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

    \168\ Demand Response Compensation in Organized Wholesale Energy
Markets, FERC Stats. & Regs. ] 32,656, at P 1 (2010).
---------------------------------------------------------------------------

    87. Each RTO and ISO with a demand response program has procedures
for the measurement and verification of demand response. These
procedures include techniques to establish a customer baseline for each
demand response participant. This customer baseline then becomes the
basis for measuring the quantity of demand response delivered to the
wholesale market. Customer baselines are often based on historic load
information, such as an average of five of the last ten comparable
days' hourly load profile. Techniques vary among RTOs and ISOs and most
have several techniques that may be allowed, depending on the demand
response provider's characteristics.\169\
---------------------------------------------------------------------------

    \169\ See, e.g., ISO/RTO Council, North American Wholesale
Electricity Demand Response 2010 Comparison, under the tab for
``Performance Evaluation Methods'' (http://www.isorto.org/atf/cf/%7B5b4e85c6-7eac-40a0-8dc3-003829518ebd%7D/IRC%20DR%20M&V%20STANDARDS%20IMPLEMENTATION%20COMPARISON%20(20100524)
.XLS).
---------------------------------------------------------------------------

2. Comments
    88. Commenters assert that the integrity of a demand response
program is heavily dependent on measurement and verification.\170\ Some
commenters raise the issue that paying LMP in all hours presents a
significant challenge to the accurate measurement and verification of
demand response.\171\ ISO-NE argues that when a market participant
schedules demand reductions for many consecutive days, baselines may
become stale--no longer reflecting a customer's ``normal'' electricity
usage.\172\ ISO-NE goes on to argue that ``it is necessary to limit the
number of hours or days that a demand resource could clear in the
energy market so that the customer's `normal' load can be estimated''
to avoid the potential for manipulation.\173\ In the context of the
Commission's proposal to pay demand response the LMP in all hours, ISO-
NE goes on to advocate requiring demand response to establish baselines
by purchasing energy in the day-ahead market as a way to overcome its
concerns with statistical baseline methods.\174\ ISO-NE IMM makes
similar arguments and recommendations.\175\ Westar also appears to
support this approach.\176\
---------------------------------------------------------------------------

    \170\ Illinois CUB May 14, 2010 Comments at 16-17; Joint
Consumers May 13, 2010 Comments at 12; P3 May 12, 2010 Comments at
38; Westar May 13, 2010 Comments at 3.
    \171\ See, e.g., ISO-NE May 13, 2010 Comments at 32.
    \172\ Id.
    \173\ ISO-NE May 13, 2010 Comments at 34. ISO-NE identifies
several practices that, in its view, might be deployed by a demand
responder to receive payment when it has not, in fact, responded to
price. ISO-NE states that observations of such behavior in the Fall
of 2007 led it to limit the hours demand response offers could clear
the market. Citing ISO New England Inc., Docket No. ER08-538-000
(February 5, 2008 filing). ISO-NE May 13, 2010 Comments at 32-34.
    \174\ Id.
    \175\ ISO-NE IMM May 13, 2010 Comments at 9-13 and Attachment A.
    \176\ Westar May 13, 2010 Comments at 3.
---------------------------------------------------------------------------

    89. Similarly, CPower notes that with some baseline methods, paying
LMP in all hours could reward demand responders for any shift in demand
from the baseline, not just shifting load from high LMP hours to low
LMP hours, or could simply shift load from day-to-day in different
hours to affect the calculation of actual curtailment, which it labels
``checkerboarding.'' However, CPower believes that the capability of
consumption management to shed or shift load for many hours is well
into the future, and perhaps not a current concern. CPower also
believes that baseline standards along with market monitoring will
develop to meet these concerns.\177\
---------------------------------------------------------------------------

    \177\ CPower May 13, 2010 Comments at 4-5.
---------------------------------------------------------------------------

    90. ISO-NE IMM asserts that ``[if] the Commission adopts any
proposal that permits the use of an administrative baseline it should
explicitly state that any demand reductions offered into Commission-
jurisdictional markets that are not genuine, even if they are the
result of `normal' activity * * * may be violations of the Commission's
anti-

manipulation rules and subject to penalties thereunder.'' \178\
---------------------------------------------------------------------------

    \178\ ISO-NE IMM May 13, 2010 Comments at 14 (footnotes omitted)
(ISO-NE MMU also notes that ``[i]n assessing whether demand
reductions are genuine, allowance should be made for non-performance
analogous to a generator's forced outage.'').
---------------------------------------------------------------------------

    91. Noting the ongoing efforts by the industry and the North
American Energy Standards Board (NAESB) on measurement and
verification, EnerNOC takes the view that resolution of customer
baseline issues should not delay the issuance of this Final Rule.\179\
---------------------------------------------------------------------------

    \179\ EnerNOC, Inc. May 13, 2010 Comments at 4.
---------------------------------------------------------------------------

    92. Finally, some commenters assert that measurement and
verification methods should not be standardized, but left to the RTOs
and ISOs to reflect the unique features of their individual energy,
ancillary services, and capacity markets.\180\
---------------------------------------------------------------------------

    \180\ ECS May 13, 2010 Comments at 3; Indicated New York TOs May
13, 2010 Comments at 2-3; Midwest ISO May 13, 2010 Comments at 17,
21; National Grid May 13, 2010 Comments at 11-12; NSTAR May 14, 2010
Comments at 9; PPL May 13, 2010 Comments at 4.
---------------------------------------------------------------------------

3. Commission Determination
    93. The Commission agrees with commenters who assert that
measurement and verification are critical to the integrity and success
of demand response programs. Without a determination of a demand
response provider's expected use of power, the ISOs and RTOs cannot
determine whether that provider has in fact reduced its energy usage
when paid to do so. Towards that end, all the RTOs and ISOs already
have measurement and verification protocols for their demand response
programs.\181\ In addition, we have adopted Phase I standards for
measurement and verification published by the North American Energy
Standards Board,\182\ and have recognized the potential benefits of the
continuing NAESB effort to craft Phase II standards with more
substantive and consistent wholesale standards for measurement and
verification.\183\
---------------------------------------------------------------------------

    \181\ See, e.g., PJM Interconnection, L.L.C., 123 FERC ] 61,257
(2008).
    \182\ Standards for Business Practices and Communication
Protocols for Public Utilities, Final Rule, 131 FERC ] 61,022
(2010).
    \183\ Id., at P 32-34.
---------------------------------------------------------------------------

    94. A number of commenters maintain that compensating demand
response resources at the LMP during all hours could make determining
baselines for demand response providers exceedingly difficult. However,
the impact of our adopting the net benefits test described herein is
that the LMP will not be paid to demand response resources in all
hours. Accordingly, implementation of this Final Rule would not appear
to prevent the determination of appropriate baselines. Nonetheless, we
direct ISOs and RTOs to review their current requirements in light of
the changes in this Final Rule and develop appropriate revisions and
modifications, if necessary, to ensure that their baselines remain
accurate and that they can verify that demand response resources have
performed. Specifically, we direct each RTO and ISO to include as part
of the compliance filing required herein, an explanation of how its
measurement and verification protocols will continue to ensure that
appropriate baselines are set, and that demand response will continue
to be adequately measured and verified as necessary to ensure the
performance of each demand response resource. If necessary, each RTO
and ISO should propose any changes needed to ensure that measurement
and verification of demand response will adequately capture the
performance (or non-performance) of each participating demand response
market participant to be consistent with the requirements of this Final
Rule.
    95. Finally, we agree with ISO-NE IMM that demand reductions that
are not genuine may be violations of the Commission's anti-manipulation
rules.\184\ Allegations of such behavior will continue to be
investigated, and when appropriate, sanctions will be brought to bear.
---------------------------------------------------------------------------

    \184\ 18 CFR 1.c (2010).
---------------------------------------------------------------------------

D. Cost Allocation

1. NOPR Proposal
    96. In response to the NOPR and September 13, 2010 Technical
Conference, many commenters argue that, in order to determine the
justness and reasonableness of the proposed compensation level, the
corresponding cost allocation must be considered.\185\ More
specifically, these commenters raise concerns regarding how the costs
associated with payment of LMP for demand response will be allocated,
or assigned, within an ISO or RTO. Several commenters assert that the
issues of cost allocation and net benefits are inherently linked, so
that the Commission must address both issues together.\186\
---------------------------------------------------------------------------

    \185\ ISO-NE May 13, 2010 Comments at at 39-40; see also May 13,
2010 Comments of: AEP at 6-10; CAISO at 6; ConEd at 2; Hess at 3;
ICC at 12; PJM at 8; Potomac Economics at 3; Massachusetts AG at 11;
Midwest ISO TOs at 5-6; Midwest TDUs at 13; EEI at 5; NECPUC at 12,
22; NECA at 11; RRI at 6; SDG&G at 3-4.
    \186\ As further addressed below, several commenters assert that
the costs of demand response compensation should be borne by only
those market participants determined to have benefitted from the
subject load reduction, as determined by some type of net benefits
test. See, e.g., May 13, 2010 Comments of: ISO-NE at 5-6; NECPUC at
22; PJM at 12-14; P3 at 37-38.
---------------------------------------------------------------------------

2. Comments
    97. Comments reveal five specific methods for cost allocation: (1)
Assignment of costs to the load serving entity (LSE) associated with
the demand response provider, (2) assignment of costs broadly to all
purchasing customers, (3) bifurcated assignment of costs with some
directly assigned to a LSE and others assigned broadly, (4) directly
assign the cost for demand response compensation to the retail
customers that bid the demand response into the wholesale market, and
(5) the settlement method proposed by CDRI, which incorporates the cost
of demand response into the dispatch algorithm. Some commenters argue
not for a specific method, but for each regional entity to select and
employ a method of its own,\187\ and a few other commenters assert that
the Commission need not address cost allocation in this
proceeding.\188\
---------------------------------------------------------------------------

