[Federal Register Volume 86, Number 105 (Thursday, June 3, 2021)]
[Rules and Regulations]
[Pages 29687-29688]
[FR Doc No: 2021-11629]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 73

[Docket No. FAA-2021-0483; Airspace Docket No. 19-ANM-84]
RIN 2120-AA66

Amendment of Restricted Area R-6413; Green River, UT

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; technical amendment.

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

SUMMARY: This action changes the using agency of restricted area R-
6413, Green River, UT. The FAA is taking this administrative action in
response to the requested change from the United States Air Force to
the United States Army as the using agency. There are no changes to the
boundaries; designated altitudes; or activities conducted within the
affected restricted area.

DATES: Effective date 0901 UTC, August 12, 2021.

FOR FURTHER INFORMATION CONTACT: Christopher McMullin, Rules and
Regulations Group, Office of Policy, Federal Aviation Administration,
800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-
8783.

SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is
found in Title 49 of the United States Code. Subtitle I, Section 106
describes the authority of the FAA Administrator.
    Subtitle VII, Aviation Programs, describes in more detail the scope
of the agency's authority.
    This rulemaking is promulgated under the authority described in
Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the
FAA is charged with prescribing regulations to assign the use of the
airspace necessary to ensure the safety of aircraft and the efficient
use of airspace. This regulation is within the scope of that authority
as it administratively amends the using agency for restricted area R-
6413, Green River, UT.

History

    The FAA evaluates utilization of special use airspace annually. For
the past several years the utilization of restricted area R-6413 has
declined steadily. The FAA in coordination with the United States Air
Force and the United States Army, has concluded the restricted area is
still needed, and the using agency should be transferred. Therefore,
the using agency has changed from Deputy for Air Force, White Sands
Missile Range, NM 88002 to Commanding General, White Sands Missile
Range, NM, due to emerging Army requirements and their planned use of
the restricted area R-6413.

The Rule

    This action amends 14 CFR part 73 by revising the using agency
listed for restricted area R-6413, Green River, UT. The using agency
for R-6413 is changed from ``Deputy for Air Force, White Sands Missile
Range, NM 88002'' to ``Commanding General, White Sands Missile Range,
NM''. These are administrative changes and do not affect the
boundaries, designated altitudes, or activities conducted within the
restricted area; therefore, notice and public procedures under 5 U.S.C.
553(b) are unnecessary.

Regulatory Notices and Analyses

    The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore: (1) Is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under
Department of Transportation (DOT) Regulatory Policies and Procedures
(44 FR 11034; February 26, 1979); and (3) does not warrant preparation
of a regulatory evaluation as the anticipated impact is so minimal.
Since this is a routine matter that only affects air traffic procedures
and air navigation, it is certified that this rule, when promulgated,
does not have a significant economic impact on a substantial number of
small entities under the criteria of the Regulatory Flexibility Act.

Environmental Review

    The FAA has determined that this action of changing the using
agency from the US Air Force to the US Army for restricted area R-6413;
Green River, UT, qualifies for categorical exclusion under the National
Environmental Policy Act (42 U.S.C. 4321 et seq.) and in accordance
with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures,
paragraph 5-6.5.d, ``Modification of the technical description of
special use airspace (SUA) that does not alter the dimensions,
altitudes, or times of designation of the airspace (such as changes in
designation of the controlling or using agency, or correction of
typographical errors).'' This airspace action is an administrative

change which changes the user of restricted area R-6413; Green River,
UT. It does not alter the dimensions, altitudes, time of designation,
or use of the airspace. Therefore, this airspace action is not expected
to result in any significant environmental impacts. In accordance with
FAA Order 1050.1F, paragraph 5-2 regarding Extraordinary Circumstances,
this action has been reviewed for factors and circumstances in which a
normally categorically excluded action may have a significant
environmental impact requiring further analysis, and it is determined
that no extraordinary circumstances exist that warrant preparation of
an environmental assessment.

List of Subjects in 14 CFR Part 73

    Airspace, Prohibited areas, Restricted areas.

The Amendment

    In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 73, as follows:

PART 73--SPECIAL USE AIRSPACE

0
1. The authority citation for part 73 is amended to read as follows:

    Authority: 49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O.
10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

Sec.  73.64  Utah [Amended]

0
2. Sec.  73.64 is amended as follows:
* * * * *

R-6413 Green River, UT [Amended]

    By removing the ``Using agency. Deputy for Air Force, White
Sands Missile Range, NM 88002'' and adding in their place ``Using
agency. Commanding General, White Sands Missile Range, NM.''
* * * * *

    Issued in Washington, DC, on May 27, 2021.
George Gonzalez,
Acting Manager, Rules and Regulation Group.
[FR Doc. 2021-11629 Filed 6-2-21; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 83, Number 164 (Thursday, August 23, 2018)]
[Notices]
[Pages 42756-42757]
[FR Doc No: 2018-18252]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Office of Commercial Space Transportation: Notice of
Availability, Notice of Public Comment Period, and Request for Comment
on the Draft Environmental Assessment for the Shuttle Landing Facility
Launch Site Operator License

AGENCY: The Federal Aviation Administration (FAA), Department of
Transportation (DOT) is the lead agency. The National Aeronautics and
Space Administration (NASA), U.S. Air Force, U.S. Fish and Wildlife
Service (USFWS), and National Park Service (NPS) are cooperating
agencies for this Environmental Assessment (EA) due to their special
expertise and jurisdictions (40 CFR 1508.15 and 1508.26).

ACTION: Notice of availability, notice of public comment period, and
request for comment.

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

SUMMARY: The FAA is announcing the availability of and requesting
comments on the Draft EA for the Shuttle Landing Facility (SLF) Launch
Site Operator License. The FAA has prepared the Draft EA to evaluate
the potential environmental impacts of the FAA issuing a Launch Site
Operator License to Space Florida for the operation of a commercial
space launch site at the SLF. Under the proposed action, Space Florida
would construct facilities related to the proposed launch site and
operate a commercial space launch site at the SLF to conduct launches
of horizontal takeoff and horizontal landing launch vehicles from the
SLF. The Draft EA considers the potential environmental impacts of the
Proposed Action and the No Action Alternative.

DATES: Comments must be received on or before September 17, 2018.

ADDRESSES: Please submit comments or questions regarding the Draft EA
to Shuttle Launching Facility Environmental Assessment, Attn. Pete
Eggert, 505 Odyssey Way, Suite 300, Exploration Park, FL 32953.
Comments may also be submitted by email to [email protected].

FOR FURTHER INFORMATION CONTACT: Ms. Stacey M. Zee, Environmental
Protection Specialist, Federal Aviation Administration, 800
Independence Avenue SW, Suite 325, Washington, DC 20591; email
[email protected].

SUPPLEMENTARY INFORMATION: The FAA has prepared the Draft EA in
accordance with the National Environmental Policy Act of 1969 (NEPA; 42
United States Code 4321 et seq.), the Council on Environmental Quality
Regulations for Implementing the Procedural Provisions of NEPA (40 Code
of Federal Regulations parts 1500-1508), and FAA Order 1050.1F,
Environmental Impacts: Policies and Procedures, as part of its
licensing process. Concurrent with the NEPA process and to determine
the potential effects of the Proposed Action on historic and cultural
properties, the FAA has initiated Section 106 Consultation with the
Florida State Historic Preservation Office and the following Native
America tribes: Catawba Indian Nation, Chitimacha Tribe of Louisiana,
Coushatta Tribe of Louisiana, Eastern Band of Cherokee Indians, Jena
Band of Choctaw Indians, Miccosukee Tribe of Indians of Florida,
Muscogge (Creek) Nation, Poarch Band of Creek Indians, Seminole Nation
of Oklahoma, and Seminole Tribe of Florida. The FAA has also consulted
with the USFWS under Section 7 of the Endangered Species Act regarding
potential impacts on federally-listed threatened and endangered
species. Pursuant to the U.S. Department of Transportation Act of 1966,
this EA will comply with the requirements of Section 4(f) of the Act.
    An electronic version of the Draft EA is available on the FAA
Office of Commercial Space Transportation website at: https://www.faa.gov/about/office_org/headquarters_offices/ast/environmental/nepa_docs/review/documents_progress/space_florida/.
    The FAA encourages all interested agencies, organizations, Native
American tribes, and members of the public to submit comments
concerning the analysis presented in the Draft EA by September 17,
2018. Comments should be as specific as possible and address the
analysis of potential environmental impacts. Reviewers should organize
their participation so that it is meaningful and makes the agency aware
of the viewer's interests and concerns using quotations and other
specific references to the text of the Draft EA and related documents.
Matters that could have been raised with specificity during the comment

