924. The Commission clarified in Order No. 890 that a request for
termination of a network resource that is concurrently paired with a
request to redesignate that resource at a specific point in time will
not result in the network customer permanently forfeiting its rights to
use that resource as a designated network resource. Any change in ATC
that is determined by the transmission provider to have resulted from
the temporary termination shall be posted on OASIS during this
temporary period. A request that is not accompanied with a request to
redesignate that resource at a specific point in time is to be
considered an indefinite termination. After an indefinite termination
of a resource, the network customer has no continuing rights to the use
of such resource and future requests to designate that resource would
be processed consistent with section 30.2 of the pro forma OATT as a
designation of a new network resource.
Requests for Clarification and Rehearing
    925. NorthWestern argues that, once upgrades specified through the
interconnection process have been installed, the generator can be
specified as a network resource by any customer, at the time of
commercial operation of the generator or at any time in the future.
NorthWestern acknowledges that the Commission rejected this position in
Order No. 890, but contends that the Commission's determination cannot
be reconciled with the ability of a generator under Order No. 2003 to
designate, during the application process, whether it wishes to be
studied and interconnected as a network resource or an energy
resource.\337\ NorthWestern contends that interconnection as a network
resource assumes that the generator will be eligible to be designated
by any network customer to serve its load in the future. If this is not
the case, NorthWestern questions the distinction between energy
resource interconnection service and network resource interconnection
service and the transmission provider's ability to confidently study
any network generation request will be diminished. NorthWestern states
that a generator's request for network interconnection does not
necessarily mean that any customer has designated the generator as a
network resource, but only that it may be designated as a network
resource by any customer.
---------------------------------------------------------------------------

    \337\ Citing Order No. 2003.
---------------------------------------------------------------------------

    926. NorthWestern also requests clarification regarding the
interaction of transmission service and generation interconnection
requests, asking the Commission to confirm that both should be studied
through a single queue prioritized by request date. NorthWestern argues
that decoupling the network generation interconnection study from the
transmission service study could undermine reliability. NorthWestern
suggests that all generation interconnection and transmission service
requests be studied through a single study queue, where the requests
are prioritized by their request date, in order to allow the
relationship and mitigation requirements between senior and junior
queued transmission and interconnection requests to be known and
applied appropriately in junior queue studies.
Commission Determination
    927. We disagree with NorthWestern that a generator interconnected
under network resource interconnection service (NRIS) may be designated
as a network resource by any customer at any point in time. As the
Commission explained in Order No. 2003-A, NRIS status does not convey
any right to transmit power and does not constitute a reservation of
transmission capacity to any specific point.\338\ The purpose of NRIS
is to provide only those network upgrades needed to allow the aggregate
of generation in the facility's local area to be delivered to the
aggregate of load on the transmission provider's

transmission system, such that the output of the generating facility
will not be ``bottled up'' during peak load conditions.\339\ As a
result, NRIS does not necessarily provide the interconnection customer
with the capability to physically deliver the output of its generating
facility to any particular load on the system without incurring
congestion costs. Requests for delivery service inside the transmission
provider's transmission system may require additional studies and
upgrades to reduce congestion to acceptable levels.\340\
---------------------------------------------------------------------------

    \338\ Order No. 2003-A at P 516.
    \339\ Id. at P 531.
    \340\ Id. at P 502.
---------------------------------------------------------------------------

    928. We decline to adopt at this time NorthWestern's request that
all transmission service and generation interconnection requests be
studied through a single queue prioritized by application date and
time. NorthWestern requests specific revisions to the management of
generator interconnection and transmission service request queues that
were not proposed in the NOPR and are beyond the scope of this
proceeding. Earlier this month, Commission staff held a technical
conference to address issues related to the management of
interconnection queues in Docket No. AD08-2-000.\341\ The queuing
concerns raised by NorthWestern are more appropriately addressed in
that proceeding.
---------------------------------------------------------------------------

    \341\ See Interconnection Queuing Practices, Notice of Technical
Conference, Docket No. AD08-2-000 (Nov. 2, 2007); Interconnection
Queuing Practices, Notice Inviting Comments, Docket Nos. AD08-2-000,
et al.
---------------------------------------------------------------------------

(2) Minimum Lead-Time
    929. The Commission concluded in Order No. 890 that network
customers should not be permitted to make firm third-party sales from
any designated network resource without (1) undesignating that resource
for the period of the third-party sale pursuant to section 30.3 of the
pro forma OATT and (2) providing notice of such undesignation before
the firm scheduling deadline. The Commission stated that this
requirement allows undesignated capacity to be acquired on a non-firm
basis without creating an undue adverse effect on third-party sales.
Requests for Clarification and Rehearing
    930. Various petitioners have requested rehearing or clarification
of the Commission's determinations regarding the minimum lead-time for
undesignating network resources in order to make firm third-party
sales.\342\ Petitioners generally object to imposing this minimum lead-
time requirement, arguing that it unduly restricts the ability of
network customers and the transmission provider to engage in third-
party sales and impairs liquidity in the market.
---------------------------------------------------------------------------

    \342\ E.g., APS and EEI, E.ON U.S., Financial Service Joint
Filers, Pacific Northwest Parties, PNM, Progress Energy, Washington
IOUs, and WSPP. In addition, APS and EEI, Barrick Goldstrike Mines,
Bonneville, EPSA, Morgan Stanley, Pacific Northwest IOUs, PNGC
Power, Powerex, PPL Parties, Public Power Council, San Diego G&E,
SCE&G, SoCal Edison, Southern, Southwestern Utilities, and WSPP
filed post-technical conference comments on this issue.
---------------------------------------------------------------------------

Commission Determination
    931. In a notice issued on September 7, 2007, the Commission
extended the effective date of the minimum lead-time for undesignating
network resources adopted in Order No. 890, deferring the effectiveness
of the phrase ``* * * but not later than the firm scheduling deadline
for the period of termination'' in section 30.3 of the pro forma
OATT.\343\ The Commission stated that it will address the appropriate
effective date for that tariff language, or any modification thereto,
in a future order to be issued in this proceeding. The Commission
therefore defers responding to the requests for rehearing and
clarification on this subject pending further action in the forthcoming
order.
---------------------------------------------------------------------------

    \343\ Preventing Undue Discrimination and Preference in
Transmission Service, Notice Granting Extension of Effective Date,
120 FERC ] 61,222 (2007).
---------------------------------------------------------------------------

(3) General
    932. In response to commenter requests, the Commission addressed a
number of other issues in Order No. 890 related to the undesignation of
network resources. Among other things, the Commission denied a request
that network customers be given the flexibility to substitute new
designated network resources without abandoning the original
transmission queue position of the existing designated network
resource. The Commission explained that granting the request would,
without any apparent justification, put point-to-point customers
seeking ATC freed up by an undesignation at a disadvantage. Pending the
implementation of new OASIS functionality to accept electronic requests
to designate and undesignated network resources, the Commission stated
that network customers could submit their requests by transmitting the
required information to the transmission provider by telefax or
providing the information by telephone over the transmission provider's
time recorded telephone line.
    933. The Commission clarified that a network customer may only
enter into a third-party power sale from a designated network resource
if the third-party power purchase agreement allows the seller to
interrupt power sales to the third party in order to serve the
designated network load. The Commission stated that such interruptions
must be permitted without penalty, to avoid imposing financial
incentives that compete with the network resource's obligation to serve
its network load. The Commission also clarified that firm third-party
sales may be made from an undesignated portion of a network customer's
network resources (i.e., a ``slice-of-system sale''), so long as all of
the applicable requirements are met. The Commission stated that the
network customer must submit undesignations for each portion of the
resource supporting the third-party sale.
    934. The Commission rejected requests to relax rules for changing
the undesignation of network resources at any time to handle system
emergencies, force majeure events, forced outages or unusual weather
conditions. The Commission explained that other procedures such as
those in NERC's standard for Capacity & Energy Emergencies, EOP-002-2,
or the possible use of capacity benefit margin are more appropriate to
deal with legitimate system emergencies. In situations where a request
to undesignate a network resource cannot be accommodated without
jeopardizing reliability, the Commission stated that the transmission
provider could deny the request.
Requests for Rehearing and Clarification
    935. Bonneville argues that, if the only ATC on a path is the ATC
freed up by an undesignation, then the network customer should be
granted use of that ATC for its requested alternate service. Bonneville
contends that such a policy would not adversely affect customers
because, if the customer that is undesignating a resource is not placed
first in line for the capacity made available by the undesignation,
that customer would not undesignate (since it will continue to need the
capacity on its existing path) and no capacity would be freed up for
others. Bonneville concludes that refusing to place the undesignating
customer first in line for the freed-up ATC will harm that customer
while advantaging no one. Bonneville suggests that allowing such
redirects of network resources would be particularly helpful for
intermittent resources such as wind, given that transmission customers
with state-

mandated renewable resource requirements may wish to redirect for a
short-term period to import renewable energy, but may be unable to do
so on a constrained path if they are unable to utilize the capacity
they are freeing up by the request to undesignate.
    936. Several petitioners request rehearing or clarification with
respect to the Commission's finding in Order No. 890 that network
customers making firm third-party system sales from network resources
must undesignate each portion of each resource supporting the third-
party sales. \344\ Petitioners generally argue that requiring a network
customer to keep track of the individual generating units and amounts
of generation from each unit being used to supply a system sale is
unduly burdensome or impossible. South Carolina E&G argues that,
between the scheduling deadline and the time when service commences,
any number of events can change the available generating units being
dispatched, change the merit order dispatch, or cause dispatch of
additional units. Joined by EEI, South Carolina E&G asks the Commission
to allow slice of system sales from a generation fleet by undesignating
the amount of the sale.
---------------------------------------------------------------------------

    \344\ E.g., Duke, EEI, and South Carolina E&G. Pacific Northwest
IOUs raise similar issues in their post-tech conference comments.
---------------------------------------------------------------------------

