transmission service by affiliated merchant or trading entities or
requests for transmission service by the transmission provider's
merchant function, including requests to designate or undesignate
network resources and requests to procure secondary network service to
serve native load.
    138. TDU Systems request that the Commission reconsider its
decision to exempt RTOs and ISOs from the requirement to post data
regarding their processing of transmission service requests. Although
RTOs and ISOs have no generation affiliates, TDU Systems argue that
requiring RTOs and ISOs to post information as to the number of
requests made and rejected would make the acquisition of transmission
services more transparent, serve as a signal for potential congestion
problems on the system that should be studied through the planning
process, and alert market participants to the emergence of market power
in local submarkets.
    139. Constellation requests that the Commission clarify that the
requirement to post underlying load forecast assumptions includes a
complete list of modeling assumptions, protocols and automation
modifications, including what the adjustments are and how they are
applied. Constellation states that it requested that such information
be required in its NOPR comments, but that it is unclear whether the
requirement in Order No. 890 is broad enough to reflect that request.
    140. E.ON LSE requests that the Commission grant rehearing to
permit utilities to decline to publicly post information regarding
actual load and forecasts where such information is commercially
sensitive or where customer-specific information is deemed confidential
by the affected customer. E.ON LSE requests that such commercially
sensitive information instead be posted four weeks after the time
period that the data covers. E.ON LSE contends that disclosure of
customer-specific load forecasts could have adverse competitive
effects, such as a daily forecast signaling to sellers that a utility
is in substantial need for additional energy during the upcoming day's
operations. E.ON LSE contends that the goal of transparency is
sufficiently met even with a slight delay in posting commercially
sensitive forecasts and load data.
Commission Determination
    141. In Order No. 890, the Commission required transmission
providers to post on OASIS metrics regarding transmission service
requests. The Commission did not distinguish between types of requests
for transmission service. Transmission providers therefore should
include in their metrics any type of request for service, including
transmission service requests by affiliated merchant or trading
entities as well as requests by the transmission provider's merchant
function to designate or undesignate network resources or to procure
secondary network service to serve native load. We revise our
regulations to make this clear.
    142. In response to TDU Systems, we clarify that Order No. 890 did
not exempt RTOs and ISOs from the requirement to post metrics related
to the provision of transmission service. While the affiliate posting
requirements do not apply to RTOs and ISOs,\58\ the requirement to post
metrics regarding all transmission service requests remains.\59\ We
agree with TDU Systems that requiring RTOs and ISOs to post non-
affiliate transmission service request metrics improves the
transparency of transmission service request processing by those
transmission providers.
---------------------------------------------------------------------------

    \58\ See Order No. 890 at P 414.
    \59\ See 18 CFR 37.6(i)(1) and (2).
---------------------------------------------------------------------------

    143. In response to Constellation, we clarify that underlying load
forecast assumptions should include economic and weather-related
assumptions. We revise our regulations to clearly state the obligation
to post both actual daily peak load and load forecast data, as required
in Order No. 890.\60\ We decline to adopt E.ON LSE's request to delay
release of load data required to be posted in Order No. 890. Posting
load forecast and actual load data on a control area and LSE level
provides necessary transparency to transmission customers and does not,
in our view, raise serious competitive implications.\61\ If there is
customer-specific information deemed confidential by the affected
customer that impedes the ability of the transmission provider to post
this data, we will consider requests for exemption from the posting
requirement on a case-by-case base.
---------------------------------------------------------------------------

    \60\ See Order No. 890 at P 416.
    \61\ See id. at P 417.
---------------------------------------------------------------------------

(5) Requests for Additional Transparency
Requests for Rehearing and Clarification
    144. Constellation repeats a request from its NOPR comments to
require transmission providers to post certain additional modeling
data, modeling support information, and model benchmarking and
forecasting data/TSR study audit data (identified in an attachment to
its request for rehearing). Constellation argues that, since Order No.
890 requires transmission providers to calculate much of this
additional information, the Commission should require that it be posted
as well. Constellation contends that these postings would allow
transmission customers and the Commission to assess the likely
availability of transmission capacity, verify or challenge the
conclusions reached by the transmission provider on a specific
transmission request, and identify constraints and congestion, as well
as physical or financial measures that could be taken to optimize the
use of transmission system.
    145. EPSA asks the Commission to clarify that the standards
developed during the NAESB process should require transmission
providers to post essential details of ETCs that affect current
customers' access to transmission capacity, including duration and
volume, priority rights, redispatch and scheduling rights, and any
other rights that affect others' use of the grid. As part of these
postings, EPSA suggests that transmission providers be required to
include information concerning transmission arrangements that are not
provided under the OATT, e.g., pre-OATT transmission arrangements. EPSA
argues that non-OATT transmission arrangements often include terms that
are inconsistent with OATT terms and which can impact OATT customers'
access to the grid. Unless transmission providers are required to post
ETC-related information, EPSA contends that there will be no way for
market participants to determine whether the transmission provider has
appropriately modeled ETC set-asides.
    146. Powerex makes a similar request, reiterating a NOPR proposal
that the Commission require transmission providers to post those
provisions of pre-Order No. 888 contracts that affect current
customers' access to transmission capacity, including duration and
volume, priority rights, redispatch and scheduling rights, and any
other rights that affect transmission access. Powerex further requests
that the Commission prohibit the continuation

of grandfathered contracts unless the parties can point to a provision
within the existing contract that contains explicit and guaranteed
rights to extend or renew the contract term and reaffirm that pre-Order
No. 888 contracts cannot be altered upon their expiration. Powerex
complains that the Commission did not address these proposals in Order
No. 890 and that no commenting party put forward credible evidence to
rebut the information Powerex presented the Commission in its NOPR
comments.
    147. TDU Systems argue that transmission providers should be
required to provide customers with access to modeling software used to
calculate ATC values. TDU Systems state that Commission staff expressed
concern at the Technical Conference held on October 12, 2006, in this
docket that customers could find it difficult to sort through and use
the large volume of data the Commission proposed to be posted by the
transmission provider. TDU Systems argue that providing access to the
modeling software used by the transmission provider to calculate ATC
would resolve many of these concerns and better enable transmission
customers to replicate and verify transmission provider ATC
calculations, avoiding the potential for protracted litigation over the
ATC results. TDU Systems contend that any proprietary or licensing
concerns of the transmission provider or its vendors could be addressed
through reasonable charges for use of the software and/or appropriate
confidentiality agreements.
Commission Determination
    148. In Order No. 890, the Commission required transmission
providers to make available, upon request, all data used to calculate
ATC, TTC, CBM and TRM for any constrained posted path.\62\ We believe
that this adequately addresses Constellation's request for access to
modeling data used by the transmission provider. Specifically, we
expect transmission providers to make available, upon request and
subject to appropriate confidentiality protections and CEII
requirements, the following modeling data: (1) Load flow base cases and
generation dispatch methodology; (2) contingency, subsystem,
monitoring, change files and accompanying auxiliary files; (3)
transient and dynamic stability simulation data and reports on
flowgates which are not thermally limited; (4) list of transactions
used to update the base case for transmission service request study;
(5) special protection systems and operating guides, and specific
description as to how they are modeled; (6) model configuration
settings; (7) dates and capacities of new and retiring generation; (8)
new and retired generation included in the model for future years; (9)
production cost models (including assumptions, settings, study results,
input data, etc.), subject to reasonable and applicable generator
confidentiality limitations; (10) searchable transmission maps,
including PowerWorld or PSSE diagrams; (11) OASIS names to Common Names
table and PTI bus numbers; and, (12) flowgate and interface limits
including limit category (thermal, steady state or transient, voltage
or angular). We decline, however, to require the transmission provider
to post this information on OASIS, as Constellation suggests. We
conclude that making this information available on request provides
sufficient transparency for customers without unduly burdening the
transmission provider.
---------------------------------------------------------------------------

    \62\ See id. at P 348.
---------------------------------------------------------------------------

    149. With regard to the modeling support information sought by
Constellation, we believe much of this information should already be
stated in each transmission provider's Attachment C. In Order No. 890,
the Commission required each transmission provider to set forth in the
Attachment C to its OATT the ATC calculation methodology used by the
transmission provider.\63\ To the extent necessary, we clarify that the
step-by-step modeling study methodology and criteria for adding or
eliminating flowgates (permanent and temporary) is part of the ATC
methodology that must be stated in the transmission provider's
Attachment C. We direct any transmission provider that has failed to
include this information in its Attachment C to include that
information as part of the compliance filing directed in section II.C.
If the transmission provider has already satisfied this obligation in a
previous compliance filing, it should refer to that filing instead.
---------------------------------------------------------------------------

    \63\ See id. at P 323.
---------------------------------------------------------------------------

    150. We deny as premature Constellation's request to require OASIS
postings of additional model benchmarking and forecasting data/TSR
study audit data. Such information would be utilized in the process of
updating and benchmarking models to actual events, which is the subject
of ongoing efforts to modify relevant reliability standards from the
MOD and facilities design, connections and maintenance (FAC) groups.
    151. We decline to impose additional posting requirements regarding
ETC uses, as requested by EPSA and Powerex. In Order No. 890, the
Commission required transmission providers to make available all data
used to calculate ATC for constrained paths and any system planning
studies or specific network impact studies performed for customers.\64\
This would include information regarding ETC uses, including
grandfathered agreements, that affect ATC calculations or study
results. EPSA and Powerex fail to demonstrate that it is necessary to
require the posting of additional information regarding ETC uses to
verify the accuracy of the transmission provider's ATC calculations. We
note in response to Powerex that, if any new service taken upon
expiration of a pre-Order No. 888 contract, the terms and conditions of
the transmission provider's OATT would apply.\65\
---------------------------------------------------------------------------

    \64\ See id. at P 348.
    \65\ See Order No. 888 at 31,655.
---------------------------------------------------------------------------

    152. We deny TDU Systems' request to require transmission providers
to grant customers access to proprietary modeling software used to
calculate ATC values. The Commission believes at this time that the
requirements of Order No. 890 are sufficient to achieve the
Commission's transparency goals without further requiring the
disclosure of proprietary software.