period on the Draft EA may not be considered if they are raised for the
first time later in the decision process. This comment procedure is
intended to ensure that substantive comments and concerns are made
available to the FAA in a timely manner so that the FAA has an
opportunity to address them.
    Before including your address, phone number, email address, or
other personal identifying information in your comment, be advised that
your entire comment--including your personal identifying information--
may be made publicly available at any time. While you can ask us in
your comment to withhold from the public review your personal
identifying information, we cannot guarantee that we will be able to do
so.
    The FAA has prepared the Draft EA to evaluate the potential
environmental impacts of the construction and operation of the SLF as a
launch location for horizontally launched and landed launch vehicles
and issuing a Launch Site Operator License to Space Florida at the SLF.
The EA considers the potential environmental impacts of the Proposed
Action and the No Action Alternative. The successful completion of the
environmental review process does not guarantee that the FAA Office of
Commercial Space Transportation would issue a Launch Site Operator
License to Space Florida. The project must also meet all FAA
requirements of a Launch Site Operator License. Individual launch
operators proposing to launch from the site would be required to obtain
a separate launch operator license.
    The Proposed Action is for Space Florida to construct facilities
related to the proposed launch site and for the FAA to issue a Launch
Site Operator License to Space Florida for the operation of a
commercial space launch site at the SLF. The Proposed Action would also
allow Space Florida to offer the commercial space launch site at the
SLF to commercial space operators to support their application to
acquire a launch license or experimental permit (when their operations
match those described and assessed within this EA) to allow them to
conduct horizontal launches and horizontal landings of launch vehicles
at the SLF. The alternatives under consideration include the Proposed
Action and the No Action Alternative. Under the No Action Alternative,
the FAA would not issue a Launch Site Operator License to Space
Florida.

    Issued in Washington, DC, on August 17, 2018.
Daniel Murray,
Manager, Space Transportation Development Division.
[FR Doc. 2018-18252 Filed 8-22-18; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 80, Number 17 (Tuesday, January 27, 2015)]
[Proposed Rules]
[Pages 4231-4239]
[FR Doc No: 2015-01423]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 33

[Docket No. PL15-3-000]

Policy Statement on Hold Harmless Commitments

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Proposed policy statement.

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

SUMMARY:  The Commission proposes, as a statement of policy, the
following clarifications regarding hold harmless commitments offered by
applicants as ratepayer protection mechanisms to mitigate adverse
effects on rates that may result from transactions subject to section
203 of the Federal Power Act (FPA). First, the Commission proposes to
clarify the scope and definition of the costs that should be subject to
hold harmless commitments. Second, the Commission proposes to clarify
that applicants offering hold harmless commitments must implement
controls and procedures to track the costs from which customers will be
held harmless. The Commission also proposes to clarify the types of
controls and procedures that applicants offering hold harmless
commitments must implement. Third, the Commission proposes to no longer
accept hold harmless commitments that are limited in duration. Fourth,
the Commission proposes to clarify that applicants may demonstrate
that, under certain circumstances, transactions will not have an
adverse effect on rates without relying on hold harmless commitments or
other ratepayer protection mechanisms.

DATES:  Comments on the proposed policy statement are due within March
30, 2015.

FOR FURTHER INFORMATION CONTACT:
Eric Olesh (Technical Information), Office of Energy Market Regulation,
888 First Street NE., Washington, DC 20426,<PHONE_NUMBER>,
<EMAIL_ADDRESS>Adam Batenhorst (Legal Information), Office of the General Counsel, 888
First Street NE., Washington, DC 20426,<PHONE_NUMBER>,
<EMAIL_ADDRESS>Olga Anguelova (Accounting Information), Office of Enforcement, 888
First Street NE., Washington, DC 20426,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:
    1. We propose, as a statement of policy, the following
clarifications regarding hold harmless commitments offered by
applicants as ratepayer protection mechanisms to mitigate adverse
effects on rates that may result from transactions that are subject to
section 203 of the Federal Power Act (FPA).\1\ First, we propose to
clarify the scope and definition of the costs that should be subject to
hold harmless commitments. Second, we propose to clarify that
applicants offering hold harmless commitments must implement controls
and procedures to track the costs from which customers will be held
harmless. We also propose to clarify the types of controls and
procedures that applicants offering hold harmless commitments must
implement. Third, we propose to no longer accept hold harmless
commitments that are limited in duration. Fourth, we propose to clarify
that applicants may demonstrate that, under certain circumstances,
transactions will not have an adverse effect on rates without relying
on hold harmless commitments or other ratepayer protection mechanisms.
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824b.
---------------------------------------------------------------------------

I. Background

A. The Commission's Analysis of Proposed Transactions Under FPA Section
203

    2. FPA section 203(a)(4) requires the Commission to approve a
transaction if it determines that the transaction will be consistent
with the public interest.\2\ The Commission has stated that its
analysis of whether a transaction will be consistent with the public
interest generally involves consideration of three factors: (1) The
effect on competition; (2) the effect on rates; and (3) the effect on
regulation.\3\ FPA section

203(a)(4) also requires the Commission to find that the transaction
``will not result in cross-subsidization of a non-utility associate
company or the pledge or encumbrance of utility assets for the benefit
of an associate company, unless the Commission determines that the
cross-subsidization, pledge, or encumbrance will be consistent with the
public interest.'' \4\
---------------------------------------------------------------------------

    \2\ 16 U.S.C. 824b(a)(4).
    \3\ See Inquiry Concerning the Commission's Merger Policy Under
the Federal Power Act: Policy Statement, Order No. 592, 61 FR 68595
(Dec. 30, 1996), FERC Stats. & Regs. ] 31,044, at 30,111 (1996)
(Merger Policy Statement), reconsideration denied, Order No. 592-A,
79 FERC ] 61,321 (1997). See also FPA Section 203 Supplemental
Policy Statement, 72 FR 42277 (Aug. 2, 2007), FERC Stats. & Regs. ]
31,253 (2007). See also Revised Filing Requirements Under Part 33 of
the Commission's Regulations, Order No. 642, 65 FR 70983 (Nov. 28,
2000), FERC Stats. & Regs. ] 31,111 (2000), order on reh'g, Order
No. 642-A, 94 FERC ] 61,289 (2001). See also Transactions Subject to
FPA Section 203, Order No. 669, 71 FR 1348 (Jan. 6, 2006), FERC
Stats. & Regs. ] 31,200 (2005), order on reh'g, Order No. 669-A, 71
FR 28422 (May 16, 2006), FERC Stats. & Regs. ] 31,214, order on
reh'g, Order No. 669-B, 71 FR 42579 (July 27, 2006), FERC Stats. &
Regs. ] 31,225 (2006).
    \4\ 16 U.S.C. 824b(a)(4). The Commission's regulations establish
verification and information requirements for applicants that seek a
determination that a transaction will not result in inappropriate
cross-subsidization or a pledge or encumbrance of utility assets.
See 18 CFR 33.2(j).
---------------------------------------------------------------------------

    3. This proposed policy statement focuses on the second prong of
the Commission's FPA section 203 analysis, the effect of a proposed
transaction on rates. The Commission has stated that, when considering
a proposed transaction's effect on rates, its focus ``is on the effect
that a proposed transaction itself will have on rates, whether that
effect is adverse, and whether any adverse effect will be offset or
mitigated by benefits that are likely to result from the proposed
transaction.'' \5\ Specifically, as relevant here, the Commission
considers whether the transaction could result in an adverse effect on
rates to wholesale requirements or transmission customers.
---------------------------------------------------------------------------

    \5\ ITC Midwest LLC, 140 FERC ] 61,125, at P 19 (2012).
---------------------------------------------------------------------------

    4. If an applicant's only customers are wholesale power sales
customers served under market-based rates, then the transaction will
have no adverse effect on rates for such customers.\6\ If, however, the
transaction could result in an increase in rates and the wholesale
power sales customers of the applicants are not served exclusively
under market-based rates, or if the applicants have wholesale
requirements or transmission customers, the Commission evaluates
whether there are sufficient potential economic benefits that offset
the projected increase in rates. If such benefits exist, the analysis
of the effect on rates ends with a finding that there is no adverse
effect on rates because of those offsetting economic benefits.\7\
---------------------------------------------------------------------------

    \6\ Cinergy Corp., 140 FERC ] 61,180, at P 41 (2012) (citing
Duquesne Light Holdings, Inc., 117 FERC ] 61,326, at P 25 (2006))
(``The Commission has previously stated that, when there are market-
based rates, the effect on rates is not of concern. The effect on
rates is not of concern in these circumstances because market-based
rates will not be affected by the seller's cost of service and,
thus, will not be adversely affected by the Proposed
Transaction.'').
    \7\ The Commission has found that there is no adverse effect on
rates where, although costs may increase in one area of the
utility's operations, lower costs are expected elsewhere. See, e.g.,
Bluegrass Generation Co., L.L.C., 139 FERC ] 61,094, at P 41 (2012)
(finding no adverse effect on rates because increases in capacity
charges would be offset by a savings in energy rates).
---------------------------------------------------------------------------