    937. Duke states that the Commission's policies are clear that for
off-system system sales a generating resource must be identified on a
specific basis for purposes of arranging point-to-point transmission
service to support the off-system sale. However, with regard to
identifying which generating units will be used to generate the energy
to make on-system system sales, Duke argues that the Commission has
never required that particular units or portions of units be identified
and undesignated on a unit-by-unit basis. Duke contends that all
generating units that comprise the ``system'' are used to serve all
loads, and the undesignation process should occur through the
recognition that a share of the generation system is used for retail
native load and a share is used for wholesale native load (i.e.,
requirements customers) and off-system firm load. Duke maintains that
this approach is reasonable and ensures that the transmission provider
is not double-counting or double-reserving transmission capacity needed
to serve such loads, and is purchasing point-to-point service that is
needed.
    938. E.ON U.S. argues that the Commission has provided insufficient
protection for LSEs and others that may need to recall undesignated
resources for use to supply native load during times of system
emergencies. E.ON U.S. asks the Commission to make clear in the pro
forma OATT that the obligation to serve native load may require the
redesignation of network resources in times of system emergency. Absent
such a clarification, E.ON U.S. argues that LSEs will be reluctant to
make network resources available to serve the market and, in a time of
emergency, confusion may occur regarding the proper procedure for
redesignating resources.
    939. Pacific Northwest IOUs and South Carolina E&G request
clarification in their post-technical conference comments that a
network resource does not have to be undesignated before it is used to
support the provision of reserve energy under a regional reserve
sharing arrangement. E.ON U.S. requests similar clarification, arguing
that flexible undesignation rules are necessary to allow utilities to
quickly respond under reserve-sharing arrangements. Together, they
argue that the failure to provide such clarification, and the related
complications and potential sanctions, could impede or destroy reserve
sharing arrangements and/or seriously imperil system reliability. South
Carolina E&G proposes that the Commission expressly redefine network
load under the pro forma OATT to include responses by the transmission
provider to requests for emergency assistance or calls for reserves
under reserves sharing agreements. If the Commission concludes that the
undesignation requirements apply to designated network load used for
reserve sharing purposes, E.ON U.S. proposes to post on OASIS
information regarding its reserve sharing events within five days of
the end of each month in which an event occurred. E.ON U.S. states that
the particular units used to meet its reserve sharing obligation are
not known until it performs an after-the-fact, monthly allocation of
the highest-cost resources to off-system sales.
    940. MidAmerican requests clarification that, during the period
until improved OASIS functionality is available for designating and
undesignating network resources, electronic transmissions and e-mail
are acceptable means of designating and undesignating network
resources. MidAmerican argues that electronic transmittals are similar
to the already accepted telefax and recorded telephone line procedures,
in that they provide a quick, efficient means of communication that can
be readily stored.
    941. NRECA requests rehearing of the Commission's determination
that transmission providers have the discretion to deny undesignations
of network resources. NRECA argues that the Commission has given
transmission providers the ability to unduly discriminate against its
wholesale customers (i.e., its direct competitors). Because the
transmission provider is not likely to deny its own undesignation
requests, NRECA contends that comparability requires that it not be
allowed the ability to deny undesignation requests of its network
customers. NRECA argues that while the actual scheduling of a resource
could affect reliability, there should be no reliability effects from
the mere designation or undesignation of a resource. NRECA contends
that there are many other standards and procedures in place to protect
against insufficient capacity.
    942. If the Commission retains the ability to deny a request to
terminate the designation of a network resource, NRECA asks the
Commission to at least require that denials come at the direction of
the reliability coordinator, rather than the transmission provider.
NRECA argues that denying the undesignation of a network resource is
akin to designating the resource as a ``must-run'' generating resource.
If the resource is owned by the network customer, NRECA maintains that
the reliability coordinator should be able to designate the unit as a
reliability-must-run unit and compensate the network customer for its
dispatch. If the resource is not owned by the network customer, NRECA
argues that nothing in the FPA authorizes the Commission to require the
network customer or the owner of the resource to continue to contract
for service with each other or use any particular capacity for a
specific purpose.
    943. TAPS seeks clarification that a transmission provider could
deny a request to undesignate a network resource only in the context of
requests for temporary undesignation. TAPS argues that there are
circumstances in which a resource is simply not available because, for
example, it is incapable of continued operation or no longer
economically viable or, in the case of a purchase, the contract has
ended.
    944. MidAmerican asks that transmission providers be required to
explicitly approve or deny requests to undesignate network resources
and that the timing of action on undesignation requests be made
consistent with the timing requirements to designate a network
resource. MidAmerican argues that clarification is necessary to avoid
confusion when one customer is undesignating a network resource so that
another customer may designate it,

otherwise a customer could be attempting to designate a resource before
the request to undesignate has been addressed.
    945. Bonneville argues that the Commission should not require
network resources to be temporarily undesignated to make firm third-
party power sales if the transmission provider's ATC methodology
already assures that ATC has not been withheld to accommodate the
underlying designation. Bonneville maintains that its transmission
customers usually designate as network resources power purchase
agreements sourced from the resources that comprise the interconnected
hydroelectric system. Bonneville argues that its ATC methodology, which
is based on historical usage data, addresses the Commission's concerns
about the availability of ATC without further requiring network
resources to be undesignated prior to making third-party sales from
those resources.
Commission Determination
    946. We disagree with Bonneville's argument that a customer
undesignating a network resource should be first-in-line for the
transmission capacity freed up by such a designation. While it may be
true in some circumstances that a network customer would choose not to
undesignate a resource if there is insufficient ATC to accommodate a
desired alternative transaction, it does not follow that the network
customer's alternative transaction should be put ahead of other
competing requests in the queue. That would undermine long-standing
policies governing the priority of service requests and unduly
preference network customers. The Commission rejects similar requests
by point-to-point customers to be first in line for ATC in section
III.D.4.b.
    947. With regard to the undesignation of units used to supply
system sales, we clarify that portions of the seller's individual
network resources supporting a sale of system power do not need to be
undesignated so long as the system sale is itself designated as a
network resource by the buyer. Instead, the seller should undesignate a
portion of its system equal to the amount of the system sale, but which
is not attributed to any specific generators. If the system sale is not
designated as a network resource by the buyer, the seller must submit
undesignations for each portion of each resource supporting the third-
party sale. Since we believe most, if not all, system sales sourced
from designated network resources are themselves designated as network
resources by the buyer, we expect that few system sales will require
undesignation on a unit-by-unit basis.
    948. As we reiterate in section III.D.9.c there is also no need to
undesignate network resources prior to making sales that permit
curtailment without penalty to serve the seller's native load.\345\
Since there is no need to undesignate resources to make such sales,
there is no corresponding need to redesignate those resources in times
of emergency when power is recalled to serve native load. We therefore
disagree with E.ON U.S. that special redesignation procedures are
necessary for LSEs selling recallable energy. In response to Pacific
Northwest IOUs and South Carolina E&G, we amend sections 1.26 and 30.4
of the pro forma OATT to make clear that network resources do not have
to be undesignated before they are used to support the provision of
reserve energy under a Commission-approved reserve sharing agreement.
---------------------------------------------------------------------------

    \345\ See Order No. 890 at P 1459; see also WPPI 84 FERC at
61,152. Curtailment contemplates a reduction in service as a result
of system reliability conditions, not economic reasons.
---------------------------------------------------------------------------

    949. In response to MidAmerican's request, we clarify that, pending
implementation of the new OASIS functionality, submission of requests
to designate and undesignate network resources may be provided by any
appropriate electronic procedures established by the transmission
provider, or by telephone or telefax as provided in Order No. 890.
    950. We grant NRECA and TAPS' request for rehearing of the
Commission's decision in Order No. 890 to allow transmission providers
to deny requests to terminate network resource designations in certain
situations. Upon consideration of petitioners' arguments, we agree that
it is not appropriate to allow the transmission provider to deny
undesignation, effectively requiring the network customer to continue
to make available a resource that the customer is unable to, or no
longer wishes to, make available. Reliability problems caused by the
lack of available resources should be dealt with through other means,
such as negotiation of must-run service agreements. In light of this
decision, MidAmerican's request to establish a time by which a
transmission provider must act on a request to terminate the
designation of a network resource is rejected as moot.
    951. We disagree with Bonneville that the pro forma OATT should be
amended to allow for firm third-party sales from a network resource
without first undesignating the network resource. If the particular ATC
methodology used by the transmission provider allows for flexibility in
implementing this requirement, the transmission provider may propose a
variation to the pro forma OATT in an FPA section 205 filing. Any such
request should adequately address the Commission's concern, as stated
in Order No. 888, that network customers may (absent a prohibition on
network resources including any portion of a resource that was
committed for sale to a third party) have the incentive to specify
unlimited generation resources to be integrated into their load without
any commensurate financial obligation, given that network transmission
service is billed on a load ratio basis.\346\
---------------------------------------------------------------------------

    \346\ See Order No. 888 at 31,753-54.
---------------------------------------------------------------------------

6. Clarifications Related to Network Service
a. Secondary Network Service
    952. In Order No. 890, the Commission declined to adopt further
limitations to the use of secondary network service under section 28.4
of the pro forma OATT, which allows a network customer to deliver
energy to its network load from non-designated network resources on an
as-available basis without additional charge. Although the Commission
had proposed in the NOPR to limit the proper use of secondary network
service to deliveries of economy energy only, upon review of comments
submitted on this issue the Commission concluded that there were
instances outside of the proposed definition of economy energy that
warranted the use of secondary network service. The Commission
therefore decided to retain the existing section 28.4 of the pro forma
OATT that allows the use of secondary network service ``to deliver
energy to its Network Loads.''
Requests for Rehearing and Clarification
    953. Idaho Power asks the Commission to clarify the showing that
transmission customers must make to demonstrate that they are using
secondary network service properly or not using secondary network
service to support off-system sales. Idaho Power states that several
commenters lamented in response to the NOPR the difficulties of making
the calculations necessary to demonstrate that secondary network
service is not being used to support off-system sales. Idaho Power
contends that the Commission has never clearly articulated the test
used to determine improper use of network service. Although Idaho Power
acknowledges that the Commission has provided some guidance on these
issues in audit and investigation reports, Idaho Power states

that it is unclear to what extent the Commission intends language in
such reports to apply beyond the context of the particular audit or
investigation.
    954. Idaho Power suggests that an economic test would not be
precise enough to address all the circumstances where network and
secondary transmission should be used. Idaho Power asks that the
Commission instead consider three factual questions to evaluate the
proper use of secondary network service: Whether the utility's
decisions were intended to maintain a balanced portfolio for service to
load; whether the off-system sale was made at a time when the utility's
resources exceeded its expected load and needed to balance its
portfolio; and, whether the utility either actually needed the imported
energy to serve load or needed the imported energy to replace a more
expensive resource that otherwise would have been used to serve load.
If the answer to these questions is ``yes,'' then Idaho Power argues
that the use of network or secondary transmission should always be
allowed to import energy.
    955. Idaho Power also asks the Commission to articulate the types
of records it expects a utility to maintain in order to document the
use of its transmission network in compliance with Commission
requirements. In Idaho Power's view, clarification of the rules and
corresponding documentation requirements will allow utilities and other
network customers to become more comfortable using secondary network
service rather than buying excessive amounts of point-to-point
transmission.
Commission Determination
    956. The Commission affirms the decision in Order No. 890 to retain
the existing test for eligibility to use secondary network service,
i.e., when energy is delivered to serve network loads. In rejecting the
proposed restriction to deliveries of economy energy, the Commission
recognized that there may be instances that warrant the use of
secondary service in order to serve network loads reliably that would
not satisfy an economic test, as Idaho Power suggests. The Commission
declined to adopt other restrictions on the use of secondary network
service proposed by commenters, expressing concern that the proposals
could preclude legitimate use of secondary network service.
    957. We similarly conclude that the alternative three-part factual
test proposed by Idaho Power might not reflect all of the factors to be
considered in determining whether a particular use of secondary network
service was to deliver energy to network loads. The Commission did not
preclude in Order No. 890 consideration of whether the delivery in
question is economic energy and, instead, determined that restricting
the use of secondary network service only to economic energy would be
too severe. The primary focus of the Commission's analysis is whether
the energy delivered using secondary network service was intended to
serve network load. Whether a delivery in question is for economic
energy may very well be relevant when considering intent, but so would
contemporaneous documentation and other evidence. We will continue to
address the appropriate use of secondary network service on a case-by-
case basis, as in MidAmerican,\347\ which we intend to serve as
guidance to the industry regarding the appropriate use of secondary
network service and the documentation that would be relevant for
analysis.
---------------------------------------------------------------------------