B. Coordinated, Open, and Transparent Planning

1. The Need for Reform
    153. In Order No. 890, the Commission required transmission
providers to participate in a coordinated, open, and transparent
planning process on both a local and regional level. Transmission
providers, including RTOs and ISOs, were directed to submit a
compliance filing describing their proposals for a coordinated and
regional planning process that comply with the planning principles and
other requirements of Order No. 890. The transmission planning process
must be documented as an attachment to the transmission provider's
OATT.
    154. The Commission determined that planning-related reforms were
necessary in order to limit opportunities for undue discrimination and
to ensure that comparable transmission service is provided by all
public utility transmission providers. The Commission stated that it
did not intend to reopen prior approvals regarding planning processes
adopted by RTOs and ISOs and, instead, sought to ensure that such
planning processes are

consistent with or superior to the requirements of Order No. 890. In
order for an RTO's or ISO's planning process to be open and
transparent, transmission customers and stakeholders must be able to
participate in each underlying transmission owner's planning process.
The Commission therefore directed RTOs and ISOs to indicate in their
compliance filings how participating transmission owners within their
footprint will comply with the planning requirements of Order No. 890.
    155. The Commission also noted that the planning obligations
imposed in Order No. 890 did not address or dictate which investments
identified in a transmission plan should be undertaken by transmission
providers. Through the principles adopted by the Commission, a process
was established through which transmission providers will coordinate
with customers, neighboring transmission providers, affected state
commissions, and other stakeholders in order to ensure that
transmission plans are not developed in an unduly discriminatory
manner.
Requests for Rehearing and Clarification
    156. E.ON U.S challenges the Commission's authority to adopt
transmission planning rules beyond the implementation of service
reservations or requests by customers. E.ON U.S. argues that the
Commission's reliance on new section 217(b)(4) of the FPA is misplaced
because that provision does not enlarge the Commission's authority and,
in any event, Order No. 890 goes beyond assuring that LSEs have
adequate transmission service. E.ON U.S. contends that characterizing
transmission planning as a practice affecting rates would require an
expansion of the Commission's jurisdiction over the underlying rate,
which it argues does not exist.
    157. Southern states that it supports the bulk of the coordinated
planning provisions of Order No. 890, but nonetheless argues that
reform is not needed to ensure that transmission planning is performed
on a non-discriminatory basis. Southern states that it has invested
billions of dollars in transmission over the last decade and expects to
continue the trend of considerable investment through the foreseeable
future. Southern also contends that it and other vertically-integrated
utilities have obligations to procure generation through
nondiscriminatory requests for proposals and that contracts awarded to
any non-affiliated generator are already incorporated into the planning
process as designated resources. Southern therefore contends that it
does not have a disincentive to impede the ability of lower cost
generation to access its control area. Southern suggests that any
failure to upgrade interfaces is due to the lack of long-term firm
service commitments to justify the upgrade, not a desire to keep lower-
cost power from accessing the transmission provider's control area.
    158. NYISO challenges the Commission's reform of previously-
approved RTO and ISO planning processes, arguing that the Commission
cannot require changes to the NYISO planning process without first
making a finding that it is no longer just and reasonable. NYISO
contends that no such finding was made in Order No. 890, nor did the
Commission identify discrimination in areas with centralized markets,
such as NYISO.
    159. NRECA, Old Dominion, and TDU Systems ask the Commission to
clarify that those RTOs and ISOs and other public utility transmission
providers able to demonstrate that their planning processes are
consistent with or superior to the requirements of Order No. 890 must
nevertheless still file their planning process as part of their OATTs.
These petitioners contend that requiring an RTO or an ISO to include
the details of its planning process in its OATT, rather than its
operating agreements, business manuals or Web site postings, will
enable the Commission to monitor compliance with the reformed planning
principles of Order No. 890 and provide needed transparency for
customers. Entergy requests clarification that a transmission provider
that has transferred authority over planning activities to an
independent transmission coordinator may make the same compliance
filings as an RTO/ISO, demonstrating that its existing planning process
is consistent with or superior to the Order No. 890 requirements.
    160. Old Dominion asks the Commission to clarify that the list of
requirements in paragraph 602 of Order No. 890 (regarding the level of
detail to be included in the OATT) is not exclusive and that, instead,
every transmission provider must include the entirety of its planning
process in its Attachment K with sufficient detail for stakeholders to
understand that process. TDU Systems seek further clarification that
transmission providers that have not turned over operational control of
their facilities to an RTO or ISO must comply with the Attachment K
filing obligations even if their facilities are governed by non-OATT
arrangements, such as facilities agreements.
    161. Several petitioners ask the Commission to clarify whether
individual transmission-owning members within an RTO/ISO must comply
with the planning-related posting and filing requirements of Order No.
890.\66\ New York Transmission Owners argue that, where there is an
existing compliant regional planning process conducted by an RTO or
ISO, participation in the planning process by a transmission owner is
sufficient to satisfy the requirements of Order No. 890. Old Dominion
and TDU Systems, however, seek confirmation that each of the nine
planning principles adopted by the Commission apply equally to
transmission owners that are members of an RTO, otherwise the RTO's
planning process will be insufficient to satisfy the requirements of
Order No. 890. TDU Systems argue that RTO and ISO tariff filings must
provide detail on how the RTO will ensure transmission owner compliance
with planning requirements and that reliance on statements of
commitment to comply would be insufficient. Old Dominion contends that
all filing and posting obligations should rest with the RTO or ISO and
not their transmission-owning members. EEI suggests that the processes
for incorporating the planning processes of transmission owning members
of RTOs and ISOs should be addressed by each RTO and ISO.
---------------------------------------------------------------------------

    \66\ See, e.g., EEI, National Grid, New York Transmission
Owners, Old Dominion, and TDU Systems.
---------------------------------------------------------------------------

    162. National Grid objects to any obligation to allow stakeholders
an opportunity to preview the internal planning deliberations of
transmission-owning RTO/ISO members prior to presentation of plans to
the RTO or ISO. National Grid argues that this would give special
interest stakeholders two opportunities to oppose specific projects,
once at the local level without the full participation of the region
and again at the regional level, and undermine the ability of the
regional process to resolve conflicts between competing proposals.
National Grid contends that it would be unfair to require transmission
owners to open up their internal deliberations in advance of the
regional planning process while allowing other stakeholders to
deliberate in private their own strategies for the regional planning
process. National Grid asks the Commission to clarify that the regional
planning process is the appropriate forum in which stakeholders can
examine each other's upgrade proposals. National Grid argues that the
adoption of separate local planning processes is not necessary to
remedy undue discrimination and is unnecessary given

that stakeholders in the ISO-NE regional planning process have an
opportunity to comment on all aspects of the transmission plan, even
those developed by the underlying transmission owners.
    163. Several petitioners challenge the Commission's decision in
Order No. 890 not to mandate the construction of facilities identified
in a transmission plan. TAPS argues that the Commission's finding that
discrimination exists in expansion decisions compels obligating
transmission providers to build needed facilities to accommodate uses
identified in the planning process or explain why they cannot do so.
TAPS contends that, under Order No. 890, a transmission provider can
choose to build only the planned upgrades that benefit its native load,
leaving a weak and uneven grid that prevents embedded TDUs from
accessing economic alternatives.
    164. TAPS asks that the following measures be adopted to protect
the interest of customers potentially harmed by failing to obligate the
transmission provider to construct facilities identified in the
transmission plan. First, TAPS suggests that transmission providers be
required to accept any request for transmission to a network customer
load, if necessary by redispatch shared on a load-ratio basis, if the
request would have been accepted if the transmission provider's own
load had been designated the sink. Second, TAPS asks the Commission to
require transmission providers to accept a network customer's timely
designated network resource so long as the designation is consistent
with the regional transmission plan and the long-term projections and
planning information provided by the customer pursuant to OATT Sec.
31.6 and in the planning process, supporting the network resource
designation through redispatch if necessary, with costs shared on a
load-ratio basis. Third, TAPS suggests that transmission providers be
required to offer embedded cost sales to transmission-dependent
utilities if the provider's failure to plan and construct on a
comparable basis has left those embedded utilities trapped without
reasonable access to competitive alternatives. Finally, TAPS asks the
Commission to make clear that its ``toolbox'' to address egregious
failures to plan and construct a robust grid that meets the needs of
network customers includes the exercise of jurisdiction over the
transmission component of bundled retail sales of a particular utility
to remedy undue discrimination.\67\
---------------------------------------------------------------------------

    \67\ Citing New York v. FERC, 535 U.S. 1 (2002).
---------------------------------------------------------------------------

    165. TAPS argues that these measures would provide transmission
providers with the right financial incentives to construct facilities
identified in the transmission plan. If the transmission provider fails
to build and there is insufficient capacity to accommodate planned
uses, TAPS argues it is appropriate for the transmission provider to
share the cost of providing alternative service. TAPS argues that this
would also mitigate the Commission's concern that imposing an
obligation to build would conflict with the need for transmission plans
to change over time.
    166. TAPS also suggests that the Commission monitor the
transmission provider's actions by requiring any denial of service to a
network customer be reported to the Commission so that the transmission
provider can demonstrate to enforcement staff that the transmission
provider has adequately planned for its customers and made diligent
efforts to build planned upgrades. TAPS also argues that transmission
providers should be required to demonstrate that they are making good
faith efforts to obtain any necessary state and local siting approvals
and to acquire any property rights necessary to construct planned
facilities in order to show that they are not selecting projects for
construction that favor their own uses over the uses of their network
customers.
    167. TDU Systems agree that better planning will not remedy or
mitigate undue discrimination without an enforceable obligation to
actually construct upgrades needed to ensure reliable and economic
service to LSEs. TDU Systems argue that an obligation to build would be
consistent with other reforms adopted in Order No. 890, such as
extending the minimum term of contracts eligible for rollover rights
and eliminating the price cap on reassignments of capacity, by ensuring
that adequate capacity exists to accommodate transmission service
requests. They contend that the failure to mandate expansion of the
grid is particularly egregious in situations when zero ATC values are
posted on a recurring or lengthy basis, which they argue should trigger
a rebuttable presumption that congestion exists on the transmission
system and that upgrades are needed. TDU Systems contend that failing
to require transmission providers to expand their systems in these and
other situations is inconsistent with the requirement of section
217(b)(4) of the FPA for the Commission to exercise its authority to
facilitate the planning and expansion of transmission facilities to
meet the reasonable needs of LSEs.
    168. TDU Systems suggest that the Commission strengthen and
aggressively enforce the existing construction obligations in the pro
forma OATT and subject transmission providers that fail to implement a
transmission plan in good faith to sanctions. TDU Systems argue that
section 28.2 of the pro forma OATT should be amended to require a
transmission provider to do more than endeavor to construct new
facilities needed to meet network customer load or, in the alternative,
the Commission should indicate that it will aggressively enforce the
existing obligation to build. They request that the Commission adopt a
clear policy of sanctions for cases in which a transmission provider is
found to have failed to proceed in good faith and with due diligence in
implementing the planning process. TDU Systems ask the Commission to
clarify in particular that it will consider revocation of market-based
rate authority for bad faith in implementing the transmission planning
and expansion requirements under Order No. 890.
    169. NRECA also urges the Commission to reiterate and enforce the
existing obligations to build in order to meet its service obligations
to network and long-term point-to-point customers under the pro forma
OATT.\68\ NRECA argues that the obligation to expand capacity should be
viewed as part and parcel of the transmission provider's obligation to
plan for these customers and that statements to the contrary in Order
No. 890 should be clarified. NRECA argues that leaving the transmission
provider with the discretion not to build facilities identified in the
transmission plan would allow it to discriminate in favor of its native
load customers to the detriment of network and long-term point-to-point
customers.
---------------------------------------------------------------------------

    \68\ Citing pro forma OATT sections 13.5, 15.4 and 28.2.
---------------------------------------------------------------------------

    170. Washington IOUs request clarification that the planning
requirements of Order No. 890 do not supersede the planning and
coordination activities undertaken by a transmission provider under its
network operating agreements. Washington IOUs state that transmission
providers providing network service currently engage in local planning
and coordination activities with network customers to ensure their
needs are met and that such activities should not be

superseded by the planning-related reforms of Order No. 890.
Commission Determination
    171. The Commission affirms the decision in Order No. 890 to amend
the pro forma OATT to require coordinated, open and transparent
transmission planning on both a local and regional level. Although the
Commission encouraged utilities to engage in joint planning in Order
No. 888-A, it placed no affirmative obligation on transmission
providers to coordinate with their customers in transmission planning
or otherwise publish the criteria, assumptions, or data underlying
their transmission plans, nor were transmission providers required to
coordinate planning activities with other transmission providers in
their region. This lack of clear criteria regarding planning
obligations has created opportunities for undue discrimination by
transmission monopolists with an incentive to deny transmission or
offer transmission on an inferior basis.
    172. Petitioners generally do not challenge the Commission's
conclusion that the lack of coordination, openness, and transparency
results in opportunities for undue discrimination in transmission
planning and, instead, raise more narrow arguments regarding particular
aspects of the planning reforms. E.ON U.S. argues that the Commission
must limit the scope of the planning requirements to implementation of
service requests. We disagree. The Commission has a statutory
obligation under sections 205 and 206 of the FPA to ensure that each
public utility's rates, charges, classifications, and services are just
and reasonable and not unduly discriminatory. The Commission has
exercised jurisdiction over planning-related proposals submitted by
individual transmission providers in the past, rejecting arguments
regarding a lack of jurisdiction.\69\ Transmission planning activities
are within our jurisdiction and, therefore, we have a duty under FPA
section 206 to remedy undue discrimination in this area and a further
obligation under FPA section 217 to act in a way that facilitates the
planning and expansion of facilities to meet the reasonable needs of
LSEs.
---------------------------------------------------------------------------