    5. If a proposed transaction has the potential to increase
wholesale rates, but there is no showing of quantifiable offsetting
economic benefits, the Commission must determine whether ratepayers are
sufficiently protected from the potential rate increase, or whether
there are other non-quantifiable, offsetting benefits that would,
nevertheless, support a finding that the proposed transaction is
consistent with the public interest, regardless of the potential for a
rate increase.\8\ When the Commission has considered such non-
quantifiable offsetting benefits, it has often been in the context of
transactions that increase competition or enable more competitive
markets, such as transactions resulting in the expansion of regional
transmission organizations or the increase in transmission ownership by
independent transmission companies.\9\
---------------------------------------------------------------------------

    \8\ An increase in rates ``can still be consistent with the
public interest if there are countervailing benefits that derive
from the merger.'' Merger Policy Statement, FERC Stats. & Regs. ]
31,044 at 30,114; see also ALLETE, Inc., 129 FERC ] 61,174, at P 19
(2009) (``Our focus here is on the effect that the Proposed
Transaction itself will have on rates, whether that effect is
adverse, and whether any adverse effect2 will be offset or mitigated
by benefits likely to result from the Proposed Transaction.'').
    \9\ See, e.g., ITC Midwest LLC, 133 FERC ] 61,169, at P 23
(2010) (finding offsetting benefits because of the transfer of
transmission assets to a standalone transmission company); ALLETE,
129 FERC ] 61,174 at P 20 (finding that the advantages created in
joining a regional transmission organization outweighed potential
rate increase created by the different tax treatment of the assets
after transfer); Ameren Servs. Co., 103 FERC ] 61,121, at P 23
(2003) (finding that increasing a regional transmission
organization's footprint would offset a rate increase); Rockland
Elec. Co., 97 FERC ] 61,357, at 62,651 (2001) (finding that
attracting more bidders and encouraging more competition offset a
potential rate increase for locational marginal prices along a seam
at times of peak demand).
---------------------------------------------------------------------------

    6. Prior to the issuance of the Merger Policy Statement, the
Commission had required applicants and intervenors to estimate the
future costs and benefits of a transaction and then litigate the
validity of those estimates. The Commission, however, eliminated those
requirements in the Merger Policy Statement and established various
mechanisms that applicants could implement to show that a merger would
have no adverse effect on rates.\10\ As the Commission explained:
---------------------------------------------------------------------------

    \10\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,111 (``[I]n assessing the effect of a proposed merger on rates,
we will no longer require applicants and intervenors to estimate the
future costs and benefits of a merger and then litigate the validity
of those estimates. Instead, we will require applicants to propose
appropriate rate protection for customers.'').

    Merger applicants should propose ratepayer protection mechanisms
to assure that customers are protected if the expected benefits do
not materialize. The applicant bears the burden of proof to
demonstrate that the customer will be protected. This puts the risk
that the benefits will not materialize where it belongs--on the
applicants.
    Furthermore, we believe that the most promising and expeditious
means of addressing ratepayer protection is for the parties to
negotiate an agreement on ratepayer protection mechanisms. The
applicants should attempt to resolve the issue with customers even
before filing, and should propose a mechanism as part of their
filing. Even if these negotiations have not succeeded by the time of
filing, the parties should continue to try to reach a settlement.
What constitutes adequate ratepayer protection necessarily will
depend on the particular circumstances of the merging utilities and
their ratepayers, and we strongly encourage parties to minimize
contentious issues and to resolve them without the time and expense
of a formal hearing. Parties may not be able to reach an agreement
on an appropriate ratepayer protection and the Commission may still
be able to approve the merger. As mentioned earlier, this could
occur either after a hearing or on the basis of parties' filings if
we determine that the applicants' proposal sufficiently insulates
the ratepayers from harm.\11\
---------------------------------------------------------------------------

    \11\ Id. at 30, 123-24.

    7. The Commission then explained that it had previously accepted
``a variety of hold harmless provisions,'' and that parties could
consider those as well as ``other mechanisms if they appropriately
address ratepayer concerns.'' \12\ Among the types of protection the
Commission stated applicants could propose were the following:
---------------------------------------------------------------------------

    \12\ Id. at 30, 124.

--Open season for wholesale customers--applicants agree to allow
existing wholesale customers a reasonable opportunity to terminate
their contracts (after notice) and switch suppliers. This allows
customers to protect themselves from merger-related harm.
--General hold harmless provision--a commitment from the applicant
that it will protect wholesale customers from any adverse rate
effects resulting from the merger for a significant period of time
following the merger. Such a provision must be enforceable and
administratively manageable.

--Moratorium on increases in base rates (rate freeze)--applicants
commit to freezing their rates for wholesale customers under certain
tariffs for a significant period of time.
--Rate reduction--applicants make a commitment to file a rate
decrease for their wholesale customers to cover a significant period
of time.\13\

    \13\ Id. (footnotes omitted).
---------------------------------------------------------------------------

    8. The Commission concluded that, although each mechanism would
provide some benefit to ratepayers, in the majority of circumstances
the most meaningful (and the most likely to give wholesale customers
the earliest opportunity to take advantage of emerging competitive
wholesale markets) was an open season provision.\14\ The Commission
stated that if intervenors raised a substantial question as to the
adequacy of a merger applicant's proposal, the parties should continue
to pursue a settlement; if no agreement could be reached, the
Commission explained it might decide the issue on the written record or
set the issue for hearing.\15\
---------------------------------------------------------------------------

    \14\ Id.
    \15\ Id.
---------------------------------------------------------------------------

    9. Subsequently, in Order No. 642, the Commission promulgated
regulations governing FPA section 203 applications and described the
information applicants must submit regarding the effect of a proposed
transaction on rates. In relevant part, the Commission stated:

    In the [Merger] Policy Statement, we determined that ratepayer
protection mechanisms (e.g., open seasons to allow early termination
of existing service contracts or rate freezes) may be necessary to
protect the wholesale customers of merger applicants. . . .
    Thus, in the [Notice of Proposed Rulemaking] we proposed that
all merger applicants demonstrate how wholesale ratepayers will be
protected and that applicants will have the burden of proving that
their proposed ratepayer protections are adequate. Specifically, we
proposed that applicants must clearly identify what customer groups
are covered (e.g., requirements customers, transmission customers,
formula rate customers, etc.), what types of costs are covered, and
the time period for which the protection will apply.\16\
---------------------------------------------------------------------------

    \16\ Order No. 642, FERC Stats. & Regs. ] 31,111 at 31,914.

    10. The Commission adopted the proposals set forth in the Notice of
Proposed Rulemaking and emphasized that if applicants did not offer any
ratepayer protection mechanisms, they must explain how the proposed
merger would provide adequate ratepayer protection.\17\
---------------------------------------------------------------------------

    \17\ Id.
---------------------------------------------------------------------------

B. Current Commission Practice Regarding Hold Harmless Commitments

    11. Over the last decade hold harmless commitments have become a
common feature of FPA section 203 applications involving mergers of
traditional franchised utilities or their upstream holding
companies.\18\ More recently, some applicants have made hold harmless
commitments in connection with transactions involving the acquisition
or disposition of existing jurisdictional facilities, including in
circumstances where the acquiring entity was a traditional franchised
utility and entered into the transaction in order to satisfy resource
adequacy requirements at the state level, to improve system reliability
and/or meet other regulatory requirements.\19\
---------------------------------------------------------------------------

    \18\ The Commission has also accepted other forms of ratepayer
protection in lieu of or in addition to hold harmless commitments.
See, e.g., Cinergy Services, Inc., 102 FERC ] 61,128, at P 33 (2003)
(accepting rate freeze as rate mitigation); Vermont Yankee Nuclear
Power Corp., 91 FERC ] 61,325, at 62,125 (2000) (accepting rate cap
and an open season provision as mitigation); Cajun Elec. Power
Coop., Inc., 90 FERC ] 61,309, at 62,005-06 (2000) (approving a
transaction where current customers were allowed to keep their
current contracts or choose from three different power purchasing
agreements).
    \19\ See, e.g., FirstEnergy Generation Corp., 141 FERC ] 61,239,
at PP 1, 16, 27-30 (2012) (FirstEnergy) (accepting a hold harmless
commitment in an asset transaction where generation assets would be
turned into assets to support transmission system upgrades in order
to meet needs identified in a study by PJM Interconnection, L.L.C.
following the retirement of other generating facilities); ITC
Midwest, 140 FERC ] 61,125 at P 15; Int'l Transmission Co., 139 FERC
] 61,003, at P 16 (2012).
---------------------------------------------------------------------------

