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

    \259\ See id. at P 1247.
---------------------------------------------------------------------------

    656. We acknowledge that, in certain circumstances, the one-year
notice period could cause the transmission provider to undertake
construction of facilities that are not ultimately needed to
accommodate other service obligations in light of a rollover customer
declining to rollover its service. However, moving from a 60-day notice
period to one year should mitigate the risk of unnecessary investments.
While allowing a transmission provider to require rollover notification
prior to construction of facilities (whether or not identified in the
original service agreement), or treating the customer's service as
conditionally firm while upgrades are completed, would further reduce
this risk for the transmission provider, it also would further decrease
flexibility for the transmission customer. As the Commission explained
in Order No. 890, no single notice period can perfectly balance the
needs of customers and transmission providers.\260\ The Commission
concluded that a one-year notice provision best balances the respective
benefits and burdens for customers and transmission providers, and we
affirm that decision here.
---------------------------------------------------------------------------

    \260\ See id. at P 1246.
---------------------------------------------------------------------------

c. Matching Competing Requests
Requests for Rehearing and Clarification
    657. APPA argues that the Commission's retention of its matching
policy, requiring transmission customers to match competing requests
for service as to term and rate, is inconsistent with FPA section
217(b)(4). In APPA's view, section 217(b)(4) requires the Commission to
exercise its FPA authorities to assist LSEs in meeting their service
obligations by securing firm transmission rights on a long-term basis.
APPA contends it is contrary to Congressional intent to require LSEs
that have made long-term financial commitments to the transmission
system, by entering into five-year agreements, to bid against all other
interested market participants in order to roll over their firm
transmission rights.
    658. APPA also argues that the Commission's decision to lift the
price cap on reassignments of firm transmission capacity might
exacerbate the situation, as it could mean that LSEs will have to bid
against well-heeled financial players or marketing affiliates of the
transmission provider that may be bidding for the same capacity with
the sole intent of reassigning it at whatever price the market will
bear. APPA contends that this would require LSEs unable to match the
longer term offered (due, for example, to its inability to obtain a
power supply contract of that length) to have to obtain firm
transmission capacity in the reassignment market at a much higher rate.
APPA argues that this, too, is inconsistent with the Commission's
obligation under FPA section 217(b)(4) to enable LSEs with service
obligations to obtain the long-term firm transmission rights they must
have to meet those needs.
    659. APPA adds that the transmission provider should have been
planning for the needs of firm transmission customers with contracts
that carry rollover rights throughout the term of the contract, since
the stated purpose of the rollover reform is to ensure that the rights
and obligations of the customer are better aligned with the planning
and construction obligations of the transmission provider. APPA argues
that capacity should therefore be available to meet the needs of firm
transmission customers seeking to exercise their rollover rights
without forcing them to ``bid on the margin'' for transmission capacity
every time their contracts come up for renewal.
    660. TAPS proposes what it characterizes as safeguards to prevent
network customers exercising rollover rights from being significantly
disadvantaged by the obligation to match point-to-point reservations.
TAPS contends that a point-to-point customer, faced with a competing
longer-term reservation, can simply extend the term of its point-to-
point commitment to match the competing request. If the matching
process applies to network service designations under a network service
agreement (versus the service agreement itself), TAPS contends that the
network customer would need to extend its power supply commitment in
order to extend its transmission reservation to match the competing
request and would not be able to resell any transmission capacity for
which it could not find supplies. TAPS argues that this fails to
recognize and preserve the LSE's continuing rights under FPA section
217(b)(1) to (3) to use their existing firm transmission rights,
including rollover rights, and that it is inconsistent with section
217(b)(4) for the Commission to leave transmission-dependent LSEs at
risk of denial of continued use of transmission to meet their service
obligations.
    661. TAPS therefore suggests that the Commission implement matching
based on the duration of a network customer's network service agreement
rather than its resource designation. Alternatively, if the Commission
concludes that the network customer must extend its resource commitment
(rather than just

its network agreement duration) to match a competing request, TAPS
proposes the following modifications to the process so that the network
customer is on a level playing field with competing point-to-point
customers in the matching process: restrict reservations qualified to
compete against a network customer's reservation to customers with
long-term power contracts (even if they seek only point-to-point
reservations); and provide a cut-off for competing requests that
accommodates the network customer's need to extend power supply
arrangements in order to match competing requests. TAPS suggests, for
example, that the network customer should only need to compete with
requests submitted at least three months prior to when the network
customer exercises its rollover right, which would allow the network
customer to structure its power supply commitments with some degree of
advanced knowledge of the competing requests. TAPS also suggests that
such a rolling cut-off (i.e., one tied to the network customer's
rollover notice) be adopted to encourage early exercise of rollover
rights, thereby benefiting the planning process.
    662. TDU Systems suggest that the Commission cap the matching term
required to secure rollover rights to five years, arguing that a
customer agreeing to pay the maximum rate allowed under the tariff for
a five-year term should be assured that it will retain its rollover
rights. TDU Systems contend that the increase in the minimum term from
one year to five years has mitigated the need for an unlimited matching
requirement by providing the transmission provider greater certainty in
planning its system. TDU Systems also contend that transmission
providers will not be financially harmed by capping the matching
requirement at five years since competing rollover customers would be
subject to price-matching as well. Finally, TDU Systems argue that the
``longer of'' matching policy is unduly discriminatory when applied to
requests from transmission providers in particular, since they are able
to request transmission service for unreasonable terms that no
transmission customer could prudently match.
    663. Ameren and Powerex propose other modifications to the matching
process. Ameren proposes that customers be required to provide notice
of a rollover within 15 days of a pre-confirmed competing request to
prevent the customer from sitting on capacity until the end of its
notice period. Powerex makes a related request to restrict the matching
requirement to bona fide competing commitments to take such service,
such as by requiring competing requests to be pre-confirmed or
requiring the execution of contingent service contracts. Powerex
contends that, without such a restriction, a customer wishing to roll
over its service could be required to match requests in the queue for a
longer duration that ultimately may not come to fruition. Powerex also
asks that the Commission clarify that, in cases where a long-term
customer that has exercised its rollover right is ``trumped'' by a
longer-duration competing request for a lesser quantity, the rollover
of the original request should be displaced only by the quantity needed
to fulfill the longer-term, lesser MW request. Powerex argues that no
commenter opposed this proposal and that the Commission did not provide
any rational basis for its rejection in Order No. 890.
Commission Determination
    664. The Commission affirms the decision in Order No. 890 not to
eliminate the requirement to match competing requests in order to
retain rollover rights. Long-standing policy requires transmission
customers, at the time of rollover of their contracts, to match
competing requests for service as to term and rate. We disagree with
petitioners who claim that the requirement of a five-year minimum
contract term, or the terms of FPA section 217, necessitate any change
to our matching policy. The same rationale for the matching policy
articulated in Order No. 888 and its progeny with regard to the
original rollover right applies with equal force to the reformed
rollover right. That is, the matching policy provides a mechanism not
only for awarding capacity to those who value it most, but also for
breaking ties.\261\ We do not see how a change to a five-year minimum
contract term diminishes the need for, or the efficacy of, such a
mechanism.
---------------------------------------------------------------------------

    \261\ See Order No. 888-A at 30,197.
---------------------------------------------------------------------------

    665. As we noted in Order No. 890, absent the requirement that a
customer match the 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, including system
planning, and a financial standpoint.\262\ While it is true that the
extension of the minimum rollover term from one to five years will
otherwise enhance the transmission provider's ability to fulfill its
planning and construction obligations, it does not follow that the
transmission provider should be required to forgo the operational and
financial certainty of an even longer-term competing request at the
time of a rollover. By awarding capacity to the customers that value it
the most, the matching requirement benefits all longer-term customers,
whether LSEs or other classes of customers, and is therefore fully
consistent with the requirements of FPA section 217.
---------------------------------------------------------------------------

    \262\ See Order No. 890 at P 1255 (citing Order No. 888-A at
30,197).
---------------------------------------------------------------------------

    666. We reiterate our existing policy that, in the event of
competing, mutually exclusive requests for network resource
designations, the network customer seeking rollover must match the term
of the competing network resource power contract.\263\ However, we
agree with TAPS that, given the differing nature and obligations of
network service versus point-to-point service, a network customer
seeking rollover of its network service for a designated resource
should be able to match a competing point-to-point request by extending
its network service agreement rather than the power contract supporting
the network resource designation.\264\ We also clarify, in response to
Powerex, that a customer exercising a rollover right is only required
to match a bona fide competing commitment to take service, evidenced
for example by a pre-confirmed transmission request or the execution of
a contingent service contract. We disagree with Ameren, however, that
the transmission provider should be permitted to effectively shorten
the customer's notice period by requiring the rollover customer to
match a competing request prior to the date by which its rollover
notice would otherwise be required.
---------------------------------------------------------------------------

    \263\ See WPPI 84 FERC at 61,655-56.
    \264\ Any subsequent request to designate a network resource
would remain subject to the requirements of the pro forma OATT, as
with any other request to designate a network resource.
---------------------------------------------------------------------------

    667. With these clarifications, we continue to believe that it is
not unreasonable to require network customers to match competing
requests for their capacity, even if made by marketers in order to
engage in resales of capacity or by the transmission provider itself.
Matching ensures that the customers that value the capacity the most
are awarded the capacity. In any event, we believe it unlikely that a
network customer would be routinely faced with viable competing
requests from a point-to-point customer seeking service at the time of
the rollover because of the significant differences between network
transmission service (under which loads and resources are designated,
but not specific points of