    \187\ EPSA May 12, 2010 Comments at 67; Midwest TDUs May 13,
2010 Comments at 1; ODEC May 14, 2010 Comments at 5; Potomac
Economics May 14, 2010 Comments at 9-10; RRI May 13, 2010 Comments
at 4; SoCal Edison May 13, 2010 Comments at 4 (advocating that the
local regulatory authority is the proper entity to regulate cost
allocation); Viridity May 13, 2010 Comments at 24; EnerNOC Sept. 13,
2010 Comments at 1; Midwest TDUs Sept. 13, 2010 Comments at 2.
    \188\ Massachusetts AG May 13, 2010 Comments at 9-10.
---------------------------------------------------------------------------

    98. Some commenters argue that costs should be assigned to the LSE
associated with the demand response provider because it is this entity
that receives the full benefit of demand response.\189\ Others argue
that costs should be assigned broadly to all purchasing customers
because of the concept of cost causation.\190\ Cost causation dictates
that the costs of demand response should be allocated directly to those
entities that benefit from the demand response service provided.\191\
Another method presented involves a bifurcated assignment of costs,
with some directly assigned to a

LSE and others assigned broadly.\192\ The fourth method suggested is to
directly assign the costs of demand response to the retail customer
that bid the demand response into the wholesale market.\193\ Lastly,
the settlement algorithm proposed by CDRI adjusts upward the day-ahead
price paid by the customers that participate in the day-ahead energy
market to account for these costs.\194\
---------------------------------------------------------------------------

    \189\ PJM May 13, 2010 Comments at 15; Midwest ISO May 13, 2010
Comments at 6; CAISO May 13, 2010 Comments at 6; Detroit Edison May
13, 2010 Comments at 3-4; EEI May 13, 2010 Comments at 5; NUSCO May
13, 2010 Comments at 2; National Grid Sept. 13, 2010 Comments at 2-
3; Midwest ISO Oct. 13, 2010 Comments at 4.
    \190\ NECPUC May 13, 2010 Comments at 22; DC OPC May 13, 2010
Comments at 4; PCA Sept. 10, 2010 Comments at 4; Steel Manufactures
Ass'n Sept. 13, 2010 Comments at 5; Ohio Commission Sept. 13, 2010
Comments at 4; Wal-Mart Sept. 14, 2010 Comments at 3.
    \191\ PJM May 13, 2010 Comments at 9; NECPUC May 13, 2010
Comments at 22; PCA Sept. 10, 2010 Comments at 4.
    \192\ PJM May 13, 2010 Comments at 12; ISO-NE May 13, 2010
Comments at 5.
    \193\ DC OPC May 13, 2010 Comments at 4. It concedes that this
could be a complex undertaking and would result in billing a retail
customer for energy that did not consume. Id.
    \194\ CDRI, Integration of Demand Response Into Day Ahead
Markets (Attachment B), May 13, 2010 Comments at 16.
---------------------------------------------------------------------------

3. Commission Determination
    99. When a demand response provider curtails, the RTO experiences a
reduction in load with a corresponding reduction in billing units
through which the RTO derives revenue. When the two conditions
discussed above are met, however, the RTO must pay LMP to both
generators and demand response providers for the resources that clear
the energy market. The difference between the amount owed by the RTO to
resources, including demand response providers, and the revenue it
derives from load results in a negative balance that must be addressed
through cost allocation. Therefore, a method is needed to ensure that
RTOs and ISOs recover the costs of obtaining demand response.
    100. Since the dispatch of demand response resources affects the
LMP charged, and will result in a lower LMP, the customers benefitting
from that lower LMP depends upon transmission constraints, and the
price separation such constraints cause within the RTO. In some hours
in which transmission constraints do not exist, RTOs establish a single
LMP for their entire system (a single pricing area) in which case the
demand response would result in a benefit to all customers on the
system. When transmission constraints are present, however, LMPs often
vary by zone, or other geographic areas. Allocating the costs
associated with demand response compensation proportionally to all
entities that purchase from the relevant energy market in the area(s)
where the demand response resource reduces the market price for energy
at the time when the demand response resource is committed or
dispatched will reasonably allocate the costs of demand response to
those who benefit from the lower prices produced by dispatching demand
response.\195\
---------------------------------------------------------------------------

    \195\ This approach is consistent with long-standing judicially-
endorsed cost allocation principles. See, e.g., Midwest ISO
Transmission Owners v. FERC, 373 F.3d 1361, 1368, 1370-71 (DC Cir.
2004); see also Illinois Commerce Comm'n v. FERC, 576 F.3d 470, 476
(7th Cir. 2009).
---------------------------------------------------------------------------

    101. We reject the various other methods of cost allocation
suggested by commenters. Assignment of all costs to the LSE associated
with the demand response provider, as suggested by some commenters,
would not include others who benefit from the demand response.
Bifurcated assignment of costs to the LSE and to others appears to
represent an arbitrary division of cost responsibility without regard
to the degree to which each receives benefits.
    102. We therefore find just and reasonable the requirement that
each RTO and ISO allocate the costs associated with demand response
compensation proportionally to all entities that purchase from the
relevant energy market in the area(s) where the demand response reduces
the market price for energy at the time when the demand response
resource is committed or dispatched. Accordingly, each RTO and ISO is
required to make a compliance filing on or before July 22, 2011 that
either demonstrates that its current cost allocation methodology
appropriately allocates costs to those that benefit from the demand
reduction or proposes revised tariff provisions that conform to this
requirement.

E. Commission Jurisdiction

1. Comments
    103. Some commenters, including several State commissions and LSEs,
express concern about whether and how standardizing demand response
compensation in the wholesale market will affect treatment of demand
response at the retail level. They assert that the issue of demand
response compensation is fundamentally intertwined with retail rates,
ratepayer issues, and State jurisdictional concerns.\196\ Some
commenters note general concerns about the need for Federal and State
level coordination. They assert that many States have taken significant
steps to install advanced meters and implement programs to encourage
efficient use of energy and that the success of State-level efforts
should be a factor in deciding whether and how to implement demand
response programs in the wholesale market.\197\ According to these
commenters, a Commission-mandated compensation level could have the
unintended consequence of retarding the expansion of price-responsive
demand at the retail level.\198\
---------------------------------------------------------------------------

    \196\ See, e.g., CAISO May 13, 2010 Comments at 12; PJM May 13,
2010 Comments at 8 (appropriate and efficient demand response
compensation may require coordination between the Commission, retail
regulatory authorities, competitive retail suppliers, and other
RTOs).
    \197\ See ISO-NE IMM May 13, 2010 Comments at 6.
    \198\ Illinois Commission May 13, 2010 Comments at 8; PJM May
13, 2010 Comments at 23; EEI May 13, 2010 Comments at 4; Capital
Power May 13, 2010 Comments at 5; ODEC May 13, 2010 Comments at 60;
Steel Producers May 13, 2010 Comments at 2.
---------------------------------------------------------------------------

    104. Other commenters flatly question the Commission's jurisdiction
to set the compensation for demand response in wholesale energy
markets. They argue that it is within the purview of retail regulatory
authorities to take into account local policies and concerns, and the
types of demand response being offered, when determining the
appropriate compensation level.\199\ Indeed, the California Commission
seeks clarification that this Commission does not seek to regulate
retail customer rates or seeks LSE oversight authority traditionally
exercised by States. The California Commission asserts that this
Commission's actions concerning CAISO's Proxy Demand Resource tariff
filing \200\ illustrates that demand response settlement mechanisms are
within the authority of the California Commission.\201\
---------------------------------------------------------------------------

    \199\ See Illinois Commission May 13, 2010 Comments at 13; CAISO
May 13, 2010 Comments at 12-13; PJM IMM May 13, 2010 Comments at 5
(``The assertion that demand side participants should be paid full
LMP, regardless of their retail tariff rate, because the current
approach of paying LMP minus G represents an intervention into
retail rate design, cannot be correct. The entire demand side
program exists only because of the disconnect between wholesale and
retail rates. The assertion that the program design should not
account for the details of retail rate design leads to the
conclusion that there should be no demand side program at all.'');
NECPUC May 13, 2010 Comments at 25 (``As energy market customers
benefit most from both a well-functioning wholesale market and
robust participation in retail programs, a balance between these two
segments is essential. Compensation that increases demand response
resource participation in the wholesale market should not be so
generous, from the perspective of the customer, that it makes
participation in retail programs pale in comparison.''); SDG&E,
SoCal Edison, and PG&E May 13, 2010 Comments at 4 (``[M]andating
that ISOs take on settlement responsibility or precluding any retail
settlement between retail customers, LSEs or DRPs would intrude on
retail jurisdictional authority and contravenes the premise of
separation outlined in Order 719.''); Consumers Energy May 13, 2010
Comments at 3; Detroit Edison May 13, 2010 Comments at 4.
    \200\ See California Independent System Operator Corp., 132 FERC
] 61,045 (2010).
    \201\ California Commission May 13, 2010 Comments at 9-10. 1.
See also SDG&E, SCE, PG&E May 13, 2010 Comments at 2 (``[T]he
Commission should clarify that its order does not preclude LRAs from
administering retail revenue settlements between retail customers,
Load Serving Entities (LSEs) and Demand Response Providers (DRPs)
associated with DR participation in wholesale markets.'').