    \347\ MidAmerican Energy Co., 112 FERC ] 61,346 at P 6 (2005)
(MidAmerican).
---------------------------------------------------------------------------

b. ``On an as-available basis''
    958. The Commission clarified in Order No. 890 that secondary
service must be requested in accordance with section 18, including the
timing restrictions set forth in section 18.3 of the pro forma OATT.
The Commission explained that secondary service is on an as-available
basis and that network customers should not be allowed to lock in such
service in advance of other non-firm uses of available transmission.
The Commission concluded that allowing lower priority secondary service
to have a scheduling advantage over non-firm transmission would be
inappropriate and would discourage the use of non-firm transmission
service.
Requests for Rehearing and Clarification
    959. Several petitioners request clarification regarding the
priority level of secondary network service in relation to non-firm
transmission service. NRECA, Southern, and TDU Systems ask the
Commission to clarify that secondary service has a higher priority than
non-firm point-to-point service. These petitioners state that section
28.4 of the pro forma OATT grants secondary service a higher priority
than all non-firm point-to-point service and that the Commission's
reference to secondary network service as ``lower-priority'' in Order
No. 890 is incorrect and contradictory of Order No. 888. Without a
higher priority for secondary network service, these petitioners
contend that network customers located in constrained regions who are
forced to rely on secondary service will be worse off and reliability
will be impaired.
    960. Joined by TAPS, NRECA argues that application of the
scheduling requirements for non-firm point-to-point service to network
customer reservations of secondary service would present a serious set-
back for LSEs. NRECA states that its members commonly use secondary
service to import long-term firm power from other states into their
home states in order to serve native load. NRECA argues that this use
of secondary service could not happen if network customers were held to
the timing restrictions in section 18.3. NRECA contends that precluding
network customers from acquiring secondary service to coincide with
long-term generation requirements, but before actual use of the
transmission, would contradict Congressional intent to preserve and
enhance network service to native load.
    961. NRECA further contends that there is no evidentiary record for
finding that the existing practice of scheduling secondary service
without regard to the time restrictions of section 18.3 has
``discouraged'' the use of non-firm transmission service or minimized
associated revenue credits. Even if that is the case, NRECA argues that
secondary network service customers should have priority and any
marginal amount of foregone revenues is justified by more reliable,
economic service for LSEs. Because network customers pay a load ratio
share of total transmission costs regardless of whether their energy is
coming from designated network resources or non-designated network
resources on an as-available basis, NRECA concludes that network
customers use the transmission system in a fundamentally different way
from non-firm users and, therefore, they should not be held to the same
timing restrictions in 18.3 that apply to non-firm customers.
    962. TAPS argues that, as long as network customers bear a full
share of the costs of operating the entire system, they should have
first call on non-firm use, just as secondary network service is the
last non-firm use to be curtailed in response to constraints. In the
event the Commission denies rehearing on this issue and retains the new
timing restrictions on secondary service, TAPS asks that transmission
providers also be required to abide by those same requirements when
they seek to use an undesignated resource (or the undesignated portion
of a resource) to service their native load.

Commission Determination
    963. The Commission grants clarification of the reference to
``lower-priority'' secondary network service in paragraph 1606 of Order
No. 890, which was intended to distinguish secondary network service
from firm transmission service, not non-firm transmission service.
Section 28.4 of the pro forma OATT affords secondary service a higher
curtailment priority than any non-firm point-to-point service and the
Commission did not intend to imply otherwise in Order No. 890. We
disagree, however, that secondary service should be allowed a higher
scheduling priority compared to all other non-firm service. Secondary
service is on an ``as available'' basis and, therefore, network
customers should not be allowed to lock in such service in advance of
other non-firm uses of available transmission.
    964. Petitioners' arguments to the contrary are misplaced. Although
FPA section 217 does address LSE uses of the transmission systems, the
focus of that provision is on the use of firm transmission, not non-
firm uses such as secondary network service. The fact that network
customers pay a load ratio share of transmission costs does not grant
them superior rights when scheduling firm transmission, nor should it
justify superior rights when scheduling uses of the transmission system
other than firm uses. Any request for secondary network service
therefore must be made in compliance with section 18, including the
timing restrictions set forth in 18.3, of the pro forma OATT. In
response to TAPS, we reiterate that section 28.2 of the pro forma OATT
requires the transmission provider to designate resources and loads in
the same manner as any network customer.
c. Behind the Meter Generation and Uses of Point-To-Point Service
    965. The Commission declined to require transmission providers to
allow netting of behind the meter generation against transmission
service charges to the extent customers do not rely on the transmission
system to meet their energy needs, stating that commenters had not
provided any different arguments not fully addressed in Order No. 888.
The Commission explained that the existing pro forma OATT already
allowed transmission customers to exclude the entirety of a discrete
load from network service and serve such load with the customer's
behind the meter generation and point-to-point transmission service as
necessary, thereby reducing the network customer's load ratio share.
The Commission concluded it is most appropriate to continue to review
alternative transmission provider proposals for behind the meter
generation treatment on a case-by-case basis.
Requests for Rehearing and Clarification
    966. Washington IOUs contend that the language added to section
30.4 of the pro forma OATT in Order No. 890 appears to permit a
transmission provider or network customer to take point-to-point
service to deliver power from remote network resources to loads in
certain instances. Washington IOUs ask the Commission to clarify that a
transmission provider or network customer may use short-term firm
point-to-point service to serve native load or network load,
respectively. Washington IOUs state that there are at least two events
in which the use of point-to-point service to serve native or network
load is needed and appropriate: the need to import power when it is
unclear whether or not the power will be deemed to be used to serve
native or network load because of its relative cost; and the need to
import power reliably from non-designated network resources in order to
serve native or network load, instead of relying on secondary network
service. In their view, a restriction on the use of point-to-point
service would prevent the transmission provider and network customer
from competing for scarce transmission capacity in order to serve their
native or network load.
    967. Idaho Power similarly asks the Commission to clarify whether a
network customer or transmission provider could use point-to-point
transmission to serve load in addition to, and not in place of, paying
its full load ratio share for use of the network. Idaho Power contends
that a transmission provider or network customer should have the option
to compete in the market for point-to-point service when it is not sure
at the time of a purchase whether the energy will be needed for load or
sold off-system as surplus, provided they pay the full value of point-
to-point service. Alternatively, Idaho Power requests the Commission
clarify that the network customer and the transmission provider may
procure firm point-to-point service in order to serve native and
network load when the utility requires capacity in addition to the
existing network reservations or secondary transmission over an
interface. In order to ensure that network and secondary transmission
rights are not being used to support off-system sales, Idaho Power
contends that the use of network transmission rights must be minimized
and used in combination with point-to-point service.
    968. Idaho Power also requests clarification that the following
examples are considered proper uses of network transmission, secondary
transmission and point-to-point transmission. First, use of point-to-
point transmission to accomplish an off-system sale entered into at a
time the utility was forecasted to be long, even if followed by a
subsequent purchase to serve load using secondary network service or
point-to-point transmission if the utility becomes short. Second, use
of a combination of network service, secondary network service, or
point-to-point transmission for a purchase at a time the utility was
forecasted to be short, even if followed by a subsequent sale using
point-to-point transmission from a portion of that resource that
becomes excess due to a drop in forecasted load. Third, and related,
use of network transmission for a purchase expected to serve load, even
if followed by a subsequent sale using point-to-point service from a
portion of that resource that becomes excess in real-time. Fourth, use
of point-to-point service to purchase economic energy to serve network
load in conjunction with an off-setting undesignation of network
resources and sale of energy off system using point-to-point
transmission. Finally, use of secondary network service to purchase
economic energy to serve network load in conjunction with an off-
setting undesignation of network resources and sale of energy off
system using point-to-point transmission. Idaho Power contends that
only the last example should involve an economic test to demonstrate
that the imported resource will displace a resource in the utility's
load service stack of resources.
    969. TAPS and FMPA argue that the Commission failed to consider in
Order No. 890 the circumstance when it is physically impossible for the
transmission system to actually deliver a customer's full load, which
they contend was not addressed in Order No. 888.\348\ TAPS states that
the Commission's proposed solution of the exclusion of the entirety of
a discrete load from network service is no help to a customer that is
served through a single delivery point and, therefore, has no discrete
load that could be service through a combination of point-to-point
service and behind the meter generation while other load takes network
service. FMPA argues that it is unjust to charge a customer for service
that cannot be provided and, therefore, there should be an exception to
load ratio share pricing

when the transmission provider is unable to serve the network
customer's entire load.
---------------------------------------------------------------------------

    \348\ Citing Florida Mun. Power Agency v. FERC, 411 F.3d 287,
291 (D.C. Cir. 2005).
---------------------------------------------------------------------------

Commission Determination
    970. As stated in Order No. 890, the pro forma OATT permits
transmission customers to exclude the entirety of a discrete load from
network service and serve such load with the customer's behind the
meter generation and through any needed point-to-point transmission
service, thereby reducing the network customer's load ratio share.\349\
In other situations, use of point-to-point service by network customers
is in addition to network service and therefore does not serve to
reduce their load ratio share. As the Commission concluded in Order No.
888-A, transmission customers ultimately must evaluate the financial
advantages and risks and choose to use either network integration or
firm point-to-point transmission service to serve load.\350\ Any
alternative transmission provider proposals for behind the meter
generation treatment will be reviewed on a case-by-case basis.\351\
---------------------------------------------------------------------------

    \349\ See Order No. 890 at P 1619.
    \350\ Order No. 888-A at 30,260-61.
    \351\ See, e.g., PJM Interconnection, L.L.C., 113 FERC ] 61,279
(2005).
---------------------------------------------------------------------------

    971. With regard to concerns of insufficient transmission to serve
the network customer's full load, we fail to understand how, under
normal circumstances, the transmission provider has no capacity to
service a load that has been designated by the network customer. Once a
load has been designated, it is the obligation of the transmission
provider to serve that load and to plan its system so that the load can
be accommodated in the future. To assist the transmission provider in
fulfilling that obligation, network customers are required to provide
load forecasts to the transmission provider each year. The transmission
planning reforms adopted in Order No. 890 will add greater transparency
to this planning process, better enabling network customers to
understand how their needs are reflected in the development of the
transmission system. To the extent a transmission provider is unable to
satisfy its obligation to serve a designated network load, it is more
appropriate to address that situation on a case-by-case basis.
    972. The Commission also declines to address here the hypothetical
scenarios offered by Idaho Power. Any determination regarding the
appropriate use of secondary, network, or point-to-point service will
depend upon the facts surrounding the use of such services. While load
forecasts may change and weather related incidents may occur, with
corresponding implications for a utility's purchasing activities, it is
most appropriate for the Commission to consider whether a particular
transaction is an appropriate use of secondary network service based on
the facts and circumstances surrounding the transaction, as discussed
above.
7. Transmission Curtailments
    973. The Commission did not propose in the NOPR, or adopt in Order
No. 890, any changes to the terms and conditions under which a
transmission provider may curtail service to maintain reliable
operation of the grid, as set forth in sections 13.6 and 14.7 for
point-to-point service and section 33 for network service. The
Commission did, however, conclude that the posting of additional
curtailment information is necessary to provide transparency and allow
customers to determine whether they have been treated in the same
manner as other transmission system users, including customers of the
transmission provider. Accordingly, the Commission required
transmission providers, working through NAESB, to develop a detailed
template for the posting of additional information on OASIS regarding
firm transmission curtailments, including all circumstances and events
contributing to the need for a firm service curtailment, specific
services and customers curtailed (including the transmission provider's
own retail loads), and the duration of the curtailment.
Requests for Rehearing and Clarification
    974. Powerex claims the Commission improperly rejected its request
that the pro forma curtailment provisions be modified to provide for
pro rata curtailment based on a customer's reserved capacity rather
than its scheduled capacity. Powerex states that the Commission appears
to have misunderstood its proposed two-stage curtailment procedure,
which was rejected for having the potential to impair reliability since
the amount of capacity curtailed using that approach would not address
the actual power flows and, therefore, could be less than required to
relieve the overloaded facility. Powerex explains that the proposed
two-stage process pertained solely to the timeframe before power is
actually flowing. Powerex further states that pro rata curtailments
based on reservation capacity would be made prior to the energy
scheduling and tagging deadline (e.g., 20 minutes before the operating
hour), that the transmission provider would compare a customer's
individual schedule to its reduced/curtailed rights, and, if the
customer's scheduled quantities fall within its reduced rights, that
schedule would flow uncut. After calculating the total capacity
scheduled following the application of the pro rata curtailment,
Powerex proposes that any excess transmission be allocated back on a
pro rata basis to transmission customers whose schedules were cut below
their reduced rights. Powerex states that this would in no way affect
curtailments to actual power flows. Powerex suggests that curtailment
within the hour, due to the limited time available to affect relief,
should continue to be allocated based on actual schedules.
    975. Powerex contends that the Commission mistakenly concluded that
Powerex's proposal would adversely impact reliability, arguing that the
amount of capacity curtailed under the two-stage process would be no
different from the amount of capacity the transmission provider
believes is necessary to address the constraint and that the capacity
would be more equitably and economically cut according to the
transmission customers' reserved quantities rather than the scheduled
quantities. Powerex states that it is not aware of a single commenter
that provided any evidence that the above modification would be
detrimental in any way to reliability, nor did the Commission provide
any evidentiary support for its response.
    976. E.ON U.S. requests clarification of the correct order of
curtailments given the addition of conditional firm point-to-point
transmission service. Specifically, E.ON U.S. requests clarification
regarding the curtailment priority of the different conditional firm
options, i.e., conditions based on an annual number of hours and
conditions based on specific system conditions.
Commission Determination
    977. The Commission rejects Powerex's request to modify the
curtailment provisions of the pro forma OATT to provide for pro rata
curtailment based on a customer's reserved capacity rather than its
scheduled capacity. Although Powerex addresses in its request for
rehearing the Commission's initial concern regarding the proposal,\352\
we continue to believe that the proposal would have a potentially
adverse impact on reliability. Powerex's proposal would

greatly increase the complexity of scheduling transactions at or near
real-time operations, threatening reliability without providing
significant competitive benefits. Powerex has taken a complex issue and
presented it in two simple steps, leaving out the details of how the
transmission operators could obtain all the necessary information
required to make on-the-spot decisions, perform the analyses to
determine whether each schedule flow fully utilizes its respective
reservation, reallocate unused reserved capacity, and curtail
transactions without impairing reliability. We thus reject the
Powerex's request for rehearing in this regard.
---------------------------------------------------------------------------