receipt and delivery) and point-to-point service (under which such
points are required to be designated).
    668. We disagree with APPA's suggestion that rollover customers
should be relieved of having to match competing requests because the
transmission provider is planning and upgrading its system on the
assumption that the rollover customer will continue service. The
matching requirement only arises if there are competing requests, i.e.,
notwithstanding any upgrades constructed or planned, capacity will not
be available to serve both the rollover customer and the competing
customer. If there is a bona fide request from a competing longer-term
customer, it is reasonable to expect the rollover customer to match the
request in order to ensure that capacity is awarded to the customer
that values it the most.
    669. Finally, we further clarify in response to Powerex that, in
cases where a rollover customer loses service to a longer-duration
competing request for a lesser quantity, the rollover of the original
request should only be displaced by the quantity needed to fulfill the
longer-term request for a lesser quantity. In such instances, the
transmission provider should grant service to the competing customer
and reduce the amount of capacity available for roll over by the
original customer accordingly.
d. Rollover Restrictions Based on Native and Network Load Growth
Requests for Rehearing and Clarification
    670. TDU Systems ask the Commission to eliminate the ability of
transmission providers to restrict other LSEs' rollover rights based on
forecasts of the transmission provider's retail and wholesale native
load growth. TDU Systems argue that extending the minimum term to
qualify for rollover rights effectively provides the transmission
provider five years of notice that it will need to construct
transmission upgrades to serve its native load growth. Thus, TDU
Systems contend, there is no justification for that transmission
provider to fail to build to meet its service obligation within this
period. TDU Systems further contend that permitting a transmission
provider to avoid its obligation to build for its known native load
growth by curtailing an LSE customer's rollover rights gives an undue
preference to the transmission provider's native load and violates the
Commission's comparability principle. TDU Systems argue this also
violates FPA section 217(b), which it contends does not distinguish
between the transmission provider's native load and the native load of
other LSEs.
    671. If the Commission does not eliminate the ability of the
transmission provider to restrict rollover rights based on its own
forecasted load growth, TDU Systems ask, at a minimum, that the
Commission require transmission providers to treat the load growth of
other LSEs with native load service obligations in the same manner as
the transmission provider's own native load growth. NRECA makes a
similar request, arguing that comparability requirements and FPA
section 217 should place the service obligations of all LSEs on an
equal footing. NRECA asks the Commission to confirm that a transmission
customer using rollover rights to serve native load enjoys the same
priority as a transmission provider serving its own retail native load
and will be factored into any native load growth forecasts.
    672. By contrast, South Carolina E&G and South Carolina Regulatory
Staff argue that the Commission should expand the ability of
transmission providers to restrict rollover rights. South Carolina
Regulatory Staff asks the Commission to ensure that native load growth
is not marginalized by new non-native customers. The South Carolina
Regulatory Staff expresses concern that native load service may be
forced to yield to other service if the transmission provider's native
load forecasts turn out to be wrong. South Carolina E&G agrees, arguing
that limiting the ability of transmission providers to restrict
rollover rights only in the initial service agreement puts service to
native load at an unreasonable risk. South Carolina E&G requests that
transmission providers be allowed to add rollover restrictions at the
time of each rollover (rather than only at the initiation of service)
to reflect changes in load growth forecasts.
    673. Alternatively, South Carolina E&G suggests that the Commission
provide for a procedure that would allow the transmission provider to
terminate rollover rights when new facility construction is required
during system planning, i.e., at any point the transmission provider
determines that a new facility is necessary to accommodate a new
request or projected native load growth, given the possibility of full
rollover by eligible customers. South Carolina E&G proposes that
transmission providers be required to promptly give notice of that
determination, which would trigger a limited period of time (e.g., 30
days) for each long-term customer to indicate whether it desires to
rollover its current contract for another designated period of time.
Absent such election by the customer within the designated time, South
Carolina E&G proposes that the customer's rollover rights be
terminated. South Carolina E&G argues that this proposal would provide
at least partial protection against the inequitable prospect of being
forced to construct facilities that would be needed in the event of
full rollover of service, only to be left ``high and dry'' by a
customer's failure to exercise its rollover rights. South Carolina E&G
argues its alternative proposal would ensure that native load does not
subsidize the customer seeking rollover.
    674. If the Commission declines to modify its rollover policies,
South Carolina E&G suggests the adoption of a native load curtailment
priority to ensure that continued service to the rollover candidate
does not impinge on native load service. Specifically, South Carolina
E&G states that point-to-point customers could receive rollover rights,
but if curtailment is required, then that rollover contract (like all
other point-to-point contracts) would be curtailed before native load.
South Carolina E&G also asks the Commission to provide greater
specificity regarding the meaning of the statement in Order No. 890
that, in forecasting native load growth, consideration should be given
to state-approved integrated resource plans that show a native load
need for the capacity. South Carolina E&G asks the Commission to
specify whether such a plan would be a determining factor in the
Commission's evaluation of a transmission provider's native load growth
forecast, how much weight the Commission would place on the existence
of such a plan, and whether the plan would need to incorporate specific
elements.
Commission Determination
    675. The Commission continues to believe it is appropriate to
require that rollover restrictions be based on reasonable forecasts of
native load growth or preexisting contracts that commence in the future
and that such restrictions be included in the initial transmission
service agreement. As explained in Order No. 890, this will remain the
only appropriate way to restrict a rollover right.\265\ We are not
persuaded by petitioners' arguments that the requirement of a five-year
minimum contract term, or the native load protections found in FPA
section 217, necessitates any change to this policy. The same rationale
for this policy articulated in Order No. 888 and its progeny with
regard to the original

rollover right applies with equal force to the reformed rollover
right.\266\
---------------------------------------------------------------------------

    \265\ See Order No. 890 at P 1256.
    \266\ See Order No. 888 at 31,694; Order No. 888-A at 30,198.
---------------------------------------------------------------------------

    676. We disagree with TDU Systems that extending the minimum term
to five years justifies eliminating the ability of the transmission
provider to restrict a customer's rollover right. The transmission
provider is allowed to restrict a rollover right in favor of its
reasonably forecasted native load growth in order to ensure that
capacity that exists on the provider's system, at the time of entering
into a contract with a customer seeking a rollover right, can be
recalled for the use of its reasonably forecasted native load growth at
some time in the future. Our longstanding policy, which was not changed
by Order No. 890, permits transmission providers to reserve existing
capacity for the use of its reasonably forecasted native load growth.
    677. Arguments that the transmission provider has more time to plan
for upgrades to meet its native load growth because of the new five-
year minimum contract term miss the point. A transmission provider
should not be forced to allow rollover where, at the time of entering
into a five-year transmission contract with a customer for existing
capacity, it can show that it will need to reclaim that capacity to
serve its reasonably forecasted native load growth. Customers that are
denied rollover rights may nonetheless secure transmission service by
submitting service requests for the period in question and committing
to fund any necessary upgrades.
    678. Alternatively, TDU Systems and NRECA ask the Commission to
require transmission providers to treat the load growth of other LSEs
with native load service obligations in the same manner as the
transmission provider's own native load growth during forecasting. This
is already our policy. In Order No. 888-B, the Commission, in
addressing a transmission provider's ability to recall capacity needed
for native load growth, clarified that ``network transmission customers
are afforded the same treatment as the transmission provider on behalf
of native load (retail and wholesale requirements customers) in terms
of the reservation of existing transmission capacity by the
transmission provider.'' \267\ This ensures that the LSE's native load
is treated the same as the transmission provider's native load at the
time a rollover restriction is considered.
---------------------------------------------------------------------------

    \267\ See Order No. 888-B at 62,084-85.
---------------------------------------------------------------------------

    679. We reject the argument of South Carolina E&G and South
Carolina Regulatory Staff that the Commission should expand the ability
of transmission providers to restrict rollover rights by, for example,
allowing rollover restrictions to be added at the time of each rollover
(rather than only at the initiation of service) or when the need for
new facilities arises. We continue to believe that requiring
transmission providers to determine at the initiation of service
whether they have a reasonably forecasted native load growth need for
the capacity strikes a reasonable balance between the transmission
provider's needs and those of its customers seeking long-term
transmission service with a rollover right.\268\ If we were to allow
the transmission provider the ability to seek to restrict a rollover at
the time of each rollover, as suggested by South Carolina E&G, it would
vitiate the benefit of the rollover right to transmission customers,
many of which also have load-serving obligations. We note, however,
that South Carolina E&G's concerns should be mitigated going forward
since our requirement of a five-year minimum contract term, as well as
the one-year notice period and the other rollover reforms, will ensure
greater consistency between the rights and obligations of customers and
the planning and construction obligations of transmission providers.
---------------------------------------------------------------------------

    \268\ In addition, we believe that putting the onus on the
transmission provider to determine the limitations of its system and
its own native load growth needs at the time of the initial service
agreement appropriately allocates responsibility and encourages
accuracy. Allowing transmission providers the ability to reevaluate
their native load growth needs on an ongoing basis, or to escape
obligations to serve rollover customers when upgrades are
identified, would tend to discourage a thorough review upfront.
---------------------------------------------------------------------------

    680. We also decline to adopt South Carolina E&G's suggestion that
point-to-point customers with rollover rights be curtailed before
native load. The Commission has long required that firm point-to-point
customers share the same curtailment priority as network customers and
the transmission provider serving native load except in the limited
circumstance when it would require the shedding of bundled retail
load.\269\ Nothing in our changes to rollover policies justifies
modifying that requirement. We also decline to determine generically
the weight to be given to state-approved integrated resource plans in
the determination of reasonable native load restrictions. The
determinative factors in each case will be identified based on the
record, along with the relevant particular supporting documentation to
be considered.
---------------------------------------------------------------------------

    \269\ See Northern States Power Co., 89 FERC ] 61,178 (1999).
---------------------------------------------------------------------------

e. Effectiveness Upon Acceptance of Coordinated and Regional Planning
Process
Requests for Rehearing and Clarification
    681. Duke argues that the rollover reforms should be implemented
immediately and not upon acceptance of the transmission provider's
planning process compliance filing. Duke contends that the Commission
unambiguously found that the prior rollover policy was no longer just
and reasonable and not unduly discriminatory. Duke also argues that the
prior rollover policy is inconsistent with FPA section 217, suggesting
that the prior policy conflicts with the reasonable needs of LSEs to
satisfy their service obligations. Duke therefore argues that it is not
reasonable for the Commission to allow its prior rollover policies to
remain in place pending acceptance of the transmission planning process
compliance filings. Duke contends that the Commission did not base its
finding that rollover policies were in need of reform on the lack of
transmission planning processes and, therefore, making one conditioned
on the other is unsupported.
    682. TAPS requests clarification of the timing of compliance
filings implementing the new rollover policies. TAPS questions whether
transmission providers were required to submit conforming changes to
section 2.2 in their initial compliance filings or as part of the
Attachment K compliance filings due at a later date. If the former,
TAPS states that transmission providers would be deleting the current
language that will still be in effect. TAPS suggests that changes to
section 2.2 not be made until the Attachment K is accepted.
Commission Determination
    683. The Commission denies rehearing of the determination to tie
the effectiveness of rollover reform to the acceptance of the
transmission provider's coordinated and regional planning process
required under Order No. 890. As the Commission explained in Order No.
890, reforms regarding rollovers and transmission planning must proceed
together because they are closely related. Under our longstanding
policy, transmission service eligible for a rollover right must be set
aside for rollover customers and included in transmission planning.
Duke is therefore incorrect in suggesting that the Commission did not
rely on our planning-related reforms when fashioning a remedy to ensure
rollover

policies remain just and reasonable and not unduly discriminatory.
    684. With regard to TAPS' concern regarding the timing of
compliance filings implementing the new rollover policies, we reiterate
that the previously existing rollover provisions will remain in effect
for the transmission provider until such time as the Commission accepts
the transmission provider's Attachment K compliance filing.
Accordingly, it is only after a transmission provider's Attachment K
planning process is accepted by the Commission that the transmission
provider should file the rollover reform language, and the effective
date of that language should be commensurate with the date of that
filing. We have revised section 2.2 of the pro forma OATT to make this
clear.
f. Transition Issues
Requests for Rehearing and Clarification
    685. Great Northern seeks clarification, or in the alternative
rehearing, regarding how rollover reform would apply to transmission
service requests that were made before the issuance of Order No. 890 in
reliance on the prior version of section 2.2 of the pro forma OATT. If
Order No. 890 is implemented in such a way as to require a minimum
five-year contract term in order for rollover rights to attach to
pending transmission service requests, Great Northern contends it would
cause significant disruption in the development and financing of
competitive generation projects already in the queue. Great Northern
suggests that requiring pending projects to submit new contracts for
five-year terms in order to obtain rollover rights in turn would
require it to restart its project planning process for each of those
projects.
    686. Great Northern therefore asks the Commission to confirm that
the current one-year contract commitment right of first refusal rule
will continue to apply to transmission service requests that were made
prior to the issuance of Order No. 890 and that the five-year contract
commitment right of first refusal rule will not apply until the first
rollover date after both the executed transmission service contract and
revised section 2.2 of the transmission provider's pro forma OATT have
become effective. If the Commission is not inclined to make such a
generalized determination in this proceeding, Great Northern requests
the Commission to rule that, in the specific circumstances where a
customer has requested transmission service for one year with rollover
rights as described in section 2.2 of the OATT, and thus the
transmission provider was on notice of the potential need to exercise
rollover rights, it will allow rollover rights to apply until the first
rollover date after both the executed transmission service contract and
revised section 2.2 of the transmission provider's OATT have become
effective.
    687. NCEMC, NRECA, and TDU Systems request that the Commission
clarify that a transmission customer will be permitted to rollover an
existing contract one time at the current terms and conditions
following the effective date of Order No. 890, as this would avoid any
impairment of the contracts entered into by parties prior to the
Commission's change in rollover rights policy, consistent with Mobile-
Sierra requirements.\270\ By granting one rollover with the same terms
and conditions following the effective date of Order No. 890, these
petitioners assert that the Commission will permit the parties to
fulfill all obligations under their previously-negotiated transmission
contracts and then, following this rollover, enter into new
transmission and power supply contracts with full knowledge of the
Commission's new rollover policy. They contend that certain preamble
language could be understood to permit a customer to rollover a
contract one time at the currently-effective terms and conditions
following the effectiveness of the rollover reforms,\271\ whereas
reformed section 2.2 suggests that the five-year term requirement and
notice provision will become effective on the first rollover following
effectiveness of the rollover reforms.\272\
---------------------------------------------------------------------------