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

    105. Other commenters foresee retail regulatory authorities
effectively taking an end-run around any Commission-mandated
compensation level by adjusting retail rate design or prohibiting
jurisdictional end-use customers from participating in wholesale market
opportunities available to demand response resources.\202\ The Illinois
Commission argues:
---------------------------------------------------------------------------

    \202\ See PJM May 13, 2010 Comments at 24; PJM May 13, 2010
Comments at 18 (It is reasonable to assume that each retail
regulatory authority in PJM will re-examine the impact of load
reduction based on wholesale compensation equal to the LMP,
including cost allocation, on the LSEs subject to its jurisdiction,
and potentially re-align retail market rules affecting economic load
response participation.); Delaware Commission and NECPUC May 13,
2010 Comment at 25; OMS May 13, 2010 Comments at 7 (State
commissions and LSEs have significant concerns that the potential
costs for non-participating customers may exceed the benefits that
ARCs can provide to their States and to participating customers, so
State commissions will have a significant disincentive to support
the participation of ARCs in RTO energy markets and in their States
if LMP compensation is adopted).

    [W]hen load serving entities are vertically integrated with
generation regulated under state authority * * * any non-zero
payment to a demand response resource reduces the revenues to
generators under the state regulatory authority. The result is a
leakage of money to an entity outside of the state's regulatory
authority. Therefore, retail rates to all customers may need to be
increased in order to recover the costs to generators that would
have otherwise been recovered through the purchase of electricity,
but instead went to the payment of a demand response resource.
Therefore, compensating demand response resources may increase the
likelihood that state commissions will prohibit the participation of
demand response resources in the jurisdictions.\203\
---------------------------------------------------------------------------

    \203\ Illinois Commission May 13, 2010 Comments at 15.

    106. Similarly, PJM states that the prohibition devised by retail
regulatory authorities with jurisdiction over smaller distributors that
deliver 4 million MWh or fewer per annum may entail the revocation of
previously provided permission to participate in some or all of the
wholesale market opportunities for demand resources.\204\
---------------------------------------------------------------------------

    \204\ PJM May 13, 2010 Comments at 20-21.
---------------------------------------------------------------------------

    107. Some commenters further posit that, even where retail
regulatory authorities do not prohibit or limit demand response
participation, they may make adjustments to the retail rate, which
affect the ultimate compensation that the retail customer will be paid
for its demand reductions.\205\ For example, the OMS asserts,
---------------------------------------------------------------------------

    \205\ CAISO May 13, 2010 Comments at 4.

    If the Commission were to adopt the proposed rule, state
commissions and LSEs could correct this distorted price signal by
revising retail tariffs for customers that do business with
[aggregators of retail customers] in order to charge the retail rate
to participating customers for energy which was not consumed or
metered as a result of load reductions.\206\
---------------------------------------------------------------------------

    \206\ OMS May 13, 2010 Comments at 3. See also EEI May 13, 2010
Comments at 4.

    108. Another set of commenters, especially generators, assert that
due to the disconnect between wholesale and retail issues related to
demand response, Commission-mandated payments for demand response will
fail to address true barriers to demand response, which exist, they
assert, at the retail level. These commenters argue that the
Commission's actions in this proceeding ignore the fact that the
primary barrier to demand response is the disconnect between retail and
wholesale prices and, according to these commenters, the remedy resides
at the retail--not wholesale--level where there is a lack of dynamic
pricing.\207\ For example, some commenters recognize that the lack of
retail real-time pricing is a barrier to demand response participation
but further assert that whatever changes the Commission makes to
wholesale demand response (where there is real-time pricing) will not
address that fundamental problem.\208\
---------------------------------------------------------------------------

    \207\ Calpine May 13, 2010 Comments at 3.
    \208\ See EPSA May 13, 2010 Comments at 7 (``The NOPR
incorrectly attempts to resolve retail market barriers to DR
participation (i.e., lack of dynamic pricing) through a wholesale
pricing fix.''); RRI Energy May 13, 2010 Comments at 5 (``The NOPR
is essentially trying to use an inefficient wholesale solution to
remedy a retail problem. The NOPR does not attempt to address (nor
should it attempt to address) the various retail rate structures
that demand response providers in various regions of the country
face.''); The Brattle Group May 13, 2010 Comments at 8 (``[T]he
appropriate avoidable retail generation rate is best done through
agreements between the LSE and the curtailment service provider
under the oversight of the relevant retail regulating authority.
This approach . . . avoids requiring the RTO to sort through
potentially complicated retail rate structures.''); Steel
Manufacturers Ass'n May 13, 2010 Comments at 9 (``[T]here is no
rational basis for the Commission, or RTOs, to adopting varying
demand response participation or compensation rules based on the
retail pricing method of otherwise qualified participating
loads.'').
---------------------------------------------------------------------------

    109. On the other hand, some commenters, such as commercial
customers, wholly reject challenges to the Commission's authority to
set the compensation level for demand response occurring in organized
wholesale energy markets.\209\ They assert that the FPA gives the
Commission broad authority to correct market flaws, including
compensation for demand response.\210\
---------------------------------------------------------------------------

    \209\ DR Supporters Aug. 30, 2010 Reply Comments at 4.
    \210\ Id.
---------------------------------------------------------------------------

    110. Some commenters further argue that any disconnect between
wholesale and retail issues relevant to demand response should not
negate the Commission's efforts in this proceeding. They argue that
dynamic retail pricing, retail shopping opportunities and the potential
for retail energy efficiency measures are no substitute for adequate
wholesale demand response compensation and the deployment of demand
response measures akin to a generator.\211\
---------------------------------------------------------------------------

    \211\ Wal-Mart May 13, 2010 Comments at 11.
---------------------------------------------------------------------------

    111. Moreover, some commenters assert that, while the Commission
has authority to establish the compensation level for demand response
in the wholesale market, the Commission cannot require subtraction of
retail rate components from the LMP rate, reasoning that retail rates
reflect a myriad of local concerns beyond the Commission's
jurisdiction. These commenters assert that LMP reflects the wholesale
value of the demand response service provided and that proponents of
the LMP-G formulation (subtracting a portion of the retail rate) seek
to draw the Commission into a review of retail rate matters beyond its
purview.\212\ Additionally, these commenters point to the difficulty of
isolating the generation component of the retail rate from other
components, such as transmission, distribution, and overhead. They
argue that different retail rate contracts reflect different costs of
generation, depending on local circumstances existing at the time the
contract was executed, and that retail rate structures reflect a wide
range of competing considerations, such as cost causation, the impact
of rate design on employment, and the state of the local economy, all
of which are appropriately left to State commissions. These commenters
posit that, instead of tailoring the wholesale rate, i.e., LMP, to
retail rate conditions, it is better to get the wholesale rate right in
the first instance and then allow retail rate structures adjust as
needed to wholesale market conditions.\213\ According to Dr. Kahn,
accounting for the retail rate in this Final Rule would ``ignore the
proper scope of the Commission's regulatory responsibilities, the fact
that the great majority of retail rate designs are economically
inefficient and that it is retail rates that should not be permitted

to undermine efficient wholesale rates rather than the reverse.'' \214\
---------------------------------------------------------------------------

    \212\ Viridity June 18, 2010 Comments at 13.
    \213\ Viridity June 18, 2010 Comments at 14.
    \214\ DR Supporters Aug. 30, 2010 Comments (Kahn Affidavit at
4).
---------------------------------------------------------------------------

2. Commission Determination
    112. We begin by rejecting challenges to the Commission's authority
to set the compensation level for demand response in organized
wholesale energy markets. Section 205 of the FPA tasks the Commission
with ensuring that all rates and charges for or ``in connection with''
the transmission or sale for resale of electric energy in interstate
commerce, and all rules and regulations ``affecting or pertaining to''
such rates or charges are just and reasonable.\215\ The Commission has
previously explained that it has jurisdiction over demand response in
organized wholesale energy markets, because it directly affects
wholesale rates.\216\
---------------------------------------------------------------------------

    \215\ 16 U.S.C. 824d (2006).
    \216\ Order No. 719-A, FERC Stats. & Regs. ] 31,292 at P 47.
---------------------------------------------------------------------------

    113. For this reason, the Commission has jurisdiction to regulate
the market rules under which an ISO or RTO accepts a demand response
bid into a wholesale market.\217\ Furthermore, as discussed above, the
Commission's actions in this proceeding are consistent with
Congressional policy requiring Federal level facilitation of demand
response, because this Final Rule is designed to remove barriers to
demand response participation in the organized wholesale energy
markets.
---------------------------------------------------------------------------

    \217\ Order No. 719-A, FERC Stats. & Regs. ] 31,292 at P 52.
---------------------------------------------------------------------------

    114. Nevertheless, we recognize that jurisdiction over demand
response is a complex matter that lies at the confluence of State and
Federal jurisdiction. By issuing this Final Rule, the Commission is not
requiring actions that would violate State laws or regulations. The
Commission also is not regulating retail rates or usurping or impeding
State regulatory efforts concerning demand response.
    115. We acknowledge that many barriers to demand response
participation exist and that our ability to address such barriers is
limited to the confines of our statutory authority. At the same time,
the FPA requires the Commission to ensure that the rates charged for
energy in wholesale energy markets are just, reasonable, and not unduly
discriminatory or preferential. The Commission has the authority,
indeed the responsibility, to assure that wholesale rates are just and
reasonable. Therefore, we disagree with commenters who would have the
Commission refrain from acting on demand response compensation in the
organized wholesale energy markets because of the potential actions
that State retail regulatory authorities may or may not take. As we
note above, this Final Rule is not intended to usurp State authority or
impede States from taking any actions within their authority. Rather,
the Commission is taking action here to fulfill its statutory mandate
to ensure just, reasonable, and not unduly discriminatory or
preferential wholesale rates.