    \352\ See Order No. 890 at P 1629 (stating that the amount of
capacity actually curtailed under the Powerex proposal might be less
than required to relieve the overloaded facility).
---------------------------------------------------------------------------

    978. In response to E.ON U.S., we reiterate that the Commission
adopted a secondary network curtailment priority to apply for the hours
or specific conditions when conditional firm service is conditional.
During non-conditional periods, conditional firm service curtailment is
treated consistent with curtailment of other long-term firm
service.\353\ We reiterate that Order No. 890 did not change the terms
and conditions under which a transmission provider may curtail service
to maintain reliable operation of the grid or change the priority of
curtailment for any type of transmission service. Rather, conditional
firm point-to-point service, as adopted in Order No. 890, fits within
the existing curtailment priorities and constructs.
---------------------------------------------------------------------------

    \353\ See id. at P 1074.
---------------------------------------------------------------------------

8. Standardization of Rules and Practices
a. Business Practices
    979. In Order No. 890, the Commission adopted the NOPR proposal to
continue to require that only those rules, standards, and practices
that significantly affect transmission service be incorporated into a
transmission provider's OATT. The Commission affirmed the use of a
``rule of reason'' to determine what rules, standards, and practices
significantly affect transmission service and, as a result, must be
included in the transmission provider's OATT.
    980. Regarding rules, standards, and practices that relate to
transmission service, but are not included in the OATT, the Commission
required transmission providers to post this information on their
public Web sites and make it accessible via OASIS. The Commission made
this requirement applicable to all such rules, standards, and
practices, currently written or otherwise.\354\ The Commission stated
that it would not be appropriate to place the rules, standards, and
practices only on OASIS, as some transmission providers use
certificates to restrict access to their OASIS sites. The Commission
amended section 4 of the pro forma OATT to establish this posting
requirement.
---------------------------------------------------------------------------

    \354\ With respect to the business practices developed by NAESB,
the Commission noted that there may be copyright restrictions that
limit the transmission provider's ability to post those practices on
its own Web site. In such instances, the Commission stated its
expectation that the transmission provider will reference any NAESB
practices it uses and provide a link on its public Web site to the
copyrighted material on the NAESB Web site.
---------------------------------------------------------------------------

    981. The Commission also required each transmission provider to
post on its public Web site, with a corresponding link on OASIS, a
statement of the process by which the transmission provider will amend
the rules, standards, and practices that relate to transmission
service, but which are not included in the OATT. The Commission stated
that this process must include a mechanism to provide reasonable notice
of any proposed changes to a posted business practice and the
respective effective date of such change.\355\ Section 4 of the pro
forma OATT was further amended to formalize this posting requirement.
---------------------------------------------------------------------------

    \355\ The Commission permitted transmission providers to adopt
such additional procedures they deem appropriate, such as
opportunities for comment to proposed changes to rules, standards,
and practices.
---------------------------------------------------------------------------

    982. Finally, the Commission adopted the NOPR proposal to amend the
pro forma OATT by including a new Attachment L specifying the
qualitative and quantitative criteria that the transmission provider
uses to determine the level of secured and unsecured credit required.
The Commission determined that Attachment L must contain the following
elements: (1) A summary of the procedure for determining the level of
secured and unsecured credit; (2) a list of the acceptable types of
collateral/security; (3) a procedure for providing customers with
reasonable notice of changes in credit levels and collateral
requirements; (4) a procedure for providing customers, upon request, a
written explanation for any change in credit levels or collateral
requirements; (5) a reasonable opportunity to contest determinations of
credit levels or collateral requirements; and (6) a reasonable
opportunity to post additional collateral, including curing any non-
creditworthy determination. The Commission stated that the transmission
provider could supplement Attachment L with a credit guide or manual to
be posted on OASIS.
Requests for Rehearing and Clarification
    983. TDU Systems contend that the Commission's filing standard
suggests that the ``rule of reason'' test will only come into play
after it has determined that a particular practice is one that
significantly affects transmission service. TDU Systems argue that,
once the Commission has determined that a practice significantly
affects rates and services, the only remaining question is whether the
practice is realistically susceptible of specification and is not so
generally understood in any contract or arrangement as to render
recitation superfluous.\356\ TDU Systems contend that Order No. 890 is
an unexplained departure from prior precedent and that the Commission
failed to justify its limitation on the data to be included in the
OATT.
---------------------------------------------------------------------------

    \356\ Citing City of Cleveland v. FERC, 773 F.2d 1368, 1376
(D.C. Cir. 1985) (City of Cleveland).
---------------------------------------------------------------------------

    984. In order to increase certainty, TDU Systems also requests that
the Commission specify in advance the different categories of
transmission provider issuances that the Commission expects to see in
the tariffs. At a minimum, TDU Systems asks that the Commission clarify
that any rule, standard, or practice that can serve to limit a
transmission customer's access to transmission service is one that
significantly affects transmission service and, therefore, should be
included in the OATT.
    985. Old Dominion requests that the Commission clarify that, for
individual transmission-owning members of an RTO that do not maintain
their own OATT, the transmission owners must comply with the
requirements of Order No. 890 by including in the RTO's OATT any rules,
standards and practices that affect transmission service that are
either different from or an expansion upon those in the RTO's OATT. Old
Dominion states that this is necessary because individual transmission
owners' planning criteria and business practices can limit access to
transmission service in the same manner as those of the RTO.
    986. NRECA states that it supports the Commission's decision to
require each transmission provider to post on its public Web site (with
a corresponding link on OASIS) all rules, standards or business
practices that relate to the terms and conditions of transmission
service, if not already stated in the OATT itself. NRECA contends,
however, that the Commission's subsequent discussion of transmission
providers' credit guides or manuals seemingly allows that information
to be

posted only on OASIS.\357\ Because credit is such an important
potential barrier to transmission access, NRECA maintains that it is
critical for the details of the credit criteria and methodologies to be
posted on the public Web site of the transmission provider, with a link
on OASIS. NRECA also contends that a statement should be added to the
first paragraph of Attachment L explicitly clarifying that the credit
review procedures and criteria may not unfairly disadvantage public
power entities or other customer groups having unconventional financing
or business structures.
---------------------------------------------------------------------------

    \357\ Citing Order No. 890 at P 1657-58.
---------------------------------------------------------------------------

    987. Southern requests that the Commission grant rehearing to allow
a transmission provider that does not restrict access to its OASIS site
the option of posting rules, standards and practices relating to
transmission service on its OASIS with a link to such information on
its public Web site. Southern maintains that permitting transmission
providers that do not restrict access to their OASIS to make required
postings on OASIS would satisfy the Commission's objective to provide
public access to such information. Southern argues that not allowing
such flexibility would be arbitrary and capricious.
Commission Determination
    988. The Commission did not intend, as TDU Systems suggest, that
the Commission must first determine that a particular practice
significantly affects transmission service before it applies the ``rule
of reason.'' In Order No. 890, the Commission ``affirm[ed] the use of a
``rule of reason'' to determine what rules, standards, and practices
significantly affect transmission service and, as a result, must be
included in the transmission provider's OATT.'' \358\ Specifically, the
``rule of reason'' requires ``recitation of only those practices that
affect rates and services significantly, that are realistically
susceptible of specification, and that are not so generally understood
as to render recitation superfluous.'' \359\ The Commission intends to
continue to use the ``rule of reason'' for this purpose, consistent
with its statutory responsibility and precedent.
---------------------------------------------------------------------------

    \358\ Id. at P 1649.
    \359\ Public Serv. Co. of Colo., 67 FERC ] 61,371 at 62,267
(1994) (quoting City of Cleveland, 773 F.2d at 1376).
---------------------------------------------------------------------------

    989. We decline to specify in advance the particular categories of
rules, standards, and practices that must be documented in the
transmission provider's OATT. Although rules, standards, and practices
that limit a transmission customer's access to transmission service may
very well have a significant effect on transmission services, and
therefore should be in the OATT, any attempt to list the specific
categories of rules, practices and standards that must be included in
an OATT would be over- or under-inclusive as applied to a particular
transmission provider. The Commission believes that, through
application of the ``rule of reason,'' we will be better able to
identify those rules, standards and practices that significantly affect
transmission service and, as a result, are required to be in each
transmission provider's OATT.
    990. In response to Old Dominion, we reiterate that each ISO and
RTO must include in its OATT all of the rules, standards and practices
that significantly affect the transmission service provided by the ISO
or RTO and must electronically post all of the rules, standards and
practices that relate to transmission service, but which are not
included in the OATT. To the extent any of the transmission-owning
members of the ISO or RTO have additional rules, standards and
practices that significantly affect, or relate to, the transmission
service being provided by the ISO or RTO, the ISO or RTO must include
such rules, standards and practices in its OATT or electronic postings,
as relevant. Transmission customers must be able to understand the
rules, standards and practices that affect or relate to the service
being provided by the transmission provider, even if such rules,
standards or practices are developed or implemented by third parties.
    991. We agree with Southern's request for rehearing to allow a
transmission provider that does not restrict access to its OASIS site
the option of posting rules, standards and practices relating to
transmission service on its OASIS with a link to such information on
its public Web site. The Commission is sympathetic to Southern's
concern and agrees that section 4 of the pro forma OATT, as revised by
Order No. 890, is overly restrictive. The Commission's purpose in
revising section 4 was to ensure that the public has unrestricted
electronic access to the transmission provider's rules, standards and
practices that are not included in its OATT. The Commission concludes
that the transmission provider should be free to place this information
on OASIS, its public Web site or other suitable electronic platform as
long as the transmission provider provides, both on OASIS and on its
public Web site, an electronic link to the information. We have revised
section 4 accordingly.
    992. We also agree with NRECA that, in Order No. 890, the
Commission appears to allow the transmission provider to post its
credit guides or manuals only on OASIS.\360\ This was not our intent.
The Commission considers credit guides and manuals containing more
detailed information than that required in Attachment L to be rules,
standards or practices that relate to transmission service, that not be
included in the transmission provider's OATT. We clarify that the
transmission provider must electronically post such credit guides and
manuals and provide a link to that information on its public Web site
and OASIS. We deny as unnecessary NRECA's request to add a statement to
Attachment L regarding application of credit review procedures and
criteria to customer groups with unconventional financing or business
structures. The Commission already provided in Order No. 890 that
transmission providers must consider both quantitative and qualitative
factors so that the particular circumstances surrounding public power
entities can be recognized when analyzing their creditworthiness.\361\
---------------------------------------------------------------------------