    \270\ Citing United Gas Pipe Line Co. v. Mobile Gas Services
Corp., 350 U.S. 332 (1956); Federal Power Commission v. Sierra
Pacific Power Co., 350 U.S. 348 (1956).
    \271\ Citing Order No. 890 at P 1238 (``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.'').
    \272\ Citing reformed section 2.2 (``[s]ervice agreements
subject to a right of first refusal entered into prior to [the
acceptance by the Commission of the Transmission Provider's
Attachment K], unless terminated, will become subject to the five-
year/one-year requirement on the first rollover date after [the
acceptance by the Commission of the Transmission Provider's
Attachment K].'').
---------------------------------------------------------------------------

    688. TAPS contends that there could be confusion stemming from the
language in the Order No. 890 version of section 2.2, which states that
the ``five-year/one-year requirement'' will apply ``on the first
rollover date'' after Attachment K is accepted. TAPS believes this
language could be read to require that a customer's first rollover
after the effective date of Attachment K must be exercised one year
prior to the end of the existing service agreement, which is at odds
with the Commission's recognition that some contracts may not have a
year left on them and therefore the 60-day notice should apply to such
contracts.\273\ TAPS suggests specific amendments to section 2.2 of the
pro forma OATT to more clearly state the process for rolling over
service during the transition period.
---------------------------------------------------------------------------

    \273\ Citing Order No. 890 at P 1267.
---------------------------------------------------------------------------

    689. Powerex also asks that section 2.2 be amended to more clearly
state the Commission's rollover policies, arguing that discriminatory
and anticompetitive practices are more likely to occur in areas where
the transmission provider retains discretion. Powerex suggests that the
Commission clarify that customers with existing long-term contracts
with rollover rights must only provide 60-days prior notice of their
desire to roll over their capacity and that the rollover may be for a
one-year term with no rollover rights or a five-year term with rollover
rights. TransServ, however, argues that the modified notice
requirements of section 2.2 should apply only to existing long-term
agreements set to expire within one or two years of the effective date
of the new five-year/one-year long-term service requirements. TranServ
argues that allowing existing customers with longer-term contracts to
retain a 60-day notice provision for many years into the future would
unnecessarily complicate and delay the transmission provider's ultimate
conversion of all existing service agreements to comply with the new
five-year/one-year provisions for long-term firm service.
    690. Ameren and Tenaska ask the Commission to clarify that notice
of a rollover given prior to the effectiveness of rollover reform would
remain subject to the pre-Order No. 890 rollover polices, including the
existing customer's willingness to accept a term of one year (or the
term offered by a competing applicant, if longer).
Commission Determination
    691. We agree with Great Northern that requiring a five-year
minimum contract term in order for rollover rights to attach to pending
transmission service requests could cause significant disruption to
those transmission customers already in the transmission queue at the
time of the effective date of Order No. 890. These customers requested
service believing that they only needed to enter into a one-year
contract in order to obtain a rollover right. Accordingly, we grant
rehearing and revise section 2.2 of the pro forma OATT to provide that
the current one-

year contract commitment requirement will continue to apply to all
transmission service requests that were in a transmission provider's
transmission queue as of the effective date of the reforms adopted in
Order No. 890 (i.e., July 13, 2007). For such transmission requests,
the five-year contract commitment requirement will not apply until the
first rollover date after both the execution of the transmission
service contract and effectiveness of the revised section 2.2 for the
particular transmission provider.
    692. We disagree with other petitioners, however, that a
transmission customer should be permitted to roll over any other
existing contracts one time at the current terms and conditions
following the effective date of the rollover reforms. As we explained
in Order No. 890, ``[i]t is only a rollover contract entered into or
renewed after the effectiveness of rollover reform that must comply
with the new rollover provisions.'' \274\ While it is true that the
customer rolling over service after the effectiveness of the reforms
will be required to agree to a minimum five-year term to obtain
rollover rights for the new agreement, this does not impair the
customer's rights or obligations under its existing contract.
---------------------------------------------------------------------------

    \274\ See id.
---------------------------------------------------------------------------

    693. To the extent there is any confusion regarding the discussion
in Order No. 890 of when the rollover reforms apply to existing
customers, we clarify that an existing customer must comply with the
new rollover reforms at the time of the first rollover of its contract
occurring after the effectiveness of the rollover reforms for its
transmission provider, as provided in the revisions to section 2.2 of
the pro forma OATT. For example, if an existing customer's contract
expires January 1, 2009, and rollover reform became effective on
January 1, 2008 for its transmission provider, then any contract
entered into by the customer at the time of expiration of its existing
contract on January 1, 2009 would have to comply with the rollover
reforms (e.g., the new contract must be for a minimum term of five
years to retain a rollover right and, if so, one-year notice must be
given to exercise that right at the expiration of the contract).
    694. In response to TAPS and Powerex, we reiterate that a
transmission customer with an existing contract that seeks to exercise
its rollover after the effectiveness of rollover reform may exercise
this rollover based on the existing 60-day notice rule, in recognition
of the fact that during this transition period certain customers may
not have a year or more left on their existing contracts.\275\ We
agree, however, with TranServ that allowing existing customers with
longer-term contracts to retain a 60-day notice period provision for
many years in the future would unnecessarily complicate and delay the
transition to rollover reform. Allowing existing customers to utilize
the 60-day notice rule was intended largely to address the situation
where a given customer does not have a year or more left on its
contract such that it is possible to give one-year notice. This, of
course, is not the case with existing contracts that have many years
left in their terms before expiration.
---------------------------------------------------------------------------

    \275\ See id.
---------------------------------------------------------------------------

    695. We therefore clarify that the current 60-day notice rule will
continue to apply only to those existing contracts that have less than
five years left in their terms at the time of effectiveness of rollover
reform for its transmission provider. Any customer with an existing
contract with five or more years left in its term at the time of
effectiveness of rollover reform for its transmission provider will be
required to give one-year notice of whether it intends to exercise its
rollover right. We emphasize that, whether an existing transmission
customer is required to give 60-days or one-year notice when exercising
its rollover right under its existing contract, the customer must enter
into a minimum of five years of service and meet any of the other
requirements of the reformed rollover right in order to retain a
rollover right going forward. An existing customer may rollover its
service for a term of less than five years, but will not then retain a
rollover right for this service. We revise section 2.2 of the pro forma
OATT to make these requirements clear.
    696. In response to Ameren and Tenaska, we reiterate that notice of
a rollover given prior to the effectiveness of rollover reform remains
subject to the pre-Order No. 890 rollover policies, including the
existing customer's willingness to accept a term of one year (or the
term offered by a competing applicant, if longer).\276\
---------------------------------------------------------------------------

    \276\ See id. at P 1238 (``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.'').
---------------------------------------------------------------------------

3. Modification of Receipt or Delivery Points
    697. Pursuant to Section 22 of the pro forma OATT, 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
firm basis. 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).\277\ The WEQ standards include standards addressing requirements
for redirects on both a firm and non-firm basis, all of which were
incorporated by reference into the Commission's regulations except for
WEQ Standard 001-9.7, which addressed the impact of redirects on the
rollover rights of a long-term transmission customer. Order No. 676
directed the WEQ to reconsider WEQ Standard 001-9.7 and develop a
revised standard consistent with Commission policy.
---------------------------------------------------------------------------

    \277\ Standards for Business Practices and Communication
Protocols for Public Utilities, Order No. 676, 71 FR 26199 (May 4,
2006), FERC Stats. & Regs. ] 31,216 (2006), reh'g denied, Order No.
676-A, 116 FERC ] 61,255 (2006), order on reh'g, Order No. 676-B, 72
FR 21095 (Apr. 30, 2007), FERC Stats. & Regs. ] 31,246 (2007).
---------------------------------------------------------------------------

    698. In Order No. 890, the Commission affirmed reliance on the
NAESB process to develop business practices implementing the
Commission's redirect policy. The Commission also determined that the
reforms adopted in Order No. 676, in combination with the OATT-related
reforms adopted in this proceeding, were 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. With respect to the effect of redirects on rollover rights, the
Commission affirmed its policy allowing a redirect of firm, long-term
service to retain rollover rights, even if the redirect is requested
for a shorter period. The Commission concluded that a transmission
customer should not have to choose between maintaining its rollover
rights and redirecting on a firm basis. The Commission noted, however,
that any change to a delivery point would be treated as a new request
for service for purposes of determining availability of capacity. As a
result, a redirect right does not grant the customer access to system
capacity or queue position different from other customers submitting
new requests for service. The Commission also provided guidance
regarding the processing of, and pricing for, redirected service.
Requests for Rehearing and Clarification
    699. MISO seeks rehearing of the Commission's decision to allow
rollover rights to follow the redirected service, asking that rollover
rights be limited or eliminated altogether in the event of a