V. Information Collection Statement

    116. The Office of Management and Budget (OMB) requires that OMB
approve certain information collection and data retention requirements
imposed by agency rules.\218\ Therefore, the Commission is submitting
the proposed modifications to its information collections to OMB for
review and approval in accordance with section 3507(d) of the Paperwork
Reduction Act of 1995.\219\
---------------------------------------------------------------------------

    \218\ 5 CFR 1320.11(b) (2010).
    \219\ 44 U.S.C. 3507(d) (2006).
---------------------------------------------------------------------------

    117. OMB's regulations require approval of certain information
collection requirements imposed by agency rules. 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 a
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.
    118. The Commission is submitting these reporting requirements to
OMB for its review and approval under section 3507(d) of the Paperwork
Reduction Act. Comments are solicited on the Commission's need for this
information, whether the information will have practical utility, the
accuracy of provided burden estimates, ways to enhance the quality,
utility, and clarity of the information to be collected, and any
suggested methods for minimizing the respondent's burden, including the
use of automated information techniques.
    Burden Estimate and Information Collection Costs: The estimated
Public Reporting burden and cost for the requirements contained in the
final rule follow.

----------------------------------------------------------------------------------------------------------------
                                                             Number of
    FERC-516 data collection            Number of          responses per        Hours per     Total annual hours
                                       respondents      respondent per year     response
                                  (a).................  (b)................             (c)  (d) [a*b*c]
----------------------------------------------------------------------------------------------------------------
Compliance filing, including      6 (RTOs and ISOs)...  1 (one-time filing)             300  1,800 (one-time
 tariff provisions and analysis                                                               filing).
 (one-time filing, due 7/22/
 2011).
Study on dynamic net benefits     6 (RTOs and ISOs)...  1 (one-time filing)           2,000  12,000 (one-time
 approach (one-time filing, due                                                               filing).
 9/21/2012).
Monthly update to price           6 (RTOs and ISOs)...  12.................              50  3,600.
 threshold and Web posting (due
 monthly, starting after the
 compliance filing due 7/22/
 2011).
----------------------------------------------------------------------------------------------------------------

    In Year 1, the following requirements are imposed \220\: (1)
Compliance filing due on or before July 22, 2011, and (2) monthly
updates (for months 5-12, and starting after the compliance filing).
The total corresponding burden hours are estimated to be: 1,800 hrs. +
(8 filings * 6 respondents * 50 hrs./filing), for a total of 4,200
hours. The corresponding total cost is estimated to be: 4,200 hours *
$220/hour, for a total of $924,000.
---------------------------------------------------------------------------

    \220\ The one-time study is due on or before September 21, 2012.
For the purpose of the burden and cost estimates, we are including
all of the burden and cost related to the study in Year 2, although
filers may perform part of the work in Year 1.
---------------------------------------------------------------------------

    In Year 2, (a) the monthly update to the price threshold, and (b)
the study on dynamic net benefits approach (due on or before September
21, 2012) are imposed. The corresponding total burden is estimated to
be 3,600 + 12,000 hours, for a total of 15,600 hours. The corresponding
total cost estimate is: 15,600 hours * $220/hour, for a total of
$3,432,000.
    In Year 3, the monthly update to the price threshold is imposed.
The corresponding total burden and cost are

estimated to be 3,600 hours and $792,000 (3,600 hours * $220/hour).
    Title: FERC-516, ``Electric Rate Schedules and Tariff Filings''.
    Action: Proposed Collections.
    OMB Control No: 1902-0096.
    Respondents: Business or other for profit, and/or not for profit
institutions.
    Frequency of Responses: One-time filings for (a) the compliance
filing, due on or before July 22, 2011, and (b) the study on dynamic
net benefits approach, due on or before September 21, 2012. In
addition, monthly updates to the price threshold and Web posting will
be required starting after the compliance filing.
    Necessity of the Information: The information from FERC-516 enables
the Commission to exercise its statutory obligation under sections 205
and 206 of the FPA. FPA section 205 specifies that all rates and
charges, and related contracts and service conditions for wholesale
sales and transmission of energy in interstate commerce be filed with
the Commission and must be ``just and reasonable.'' In addition, FPA
section 206 requires the Commission, upon complaint or its own motion,
to modify existing rates or services that are found to be unjust,
unreasonable, unduly discriminatory or preferential.
    119. In Order No. 719, the Commission emphasized the importance of
demand response as a vehicle for improving the competitiveness of
organized wholesale electricity markets and ensuring supplies of energy
at just, reasonable and not unduly discriminatory or preferential
rates. This Final Rule addresses the need for organized wholesale
energy markets to provide compensation to demand response resources on
a comparable basis to supply-side resources when demand response
resources are comparable to supply-side resources, so that both supply
and demand can meaningfully participate. This final rule establishes a
specific compensation approach for demand response resources
participating in organized wholesale energy markets, administered by
RTOs and ISOs. Each Commission-approved RTO and ISO that has a tariff
provision providing for participation of demand response resources in
its organized wholesale energy market must: (a) Pay demand response
resources the market price (full LMP) for energy (when found to be
cost-effective as determined by the net benefits test described
herein), (b) submit a one-time compliance filing, (c) perform monthly
updates to the Price Threshold, and (d) submit a one-time Study on
Dynamic Net Benefits Approach.
    120. 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,
Information Clearance Officer, Office of the Executive Director, e-
mail<EMAIL_ADDRESS>phone:<PHONE_NUMBER>, fax: (202) 273-
0873]. Comments on the requirements of the final rule may also be sent
to the Office of Information and Regulatory Affairs, Office of
Management and Budget, Washington, DC 20503 [Attention: Desk Officer
for the Federal Energy Regulatory Commission]. For security reasons,
comments to OMB should be submitted by e-mail to<EMAIL_ADDRESS>Comments submitted to OMB should include Docket
Number RM10-17 and OMB Control Number 1902-0096.

VI. Environmental Analysis

    121. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\221\ The
Commission concludes that neither an Environmental Assessment nor an
Environmental Impact Statement is required for this Final Rule under
section 380.4(a)(15) of the Commission's regulations, which provides a
categorical exemption for approval of actions under sections 205 and
206 of the FPA relating to the filing of schedules containing all rates
and charges for the transmission or sale subject to the Commission's
jurisdiction, plus the classification, practices, contracts, and
regulations that affect rates, charges, classifications, and
services.\222\
---------------------------------------------------------------------------

    \221\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs., Regulations Preambles 1986-1990 ] 30,783 (1987).
    \222\ 18 CFR 380.4(a)(15) (2010).
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act

    122. The Regulatory Flexibility Act of 1980 (RFA) \223\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a rule and that minimize any
significant economic impact on a substantial number of small entities.
The Small Business Administration's (SBA) Office of Size Standards
develops the numerical definition of a small business.\224\ The SBA has
established a size standard for electric utilities, stating that a firm
is small if, including its affiliates, it is primarily engaged in the
transmission, generation and/or distribution of electric energy for
sale and its total electric output for the preceding twelve months did
not exceed four million megawatt hours.\225\ ISOs and RTOs, not small
entities, are impacted directly by this rule.
---------------------------------------------------------------------------

    \223\ 5 U.S.C. 601-612 (2006).
    \224\ 13 CFR 121.101 (2010).
    \225\ 13 CFR 121.201, Sector 22, Utilities.
---------------------------------------------------------------------------

    123. California Independent System Operator Corp. (CAISO) is a non-
profit organization with over 54,000 megawatts of capacity and over
25,000 circuit miles of power lines.
    124. New York Independent System Operator, Inc. (NYISO) is a non-
profit organization that oversees wholesale electricity markets,
dispatches over 500 generators, and manages a nearly 11,000-mile
network of high-voltage lines.
    125. PJM Interconnection, L.L.C. (PJM) is comprised of more than
600 members including power generators, transmission owners,
electricity distributors, power marketers, and large industrial
customers, serving 13 States and the District of Columbia.
    126. Southwest Power Pool, Inc. (SPP) is comprised of 61 members
serving over 6.2 million households in nine States and has almost
50,000 miles of transmission lines.
    127. Midwest Independent Transmission System Operator, Inc.
(Midwest ISO) is a non-profit organization with over 145,000 megawatts
of installed generation. Midwest ISO has over 57,000 miles of
transmission lines and serves 13 States and one Canadian province.
    128. ISO New England, Inc. (ISO-NE) is a regional transmission
organization serving six States in New England. The system is comprised
of more than 8,000 miles of high-voltage transmission lines and over
350 generators.
    129. The Commission believes this rule will not have a significant
economic impact on a substantial number of small entities, and
therefore no regulatory flexibility analysis is required.

VIII. Document Availability

    130. 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 p.m. Eastern time) at 888 First Street,
NE., Room 2A, Washington DC 20426.
    131. 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.
    132. 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 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>
IX. Effective Date and Congressional Notification

    133. This Final Rule will become effective on April 25, 2011. The
Commission has determined, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs, Office of Management
and Budget, that this rule is not a ``major rule'' as defined in
section 351 of the Small Business Regulatory Enforcement Fairness Act
of 1996.

    By the Commission. Commissioner Moeller dissenting with a
separate statement attached.
Kimberly D. Bose,
Secretary.
    In consideration of the foregoing, the Commission amends part 35,
chapter I, title 18, Code of Federal Regulations, as follows.

PART 35--FILING OF RATE SCHEDULES AND TARIFFS

0
1. The authority citation for Part 35 continues to read as follows:

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

0
2. Amend Sec.  35.28 by adding a new paragraph (g)(1)(v) to read as
follows:

Sec.  35.28  Non-discriminatory open access transmission tariff.

* * * * *
    (g) * * *
    (1) * * *
    (v) Demand response compensation in energy markets. Each
Commission-approved independent system operator or regional
transmission organization that has a tariff provision permitting demand
response resources to participate as a resource in the energy market by
reducing consumption of electric energy from their expected levels in
response to price signals must:
    (A) Pay to those demand response resources the market price for
energy for these reductions when these demand response resources have
the capability to balance supply and demand and when payment of the
market price for energy to these resources is cost-effective as
determined by a net benefits test accepted by the Commission;
    (B) Allocate the costs associated with demand response compensation
proportionally to all entities that purchase from the relevant energy
market in the area(s) where the demand response reduces the market
price for energy at the time when the demand response resource is
committed or dispatched.
* * * * *

    Note: The following appendices will not be published in the Code
of Federal Regulations.