    12. The Commission has consistently accepted hold harmless
commitments in which FPA section 203 applicants commit not to seek
recovery of transaction-related costs in jurisdictional rates except to
the extent that such costs are offset by transaction-related
savings.\20\ Thus, hold harmless commitments typically focus on
preventing recovery in rates of the costs incurred that are ``related''
to the transaction. The Commission has previously found that hold
harmless commitments under which applicants commit not to seek to
recover transaction-related costs except to the extent that such costs
are exceeded by demonstrated transaction-related savings for a period
of five years to be ``standard.'' \21\
---------------------------------------------------------------------------

    \20\ NSTAR Advanced Energy Sys., Inc., 131 FERC ] 61,098, at P
24 (2010) (``The Commission looks for assurances from public
utilities that they hold customers harmless from these transaction-
related costs, to the extent they are not exceeded by cost savings
arising from the transaction, for a significant period of time
following the merger, not an indefinite period of time.'') (internal
citation omitted); see also Cinergy, 140 FERC ] 61,180 at P 42; ITC
Midwest, 140 FERC ] 61,125 at PP 21-22; Int'l Transmission, 139 FERC
] 61,003 at P 17; BHE Holdings Inc., 133 FERC ] 61,231, at P 37
(2010); cf. Sierra Pacific Power Co., 133 FERC ] 61,017, at P 14
(2010) (accepting a commitment not to include any transaction-
related costs in its Commission-accepted open access transmission
tariff).
    \21\ ITC Holdings Corp., 121 FERC ] 61,229, at P 128 (2007).
Although five-year hold harmless commitments are most common, the
Commission has also accepted three-year hold harmless commitments.
Westar Energy, Inc., 104 FERC ] 61,170, at PP 16-17 (2003); Long
Island Lighting Co., 82 FERC ] 61,129, at 61,463-65 (1998).
---------------------------------------------------------------------------

    13. Although the Commission has relied on commitments to hold
customers harmless from transaction-related costs to support findings
of no adverse effects on rates, in many of these cases, these
commitments have not included detailed definitions of transaction-
related costs or savings.\22\ Further, the Commission has only provided
general guidance on the scope of these costs. In most orders addressing
transactions in which the Commission has accepted hold harmless
commitments, the Commission has explained that transaction-related
costs are not just those costs related to consummating the proposed
transaction, such as legal, investment advisory, accounting and
financing costs. Rather, the Commission has stated that the costs
subject to hold harmless commitments include all costs that are related
to the transaction. The Commission, however, has never specified what
these other costs may include.\23\ In more recent cases, the Commission
has specified that transaction-related costs include costs, both
capital and operating, incurred to achieve merger synergies.\24\ The
Commission has also specifically noted that acquisition premiums,
including

goodwill,\25\ are not considered part of transaction-related costs, and
that recovery of such costs must be pursued through FPA section 205
filings.\26\ The Commission has also explained that protection from
transaction-related costs does not mean that consumers are necessarily
insulated from any rate increase, such as those related to market
conditions or those unrelated to the transaction,\27\ or unspecified or
speculative costs that intervenors claim may result from a merger.\28\
---------------------------------------------------------------------------

    \22\ See, e.g., Puget Energy, 123 FERC ] 61,050 at P 27 (``We
accept Applicants' hold harmless commitment, which we interpret to
include all merger-related costs, not only costs related to
consummating the transaction. If Applicants seek to recover any
merger-related costs in a subsequent section 205 filing, they must
show quantifiable offsetting benefits.'') (citations and footnotes
omitted); National Grid plc, 117 FERC ] 61,080, at P 54 (2006)
(``Applicants have committed to hold ratepayers harmless from
transaction-related costs in excess of transaction savings for a
period of five years.'').
    \23\ ITC Holdings Corp., 143 FERC ] 61,256, at P 138 (2013); see
also Cinergy, 140 FERC ] 61,180 at P 42; FirstEnergy Corp., 133 FERC
] 61,222, at PP 62-63 (2010); NSTAR, 136 FERC ] 61,016, at PP 62-63
(2011); PPL Corp., 133 FERC ] 61,083, at PP 26-27 (2010); Consumers
Energy Co., 118 FERC ] 61,143, at P 33, order on clarification, 120
FERC ] 61,091 (2007).
    \24\ See, e.g., Silver Merger Sub, Inc., 145 FERC ] 61,261, at P
68 (2013) (``We interpret Applicants' hold harmless commitment to
apply to all transaction-related costs, including costs related to
consummating the Proposed Transaction and transition costs (both
capital and operating) incurred to achieve merger synergies.'');
Bangor Hydro Elec. Co., 144 FERC ] 61,030, at P 20 (2013) (same);
Exelon Corp., 138 FERC ] 61,167, at P 118 (2012) (same).
    \25\ An acquisition premium is the excess of the total purchase
price or consideration paid in the transaction over the historical
cost of the net assets of the entity acquired.
    \26\ Exelon, 138 FERC ] 61,167 at P 118 (citing Merger Policy
Statement, FERC Stats. & Regs. ] 31,044 at 30,126; Duke Energy Moss
Landing LLC, 83 FERC ] 61,318 (1998), reh'g denied, 86 FERC ]
61,227, at 61,816 (1999) (citing Mid-Louisiana Gas Co., 7 FERC ]
61,316, at 61,682, reh'g denied, 8 FERC ] 61,227 (1979), aff'd sub
nom. Transcon. Gas Pipe Line Corp. v. FERC, 652 F.2d 179 (D.C. Cir.
1981)) (rate recovery of an existing facility is generally limited
to the original cost of the facility)).
    \27\ BHE Holdings, 133 FERC ] 61,231 at P 36 (citing PNM
Resources, Inc., 124 FERC ] 61,019, at P 43 (2008) (``Applicants are
not required to apply a rate freeze and may propose rate increases
under section 205 filings.'')); ITC Holdings, 121 FERC ] 61,229 at P
124 (``[T]he Commission finds that any increased costs of ITC
Midwest attributable to prudent transmission investment do not make
the Transaction contrary to the public interest''); Boston
Generating, LLC, 113 FERC ] 61,016, at P 26 (2005) (``In reviewing
an application under section 203, the Commission looks at the
effects of the transaction on rates, not at rate changes that may
occur regardless of the transaction.'')); Jersey Central Power &
Light Co., 87 FERC ] 61,014, at 61,039 (1999) (``The Commission does
not require applicants under [s]ection 203 to insulate their
customers from the rate effects of market forces. Accordingly,
customers are not entitled in a [s]ection 203 proceeding to be held
harmless from external factors such as rising market prices.'');
Cincinnati Gas & Elec. Co., 64 FERC ] 61,237, at 62,686, 62,714
(1993), reh'g denied, 69 FERC ] 61,005, order on clarification, 69
FERC ] 61,088 (1994), reh'g denied, 71 FERC ] 61,380 (1995).
    \28\ Exelon Corp., 127 FERC ] 61,161, at P 102 (2009) (citing,
inter alia, NorthWestern Corp., 117 FERC ] 61,100, at P 40 (2006)
(finding speculative protestor's argument that the proposed
transaction would result in a credit ratings downgrade and lead to
higher rates or lower reliability)); Old Dominion Elec. Coop., 117
FERC ] 61,313, at P 29 (2006) (affirming initial decision that ``the
record supports the conclusion that the credit downgrade will not
raise rates'').
---------------------------------------------------------------------------

    14. With respect to recovering transaction-related costs, as noted
earlier, the standard hold harmless commitment provides that applicants
may not seek to recover in rates any transaction-related costs except
to the extent that such costs are exceeded by demonstrated transaction-
related savings. The Commission recently clarified its policy on the
recovery of transaction-related costs.\29\ As clarified, applicants may
seek to recover transaction-related costs incurred prior to
consummating a proposed transaction or those transaction-related costs
incurred within the time period during which the hold harmless
commitment applies by making certain filings.\30\ Specifically,
applicants must submit a new filing under FPA section 205, and a
concurrent informational filing in the relevant FPA section 203
docket.\31\ Consistent with Commission precedent, in the FPA section
205 filing, applicants must still: (1) Specifically identify the
transaction-related costs they are seeking to recover; and (2)
demonstrate that those costs are exceeded by the savings produced by
the transaction.\32\ The Commission further clarified that it will not
authorize the recovery of merger-related costs in an annual
informational filing under existing formula rates. After noticing the
new section 205 filing for public comment, the Commission will
determine both if there is adequate support to show that recovery of
merger-related costs is consistent with the hold harmless commitment
and that the resulting new rate is just and reasonable in light of all
the other factors underlying the proposed new rate.\33\ In accordance
with the Merger Policy Statement, the Commission's approach places the
burden of proof on applicants to demonstrate that customers are
protected if the expected benefits do not materialize.\34\
---------------------------------------------------------------------------