redirect. MISO argues that the Commission's statement that it was
simply continuing its existing rollover policy is confusing since the
Commission found that the current rollover policy was no longer just
and reasonable. MISO also contends that the precedent cited by the
Commission does not support migration of rollover rights to a
redirected path. Even if the rollover policy were justified under the
Commission's precedent, MISO argues that the Commission's finding that
the policy is no longer just and reasonable undermines continued
reliance on that precedent.
    700. If the Commission decides to maintain rollover rights for
redirects, MISO proposes the following limitations and requests the
Commission to direct NAESB to draft its business practices accordingly.
First, MISO suggests that the primary path agreement should have a term
of at least five years for any rollover rights to attach. Second, MISO
requests that any redirect must be for firm service for one year or
longer. If the redirect is for a shorter period, MISO contends that the
rollover rights should remain with the original path. Third, MISO
requests redirected service to terminate on the same date as the parent
service so as to maintain the timing for execution of rollover rights.
Finally, MISO suggests that in order to execute a rollover right the
redirected service must be requested and granted prior to the one-year
deadline for the customer to request rollovers along the original path.
    701. Bonneville requests a similar clarification of the application
of rollover rights to redirects. Bonneville argues that a literal
reading of the revised pro forma OATT allows a long-term point-to-point
customer to request redirected service within the last year of its
service contract, maintain its rollover rights, and apply them to the
new points even though it is unable to give a year's notice of intent
to rollover at those points. Bonneville therefore seeks clarification
from the Commission that rollover rights will remain with the original
points unless the customer redirects service for at least one year.
Without clarification, Bonneville contends that redirecting customers
will have greater rights than customers that do not redirect, who must
give one-year's notice.
    702. TranServ also requests clarification regarding the requirement
for the rollover right to follow the redirect, regardless of the
duration of the redirect. TranServ questions whether a redirect of a
long-term firm service reservation for one day qualifies that customer
for rollover rights on the redirected service points. TranServ suggests
that the Commission instead restrict rollover rights on redirected
service points to redirects of five years or longer and further require
that the redirect be co-terminus with the original request being
redirected. TranServ argues that more guidance regarding implementation
of the rollover and redirect policies will facilitate the NAESB
standards development process.
    703. MidAmerican requests clarification regarding the queuing of
service requests as applied to redirects. MidAmerican argues that a
request to redirect service should not result in a release of transfer
capability for third-party service requests in the queue, since the
increase in transfer capability is contingent upon the approval of the
redirect request. MidAmerican argues that this approach is consistent
with the requirement in section 17 of the pro forma OATT to use the
``same system assumptions and analysis applicable to any other new
request for service, including whether sufficient ATC exists,'' when
analyzing the ability to grant a request for redirected service.
Commission Determination
    704. The Commission denies petitioners' requests to amend the
rights of rollover customers to redirect their service. Under section
22.2 of the pro forma OATT, a request for a firm redirect must be
treated like a request for new transmission service.\278\ As a new
request for service, each redirect request is subject to the
availability of capacity and subject to the possibility that the
transmission provider may not be able to provide rollover rights on the
new redirected path. The transmission provider is required to offer
rollover rights to a customer requesting a firm redirect only if
rollover rights are available on the redirected path, i.e., to the
extent not restricted based on reasonable forecasts of native load
growth or preexisting contracts that commence in the future.\279\
---------------------------------------------------------------------------

    \278\ See Order No. 890 at P 1268.
    \279\ See Order No. 676 at P 51.
---------------------------------------------------------------------------

    705. As the Commission explained in Order No. 890, rollover rights
follow the redirect regardless of the duration of the redirect.\280\ A
transmission customer making a firm redirect request does not convert
its original long-term firm transmission service agreement into two
short-term service agreements, nor does it lose its rollover rights
under its long-term firm transmission service agreement.\281\ At the
same time, a customer can exercise its rollover right only at the end
of the contract. Thus, if a customer with rollover rights chooses to
redirect its capacity for less than the full remaining term of the
contract, absent some further request to redirect, the original path
will automatically be reinstated and rollover rights would remain on
only the original path. By contrast, if the customer chooses to
redirect its capacity until the end of its contract, the customer would
have rollover rights along only the redirected path, and only to the
extent not restricted based on native load growth or future contracts
along the redirected path.
---------------------------------------------------------------------------

    \280\ Order No. 890 at P 1280.
    \281\ Id.; see also Commonwealth Edison Co., 95 FERC ] 61,027 at
61,083 (2001) (explaining that a request to change delivery points
on a firm basis for one month, followed by a reversion to the
original points does not convert the existing long-term firm
agreement into two separate short-term agreements); American
Electric Power Service Corp., 97 FERC ] 61,207 at 61,905-06 (2001).
---------------------------------------------------------------------------

    706. We therefore reject requests to restrict rollover rights to
longer-term redirects. A long-term transmission customer may request
multiple, successive redirects for firm service. This discretion is
limited by the fact that each successive request is treated as a new
request for service in accordance with section 17 of the pro forma
OATT. Each request is therefore subject to the availability of capacity
and subject to the possibility that the transmission provider may not
be able to provide rollover rights on the new, redirected path.\282\ If
the customer has not been granted rollover rights for a redirect that
extends to the end of its contract, the redirected service will
terminate on the same date as the parent service.
---------------------------------------------------------------------------

    \282\ For example, assume a transmission customer with a five-
year agreement for firm service between points A and B, who
qualifies for rollover rights on that path. If the transmission
customer seeks to redirect on a firm basis in year 3 to points C to
D and then redirect back to points A and B thereafter, at the end of
the five year agreement the transmission customer would have
rollover rights only with respect to points A to B. If, however, the
transmission customer seeks to redirect to points C and D for the
last six months of the contract term and both qualifies for rollover
rights on this path and has requested rollover within the notice
period of the contract, the customer would then have rollover rights
only with respect to points C and D. See Order No. 676 at P 59.
---------------------------------------------------------------------------

    707. We also reiterate that a customer cannot exercise any rollover
rights unless it first has provided the appropriate notice to the
transmission provider. If a customer requests and is granted a rollover
right prior to the relevant notice deadline (60 days for pre-Order No.
890 agreements or one year for all others) and subsequently requests
and is granted a redirect for firm service for the remainder of the
contract term (i.e., within the notice period), the new reservation
governs the rights at the new receipt and delivery

points and the customer can obtain rollover rights with respect to the
redirected capacity to the extent rollover rights are available for the
redirected points. If, however, a customer fails to request a rollover
right prior to the relevant notice deadline, the customer forfeits
rollover rights along the current or any redirected path.
    708. We clarify, to the extent necessary, that transfer capability
is not freed up for earlier queued service requests until a redirect
has been granted. A redirect request must be evaluated in accordance
with section 17 of the pro forma OATT using the same system assumptions
and analysis applicable to any other new request for service, including
whether sufficient ATC exists to accommodate the request.\283\ If there
is insufficient ATC to offer service to customers in the queue, and an
existing customer requests redirected service, any increase in ATC
along the original path is contingent upon the acceptance and
confirmation of the redirect. It cannot be assumed at the time of a
redirect request that the transmission provider will grant the request.
---------------------------------------------------------------------------

    \283\ Order No. 890 at P 1285.
---------------------------------------------------------------------------

4. Acquisition of Transmission Service
a. Processing of Service Requests
(1) Posting Performance Metrics
    709. To enhance the transparency of the study process and shed
light on whether transmission providers are processing studies in a
timely and non-discriminatory manner, Order No. 890 required all
transmission providers, including RTOs and ISOs, to post on their OASIS
sites certain metrics that track their performance in processing system
impact studies and facilities studies associated with requests for
transmission service. Specifically, the Commission required all
transmission providers to post on a quarterly basis performance metrics
associated with: processing time from initial service requests to the
offer of a system impact study; system impact study processing time;
service requests withdrawn from the system impact study queue;
processing delays for system impact studies caused by transmission
customer actions; processing time from completed system impact study to
the offer of a facilities study; facilities study processing time;
service requests withdrawn from the facilities study queue; and,
processing delays for facilities studies caused by transmission
customer actions. The Commission required transmission providers to
begin tracking these performance metrics upon the effective date of
Order No. 890 and keep the quarterly performance metrics posted on
their OASIS sites for three calendar years.
    710. The Commission also required transmission providers, including
RTOs and ISOs, to submit a notification filing to 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. 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. Absent a determination from the
Commission that delays were due to extenuating circumstances, the
transmission provider is required to post additional metrics regarding
the average number of hours expended on, and the number of employees
dedicated to, system impact studies and facilities studies. Unless
otherwise directed by the Commission, the transmission provider must
begin posting the additional performance metrics the quarter following
the notification filing.
    711. The Commission delegated to NAESB the responsibility for
developing the Standard and Communications Protocols, business
practices and OASIS modifications that will be necessary to implement
the performance metrics.
Requests for Rehearing and Clarification
    712. Two transmission providers object to aspects of the standard
performance metric posting requirements. Ameren objects to the
requirement that RTOs post these metrics, arguing that the requirement
may increase an RTO's cost even though it is unnecessary for the
efficient operation of competitive markets. Ameren argues that RTOs are
by definition independent entities that lack the incentive to favor any
transmission customer over another and, therefore, the performance
metrics will serve no purpose in uncovering potential discrimination in
the study request process. Ameren argues that information already
posted by MISO and other RTOs allows the Commission to obtain the data
it seeks without placing additional requirements on RTOs.
    713. Old Dominion argues that the Commission should include in the
standard performance metrics any denials or delays in the construction
phase of transmission service requests, suggesting that review of
whether requested transmission service is effected through construction
of identified upgrades and other facilities is a logical and necessary
outgrowth of Order No. 890.\284\ Old Dominion asks the Commission to
require transmission providers to add to the standard performance
metrics: the time period of any such postponement or delay; the MW
amount of congestion caused by the delay, if any; the amount of
transmission rights underfunding caused by the delay, if any; and,
whether the delay resulted in any degradation of system reliability.
Old Dominion contends that the progress of each project is essential
for transmission providers to determine whether transmission service
requests can be accommodated and whether a transmission project is
actually constructed or not has an effect on the study process for
subsequent projects in the queue.
---------------------------------------------------------------------------

    \284\ Old Dominion also argues that the Commission should
require performance reports regarding transmission planning
activities, which the Commission addresses in section III.B.
---------------------------------------------------------------------------

    714. Other transmission providers object to the aspects of the
additional performance metrics triggered by consistently processing
studies outside the 60-day due diligence deadline. Washington IOUs ask
that the Commission require transmission providers to post information
on employees and employee-hours devoted to study processing only if the
Commission first determines that delays in processing study requests
are not excused by extenuating circumstances. Washington IOUs contend
that the Commission's requirement, in Order No. 890, to calculate and
post this additional information will create a significant additional
burden and fails to recognize that the 60-day window is a target, not a
deadline. They further contend that customers may ask that additional
time be taken in the processing of studies. Absent a determination that
delays in processing study requests are a result of a lack of good
faith and due diligence on the part of the transmission provider,
Washington IOUs argue that there should be no requirement to track and
post employees and employee-hours devoted to study processing.
    715. Washington IOUs also ask that the Commission not count
transmission requests submitted as part of a transmission provider's
Integrated Resource Planning (IRP) process in the calculation of
percentages of studies performed outside the 60-day window. They
contend that transmission requests associated with such studies are
often made years in advance to ensure that transmission for service of
long-term

load is available and can be discussed in the public domain, to allow
operational personnel to confer with one another on IRP issues in a
public forum while adhering to the Commission's standards of conduct,
and to ensure that the utility will be able to reserve transmission
capacity necessary to serve the utility's native load reliably and in a
cost-effective manner. Washington IOUs argue that there is no need for
studies associated with these requests to be performed within the 60-
day window.
    716. Southern argues that the Commission should grant rehearing so
that studies for which the customer has requested or expressly agreed
to extend the 60-day study period should not be required to be included
among those studies considered to be completed late. Southern contends
that it would be arbitrary and capricious to include studies that are
``late'' due to no fault of the transmission provider (e.g., studies
delayed or extended due to customer request or action) in the metrics
calculations. Southern states that doing so could cause the
transmission provider to be automatically penalized with additional
reporting requirements and cross the threshold for which the
transmission provider must proffer excuses acceptable to the Commission
or suffer significant penalties.
Commission Determination
    717. The Commission denies rehearing of the decision in Order No.
890 to require transmission providers to post standard performance
metrics regarding the processing of system impact studies and
facilities studies and, for consistently late studies, additional
performance metrics regarding the resources dedicated to processing
studies. These posting requirements are necessary to promote greater
market transparency and establish important incentives for all
transmission providers to complete transmission service requests in a
timely and transparent fashion. As the Commission explained in Order
No. 890, despite the fact that some transmission providers currently
post some information related to the processing of transmission service
requests on their OASIS, much of the public information currently
posted by transmission providers lacks transparency, accessibility, and
consistency.\285\
---------------------------------------------------------------------------

