unsuccessful, the transmission provider will terminate the network
customer's request and change the status of the request on OASIS to
``retracted.'' This termination will be without prejudice to the
network customer submitting a new request that includes the required
attestation. The network customer will be assigned a new priority
consistent with the date of the new request.
    416. In the event that the transmission provider or any network
customer designates a network resource that it does not own or has not
committed to purchase or that does not comport with the requirements
for designated network resources, we will deem the network customer to
be in violation of the pro forma OATT and will consider assessing civil
penalties on a case-by-case basis consistent with the Commission's
Enforcement Policy Statement. We encourage the transmission provider
and other market participants to use the Commission's Enforcement
Hotline to report instances when they believe a network customer has
designated as a network resource a resource that does not meet the
criteria for network resources.
c. Undesignation of Network Resources
    417. Section 28.2 of the pro forma OATT requires the transmission
provider, on behalf of its native load customers, to designate
resources and loads in the same manner as any network customer under
Part III of the pro forma OATT (Network Integration Transmission
Service). The information provided by the transmission provider must be
consistent with the information it uses to calculate ATC. Section 30.3
of the pro forma OATT allows the network customer to terminate the
designation of all or part of a generating resource as a network
resource at any time, though the network customer should provide
notification to the transmission provider as soon as reasonably
practicable.
    418. In Order No. 888-B, the Commission clarified that the pro
forma OATT allows network customers to designate network resources over
shorter time periods. The Commission indicated that a network customer
that seeks to engage in firm sales from its current designated network
resources may terminate the generating resource (or a portion of it) as
a network resource pursuant to section 30.3 of the pro forma OATT and
request, as set forth in section 29 of the pro forma OATT, that the
same generation resource be designated as a network resource effective
with the end of its power sale.\379\
---------------------------------------------------------------------------

    \379\ Order No. 888-B at 62,093
---------------------------------------------------------------------------

    419. In the NOI, the Commission sought comment on whether network
customers should be allowed to ``undesignate'' portions of their
designated network resources on a short-term basis in order to make
firm sales from these resources.
Comments
    420. Most commenters suggest that the Commission continue to allow
network customers to undesignate a portion of their designated network
resources on a short-term basis in order to make firm sales.\380\ APPA
argues that the ability of network customers to undesignate their
network resources on a short-term basis is an important aspect of Order
No. 888-B and should be preserved. APPA states that the flexibility
afforded to network resource customers allows them to lay off excess
power supplies that they do not need to serve their designated loads
during off-peak demand periods. APPA and EEI contend that this
increases the number of wholesale sellers in the market during non-peak
periods, and this supports wholesale competition for power supply
sales.
---------------------------------------------------------------------------

    \380\ E.g., APPA, EEI, Entergy, Nevada Companies, Public Power
Council, Southern, and TVA.
---------------------------------------------------------------------------

    421. Several commenters suggest that network customers should have
the same right as transmission providers to undesignate network
resources to make off-system sales.\381\ APPA states that the
Commission should make explicit the requirement that the transmission
provider must provide the same flexibility to its network customers as
it does to its own merchant function in designating and terminating
network resources.
---------------------------------------------------------------------------

    \381\ E.g., APPA, NRECA, and Public Power Council.
---------------------------------------------------------------------------

    422. NRECA asserts that public utility transmission providers must
be required to undesignate resources or portions thereof in order to
make firm sales out of generation fleets that they have designated as a
network resource.
Discussion
    423. We propose to continue to allow network customers to
undesignate a portion of their network resources on a short-term basis
to make off-system sales. We reiterate that a network customer may
redesignate the resource by making a request to designate a new network
resource. In response to comments that the transmission provider also
should be required to undesignate network resources when the
transmission provider makes firm off-system sales, we reiterate that
the transmission provider must abide by both the requirement in section
28.2 of the pro forma OATT to designate its network resources in the
same manner as network customers and the prohibition in section 30.1 of
the pro forma OATT against making firm sales from its designated
network resources. That is, the transmission provider and all network
customers must designate their network resources and are prohibited
from making firm sales from designated network resources. To the extent
the transmission provider or a network customer wants to make a firm
sale from a network resource, it must undesignate the resource pursuant
to section 30.3 of the pro forma OATT. The network customer, including
the transmission provider itself, can request to redesignate the
resource by making a request to designate a new network resource
pursuant to section 30.2 of the pro forma OATT.
    424. We seek comment on the amount of time prior to operation that
the transmission provider and other network customers should be
required to terminate a network resource to ensure that the appropriate
set of network resources are included in the ATC calculation.
7. Clarifications Related to Network Service
Secondary Network Service
    425. Section 28.4 of the pro forma OATT allows a network customer
to deliver economy energy purchases to its network load from non-
designated network resources on an as-available basis without
additional charge. In Order No. 888, the Commission described economy
energy purchases as energy that displaces firm network resources.\382\
---------------------------------------------------------------------------