Appendix 1--List of Commenters

Alcan Primary Products Corp. (Alcan)
Alcoa Inc. (Alcoa)
Alliance for Clean Energy New York, Inc. (ACENY)
Alliance to Save Energy (Alliance)
American Chemistry Council (ACC)
American Clean Skies Foundation
American Council for an Energy-Efficient Economy (ACEEE)
American Electric Power Service Corporation (AEP)
American Forest & Paper Association (AFPA)
American Municipal Power, Inc. (AMP)
American Public Power Association (APPA)
American Wind Energy Association (AWEA)
ArcelorMittal USA Inc. (ArcelorMittal)
Battelle Pacific Northwest Laboratories (Battelle)
Boston College Law School Administrative Law Class (BC Law)
California Department of Water Resources State Water Project (CDWR)
California Independent System Operator Corporation (CAISO)
California Public Utilities Commission (California Commission)
Calpine Corp. (Calpine)
Capital Power Corporation (Capital Power)
Cities of Anaheim, Azusa, Banning, Colton, Pasadena, and Riverside,
California (Six Cities)
Citizens for Pennsylvania's Future (PennFuture)
Coalition of Midwest Transmission Customers (CMTC)
Connecticut Municipal Electric Energy Cooperative (CMEEC)
Consert Inc. (Consert)
Conservation Law Foundation (CLF)
Consolidated Edison Solutions, Inc. (ConEd)
Constellation Energy Commodities Group, Inc. (Constellation)
Consumer Demand Response Initiative (CDRI)
Consumer Power Advocates (CPA)
Consumers Energy Company (Consumers Energy)
CPG Advisors, Inc. (CPG)
CPower, Inc. (CPower)
Crane & Co., Inc. (Crane)
Delaware Public Service Commission (Delaware Commission)
Demand Response and Smart Grid Coalition (Smart Grid Coalition)
Demand Response Supporters (DR Supporters)
Derstine's Inc. (Derstine's)
Detroit Edison Company (Detroit Edison)
Direct Energy Services, LLC (Direct Energy)
Dominion Resources Services, Inc. (Dominion)
Dr. Alfred E. Kahn (Dr. Kahn)
Dr. Charles J. Cicchetti (Dr. Cicchetti)
Dr. Roy J. Shanker (Dr. Shanker)
Dr. William W. Hogan (Dr. Hogan)
Duke Energy Corporation (Duke Energy)
Durgin and Crowell Lumber Co., Inc. (Durgin)
Edison Electric Institute (EEI)
Edison Mission Energy (Edison Mission)
Electric Power Supply Association (EPSA)
Electricity Committee
Electricity Consumers Resource Council (ELCON)
Electrodynamics, Inc. (Electrodynamics)
Energy Curtailment Specialists, Inc. (ECS)
EnergyConnect (EnergyConnect)
Energy Future Coalition (EFC)
EnerNOC, Inc. (EnerNOC)
Environmental Defense Fund (EDF)
Exelon Corporation (Exelon)
Federal Trade Commission (FTC)
FirstEnergy Service Company (FirstEnergy)
GDF SUEZ Energy North America, Inc. (GDF)
Hess Corporation (Hess)
Illinois Citizens Utility Board (Illinois CUB)
Illinois Commerce Commission (ICC)
Independent Power Producers of New York, Inc. (IPPNY)
Indicated New York Transmission Owners (Indicated New York TOs)
Industrial Energy Consumers of America (IECA)
Industrial Energy Consumers of Pennsylvania (IECPA)
Intergrys Energy Services, Inc. (Intergrys)
International Power America, Inc. (IPA)
Irving Forest Products, Inc. (Irving Forest)
ISO New England Inc. (ISO-NE)
ISO-NE Internal Market Monitor (ISO-NE IMM)
Jiminy Peak Mountain Resort, LLC
Joint Consumer Advocates (Joint Consumers)
Limington Lumber (Limington)
Madison Paper Industries (Madison Paper)
Maryland Governor Martin O'Malley (Governor O'Malley)
Maryland Public Service Commission (Maryland Commission)
Massachusetts Attorney General (Massachusetts AG)
Midwest Independent Transmission System Operator, Inc. (Midwest ISO)
Midwest ISO Transmission Owners (Midwest ISO TOs)
Midwest TDUs
Mirant Corporation (Mirant)
Monitoring Analytics, LLC (PJM IMM)
National Electrical Manufactures Association (NEMA)
National Energy Marketers Association (NEM)
National Grid USA (National Grid)

National League of Cities (NLC)
Natural Gas Supply Association (NGSA)
New England Conference of Public Utilities Commissioners (NECPUC)
New England Consumer Advocates (NECA)
New England Power Generators Association Inc. (NEPGA)
New England Power Pool Participants Committee (NEPOOL)
New England Public Systems (NE Public Systems)
New Jersey Board of Public Utilities (NJBPU)
New York Independent System Operator, Inc. (NYISO)
New York Mayor Michael R. Bloomberg (Mayor Bloomberg)
New York State Consumer Protection Board (NYSCPB)
New York State Public Service Commission (New York Commission)
North America Power Partners LLC (NAPP)
Northeast Utilities Services Company (NUSCO)
Northern California Power Agency (NCPA)
NSTAR Electric Company (NSTAR)
Occidental Chemical Corp. (Occidental)
Office of the People's Counsel for the District of Columbia (DC OPC)
Okemo Mountain Resort (Okemo)
Old Dominion Electric Cooperative (ODEC)
Organization of Midwest ISO States (OMS)
Partners HealthCare (Partners)
Pennsylvania Department of Environmental Protection (PA Department
of Environment)
Pennsylvania Office of Consumer Advocate (PCA)
Pennsylvania Public Utility Commission (Pennsylvania Commission)
Pennsylvania State Representative Chris Ross (Rep. Ross)
Pepco Holdings, Inc. (PHI)
PJM Interconnection, L.L.C. (PJM)
PJM Power Providers Group (P3)
Potomac Economics, Ltd. (Potomac Economics)
PPL Parties (PPL)
Praxair, Inc. (Praxair)
Precision Lumber, Inc. (Precision)
Price Responsive Load Coalition (PRLC)
PSEG Companies (PSEG)
Public Interest Organizations (PIO)
Public Utilities Commission of Ohio (Ohio Commission)
Raritan Valley Community College (Raritan)
Robert J. Borlick (Mr. Borlick)
RRI Energy, Inc. (RRI)
San Diego Gas & Electric Company (SDG&E)
Schneider Electric USA, Inc. (Schneider)
Southern California Edison Company (SoCal Edison)
Southwest Power Pool, Inc. (SPP)
Steel Manufacturers Association (Steel Manufacturers Ass'n)
Steel Producers (SP)
Tendrill Networks, Inc. (Tendrill)
The Brattle Group
The E Cubed Company, L.L.C. (E3)
University of California, San Diego (UCSD)
Utility Economic Engineers (UEE)
Verso Paper Corp. (Verso)
Virginia Committee for Fair Utility Rates (Virginia Committee)
Viridity Energy, Inc. (Viridity)
Wal-Mart Stores, Inc. (Wal-Mart)
Waterville Valley Ski Resort Inc. (Waterville)
Westar Energy, Inc. (Westar)
Wisconsin Industrial Energy Group (WIEG)

Appendix 2--Dissenting Statement

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

Demand Response Compensation in Organized Wholesale Energy Markets

Docket No. RM10-17-000
(Issued March 15, 2011)

MOELLER, Commissioner, dissenting:

    While the merits of various methods for compensating demand
response were discussed at length in the course of this rulemaking,
nowhere did I review any comment or hear any testimony that
questioned the benefit of having demand response resources
participate in the organized wholesale energy markets. On this
point, there is no debate. The fact is that demand response plays a
very important role in these markets by providing significant
economic, reliability, and other market-related benefits.
    However, in a misguided attempt to encourage greater demand
response participation in the organized energy markets, today's Rule
imposes a standardized and preferential compensation scheme that
conflicts both with the Commission's efforts to promote competitive
markets and with its statutory mandate to ensure supplies of
electric energy at just, reasonable, and not unduly discriminatory
or preferential rates.\1\ For these reasons, I cannot support this
Rule.
---------------------------------------------------------------------------

    \1\ 16 U.S.C. Sec.  824d (2006).
---------------------------------------------------------------------------

Standardizing Demand Response Compensation

    As an initial matter, RTOs and ISOs currently offer different
types of demand response products that vary from region to region
and in terms of capability and services offered in the day-ahead and
real-time energy markets. Moreover, the RTOs and ISOs to date have
been working with their market participants in a stakeholder process
to design demand response compensation rules that are tailored to
suit the needs of their individual energy markets. However, this
will all change once the Rule takes effect and this existing
framework is replaced with the requirement that every organized
wholesale energy market pay demand resources the market price for
energy (LMP) when its demand reductions are, in theory, found to be
cost-effective.
    As I recognized in my initial statement in this proceeding,
organized markets such as the PJM Interconnection have already
demonstrated the ability to develop demand response compensation
rules. Accordingly, I would have preferred to allow these markets to
continue to develop their own rules. Different demand response
products will have different values that reflect their varying
capabilities and to require a standard payment fails to reflect
these meaningful differences.\2\
---------------------------------------------------------------------------

    \2\ California Commission May 13, 2010 Comments at 6,
``[P]romulgating a uniform national rule at this time may
inadvertently impede the implementation of optimal demand response
compensation for an individual ISO or RTO which address the needs of
that particular region.'' The California Commission ``is concerned
that mandatory `one size fits all' pricing may stifle national and
regional efforts to collect valuable data and experience regarding
the effects of different demand response program designs on consumer
participation and conflict with Congressional objectives.''
---------------------------------------------------------------------------