    \69\ See New York Independent System Operator, Inc., 109 FERC ]
61,372 at P 18 (2004); Southwest Power Pool, Inc., 109 FERC ] 61,010
at P 78 (2004).
---------------------------------------------------------------------------

    173. The fact that transmission providers, such as Southern, have
undertaken some transmission investment in recent years does not mean
that planning reform is not needed. Southern does not challenge the
fundamental conclusion that it is in the economic self-interest of
transmission monopolists to discriminate in the provision of service
and, in turn, in planning-related activities. The ability of generators
to participate in requests for proposals for generation service does
not adequately respond to the need for a coordinated, open, and
transparent transmission planning process that considers the needs of
all customers as well as the transmission provider itself. The planning
process adopted in Order No. 890 is designed to enhance the ability of
all customers to make long-term firm service commitments by allowing
them to participate in the transmission provider's planning activities.
    174. The Commission also based its planning-related reforms on the
need to ensure comparable transmission service by all transmission
providers, including RTOs and ISOs. We therefore disagree with NYISO
that the Commission failed to justify application of the Attachment K
filing obligations to RTOs and ISOs. The Commission was not required to
find each and every tariff unjust and unreasonable to adopt this
rulemaking, and, instead, had the discretion to adopt principles of
generic applicability to govern all transmission tariffs. Indeed, we
made clear, and reiterate here, that RTOs and ISOs can continue to rely
on their existing planning processes if those processes meet the
requirements of Order No. 890. As the Commission explained, it is not
our intention to reopen prior approvals simply for the sake of doing
so, but rather to ensure that those previously approved planning
processes fulfill the obligations imposed on all transmission providers
in Order No. 890.\70\
---------------------------------------------------------------------------

    \70\ See Order No. 890 at P 437.
---------------------------------------------------------------------------

    175. We therefore affirm the decision to require all transmission
providers to comply with the planning-related reforms adopted in Order
No. 890, including RTOs and ISOs. We agree with Old Dominion that the
filing and posting requirements stated in Order No. 890 apply only to
the transmission provider, e.g., the RTO or ISO, and not the
transmission-owning RTO/ISO members without an OATT.\71\ Each RTO and
ISO may fulfill its obligations under Order No. 890 by delegating
certain actions to, or otherwise relying on, their transmission-owning
members, provided that the rights and responsibilities of all parties
are clearly stated in the transmission provider's OATT. In the end,
however, it is each RTO's and ISO's responsibility to demonstrate
compliance with each of the nine planning principles adopted in Order
No. 890 since it is the entity with the Attachment K on file.
---------------------------------------------------------------------------

    \71\ As the Commission noted in Order No. 890, transmission
owning members of an RTO or ISO that continue to have OATTs on file
under which they provide service over jurisdictional facilities not
under control of the RTO or ISO would continue to have filing
obligations under Order No. 890, like any other transmission
provider. See id. at P 440, n.247. This would apply equally to a
transmission provider that has retained operational control of
facilities governed by other non-OATT arrangements.
---------------------------------------------------------------------------

    176. We clarify in response to National Grid that an RTO or ISO
would not be able to satisfy the requirements of Order No. 890 if the
plans developed by its transmission-owning members and relied upon by
the RTO/ISO did not also satisfy those requirements. A fundamental
assumption underlying National Grid's argument is that issues addressed
in a local planning proposal should be final prior to its introduction
at the regional level. Yet such finality could exclude customers from
the development of aspects of what eventually becomes the regional plan
implemented by the RTO or ISO. As the Commission explained in Order No.
890, local planning issues may be critically important to some
transmission customers, such as those embedded within the service areas
of individual transmission owners.\72\ While we leave the mechanics of
incorporating the planning processes of transmission owning members to
each RTO and ISO, as EEI suggests, it would not be appropriate to
entirely exclude such processes as proposed by National Grid.
---------------------------------------------------------------------------

    \72\ See id. at P 440.
---------------------------------------------------------------------------

    177. To the extent necessary, we clarify in response to NRECA, Old
Dominion and TDU Systems that every transmission provider, including
RTOs and ISOs, must submit a compliance filing stating its transmission
planning process in an attachment to its OATT. This tariff language
must satisfy all of the requirements of Order No. 890 with sufficient
detail for stakeholders to understand the planning process implemented
by the transmission provider. To the extent the transmission provider
previously received Commission approval to delegate planning
responsibilities to an independent transmission coordinator, the
transmission provider may demonstrate in its compliance filing that its
planning process is consistent with or superior to the Order No. 890
planning requirements, similar to the RTO and ISO compliance filings.
    178. The Commission declines to expand the pro forma OATT to place
additional obligations on the

transmission provider to construct facilities identified in its
transmission plan. As the Commission explained in Order No. 890, there
may be reasons a transmission provider declines to undertake a
particular project given the complexity of the transmission grid and
changing conditions of supply and demand.\73\ Our focus is therefore on
the process leading to the transmission plan and not the construction
of specific facilities. This does not, as some petitioners argue,
undermine the construction-related obligations that exist under
sections 13.5, 15.4 and 28.2 of the pro forma OATT. The planning-
related reforms adopted in Order No. 890 are intended to support, not
replace, those requirements by establishing a process to govern all
planning-related decisions.
---------------------------------------------------------------------------

    \73\ See id. at P 594.
---------------------------------------------------------------------------

    179. We therefore believe adequate protections are in place to
ensure that transmission providers do not unduly discriminate in the
selection of which facilities they choose to construct to the detriment
of their customers. If a particular customer believes that its
transmission provider has in fact not complied with its OATT
obligations, the customer should bring the matter to the Commission's
attention, such as by filing a complaint. Indeed, the planning-related
reforms adopted in Order No. 890 will facilitate tariff compliance by
opening up the transmission provider's decisional process, providing
much needed transparency in the area of transmission planning.
    180. We deny as unnecessary TAPS' request to impose additional
accountability mechanisms or require other demonstrations regarding a
transmission provider's construction decisions or to generically
address the appropriateness of sanctions, including revocation of
market-based rate authority, for non-compliance with tariff
obligations. We will likewise deny requests to revise the construction-
related obligations of the pro forma OATT. The Commission will remain
actively involved in the review and implementation of the transmission
planning processes required in Order No. 890, during and beyond the
initial compliance phase, to ensure that the potential for undue
discrimination in planning activities is adequately addressed. Further,
we expect transmission customers to advise the Commission if
transmission providers do not adhere to the terms of the tariff
provisions we ultimately approve. In the absence of specific evidence
that a transmission provider has failed to satisfy its tariff
obligations, either under sections 13.5, 15.4 or 28.2 of the pro forma
OATT or its Attachment K planning process, we believe it unnecessary to
adopt the additional measures proposed by TAPS. In the case of tariff
non-compliance, the Commission will consider these and any other
remedies that may be appropriate on a case-by-case basis in the context
of the specific facts presented.
2. Planning Principles
    181. The Commission identified nine planning principles in Order
No. 890 that must be satisfied for a transmission provider's planning
process to be considered compliant with that order. These nine planning
principles are:
    (1) Coordination--the process for consulting with transmission
customers and neighboring transmission providers;
    (2) Openness--planning meetings must be open to all affected
parties;
    (3) Transparency--access must be provided to the methodology,
criteria, and processes used to develop transmission plans;
    (4) Information Exchange--the obligations of and methods for
customers to submit data to transmission providers must be described;
    (5) Comparability--transmission plans must meet the specific
service requests of transmission customers and otherwise treat
similarly-situated customers (e.g., network and retail native load)
comparably in transmission system planning;
    (6) Dispute Resolution--an alternative dispute resolution process
to address both procedural and substantive planning issues must be
included;
    (7) Regional Participation--there must be a process for
coordinating with interconnected systems;
    (8) Economic Planning Studies--study procedures must be provided
for economic upgrades to address congestion or the integration of new
resources, both locally and regionally; and
    (9) Cost Allocation--a process must be included for allocating
costs of new facilities that do not fit under existing rate structures,
such as regional projects.
    Petitioners have requested rehearing and clarification regarding
certain of these principles, which we address in turn.
a. Coordination
    182. In order to satisfy the coordination principle, transmission
providers must provide stakeholders the opportunity to participate
fully in the planning process. The purpose of the coordination
requirement is to eliminate the potential for undue discrimination in
planning by opening appropriate lines of communication between
transmission providers, their transmission-providing neighbors,
affected state authorities, customers, and other stakeholders. The
planning process must provide for the timely and meaningful input and
participation of customers regarding the development of transmission
plans, allowing customers to participate in the early stages of
development.
Requests for Rehearing and Clarification
    183. EPSA and TDU Systems argue that, under Order No. 890,
transmission providers inappropriately retain veto rights over the
decision as to which upgrade projects to include in transmission plans.
These petitioners acknowledge that the transmission provider has the
ultimate obligation to comply with its tariff, but argue that those
tariff obligations be fulfilled in a way that allows for full and equal
participation of customers. EPSA argues that transmission providers
should be obligated to consider consensus positions, to present to the
Commission or its designee minority opinions that have been excluded,
and to explain why consensus proposals that have been disregarded will
not be converted into actual plans to expand or reduce constraints on
the system. TDU Systems request that transmission providers be required
to post on their Web sites a record of the transmission planning
decisions that reflect the views and votes of all participants to that
process. TDU Systems argue that this would enable the Commission to
determine whether the plan reflects consensus among stakeholders and
the needs of customers, as opposed to the unilateral determinations of
the transmission providers. NRECA asks the Commission to clarify that
LSEs in particular have the opportunity to be an integral and equal
part of the regional planning process from the beginning of the process
to its end, including implementation of the regional participation
principle.
    184. NRECA argues that comparability requires that LSEs have equal
weight in decision-making. Otherwise, NRECA contends that transmission
providers will continue to have the opportunity and right to
discriminate. NRECA expresses concern that transmission providers will
be able to develop the basic criteria, assumptions, and data that
underlie transmission plans on their own and merely present the results
to customers after the fact. NRECA asks the Commission to clarify that
public utility transmission providers may not arbitrarily,
deliberately, or