    \382\ Order No. 888 at 21,751.
---------------------------------------------------------------------------

    426. The use of secondary network service to deliver purchased
power

when a network customer is making off-system sales was raised in
several Commission investigations and audits. In Idaho Power, the
Commission accepted a settlement with Idaho Power related to Idaho
Power's incorrect use of the native load priority to access its
transmission system.\383\ In Idaho Power, the utility's wholesale
merchant function purchased power outside of Idaho Power's control area
to facilitate an off-system sale and used secondary network service to
bring the purchases into Idaho Power's control area.\384\ In accepting
the settlement, the Commission stated that ``[i]t is axiomatic that the
native load priority cannot be used to complete sales that are not
necessary to serve native load.'' \385\ In MidAmerican, the Commission
issued an audit report that contained a finding that MidAmerican's
wholesale merchant function used network service instead of point-to-
point service to deliver short-term energy purchases to its control
area that were not used to serve MidAmerican's native load.\386\
---------------------------------------------------------------------------

    \383\ Idaho Power Co., 103 FERC ] 61,182 at P 2 (2003) (Idaho
Power).
    \384\ Id. at P 4.
    \385\ Id.
    \386\ MidAmerican Energy Co., 112 FERC ] 61,346 at P 6 (2005).
---------------------------------------------------------------------------

Comments
    427. South Carolina E&G asks the Commission to clarify whether
specific methods used to bring sellers and buyers together in the
wholesale market are appropriate under the pro forma OATT in its
current form. South Carolina E&G notes that as a utility's native load
forecasts evolve into real-time conditions, the utility may need to
sell off excess energy. South Carolina E&G notes further that, as
inexpensive sources of power become available off-system, the utility
may engage in economy purchases of power for native load. South
Carolina E&G asserts that such practices clearly benefit the market and
safeguard native load customers' interests by ensuring that economy
purchases minimize the price of consumers' power and/or giving the
utility a market outlet for excess energy, thus avoiding the uneconomic
backing down of lower cost generating units while retaining higher cost
prescheduled purchases. South Carolina E&G urges the Commission to
support the continuation of such practices.
Discussion
    428. We propose to clarify that a network customer may not use
secondary network service to bring energy onto its system to support an
off-system sale if the purchased power does not displace the customer's
own higher cost generation. We propose to modify the section 28.4 of
the pro forma OATT to clarify that a network customer may use secondary
network service to deliver economy energy and we propose to add a
definition for ``economy energy'' to the pro forma OATT. We propose to
define ``economy energy'' as energy purchased by a network customer
that displaces the customer's own higher cost generation for the
purpose of serving the customer's designated network loads.
    429. While we reiterate that secondary network service may be used
only to serve a network customer's designated network load, we do not
intend to discourage market participants from identifying opportunities
to profitably purchase for resale. We simply intend to ensure that all
market participants compete on a comparable basis and use point-to-
point service to complete all segments of a purchase for resale off-
system.
    430. We also do not intend to discourage network customers from
purchasing off-system energy to lower the cost of serving network
loads. A network customer may use secondary network service in hours
when it is also making off-system sales. However, the network customer
may do so only to deliver purchases that qualify as economy energy
purchases. In response to South Carolina E&G's observation that a
utility's native load forecasts evolve in real-time to the point that
the utility may need to sell off excess energy that was purchased off-
system, we note that our definition would allow a network customer to
use network service to deliver off-system purchases when the network
customer purchases the energy with the intent to serve native load.
    431. In enforcing this policy, we will apply the definition of
``economy energy'' at the time the network customer commits to purchase
energy. For instance, we will not take issue if a network customer uses
secondary network service to deliver an hour-ahead purchase that costs
less than the network customer's generation cost in the hour of
operation. Similarly, we will not question the use of secondary network
service by a network customer to deliver a day-ahead off-system
purchase that costs less than the network customer's forecast
generation cost, even if real-time system conditions evolve so that the
realized generation cost is less than the cost of the purchased energy.
We also would not take issue with a network customer that uses network
service to deliver off-system block energy because the purchased energy
is more economic than using its network resources, but makes off-system
sales during some hours when the block energy purchase is scheduled. In
other words, in enforcing this policy, we will apply the definition of
``economy energy'' as it applies to the entire period covered by the
block purchase and not to a single hour within the block.
``[O]n an As-Available Basis''
    432. Section 28.4 of the pro forma OATT allows a network customer
to use secondary network service to deliver economy energy purchases to
its network load from non-designated resources ``on an as-available
basis.'' However, the current pro forma OATT does not specify how a
network customer must arrange for secondary network service.
Discussion
    433. We propose to modify section 28.4 of the pro forma OATT by
clarifying that a network customer need not file an application for
network service to receive secondary network service, but that all
other requirements of Part III of the pro forma OATT (except for
transmission rates) apply to secondary network service. In other words,
a network customer must request secondary network service on OASIS in a
manner consistent with pro forma OATT sections 18.1 and 18.2
(Procedures for Arranging Non-Firm Point-To-Point Transmission
Service).
Redirect of Network Service
    434. The current pro forma OATT does not include any provision to
change the point of receipt for an off-system designated network
resource, in a manner similar to redirect of point-to-point service.
However, we are aware that several transmission providers have posted
business practices that allow network customers either to substitute an
off-system non-designated network resource for a designated network
resource or to redirect the point of receipt associated with an
existing network resource.
Discussion
    435. We propose to clarify that network customers may not redirect
network service in a manner comparable to the way customers redirect
point-to-point service. Unlike point-to-point service that is based
upon a contract-path model consisting of a designated point of receipt
and point of delivery, network service involves no identified contract
path and is therefore not a directable service. Rather, network