    However, without ever determining that the existing region-by-
region approach to compensation is unjust and unreasonable, the Rule
implies that the current approach is no longer adequate to ensure
that rates remain just and reasonable. In turn, the Rule finds that
``greater uniformity in compensating demand response resources'' is
required and as justification for its action, references the
existence of various barriers that limit the participation of demand
response in the energy markets.\3\ The majority ultimately concludes
that these barriers can be removed by better equipping demand
response providers with the financial resources to invest in
enabling technologies.\4\ This is to say that the majority believes
that paying demand resources more money will help overcome these
barriers and encourage more participation. The Rule, however, never
clearly explains how the existence of barriers, in turn, justifies a
payment of full LMP to demand resources.
---------------------------------------------------------------------------

    \3\ Rule at P 17, 57-59.
    \4\ Rule at P 57-59.
---------------------------------------------------------------------------

    The Rule (like the NOPR) does not sufficiently discuss the need
for standardizing compensation across the organized markets or
elaborate on how standardization will remove genuine barriers that
prevent meaningful participation by demand resources in the energy
markets.\5\ While the Energy Policy Act of 2005 states that the
policy of the U.S. Government is to remove unnecessary barriers to
demand response, the statute never authorized the Commission to
stimulate increased demand response participation by requiring its
compensation to include incentives or preferential treatment.\6\
Although, the majority is quick to claim ``that removing barriers to
demand response participation is not the same as giving preferential
treatment to demand response providers * * *'', this is exactly what
is occurring in this Rule.\7\ As discussed below, the majority's
determination is troubling as the Rule both affords preferential
treatment to demand response resources and unduly discriminates
against them in other respects.
---------------------------------------------------------------------------

    \5\ Significant barriers do exist which prevent demand response
from reaching its full potential. Specifically, 24 barriers were
identified in our National Assessment of Demand Response Potential,
FERC Staff Report, (June 2009) at 65-67.
    \6\ See Energy Policy Act of 2005, Pub. L. No. 109-58, Sec.
1252(f), 119 Stat. 594, 965 (2005).
    \7\ Rule at P 59.
---------------------------------------------------------------------------

Demand Response Resources are Comparable * * * Sometimes

    At the outset, the concept of ``comparability'' is at the core
of this rulemaking, i.e., whether demand response resources are
capable of providing a service comparable to generation resources
and if so, whether these resources should receive comparable
compensation for a comparable

service. On this point, I believe they should.\8\ This is not to say
that a megawatt produced is the same as a megawatt not consumed;
they are not perfect equivalents. The characteristics of a megawatt
and a ``negawatt'' are different, both in terms of physics and in
economic impact.
---------------------------------------------------------------------------

    \8\ As explained below, I believe that comparable compensation
is represented by the value realized by the demand resource for
providing a comparable service, regardless of whether the source of
that value is a payment from the market or a savings by the
resource.
---------------------------------------------------------------------------

    Assuming, however, that a demand resource can provide a
balancing service that is identical to that of a generation
resource, it would make sense that a demand resource providing a
comparable service would receive comparable compensation. But this
may not occur under the Rule. The majority explains that if a demand
resource is capable of providing a service comparable to a
generation resource, it will only be eligible to receive comparable
compensation, by definition, if it can also be determined that the
resource will result in a price-lowering effect to the market by
passing a net benefits test.\9\
---------------------------------------------------------------------------

    \9\ Rule at P 47-50.
---------------------------------------------------------------------------

    In no other circumstance is a resource required to show that its
participation will depress the market price in order to receive
comparable compensation for a comparable service.\10\ Such a
definition unduly discriminates against demand resources and as
such, this requirement is unjust, unreasonable, and unduly
discriminatory.
---------------------------------------------------------------------------

    \10\ Testimony of Audrey Zibelman, President and CEO of Viridity
Energy, Inc., Sept. 13, 2010 Tr. at 119, ``[T]he fact that we're
debating this [net benefits test] is somewhat absurd. We have not
required any other resource to demonstrate a benefit in order to
enter this market.''
---------------------------------------------------------------------------

Overcompensating Demand Resources and the Net Benefits Test

    At first glance, the Rule's requirement that RTOs and ISOs pay
demand response resources the LMP only when it is deemed cost-
effective appears to make sense. There is near-universal agreement
that the LMP reflects the value of the marginal unit, and as such,
it sends the proper price signal to keep supply and demand in
relative balance. Accordingly, the Rule explains that if the demand
resource is capable of providing a comparable service and is also
cost-effective (i.e., using a net benefits test to ensure that the
overall benefit of the reduced LMP that results from dispatching
demand recourses exceeds the cost of dispatching those resources),
then this resource should be paid the same as a generation resource.
However, the decision to pay demand resources the full LMP under
such circumstances actually results in overcompensation that is
economically inefficient, preferential to demand resources, and
unduly discriminatory towards other market resources.
    An example may help to illustrate a major flaw with this Rule.
Assume that both a generation resource and a demand resource bid
into the energy market and both bids are accepted and paid the LMP
($100). Then consider the fact that the demand resource will save an
amount that it would have otherwise paid by not purchasing
generation at the retail rate (``G''), which is $25. While the Rule
requires that RTOs and ISOs pay the demand resource the LMP (which
is the identical amount the generation resource receives), the Rule
effectively ignores the fact that the demand resource will actually
receive a total compensation of LMP+G ($125) as a result of its
decision not to consume.\11\ Meanwhile, the generation resource will
only receive the LMP ($100) payment as a result of its decision to
produce. While the Rule's intent is to ensure that a demand resource
receives ``the same compensation, the LMP, as a generation
resource'', this is not the actual result.\12\ In this example, what
will happen is that the Rule will require that the demand response
resource be overcompensated by $25.\13\
---------------------------------------------------------------------------

    \11\ The proper economic measure of value realized by the demand
resource is one where the RTO or ISO makes a reduction from the LMP
to account for the retail rate, but then recognizes that the savings
associated with the avoided retail generation cost should be added
back into the equation, i.e., (LMP-G)+G.
    \12\ Rule at P 82. If it were the result, the generation
resource would be paid the LMP, $100, and the demand resource would
be paid $75 and realize an additional $25 in retail rate savings.
Accordingly, both resources realize equivalent compensation valued
at $100.
    \13\ Ohio Commission May 13, 2010 Comments at 6, ``[T]he
Commission's proposal that RTOs pay demand response resources the
full LMP takes the incentives for wholesale demand response
resources a step too far. It would provide an incentive to the
supplier of a demand response resource that exceeds the payments
available to an equivalent supply resource. The Commission should
instead focus on removing the existing barriers in the wholesale
markets * * *.''
---------------------------------------------------------------------------

    The Rule effectively finds that demand resources being
compensated at the value of full LMP is not enough, so instead
requires that demand resource be paid the full LMP plus be allowed
to retain the savings associated with its avoided retail generation
cost. Professor William W. Hogan refers to this outcome as a
``double-payment'' because demand resources would ``receive'' both
the cost savings from not consuming electricity at a particular
price, plus an LMP payment for not consuming that same increment of
electricity.\14\ Not only is this result not comparable (by valuing
a negawatt more than a megawatt) and economically inefficient (by
distorting the price signal), but this preferential compensation
will harm the efficiency of the competitive wholesale energy
markets.
---------------------------------------------------------------------------

    \14\ See Attachment to Answer of EPSA, Providing Incentives for
Efficient Demand Response, Dr. William W. Hogan, October 29, 2009
(Docket No. EL09-68).
---------------------------------------------------------------------------

    The use of a net benefits test further reduces competitive
efficiency and only complicates the issue. As the Rule explains, the
net benefits test involves the determination of a threshold price
point that is plotted along a historical supply curve in an attempt
to accurately calculate whether the cost of procuring additional
demand response is outweighed by the value it brings to the market
in the form of a lower LMP.\15\ However, this test, which attempts
to justify the LMP payment by promising a ``win-win'' outcome, is
nothing more than a fig leaf that provides little protection against
the long-term potential for unintended market damage. As recognized
by ISO-NE, generation is not dispatched and paid for only when such
generation reduces LMP, instead generation is dispatched and paid
for only when it is cost-effective.\16\ Likewise, logic would
require that demand resources be treated similar to generation
resources and be similarly cost-effective.
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    \15\ Testimony of Robert Weishaar, Jr., Attorney for Demand
Response Supporters, Sept. 13, 2010 Tr. at 46-47, ``Administratively
constructing an LMP-based break point for compensating Demand
Response participation would ignore many other qualitative and
quantitative benefits of Demand Response. Focusing only on the LMP
impacts of Demand Response is problematic.''
    \16\ ISO-NE May 13, 2010 Comments at 3-4.
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    During a technical conference convened to discuss the specific
question on the necessity of a net benefits test, the Commission
heard testimony from a panel of experts. A clear majority of the
witnesses (representing a spectrum of interests that included demand
response advocates, economists, generators, and the RTOs and ISOs)
argued against the use of a complicated and admittedly imprecise
\17\ net benefits test.\18\ Chief among their concerns was that a
net benefits test is unnecessary since the market clearing function
in a wholesale market, by definition, serves to guarantee that the
resource that clears the market is the lowest-cost resource.\19\
Other experts commented that the net benefits test would be
complicated, costly to implement, and of little value.\20\ Notably,
Dr. Alfred E. Kahn, the majority's oft-quoted expert in defense of
the full LMP payment, did not opine on the merit of subjecting the
LMP payment to a net benefits test.
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    \17\ Rule at P 80. Recognizing that ``the threshold price
approach we adopt here may result in instances both when demand
response is not paid the LMP but would be cost-effective and when
demand response is paid the LMP but is not cost-effective.''
    \18\ Testimony of Donald Sipe, Attorney for Consumer Demand
Response Initiative, Sept. 13, 2010 Tr. at 43, ``[T]here is probably
not a need for a Net Benefits Test. But if one is adopted, it should
not be an artificial threshold that can be wrong both ways. It
should not be a mechanism that treats DR differently than
generation.''
    \19\ Viridity Energy, Inc., Oct. 13, 2010 Comments at 10. See
also ELCON Oct. 13, 2010 Comments at 3; and Environmental Defense
Fund Comments at 2.
    \20\ Testimony of Andy Ott, Sr. Vice President, PJM
Interconnection, Sept. 13, 2010 Tr. at 19, ``[Y]ou have to use
caution to actually take a benefits test and apply that to
compensation, because you may have unintended consequences.''
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    Further, as explained by Dr. Roy J. Shanker, if the Commission
adopted the payment of LMP minus the retail rate (``G''), then there
is no need for a net benefits test since the customer is paid the
difference between the LMP and what they would have paid under their
retail rate, which is their net benefit.\21\ He testified that the
``Net Benefits

