recommends a penalty of up to $10,000 per day per violation. Entegra
suggests the Commission set the penalty equal to the higher of the lost
opportunity cost to the customer resulting from the delay, if any, or
$1,000 for each day. Entegra also suggests that penalties should be
assessed automatically, without a notification filing to the
Commission. In its reply comments, EEI argues that the total penalty
for delayed studies will be far higher than $500 per day if the
transmission provider is processing more than five requests per 60-day
period, which EEI asserts is extremely likely.
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    \808\ E.g., TAPS, Constellation, and Entegra.
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    1332. Constellation asks the Commission to consider whether to
require the transmission provider to engage an independent transmission
administrator to the extent a transmission provider's posted
performance metrics are not accurate or the transmission provider
persistently fails to adhere to the relevant timelines.
    1333. Several commenters suggest that the Commission extend the
study completion deadlines, such as to 120 or 180 days, at least for
the purposes of assessing penalties.\809\ Bonneville suggests that the
Commission change the service request study process to match the
interconnection study process as articulated in the Large Generator
Interconnection Procedures. Imperial recommends that instead of
mandating a nationwide study schedule, each of the NERC regions should
establish a schedule taking into account the various needs of the
region. Southern suggests restarting the 60-day due diligence period
for any study that experiences a delay that cannot properly be
attributed to the transmission provider. In contrast to the suggestions
to increase the study time, Entegra suggests that the Commission
consider changing the due diligence deadlines to 30 days to further the
goal of encouraging timeliness in completing required studies.
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    \809\ E.g., Bonneville, MidAmerican, Progress Energy,
NorthWestern, Northwest IOUs, and EEI Reply.
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    1334. Several commenters suggest methods for distributing the
operational penalties the transmission provider pays for late studies.
TAPS believes that penalty revenues should go to victims of study
delay. Similarly, Entegra believes the penalty should take the form of
a credit against the transmission customer's obligation to reimburse