service provides for the integration of designated network resources
and loads using the entire transmission grid in a manner comparable to
the transmission provider's use of the transmission grid to serve its
native load customers. When a network customer wants to substitute one
designated network resource for another, it should terminate the
designation of the existing network resource and designate a new
network resource. The network customer can then request to redesignate
its original network resource by making a request to designate a new
network resource. Alternatively, a network customer could use secondary
network service when it wants to substitute a non-designated network
resource for a designated network resource on an as-available basis.
8. Transmission Curtailments
    436. Section 1.7 of the pro forma OATT defines curtailment as ``a
reduction in firm or non-firm transmission service in response to a
transmission capacity shortage as a result of system reliability
conditions.'' Curtailment provisions for point-to-point service are set
forth in sections 13.7 and 14.7 for firm and non-firm transmission
services respectively and the curtailment provisions for network
service are contained in section 33. Complaints regarding improper
curtailment of service by transmission providers have been made in a
variety of proceedings and the Commission has found cases of improper
curtailment in the past.\387\
---------------------------------------------------------------------------

    \387\ See, e.g., Consolidated Edison Co. of N.Y. v. Public Serv.
Elec. & Gen. Co., 108 FERC ] 61,120 (2004).
---------------------------------------------------------------------------

    437. In the NOI, the Commission asked whether there is evidence of
improper curtailment practices by public utility transmission providers
or customers that warrants reforms to the pro forma OATT. If there is,
we requested that commenters provide specific examples of such
practices. We also asked whether transmission providers engaging in
improper curtailments should be subject to monetary penalties or other
remedies for market manipulation.
Comments
    438. EEI argues that there do not appear to be many instances of
improper curtailments and many utilities state that they are not aware
of any improper curtailments by public utility transmission providers.
For example, Southern states that curtailments are performed on a non-
discriminatory basis, in accordance with applicable OATT provisions.
Ameren, KCP&L, and PNM-TNMP state that they are not aware of any
improper practices that would warrant reforms to the pro forma OATT.
APPA does not advocate changes to the pro forma OATT regarding
curtailment, stating that its members express more concerns about the
denial of service prior to and at the time of scheduling than they do
regarding curtailment of service once it has commenced. However, APPA
also notes that most of its members use firm service that is unlikely
to be interrupted once it is scheduled. Public Power Council,
Snohomish, MEAG and Salt River concur with APPA that OATT reforms are
not needed for curtailments.
    439. Transmission customers, particularly IPPs, generally have a
different view, arguing that the reasons for curtailment are difficult
to discern, and that information is often insufficient to determine
whether curtailments have been performed correctly. Northwest IPPs
state curtailments frequently appear arbitrary. Powerex argues that
incomplete postings on many transmission systems and the lack of
transparency in curtailment data could mask improper curtailment.
Calpine states that it is usually difficult to determine whether a
curtailment of service is truly justified by system reliability factors
because the operational facts underlying the utility's curtailment
decision are unknown. It argues that the criteria for utility
curtailment decisions are not standardized, making it difficult to
determine the propriety of curtailment decisions, particularly when
curtailment is internal to a single area and not performed through the
NERC TLR process. Calpine recommends that the terms and conditions for
curtailments be standardized by the new reliability organizations
created by EPAct 2005, that such terms and conditions be made a formal
part of the pro forma OATT and the OATTs of public, private and federal
utilities, and that these be posted on the transmission provider's
OASIS. Calpine further recommends that regional NERC organizations be
requested to audit the curtailment practices of all utilities that are
not members of an RTO/ISO. Constellation asserts that TLRs are a
``blunt and inefficient mechanism'' for curtailment and calls for a
requirement that transmission providers provide redispatch options.
    440. In reply to claims that vertically integrated utilities
provide inadequate information on curtailments, Southern states that
existing OASIS requirements already require utilities to post a
considerable amount of information on curtailments, and that the
information currently posted is adequate to meet customers' needs.
Nevertheless, Southern also states that while those rules have been
effective in achieving their intended purpose, incremental additions to
the information that is available through OASIS could assure customers
that they have all of the information they need to make prudent
decisions about transmission service and that they are being treated in
a fair, equitable, and non-discriminatory way.
    441. Commenters appear divided on the issue of whether there should
be penalties for improper curtailments. The most common view, expressed
by EEI and others, is that penalties for improper curtailments should
be assessed only if the Commission finds that the transmission provider
imposed the curtailment with the intent to treat a customer in an
unduly discriminatory or preferential manner. Other commenters
expressed a wide range of views. Alcoa states that improper
curtailments should be the subject of monetary penalties. Santa Clara
contends that transmission providers should be fully liable for any
damages caused by improper curtailments. On the other hand, Southern
argues that curtailment is a reliability issue and it would be unwise
to subject transmission providers to after-the-fact assessments of
their curtailment decisions. KCP&L notes that the responsibility for
calling a TLR rests with the reliability coordinator, who makes
decisions based on the NERC standard, so that penalties for improper
curtailment activity should be a subject for the ERO.
Discussion
    442. The Commission reminds both transmission providers and
customers that our regulations require posting of transmission
curtailment information on OASIS. The OASIS regulations state:

    When any transaction is curtailed or interrupted, the
Transmission Provider must post notice of the curtailment or
interruption on the OASIS, and the Transmission Provider must state
on the OASIS the reason why the transaction could not be continued
or completed.
    (ii) Information to support any such curtailment or
interruption, including the operating status of the facilities
involved in the constraint or interruption, must be maintained and
made available upon request, to the curtailed or interrupted
customer, the Commission's Staff, and any other person who requests
it, for three years.\388\
---------------------------------------------------------------------------

    \388\ We note that we are proposing to change this information
retention period to five years, consistent with our other proposed
changes to the OASIS information retention provisions.

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

    (iii) Any offer to adjust the operation of the Transmission
Provider's system to restore a curtailed or interrupted transaction
must be posted and made available to all curtailed and interrupted
Transmission Customers at the same time.\389\
---------------------------------------------------------------------------

    \389\ 18 CFR 37.6(d)(3) (2005).

    443. Those commenting that they have inadequate information about
curtailments do not clearly state whether the source of this deficiency
lies in: (1) The inadequacy of our standards, (2) inadequate compliance
with these standards, (3) difficulties in dealing with the way the
information is provided, or (4) some other area. We are, however,
mindful that objective review of curtailments can require a
considerable amount of information, some of which may not be provided
under the present OASIS regulations, or may be provided in an
inefficient manner. For example, we recognize that it is difficult for
a customer to determine what network resources were available to the
transmission provider that could have been redispatched consistent with
pro forma OATT sections 30.5 and 33.2 to relieve the transmission
constraint that led to a transmission curtailment. Another example may
be discerning which discrete transaction(s) could be curtailed on a
non-discriminatory basis to effectively relieve the constraint
consistent with pro forma OATT section 13.6. We seek comment on whether
additional requirements would improve the transparency of transmission
curtailment information and the ability of customers to make use of
that information.
    444. With respect to the imposition of penalties, the Commission
recognizes that the transmission curtailment decision is a reliability
decision that should be based on applicable reliability standards.
Moreover, we note that the need for transmission curtailment depends on
many factors outside the control of an individual transmission
provider, including loop flows throughout an interconnection.
Accordingly, we will not propose generic penalties for improper
transmission curtailments in this rulemaking. However, the absence of
generic penalties should not be construed to mean that we will tolerate
intentional behavior that subjects customers to unduly discriminatory
or preferential actions. We remain vigilant in monitoring for
intentionally discriminatory provision of transmission service, and
stand ready to use our enforcement powers and penalty authority when
needed.
9. Standardization of Rules and Practices
    445. In Order No. 888, the Commission required each public utility
that owns, controls, or operates facilities used for transmitting
electric energy in interstate commerce to file, pursuant section 205 of
the FPA, a pro forma OATT under which it would provide open access
transmission services. However, certain rules, standards and practices
governing the provision of such transmission service (e.g., public
utility business practices) are not reflected in the pro forma OATT.
Only when a public utility adopts a rule, standard or practice that
significantly affects its rates and services has the Commission
required it to make a filing pursuant to FPA section 205 to amend its
OATT.\390\ The Commission has applied this policy using a ``rule of
reason'' test.\391\
---------------------------------------------------------------------------