    \285\ See Order No. 890 at P 1308.
---------------------------------------------------------------------------

    718. We affirm the decision to subject all transmission providers,
including RTOs and ISOs, to the same reporting requirements. While it
may be true that data already posted by RTOs and ISOs provides much of
the information contained in the standard performance metrics, it does
not follow that posting the remaining information is unnecessary. The
independent nature of RTOs and ISOs does not justify relieving them of
this particular obligation. All transmission providers should be
subject to the same posting requirements to enhance uniformity and
transparency in processing transmission service requests and
transmission studies. Indeed, to the extent an RTO or ISO is already
posting much of this information, the incremental burden of posting the
remaining information should be minimal.
    719. The Commission does not believe it is appropriate at this time
to add posting requirements regarding denials or delays in the
construction phase, as requested by Old Dominion. While construction
delays can affect transmission service start dates, the transmission
provider will be in communication with the relevant customers regarding
the status of those projects. The transmission provider is also
required to make available information regarding the status of upgrades
identified in its transmission plan, as we discuss in section III.B. We
are not persuaded that, based on the evidence before us at this time,
additional posting requirements for denials or delays in the
construction phase of transmission service requests are necessary or
appropriate. Absent particular evidence to the contrary, we believe
that other OATT provisions such as section 21.2 and the current
standard performance metrics adequately protect customers from
inappropriate delays or discrimination during construction phases.
    720. We also affirm the decision to require any transmission
provider that 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 to submit a notification filing to the
Commission and post additional performance metrics. We disagree with
Washington IOUs that transmission providers should be required to post
these metrics only after Commission action on a notification filing.
Posting of these additional metrics is not required until two months
after the notification filing, giving the Commission time to consider
the extenuating circumstances that prevented the transmission provider
from processing requested studies on a timely basis. If, upon review of
such a filing, the Commission finds that delays were caused by
extenuating circumstances, the Commission will not require the
transmission provider to continue to post the additional performance
metrics. As a result, we expect transmission providers with legitimate
extenuating circumstances should not have to post any additional
metrics.
    721. Similarly, we decline to exempt, as a general matter, studies
that are delayed by customer agreement or that are associated with
resource planning. The transmission provider can explain the
circumstances surrounding any particular delay in its notification
filing, which the Commission will review on a case-by-case basis. The
process adopted in Order No. 890 is sufficiently flexible to relieve
any transmission provider who completes more than 20 percent of non-
affiliates' studies outside of the 60-day due diligence deadlines for
two consecutive quarters from any additional posting requirements, or
operational penalties, if the Commission finds the delays were due to
extenuating circumstances.
    722. The Commission grants rehearing to make several typographical
revisions to our rules implementing these posting requirements. In
Order No. 890, the Commission stated that short-term and long-term
requests for point-to-point service must be aggregated for purposes of
the posting requirement in order to ease the burden on transmission
providers and in recognition that many customers requesting short-term
point-to-point service are unwilling to pay for studies.\286\ The
accompanying regulations, however, stated that transmission providers
must separately calculate and post metrics for long-term and short-term
requests.\287\ Upon further consideration, we believe it appropriate to
allow, but not require, transmission providers to aggregate requests
for long-term and short-term point-to-point service for purposes of the
posting requirements. We also clarify that the posting requirements
apply to all requests for service, including requests for point-to-
point service and requests to designate new network resources or loads.
We have revised our regulations to make these requirements more clear.
---------------------------------------------------------------------------

    \286\ See id. at P 1309.
    \287\ 18 CFR 37.6(h)(1).
---------------------------------------------------------------------------

(2) Operational Penalties for Late Studies
    723. The Commission determined in Order No. 890 that all
transmission providers, including RTOs and ISOs, would be subject to
operational penalties when they routinely fail to meet the 60-day due
diligence deadlines prescribed in sections 19.3, 19.4, 32.3 and 32.4 of
the   OATT. Absent

extenuating circumstances, penalties will apply to any transmission
provider that continues to be out of compliance with these deadlines
for each of the two consecutive quarters following a notification
filing, described above, stating that the transmission provider has not
completed request studies on a timely basis. A transmission provider
will be deemed out of compliance if it completes 10 percent or more of
non-affiliates' system impact studies outside of the deadlines
prescribed in the pro forma OATT.
    724. Operational penalties will 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. The penalty will be equal to $500 for each day the
transmission provider takes to complete any system impact study or
facilities 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 penalty
will equal $500 for each day the study has been in the study queue
beyond 60 days.
    725. As explained above, the Commission reiterated that
transmission providers may document and describe in their notification
filing any unique complexities that particular requests introduce into
the study process and that prevent the transmission provider from
completing a study within the 60-day due diligence timeframe. On review
of a notification filing, the Commission will waive operational
penalties if a transmission provider establishes that its non-
compliance is the result of extenuating circumstances, including
factors or events that are truly beyond its control, such as delays
caused by the transmission customer. The submission of a notification
filing documenting extenuating circumstances will not, however, suspend
the obligation of a transmission provider to process at least 90
percent of the study requests within the deadlines, until such time as
the Commission issues a final determination on the notification of
extenuating circumstances.
    726. The Commission declined to alter the 60-day study completion
timeframe embodied in sections 19.3, 19.4, 32.3 and 32.4 of the pro
forma OATT. The Commission concluded that this timeframe adequately
balances the need for expeditious resolution of study requests and the
need to ensure that the transmission provider can reliably accommodate
the transmission service reserved. The Commission also found that the
penalty regime adopted in Order No. 890 protects the transmission
provider in the event studies take longer to complete due to the new
planning requirements or the new requirement to consider conditional
firm options.
    727. The Commission determined that revenues associated with
operational penalties for late studies should be distributed to non-
affiliated transmission customers. Transmission providers were directed
to propose a method to determine how unaffiliated transmission
customers will receive operational penalty distributions. In the event
the transmission provider has raised extenuating circumstances in its
notification filing, the Commission stated that the transmission
provider should not distribute its operational penalty while the
Commission is considering the notification filing.
Requests for Rehearing and Clarification
    728. NorthWestern challenges the application of any operational
penalties for late processing of studies associated with transmission
service requests. NorthWestern contends that the most important goal of
a system impact study or facility study should be the ability to
perform an accurate study, not one that is quick, and that the
Commission cites no record evidence that penalties are necessary to
prevent unduly discriminatory completion of studies. NorthWestern
argues that all transmission providers have a financial incentive to
complete system impact studies quickly in order to maximize use of
their transmission systems. In NorthWestern's view, it is unreasonable
for the Commission to maintain a 60-day period for processing facility
studies for transmission service requests, yet allow a 90-day and 180-
day timeframe for generator interconnection facility studies which may
be equally complicated. NorthWestern argues that a study may take
longer than 60 days for a myriad of reasons and, therefore, section
19.9 of the pro forma OATT should be eliminated.
    729. To the extent the Commission declines to eliminate section
19.9, NorthWestern argues that it should be waived for transmission
providers that do not have an affiliate that could benefit from any
delay. NorthWestern states that it is a transmission and distribution
utility within its Montana service territory without an active power
marketing affiliate and, as a result, the Commission's rationale for
imposing penalties is not applicable to NorthWestern and similarly-
situated transmission providers.
    730. Several petitioners ask the Commission to clarify that
penalties will be assessed only if the transmission provider fails to
exercise due diligence in completing studies within 60 days. EEI argues
that the due diligence standard is sufficient to protect customers and,
therefore, the Commission's references to extenuating circumstances and
events beyond the control of the transmission provider should be
interpreted to explain some aspects of the due diligence standard,
rather than impose a new standard for completion of studies. Joined by
Progress Energy, EEI asks the Commission to modify section 19.9(iii) of
the pro forma OATT to explicitly provide that penalties will be
assessed only if the transmission provider fails to complete 90 percent
of its studies for non-affiliates within 60 days because of a lack of
due diligence or where there are no extenuating circumstances.
    731. National Grid seeks similar clarification that the Commission
is not moving away from the due diligence standard in favor of an
excuse-based standard. National Grid argues that the requirement that
transmission providers provide an affirmative excuse to avoid
operational penalties for untimely studies is an unexplained departure
from precedent and inconsistent with the Commission's reference to the
due diligence standard in Order No. 890. National Grid states that the
Commission found in Order No. 2003 that financial penalties were not
appropriate for late interconnection studies and, instead, required the
transmission provider to use due diligence to perform within the
specified time frame. National Grid argues that the Commission failed
to justify use of a different, excuse-based structure with monetary
penalties in the context of studying transmission service requests.
    732. National Grid, along with the Washington IOUs, opposes an
excuse-based standard, arguing that the transmission provider may not
always have a readily articulated excuse for not completing studies on
time. National Grid states that transmission providers cannot simply
hire and fire planning employees or otherwise redeploy other employees
as study queues expand and contract and that, even if they could, the
pool of qualified planning engineers is inadequate. Washington IOUs
also argue that there are numerous legitimate reasons why a
transmission provider might not process a study within the 60-day
guideline, including requests by the transmission customer to delay the
study process.
    733. Several petitioners argue that the Commission should extend by
30 days or 60 days the period within which