    \29\ Exelon Corp., 149 FERC ] 61,148 (2014) (Exelon-Pepco).
    \30\ Id. P 106.
    \31\ Id. P 105.
    \32\ Id. P 107.
    \33\ Id. P 106.
    \34\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,123. See, e.g., Consol. Edison, Inc., 94 FERC ] 61,079, at 61,366
(2001) (``customers do have the opportunity to scrutinize costs
before they are included in NEPOOL's formula rate, and could
therefore alert the Commission to costs that, contrary to
Applicants' commitments here, might be merger-related. In such a
situation, we read Applicants' commitment to require them to
shoulder the burden of proof, and to justify their failure to
identify the costs as merger-related.'') (citing BEC Energy, 88 FERC
] 61,002, at 61,007 (1999); New England Power Co., 87 FERC ] 61,287,
at 62,146 (1999)).
---------------------------------------------------------------------------

II. Discussion

A. Purpose of Proposed Policy Statement

    15. Upon consideration of the Commission's experience regarding
hold harmless commitments since issuance of the Merger Policy
Statement, we believe that clarifying the Commission's policy regarding
hold harmless commitments, a frequently proposed ratepayer protection
mechanism in FPA section 203 applications, would be beneficial to
applicants, customers, and interested persons. We note, however, that
unless specifically discussed herein, we reaffirm the guidance provided
in the Merger Policy Statement and subsequent precedent, and reiterate
that applicants under FPA section 203 should propose ratepayer
protection mechanisms that ensure that customers are protected from the
adverse rate effects of a proposed transaction. Furthermore, the
guidance here should not discourage applicants from working with
interested parties to resolve contentious issues regarding appropriate
ratepayer protection mechanisms prior to the submission of an
application under FPA section 203. As the Commission stated in the
Merger Policy Statement, ``the most promising and expeditious means of
addressing ratepayer protection is for the parties to negotiate an
agreement on ratepayer protection mechanisms.'' \35\ Accordingly, we
continue to expect applicants under FPA section 203 to engage their
customers, when appropriate, and discuss with them any potential
adverse rate effects that may result from a proposed transaction under
FPA section 203, and how those effects can be mitigated.
---------------------------------------------------------------------------

    \35\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,123.
---------------------------------------------------------------------------

    16. In this proposed policy statement, we propose to provide
greater clarity to and seek comment from interested persons regarding
the following issues related to hold harmless commitments. First, we
propose to clarify those costs to which hold harmless commitments will
apply. Although the Commission has provided broad guidance regarding
the costs that should be covered under hold harmless commitments, it
has never defined those costs with much specificity, leading to
inconsistency with respect to this issue. Below, we propose to provide
additional guidance by clarifying the costs that the Commission
considers to be transaction-related costs. These are also the
transaction-related costs that the Commission will review if and when
applicants make the requisite filing under FPA section 205 to attempt
to recover those costs by showing that they have been offset by savings
due to the transaction. Finally, although we identify specific
categories of costs below, we continue to believe that the Commission's
policy must remain flexible enough to permit a case-by-case
determination of transaction-related costs, and that an attempt to
articulate those costs precisely could have unintended consequences.
    17. Second, we propose to clarify that applicants offering hold
harmless commitments must implement

appropriate internal controls and procedures to track those costs from
which they have committed to hold their customers harmless and must
describe such controls and procedures as a part of their FPA section
203 applications and any section 205 filings.\36\ We believe that these
controls and procedures will ensure the proper identification,
accounting, and rate treatment of all transaction-related costs
incurred prior to and subsequent to the announcement of a proposed
transaction. Requiring applicants to explain how they will track costs
related to a hold harmless commitment will improve the Commission's
ability to ensure that there is a process in place to prevent those
costs from being recovered in rates prior to the Commission approving
the recovery of them at a later date under FPA section 205, and will
also clarify for customers what types of costs are covered under a hold
harmless commitment, as required by Commission precedent.\37\
---------------------------------------------------------------------------

    \36\ The Commission has previously explained that applicants
should ensure that they have appropriate internal controls and
procedures to ensure the proper identification, accounting, and rate
treatment for all transaction-related costs incurred prior to and
subsequent to proposed transactions, including all transition costs
incurred after a merger is consummated. See, e.g., ITC Holdings, 143
FERC ] 61,256 at P 168; Silver Merger Sub, 145 FERC ] 61,261 at P
78.
    \37\ See, e.g., Order No. 642, FERC Stats. & Regs. ] 31,111 at
31,914 (``[A]pplicants must clearly identify what customer groups
are covered (e.g., requirements customers, transmission customers,
formula rate customers, etc.), what types of costs are covered, and
the time period for which the protection will apply.'').
---------------------------------------------------------------------------

    18. Third, we propose that, in order for a hold harmless commitment
to provide adequate ratepayer protection, it should not be limited in
duration. As discussed in further detail below, we are concerned that
limiting the hold harmless commitment to a certain period (generally
five years) raises the risk that transaction-related costs could be
included in future formula rate billings without applicants making the
showing of offsetting savings. Eliminating the time limit will ensure
that transaction-related costs cannot be recovered from ratepayers at
any time, unless applicants can demonstrate that there are offsetting
transaction-related savings. This revised approach is consistent with
the Merger Policy Statement, which emphasized that the burden of proof
to demonstrate that customers will be protected should be on applicants
and that applicants should also bear the risk that benefits will not
materialize.\38\
---------------------------------------------------------------------------

    \38\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,123.
---------------------------------------------------------------------------

    19. Finally, we propose to clarify that applicants may demonstrate
that, under certain circumstances, transactions will not have an
adverse effect on rates without relying on hold harmless commitments or
other ratepayer protection mechanisms. As noted above, some applicants
have made hold harmless commitments in connection with transactions
involving the acquisition or disposition of existing jurisdictional
facilities where the acquiring entity was a traditional franchised
utility and entering into the transaction in order to satisfy resource
adequacy requirements at the state level, to improve system
reliability, and/or meet other regulatory requirements.\39\ Hold
harmless commitments may not be appropriate in these and other similar
circumstances given that while these proposed transactions may have an
effect on rates, that effect may not be adverse. Accordingly, as
discussed in further detail below, we propose that under certain
circumstances, applicants may show that a transaction will not have an
adverse effect on rates without proposing additional ratepayer
protection mechanisms.
---------------------------------------------------------------------------

    \39\ See, e.g., FirstEnergy, 141 FERC ] 61,239, at PP 1, 16, 27-
30 (2012) (accepting a hold harmless commitment in an asset
transaction where generation assets would be turned into assets to
support transmission system upgrades in order to meet needs
identified in a study by PJM Interconnection, L.L.C. following the
retirement of other generating facilities); ITC Midwest, 140 FERC ]
61,125 at P 15; Int'l Transmission Co., 139 FERC ] 61,003, at P 16
(2012).
---------------------------------------------------------------------------

    20. Our intent is to apply any changes to our policy on hold
harmless commitments on a prospective basis, for applications submitted
after the Commission has issued a policy statement, and not alter
existing hold harmless commitments accepted by the Commission or
submitted in applications pending at the time the Commission issues the
policy statement. We seek comments from interested persons on these
proposals.