    \390\ E.g., Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir.
1985).
    \391\ See, e.g., Public Serv. Comm'n of N.Y. v. FERC, 813 F.2d
448, 454 (D.C. Cir. 1987) (holding that the Commission properly
excused utilities from filing policies or practices that dealt only
with matters of ``practical insignificance'' to serving customers);
Midwest Independent Transmission System Operator, Inc., 98 FERC ]
61,137 at 61,401 (``It appears that the proposed Operating Protocols
could significantly affect certain rates and service and as such are
required to be filed pursuant to Section 205.''), order granting
clarification, 100 FERC ] 61,262 (2002).
---------------------------------------------------------------------------

    446. The rule of reason test has arisen primarily with respect to
protocols or operating procedures used by RTOs and ISOs. For example,
the Commission has held that while the business practices manuals of
the Midwest ISO implicate the Commission's jurisdiction because they
generally involve ``the installation, operation, or use of facilities
for the transmission or delivery of power * * * in interstate
commerce,'' they do not require a FPA section 205 filing because ``they
mostly involve general operating procedures.''\392\ In other cases, the
facts have required the filing of the rule, standard or practice. For
example, CAISO proposed to post certain, technical, operational and
business standards related to dynamic scheduling on its Web site and
include only the rates under its OATT. There, the Commission found that
the details contained in the standards are practices that may affect
the terms and conditions of service significantly, and therefore, under
the Commission's ``rule of reason,'' must be filed under FPA section
205.\393\
---------------------------------------------------------------------------

    \392\ Midwest Independent Transmission System Operator, Inc.,
108 FERC ] 61,163 at P 656, 658, order on reh'g, 109 FERC ] 61,157
(2004), order on reh'g, 111 FERC ] 61,043, order on reh'g, 112 FERC
] 61,086 (2005); see also PJM Interconnection, L.L.C., 81 FERC ]
61,257 at 62,267 (1997) (finding no reason to require filing of the
PJM Manuals but requiring that such manuals be available for public
inspection on a permanent basis), order on reh'g, 92 FERC ] 61,282
(2000).
    \393\ California Independent System Operator Corp., 107 FERC ]
61,329 at P 21-22 (2004); see also Southwest Power Pool, Inc., 112
FERC ] 61,303 at P 25 (2005) (requiring that the SPP OATT provide
sufficient information for market participants to fully understand
SPP's implementation of an imbalance market), reh'g dismissed, 113
FERC ] 61,115 (2005); PJM Interconnection, L.L.C., 104 FERC ] 61,124
at P 61 (requiring PJM to place all procedures, standards and
requirements for proposing that a transmission owner construct a
specific upgrade, and all procedures for charging customers, in its
tariff, not in its manuals), order on reh'g, PJM Interconnection,
L.L.C., 105 FERC ] 61,123 (2003).
---------------------------------------------------------------------------

    447. In the NOI, the Commission asked: (1) Whether all rules,
standards and practices should be required to be included in public
utilities' OATTs? (2) If not all, which of such rules, standards and
practices should be included in public utilities' OATTs? and (3) Should
rules, standards and practices not required to be included in public
utilities' OATTs be required to be posted on OASIS to increase
transparency?
Included in Open Access Transmission Tariffs
    448. Some commenters argue that the rules, standards and practices
governing the provision of transmission service should be included in
public utilities' OATTs.\394\ Occidental states that the inclusion of
rules, standards and practices governing the provision of transmission
service in public utilities' OATTs will add much needed clarity as to
how transmission service is provided. EPSA states that while it may not
be necessary, or desirable, to require all business practices to be
incorporated into the OATT, there have been instances where
transmission providers have adopted business practices that are
inconsistent with their OATT requirements or that should have been
filed as OATT amendments. Some commenters also support the inclusion of
the NAESB standards in the OATT.\395\
---------------------------------------------------------------------------

    \394\ E.g., Occidental, TAPS, and Williams.
    \395\ E.g., Salt River and Snohomish.
---------------------------------------------------------------------------

    449. In contrast, some commenters oppose including rules, standards
and practices in the OATT.\396\ EEI argues that rules, standards and
practices should not be included as part of an OATT unless they
significantly affect rates and service under the OATT. EEI states that
this is consistent with the Commission's current practice for the
inclusion of manuals in an OATT. Indicated New York Transmission Owners
state that the inclusion of rules, standards and practices in the OATT
is

unnecessary and would administratively encumber any future revisions to
the practices and rules by requiring conforming tariff filings.
---------------------------------------------------------------------------

    \396\ E.g., BPA, EEI, MidAmerican, and Southern.
---------------------------------------------------------------------------