studies should be completed. MidAmerican argues that strict adherence
to the 60-day target will lead to less complete analyses by limiting
the transmission provider's ability to coordinate with neighboring
systems and regional reliability organizations, which may be necessary
to understand the full effect of a proposed transaction, and forcing
the transmission provider to make assumptions regarding the impacts of
higher queued requests still in study status. E.ON U.S. similarly
argues that the length of a study is influenced by the size and type of
the line or substation upgrade required, the limited availability of
third-party contractors, and the fact that certain modeling studies can
take many weeks to prepare. MidAmerican and E.ON U.S. both argue that
internal staff limitations further impact the transmission provider's
ability to meet the 60-day target.
    734. EEI, MidAmerican, and Southern argue that introduction of
conditional firm and modified planning redispatch service will
complicate the study process, may lead to an increase in study volume,
and ultimately make the 60-day deadline substantially more difficult to
meet. EEI and Southern argue that it is arbitrary and capricious for
the Commission to acknowledge in Order No. 890 that studying the
availability of these products will place increased burdens on
transmission provider without addressing the problem by granting
transmission providers more time to complete those studies.
    735. MidAmerican, Progress Energy and TranServ request
clarification regarding when a system impact study is considered
complete for purposes of the 60-day due diligence deadline. Progress
Energy suggests that failure to complete a study within 60 days should
be measured from the projected start date that is included in the
applicable study agreement, rather than the date the study agreement is
executed, and that the transmission provider must clearly explain the
extenuating circumstance to the customer. MidAmerican suggests that the
milestone should be the first submission of the study report to the
transmission customer because it is customary for transmission
providers to provide a copy of the system impact study for customers to
review, which may lead to additional analysis or review of potential
issues prior to issuing a final system impact study. If provision of
the review copy of the system impact study does not satisfy the tariff
requirement, MidAmerican contends that transmission providers will
simply omit customer review and provide final studies, likely resulting
in more disputes between customers and transmission providers.
MidAmerican also argues that any delays that occur as a result of
review and acceptance of study results due to regional planning process
criteria should not subject the transmission provider to penalties.
TranServ similarly notes that certain system impact studies are subject
to regional coordination review that is out of its control. TranServ
contends that a system impact study should be deemed complete when a
study report is concurrently posted on the OASIS, provided to the
customer for review, and provided for regional coordination.
    736. Some petitioners ask that the Commission exempt from potential
operational penalties certain types of studies or otherwise confirm
that delays in those circumstances will be considered extenuating
circumstances. Southern and Washington IOUs ask the Commission to make
clear that operational penalties will not apply when the transmission
provider and transmission customer expressly agree to a study schedule
providing for a study period longer than 60 days. TranServ contends
that extension of a study period to allow for clustering of multiple
requests from the same transmission customer should be deemed an
extenuating circumstance. EEI suggests that studies of the redispatch
or conditional firm options be exempted from potential penalties or, at
a minimum, that the Commission establish a one-year transition period
prior to including such studies.
    737. Progress Energy asks that the Commission recognize additional
specific examples of possible extenuating circumstances, including:
prior submitted generator interconnection queue requests that impact
the same interface as transmission service queue requests; multiple
transmission service queue requests being submitted within a 60-day
period; a higher queued request that is withdrawn after it has been
accepted which can cause a restart on subsequent studies that are
underway; and a major change in transmission and generation plans of a
local or neighboring system that can cause a restart on subsequent
studies that are underway.
    738. MidAmerican argues that the Commission should remove the
penalty provisions for facilities studies requiring major construction
or offer customers the option of extending the study period without
penalty to the transmission provider where a customer has a desire for
an accurate cost and schedule estimate. MidAmerican contends that the
60-day study window is inadequate to fully evaluate all the
environmental, cultural, and landowner issues to fully determine the
optimum route for a new line. Without knowing what route a line should
take, MidAmerican argues that an accurate cost estimate and schedule
cannot be prepared for the customer and, in turn, that it is
unreasonable to expect a customer to sign a service agreement based on
a highly variable cost and schedule estimate. MidAmerican also suggests
that, in cases where the transmission service requests are submitted in
association with a new generation interconnection request, coordination
with the generation interconnection queue should be explicitly allowed.
MidAmerican states that, under the Large Generator Interconnection
Procedures, the time required to determine the facilities necessary to
accommodate a generation interconnection request can exceed 250 days
from the date the interconnection request is submitted. MidAmerican
contends it is not possible to start the system impact study for the
transmission service request until after it is known what the topology
of the system will be with the new generating facility and any
associated network upgrades and, therefore, the 60-day target should
not apply.
    739. E.ON U.S. requests clarification of the application of
operational penalties to its operations in particular. E.ON U.S. states
that it has delegated certain tasks, including the responsibility to
perform system impact studies, to an independent transmission
organization, i.e., Southwest Power Pool. E.ON U.S. contends that this
delegation of responsibility is consistent with or superior to the
penalties established in the pro forma OATT since it ensures that
studies will be performed in a non-discriminatory manner. In the
alternative, E.ON U.S. seeks guidance on how, or whether it may
influence the length of time it takes Southwest Power Pool to complete
system impact studies, so that they are completed within the 60-day due
diligence requirement. E.ON U.S. is concerned that it may be
responsible for penalties incurred by Southwest Power Pool for failure
to complete system impact studies for E.ON U.S. while being prohibited
from influencing the manner in which the studies are performed due to
the Commission's orders regarding Southwest Power Pool's independence.
    740. TDU Systems seek clarification that imposition of an
operational penalty on a transmission provider for a late study does
not foreclose other

remedies to compensate for any damages arising out of a transmission
provider's lack of due diligence, such as, recovery of the incremental
cost of purchasing power from the market as well as other direct and
consequential damages, if the transmission customer can show it is
entitled to further relief. TDU Systems suggest that the Commission
explicitly recognize that a transmission provider's failure of
performance sufficient to merit the imposition of an operational
penalty also falls outside the scope of the indemnification owed by the
transmission customer to the transmission provider under OATT section
10.2.
Commission Determination
    741. The Commission affirms the decision in Order No. 890 to
subject transmission providers to operational penalties when they
routinely fail to meet the 60-day due diligence deadlines prescribed in
sections 19.2, 19.4, 32.3 and 32.4 of the pro forma OATT. As the
Commission explained in Order No. 890, transmission providers must have
a meaningful stake in meeting study time frames.\288\ With the
procedural protections adopted by the Commission, the new penalties for
late study will ensure that transmission providers have an adequate
financial incentive to exercise due diligence in processing service
requests in a timely and nondiscriminatory manner.
---------------------------------------------------------------------------

    \288\ See Order No. 890 at P 1340.
---------------------------------------------------------------------------

    742. We agree with petitioners that transmission providers should
not sacrifice accuracy in order to complete studies within the 60-day
due period and that transmission providers may already have an
incentive to complete studies quickly in order to increase revenues
from transmission service. This does not mean, however, that it is
inappropriate to apply penalties in instances when transmission
providers repeatedly fail to comply with study deadlines without
justification. The notice procedures adopted in Order No. 890 give
transmission providers an opportunity to explain why studies have been
completed late. As a practical matter, then, late study penalties
should only apply to those transmission providers unable to justify
their repeated failure to meet deadlines. At the same time, the
possibility of penalties will provide appropriate incentives to ensure
that transmission providers process studies on a timely and
nondiscriminatory basis.
    743. In response to concerns regarding application of the due
diligence standard, we reiterate that sections 19.3, 19.4, 32.3, and
32.4 of the pro forma OATT require transmission providers to use due
diligence to meet the 60-day study deadline. The 60-day due diligence
deadline serves as a good measure of a transmission provider's use of
due diligence since, in our experience, the vast majority of
transmission studies can be completed within that period. We recognize,
however, that certain transmission studies can present challenges or
other circumstances may justify a longer study period. The Commission
therefore adopted rules that allow transmission providers to complete
studies outside the due diligence deadlines without paying late study
penalties. In its notification filing, the transmission provider can
explain the extenuating circumstances that lead to delay and, in turn,
demonstrate that it has used due diligence in processing the relevant
studies notwithstanding its inability to meet the 60-day target.
Transmission providers should discuss any factors that they believe are
relevant, including reasonable resource limitations, the accommodation
of customer requests (including clustering), inter-regional and seams
coordination, the scope of particular studies, or fluctuations in study
volumes. On review of this information, the Commission will waive
application of late study penalties under section 19.9 of the pro forma
OATT as appropriate. We therefore do not believe any modification to
the language of section 19.9 is necessary.
    744. We also reject requests to create broad categories of
extenuating circumstances that would exempt transmission providers from
late study penalties or related posting requirements. Consideration of
the particular circumstances causing a transmission provider to
repeatedly miss study deadlines is best left to a case-by-case
analysis. Again, failure to meet the 60-day due diligence deadlines
does not lead unavoidably to late study penalties, regardless of
whether the study is related to the new planning redispatch option for
long-term point-to-point service, the modified conditional firm option,
or any other service request. Granting broad exemptions for any
particular types of requests would undermine the Commission's ability
to gather information regarding the reasons for processing delays and,
in turn, ensure that those delays are justified under the
circumstances.
    745. We also decline to automatically waive late study penalties
for particular types of transmission providers, such as transmission
and distribution utilities without a power marketing affiliate, as
suggested by NorthWestern, or RTOs and ISOs, as suggested by MISO. The
Commission is concerned about potential discrimination in favor of a
transmission provider's affiliated customers as well as discrimination
between different classes of unaffiliated customers. In response to
E.ON U.S., we clarify that delegating to a third party the
responsibility for conducting transmission studies does not relieve the
transmission provider of its obligation to ensure compliance with
sections 19 and 32 of the pro forma OATT. Regardless of whether the
third-party service provider is under the transmission provider's
control, the agreement governing the relationship between the service
provider and the transmission provider would establish the service
provider's responsibilities and potential liability for failing to meet
service obligations. This could include, for example, the
responsibility to submit notification filings describing any
extenuating circumstances that keep the contractor from meeting
deadlines.
    746. We disagree that the 60-day due diligence period should be
extended simply because there is the possibility of penalties in the
event of repeated non-compliance. While we recognize that the timelines
we use in Order No. 890 for processing transmission service requests
may differ from those we have in place in other settings, the 60-day
deadlines have been in place for many years. We continue to believe
that 60 days is, on average, sufficient time to complete most
transmission studies. As the Commission explained in Order No. 890, and
as we reiterate above, transmission providers that are delayed due to
the addition of the conditional firm option, modification of planning
redispatch, staffing availability, or any other issues are free to
raise those issues in their notification filings.\289\ We appreciate,
and in fact intend, that the possibility of penalties will create added
incentives to complete system impact studies and facilities studies
within the 60-day due diligence deadlines. It does not follow, however,
that the deadlines themselves should change. In order for late study
penalties to apply, the transmission provider would have to be out of
compliance for at least three quarters after the reforms adopted in
Order No. 890 took effect. This gives transmission providers nine
months to adjust their operations and reallocate resources as necessary
to meet its obligation to process studies on a timely basis.
---------------------------------------------------------------------------

    \289\ See id. at P 1345.
---------------------------------------------------------------------------