discriminatorily disregard the input of LSE customers at any stage in
the development and drafting of the transmission plan and modify the
pro forma Attachment K to reflect that LSEs will be an integral part of
the planning process.
    185. With regard to small LSE customers, NRECA asks the Commission
to clarify that the new requirement that transmission providers develop
and implement joint planning processes does not leave customers that
lack the resources to fully participate in the planning process in a
worse position than they were in under Order No. 888. NRECA states
that, under Order No. 888, transmission providers were required to plan
and expand their systems to meet the needs of all network customers and
long-term point-to-point customers. NRECA contends that the new joint
planning requirement could be read to allow transmission providers to
refuse to consider these customers' needs if they are unable to
participate fully in the transmission planning process. NRECA suggests
that participation in the planning process be an opportunity for load-
serving customers, not an obligation, and that transmission providers
be required to plan for those that are unable to fully participate.
    186. Constellation requests that the Commission clarify that it
will closely monitor the planning process to ensure that reforms are
implemented in a meaningful way and that customers have the ability to
truly participate in the process. Williams requests that the planning-
related requirements of Order No. 890 be augmented to require a written
record of stakeholder input, in order to guarantee informed
consideration and debate of non-transmission provider proposals.
    187. EEI seeks clarification that transmission providers may adopt
restrictions on the disclosure of CEII in the context of transmission
planning. EEI argues that login requirements and nondisclosure
agreements may not provide sufficient protection for CEII. EEI suggests
that transmission providers be allowed to adopt the Critical
Infrastructure Protection (CIP) reliability standards for the
disclosure of CEII that the Commission adopts in Docket No. RM06-22-
000, Mandatory Reliability Standards for Critical Infrastructure
Protection.
Commission Determination
    188. The Commission affirms the decision in Order No. 890 not to
require the development of transmission plans on a co-equal basis with
customers. Transmission planning is the tariff obligation of the
transmission provider, and the pro forma OATT planning process adopted
in Order No. 890 is the means to see that it is carried out in a
coordinated, open, and transparent manner. It would not be appropriate
to allow customers and others that do not bear the responsibility for
tariff compliance to have co-equal control over the planning process.
We reiterate, however, that the planning process must provide for the
timely and meaningful input and participation of all interested
customers and other stakeholders in the development of transmission
plans. Customers and other stakeholders therefore must have the
opportunity to participate at the early stages of the development of
the transmission plan, rather than merely given an opportunity to
comment on transmission plans that were developed in the first instance
without their input.
    189. We disagree that the additional processes proposed by EPSA,
TDU Systems, and Williams are necessary at this time to ensure that
transmission providers do not unduly discriminate in the performance of
their planning responsibilities. Customers and other stakeholders have
been given a meaningful opportunity to participate in the planning
process and to voice their concerns, not a formal ``vote'' on the
transmission plan. While we would not consider it reasonable for the
transmission provider to act in an arbitrary fashion by simply ignoring
the comments and concerns of interested parties, we do not believe it
appropriate at this time to adopt additional procedural mechanisms to
measure or track the views of those participants in the planning
process. Should disputes arise, they should first be addressed through
the dispute resolution process set forth in the transmission provider's
Attachment K and then, if necessary, to the Commission's attention
through a complaint or other appropriate procedural mechanism.
    190. With regard to participation by small LSEs in planning
activities, we reiterate that the planning process adopted in Order No.
890 is intended to supplement, not replace, the transmission provider's
obligations under section 28.2 of the pro forma OATT to plan for the
transmission needs of its network customers on a comparable basis and
in accordance with Good Utility Practice, as well as the obligation to
construct new facilities pursuant to sections 13.5 and 15.4 of the pro
forma OATT to meet the service requests of its long-term point-to-point
customers. Transmission providers are therefore required to craft a
planning process that allows for a reasonable and meaningful
opportunity for those that are interested and able to meet and
otherwise interact with the transmission provider.\74\ Notwithstanding
a smaller LSE's inability to participate in the additional processes
implemented in compliance with Order No. 890, the transmission provider
still must fulfill its network service obligation to that customer.
---------------------------------------------------------------------------

    \74\ See Order No. 890 at P 453.
---------------------------------------------------------------------------

    191. In response to EEI, we clarify that, in addition to login
requirements and nondisclosure agreements, transmission providers may
adopt further restrictions on the distribution of CEII consistent with
any CIP reliability standards that the Commission may adopt in Docket
No. RM06-22-000.
b. Openness
    192. In order to satisfy the openness principle, transmission
planning meetings must be open to all affected parties including, but
not limited to, all transmission and interconnection customers, state
commissions and other stakeholders. The Commission recognized in Order
No. 890 that it may be appropriate in certain circumstances, such as a
particular meeting of a subregional group, to limit participation to a
relevant subset of these entities. The Commission emphasized, however,
that the overall development of the plan must remain open.
Requests for Rehearing and Clarification
    193. TDU Systems argue that any condition under which a
transmission planning meeting could be limited so as to exclude certain
customers or stakeholders must be explicitly set forth in the
transmission provider's Attachment K. Otherwise, TDU Systems contend
the transmission provider will retain undue discretion over who is
allowed to participate in meetings.
Commission Determination
    194. The Commission agrees with TDU Systems that the circumstances
under which participation in a planning meeting is limited should be
clearly described in the transmission provider's Attachment K planning
process. All affected parties must be able to understand how, and when,
they are able to participate in planning activities.
c. Transparency
    195. In order to satisfy the transparency principle, transmission
providers must disclose to all customers and other stakeholders the
basic criteria, assumptions, and data that underlie their transmission
system plans. The Commission concluded that this

information should enable customers, other stakeholders, or an
independent third party to replicate the results of planning studies
and thereby reduce the incidence of after-the-fact disputes regarding
whether planning has been conducted in an unduly discriminatory
fashion. Among other things, the Commission required transmission
providers to make available information regarding the status of
upgrades identified in their transmission plans in addition to the
underlying plans and related studies.
Requests for Rehearing and Clarification
    196. TDU Systems ask the Commission to clarify that transmission
providers, and transmission-owning members of an RTO or ISO, must
provide customers and other stakeholders with base case and change case
data. TDU Systems contend that this would be consistent with the
Commission's goal of allowing stakeholders to replicate the results of
planning studies and, in their view, would virtually eliminate disputes
regarding whether planning has been conducted in an unduly
discriminatory fashion.
    197. TAPS questions whether the Standards of Conduct would trigger
the full functional separation requirement for a non-public utility
transmission provider participating in the planning process. TAPS
contends that both transmission and generation functions of a non-
public utility transmission provider could participate in planning
activities, consistent with the Standards of Conduct, so long as all
information used in transmission planning is made available to all
participants. If the Commission disagrees, TAPS asks that new
mechanisms be adopted to assure information is not abused, independent
from the Standards of Conduct and existing Standards of Conduct waivers
that do not inhibit the participation of non-public utility
transmission providers in the planning process. TAPS suggests that any
entity be allowed to participate in the regional planning process if it
establishes procedures defining which employees/consultants may receive
confidential transmission and planning information and prohibiting such
employees/consultants from sharing that information with the entity's
wholesale merchant personnel.
    198. Old Dominion requests that the Commission adopt performance
metrics governing transmission planning in addition to reports
regarding the status of upgrades. Old Dominion suggests that the
Commission specifically require transmission providers to report on the
progress and construction of all upgrades and facilities in the
transmission plan.
Commission Determination
    199. In Order No. 890, the Commission required transmission
providers to disclose to all customers and other stakeholders the basic
criteria, assumptions, and data that underlie their transmission system
plans.\75\ To the extent necessary, we clarify in response to TDU
Systems that this includes disclosure of transmission base case and
change case data used by the transmission provider. These are basic
assumptions necessary to adequately understand the results reached in a
transmission plan.
---------------------------------------------------------------------------

    \75\ See id. at P 471.
---------------------------------------------------------------------------

    200. With regard to management of non-public information by non-
public utility transmission providers, we reiterate that the
reciprocity obligation requires non-public utility transmission
providers to abide by the Standards of Conduct or obtain waiver of
them.\76\ Although we recognize that compliance with the Standards of
Conduct can impose costs on small entities, an open planning process
cannot be fully successful if certain entities (whether jurisdictional
or nonjurisdictional) can use planning-related information to obtain an
undue advantage. The Commission therefore explained in Order No. 890
that it may be necessary to revisit waivers of the Standards of Conduct
granted to certain non-public utility transmission providers in the
past.\77\ The Commission declined to alter such waivers on a generic
basis in Order No. 890 and we affirm that decision here.
---------------------------------------------------------------------------

    \76\ See Order No. 888-A at 30,286.
    \77\ See Order No. 890 at P 474.
---------------------------------------------------------------------------

    201. As TAPS notes, many of the concerns regarding management of
non-public information shared in the planning process can be alleviated
by simultaneous disclosure of that information to all participants.
Moreover, the Standards of Conduct govern the relationship and exchange
of information between transmission providers and their marketing or
energy affiliates. Entities that do not own, operate or control
transmission facilities, and who are not affiliated with transmission
providers, are not subject to the Standards of Conduct. We believe
establishment of new mechanisms to manage the sharing of non-public
planning information by transmission providers subject to the Standards
of Conduct would be premature and more appropriately addressed in any
proceeding in which the revocation of a Standards of Conduct waiver is
considered.
    202. We also decline to adopt additional performance metrics
governing transmission planning. The Commission required in Order No.
890 for transmission providers to make available information regarding
the status of upgrades identified in their transmission plans.\78\
Customers and other stakeholders that are interested in the
implementation of the transmission plan will be able to monitor this
information to gather information regarding the progress and
construction of upgrades and facilities. The Commission does not
believe further reporting requirements are necessary at this time to
keep interested parties informed regarding the status of upgrades
identified in a transmission plan.
---------------------------------------------------------------------------

    \78\ See id. at P 472.
---------------------------------------------------------------------------

d. Information Exchange
    203. In order to satisfy the information exchange principle,
transmission providers must develop guidelines and a schedule for the
submittal of information in consultation with their network and point-
to-point customers. The Commission stressed that information collected
by transmission providers to provide transmission service to their
native load customers must be transparent and equivalent information
must be provided by transmission customers to ensure effective planning
and comparability. Point-to-point customers were also required to
submit any projections they have of a need for service over the
planning horizon and at what receipt and delivery points.
Requests for Rehearing and Clarification
    204. E.ON U.S. requests that the Commission clarify that all
entities seeking comparable treatment for transmission planning
purposes, including any non-public utilities, must share their cost
information with the transmission provider, as needed for planning
purposes. E.ON U.S. contends that it must have access to information
regarding all of its customers' dispatch and transmission costs in
order to implement joint planning as envisioned by Order No. 890. E.ON
U.S. acknowledges that this information would need to be treated as
competitively sensitive and shielded from the transmission provider's
merchant function employees.
    205. Duke seeks clarification that projections of a point-to-point
customer's anticipated needs do not have to be included in the models

serving as the predicate of the transmission plan. Duke agrees that,
while projected uses may be helpful in understanding the scope of the
potential need for future upgrades, only reservations impose an
obligation on the transmission provider.
Commission Determination
    206. The Commission clarifies in response to E.ON U.S. that, within
the context of transmission planning, customers should only be required
to provide cost information for transmission and generation facilities
as necessary for the transmission provider to perform economic planning
studies requested by the customer. If stakeholders request that a
particular congested area be studied, they must supply relevant data
within their possession to enable the transmission provider to
calculate the level of congestion costs that is occurring in the near
future.\79\ This may necessarily involve customers providing their cost
information. As E.ON U.S. notes, transmission providers must maintain
the confidentiality of this information, protecting it from
distribution to employees of the merchant function and its affiliates.
Transmission providers must clearly define in their Attachment K the
information sharing obligations placed on customers in the context of
economic planning.
---------------------------------------------------------------------------

    \79\ See id. at P 550. The Commission also required the
transmission provider's merchant function to provide any information
necessary for economic planning studies (e.g., redispatch cost
information).
---------------------------------------------------------------------------