    \360\ See Order No. 890 at P 1657-58.
    \361\ See id. at P 1659.
---------------------------------------------------------------------------

b. Limitation on Liability
    993. In Order No. 890, the Commission declined to amend the
liability protections found in the pro forma OATT for the same reasons
that the Commission rejected similar proposals in the past.\362\ The
Commission relied upon the reasoning found in Order Nos. 888-A, 888-B,
2003,\363\ the Reliability Policy Statement,\364\ and Commission
precedent.\365\ The Commission explained that the pro forma OATT was
not intended to address liability issues and that liability was a
separate issue from indemnification.\366\ The Commission further
explained that

transmission providers were not precluded from relying on state laws
that protected utilities or others from claims founded in ordinary
negligence.\367\ The Commission declined to adopt a uniform federal
liability standard and decided that, while it was appropriate to
protect the transmission provider through force majeure and
indemnification provisions from damages or liability when service is
provided by the transmission provider without negligence, it would
leave the determination of liability in other instances to other
proceedings.\368\
---------------------------------------------------------------------------

    \362\ See, e.g., Southwest Power Pool, Inc., 113 FERC ] 61,287
(2005); Southern Company Services, Inc., 113 FERC ] 61,239 (2005);
Nevada Power Co., 99 FERC ] 61,347 (2002); Arkansas Louisiana Gas
Co. v. Hall, 7 FERC ] 61,175, reh'g denied, 8 FERC ] 61,039 (1979).
    \363\ Order No. 2003 at P 636; Order No. 2003-A at 31,162.
    \364\ Policy Statement on Matters Related to Bulk Power System
Reliability, 107 FERC ] 61,052 (2004) (Reliability Policy
Statement).
    \365\ See, e.g., Northeast Utilities Services Co., 111 FERC ]
61,333 (2005) (Northeast Utilities); Southwest Power Pool, Inc., 112
FERC ] 61,100 at P 39 (2005); Southern Company Services, Inc., 113
FERC ] 61,239, at P 7 (2005).
    \366\ See Order No. 888-A at 30,301 and Order No. 888-B at
62,081 (section 10.2 of the pro forma OATT).
    \367\ Order No. 888-A at 30,301.
    \368\ Order No. 888-B at 62,081.
---------------------------------------------------------------------------

Requests for Rehearing and Clarification
    994. Washington IOUs request that the Commission grant rehearing
and establish a uniform liability provision in the pro forma OATT that
limits transmission provider liability except in instances of gross
negligence or willful misconduct. In their view, enactment of mandatory
reliability standards under FPA section 215, the threat of civil
penalties and other remedial actions, and state oversight all provide
appropriate incentives for utilities to exercise due care in the
operation of their systems. Washington IOUs argue that state
protections do not appear to be sufficient to protect a transmission
provider against outage liability since they have arisen in the context
of claims by retail customers. They argue that granting liability
limitations except in instances of gross negligence or intentional
misconduct is appropriate given that outage liability is not necessary
to ensure utilities operate their transmission systems reliably.
    995. Washington IOUs also contend that limitations of liability can
be effected by contracts, such as the pro forma OATT, under much state
law. They argue that it is therefore arbitrary for the Commission to
expect transmission providers to rely on state law for appropriate
limitations of liability, while preventing the inclusion of provisions
in the pro forma OATT to effectuate such limitations of liability.
Washington IOUs also argue that the Commission has provided no good
reason for approving limitations on liability for RTOs/ISOs, but not
for other transmission providers. In their view, the policy concerns
justifying liability limitations for utilities in RTOs/ISOs are
identical to those confronting utilities in non-RTO/ISO areas.
Commission Determination
    996. The Commission denies rehearing of the determination in Order
No. 890 not to change the liability protections found in the pro forma
OAAT. Washington IOUs raise no new arguments in support of their
position. As the Commission explained in Order No. 890, proposals by
public utilities to amend their OATTs to include limitations on
liability will be considered on a case-by-case basis.\369\ On review of
such requests, the Commission will consider whether state laws provide
inadequate protection from liability.\370\ In response, Washington IOUs
argue that state law protections appear to be insufficient because they
arose in the context of claims by retail customers, yet petitioners
offer no evidence that transmission providers are in fact precluded
from relying on state law for liability protections. The potential for
legal and regulatory gap is therefore not so great as to warrant
inclusion of liability protections in the pro forma OATT for all
transmission providers.
---------------------------------------------------------------------------

    \369\ See Order No. 890 at P 1675 (citing Reliability Policy
Statement at P 40).
    \370\ See Southern Company Services, Inc., 113 FERC ] 61,239 at
P 7.
---------------------------------------------------------------------------

    997. We also disagree that there is no reason to distinguish
between RTOs/ISOs and other transmission providers in considering
requests to amend the liability standard of their OATTs. The Commission
has provided increased liability protection to RTOs/ISOs because they
were created by and are solely regulated by the Commission and
otherwise would be without limitations on liability.\371\ Because
Washington IOUs have failed to show that other transmission providers
are similarly situated to RTOs/ISOs in this regard, we affirm the
decision to continue to review on a case-by-case basis a request to
amend the liability standard in a transmission provider's OATT.
---------------------------------------------------------------------------

    \371\ See id.
---------------------------------------------------------------------------

9. OATT Definitions
    998. In order to support the reforms adopted in Order No. 890 and
otherwise clarify the requirements of the pro forma OATT, the
Commission added and amended various definitions in the pro forma OATT.
Petitioners have sought rehearing and clarification of certain of these
definitions.
a. Affiliate
    999. In order to support reforms associated with the distribution
of operational penalties, the Commission adopted the following
definition of Affiliate in the pro forma OATT: ``With respect to a
corporation, partnership or other entity, each such other corporation,
partnership or other entity that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, such corporation, partnership or other entity.''
Requests for Rehearing and Clarification
    1000. EEI states that the term Affiliate is used in several
provisions of the pro forma OATT that were not modified by Order No.
890. To avoid potential confusion, EEI requests that the Commission
amend the pro forma OATT to capitalize every use of the term.
    1001. APPA requests that, consistent with Order No. 888-A, the
Commission clarify that public power joint agencies and their members
are not corporate affiliates and, therefore, the definition of
Affiliate does not apply to public power joint action agencies for the
purposes of applying the Standards of Conduct. APPA notes that the
Commission in Order No. 890 concluded that the definition of Affiliate
does not apply to G&T cooperatives and their member distribution
cooperatives. APPA argues that public power joint action agencies and
their members are similarly situated to G&T cooperatives and their
members and, as a result, the rationale set out in Order No. 888-A and
Order No. 890 applies equally to public power agencies joint action
agencies and their members.\372\ APPA suggests Commission policy that
supports not treating joint action agencies and their members as
consisting of ``single economic units'' also supports not treating
joint action agencies and their members as Affiliates.\373\
---------------------------------------------------------------------------

    \372\ Citing Order No. 890 at P 1682 (citing Order No. 888-A at
30,286 and 30,366).
    \373\ Citing Southwest Power Pool, 112 FERC ] 61,355 at P 23-24
(2005).
---------------------------------------------------------------------------

    1002. E.ON U.S. requests guidance on how functionally unbundled
transmission providers should treat their generation function for
purposes of the pro forma OATT. E.ON U.S. states that its generation
and transmission functions are owned by the same corporate entity, but
are unbundled from each other for purposes of the Standards of Conduct.
As a result, E.ON U.S. contends that its generation and transmission
functions are not Affiliates because they are part of the same
corporate entity. E.ON U.S. asks the Commission to clarify whether it
intends to include a transmission provider's unbundled generation
function within the definition of Affiliate even if the generation
function is part of the same corporate entity.
Commission Determination
    1003. The Commission grants rehearing, as requested by EEI, to
amend

the pro forma OATT such that every use of the term Affiliate is
capitalized. We agree with APPA that members of an umbrella joint
action agency are not Affiliates of the joint action agency within the
meaning of the pro forma OATT. We clarify in response to E.ON U.S.,
however, that the transmission function and generation function of a
single corporation are Affiliates. Each would be an entity under common
control, notwithstanding the fact that they are within the same
corporation.
b. Good Utility Practice
    1004. In Order No. 890, the Commission incorporated the definition
of reliable operation in FPA section 215 into the definition of Good
Utility Practice in the pro forma OATT. As amended, the definition of
Good Utility Practice is: ``Any of the practices, methods and acts
engaged in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices,
methods and acts which, in the exercise of reasonable judgment in light
of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost
consistent with good business practices, reliability, safety and
expedition. Good Utility Practice is not intended to be limited to the
optimum practice, method, or act to the exclusion of all others, but
rather to be acceptable practices, methods, or acts generally accepted
in the region, including those practices required by Federal Power Act
section 215(a)(4).''
Requests for Rehearing and Clarification
    1005. Xcel argues that revising the definition of Good Utility
Practice to include compliance with the mandatory reliability standards
of FPA section 215 inappropriately subjects transmission providers to
two separate enforcement schemes for alleged violations of the
reliability standards. Xcel suggests that the Commission eliminate from
the definition of Good Utility Practice the reference to practices
under FPA section 215. Xcel argues that this would not eliminate the
obligation of transmission providers or transmission owners to comply
with the mandatory reliability standards and, instead, would make such
compliance subject to enforcement and potential penalties under one
enforcement regime, as contemplated by Congress under the FPA.
    1006. If the Commission does not eliminate the reference to
practices required by section 215, Xcel asks the Commission to clarify
that reliability standards that have not been approved under FPA
section 215 would not be enforceable as an OATT violation.\374\ Xcel
also argues that a violation of a mandatory reliability standard
approved by the Commission should be subject to enforcement only by the
ERO or applicable RE under the compliance and enforcement scheme
created by NERC and the Commission under FPA section 215. Xcel contends
it would subject FERC-jurisdictional transmission providers to ``double
jeopardy'' to allow a claim of an alleged violation of a mandatory
reliability standard to be pursued in both an OATT enforcement
proceeding and a section 215 enforcement proceeding. Finally, Xcel
argues that in no event should an alleged violation of a mandatory
reliability standard be subject to dual financial penalties through
separate enforcement actions by the Commission for an OATT violation
and by the ERO or RE for a reliability violation.
---------------------------------------------------------------------------

    \374\ Citing Order No. 693 at P 302.
---------------------------------------------------------------------------

Commission Determination
    1007. The Commission affirms the decision in Order No. 890 to
incorporate within the definition of Good Utility Practice those
practices required by FPA section 215(a)(4). Even without the revisions
adopted in Order No. 890, the definition of Good Utility Practice would
have incorporated each reliability standard approved by the Commission,
since they represent practices in which the industry is required to
engage. The Commission simply made this explicit in Order No. 890.
    1008. As we explained in Order No. 693, however, the Commission
does not believe it would be appropriate to retain a dual mechanism to
enforce reliability standards both as Good Utility Practice and under
FPA section 215.\375\ The pro forma OATT only applies to entities
subject to our jurisdiction as public utilities under the FPA, while
section 215 defines more broadly our jurisdiction with respect to
mandatory reliability standards. We therefore do not intend to enforce,
as an OATT violation, compliance with any reliability standard approved
by the Commission under section 215. It is more appropriate for the
Commission to rely on its authority under section 215 to enforce
compliance with mandatory reliability standards.
---------------------------------------------------------------------------