B. Revisions to the Commission's Policy on Hold Harmless Commitments

1. Identifying and Accounting for Transaction-Related Costs
    21. We propose to designate the following categories of costs as
the transaction-related costs that should be subject to any hold
harmless commitment. Accordingly, the costs set out below are those
transaction-related costs from which customers must be held harmless
and that may not be recovered from customers except to the extent
exceeded by demonstrated savings.\40\ As noted above, although we
propose to provide guidance in this proposed policy statement regarding
how to identify transaction-related costs, we continue to believe that
attempts to precisely articulate all such costs are not feasible. For
example, while many direct costs of a transaction can be tracked with
proper mechanisms and controls, other costs may be more difficult to
classify. Accordingly, because each transaction is unique, the final
determination of what transaction-related costs may be recovered by
applicants will remain subject to a case-by-case analysis;
specifically, this determination will be made if and when applicants
propose to recover transaction-related costs and demonstrate offsetting
savings in the subsequent FPA section 205 filing described previously
by the Commission.
---------------------------------------------------------------------------

    \40\ We expect that applicants proposing to recover these costs
would track and record them pursuant to the procedures established
below. See infra section II.B.2.
---------------------------------------------------------------------------

    22. First, we propose that transaction-related costs include, but
are not limited to, the following costs incurred to explore, agree to,
and consummate a transaction:
     The costs of securing an appraisal, formal written
evaluation, or fairness opinions related to the transaction;
     The costs of structuring the transaction, negotiating the
structure of the transaction, and obtaining tax advice on the structure
of the transaction;
     The costs of preparing and reviewing the documents
effectuating the transaction (e.g., the costs to transfer legal title
of an asset, building permits, valuation fees, the merger agreement or
purchase agreement and any related financing documents);
     The internal labor costs of employees \41\ and the costs
of external, third-party, consultants and advisors to evaluate
potential merger transactions, and once a merger candidate has been
identified, to negotiate merger terms, to execute financing and legal
contracts, and to secure regulatory approvals; \42\
---------------------------------------------------------------------------

    \41\ If the duties of employees are not solely dedicated to
activities related to a transaction, internal labor costs deemed
merger-related should be determined in a manner that is
proportionally equal to the amount of time spent on the merger
compared to other activities of the utility and tracked accordingly.
    \42\ Some of these costs are typically incurred prior to the
announcement of a merger.
---------------------------------------------------------------------------

     The costs of obtaining shareholder approval (e.g., costs
of proxy solicitation and special meeting of shareholders);
     Professional service fees incurred in the transaction
(e.g., fees for accountants, surveyors, engineers, and legal
consultants); and

     Installation, integration, testing, and set up costs
related to ensuring the operability of facilities subject to the
transaction
    23. Moreover, for transactions that are pursued but never completed
(transactions that ultimately fail), their costs should not be
recovered from ratepayers. In addition, we recognize that not every
cost listed above will be found in every transaction.
    24. The second category of transaction-related costs relates to
mergers, where, in addition to the transaction-related costs described
above, parties typically also incur costs to integrate individuals and
assets into the acquiring utility and costs to achieve merger
synergies.\43\ These costs, which are sometimes referred to
collectively as ``transition'' costs, are incurred after the
transaction is consummated, often over a period of several years. These
costs include both the internal costs of employees spending time
working on transition issues, and external costs paid to consultants
and advisers to reorganize and consolidate functions of the merging
entities to achieve merger synergies. These costs may also include both
capital items (e.g., a new computer system or software, or costs
incurred to carry out mitigation commitments accepted by the Commission
in approving the transaction to address competition issues, such as the
cost of constructing new transmission lines, etc.) and expense items
(e.g., costs to eliminate redundancies, combine departments, or
maximize contracting efficiencies). We propose that transaction-related
costs incurred to integrate the operations of merging companies
include, but are not limited to, the following:
---------------------------------------------------------------------------

    \43\ Entities engaging in certain internal corporate
restructuring and reorganizations, unrelated to complying with state
law restructuring requirements, may seek to achieve similar cost
savings or increased efficiencies as merging entities.
---------------------------------------------------------------------------

     Engineering studies needed both prior to and after closing
the merger;
     Severance payments;
     Operational integration costs;
     Accounting and operating systems integration costs;
     Costs to terminate any duplicative leases, contracts, and
operations; and
     Financing costs to refinance existing obligations in order
to achieve operational and financial synergies.
    25. As above, this list of transition costs is not exhaustive, and
may not include some material costs involved in the integration of two
utilities after a merger. We propose to consider transition costs as
transaction-related costs that should be subject to hold harmless
commitments. We propose to assume that such transaction-related costs
should be covered under hold harmless protection, though applicants
will have an opportunity on a case-by-case basis to show why certain of
those costs should not have to be covered under their hold harmless
commitment based on their particular circumstances. Also, we propose to
consider, on a case-by-case basis, whether other costs not discussed
herein should be subject to hold harmless commitments.
    26. Additionally, we note that accounting journal entries related
to a merger transaction may affect expense, asset, liability, or
proprietary capital accounts used in the development of a public
utility's rates. These accounting journal entries may originate from
transaction-related costs recorded as an expense or capitalized as an
asset. Additional accounting journal entries may originate from
goodwill and fair value adjustments related to the purchase price paid
for the acquired company. Merger transactions are accounted for by
applying purchase accounting, which adjusts the assets and liabilities
of the acquired entity to fair value and recognizes goodwill for the
amount paid in excess of fair value.\44\ If the acquired company is a
holding company, purchase accounting also provides for the fair value
adjustments and goodwill to be recorded on the books of some, or all,
of the acquired holding company's subsidiaries, which is commonly
referred to as ``push-down'' accounting. Under appropriate
circumstances, the Commission has allowed the fair value accounting
adjustments and goodwill to be recorded on a public utility's books and
reported in the FERC Form No. 1. Additionally, the Commission has
required public utilities to maintain detailed accounting records and
disclosures associated with such amounts so as to facilitate the
evaluation of the effects of the transaction on common equity and other
accounts in future periods if needed for ratemaking purposes.\45\ We
believe that ratepayers should continue to be protected from adverse
effects on rates stemming from accounting entries recording goodwill
and fair value adjustments on a public utility's books and reported in
FERC Form Nos. 1 or 1-F. This is consistent with our long-standing
policy that acquisition premiums, including goodwill, must be excluded
from jurisdictional rates absent a filing under FPA section 205 and
Commission authorization granting recovery of specific costs.
---------------------------------------------------------------------------

    \44\ Purchase accounting is also commonly referred to as
acquisition accounting under generally accepted accounting
principles in the United States. Purchase accounting is a formal
accounting method for merger transactions which measures the assets
and liabilities of the acquired entity at fair value and establishes
goodwill for amounts paid in excess of fair value. See Accounting
Standard Codification Section 805-10 (Fin. Accounting Standards Bd.
2014), available at http://asc.fasb.org.
    \45\ Michigan Electric Transmission Co., LLC, 116 FERC ] 61,164,
at PP 29-30 (2006); Niagara Mohawk Holdings Inc., 95 FERC ] 61,381,
at 62,415, reh'g denied, 96 FERC ] 61,144 (2001); PPL, 133 FERC ]
61,083 at P 39.
---------------------------------------------------------------------------

    27. Similarly, in the context of the acquisition of discrete assets
by a utility, under the Commission's accounting regulations and rate
precedent the excess purchase cost of utility plant over its
depreciated original cost is an acquisition premium and is excluded
from recovery through rates unless a showing of offsetting benefits is
demonstrated in an FPA section 205 filing. In the past, applicants have
proposed to include acquisition premiums as transaction-related costs
subject to their proposed hold harmless commitments,\46\ and
intervenors have requested that the Commission require applicants to
include acquisition premiums as transaction-related costs.\47\ The
Commission has not, and does not, consider acquisition premiums to be
part of transaction-related costs. The recovery of acquisition premiums
must be pursued through a separate FPA section 205 filing, whether or
not a hold harmless commitment has been made.\48\ We do not believe
that our proposed treatment of transaction-related costs here requires
a change in the Commission's current practice with respect to
acquisition premiums. We will continue to preclude recovery of
acquisition premiums as part of transaction-related costs, and remind
applicants that a showing of ``specific, measurable, and substantial
benefits to ratepayers'' must be made in a subsequent FPA section 205
proceeding in order to recover an acquisition premium.\49\
---------------------------------------------------------------------------

    \46\ See, e.g., Florida Power & Light Co., 145 FERC ] 61,018, at
PP 53, 60 (2013); FirstEnergy, 141 FERC ] 61,239 at P 16 n.13.
    \47\ See, e.g., Silver Merger Sub, 145 FERC ] 61,261 at PP 61-
62.
    \48\ Exelon-Pepco, 149 FERC ] 61,148 at n.180; Silver Merger
Sub, 145 FERC ] 61,261 at P 68; Florida Power & Light, 145 FERC ]
61,018 at P 60; Exelon, 138 FERC ] 61,167 at P 118 (citing Merger
Policy Statement, FERC Stats. & Regs. ] 31,044 at 30,126; Duke
Energy Moss Landing, 83 FERC ] 61,318, reh'g denied, 86 FERC ] at
61,816 (citing Mid-Louisiana Gas, 7 FERC ] 61,316, at 61,682, reh'g
denied, 8 FERC ] 61,227, aff'd sub nom. Transcon. Gas Pipe Line Co.
v. FERC, 652 F.2d 179 (D.C. Cir. 1981)) (rate recovery of an
existing facility is generally limited to the original cost of the
facility)).
    \49\ Duke Energy Progress, Inc., 149 FERC ] 61,220, at PP 67-68
(2014) (reviewing Commission precedent requiring that acquisition
adjustments may be recovered if the acquisition provides
``measurable benefits'' that are ``tangible and nonspeculative,''
and allowing recovery of an acquisition adjustment where ``the
acquisition provides specific, measurable, and substantial benefits
to ratepayers'') (internal citations omitted).