    207. We clarify in response to Duke that good faith projections of
anticipated point-to-point uses of the transmission system are intended
only to give the transmission provider additional data to consider in
its planning activities. The Commission did not intend to suggest in
Order No. 890 that such projections be treated as a proxy for actual
reservations. Even though they are not the equivalent of reserved uses
of the system, such projections could, for example, provide planners
with likely scenarios for new investment.
e. Comparability
    208. In order to satisfy the comparability principle, transmission
providers must develop, after considering the data and comments
supplied by customers and other stakeholders, a transmission system
plan that (1) meets the specific service requests of its transmission
customers and (2) otherwise treats similarly-situated customers (e.g.,
network and retail native load) comparably in transmission system
planning. The Commission also required that customer demand resources
be considered on a comparable basis to the service provided by
comparable generation resources where appropriate.
Requests for Rehearing and Clarification
    209. E.ON U.S. argues that the comparability principle poses a
dilemma for vertically-integrated utilities in that the utility must
engage in least cost planning at the state level, but is required to
engage in comparable planning at the federal level. E.ON U.S. questions
whether comparability requires the transmission provider to include all
customer-identified projects in its plan or whether the transmission
provider must merely consult with customers regarding their projects.
E.ON U.S. also objects to treating a non-public utility customer
comparably to its own native load in instances when the non-public
utility customer fails to do the same in its own transmission planning
activities. E.ON U.S. requests that the Commission clarify that public
utilities are not required to include non-public utilities in
transmission planning to the extent a non-public utility has not
adopted the transmission planning principles of the pro forma OATT.
    210. REPIO argue that planning processes must be clear to ensure
that transmission providers fairly consider and implement the best
alternatives among transmission, generation, and demand response
options. To that end, REPIO ask the Commission to make explicit the
requirement that all resource options be given technology neutral
treatment.
    211. Areva, however, argues that transmission providers must be
required to do more than simply include demand resources in the
planning process, arguing that the Commission failed to adequately
encourage the use of alternative technologies as required by section
1223 of EPAct 2005. Areva contends that the Commission erred in failing
to provide new opportunities for advanced technologies in the energy
markets, particularly demand response resources. Areva argues it is
inadequate to merely allow participation of comparable demand-side
resources and, instead, the Commission must take the steps necessary to
promote integration of advanced technologies in the planning process,
including the assessment of penalties for failure to include such
technologies in transmission plans and, ultimately, on the transmission
grid. If the Commission declines to do so, Areva contends that the
Commission at a minimum should require transmission providers to report
their consideration of advanced technologies in their planning process,
highlight uses of such technologies in their resulting transmission
plan, or report to the Commission why such technologies were excluded
from the resulting transmission plan.
    212. TDU Systems, however, ask the Commission to confirm that
demand resources can only substitute for truly comparable generation
resources in the planning process. TDU Systems state that demand
resources are, for example, non-dispatchable and can be reasonably
substituted only for equivalent non-dispatchable blocks of energy. TDU
Systems ask the Commission to establish criteria for determining
whether demand resources are comparable to generation resources for
purposes of consideration in the transmission plan or direct
transmission providers to develop such criteria in their Attachment K
proposals.
Commission Determination
    213. Comparability requires that the interests of transmission
providers and their similarly-situated customers be treated on a
comparable basis in the transmission planning process.\80\ We do not
believe that this creates a conflict with least cost planning at the
state level. Comparability simply requires that a transmission provider
engage in comparable planning for its similarly-situated customers. The
transmission provider retains discretion as to which solutions to
pursue. Transmission providers are therefore not required to include
all customer-identified projects in its plan, so long as similarly-
situated customers are given comparable consideration.
---------------------------------------------------------------------------

    \80\ See id. at P 494.
---------------------------------------------------------------------------

    214. With regard to non-public utility transmission providers, we
reiterate our expectation of participation in the planning processes
established pursuant to Order No. 890 consistent with their reciprocity
obligations.\81\ Reciprocity dictates that non-public utility
transmission providers that take advantage of open access due to
improved planning should be subject to the same requirements as
jurisdictional providers. A non-public utility transmission provider
with reciprocity obligations that declines to adopt a planning process
that complies with Order No. 890 therefore may not be considered to be
providing reciprocal transmission service and may be at risk of being
denied open access transmission services by a public utility
transmission provider. We will consider on a case-by-case basis how a
transmission provider should treat for planning purposes a non-public
utility

transmission provider that fails to implement a planning process that
fulfills the requirements of Order No. 890.\82\
---------------------------------------------------------------------------

    \81\ See id. at P 441.
    \82\ As the Commission noted in Order No. 890, the Commission
may exercise its authority under section 211A on a case-by-case
basis if we find on the appropriate record that non-public utility
transmission providers are not participating in the planning
processes required therein. See id. at P 441.
---------------------------------------------------------------------------

    215. We disagree with Areva that the transmission planning process
required in Order No. 890 is inconsistent with section 1223 of EPAct
2005.\83\ The Commission made clear in Order No. 890 that advanced
technologies and demand-side resources must be treated comparably where
appropriate in the transmission planning process and, thus, the
transmission provider's consideration of solutions should be technology
neutral. We believe that the reforms adopted in Order No. 890 are
sufficient to ensure comparable consideration of such technologies in
transmission planning and, therefore, we decline to impose the type of
special penalties proposed by Areva.
---------------------------------------------------------------------------

    \83\ We note that, in addition to the reforms adopted in Order
No. 890, the Commission is taking steps in other proceedings to
encourage the deployment of advanced technologies as required by
section 1223 of EPAct 2005. See, e.g., Promoting Transmission
Investment through Pricing Reform, Order No. 679, 71 FR 43294 (July
31, 2006), FERC Stats & Regs. ] 31,222 at P 302 (2006), order on
reh'g, Order No. 679-A, 72 FR 1152 (Jan. 10, 2007), FERC Stats. &
Regs. ] 31,236 (2007), order on reh'g, Order No. 679-B, 119 FERC ]
61,062 (2007).
---------------------------------------------------------------------------

    216. We disagree with TDU Systems that comparability requires that
generation resources and demand resources be subject to the same
operational parameters in every circumstance. Treating similarly-
situated resources on a comparable basis does not necessarily mean that
the resources are treated the same. As part of its Attachment K
planning process, each transmission provider is required to identify
how it will treat resources on a comparable basis and, therefore,
should identify how it will determine comparability for purposes of
transmission planning.
f. Dispute Resolution
    217. In order to satisfy the dispute resolution principle,
transmission providers must develop a dispute resolution process to
manage disputes that arise from the Attachment K planning process. The
Commission stated that the dispute resolution process must address both
procedural and substantive planning issues, as the purpose for
including a dispute resolution process is to provide a means for
parties to resolve all disputes related to the planning process before
turning to the Commission.
Requests for Rehearing and Clarification
    218. TDU Systems ask the Commission to clarify that transmission
providers must develop a dispute resolution process in collaboration
with transmission customers and other stakeholders. TDU Systems argue
that this clarification is necessary to assure that ``the shape of the
table'' for dispute resolution is not fashioned to favor one side.
    219. Duke asks the Commission to clarify whether alternative
dispute resolution (ADR) will become a vehicle to challenge the
transmission plan ultimately adopted by the transmission provider. Duke
questions any intent by the Commission to exercise authority to approve
or disapprove a transmission plan. Duke argues that ADR should not be
used to substantively second guess a vertically-integrated transmission
provider's plan. If ADR is intended to address substantive planning
issues, Duke asks the Commission to clearly delineate the scope of
those issues. Duke also asks the Commission to state the basis for any
determination that ADR could be used to require changes to a
transmission plan that would have the effect of fashioning binding
obligations to build or not to build any particular facility in
contravention of the transmission plan.
Commission Determination
    220. As with any aspect of the transmission provider's Attachment K
compliance filing, the Commission encourages stakeholder involvement in
the development of an appropriate dispute resolution process to govern
planning-related disputes. The Commission will carefully review each
compliance filing to ensure that the proposed planning process is
consistent with the principles and other requirements of Order No. 890.
Any stakeholder that has concerns regarding the dispute resolution
mechanism proposed by a transmission provider, or any other aspect of
the compliance filing, may bring them to the Commission's attention on
review of the proposal.
    221. We disagree with Duke that the scope of this dispute
resolution mechanism is limited to procedural issues. As the Commission
explained in Order No. 890, the dispute resolution process should be
available to address all disputes related to the planning process, both
procedural and substantive.\84\ This does not mean, as Duke implies,
that any changes to the plan that may result from dispute resolution
procedures become a binding obligation to build. In requiring a dispute
resolution process for planning-related disputes, the Commission is not
asserting any greater authority than it otherwise has to ensure that
transmission providers comply with their tariff obligations to expand
their systems to meet the needs of their customers. The dispute
resolution process therefore does not change the rights or obligations
otherwise established in the pro forma OATT. As we reiterate above, the
Attachment K planning process does not place an affirmative obligation
on the transmission provider to build upgrades identified in a plan.
The tariff requirements regarding the construction of new facilities
are covered in other portions of the pro forma OATT, as discussed
above.
---------------------------------------------------------------------------

    \84\ See id. at P 501.
---------------------------------------------------------------------------

g. Regional Participation
    222. In order to satisfy the regional participation principle,
transmission providers must coordinate with interconnected systems to
(1) share system plans to ensure that they are simultaneously feasible
and otherwise use consistent assumptions and data and (2) identify
system enhancements that could relieve congestion or integrate new
resources. The Commission explained that the specific features of the
regional planning effort should take account of and accommodate, where
appropriate, existing institutions, as well as physical characteristics
of the region and historical practices.
Requests for Rehearing and Clarification
    223. TDU Systems ask the Commission to clarify that the regional
participation principle requires both transmission providers and other
stakeholders to be actively involved in regional planning activities.
TDU Systems contend that some language in Order No. 890 could be read
to limit regional coordination to transmission providers.\85\
---------------------------------------------------------------------------

    \85\ Citing id. at P 523.
---------------------------------------------------------------------------

    224. National Grid asks the Commission to expand the regional
participation principle to expressly require regions to adopt
interregional planning processes subject to the same nine principles
applicable to individual regions. National Grid argues that there will
be little improvement in the area of interregional planning, and that
disputes will continue to arise, in the absence of generic action by
the Commission.

    225. EPSA suggests that Commission staff be designated to attend
the development of all regional planning processes in non-RTO areas, in
order to ensure adequate and timely oversight and accountability during
the development stage, as well as to ensure that all stakeholders have
a viable chance to participate in the development of their own regional
planning processes.
Commission Determination
    226. The Commission clarifies in response to TDU Systems that,
while the obligation to engage in regional coordination is directed to
transmission providers, participation in such processes is not limited
to transmission providers. In Order No. 890, the Commission required
transmission providers to develop a planning process that facilitates
regional participation and required that process, in turn, to be open
to all interested customers and stakeholders. In response to National
Grid, we emphasize that effective regional planning should include
coordination among regions. As the Commission explained in Order No.
890, the identification of relevant regions and sub-regions will depend
on the integrated nature of the power grid and the particular
reliability or resource issues affecting individual regions and sub-
regions.\86\ Each of these regions and sub-regions should coordinate as
necessary to share data, information and assumptions to maintain
reliability and allow customers to consider resource options that span
the regions.
---------------------------------------------------------------------------

    \86\ See id. at P 627.
---------------------------------------------------------------------------

    227. We decline EPSA's suggestion to direct Commission staff to
attend the development of all regional planning processes in non-RTO
areas. Commission staff has organized and attended a total of seven
transmission planning technical conferences around the country, and
engaged in numerous other meetings, phone calls and discussions, in
order to assist transmission providers and customers in the development
of planning processes that comply with the planning requirements of
Order No. 890.\87\ Transmission providers and stakeholders alike
actively participated in these conferences. Any concerns regarding the
inability of interested parties to participate in the development
process can be raised on Commission review of the Attachment K
compliance filings.
---------------------------------------------------------------------------