    \375\ See id.
---------------------------------------------------------------------------

c. Non-Firm Sales
    1009. In order to clarify the obligations of network customers
under section 30.4 of the pro forma OATT, the Commission adopted the
following definition of Non-Firm Sales in the pro forma OATT: ``An
energy sale for which receipt or delivery may be interrupted for any
reason or no reason, without liability on the part of either the buyer
or seller.''
Requests for Rehearing and Clarification
    1010. NRECA asks the Commission to clarify that a unit-contingent
contract is not a Non-Firm Sale within the meaning of the pro forma
OATT, which NRECA argues would make it ineligible for designation as a
network resource. NRECA states that unit-contingent contracts excuse
non-delivery only on account of constraints on the unit providing
service and not, more generally, for ``any reason'' or ``no reason.''
NRECA contends that such contracts are sufficiently firm to be
considered ``LU'' and ``IU'' service in FERC Form One Account 447 and
should likewise not be considered Non-Firm Sales under the pro forma
OATT.
    1011. Southern questions whether system-firm sales that permit
curtailment without penalty to serve the seller's native load should be
treated as Non-Firm Sales for purposes of section 30.4 of the pro forma
OATT. Southern states that the Commission has considered the purchase
of a system-firm energy to be eligible for designation as a network
resource,\376\ but contends that it is ambiguous whether the seller
should consider those sales as a Non-Firm Sale. Southern argues that
treating such sales as Non-Firm Sales would assure internal consistency
within the pro forma OATT, foster liquidity in short-term wholesale
opportunity markets, and promote the efficient optimization of network
resources.
---------------------------------------------------------------------------

    \376\ Citing WPPI.
---------------------------------------------------------------------------

    1012. Washington IOUs argues that a contract that allows for
interruption to serve native load should be considered a Non-Firm Sale
even if there is a ``make whole'' penalty for the interruption.
Washington IOUs argue that a requirement that sales from a designated
network resource be recallable for service of native or network load
without any financial consequences would constitute an unnecessary
regulatory intrusion into wholesale electricity markets, and is not
necessary for reliability purposes.\377\
---------------------------------------------------------------------------

    \377\ Washington IOUs argue that, now that the Commission has
enforcement authority for reliability under section 215 of the FPA,
there are avenues to address reliability concerns that are more
effective than the use of rules for designated network resources.
---------------------------------------------------------------------------

    1013. TAPS express similar concerns, asking the Commission to
clarify that the definition of Non-Firm Sales includes transactions
that permit interruption for any or no reason

without penalty, even if the seller may entail some financial liability
for interruption. TAPS states that failure to deliver energy sold in a
day-ahead organized market creates an obligation to pay the real-time
LMP and potentially other charges, even though the power sale is not
generally considered firm. If this potential obligation is interpreted
as a liability for purposes of qualifying as a Non-Firm Sale, TAPS
concludes that sales into day-ahead organized markets cannot be made
from a network resource without first undesignating that resource,
which TAPS argues would be unduly burdensome and would discourage
network customers from making sales into those markets. TAPS contends
that network customers will be reluctant to undesignate their network
resources for fear that they would be unable to redesignate them in a
timely manner if they are needed to serve native load in real-time.
    1014. With regard to the MISO market in particular, TAPS argues
that refusing to treat sales into that day-ahead market as Non-Firm
Sales would require network customers to undesignate resources to
comply with MISO's must offer requirements. TAPS argues that it would
be inappropriate to require undesignation of a network resource to sell
into the RTO in which the resource is located as well as neighboring
RTOs, such as from MISO into PJM. The use of centralized dispatch in
these markets, TAPS argues, eliminates any effect temporary resource
undesignations and redesignations may have on dispatch or ATC
calculations. TAPS contends that the added burden of undesignating and
redesignating network resources is therefore pointless in centrally
dispatched markets.
    1015. E.ON LSE expresses similar concerns, arguing that the
definition of Non-Firm Sale in combination with restricted network
resource designation policies will result in fewer resources being made
available. With regard to the MISO market in particular, E.ON LSE
states that the MISO tariff requires that certain day-ahead
transactions are made on the condition that the selling generator
provide service on-demand. E.ON LSE similarly request that the
Commission clarify that day-ahead and real-time sales in MISO and other
RTO/ISO markets need not meet the definition of Non-Firm Sales.
Commission Determination
    1016. The Commission agrees with NRECA that, under normal
circumstances, we would not expect a unit contingent agreement to fall
within the definition of a Non-Firm Sale since typically delivery can
only be interrupted for the specific reasons identified in the
underlying agreement. We also agree with Southern that, under normal
circumstances, a system sale that permits curtailment without penalty
to serve the seller's native load would fall within the definition of a
Non-Firm Sale since the seller would have the right to rely on that
capacity in the event it is needed to serve native load, which is the
Commission's principal concern in restricting sales from designated
network resources to Non-Firm Sales. Whether any particular contract
satisfies the definition of Non-Firm Sales, however, must be considered
based on the terms and conditions of that contract.
    1017. We disagree with TAPS and Washington IOUs that the definition
of Non-Firm Sales includes transactions that permit interruption with
financial liability, whether make whole or limited to certain
penalties. In Order No. 890, the Commission clarified its existing
policy prohibiting network customers from making third-party sales from
a designated network resource if the third-party power purchase
agreement does not allow the seller to interrupt power sales to the
third party in order to serve the designated network load.\378\ The
Commission adopted the definition of Non-Firm Sales to identify more
clearly those types of sales that are permitted from designated network
resources, explaining that any interruption in service that would
create liability on the part of the seller would create conflicting
incentives regarding use of the network resource and, therefore, such
sale could not be made without first undesignating the resource.\379\
The Commission concluded that it would be inappropriate to adopt
commenter suggestions to relax the definition of a Non-Firm Sale to
include any sale that is not otherwise firm enough to be designated as
a network resource.\380\
---------------------------------------------------------------------------

    \378\ See Order No. 890 at P 1539.
    \379\ See id. at P 1692. The Commission's use of the word
``penalty'' in paragraph 1539 of Order No. 890 was not intended to
restrict the scope of Non-Firm Sales. As the Commission explained in
that paragraph, our concern is that there not be financial
incentives that compete with the network resource's obligations to
serve its network load. Interruption must therefore be allowed
without liability or penalty.
    \380\ Id.
---------------------------------------------------------------------------

    1018. We appreciate the concerns of E.ON LSE and TAPS regarding the
potential effect of this decision on RTO/ISO markets. It does not
follow, however, that the pro forma OATT must be amended to accommodate
the particular market operations of each RTO and ISO. RTOs and ISOs
have adopted many variations from the pro forma OATT to facilitate
development of their markets, with some entirely eliminating the
designation/undesignation requirements for network resources. As TAPS
explains, centralized dispatch in these markets may very well eliminate
any effect that temporary resource undesignations and redesignations
have on dispatch or ATC calculations and, therefore, tailoring the
rules governing the designation of network resources to each RTO/ISO
market could be appropriate.
    1019. We note that MISO has adopted the pro forma definition of
Non-Firm Sales in its compliance filing in response to Order No. 890
and certain members of TAPS have argued in response that adoption of
that definition is inconsistent with the operation of the MISO
market.\381\ The Commission will address those arguments on review of
the MISO compliance filing. In the interim, we note that MISO retains
significant discretion in how to implement the undesignation
requirements for network resources. Pending development of OASIS
functionality for electronic submission of undesignations and
redesignations, each transmission provider may adopt business practices
governing the undesignation and redesignation of network resources.
While the Commission referenced the use of telefax or recorded
telephone lines to convey this information,\382\ the bid-based nature
of LMP markets may justify adoption of other procedures. We decline to
impose any particular requirements here regarding the designation and
undesignation of network resources selling in an RTO/ISO market, as it
is more appropriate to leave development of those requirements to each
transmission provider, in coordination with its stakeholders as
relevant.
---------------------------------------------------------------------------

    \381\ See Supplemental Comments of Indiana Municipal Power
Agency, Lincoln Electric System, Madison Gas & Electric Company, and
Wisconsin Public Power Inc., Docket No. OA08-14-000 (Nov. 6, 2007).
    \382\ See Order No. 890 at P 1543.
---------------------------------------------------------------------------

d. Commenter Proposals
    1020. The Commission declined to adopt various commenter proposals
for modifications or additions to the definitions contained in the pro
forma OATT. For example, the Commission declined to revise the
definition of Long-Term Firm Point-to-Point Transmission Service to
include service longer than one year, instead of one year or longer.
The Commission also rejected commenter requests to adopt proposed
definitions for the terms ``source,''

``sink,'' ``use,'' and ``transmission peak'' in the pro forma
OATT.\383\
---------------------------------------------------------------------------

    \383\ Powerex's request for rehearing of the Commission's
decision not to modify the definition of System Impact Study to
exclude short-term service requests is discussed in section
III.D.4.a.(6) above.
---------------------------------------------------------------------------

Requests for Rehearing and Clarification
    1021. Ameren argues that the Commission failed to adequately
consider its proposal to amend the definition of long-term firm service
to include only contracts that are longer than a year. Ameren argues
that contracts of only one year in duration should be reflected as a
revenue credit and that the current definition of long-term service
makes calculation very difficult in the modern RTO/Seams Elimination
Cost Allocation (SECA) environment. Ameren contends that the
Commission's refusal to modify the definition of long-term service is
inconsistent with other decisions in Order No. 890, such as the
requirement that the planning redispatch and conditional firm options
for long-term firm point-to-point service apply be offered only to
customers requesting service of more than a year in duration \384\ and
the intended planning benefits associated with granting rollover rights
only to customers with contracts of five years or longer.
---------------------------------------------------------------------------

    \384\ Citing Order No. 890 at P 978.
---------------------------------------------------------------------------

    1022. Ameren also challenges the Commission's rejection of an
alternative definition for ``transmission peak,'' arguing that the
current definition and calculation methodology is unworkable because
the data necessary no longer resides with the transmission owner.
Ameren further states that the Commission failed to adequately explain
rejection of proposed definitions of ``source'' and ``sink'' in section
22.2 of the pro forma OATT, and clarification whether the word ``use''
in section 30.8 of the pro forma OATT includes load ratio limitations,
although Ameren states no arguments in support of that contention.
Commission Determination
    1023. The Commission affirms the decision in Order No. 890 to
maintain the current definition of Long-Term Firm Point-to-Point
Service. The definition is well-established in Commission precedent
and, notwithstanding Ameren's arguments to the contrary, consistent
with the reforms adopted in Order No. 890.\385\ Ameren has failed to
justify altering the definition of Long-Term Firm Point-to-Point
Service in light of the disruption such a change would cause.
---------------------------------------------------------------------------

    \385\ The Commission clarifies in section III.D.1 our intent
that the conditional firm and planning redispatch options apply to
all long-term firm point-to-point requests for service, i.e.,
service of one year or longer.
---------------------------------------------------------------------------

    1024. We also decline to amend the pro forma OATT to adopt Ameren's
proposed definitions of ``transmission peak,'' ``source,'' ``sink,''
and ``use.'' Ameren simply repeats arguments that have previously been
rejected. While peak load data ultimately resides with the RTO or ISO
in those regions, each transmission owner coordinates this data with
the RTO/ISO and, therefore, it is not necessary to alter the definition
of transmission peak as suggested by Ameren. The Commission has
adequately addressed the definitions of ``source'' and ``sink'' in
Order No. 888 and OASIS related proceedings and Ameren fails to state
why, in its view, additional clarification is needed. Finally, the
Commission has made clear that there are no load ratio limitations on
the use of interfaces under section 30.8 of the pro forma OATT.\386\
---------------------------------------------------------------------------

    \386\ See Order No. 888 at 31,753-54; Order No. 888-A at 30,304-
5; see also Sierra Pacific Power Co., 81 FERC ] 61,136 at 61,139-40
(1997); New England Power Pool, 83 FERC ] 61,045 at 61,248 (1998).
---------------------------------------------------------------------------