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

    28. We seek comments from interested persons on these proposals. In
particular, we seek comments on the categories of costs, including
transition costs, that are proposed to be transaction-related costs
which should be subject to hold harmless protection. We also seek
comments on the costs that should not be subject to hold harmless
commitments.
2. Controls and Procedures to Track and Record Costs Related To Hold
Harmless Commitments
    29. As noted above, applicants are required to describe in their
FPA section 203 applications how they intend to protect ratepayers from
transaction-related costs, consistent with their obligation to show
that their transaction is consistent with the public interest.\50\ As
contemplated in the Merger Policy Statement, a hold harmless commitment
offered by applicants must be ``enforceable and administratively
manageable.'' \51\ In creating an enforceable and administratively
manageable commitment, applicants should provide assurances that
transaction-related costs will be quantified, documented, and verified,
and may not be recovered from ratepayers until applicants can
demonstrate that savings, if any, offset the transaction-related costs
they seek to recover. To this end, the Commission has required that
applicants offering hold harmless commitments establish internal
controls and/or tracking mechanisms.\52\ We propose additional guidance
below regarding these requirements.
---------------------------------------------------------------------------

    \50\ See Order No. 642, FERC Stats. & Regs. ] 31,111 at 31,914.
    \51\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,124.
    \52\ See Silver Merger Sub, 145 FERC ] 61,261 at P 78; ITC
Holdings, 143 FERC ] 61,256 at P 168.
---------------------------------------------------------------------------

    30. First, we propose to clarify that all applicants offering hold
harmless commitments should implement appropriate internal controls and
procedures to ensure the proper identification, accounting, and rate
treatment of all transaction-related costs incurred prior to and
subsequent to the announcement of a proposed transaction, including all
transition costs.
    31. Second, we propose that applicants offering hold harmless
commitments should include, as part of their FPA section 203
applications and any separate FPA section 205 filings, a detailed
description of how they define, designate, accrue, and allocate
transaction-related costs, and explain the criteria used to determine
which costs are transaction-related. Applicants should specifically
identify and describe their direct and indirect cost classifications,
and the processes they use to functionalize, classify and allocate
transaction-related costs. In addition, applicants should explain the
types of transaction-related costs that will be recorded on their
public utilities' books; how they determined the portion of these costs
assigned to their public utilities; and how they classify these costs
as non-operating, transmission, distribution, production, and other.
Applicants should also describe their accounting procedures and
practices, and how they maintain the underlying accounting data so that
the allocation of transaction-related costs to the operating and non-
operating accounts of their public utilities is readily available and
easily verifiable.
    32. We note that the Commission has, in the past, required
applicants to submit their final accounting entries associated with
transactions within six months of the date that the transaction is
consummated.\53\ As a part of this accounting filing, we propose to
require applicants subject to the Commission's accounting regulations
to provide the accounting entries and amounts related to all
transaction-related costs incurred as of the date of the accounting
filing, along with narrative explanations describing the entries.
---------------------------------------------------------------------------

    \53\ See, e.g., Central Vermont Public Service Corp., 138 FERC ]
61,161, at P 55 (2012).
---------------------------------------------------------------------------

    33. We seek comments on these proposals.
3. Time Limits on Hold Harmless Commitments
    34. The Commission previously stated in the Merger Policy Statement
that a hold harmless commitment need only protect customers ``for a
significant period of time following the merger.''\54\ However, in
light of the proposed treatment of certain categories of costs
discussed above, the Commission's experience auditing utilities that
have made hold harmless commitments and concerns of protestors in
previous FPA section 203 applications,\55\ we propose to reconsider
whether hold harmless commitments that are limited to five years (or
another specified period) adequately protect ratepayers from an adverse
effect on rates. As part of this reconsideration, we believe that time-
limited hold harmless commitments may not adequately protect ratepayers
from transaction-related costs. Therefore, we propose that there be no
time limit on hold harmless commitments and that costs subject to hold
harmless commitments cannot be recovered from ratepayers at any time
(regardless of when such costs are incurred), absent a showing of
offsetting savings in order to demonstrate no adverse effect on
rates.\56\ This revised approach is consistent with the Merger Policy
Statement, which emphasized that the burden of proof to demonstrate
that customers will be protected should be on applicants, and that
applicants should also bear the risk that benefits will not
materialize.\57\
---------------------------------------------------------------------------

    \54\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,124.
    \55\ See, e.g., PNM Resources, 124 FERC ] 61,019 at P 36
(protestor alleging that the five-year limitation on recovery will
simply result in the deferred recovery of transaction-related
costs).
    \56\ Evidence of offsetting merger-related savings cannot be
based on estimates or projections of future savings, but must be
based on a demonstration of actual merger-related savings realized
by jurisdictional customers. Exelon-Pepco, 149 FERC ] 61,148 at P
107 (citing Audit Report of National Grid, USA, Docket No. FA09-10-
000 (Feb. 11, 2011) at 55; Ameren Corp., 140 FERC ] 61,034, at PP
36-37 (2012)).
    \57\ Merger Policy Statement, FERC Stats. & Regs. ] 31,044 at
30,123.
---------------------------------------------------------------------------

    35. Specifically, we are concerned that limiting the applicability
of hold harmless commitments to specific time periods may create
incentives for applicants to modify how they would otherwise seek to
recover or account for recovery of certain transaction-related costs
based on the time period. For example, an applicant could try to
include transaction-related costs in formula rates without making a
showing of offsetting savings if the costs, though incurred during the
hold harmless period, do not enter the ratemaking process until after
the hold harmless period expires. Moreover, whether or not any such
incentives exist, certain transaction-related expenditures could be
properly capitalized as an asset during the hold harmless period, but
the recovery of the costs associated with that asset would occur only
as the asset is depreciated over future periods that extend beyond the
hold harmless period.
    36. Similarly, limiting the applicability of hold harmless
commitments to specific time periods may incentivize applicants to
delay incurring some types of transaction-related costs until after the
hold harmless period expires. By waiting to incur costs subject to hold
harmless commitments until after the expiration of the hold harmless
period, applicants could attempt to include such costs in their future
formula rate billings without making the showing of

offsetting savings required to justify recovery of such costs. In this
regard, we believe that the focus of a hold harmless commitment should
be on whether a cost is transaction-related, and not on when the cost
is incurred.
    37. We seek comments on this proposal.
4. Transactions Without Adverse Effects on Rates
    38. As explained above, applicants under FPA section 203 must
demonstrate that proposed transactions do not have an adverse effect on
rates. In order to make this showing, applicants sometimes propose, and
the Commission has accepted, hold harmless commitments. Pursuant to
these hold harmless commitments, the Commission has held that customers
must be held harmless from transaction-related costs unless and until
applicants demonstrate offsetting transaction-related benefits--whether
quantifiable cost savings or other non-quantifiable benefits.
    39. As noted above, some applicants have made hold harmless
commitments in connection with transactions involving the acquisition
or disposition of existing jurisdictional facilities where the
acquiring entity was a traditional franchised utility and entering into
the transaction in order to satisfy resource adequacy requirements at
the state level, to improve system reliability, and/or meet other
regulatory requirements.\58\ However, while customers in these examples
may experience a rate increase due to the costs of the facilities, such
rate effect may not necessarily be adverse because those costs were
incurred to meet a governmental regulatory requirement. The Commission
has held that, as a general matter of policy, ratepayers should bear
the cost of utility service.\59\
---------------------------------------------------------------------------

    \58\ See, e.g., FirstEnergy, 141 FERC ] 61,239 at PP 1, 16, 27-
30 (accepting a hold harmless commitment in an asset transaction
where generation assets would be turned into assets to support
transmission system upgrades in order to meet needs identified in a
study by PJM Interconnection, L.L.C. following the retirement of
other generating facilities); ITC Midwest, 140 FERC ] 61,125 at P
15; Int'l Transmission Co., 139 FERC ] 61,003, at P 16 (2012).
    \59\ See, e.g., Old Dominion Elec. Cooperative and N.C. Elec.
Membership Corp. v. Va. Elec. and Power Co.,146 FERC ] 61,200
(2014).
---------------------------------------------------------------------------