    747. In response to MidAmerican and TranServ, the Commission
reiterates its current policy that transmission studies

will be deemed complete at the point when the transmission provider
returns a final system impact study or facilities study to the
transmission customer. Drafts of such studies, whether submitted to
regional coordinators or the transmission customer, do not satisfy this
threshold because, by definition, they are subject to revision and are
incomplete. Allowing study drafts to be considered completed for
purposes of the 60-day due diligence deadline would undermine
incentives to finalize such studies, leaving transmission customers
with little assurance that their transmission requests would be
processed in a reasonable time period. We do not mean to discourage,
however, consultation with customers or regional coordination. To the
extent such activities lead to delays, they should be explained in the
notification filing. The Commission clarifies in response to Progress
Energy that the 60-day due diligence period starts on the day the
transmission study agreement is executed unless the transmission
provider and customer agree on an alternate day for the transmission
provider to begin the study. While the transmission provider and
customer may not alter the length of the study period, they can
mutually agree as to the day on which the study begins.
    748. Finally, we clarify in response to TDU Systems that payment of
a late study penalty by the transmission provider falls outside the
scope of the indemnification provided by transmission customers under
section 10.2 of the pro forma OATT. Similarly, assessment of a late
study penalty would not preclude other claims for damages to the extent
the transmission provider is liable under relevant legal principles.
(3) Recovery Through Rates
    749. In Order No. 890, the Commission prohibited all jurisdictional
transmission providers from recovering penalties for late studies from
transmission customers. The Commission required non-profit transmission
providers to pay late study penalties from sources other than the
revenue they collect for sales of transmission service.
Requests for Rehearing and/or Clarification
    750. Several petitioners object to the application of operational
penalties to RTOs and ISOs and request clarification of the manner in
which penalties could be recovered by RTOs and ISOs. MISO argues that
RTOs and ISOs should be exempt from the imposition of penalties because
the organizations have little or no equity cushion from which to pay
penalties and often need to obtain operational/technical information
from member transmission owners, over which they have no control, in
order to complete studies. MISO argues that, as independent entities,
RTOs and ISOs have no incentive to favor one group of customers over
another and that the Commission's unsupported reference to competing
internal priorities or staffing issues is not a reasoned substitute for
the undue discrimination rationale on which the Commission's reforms
are based. MISO argues that the distinction between an RTO and a single
system transmission provider is particularly acute for MISO, PJM, and
Southwest Power Pool, which have been required by the Commission to
execute seams operating agreements that require the sharing of planning
information.
    751. MISO objects to the potential use of funds set aside for
salaries or bonuses to pay penalties, suggesting that budget cuts are
not an appropriate remedy for staffing issues. MISO contends that RTOs
and ISOs should be allowed to recover penalties in rates. MISO states
that reliability rules permit RTOs and ISOs to recover their ERO
penalties in rates and the same should be allowed for operational
penalties. MISO acknowledges that the Commission allowed transmission
providers an opportunity to avoid operational penalties by showing that
failure to meet the compliance threshold is due to extenuating
circumstances, but objects to that process as burdensome. MISO argues
that it is unclear what circumstances would be considered extenuating,
suggesting that some customers request service well in advance because
they are aware of possible delays in performing necessary studies. To
the extent the Commission retains financial penalties for RTOs and
ISOs, it suggests that delays resulting in no harm to the customer
should not be included in the 10 percent threshold.
    752. EEI, National Grid, and ATCLLC argue that the Commission first
should consider non-monetary penalties for RTOs and ISOs, such as
increased oversight, before assessing any monetary penalties. ATCLLC
and National Grid contend that using a non-monetary enforcement policy
for violations of the OATT would more closely mirror the policy adopted
by the Commission with respect to enforcement of reliability standards,
as reflected in NERC Sanction Guidelines. National Grid suggests that
the Commission not take the next step of imposing monetary penalties
(whether operational or civil penalties) on RTOs or ISOs absent
extraordinary reasons, such as repeated or willful violations.
    753. If monetary penalties are assessed on an RTO or ISO, National
Grid argues that the non-profit status of RTOs and ISOs justifies
allowing those entities to recover the cost of penalties through rates,
provided those costs are allocated to all market participants fairly.
ATCLLC and Duke, however, oppose recovery of any operational or civil
penalties in the rates of an RTO or ISO. ATCLLC argues that allowing
RTOs and ISOs to include penalties in their cost of rendering
transmission or market services would defeat the purpose of the
penalty. In its view, the pass-through of penalty costs would be
tantamount to imposing the financial consequences of an action on
parties that did not commit the violation, that may not have any
control over the action causing the violation, and who may have been
negatively impacted by the violation. Duke asks the Commission to
clarify that the other sources of money from which RTOs and ISOs must
pay operational or civil penalties do not include any rates collected
from customers, including administrative charges, energy charges, or
charges for transmission-related services.
Commission Determination
    754. The Commission affirms the decision in Order No. 890 to
prohibit transmission providers from automatically passing through to
transmission customers the cost of late study penalties. The 60-day due
diligence standard is in place to protect customers and it would
therefore be inappropriate to automatically recover from those
customers penalties assessed for non-compliance. We are mindful of the
unique operating and budgetary concerns of independent transmission
providers with respect to their ability to pay late study penalties and
will keep those concerns in mind when reviewing these transmission
providers' notification filings. However, as we explain in section
III.C.4.c, it would not be appropriate to exempt, on a generic basis,
any particular class of transmission providers from the requirement to
pay operational penalties.
    755. The Commission acknowledged in Order No. 890 that the
independence of RTOs and ISOs removes incentives to favor one group of
customers over another. Notwithstanding this independence, competing
internal policies or staffing issues could lead to particular types of
customers being treated differently during the study process. The
potential application of penalties for consistently late studies

ensure that the proper incentives are in place to process request
studies in a timely and non-discriminatory manner for every customer.
The limited ability of an independent transmission provider to absorb
late study penalties is more appropriately considered when determining
the penalty, if any, that will apply to an RTO or ISO on review of its
notification filing, which would not be possible if a blanket exemption
were granted.\290\
---------------------------------------------------------------------------

    \290\ We clarify that, as part of this analysis, we will
consider whether the use of non-monetary penalties would be
appropriate in the circumstances.
---------------------------------------------------------------------------

    756. As explained in section III.C.4.c, we decline to state here
the particular sources of funds from which an RTO or ISO should pay any
late study penalties ultimately imposed. We do clarify, however, the
Commission's statement in Order No. 890 that an RTO or ISO may not use
revenues from sales of transmission service to pay late study
penalties.\291\ It may be the case that an RTO's or ISO's only source
of funds is from rates collected from jurisdictional transmission
customers. The Commission's intent in restricting transmission
providers, including RTOs and ISOs, from automatically passing on to
customers the costs of late study penalties was to prohibit those
transmission providers from designing their rates to accommodate a pass
through of the penalties, i.e., effectively including penalties in its
cost of service. A transmission provider is permitted to use revenues
previously collected under Commission-approved rates to pay late study
penalties by reallocating funds as necessary to distribute late study
penalty amounts.
---------------------------------------------------------------------------

    \291\ Id. at P 1357.
---------------------------------------------------------------------------

    757. We clarify in response to MISO that, if the RTO or ISO is
unable to identify any appropriate funds from which to pay a late study
penalty, the Commission will consider case-specific cost-recover
proposals under FPA section 205. As explained above, such proposals
should not include mechanisms to automatically pass through to
customers any penalties approved to the RTO or ISO.
(4) Clustering Transmission Service Request Studies
    758. Although the Commission did not impose, in Order No. 890, a
requirement for transmission providers to study transmission requests
in a cluster, the Commission did encourage transmission providers to
cluster request studies when reasonable. In particular, the Commission
directed transmission providers to consider clustering studies if
requested to do so by a group of transmission customers and the
transmission provider can reasonably accommodate the request. To that
end, the Commission required each transmission provider to include
tariff language in its compliance filing that describes how it will
process a request to cluster studies and how it will structure the
transmission customers' obligations when they have joined a cluster.
Requests for Rehearing and/or Clarification
    759. TranServ requests clarification that, if the transmission
provider receives a large number of study requests from the same
customer within a short time period with no other customer requests
commingled, it may be prudent to combine these studies into a clustered
study group to reduce costs and study queue volumes, even recognizing
that such a practice would result in an extended study period.
Commission Determination
    760. In Order No. 890, the Commission required transmission
providers to study transmission requests in a cluster if the customers
involved request the cluster and the transmission provider can
reasonably accept the request. The Commission did not preclude
transmission providers from clustering additional request studies if
they believe it reasonable to do so. Studying transmission service
requests in a cluster in some cases can create synergistic benefits,
simplify complex, interrelated transmission requests, and help
transmission providers reduce study queue backlogs. To the extent a
transmission provider wishes to adopt additional procedures governing
the clustering of requested studies, it may propose such procedures in
a filing under section 205 of the FPA demonstrating that clustering
will be implemented in a timely and non-discriminatory fashion.
    761. Although we agree that in certain circumstances the time
required to process a clustered study group may exceed the time
required to study a single transmission request, we do not agree that
this should be always be the case. As the Commission explains above, we
will not exempt broad categories of extenuating circumstances, such as
the clustering of request studies, from the 60-day due diligence
deadline.
(5) Standardization of Business Practices for Study Queue Processing
    762. The Commission also required transmission providers working
through NAESB to develop business practice standards to better
coordinate transmission requests across multiple transmission systems.
In order to provide guidance to NAESB, the Commission articulated the
principles that should govern processing across multiple systems. The
Commission further required transmission providers working through
NAESB to develop business practice standards to allow a transmission
customer to rebid a counteroffer of partial service so the transmission
customer can take the same quantity of service for linked transmission
service requests across multiple systems. The Commission explained that
the transmission customer should not be required to take the same
quantity of service across consecutive transmission service requests
and, instead, it should simply have the option to do so.
Requests for Rehearing and Clarification
    763. TDU Systems argue that the Commission erred by failing either
to mandate coordination among transmission providers or to provide the
oversight necessary to ensure that NAESB effectively addresses the
standards and practices for coordination. TDU Systems contend that
transmission customers have experienced denials of service because of
differing response times to transmission service requests spanning
multiple transmission systems and that a lack of coordination among
transmission providers reduces accountability for potentially anti-
competitive denials of service. To the extent the Commission relies on
business practices by NAESB, TDU Systems contend that the Commission
must provide clear deadlines for NAESB to complete the development
process for these business practices. TDU Systems argue that failure to
establish deadlines in this context, while establishing clear deadlines
for the development of ATC-related standards, is arbitrary and
capricious.
    764. TAPS asks the Commission to articulate more fully the
coordination necessary between transmission providers when a customer's
request entails use of multiple systems. TAPS notes that the Commission
refers in Order No. 890 to coordination of studies across multiple
systems, but that coordination may be unnecessary if one of the
affected transmission providers conclude that no system impact study is
required. TAPS contends there is nonetheless a need to coordinate such
requests so that the customer is not required to confirm service on the
no-study system before knowing whether service is available on the
other piece of the transmission path.

    765. TAPS also requests confirmation that, in the event only one of
the transmission providers considering a multi-system request
determines that a facilities study is necessary, the transmission
provider whose system impact study did not lead to a facilities study
must await the completion of the other transmission provider's
facilities study prior to requiring the customer to commit to the
service or lose its queue position. Similarly, TAPS argues that, if
both transmission providers find a need to undertake facilities
studies, the customer should not be subject to different deadlines for
entering into those facilities studies or committing to service after
all of the facilities studies are completed.
Commission Determination
    766. The Commission affirms the decision in Order No. 890 to rely
on the NAESB process to develop business practices to govern the
processing of transmission requests across multiple transmission
systems. We decline to dictate at this time, beyond those principles
outlined in Order No. 890, the particular practices that must be
implemented. It is more appropriate to allow transmission providers
working through NAESB, in the first instance, to consider how best to
ensure coordination across multiple systems. It is also appropriate to
give NAESB an open timeframe to develop these standards since they must
be broad enough to account for the complexities of coordinating multi-
system transmission service requests.\292\
---------------------------------------------------------------------------

    \292\ NAESB has indicated that business practices governing the
coordination of service requests across multiple transmission
systems are in development. The Commission requests NAESB to keep us
informed regarding the status of developing these and other business
practices.
---------------------------------------------------------------------------

    767. The appropriate forum for TDU Systems and TAPS to raise
substantive concerns regarding the coordination required for multi-
system requests is therefore the NAESB process. If concerns remain at
the conclusion of this process, transmission providers and customers
alike can bring them to the Commission's attention on review of the
NAESB business practices.
(6) Additional Processing Proposals
    768. In response to commenter requests, the Commission revised
section 17.7 of the pro forma OATT so that the transmission provider is
able to terminate a request for transmission service if a customer that
is extending the commencement of service does not pay the required
annual reservation fee within 15 days of notifying the transmission
provider that it would like to extend the commencement of service. The
Commission denied a request to require transmission providers to accept
or deny in all cases non-firm and short-term firm point-to-point
transmission service requests solely based on posted ATC, explaining
that transmission providers should not be discouraged from making
service available when posted ATC is not accurate.
Requests for Rehearing and/or Clarification
    769. Southern argues that the Commission should revise the amended
provisions of section 17.7 of the pro forma OATT to ensure that
transmission customers cannot escape their contractual commitments by
simply failing to timely make an extension of service payment. Southern
contends that the language of section 17.7 of the pro forma OATT makes
the termination of a customer's reservation mandatory, while the
Commission's discussion of that language in Order No. 890 indicated an
intention for such termination to be permissive.\293\ Southern contends
that mandating termination in the event of non-payment would allow
customers to easily escape contractual commitments even where the
transmission provider has reserved the underlying transmission capacity
for that customer. Southern requests that section 17.7 be revised to
state: ``If the Transmission Customer does not pay this non-refundable
reservation fee within 15 days of notifying the Transmission Provider
it intends to extend the commencement of service, then the Transmission
Provider may deem the Transmission Customer in breach and may terminate
the Transmission Customer's Service Agreement.''
---------------------------------------------------------------------------