Posted on OASIS
    450. Several commenters believe it would be appropriate to post
rules, standards and practices on public utilities' OASIS sites.\397\
For example, EEI states that it would be appropriate to post all rules,
standards and practices that are not part of the OATT on a transmission
provider's OASIS. APPA asserts that, in particular, transmission
providers should post the methodologies they use to develop ATC and ATC
calculations should be periodically verified by an independent third
party.\398\
---------------------------------------------------------------------------

    \397\ E.g., APPA, BPA, EEI, EPSA, MidAmerican, and Southern.
    \398\ See supra Part V.A addressing posting requirements for ATC
calculation.
---------------------------------------------------------------------------

    451. Other commenters contend that rules, standards and practices
should be posted on public utilities' OASIS sites only when they are
not required to be filed.\399\ TAPS argues that any rules, standards
and practices not required to be filed must be publicly posted on the
transmission provider's OASIS to provide needed transparency, because
including essential terms in business practices that are not posted
makes it very difficult for customers to understand if they are being
treated fairly by the transmission provider. TDU Systems asserts that
requiring posting on transmission providers' OASIS sites of any
standards and practices not included in their OATTs would facilitate
transactions across several transmission provider systems, especially
where transmission providers are not participating in RTOs or
ISOs.\400\ Williams goes one step further and recommends that the
Commission require that transmission providers both file with the
Commission and post on their OASIS sites, all policies, practices and
interpretations used or relied upon to evaluate a request for
transmission service.
---------------------------------------------------------------------------

    \399\ E.g., Progress Energy and TAPS.
    \400\ Suez Energy NA emphasizes that the posting of rules,
standards, and practices on OASIS merely ensures that they are
transparent, it does not ensure that they are non-discriminatory.
---------------------------------------------------------------------------

Discussion
    452. There appears to be broad consensus among the commenters that
rules, standards and practices not required to be included in a
transmission provider's pro forma OATT should be posted on the
transmission provider's OASIS. We agree and propose to require
transmission providers to post on OASIS all of their rules, standards
and practices that relate to transmission services. We believe this
proposal will provide greater transparency and mitigate the potential
for undue discrimination against customers taking transmission service
under the transmission provider's OATT.\401\ However, we seek comment
on how to determine what ``relates'' to transmission service to
facilitate a consistent interpretation and to minimize discretion on
what rules, practices and standards should be posted on OASIS.\402\
---------------------------------------------------------------------------

    \401\ We clarify that posting rules, practices and standards on
the transmission provider's OASIS--in lieu of filing such practices
with the Commission as part of the transmission provider's pro forma
OATT--neither insulates a transmission provider from complaints nor
confers a just and reasonable presumption. We encourage customers to
call the Commission's Enforcement Hotline with complaints about the
application of such rules, standards and practices should they
experience problems with their transmission providers. To the extent
customers are not satisfied with responses from utilities, they
should contact the Commission's Enforcement Hotline via telephone
(202) 502-8390, toll-free 1-888-889-8030, fax<PHONE_NUMBER>, or at
http://www.ferc.gov/cust-protect/enforce-hot.asp.

    \402\ We note that certain rules and practices are already
required to be posted on OASIS. See, e.g., Order No. 889; Open
Access Same-Time Information Systems, Order No. 605, 64 FR 34117
(Jun. 25, 1999), FERC Stats. and Regs. ] 31,075 (1999); Order No.
676.
---------------------------------------------------------------------------

    453. Commenters presented wide ranging positions on the issue of
what rules, standards and practices to include in the OATT. We do not
propose to modify our existing policy on this issue at this time.\403\
We agree with EPSA's concern that requiring transmission providers to
include all of their rules, standards and practices in their OATTs
could decrease a transmission provider's flexibility to change
businesses practices and respond to the requests of customers.
Additionally, we believe that requiring transmission providers to file
all of their rules, standards and practices in their OATTs would be
impractical and potentially administratively burdensome.\404\
---------------------------------------------------------------------------

    \403\ See supra notes 391-393 and accompanying text.
    \404\ Of course, we will require the filing of certain rules,
standards and practices when circumstances require. In Order No.
676, the Commission, among other things, incorporated certain
business standards developed by NAESB by reference into the
Commission's regulations and required public utilities to file
revisions to their OATTs to include these standards. Order No. 676
at P 20.
---------------------------------------------------------------------------