criteria is troubling in and of itself, as it explicitly
incorporates consideration of portfolio effects caused by the
reduced demand on all load payments, versus the economic decision-
making of individual market participants pursuing their own
legitimate business purpose.'' \22\
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    \21\ Testimony of Roy J. Shanker, Ph.D, PJM Power Providers
Group, Sept. 13, 2010 Tr. at 60, ``If the Commission adopts the
appropriate non-discriminatory pricing for Demand Response, and
payment of LMP minus the retail rate in the context of customer that
face a fixed retail rate, then there is no need for a Net Benefits
test.''
    \22\ Id., Tr. at 61.
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    I similarly agree that this test is unnecessary and will only
distort price signals by attracting more demand response than is
economically efficient.\23\ The use of a net benefits test also is
troubling in that the Commission's decision can be viewed as somehow
equating the concept of a just and reasonable rate with a lower
price.\24\ However, I recognize that to defend its compensation
scheme, the majority needed some proposal that could arguably
demonstrate that the cost of paying full LMP to demand resources
would be outweighed by the ``benefit'' of a lower market price.\25\
The net benefits test serves this unenviable role.
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    \23\ EPSA May 13, 2010 Comments at 23. See also May 13, 2010
Comments of APPA at 13; FTC at 9; Midwest TDUs at 14; Mirant at 2;
New York Commission at 5; PJM at 6; PSEG at 5; and Potomac Economics
at 6-8.
    \24\ Courts have stated that to be ``just and reasonable,''
rates must fall within a ``zone of reasonableness'' where they are
neither ``less than compensatory'' to producers nor ``excessive'' to
consumers. Farmers Union Central Exchange v. FERC, 734 F.2d 1486
(D.C. Cir. 1984), cert denied, 469 U.S. 1034 (1984). See also EPSA
May 13, 2010 Comments at 19; and ISO-NE at 26-28.
    \25\ Testimony of Ohio Commissioner Paul Centolella, Sept. 13,
2010 Tr. at 141, ``The Net Benefits test reflects a recognition that
paying full LMP may over-compensate Demand Response and increase
cost to customers.''
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Relationship to State Retail Regulation

    The Rule recognizes that the demand resource will retain the
retail rate (``G'') as part of the provider's total compensation,
but declines to account for this savings citing ``practical
difficulties'' for State commissions, RTOs and ISOs.\26\ While the
authority over retail rates is properly within the jurisdiction of
the State commissions, under the LMP-G equation, the RTO/ISO merely
subtracts the retail rate; it does not interfere with the retail
rate in any way.\27\ Although the Rule refers to the New York
Commission's position that subtracting the retail rate would be an
``administrative burden'' or create ``undue confusion'' \28\, other
State commissions disagree and contend that the retail rate can be
deducted without any concern about impacting the States' retail
jurisdiction.\29\
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    \26\ Rule at P 63. The RTOs and ISOs uniformly state that
compensation which ignores the retail rate will yield uneconomic
outcomes and overcompensate the demand resource. Moreover, none of
the RTOs or ISOs claimed it would be difficult to subtract the
retail rate from the LMP payment. See May 13, 2010 Comments of CAISO
at 5-6; ISO-NE at 17-26; Midwest ISO at 6-11; NYISO at 12-16; and
PJM at 5-16.
    \27\ Testimony of Joel Newton, New England Power Generators
Ass'n, Sept. 13, 2010 Tr. at 75; ``The Commission is getting into a
real close area with retail ratemaking as we go through this entire
process. For the Commission then to say `ignore the LSE payment'
which is the realm of State commissions, it's almost as you're just
hoping that the State commissions will go out and fix it. The State
commissions can do that * * * [b]ut the proper thing to do now is to
get the price right at the outset.'' See also Testimony of Ohio
Commissioner Paul Centolella, Sept. 13, 2010 Tr. at 197; ``[FERC is]
putting the State in the position where if we were to try to get
back to an efficient level of incentives, we would be having to in
effect issue a charge for energy that was not consumed. We would be
doing what would be perceived as a take-back by that customer. And
that would put us in a very difficult position.''
    \28\ Rule at P 28. Significantly, the New York Commission
``acknowledges the overstated price signal inherent in an LMP-based
formula for DR compensation * * *.'' ``Although we understand that
an LMP demand response compensation formula may result in uneconomic
demand response decisions in the markets (i.e., a price signal that
exceeds marginal cost), it also creates an incentive to participate
in DR programs * * *.'' New York Commission May 13, 2010 Comments at
5-6 (emphasis added).
    \29\ Illinois Commission May 13, 2010 Comments at 13, ``[I]f
tariffs are well designed, controversy over the jurisdictional issue
can be avoided. Requiring an ex ante approval of the retail rate to
be subtracted from the LMP at the time demand response resources are
utilized * * * accomplishes this design.'' See also Indiana
Commission September 16, 2009 Comments at 3 (Docket No. EL09-68),
``LMP-G is an accepted indicator of cost-effectiveness. Therefore,
to provide incentive compensation at a level that is above the LMP
raises the specter of unjust and unreasonable rates.''
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    Moreover, the Rule does not conclude that LMP-G would interfere
with the retail jurisdiction of the States, but goes as far as to
acknowledge the subtraction of G is ``perhaps feasible.'' \30\ The
fact is that this calculation is quite feasible. Markets such as the
PJM Interconnection currently subtract the retail rate portion from
the LMP payment and there is no evidence that accounting for the
retail rate by making the necessary reduction is either burdensome
or interferes with the retail jurisdiction of State commissions.\31\
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    \30\ Rule at P 63.
    \31\ See Sections 3.3A.4 and 3.3A.5 (Market Settlements in the
Real-Time and Day-Ahead Energy Markets) of the Appendix to
Attachment K of the PJM Tariff.
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The Unintended Consequences of Paying Too Much

    Today's determination, unencumbered by ``textbook economic
analysis of the markets subject to our jurisdiction'' will
undoubtedly have effects, both in the short-term and the long-
term.\32\ The intended consequence of providing additional
compensation to demand resources is that demand response
participation will increase in the energy markets. In turn, this
additional demand response participation will have the effect of
lowering the market price. However, it is at this point where the
unintended effects will begin to appear.
---------------------------------------------------------------------------

    \32\ Rule at P 46.
---------------------------------------------------------------------------

    With a reduced LMP, the price signal sent to customers will be
that the cost of power is cheaper so they may decide to use more
power even though the real cost of producing that power is now
higher. Such a result turns the concept of scarcity pricing on its
head and results in an economically inefficient outcome. Conversely,
customers who are demand response providers now stand to receive
more than the market price as an incentive to curtail their
consumption and will begin to make inefficient decisions about using
power.\33\ Such inefficiencies will result in customers experiencing
a short-term benefit by way of a lower LMP, but will also impose
long-term costs on the energy markets.\34\
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    \33\ Federal Trade Commission May 13, 2010 Comments at 6, ``If
customers have to pay the retail price for power they use but pay
nothing for power they resell, then they will have incentives to
resell power in situations in which it would be more beneficial for
society for them to consume it.'' See also EPSA May 13, 2010
Comments at 23; APPA at 13; FTC at 9; Midwest TDUs at 14; Mirant at
2; New York Commission at 5; PJM at 6; PSEG at 5; and Potomac
Economics at 6-8.
    \34\ PJM's Independent Market Monitor (a/k/a Monitoring
Analytics, LLC) Oct. 16, 2009 Comments at 7-8 (Docket No. EL09-68),
``Demand side resources are not generation. In a well functioning
market, demand-side resources avoid paying the market price of
energy when they choose not to consume. This allows customers to
make efficient decisions about using power. It also follows that a
customer receiving more than the market price as an incentive to
curtail will make inefficient decisions about using power, and that
this inefficiency imposes a cost rather than providing a benefit to
society.''
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    The long-term costs of allowing demand resources to receive
preferential compensation will manifest themselves in various ways.
As noted in my initial statement in this proceeding, the lack of
dynamic prices at the retail level is the primary barrier to demand
response participation. This Rule does not remedy this barrier and
customers who pay fixed retail rates will not benefit from lower
wholesale market prices. Meanwhile, at the wholesale level, the
corrosive effect of overcompensating demand resources over time will
come at the expense of other resources, particularly generation
resources that will have less to invest in maintaining existing
facilities and financing new facilities.\35\
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    \35\ NYISO May 13, 2010 Comments at 15, ``[P]aying demand
response an LMP-based payment because it is thought that demand
response participation will reduce LMPs for all customers is not a
sufficient rationale for justifying an `additional payment' for a
favored technology. Demand response is not the only resource able to
provide such benefits. However, [other] technologies may be kept out
of the market by demand response that would be uneconomic at LMP-G
but participates when subsidized at LMP.''
---------------------------------------------------------------------------