    \87\ The staff technical conferences were held on: June 4-7,
2007 in Little Rock, AR and October 1-2, 2007 in Atlanta, GA,
covering the Southeast including Southwest Power Pool and its
members; June 13, 2007 in Park City, UT, covering the Northwest and
June 26, 2007 in Phoenix, AZ, covering the Southwest and California,
as well as October 23-24, 2007 in Denver, CO, covering both of these
regions; and June 28-29, 2007 in Pittsburgh, PA and October 15-16,
2007 in Boston, MA, covering the ISO New England, NYISO, PJM, MISO,
and Mid-Continent Area Power Pool subregions.
---------------------------------------------------------------------------

h. Economic Planning Studies
    228. In order to satisfy the economic planning studies principle,
transmission providers must take into account both reliability and
economic considerations in their Attachment K planning processes. The
Commission stated that the purpose of this principle is to ensure that
customers may request studies that evaluate potential upgrades and
other investments that could reduce congestion or integrate new
resources and loads on an aggregated or regional basis, and not to
assign cost responsibility for any investments or otherwise determine
whether they should be implemented.\88\ The Commission determined that
customers should be permitted to choose the studies that are of the
greatest value to them, directing transmission providers to develop a
means to allow the transmission provider and stakeholders to cluster or
batch requests for economic planning studies so that the transmission
provider may perform the studies in the most efficient manner.
Customers must be given the right to request a defined number of high
priority studies annually, the costs of which would be recovered as a
part of the overall pro forma OATT cost of service.
---------------------------------------------------------------------------

    \88\ The Commission addressed the issue of cost allocation in a
separate principle, discussed below.
---------------------------------------------------------------------------

Requests for Rehearing and Clarification
    229. TDU Systems ask the Commission to clarify that the expansion
of economic planning required in Order No. 890 to include integration
of new resources and loads did not supplant the need to study both
short-term and long-term congestion. TDU Systems further argue that any
measure of congestion in the economic study process must be based on
total gross congestion rather than hedgeable congestion, which they
argue is unrealistic. TDU Systems state that in PJM, for example,
congestion includes only that which cannot be hedged through financial
instruments. TDU Systems contend that this ignores the significant
costs of purchasing the financial instruments necessary to hedge the
congestion and that gross congestion more accurately reflects what load
pays for congestion.
    230. TDU Systems also ask the Commission to clarify that each
transmission provider must specify in its Attachment K the process for
requesting and selecting economic planning studies and the number of
high priority studies that will be paid for by the transmission
provider. TDU Systems argue that the economic study process, including
selection of which studies to perform, must be developed in
collaboration with customers and other interested stakeholders. TDU
Systems, as well as NRECA, suggest that the high priority studies only
include those requested by non-affiliated customers so that the
economic planning process is not usurped by the transmission provider
and its affiliates.
    231. AWEA asks the Commission to require transmission providers to
engage in economic planning of upgrades to address the lumpiness of
transmission investments. AWEA argues that the needs of native load
groups, multiple generation projects, and load centers cannot be
optimized unless they are combined in a single transmission plan. AWEA
contends that comparability requires planning to provide capacity for
OATT customers so that the cost of large, lumpy upgrades are not all
assigned to single projects.
    232. EEI requests clarification that the stakeholders' right to
designate high priority studies applies to stakeholders as a group, not
to individual stakeholders. EEI asserts that allowing individual
stakeholders to designate specified numbers of studies would be
impractical and inconsistent with the goal of an aggregated or regional
approach to planning. Entergy asks the Commission to clarify that
economic studies must be related to congestion issues affecting a
stakeholder and not simply attempts to obtain competitive sensitive
information about another party's resources and loads. Entergy suggests
that a party requesting a study be required to explain the basis for
its request and how the study relates to its own transmission service
needs.
    233. MISO, NYISO and National Grid ask the Commission to clarify
that, within an RTO or ISO, requests for congestion studies must be
made and approved through existing stakeholder processes. Otherwise,
National Grid argues that studies may be tailor-made to the parochial
interests of the requestor with limited subregional scope, which in its
view would inhibit the regional planning process and tax RTO and ISO
resources. NYISO requests further clarification that transmission-
owning members of an RTO or ISO are not required to perform separate,

individual congestion studies at the request of customers.
    234. Southern argues that the economic planning requirements of
Order No. 890 should be based on the Commission's jurisdiction to
ensure just and reasonable rates, since the information from such
studies could facilitate customers' ability to optimize their future
transmission service. Southern contends that neither Good Utility
Practice nor comparability support adoption of the economic study
requirements of Order No. 890. Southern states that its transmission
function planners perform no congestion analysis and, instead, plan the
system to satisfy reliability requirements and to meet the needs of
firm transmission customers.
Commission Determination
    235. The Commission affirms the decision in Order No. 890 to allow
stakeholders the right to request a defined number of high priority
studies annually to address congestion and/or the integration of new
resources or loads.\89\ The expansion of the economic planning
principle in Order No. 890 did not supplant the need to study both
short-term and long-term congestion, if requested by a stakeholder, as
TDU Systems suggest. Similarly, the choice to study hedgeable or gross
congestion is the choice of the requesting stakeholder or group of
stakeholders. The intent of the economic planning principle is to allow
stakeholders, and not the transmission provider, to identify the
studies that are of the greatest value to them. This provides
sufficient flexibility to address customer needs, including the study
of large, lumpy transmission projects, as requested by AWEA.
---------------------------------------------------------------------------

    \89\ Order No. 890 at P 547.
---------------------------------------------------------------------------

    236. We agree with petitioners that the transmission provider's
Attachment K must clearly describe the process by which economic
planning studies can be requested and how they will be prioritized.\90\
We also agree that stakeholders as a group have the right to request
the defined number of high priority studies to be paid for by the
transmission provider.\91\ As a result, transmission providers must
develop a means to allow the transmission provider and customers to
cluster or batch requests for economic planning studies so that the
transmission provider may perform the studies in the most efficient
manner. By limiting the economic planning principle to a defined number
of high priority studies annually, the Commission did not intend to
preclude stakeholders from requesting additional studies. To provide
appropriate financial incentives, the stakeholder(s) requesting such
additional studies would be responsible for paying the cost of such
studies.\92\
---------------------------------------------------------------------------

    \90\ RTOs and ISOs may continue to use existing stakeholder
processes to identify which economic planning studies will be of
most benefit to the region, provided such processes are otherwise
consistent with the requirements of Order No. 890.
    \91\ See id. at P 547.
    \92\ See id. at P 546.
---------------------------------------------------------------------------

    237. We decline to generically limit the scope of economic planning
studies as requested by Entergy. Studies may be requested to address
congestion issues or the integration of new resources/loads. The
limited number of high priority studies available should restrict the
ability of stakeholders to use these studies for other purposes, since
stakeholders and the transmission providers will be working together to
determine which studies will be pursued. We also reject petitioners'
suggestion that the requests made by a transmission provider's
affiliates for economic planning studies should not count toward the
defined number of high priority studies. The transmission provider's
affiliates should be treated like any other stakeholder and, therefore,
their requests for studies should be considered comparably, pursuant to
the process outlined in the transmission provider's Attachment K.
    238. We clarify in response to NYISO that it is the transmission
provider's obligation to perform economic planning studies, just as it
is the transmission provider's obligation to comply with other aspects
of the planning process required in Order No. 890. As we explain above,
RTOs and ISOs have flexibility in determining how to fulfill their
planning-related obligations and may delegate certain responsibilities
to their transmission-owning members or otherwise incorporate the
processes of their members into the RTO/ISO planning process. To the
extent an RTO or ISO delegates any of its responsibilities in the
context of economic planning, it will be the obligation of the RTO or
ISO to ensure ultimate compliance with the requirements of Order No.
890.
    239. We disagree with Southern that the Commission may only require
transmission providers to undertake economic planning studies pursuant
to its authority to ensure just and reasonable rates. Consistent with
our authority under FPA section 206, the Commission acted in Order No.
890 to limit the opportunities for undue discrimination in the area of
transmission planning and to ensure that comparable service is provided
by all public utility transmission providers. As the Commission
explained in Order No. 890, a prudent vertically-integrated
transmission provider will plan not only to maintain reliability, but
also consider whether transmission upgrades or other investments can
reduce the overall costs of serving native load.\93\ To represent Good
Utility Practice and provide comparable service, the transmission
planning process under the pro forma OATT therefore must consider both
reliability and economic considerations.
---------------------------------------------------------------------------

    \93\ See id. at P 542.
---------------------------------------------------------------------------

    240. Southern states merely that its transmission planners do not
perform congestion analyses in particular, not that they disregard
economics in the planning of their system. Prudent vertically-
integrated transmission providers take into consideration whether
upgrades or other investments could allow them to meet the needs of
their customers on a more economic basis. Through the economic planning
principle, we simply require Southern, and other transmission
providers, to make available to their customers services that are
comparable to those they are performing on behalf of their native load.
We therefore affirm the decision in Order No. 890 to require
transmission providers to perform economic planning studies at the
request of their stakeholders.
i. Cost Allocation for New Projects
    241. In order to satisfy the cost allocation principle,
transmission providers must address in their Attachment K planning
processes the allocation of costs of new facilities. These cost
allocation methodologies are intended to apply to projects that do not
fit under existing rate structures, such as regional projects involving
several transmission owners or economic projects that are identified
through the study process, rather than projects built in response to
individual requests for service. The Commission declined to impose a
particular allocation methodology for such projects and, instead,
identified three factors to be considered upon review of cost
allocation proposals. First, we consider whether a cost allocation
proposal fairly assigns costs among participants, including those who
cause them to be incurred and those who otherwise benefit from them.
Second, we consider whether a cost allocation proposal provides
adequate incentives to construct new transmission. Third, we consider
whether the proposal is generally supported by state authorities and
participants across the region.

Requests for Rehearing and Clarification
    242. PSEG questions whether the Commission intended in Order No.
890 to mandate the funding of economic projects through the cost
allocation methodology developed as part of the transmission provider's
planning process. PSEG argues that this would be inappropriate since
certain transmission providers, such as NYISO, currently only conduct
reliability planning, not economic planning. PSEG argues that the most
transmission providers should be obligated to do is present information
so that market participants may respond to economic issues. In its
view, introduction of regulated transmission solutions in response to
economic enhancements destroys incentives for private investment and
precludes the possibility of other market-based solutions, such as
generation and demand side management, from providing a more efficient
solution. PSEG objects to the Commission's reliance on the PJM ``market
efficiency'' proposal, arguing that the Commission's action in that
proceeding was conditioned on PJM submitting a compliance filing to
clarify aspects of its proposal.\94\
---------------------------------------------------------------------------

    \94\ Citing id. at P 545 (citing PJM Interconnection, LLC, 117
FERC ] 61,218 (2006), reh'g pending).
---------------------------------------------------------------------------

    243. To the extent the Commission requires ratepayer funding of
economic upgrades, PSEG suggests that market participants who are asked
to pay be allowed to vote on acceptance of cost allocations for the
project. PSEG suggests that construction of a project be approved only
if a certain percentage vote in favor of building the project and no
more than a certain percentage vote against building the project. With
regard to reliability upgrades, PSEG argues that there are also
insufficient checks in place to ensure that RTOs and ISOs do not
undertake expensive upgrades to solve a reliability criteria violation
when simpler, less expensive projects may suffice. PSEG therefore
requests that the Commission require that a cost-benefit analysis be
conducted for both reliability and economic transmission projects.
    244. TDU Systems argue that the costs of all network upgrades
identified in the transmission plan be allocated and recovered on a
rolled-in basis. TDU System maintain that rolled-in rate treatment for
such upgrades would minimize disputes and encourage expansion by
providing certainty for transmission providers. TDU Systems contend
that failure to mandate rolled-in cost recovery for network upgrades
identified in the transmission plan defaults on the Commission's
obligations under FPA section 217 to promote expansion to support the
ability of LSEs to meet their service obligations.
    245. EPSA argues that any cost allocation of economic projects must
be based on clear and balanced economic metrics, calculations, and
assumptions. EPSA objects to any requirement that cost allocation
provisions for economic projects create a funding mechanism for
proponents of such projects, arguing that this would be inconsistent
with the Commission's statements that transmission providers are not
under an obligation to fund or build upgrades identified in the
transmission plan.
    246. Old Dominion urges the Commission to clarify Order No. 890 by
elaborating and expanding upon the factors the Commission will consider
in addressing cost allocation for new transmission. Old Dominion
suggests that the following issues be considered in evaluating whether
a cost allocation proposal is reasonable: facilitation of regional
market development; benefits over the life of the facility; reliability
benefits beyond resolution of the triggering reliability violation;
reduction in capacity, energy, and reserve costs from reliability
upgrades; consideration of benefits that may not be readily
quantifiable; need for rate certainty; and, avoidance of rate shock.
Old Dominion argues that elaboration on these factors will help
stakeholders reach consensus on cost allocation issues. Old Dominion
also seeks clarification that the cost allocation principle applies
equally to projects that are built by a single transmission owner, but
that have a regional impact.
    247. With regard to interregional cost allocation, Old Dominion and
TDU Systems argue that the Commission should require the cost
allocation criteria identified in the transmission provider's
Attachment K to apply to transmission facilities in one region that
provide benefits to customers in another region.\95\ Old Dominion
contends that omission of cross-border allocation requirements in the
OATT is inconsistent with basic cost causation principles as expressed
in Order No. 890 itself.\96\ TDU Systems argue that regions will
benefit from up-front resolution of cross-border allocation issues,
just as transmission providers benefit from up-front resolution of
regional cost allocation issues.
---------------------------------------------------------------------------