    40. Accordingly, we propose to clarify that applicants undertaking
certain transactions to fulfill documented utility service needs need
not propose ratepayer protection mechanisms such as a hold harmless
commitment in an application under FPA section 203 in order to show
that the transaction will not have an adverse effect on rates. We
believe that applicants engaging in these types of transactions can
make the requisite showing that, even though the proposed transaction
may have an effect on rates, such effect on rates is not adverse.
    41. Examples of the transactions in which applicants may
demonstrate no adverse effect on rates without offering a hold harmless
commitment or other ratepayer protection mechanism would include the
purchase of an existing generating plant or transmission facility that
is needed to serve the acquiring company's customers or forecasted load
within a public utility's existing footprint, in compliance with a
resource planning process, or to meet specified North American Electric
Reliability Corporation (NERC) standards. We propose that applicants
seeking to demonstrate that a transaction will not have an adverse
effect on rates for these or other reasons should provide supporting
evidence and documentation which could include an explanation that the
transaction is intended to serve existing customers or forecasted load
within an existing footprint; to address a state commission order or
directive requiring acquisition of specific assets; to address a need
for a transmission facility, as established through a regional
transmission planning process or as required to satisfy a NERC
standard; or to address other state or federal regulatory requirements.
For instance, in FirstEnergy, applicants requested approval from the
Commission under FPA section 203 for an internal transfer of certain
assets that would address significant reliability concerns, including a
potential NERC violation, at a cost that was two-thirds that of the
next possible solution.\60\ In that order, consistent with existing
policy, the Commission accepted applicants' hold harmless commitment as
it was offered. Under the clarification proposed herein, however, such
a hold harmless commitment would not need to be offered in order to
show that the transaction would not have an adverse effect on rates.
---------------------------------------------------------------------------

    \60\ FirstEnergy, 141 FERC ] 61,239 at P 5.
---------------------------------------------------------------------------

    42. Applicants may make a showing that a particular transaction
does not have an adverse effect on rates based on other grounds, but
the burden remains on applicants to show in their application for
authorization under FPA section 203 that the costs, or a portion of the
costs, related to such a transaction should be passed on to ratepayers.
Further, applicants may provide the Commission with information to show
the need to meet other regulatory requirements as a means to
demonstrate that the effect on rates due to the transaction is not
adverse. The Commission will carefully review such a showing before
determining that a proposed transaction without any proposed ratepayer
protection mechanism has no adverse effect on rates. We believe this
approach is consistent with both the Merger Policy Statement and the
Commission's policy that ratepayers should bear the costs of utility
service. We seek comments on this proposal.

III. Comment Procedures

    43. We invite comments on this proposed policy statement within
March 30, 2015.

IV. Document Availability

    44. 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 the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A,
Washington, DC 20426.
    45. From the Commission'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.
    46. User assistance is available for eLibrary and the Commission's
Web site during normal business hours from FERC Online Support at (202)
502-6652 (toll free at 1-866-208-3676) or email at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-
8371, TTY<PHONE_NUMBER>. Email the Public Reference Room at
<EMAIL_ADDRESS>
V. Information Collection Statement

    47. The Paperwork Reduction Act (PRA) \61\ requires each federal
agency to seek and obtain Office of Management and Budget (OMB)
approval before undertaking a collection of information directed to ten
or more persons or contained in a rule of general applicability. OMB
regulations require approval of certain information collection
requirements imposed by agency rules.\62\ Upon approval of a
collection(s) of information, OMB will

assign an OMB control number and an expiration date. Respondents
subject to the filing requirements of an agency rule will not be
penalized for failing to respond to these collections of information
unless the collections of information display a valid OMB control
number.
---------------------------------------------------------------------------

    \61\ 44 U.S.C. 3501-3520.
    \62\ See 5 CFR 1320.
---------------------------------------------------------------------------

    The following table shows the Commission's estimates for the
additional burden and cost, as contained in the Proposed Policy
Statement:

                        Revisions, in the Proposed Policy Statement in Docket No. PL15-3
----------------------------------------------------------------------------------------------------------------
                                                                                Average burden
                                 Number and       Number of     Total number     hours & cost      Total burden
         Requirements              type of      responses per   of responses     per response     hours & total
                                 respondents     respondent                          \63\              cost
                                     (1)             (2)         (1) * (2) =          (4)           (3) * (4)
                                                                     (3)
----------------------------------------------------------------------------------------------------------------
FERC-519 (FPA Section 203                  18               1              18  20 hrs.; $1,410.  360 hrs.;
 Filings).                                                                                $25,380.
FERC-516 (FPA Section 205,                  1               1          \64\ 1  103.26 hrs.;      103.26 hrs.;
 Rate and Tariff Filings).                                                      $7,279.83.        $7,279.83.
FERC-555, Record Retention...              18               1              18  4 hrs.; $282....  72 hrs.;
                                                                                $5,076.
                              ----------------------------------------------------------------------------------
    TOTAL....................  ..............  ..............  ..............  ................  535.26 hrs.;
                                                                                $37,735.83.
----------------------------------------------------------------------------------------------------------------

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

    \63\ The hourly cost figures are based on data for salary plus
benefits. We think industry is similarly situated to FERC in terms
of the average cost of a full time employee, and we are using $70.50
per hour for salary plus benefits.
    The estimates for cost per response are derived using the
following formula: Average Burden Hours per Response * $70.50 per
Hour = Average Cost per Response.
    \64\ We estimate that one FPA section 205 filing may be made
annually subject to the Proposed Policy Statement.
---------------------------------------------------------------------------

    Title: FERC-519, Application under Federal Power Act Section 203;
FERC-516, Electric Rate Schedules and Tariff Filings; and FERC-555,
Preservation of Records for Public Utilities and Licensees, Natural Gas
and Oil Pipeline Companies.
    Action: Revised Collections of Information.
    OMB Control No: 1902-0082 (FERC-519), 1902-0096 (FERC-516), and
1902-0098 (FERC-555).
    Respondents: Business or other for profit, and not for profit
institutions.
    Frequency of Responses: As needed and ongoing.
    Necessity of the Information: To protect ratepayers and to mitigate
possible adverse effects on rates that may result from mergers or
certain other transactions that are subject to section 203 of the FPA,
we propose clarifications and additional information collection
requirements related to hold harmless commitments offered by
applicants.
    Internal review: The Commission has reviewed the changes included
in the Proposed Policy Statement and has determined that the additional
reporting and recordkeeping requirements are necessary.
    Interested persons may obtain information on the reporting
requirements by contacting: Federal Energy Regulatory Commission, 888
First Street NE., Washington, DC 20426 [Attention: Ellen Brown, Office
of the Executive Director, email<EMAIL_ADDRESS>Phone: (202)
502-8663, fax:<PHONE_NUMBER>].

    By the Commission. Commissioner Honorable is voting present.

    Issued: January 22, 2015.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2015-01423 Filed 1-26-15; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 76, Number 30 (Monday, February 14, 2011)]
[Proposed Rules]
[Page 8330]
[FR Doc No: 2011-3098]

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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2010-0902; FRL-9265-7]

Approval and Promulgation of Air Quality Implementation Plans;
Virginia; Revision to the Definition of Volatile Organic Compound

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

SUMMARY: EPA proposes to approve the State Implementation Plan (SIP)
revision submitted by the Commonwealth of Virginia consisting of the
amended wording of the definition of ``Volatile organic compound''
(VOC). In the Final Rules section of this Federal Register, EPA is
approving Virginia's SIP submittal as a direct final rule without prior
proposal because the Agency views this as a noncontroversial submittal
and anticipates no adverse comments. A detailed rationale for the
approval is set forth in the direct final rule. If no adverse comments
are received in response to this action, no further activity is
contemplated. If EPA receives adverse comments, the direct final rule
will be withdrawn and all public comments received will be addressed in
a subsequent final rule based on this proposed rule. EPA will not
institute a second comment period. Any parties interested in commenting
on this action should do so at this time.

DATES: Comments must be received in writing by March 16, 2011.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2010-0902 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for
submitting comments.
    B. E-mail<EMAIL_ADDRESS>    C. Mail: EPA-R03-OAR-2010-0902, Harold A. Frankford, Air Protection
Division, Mailcode 3AP00, U.S. Environmental Protection Agency, Region
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address.
Such deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2010-0902. EPA's policy is that all comments received will be included
in the public docket without change, and may be made available online
at http://www.regulations.gov, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site
is an ``anonymous access'' system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through http://www.regulations.gov, your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses.
    Docket: All documents in the electronic docket are listed in the
http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in http://www.regulations.gov or in hard copy during normal business hours at the
Air Protection Division, U.S. Environmental Protection Agency, Region
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the
State submittal are available at the Virginia Department of
Environmental Quality, 629 East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT: Harold A. Frankford,<PHONE_NUMBER>,
or by e-mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: For further information, please see the
information provided in the direct final action, with the same title,
that is located in the ``Rules and Regulations'' section of this
Federal Register publication.

    Dated: February 1, 2011.
W.C. Early,
Acting Regional Administrator, Region III.
[FR Doc. 2011-3098 Filed 2-11-11; 8:45 am]
BILLING CODE 6560-50-P