    454. We propose to require, however, that creditworthiness and
security requirements be included in a transmission provider's OATT.
The creditworthiness provision in section 11 of the pro forma OATT
authorizes transmission providers to require ``reasonable credit review
procedures'' in accordance with ``standard commercial practices,'' to
determine the ability of transmission customers to meet service
obligations. Furthermore, to protect transmission providers from the
risk of non-payment, the provision authorizes the transmission provider
to require as security a letter of credit or other forms of security
consistent with the Uniform Commercial Code. In the Creditworthiness
Policy Statement, the Commission explained that non-RTO or -ISO
transmission providers generally have not incorporated creditworthiness
or security requirements into their OATTs.\405\ The Commission stressed
that transparency of credit procedures and security requirements can
enhance market certainty and liquidity by allowing customers to
determine for themselves the information they need to demonstrate
creditworthiness and the amount and type of security they need to
receive transmission service. In interpreting the ``reasonable credit
review procedures'' requirement in section 11 of the pro forma OATT,
the Commission stated that it expected transmission providers to post
on their OASIS sites the process and methodologies used to evaluate a
potential customer's creditworthiness and calculate the necessary
security.\406\ But it also stated that it would ``consider
standardizing credit procedures through a generic rulemaking if
necessary to prevent undue discrimination.'' \407\
---------------------------------------------------------------------------

    \405\ Policy Statement on Electric Creditworthiness, 109 FERC ]
61,186 at P 9 (2004) (Creditworthiness Policy Statement).
    \406\ Id. at P 12. The Commission explained that all
transmission providers (including RTOs and ISO) were expected to
``(1) make their credit-related practices more transparent and
comprehensive; (2) post on their [OASIS sites] the procedures that
they use to do their credit analyses; and (3) provide a customer
with a written analysis setting forth how that entity applied its
credit standards to that customer, if that customer is required to
provide security.'' Id.
    \407\ Id. at P 15.
---------------------------------------------------------------------------

    455. Our preliminary conclusion is that a transmission provider's
OATT should contain sufficient information about its credit process and
requirements to enable customers to understand the information required
to demonstrate creditworthiness and to determine for themselves the
general amount and type of security they may need to provide in order
to receive service. We therefore propose to amend section 11 of the pro
forma OATT on creditworthiness to require each transmission provider to
include its creditworthiness and security requirements in a new
Attachment L to its OATT.

    456. In the Creditworthiness Policy Statement, the Commission
explained that, to assess an applicant's credit risk, transmission
providers should use both qualitative factors, such as the local
regulatory environment or the applicant's history and financial
policies, and quantitative factors, such as information included on the
applicant's financial statements.\408\ We propose to require the new
Attachment L to include such quantitative and qualitative criteria to
determine the level of secured and unsecured credit. We also propose to
require the new Attachment L to include the following elements: (1) A
summary of the procedure for determining the level of secured and
unsecured credit; (2) a list of the acceptable types of collateral/
security; (3) a procedure for providing customers with reasonable
notice of changes in credit levels and collateral requirements; (4) a
procedure for providing customers, upon request, a written explanation
for any change in credit levels or collateral requirements; (5) a
reasonable opportunity to contest determinations of credit levels or
collateral requirements; and (6) a reasonable opportunity to post
additional collateral, including curing any non-creditworthy
determination. We propose to allow these basic elements to be
supplemented with a credit guide or manual to be posted on OASIS.
---------------------------------------------------------------------------

    \408\ Id. at P 13 & nn.13-14. An evaluation using both sets of
factors would allow an applicant without a credit rating or a strong
balance sheet, but with solid credit, to meet the creditworthiness
criteria. Id. at P 14.
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    457. Though we are proposing to require transmission providers to
incorporate the creditworthiness and security methodologies into their
OATTs, we recognize that there is a balance here between the burden on
the transmission provider of adding these methodologies to its OATT and
the need for Commission review and approval if methodologies frequently
change. We seek comment on whether the proposal is unduly burdensome.
10. OATT Definitions
    458. In the NOI, the Commission requested comment on whether new or
amended pro forma OATT definitions were necessary. The Commission also
noted that new section 215(a)(4) of the FPA, which was adopted as part
of EPAct 2005, defines the term ``reliable operation.'' \409\ We
therefore asked whether this definition should be incorporated in the
pro forma OATT.
---------------------------------------------------------------------------

    \409\ EPAct 2005 sec. 1211(a) (to be codified at FPA section
215(a), 16 U.S.C. 824o). Section 215(a)(4) defines ``reliable
operation'' as ``operating the elements of the bulk power system
within equipment and electric system thermal, voltage, and stability
limits so that instability, uncontrolled separation, or cascading
failures of such system will not occur as a result of a sudden
disturbance, including a cybersecurity incident, or unanticipated
failure of system elements.''
---------------------------------------------------------------------------