    \95\ Citing Midwest Ind. Sys. Operator, Inc., 117 FERC ] 61,241
(2006); Midwest Ind. Sys. Operator, Inc., 109 FERC ] 61,243 (2004).
    \96\ Citing Order No. 890 at P 559.
---------------------------------------------------------------------------

    248. E.ON U.S. asks the Commission to clarify that the cost
allocation principle may not be used to shift transmission construction
costs to border utilities that receive no direct benefit from the
construction. E.ON U.S. contends that the transmission customers of
each RTO or ISO already pay for the cost of upgrades through
transmission rates charged by the RTO or ISO.
    249. Duke does not object to the cost allocation principle, but
notes the difficulties that have been experienced in reaching consensus
in RTOs and ISOs and asks the Commission to consider delaying the
requirement beyond the 210-day due date if regional consensus cannot be
reached. In the alternative, Duke suggests that transmission providers
be allowed to submit allocation proposals as separate informational
strawmen that will serve as a vehicle for further discussion in the
region.
Commission Determination
    250. The Commission affirms the decision in Order No. 890 to
require transmission providers to address in their Attachment K
planning processes cost allocation for new facilities that do not fit
under existing structures. Transmission providers and customers cannot
be expected to support the construction of new transmission unless they
understand who will pay the associated costs. This applies equally to
reliability and economic projects, whether built by a single
transmission owner or through joint ownership. However, mandatory
rolled-in rate treatment for all network upgrades identified in the
transmission plans, as suggested by TDU Systems, is not necessarily
appropriate. The Commission is fulfilling its obligations under FPA
section 217 to support expansion of the grid by requiring transmission
providers to address in their Attachment K processes how costs will be
allocated for reliability and economic projects, which we will address
on a case-by-case basis.
    251. We disagree with PSEG's contention that economic projects
should be excluded from the cost allocation provisions of the pro forma
OATT. As the Commission noted in Order No. 890, the issue of cost
allocation is particularly important as applied to economic
upgrades.\97\ Participants seeking to support new transmission
investment need some degree of certainty regarding cost allocation to
pursue that investment. We therefore agree with EPSA that the details
of proposed cost allocation methodologies must be clearly defined,

but emphasize that adoption of a cost allocation methodology will not
impose an obligation to build. As we reiterate above, identification of
an upgrade (reliability or economic) in the transmission plan does not
trigger an obligation to build under the Attachment K planning process.
Up-front identification of how the cost of a facility will be allocated
will, however, allow transmission providers, customers, and potential
investors to make the decision whether or not to build on an informed
basis.
---------------------------------------------------------------------------

    \97\ See id. at P 542.
---------------------------------------------------------------------------

    252. As explained above, all transmission providers, including RTOs
and ISOs, must undertake economic planning studies at the request of
stakeholders. Within an RTO or ISO, stakeholder processes can be used
to determine whether to pursue either economic or reliability upgrades
and, thus, voting mechanisms such as those suggested by PSEG could be
adopted if stakeholders desire. If the transmission provider or
stakeholders determine that other solutions are superior to
transmission upgrades, they may pursue those solutions instead and
integrate them into the transmission plan. The transmission planning
process established in Order No. 890 does not dictate that particular
investments be made, rather that an open, coordinated, and transparent
process be adopted to govern the decision-making process.
    253. We decline to adopt Old Dominion's suggestion to define in
more detail the factors to be considered in evaluating whether a cost
allocation proposal is reasonable. We intend to allow regional
flexibility regarding cost allocation and will consider each proposal
on a case-by-case basis. While we would expect many of the
considerations raised by Old Dominion to be relevant, since they fall
within the three factors identified by the Commission, the merits of
each proposal will be analyzed in light of the facts and circumstances
surrounding the proposal. Similarly, issues regarding cross-border
allocation or the potential shifting of costs to border utilities are
best addressed in the context of a particular proposal.
    254. Finally, we deny Duke's request to extend the Attachment K
compliance deadline as it relates to cost allocation proposals. We
acknowledge that resolution of cost allocation issues are difficult, as
are many of the issues raised in the context of transmission planning.
The Commission therefore granted transmission providers an extension of
the Attachment K filing deadline in order to allow for a second round
of staff technical conferences to review progress made on draft
compliance filings.\98\ Commission staff also issued a white paper to
further assist transmission providers in the drafting of Attachment K
tariff language.\99\ We believe that transmission providers have had
adequate time and guidance to complete the drafting of their Attachment
K proposals prior to the revised filing deadline.
---------------------------------------------------------------------------

    \98\ See Preventing Undue Discrimination and Preference in
Transmission Service, 120 FERC ] 61,103 (2007).
    \99\ Transmission Planning Process Staff White Paper, Docket No
RM05-17-000, et al. (August 2, 2007).
---------------------------------------------------------------------------

j. Additional Issues Relating to Planning Reform
(1) Independent Third-Party Coordinator
    255. The Commission declined in Order No. 890 to require the use of
an independent third party coordinator for transmission planning
activities, but encouraged transmission providers and their customers
to explore aspects of planning where the use of an independent
coordinator would be beneficial and to incorporate those aspects in
their planning processes.
Requests for Rehearing and Clarification
    256. Old Dominion argues that the Commission erred by failing to
recognize the need for an independent third party to oversee
transmission planning. With regard to RTOs in particular, Old Dominion
seeks confirmation that market monitoring units have the requisite
independence and authority to investigate and address undue influence
in the transmission planning process. Old Dominion asks the Commission
to direct RTOs to include in their compliance filings a description of
the market monitor's ability to identify and address undue influence in
the transmission planning process. Old Dominion argues that the ability
for customers to file a section 206 complaint is insufficient and can
only bring about prospective changes in monitoring, failing to remedy
the potential exercise of transmission market power in transmission
planning.
    257. TDU Systems support the decision not to mandate use of a
third-party facilitator in the transmission planning process and seek
clarification that, to the extend a third-party facilitator is used,
related costs can be included in a transmission provider's cost of
service only if all transmission customers agree or if a cost-benefit
analysis supports the use of the facilitator. TDU Systems contend this
would avoid disputes regarding the wisdom of using a third-party
facilitator if a significant segment of transmission customers object.
Commission Determination
    258. We disagree with Old Dominion that we did not adequately
address the potential role of an independent third party in
transmission planning in Order No. 890. As the Commission explained,
there may be benefits to be gained from independent third party
oversight, but transmission providers, customers, and other
stakeholders should determine for themselves in developing the
transmission provider's planning process whether, and if so how, to
utilize an independent third party.\100\ This would include
considerations regarding recovery of costs associated with the use of a
third-party in the transmission planning process and, within an RTO,
the role of the market monitor, if any, in that process.
---------------------------------------------------------------------------

    \100\ See Order No. 890 at P 567.
---------------------------------------------------------------------------

(2) Open Season for Joint Ownership
    259. Although the Commission acknowledged in Order No. 890 the
benefits of joint ownership of transmission facilities, the Commission
declined to mandate open season procedures to allow market participants
to participate in joint ownership. The Commission recognized that there
may be reasons, given the complexity of the transmission grid and
changing conditions of supply and demand for power, why any given
facility identified in a transmission plan may not be ultimately
constructed. If a transmission provider declines to construct an
identified upgrade, the Commission encouraged customers and third
parties to consider, either individually or jointly, development and
ownership of a project to the extent consistent with applicable state
law.
Requests for Rehearing and Clarification
    260. FMPA asks the Commission to order transmission providers to
make available opportunities to jointly participate in the ownership of
new transmission facilities to achieve the benefits of joint ownership
recognized by the Commission and remedy the discriminatory and
anticompetitive effects of excluding some public power utilities from
ownership. In the alternative, FMPA asks the Commission to take the
lesser step of establishing presumptions that transmission customers
are allowed to jointly invest in new grid transmission facilities and
that transmission providers are not entitled to rate incentives if they
exclude some systems that are willing to

invest in transmission. FMPA argues that such presumptions will prevent
recalcitrant transmission owners from refusing participation or from
using their control of the grid to extract unreasonable terms and
conditions, while allowing them to protect any legitimate interests
they may have.
    261. TDU Systems argue that diversification of ownership of the
grid, facilitated by mandatory open seasons for joint or third-party
ownership, would provide a structural remedy to the vertical market
power enjoyed by many transmission providers. They contend that the
inadequacy of the grid, combined with the unwillingness or inability of
transmission providers to invest in new infrastructure, has allowed
many transmission providers to retain generation dominance on their
systems and unduly discriminate against transmission customers. TDU
Systems argue that FPA sections 205 and 206 give the Commission
adequate authority to mitigate this market power by either requiring
open seasons for joint ownership or third-party ownership or by
conditioning market-based rate authority or incentive rates on
agreements to offer such open seasons.
    262. TDU Systems argue that the Commission at a minimum should
require transmission providers to hold open seasons for third-party
construction where a transmission provider is unwilling or unable to
construct a new facility that is identified as needed in the planning
process. TDU Systems further request that the Commission modify the pro
forma OATT to include an explicit obligation to interconnect joint or
third-party facilities constructed in response to projects identified
in the local or regional planning process.
Commission Determination
    263. The Commission affirms the decision in Order No. 890 not to
mandate procedures for joint ownership of transmission facilities. We
continue to believe that there are benefits to joint ownership,
particularly for large backbone transmission facilities, and encourage
transmission providers, customers, and third parties to consider joint
development and ownership as appropriate. The Commission acknowledged
in Order No. 890, however, that joint ownership can increase the
complexity of planning and developing a transmission project and we are
sensitive to concerns that formal open seasons can add to that
complexity.\101\ We therefore decline to mandate the generic use of
open seasons or establish presumptions, as suggested by FMPA, regarding
their use.
---------------------------------------------------------------------------

    \101\ Id. at P 594.
---------------------------------------------------------------------------

    264. We also reject TDU Systems' suggestion that declining to
mandate open seasons for joint ownership leaves the transmission
provider with unmitigated vertical market power. Transmission providers
are required under the OATT to make transfer capability available on a
non-discriminatory basis and to expand their systems as necessary to
accommodate requests for transmission service, including service
associated with new customer-owned transmission facilities. In the
absence of specific evidence of undue discrimination by a transmission
provider, we do not believe mandating open seasons or altering our
incentive rate program is necessary to mitigate market power in the
provision of transmission service. Customers and third parties remain
free to develop and construct facilities as they see fit and, through
the Attachment K planning process, incorporate the development of those
facilities into the transmission plan.