E. Enforcement
    1025. The Commission addressed several matters regarding
enforcement of the pro forma OATT in Order No. 890. Among other things,
the Commission concluded that it would revoke an entity's market-based
rate authority in response to an OATT violation only upon a finding of
a specific factual nexus between the violation and the entity's market-
based rate authority.\387\ The Commission reasoned that the ``nexus
condition'' is required in order to ensure that the Commission's
actions are not arbitrary or capricious or based on an inadequate
factual record. The Commission noted that in such situations it would
have the burden to show a factual nexus and did not assign a burden on
the violator to show a lack of nexus.
---------------------------------------------------------------------------

    \387\ Order No. 890 at P 1743.
---------------------------------------------------------------------------

    1026. The Commission disagreed that a finding of a ``serious'' or
``material'' violation of the OATT alone would be sufficient to justify
revocation of an entity's market-based rate authority. The Commission
concluded that the nexus condition requires a finding both that a
substantial OATT violation has occurred and that the violation either
related to the exercise of the violator's market-based rate authority
or violated a specific condition of that authority.\388\ The Commission
emphasized, moreover, that it has discretion to fashion further
sanctions, such as civil penalties or modification of a violator's
market-based rate authority, for OATT violations that relate to the
violator's market-based rate authority where a factual nexus
justification was not found to justify revocation of that authority.
---------------------------------------------------------------------------

    \388\ Id. at P 1744.
---------------------------------------------------------------------------

    1027. The Commission also created a rebuttable presumption that all
of the transmission provider's affiliates should lose their market-
based rate authority in each market in which their affiliated
transmission provider loses its market-based rate authority as a result
of an OATT violation.\389\ The Commission stated that it would allow an
affiliate of a transmission provider to retain its market-based rate
authority in a market area if the affiliate overcomes the rebuttable
presumption with respect to that market area. To afford due process to
a transmission provider's affiliates and to ensure that revocation of
market-based rate authority in a particular market for the transmission
provider and all of its affiliates is adequately based upon record
evidence and not arbitrary or capricious, the Commission provided that
each such affiliate will be allowed to make a showing that it should
retain its market-based rate authority or that enforcement action
against it should be less severe than revocation.
---------------------------------------------------------------------------

    \389\ Id. at P 1747.
---------------------------------------------------------------------------

    1028. The Commission explained that whether an affiliate has
overcome the rebuttable presumption will depend on an analysis of
specific facts in the record. Relevant facts would include, but are not
limited to, whether: (1) The transmission provider and the affiliate
were under the same control; (2) the affiliate knew of, participated in
or was an accomplice to the OATT violation; (3) the affiliate assisted
the transmission provider in exercising market power; or (4) the
affiliate benefited from the violation.\390\
---------------------------------------------------------------------------

    \390\ Id. at P 1748.
---------------------------------------------------------------------------

Requests for Rehearing and Clarification
    1029. NRECA argues that it is unclear what would constitute a
sufficient factual nexus between an OATT violation and revocation of
the violator's market-based rate authority. NRECA suggests that the
Commission instead adopt the standard advocated by APPA in its NOPR
comments, which would require revocation of the affiliate's market-
based rate authority when there is any material violation of the
transmission provider's OATT that denies a customer access to just,
reasonable, nondiscriminatory, and comparable transmission service. If
the Commission retains the nexus

requirement as formulated in Order No. 890, NRECA asks that the
Commission provide an illustrative list of what types of violations
could constitute a sufficient nexus between an OATT violation and an
entity's market-based rate authority. NRECA urges the Commission to
specifically identify failure to comply with the planning requirements
of Order No. 890 as satisfying the nexus requirement.
    1030. TDU Systems argue that the nexus requirement does not pay
adequate attention to the basic nature and purpose of the market-based
rate authorization and, in their view, the critical question is whether
the OATT violation is indicative of conditions in the market which are
significantly different from those upon which the market-based rate
authorization was premised. TDU Systems argue that a transmission
provider's violation of a material term of its OATT should serve as
prima facie evidence that the structures presumed to cabin the exercise
of monopoly power may not be adequate. Even if the transmission
provider has not violated its OATT explicitly in connection with the
market-based rate authorization, TDU Systems contend that the violation
may nonetheless promote conditions in which the transmission provider
could gain an advantage in future transactions. TDU Systems state
particular concern that failure to comply with the planning obligations
of Order No. 890 may not be associated with any specific exercise of
market-based rate authority, yet could foster conditions inconsistent
with the premises of unconstrained and competitive markets.
    1031. EEI argues that, since there is no rebuttable presumption
with respect to a transmission provider's OATT violation and its
potential loss of market-based rate authority, there should be no
rebuttable presumption regarding the market-based rate authority of the
transmission provider's affiliates. EEI contends that the Commission's
Code of Conduct actually supports a presumption that a transmission
provider's OATT violation does not have any relation to the activities
of the marketing affiliate since, absent evidence to the contrary, the
utility and its energy affiliates should be presumed to be obeying the
Commission's separation of function requirements. EEI further argues
that the Commission's reference to allegations that transmission
providers have engaged in transactions with affiliates does not justify
adoption of a rebuttable presumption in instances in which there are no
transactions with affiliates that violated the OATT. EEI therefore asks
the Commission to grant rehearing and hold that the rebuttable
presumption applies only if there is a specific factual nexus between
the activities of the marketing affiliate and the OATT violation.
    1032. Ameren similarly argues that most integrated utility
companies that have market-based rate authority have separated their
marketing activities into ``regulated'' traditional utility functions
and ``non-regulated'' power marketing functions and have further
separated their transmission and merchant energy functions. Ameren
states that these utilities' codes of conduct and the Commission's
Standards of Conduct severely restrict the sharing of information
within an integrated utility company or the possible benefit to
affiliates from an OATT violation. Ameren argues that the presumption
adopted by the Commission unreasonably assumes a lack of compliance
with these obligations and unfairly shifts the burden to the affiliate
to show that it has not engaged in bad acts.
    1033. Ameren contends that a decision by the Commission to revoke a
transmission provider's market-based rate authority would indicate only
that the Commission has determined that sanction to be appropriate in
light of the transmission provider's actions. In Ameren's view, there
is no reason or basis to similarly sanction the transmission provider's
affiliate in the absence of a showing that the affiliate participated
in, or benefited from, the transmission provider's improper behavior.
Ameren also argues that the presumption is inconsistent with the
Commission's decision in Order No. 890 to allow non-offending
affiliates of the transmission provider to share in the distribution of
operating penalties. Finally, Ameren argues that revoking the market-
based rate authority of a utility because of the actions of an
affiliated transmission provider would unfairly harm the traditional
utility affiliate as well as its bundled customers since many
traditional utilities engage in sales at market-based rates to reduce
their overall cost of power.
    1034. Southern asks that the Commission confirm and clarify that
the rebuttable presumption does not shift the ultimate burden of proof
to the transmission provider or its affiliates, but rather places a
burden of going forward on the affiliates, with the ultimate burden
remaining with the Commission or other proponents of a revocation
sanction. Southern suggests that the presentation of evidence that
rebuts the presumption should result in the burden of proof reverting
back to the Commission or the proponent of revocation.
    1035. Southern also requests clarification of the relevant facts to
be considered by the Commission in determining whether a sanction less
severe than revocation of market-based rate authority may be
appropriate for an affiliate. Southern notes that the first relevant
fact noted by the Commission in paragraph 1748 of Order No. 890 is
whether the transmission provider and the affiliate were under ``the
same control.'' Southern questions what the Commission meant by that
language since a transmission provider is by definition under the same
corporate control as an affiliate.
Commission Determination
    1036. The Commission denies rehearing of the decision in Order No.
890 to require a factual nexus between a substantial OATT violation and
the entity's market-based rate authority to justify revocation of that
authority. As the Commission explained in Order No. 890, the ``nexus
condition'' is required in order to ensure that our actions are not
arbitrary or capricious or based on an inadequate factual record. We
disagree with NRECA and TDU Systems that any material OATT violation
should justify revocation of the entity's market-based rate authority
since the violation may have no relation to the market-based rate
authority. In such circumstances, the Commission will consider such
other sanctions as may be appropriate. We also decline to provide an
illustrative list of examples that would constitute a sufficient nexus
between an entity's market-based rate authority and an OATT violation.
The factual circumstances involved in a claimed violation will be
unique to the company and, therefore, any such list would be
incomplete. This is especially true in light of continually developing
market conditions. We continue to believe that the determination of
what would be a sufficient factual nexus between an OATT violation and
revocation of the violator's market-based rate authority is best left
to case-by-case consideration.
    1037. With regard to the transmission provider's planning
obligations, violations of the planning-related requirements of the pro
forma OATT may or may not have a sufficient factual nexus with the
transmission provider's market-based rate authority. A case-by-case
analysis will be necessary to determine if the violation justifies
revocation of the transmission provider's market-based rate authority.
While we agree with TDU Systems that a transmission provider's OATT

violations that are not explicitly connected with its market-based rate
authorization may nonetheless promote conditions in which the violator
could gain an advantage in future transactions, we note that this is
the precise result that we seek to avoid with this enforcement
provision. Therefore, we will apply the mechanisms adopted in Order No.
890 to aid us in determining, on a case-by-case basis if a particular
violation promotes conditions that will put that company at a future
advantage vis-[agrave]-vis its market-based rate authority.
    1038. We also decline to adopt TDU Systems' suggestion that we
consider whether the OATT violation is indicative of conditions in the
market that are significantly different from those upon which the
market-based rate authorization was premised. When the revocation of
market-based rate authority is being considered, we will distinguish
between those violations resulting from a change in market conditions
upon which the market-based rate authority was granted (and which are
likely outside of the company's control) versus a clear violation
related to the company's market-based rate authority. It may be most
appropriate to address those violations resulting from changes in
market conditions with an amendment to the affected company's OATT or
market-based rate tariff.
    1039. We also affirm the adoption of a rebuttable presumption that
all of the transmission provider's affiliates should lose their market-
based rate authority in each market in which their affiliated
transmission provider loses its market-based rate authority as a result
of an OATT violation.\391\ While we agree that, absent evidence to the
contrary, the transmission provider and its affiliates should be
presumed to be obeying the Commission's separation of function
requirements and Affiliate Restrictions, we disagree that this
undermines the rebuttable presumption adopted in Order No. 890. If a
violation has occurred that justifies revocation of the entity's
market-based rate authority, the violation must have related to that
market-based rate authority. Assuming that the Standards of Conduct and
Affiliate Restrictions were followed, the finding of a nexus between
the violation and the entity's market-based rate authority demonstrates
that the Standards of Conduct or Affiliate Restrictions did not
preclude the violation. An OATT violation by a transmission provider
that merits revocation of the transmission provider's market-based rate
authority will, at a minimum, raise the question whether the
transmission provider's affiliates continue to qualify for market-based
rates under the standards established by the Commission.
---------------------------------------------------------------------------

    \391\ Accord Order No. 697 at P 424-427.
---------------------------------------------------------------------------

    1040. Applying this rebuttable presumption to the transmission
provider's affiliates is not, as suggested by Ameren, inconsistent with
the Commission's decision in Order No. 890 to allow non-offending
affiliates of the transmission provider to share in the distribution of
unreserved use penalties.\392\ Unreserved use penalties are a mechanism
used to redress administrative violations of the OATT and can be
assessed on any transmission customer. It is therefore appropriate to
distribute those penalties to all non-offending customers, whether or
not affiliated with the transmission provider. Unreserved use penalties
do not rise to the level of the sanction of revocation of market-based
rate authority, to which the presumption applies.
---------------------------------------------------------------------------

    \392\ Although Ameren refers more generally to operational
penalties, only unreserved use penalties may be distributed to
affiliated customers. Late study penalties are to be distributed
only to non-affiliated transmission customers. See Order No. 890 at
P 1351.
---------------------------------------------------------------------------