    \293\ Citing Order No. 890 at P 1390.
---------------------------------------------------------------------------

    770. Southern also requests clarification that transmission
providers are allowed to study and condition a request for extension of
service for long-term agreements having a term of less than five years.
Southern states that, under the prior rollover policy, it was able to
condition the continuation of service beyond the contract term so long
as the condition was stated in the service agreement. Once the rollover
reforms become effective and the rollover right extends only to
contracts of five years or longer, Southern contends that it will no
longer evaluate service availability beyond the requested term of
service during the system impact and facility studies. Where such
service is not available, Southern contends it would not be possible to
grant an extension of the commencement date. Southern therefore asks
the Commission to allow transmission providers to study, and possibly
limit, all requests for extensions of commencement of service for long-
term agreements having a term of less than five years. If the
Commission declines to grant this request generally, Southern argues
that such studies at a minimum should be allowed for extensions of
commencement of service for customers having agreements for planning
redispatch or conditional firm service. Southern contends there is
increased need for continued study regarding the availability of those
products, as the Commission recognized by allowing a two-year
reassessment period for the products.
    771. Powerex repeats its request to require transmission providers
to respond to short-term transaction requests based on the ATC quantity
posted at the time the request is granted. Powerex contends that
allowing transmission providers to grant or deny service inconsistent
with posted ATC encourages transmission customers to always have
requests pending in the queue and may lead to customers ultimately
viewing the transmission provider's actions as discriminatory. Powerex
argues that the Commission cited no evidence that its proposal would be
unworkable, operationally problematic, or inefficient, nor explained
how its ruling is consistent with the emphasis placed on accurate,
timely and consistent ATC postings elsewhere in Order No. 890.
    772. Powerex also repeats a request to modify the language of
sections 17.1 and 17.5 of the pro forma OATT to give transmission
providers the flexibility to grant short-term transmission service
requirements without performing a system impact study.\294\ Powerex
argues that requiring transmission providers to perform system impact
studies to evaluate short-term service requests imposes deadlines that
are often unworkable. Powerex also contends that a refusal to modify
sections 17.1 and 17.5 would be at odds with the Commission's decision
in Entergy Services, Inc.,\295\ in which the Commission allowed Entergy
to evaluate short-term requests without performing a system impact
study. Powerex argues that the ATC-related reforms adopted in Order No.
890 will

ensure that this flexibility will not impair system reliability.
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    \294\ Powerex initially raised this issue in the context of the
definition of a system impact study and, thus, the Commission
addressed the argument in section V.D.10 of Order No. 890.
    \295\ Entergy Services, Inc., 101 FERC ] 61,169 (2002).
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Commission Determination
    773. The Commission grants rehearing to revise section 17.7 of the
pro forma OATT in order to define more equitably the rights and
obligations of customers failing to make timely payment of deposits in
order to extend the commencement of service. Upon further
consideration, we conclude that it would be inappropriate for a
transmission customer to lose its underlying transmission service
agreement simply because it failed to comply with the requirements of
extending the service commencement date. We believe that it is more
equitable to require those transmission customers who seek an extension
of service, but fail to pay the required deposit in a timely fashion,
to lose only their option to extend their transmission service start
date and not the underlying transmission service agreement.
    774. We therefore decline to adopt the language proposed by
Southern, since that could still result in the transmission customer
losing its entire transmission service agreement based on a
technicality. The revised language of section 17.7 will more
appropriately resolve Southern's stated concern about a transmission
customer's use of the 15-day deadline in section 17.7 of the pro forma
OATT to escape its underlying transmission service agreement. If a
transmission customer fails to make the appropriate payment to extend
service, that customer remains obligated to take service under the
original terms and conditions of the underlying transmission service
agreement.
    775. We agree with Southern, however, that transmission providers
should have the opportunity to consider the ability to provide service
in the event of an extension for commencement of service. Under prior
rollover policies, transmission providers considered whether long-term
service would continue to be available beyond the original requested
term during their initial consideration of the request for service,
since transmission providers were required to identify in the initial
service agreement any restrictions on the customer's rollover rights.
Once the rollover reforms adopted in Order No. 890 become effective,
transmission providers will undertake that analysis only for contracts
with a term of five years or more. Transmission providers should
continue to have the opportunity to consider the availability of
extended service for contracts with terms of less than five years once
the rollover reforms become effective. We therefore revise section 17.7
of the pro forma OATT to make clear that extensions of service are
subject to availability. For contracts of five years or longer, we
expect that identification of any restrictions on rollover rights in
the initial service agreement will continue to serve as corresponding
restrictions on the ability of the customer to extend the commencement
of service.
    776. We affirm the decision in Order No. 890 not to require
transmission providers to grant certain short-term transmission service
requests based only on posted ATC values. Transmission providers are in
the best position to determine how much capacity exists on their system
in real-time and, therefore, it would not be appropriate for the
Commission to categorically preclude transmission providers from making
such short-term allocations on a case-by-case basis. We do not wish to
preclude transmission providers from making service available at times
when posted ATC is not accurate. The transmission provider nevertheless
must act on a non-discriminatory basis when using its discretion to
grant service when posted ATC is insufficient. As the Commission stated
in Order No. 890, the transmission provider must log such instances as
an act of discretion and post the log so that the Commission and
customers may monitor the transmission provider's actions.\296\
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    \296\ See Order No. 890 at P 1389 (citing 18 CFR 37.6(g)(4)).
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    777. We clarify in response to Powerex that sections 17.1 and 17.5
of the pro forma OATT do not require transmission providers to
undertake system impact studies for all requests for short-term
transmission service. System impact studies are only required if it is
necessary to evaluate the impact of the request prior to granting
service. While we would expect a transmission provider to use its
knowledge of its system, including prior studies and system
assessments, to grant short-term requests when possible, the
transmission provider must in every instance consider whether a system
impact study is in fact required to evaluate the request for
transmission service, as the very precedent cited by Powerex
contemplates.\297\ We recognize that on occasion a study period could
exceed the length of service requested by a transmission customer and
thereby render moot the transmission service request. As the Commission
explained in Order No. 890, however, implementing a generic rule to
eliminate or shorten the period for performing system impacts could
jeopardize system reliability.\298\ We therefore decline to adopt
Powerex's suggested revisions to sections 17.1 and 17.5.
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    \297\ See Entergy Services, Inc., 101 FERC ] 61,169 at P 9-10
(stating that Entergy would have information to evaluate requests
for short-term service without a system impact study ``in most
instances'' and should not ``unnecessarily rel[y]'' on system impact
studies'').
    \298\ See Order No. 890 at P 1707.
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b. Reservation Priority
(1) Priority for Pre-Confirmed Requests
    778. The Commission determined in Order No. 890 that longer
duration service requests will continue to have priority over shorter
duration service requests, with pre-confirmation serving as a tie-
breaker for requests of equal duration. The Commission further provided
that pre-confirmed, non-firm point-to-point transmission service
requests and short-term, firm point-to-point transmission service
requests would have priority over non-confirmed, non-firm and short-
term requests, respectively, of equal duration. Pre-confirmed requests
for transmission service will not preempt an equal duration request
that has already been confirmed.
    779. The Commission also clarified its policies regarding the
treatment of pre-confirmed requests in order to address concerns
regarding operational difficulties caused by giving priority to such
requests. First, the Commission prohibited transmission customers from
withdrawing pre-confirmed, non-firm and short-term firm point-to-point
transmission service requests prior to when the transmission customer
is offered service or a system impact study. Transmission providers
shall invalidate, however, a pre-confirmed request at the request of
the transmission customer in the very near term following submittal of
the request, in the event the transmission customer makes an
inadvertent error in submitting its request. Second, the Commission
explained that a customer is not bound to take service when the
transmission provider counteroffers the customer's initial request,
although it is obligated to take service in the event the transmission
provider offers the service requested.
Requests for Rehearing and Clarification
    780. TranServ objects to the retention of priority for longer-term
service, regardless of pre-confirmation status. TranServ maintains that
the advantages of longer-term services in the form of redirect
opportunities and secondary market sales are sufficient incentives in
and of themselves and that the ability to preempt shorter term service
is

unnecessary to promote longer term sales. TranServ acknowledges that
the preemption and matching provisions have been in the pro forma OATT
since Order No. 888, but questions the extent to which they have been
fully implemented into the business practices of all transmission
providers. TranServ argues that transmission customers would prefer to
have transaction certainty once they have confirmed service instead of
remaining in an uncertain, conditional state up until the relevant
scheduling deadline. TranServ also suggests that retention of the
preemption policy will impede development of the secondary market for
transmission capacity, questioning whether customers would see any
value in entering into a secondary market purchase that is subject to
preemption or understand their rights and obligations, and those of the
assignee, in the event preemption occurs.
    781. If the Commission retains the priority for longer term
service, TranServ requests clarification of how preemption is to be
implemented in certain circumstances. TranServ questions whether a
reservation for consecutive terms of service is considered
``unconditional'' in its entirety when the first increment of service
becomes unconditional. For a reservation for three consecutive days of
daily service, TranServ asks whether that entire reservation (three
days) is considered unconditional one day prior to the start of
service, or whether only the first day of that three-day reservation
becomes unconditional and not subject to preemption.
    782. Ameren maintains that the Commission should include priority
for pre-confirmed long-term firm requests to ensure that long-term uses
are allocated to those customers that have the greatest demand. Ameren
contends that excluding long-term firm requests from consideration as
pre-confirmed requests may distort the transmission service queue and
affect existing long-term firm uses of the grid, such as agreements
eligible for rollover rights, by triggering the requirement to match a
competing request that has not been confirmed. Ameren requests that the
Commission require priority for pre-confirmed requests of all durations
of firm service or, at a minimum, require that any request that
competes with a long-term firm transmission service agreement eligible
for rollover must be pre-confirmed.
    783. E.ON U.S. argues that it is not clear what happens to a pre-
confirmed request if the transmission provider only can provide the
requested service if additional facilities are constructed. E.ON U.S.
requests clarification whether an offer to provide service if
additional facilities are constructed is a counteroffer that allows the
customer submitting a pre-confirmed request to decline service.
    784. Tenaska requests additional flexibility regarding the
withdrawal of pre-confirmed requests. Tenaska suggests that the
Commission establish a defined period, up to the point prior to the
processing of the request by the transmission provider, during which
pre-confirmed, non-firm and short-term firm point-to-point transmission
service requests may be withdrawn for any reason and without penalty.
Tenaska argues this flexibility is necessary to ensure that point-to-
point customers are not competitively disadvantaged vis-a-vis network