    The Commission's recent progress in promoting competitive
wholesale energy markets has the potential to be undone as a result
of this well-meaning, but misguided Rule. I believe in the proven
value of market solutions and therefore agree with the majority's
statement that ``while the level of compensation provided to each
resource affects its willingness and ability to participate in the
market, ultimately the markets themselves will determine the level
of generation and demand response resources needed for purposes of
balancing the electricity grid.'' \36\ That's precisely how markets
should work. Price signals will attract resources and new investment
when prices are high, and perhaps not so much

when prices are low.\37\ If the playing field is level, resources
can compete to the best of their abilities and efficient, cost-
effective market outcomes will result.
---------------------------------------------------------------------------

    \36\ Rule at P 59.
    \37\ PJM Interconnection's experience with paying LMP-G for
demand response in its energy market provides an example of how
market fundamentals properly influence demand resource
participation. PJM's Independent Market Monitor recently reported
that ``[p]articipation levels through calendar year 2009 and through
the first three months of 2010 were generally lower compared to
prior years due to a number of factors, including lower price
levels, lower load levels, and improved measurement and
verification, but have showed strong growth through the summer
period as price levels and load levels have increased. Citing
Monitoring Analytics, LLC, 2010 State of the Market Report for PJM
at 30 (March 10, 2011) (emphasis added).
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    As noted earlier, I would have preferred that we allow the
regional markets to continue to develop their own compensation
proposals. However, I also recognize that returning to a pre-NOPR
era would be difficult now that the Commission has signaled a new
policy of standardized compensation. Accordingly, if I were to now
support any standardization of demand response compensation, it
would be the LMP-G approach, which in my opinion, is the only
economically efficient outcome for the markets.
    Ultimately, the Rule, by requiring demand resources to
artificially suppress the market price in order to receive
incomparable compensation, will negatively impact the long-term
competitiveness of the organized wholesale energy markets.\38\ As
such, lacking sufficient rationale, I cannot support this Rule as it
violates the Commission's statutory mandate to ensure supplies of
electric energy at just, reasonable, and not unduly discriminatory
or preferential rates.

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    \38\ Federal Power Act Sec.  205(a), 16 U.S.C. Sec.  824d
(2006), ``[A]ll rules and regulations affecting or pertaining to
such rates or charges shall be just and reasonable, and any such
rate or charge that is not just and reasonable is hereby declared to
be unlawful.''
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Philip D. Moeller
Commissioner
[FR Doc. 2011-6490 Filed 3-23-11; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 79, Number 238 (Thursday, December 11, 2014)]
[Notices]
[Pages 73574-73575]
[FR Doc No: 2014-29087]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-RCRA-2014-0839; FRL-9920-38-OSWER]

Agency Information Collection Activities; Proposed Collection;
Comment Request; State Program Adequacy Determination: Municipal Solid
Waste Landfills and Non-Municipal, Non-Hazardous Waste Disposal Units
That Receive Conditionally Exempt Small Quantity Generator Hazardous
Waste

AGENCY: Environmental Protection Agency.

ACTION: Notice.

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

SUMMARY: The Environmental Protection Agency (EPA) is planning to
submit an information collection request (ICR), ``State Program
Adequacy Determination: Municipal Solid Waste Landfills (MSWLFs) and
Non-Municipal, Non-Hazardous Waste Disposal Units that Receive
Conditionally Exempt Small Quantity Generator (CESQG) Hazardous
Waste.'' (EPA ICR No. 1608.07, OMB Control No. 2050-0152) to the Office
of Management and Budget (OMB) for review and approval in accordance
with the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.). Before
doing so, the EPA is soliciting public comments on specific aspects of
the proposed information collection as described below. This is a
proposed extension of the ICR, which is currently approved through
April 30, 2015. An Agency may not conduct or sponsor and a person is
not required to respond to a collection of information unless it
displays a currently valid OMB control number.

DATES: Comments must be submitted on or before February 9, 2015.

ADDRESSES: Submit your comments, referencing Docket ID No. EPA-HQ-RCRA-
2014-0839, online using www.regulations.gov (our preferred method), by
email to<EMAIL_ADDRESS>or by mail to: EPA Docket Center,
Environmental Protection Agency, Mail Code 28221T, 1200 Pennsylvania
Ave. NW., Washington, DC 20460.
    EPA's policy is that all comments received will be included in the
public docket without change including any personal information
provided, unless the comment includes profanity, threats, information
claimed to be Confidential Business Information (CBI) or other
information whose disclosure is restricted by statute.

FOR FURTHER INFORMATION CONTACT: Craig Dufficy, Materials Recovery and
Waste Management Division, Office of Resource Conservation and
Recovery, mail code 5304P, Environmental Protection Agency, 1200
Pennsylvania Ave. NW., Washington, DC 20460; telephone number: 703-308-
9037; fax number:<PHONE_NUMBER>; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Supporting documents which explain in detail
the information that the EPA will be collecting are available in the
public docket for this ICR. The docket can be viewed online at
www.regulations.gov or in person at the EPA Docket Center, WJC West,
Room 3334, 1301 Constitution Ave. NW., Washington, DC. The telephone
number for the Docket Center is<PHONE_NUMBER>. For additional
information about EPA's public docket, visit http://www.epa.gov/dockets.
    Pursuant to section 3506(c)(2)(A) of the PRA, the EPA is soliciting
comments and information to enable it to: (i) Evaluate whether the
proposed collection of information is necessary for the proper
performance of the functions of the Agency, including whether the
information will have practical utility; (ii) evaluate the accuracy of
the Agency's estimate of the burden of the proposed collection of
information, including the validity of the methodology and assumptions
used; (iii) enhance the quality, utility, and clarity of the
information to be collected; and (iv) minimize the burden of the
collection of information on those who are to respond, including
through the use of appropriate automated electronic, mechanical, or
other technological collection techniques or other forms of information
technology, e.g., permitting electronic submission of responses. The
EPA will consider the comments received and amend the ICR as
appropriate. The final ICR package will then be submitted to OMB for
review and approval. At that time, the EPA will issue another Federal
Register notice to announce the submission of the ICR to OMB and the
opportunity to submit additional comments to OMB.
    Abstract: Section 4010(c) of the Resource Conservation and Recovery
Act (RCRA) of 1976 requires that the EPA revise the landfill criteria
promulgated under paragraph (1) of Section 4004(a) and Section
1008(a)(3). Section 4005(c) of RCRA, as amended by the Hazardous Solid
Waste Amendments (HSWA) of 1984, requires states to develop and
implement permit programs to ensure that MSWLFs and non-municipal, non-
hazardous waste disposal units that receive household hazardous waste
or CESQG hazardous waste are in compliance with the revised criteria
for the design and operation of non-municipal, non-hazardous waste
disposal units under 40 CFR part 257, subpart B and MSWLFs under 40 CFR
part 258. (40 CFR part 257, subpart B and 40 CFR part 258 are
henceforth referred to as the ``revised federal criteria''). Section
4005(c) of RCRA further mandates the EPA Administrator to determine the
adequacy of state permit programs to ensure owner and/or operator
compliance with the revised federal criteria. A state program that is
deemed adequate to ensure compliance may afford flexibility to owners
or operators in the approaches they use to meet federal requirements,
significantly reducing the burden associated with compliance.
    In response to the statutory requirement in Sec.  4005(c), the EPA
developed 40 CFR part 239, commonly referred to as the State
Implementation Rule (SIR). The SIR describes the state application, the
EPA review procedures and defines the elements of an adequate state
permit program.
    The collection of information from the state during the permit
program adequacy determination process allows the EPA to evaluate
whether a program for which approval is requested is appropriate in
structure and authority to ensure owner or operator compliance with the
revised federal criteria. The SIR does not require the use of a
particular application form. Section 239.3 of the SIR, however,
requires that all state applications contain the following five
components:
    (1) A transmittal letter requesting permit program approval.
    (2) A narrative description of the state permit program, including
a demonstration that the state's standards for non-municipal, non-
hazardous waste disposal units that receive CESQG hazardous waste are
technically comparable to the Part 257, Subpart B criteria and/or that
its MSWLF standards are technically comparable to the Part 258
criteria.
    (3) A legal certification demonstrating that the state has the
authority to carry out the program.
    (4) Copies of state laws, regulations, and guidance that the state
believes demonstrate program adequacy.
    (5) Copies of relevant state-tribal agreements if the state has
negotiated

with a tribe for the implementation of a permit program for non-
municipal, non-hazardous waste disposal units that receive CESQG
hazardous waste and/or MSWLFs on tribal lands.
    The EPA Administrator has delegated the authority to make
determinations of adequacy, as contained in the statute, to the EPA
Regional Administrator. The appropriate EPA Regional Office, therefore,
will use the information provided by each state to determine whether
the state's permit program satisfies the statutory test reflected in
the requirements of 40 CFR part 239. In all cases, the information will
be analyzed to determine the adequacy of the state's permit program for
ensuring compliance with the federal revised criteria.
    Form Numbers: None.
    Respondents/affected entities: Entities potentially affected by
this action are States.
    Respondent's obligation to respond: Mandatory (RCRA Sec.  4005(c)).
    Estimated number of respondents: 12.
    Frequency of response: On occasion.
    Total estimated burden: 2,405 hours (per year). Burden is defined
at 5 CFR 1320.03(b).
    Total estimated cost: $128,268 (per year) All costs are labor
costs, there are no capital/start-up or O&M costs associated with this
ICR.
    Changes in Estimates: There is no change of the 2,405 hours in the
total estimated respondent burden compared to the ICR currently
approved by OMB. This is a continuation of states revising or updating
their state programs.

    Dated: November 25, 2014.
Barnes Johnson,
Director, Office of Resource Conservation and Recovery.
[FR Doc. 2014-29087 Filed 12-10-14; 8:45 am]
BILLING CODE 6560-50-P