    1041. We also disagree that there must be a showing of benefit by
the affiliate in order to revoke its market-based rate authority or
that potential economic harm to the transmission provider's bundled
customers categorically justifies an affiliate to continue making sales
at market-based rates to reduce the company's overall cost of power,
even if the affiliate should otherwise lose its market-based rate
authority. It is possible that a transmission provider could violate
its OATT with an intent to advantage an affiliated marketer that, in
turn, attempts to take advantage of the violation in the market but is
unsuccessful because of market conditions. Alternatively, the
affiliated marketer could be successful, gaining an unfair advantage
due to the transmission provider's OATT violation, but thereby earning
revenue that ultimately serves to lower the cost of supplies for the
company's bundled customers. In either of these circumstances, it could
be appropriate to revoke or modify the market-based rate authority of
the affiliate. Therefore, the facts of each violation must be
considered in order to determine if revocation of market-based rate
authority is an appropriate sanction.
    1042. With regard to Southern's request for clarification
concerning the burden of proof to show that an affiliate should lose
its market-based rate authority, we confirm that the ultimate burden
remains with the Commission. The presumption does not constitute a
definitive finding that the affiliate's market-based rate authority
should be revoked and, thus, the affiliate has an opportunity to
demonstrate that revocation would not be appropriate under the facts
and circumstances at issue.\393\ The rebuttable presumption thus
satisfies the Commission's burden of going forward and shifts to the
affiliate the burden of presenting evidence rebutting the presumption.
The ultimate burden of proof remains with the Commission throughout
these proceedings, and it must base any finding on a review of the
factual record.\394\
---------------------------------------------------------------------------

    \393\ The use of shifting burdens of proof is consistent with
Commission practice in other areas. See, e.g., AEP Power Mktg, Inc.,
108 FERC ] 61,026 (2004); Southern Companies Energy Mktg, Inc., 111
FERC ] 61,144 (2005).
    \394\ See Order No. 890 at P 1743-48.
---------------------------------------------------------------------------

    1043. We clarify in response to Southern that the reference to
whether ``the transmission provider and the affiliate were under the
same control'' in paragraph 1748 of Order No. 890 is intended to
reflect that the Commission will consider whether the affiliation
between the transmission provider and the affiliate is sufficient to
give either or a common parent control over both entities.

IV. Information Collection Statement

    1044. The Office of Management and Budget (OMB) regulations require
that OMB approve certain information collection requirements imposed by
an agency.\395\ The revisions to the information collection
requirements for transmission providers adopted in Order No. 890 were
approved under OMB Control Nos. 1902-0233. This order further revises
these requirements in order to more clearly state the obligations
imposed in Order No. 890, but does not substantively alter those
requirements. OMB approval of this order is therefore unnecessary.
However, the Commission will send a copy of this order to OMB for
informational purposes only.
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    \395\ 5 CFR 1320.
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V. Document Availability

    1045. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's

Public Reference Room during normal business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First

Street, NE., Room 2A, Washington DC 20426.
    1046. From FERC's Home Page on the Internet, this information is
available on eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
    1047. User assistance is available for eLibrary and the FERC's Web
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or e-mail at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-

8371, TTY<PHONE_NUMBER>. E-mail the Public Reference Room at
<EMAIL_ADDRESS>

VI. Effective Date and Congressional Notification

    1048. Changes to Order No. 890 adopted in this order on rehearing
will become effective March 17, 2008.

List of Subjects in 18 CFR Part 37

    Conflict on interests, Electric power rates, Electric power plants,
Reporting and recordkeeping requirements.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

0
In consideration of the foregoing, the Commission amends part 37,
Chapter I, Title 18 of the Code of Federal Regulations, as follows:

PART 37--OPEN ACCESS SAME-TIME INFORMATION SYSTEMS

0
1. The authority citation for part 37 continues to read as follows:

    Authority: 16 U.S.C. 791-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.

0
2. Amend Sec.  37.6 as follows:
0
a. Paragraph (b)(3)(iv) is revised.
0
b. Paragraph (h)(1) introductory text is revised.
0
c. Paragraph (h)(3) introductory text is revised.
0
d. Paragraph (i) is revised.

Sec.  37.6  Information to be posted on the OASIS.

* * * * *
    (b) * * *
    (3) * * *
    (iv) Daily load. The Transmission Provider must post on a daily
basis, its load forecast, including underlying assumptions, and actual
daily peak load for the prior day.
* * * * *
    (h) Posting information summarizing the time to complete
transmission service request studies. (1) For each calendar quarter,
the Responsible Party must post the set of measures detailed in
paragraph (h)(1)(i) through paragraph (h)(1)(vi) of this section
related to the Responsible Party's processing of transmission service
request system impact studies and facilities studies. The Responsible
Party must calculate and post the measures in paragraph (h)(1)(i)
through paragraph (h)(1)(vi) of this section for requests for short-
term firm point-to-point transmission service, requests for long-term
firm point-to-point transmission service, and requests to designate a
new network resource or network load. When calculating the measures in
paragraph (h)(1)(i) through paragraph (h)(1)(iv) of this section, the
Responsible Party may aggregate requests for short-term firm point-to-
point service and requests for long-term firm point-to-point service,
but must calculate and post measures separately for transmission
service requests from Affiliates and transmission service requests from
Transmission Customers who are not Affiliates. The Responsible Party is
required to include in the calculations of the measures in paragraph
(h)(1)(i) through paragraph (h)(1)(vi) of this section all studies the
Responsible Party conducts of transmission service requests on another
Transmission Provider's OASIS.
* * * * *
    (3) The Responsible Party will be required to post on OASIS the
measures in paragraph (h)(3)(i) through paragraph (h)(3)(iv) of this
section in the event the Responsible Party, for two consecutive
calendar quarters, completes more than twenty (20) percent of the
studies associated with requests for transmission service from entities
that are not Affiliates of the Responsible Party more than sixty (60)
days after the Responsible Party delivers the appropriate study
agreement. The Responsible Party will have to post the measures in
paragraph (h)(3)(i) through paragraph (h)(3)(iv) of this section until
it processes at least ninety (90) percent of all studies within 60 days
after it has received the appropriate executed study agreement. For the
purposes of calculating the percent of studies completed more than
sixty (60) days after the Responsible Party delivers the appropriate
study agreement, the Responsible Party should aggregate all system
impact studies and facilities studies that it completes during the
reporting quarter.
* * * * *
    (i) Posting data related to grants and denials of service. The
Responsible Party is required to post data each month listing, by path
or flowgate, the number of transmission service requests that have been
accepted and the number of transmission service requests that have been
denied during the prior month. This posting must distinguish between
the length of the service request (e.g., short-term or long-term
requests) and between the type of service requested (e.g., firm point-
to-point, non-firm point-to-point or network service). The posted data
must show:
    (1) The number of non-Affiliate requests for transmission service
that have been rejected,
    (2) The total number of non-Affiliate requests for transmission
service that have been made,
    (3) The number of Affiliate requests for transmission service,
including requests by the transmission provider's merchant function to
designate a network resource or to procure secondary network service,
that have been rejected, and
    (4) The total number of Affiliate requests for transmission
service, including requests by the transmission provider's merchant
function to designate, or terminate the designation of, a network
resource or to procure secondary network service, that have been made.
* * * * *

    Note: The following appendix will not appear in the Code of
Federal Regulations.

             Appendix A to the Preamble: Petitioner Acronyms
------------------------------------------------------------------------
         Abbreviation                       Petitioner names
------------------------------------------------------------------------
Alcoa........................  Alcoa Inc. and Alcoa Power Generating
                                Inc.
Ameren.......................  Ameren Services Company.
AMP-Ohio.....................  American Municipal Power-Ohio, Inc.
APPA.........................  American Public Power Association.
AWEA.........................  American Wind Energy Association.

Areva........................  Areva T&D.
APS..........................  Arizona Public Service Company.
ATCLLC.......................  American Transmission Company LLC.
Barclays.....................  Barclays Bank PLC, Credit Suisse Energy
                                LLC, J. Aron & Co., and Morgan Stanley
                                Capital Group Inc.
Bonneville...................  Bonneville Power Administration.
Constellation................  Constellation Energy Group, Inc.
Duke.........................  Duke Energy Corp.
Dynegy.......................  Dynegy Power Marketing, Inc., Entegra
                                Power Group LLC, LS Power Associates.
E.ON LSE.....................  E.ON Load Serving Entity.
E.ON U.S.....................  E.ON U.S. LLC.
East Texas Cooperatives......  East Texas Electric Cooperative, Inc.;
                                Northeast Texas Electric Cooperative,
                                Inc.; Sam Rayburn Generation and
                                Electric Cooperative, Inc. and Tex-La
                                Electric Cooperative of Texas, Inc.
EEI..........................  Edison Electric Institute.
EPSA.........................  Electric Power Supply Association.
Entergy......................  Entergy Services, Inc.
Financial Service Joint        Barclays Bank PLC, Credit Suisse Energy
 Requestors.                    LLC, J. Aron & Company, and Morgan
                                Stanley Capital Group Inc.
FMPA.........................  Florida Municipal Power Agency and
                                Midwest Municipal Transmission Group.
Florida Power................  Florida Power & Light Co.
Great Northern...............  Great Northern Power Development, L.P.
Idaho Power..................  Idaho Power Co.
Indicated Commenters.........  Dynegy Power Marketing, Inc., Entegra
                                Power Group LLC, and LS Power
                                Associates, L.P.
ISO/RTO Council..............  ISO/RTO Council.
Mark Lively..................  Mark B. Lively.
MidAmerican..................  MidAmerican Energy Company and
                                PacifiCorp.
MISO.........................  Midwest Independent Transmission System
                                Operator, Inc.
Morgan Stanley...............  Morgan Stanley Capital Group Inc.
National Grid................  National Grid USA.
NRECA........................  National Rural Electric Cooperative
                                Association.
NYISO........................  New York Independent System Operator.
New York Transmission Owners.  Central Hudson Gas & Elec. Corp.,
                                Consolidated Edison Co. of New York,
                                Inc., LIPA, New York Power Authority,
                                New York State Electric & Gas Corp.,
                                Orange and Rockland Utilities, Inc., and
                                Rochester Gas and Electric Corp.
NCEMC........................  North Carolina Electric Membership
                                Corporation.
NCPA.........................  Northern California Power Agency.
NorthWestern.................  NorthWestern Corporation.
Old Dominion.................  Old Dominion Electric Cooperative.
Pacific Northwest Parties....  Avista Corp., Bonneville Power
                                Administration, PacifiCorp, PNGC Power,
                                Portland General Electric Company, and
                                Puget Sound Energy, Inc.
PJM..........................  PJM Interconnection, LLC.
Powerex......................  Powerex Corp.
Progress Energy..............  Progress Energy, Inc. (Carolina Power &
                                Light Co. d/b/a Progress Energy
                                Carolinas, Inc. and Florida Power Corp.,
                                d/b/a Progress Energy Florida, Inc.).
PNM..........................  Public Service Company of New Mexico.
PSEG.........................  Public Service Electric and Gas Company;
                                PSEG Power LLC; and PSEC Energy
                                Resources & Trade LLC (PSEG Companies).
REPIO........................  Renewable Energy and Public Interest
                                Organizations (The Project for
                                Sustainable FERC Energy Policy,
                                Environmental Law & Policy Center,
                                Illinois Citizens Utility Board, Natural
                                Resources Defense Council, Northwest
                                Energy Coalition, Pace Energy Project,
                                Renewable Northwest Project, West Wind
                                Wires, and Wind on Wires.
Sempra Global................  Sempra Global.
South Carolina E&G...........  South Carolina Electric & Gas Company.
South Carolina Regulatory      South Carolina Office of Regulatory
 Staff.                         Staff.
Southern.....................  Southern Company Services, Inc.
Steel Manufacturers            Steel Manufacturers Association.
 Association.
Tenaska......................  Tenaska Power Services, Co.
TranServ.....................  TranServ International, Inc.
TAPS.........................  Transmission Access Policy Study Group.