C. Transmission Pricing

1. Energy and Generation Imbalances
a. Tiered Approach to Imbalance Penalties in the OATT
    265. In Order 890, the Commission modified Schedule 4 of the pro
forma OATT regarding treatment of energy imbalances and adopted a
separate pro forma OATT schedule (Schedule 9) to govern treatment of
generator imbalances. The Commission determined that charges for both
energy and generator imbalances must follow three principles: (1) The
charges must be based on incremental cost or some multiple thereof; (2)
the charges must provide an incentive for accurate scheduling, such as
by increasing the percentage of the adder above (and below) incremental
cost as the deviations become larger; and (3) the provisions must
account for the special circumstances presented by intermittent
generators and their limited ability to precisely forecast or control
generation levels, such as waiving the more punitive adders associated
with higher deviations.
    266. The Commission also determined that the same tiered approach
should be used for both energy and generator imbalances. Imbalances of
less than or equal to 1.5 percent of the scheduled energy (or two
megawatts, whichever is larger) are to be netted on a monthly basis and
settled financially at 100 percent of incremental cost at the end of
each month. Imbalances between 1.5 and 7.5 percent of the scheduled
amounts (or 2 to 10 megawatts, whichever is larger) are to be settled
financially at 90 percent of the transmission provider's system
incremental cost for overscheduling imbalances that require the
transmission provider to decrease generation or 110 percent of the
incremental cost for underscheduling imbalances that require increased
generation in the control area. Finally, imbalances greater than 7.5
percent of the scheduled amounts (or 10 megawatts, whichever is larger)
are to be settled at 75 percent of the system incremental cost for
overscheduling imbalances or 125 percent of the incremental cost for
underscheduling imbalances.
Requests for Rehearing and Clarification
    267. TAPS contends that the use of the phrase ``same imbalance'' in
the language of Schedules 4 and 9 is imprecise and could lead to some
confusion. TAPS asks that the Commission amend the language of
Schedules 4 and 9 to be consistent with footnote 387 of Order No. 890,
in which the Commission states that a transmission provider may only
charge the penalty percent adder to the incremental cost for either an
hourly generator imbalance or an hourly energy imbalance for the same
imbalance.\102\ TAPS suggests modifying the first paragraph of Schedule
9 to read: ``The Transmission Provider may charge a Transmission
Customer a penalty for either hourly generator imbalances under this
Schedule or hourly energy imbalances under Schedule 4 for the
imbalances occurring during the same hour, but not both (unless the
imbalances aggravate rather than offset each other).'' TAPS requests
that the similar change be made to corresponding language in Schedule
4.
---------------------------------------------------------------------------

    \102\ See id. at P 632, n.387.
---------------------------------------------------------------------------

    268. Steel Manufacturers Association argues that the Commission
should abandon the dead band/penalty mechanism for energy imbalances
and adopt instead the basic framework employed in the organized
markets, where a customer pays or is paid the provider's incremental
cost for imbalances. Steel Manufacturers Association contends that, in
the organized markets, the Commission recognizes that pricing
imbalances at the real-time price of energy provides adequate
incentives to ensure that customers schedule accurately. Steel
Manufacturers Association argues that the Commission failed to justify
application of a different policy, i.e., escalating penalties, under
the pro

forma OATT. Steel Manufacturers Association contends that there is no
evidence of negative reliability impacts in the organized markets due
to the lack of inaccurate scheduling, nor is there evidence of
customers taking advantage of the transmission provider by leaning on
the transmission grid. Steel Manufacturers Association further contends
that similar imbalance pricing policies should apply in both market
structures. Steel Manufacturers Association argues that clearing
imbalances outside of the organized markets at the transmission
provider's marginal cost for the hour is sufficient for that purpose.
If the Commission retains a Schedule 4 with a bandwidth and penalty
structure, Steel Manufacturers Association requests that the Commission
institute a larger bandwidth of, at minimum, 10 percent for small
wholesale customers and discrete retail loads in order to provide some
measure of relief for those customers.
    269. Steel Manufacturers Association also requests that end-use
customers that provide ancillary services through demand response be
exempt from imbalance charges for imbalances created as a result of the
use of the demand response. Steel Manufacturers Association contends
that an end-use customer that modifies its usage in real-time, in order
to be price responsive or respond to a system operator's call to
curtail load, will create energy imbalances. If that end-use customer
is assessed a penalty for those energy imbalances, Steel Manufacturers
Association argues that it will have little incentive to provide an
ancillary service such as spinning reserve or regulation through demand
response. Steel Manufacturers Association suggests that the Commission
revise the energy imbalance provisions to encourage, rather than
discourage, demand response.
Commission Determination
    270. The Commission affirms the decision in Order No. 890 to adopt
a tiered bandwidth approach for both energy and generation imbalances.
We disagree with Steel Manufacturers Association that simply paying the
transmission provider's incremental cost for energy imbalances would
provide adequate incentives for customers to schedule accurately under
the pro forma OATT. Market structures in place within RTOs and ISOs are
fundamentally different from those in non-RTO/ISO regions. In the
organized markets, system operators generally use a five minute
dispatch with multiple suppliers of imbalance energy responding to
system operator instructions. Suppliers and customers alike are
therefore able to respond to real-time changes in locational prices
that reflect both the cost of energy and congestion, which serves to
discipline transmission customers and generators from deviating from
their instructed level. This is not the case outside of the organized
markets and, therefore, other incentives must be provided to discourage
deviations.
    271. We also decline to institute a larger bandwidth or eliminate
the penalty structure for energy imbalances caused by small wholesale
customers or discrete loads. Use of the bandwidths adopted in Order No.
890, with the 2 MW and 10 MW minimums for the first and second penalty
bands, appropriately links increased deviations and potential
reliability impacts on the system while allowing increased tolerance to
smaller customers. We note, moreever, that the 2 MW minimum specified
in Order 890 does allow for a 10 percent bandwidth, as Steel
Manufacturers Association requests, for loads 20 MW or less.
    272. We agree with Steel Manufacturers Association, however, that
end-use customers providing an ancillary service through demand
response should generally not be subject to penalties for imbalances
created as a result of providing the ancillary service. In this
respect, customers using demand resources for ancillary services should
not be treated differently from customers using generating units to
provide ancillary services. The mechanisms for addressing the self-
provision or third-party provision of ancillary services have developed
outside the pro forma OATT and we will not disrupt these developments.
Thus, there is no need to revise the pro forma OATT, as Steel
Manufacturers Association suggests, since existing practices for third-
party provided ancillary services should apply to demand resources as
they apply to generating resources.
    273. We agree with TAPS that the reference to ``same imbalance'' in
Schedules 4 and 9 could lead to confusion and amend the language of
those schedules accordingly. We revise the language of Schedules 4 and
9 to clarify that the transmission provider may charge a transmission
customer a penalty for either hourly generator imbalances under
Schedule 9 or hourly energy imbalances under Schedule 4 for imbalances
occurring during the same hour, but not both unless the imbalances
aggravate rather than offset each other.
b. Generator Imbalance Penalties
    274. The Commission concluded in Order No. 890 that formalizing
generator imbalance provisions in the pro forma OATT will standardize
the future treatment of such imbalances from the wide variety of
generator imbalance provisions that previously existed in various
generator interconnection agreements. Standardizing generator imbalance
provisions, in turn, should lessen the potential for undue
discrimination, increase transparency and reduce confusion in the
industry. The Commission emphasized, however, that it was not
abrogating existing generator imbalance agreements in this rulemaking
proceeding.
    275. With regard to intermittent resources, the Commission provided
that such resources are exempt from the third-tier deviation band and
would pay the second-tier deviation band charges for all deviations
greater than the larger of 1.5 percent or two megawatts. The Commission
defined intermittent resources for this purpose as ``an electric
generator that is not dispatchable and cannot store its fuel source and
therefore cannot respond to changes in system demand or respond to
transmission security constraints.'' The Commission also determined
that all generators should be excused from imbalance penalties that
occur due to directed reliability actions by a generator to correct
system frequency.
Requests for Rehearing and Clarification
    276. A number of petitioners seek rehearing and/or clarification of
the generator imbalance reforms adopted in Order No. 890. Sempra Global
asks that the Commission revise section 3 of the pro forma OATT to make
clear that generator imbalance service must be offered for any
transmission service used to deliver energy from a generator located
within the transmission provider's control area, as required in
Schedule 9. Sempra Global argues that section 3 of the pro forma OATT
is inconsistent with Schedule 9, since section 3 only requires a
transmission provider to offer generator imbalance service to a
transmission customer serving load within the transmission provider's
control area.
    277. EEI, Entergy, and Southern ask that the Commission clarify
that a transmission provider is entitled to charge either the
transmission customer or the generator for generator imbalance service
when the customer takes transmission service to deliver energy to an
off-system load. In their view, generator imbalance charges may only be
assessed to a transmission customer

under new Schedule 9. Southern and EEI argue that this may be
inappropriate because in many instances the generator is responsible
for the generator imbalance, not the transmission customer. If the
generator sells energy to more than one customer, Southern and EEI
contend that it will be virtually impossible to determine which
transmission customer should be assessed a charge and how the billing
would be determined.
    278. EEI and Southern propose changes to Schedule 9 to address
these concerns. EEI asks the Commission to clarify that either the
transmission customer or the generator must take generator imbalance
service in connection with any off-system sale of energy and that the
transmission provider has no obligation to provide transmission service
on its system to an off-system load unless the transmission customer or
the generator executes a service agreement committing to take generator
imbalance service. Southern, however, argues that the Commission should
require every generator, subject to the grandfathering provisions in
Order No. 890, to execute a service agreement to take and pay for
generator imbalance service pursuant to Schedule 9 of the OATT and be a
transmission customer for such purposes. If the Commission does not do
so, Southern asks in the alternative that the Commission clarify that
transmission providers, subject to the grandfathering provisions of
Order No. 890, have no obligation to provide transmission service from
an on-system generator to an off-system load if such generator has not
executed a service agreement under the transmission provider's OATT
providing for the generator to take and pay for generator imbalance
service.
    279. PNM argues that transmission providers should not be required
to provide generator imbalance service when doing so would impair
reliability for the transmission provider. PNM contends that some
control area operators may not be able to offer generator imbalance
service unless they can procure balancing energy and associated
capacity from another entity. PNM argues that the obligation to provide
Schedule 9 service should be contingent upon the transmission provider
determining that it is able to provide this service based upon a system
impact study. Even if the service can physically be provided, PNM
states that placing a must-offer requirement in Schedule 9,
particularly for the purpose of supplying imbalance energy for
intermittent generation, may have unreasonable impacts on the supply
resources operated by small host control areas. In PNM's view, an
absolute must-offer requirement for Schedule 9 could lead to
proportionately heavy impacts on small transmission providers that are
required to interconnect generation developed to serve distant urban
areas within large control areas.
    280. Joined by EEI and APS, PNM suggests that the Commission
address these reliability concerns by allowing transmission providers
the alternative of offering generators dynamic scheduling to change the
responsibility for generator imbalances from specific generators. In
cases where system reliability would be adversely affected, these
petitioners contend that requiring a generator to accept a dynamic
schedule of its output to the control area where the load is located,
instead of requiring the transmission provider to provide generator
imbalance service, would give the transmission provider a viable
alternative to ensure that the generator's imbalances are absorbed
without compromising the reliability of the system where the generator
is located, while also aligning the responsibility for supplying the
imbalances associated with the parties that enjoy the benefit of the
generation.
    281. EEI further argues that imbalance penalties fail to adequately
compensate transmission providers for threats to system reliability
caused by excessive generator imbalances and, therefore, use of dynamic
scheduling would be appropriate. If the Commission does not allow the
alternative of dynamic scheduling, APS requests that the Commission