    459. Though MidAmerican urges the Commission to incorporate the
definition of ``reliable operation'' into the pro forma OATT, other
commenters argue that the definition of reliable operation should not
be included in the pro forma OATT.\410\ Southern argues that the
definition of reliable operation included in section 215 of the FPA
would impose a higher standard on transmission providers than is
currently required by well-established NERC standards. Southern and EEI
assert that the system is not planned to be able to guarantee that
operations will not be impaired under any conditions. Southern argues
that transmission providers should not be held to a higher standard of
having to ensure that the system can continue to be operated even if a
``sudden disturbance, including a cybersecurity incident or
unanticipated failure of system elements'' occurs.
---------------------------------------------------------------------------

    \410\ E.g., EEI, Powerex, Snohomish, Southern, Suez Energy NA,
and TAPS.
---------------------------------------------------------------------------

    460. Along with Southern, EEI contends that the ERO should
establish standards related to reliable operation. EEI states that
section 215 of the FPA simply gives the Commission jurisdiction over
reliability standards, which are defined as standards for the reliable
operation of the transmission system; it does not require transmission
providers to meet a ``reliable operation'' standard. This is an
important distinction, EEI continues, because while a transmission
provider may adopt reasonable reliability standards, that does not
guarantee that it will in all instances meet a ``reliable operation''
requirement, which would require the transmission provider to in all
instances prevent instability, uncontrolled separation or cascading
failures despite sudden disturbances, cybersecurity incidents, or
unanticipated failures of system elements. EEI and Southern contend
that because the ERO will implement the directives of Congress
contained in section 215, the ERO will be best suited to establish the
reliability standards that incorporate principles of reliable
operation.
    461. TAPS suggests that what is more important than adding a
``reliable operation'' definition is making explicit in the tariff what
the Commission stated in its Policy Statement on Matters Related to
Bulk Power System Reliability (Reliability Policy Statement) \411\--
that transmission provider obligations under the pro forma OATT are
subject to an overriding ``Good Utility Practice'' requirement that
includes compliance with NERC reliability standards or more stringent
regional reliability council standards.
---------------------------------------------------------------------------

    \411\ Policy Statement on Matters Related to Bulk Power System
Reliability, 107 FERC ] 61,052 at P 23, clarified, 108 FERC ] 61,288
(2004); Supplement to Policy Statement on Matters Related to Bulk
Power System Reliability, 110 FERC ] 61,096 (2005).
---------------------------------------------------------------------------

Discussion
    462. We propose to require transmission-owning public utilities to
modify the definition of Good Utility Practice in their respective
OATTs to reference the reliable operation definition adopted in section
215 of the FPA. We propose to take this action for two reasons. First,
the Commission indicated in the Reliability Policy Statement that it
expects public utilities operating transmission facilities under the
pro forma OATT to conform to prevailing reliability standards. The
Commission finds that referencing the reliable operation definition in
section 215 of the FPA satisfies our requirement that transmission
providers provide safe and reliable transmission service to customers
taking service under the pro forma OATT. Second, we are mindful of the
obligation placed on ``all users, owners and operators of the bulk
power system'' under section 215(b) of the FPA to ``comply with
reliability standards'' that will take effect under this section. Those
reliability standards must ``provide for reliable operation of the
bulk-power system.'' \412\ When the ERO is certified by the Commission
and we approve its reliability standards, those standards will be based
on the same definition of reliable operation we propose to incorporate
into the pro forma OATT. We agree with EEI and Southern that the ERO is
best suited to develop reliability standards for the Commission's
approval, but our proposal to incorporate the definition of reliable
operation does not establish a reliability standard; rather, we believe
it reflects Congress's benchmark for acceptable utility practice. It
therefore belongs in our definition of Good Utility Practice in the pro
forma OATT.
---------------------------------------------------------------------------

    \412\ Section 215(a)(3) of the FPA.
---------------------------------------------------------------------------

    463. In addition to amending the definition of Good Utility
Practice, we propose to add a definition for ``non-firm sales'' to
clarify section 30.4 of the pro forma OATT. A number of transmission
providers have modified section 30.4 of the OATT to state that ``The
Network Customer shall not operate its designated Network Resources
located in the Network

Customer's or Transmission Provider's Control Area such that the output
of those facilities exceeds its designated Network Load, plus non-firm
sales delivered pursuant to Part II of the Tariff, plus losses''
(emphasis added). We propose to define ``non-firm sales'' as ``an
energy sale for which delivery or receipt of the energy may be
interrupted for any reason or for no reason, without liability on the
part of either the buyer or seller.'' This is the definition of non-
firm sales used in a number of industry-standard master power sales
agreements, including the EEI Master Purchase and Sale Agreement. We
propose to clarify that, for the purposes of applying section 30.4 of
the pro forma OATT, energy sales that can only be interrupted to
maintain system reliability will be considered firm sales.
    464. We also propose to add two new definitions that are required
to implement our proposed reforms. For example, we propose a definition
of ``affiliate'' in section 1.1 of the revised pro forma OATT incident
to our proposed change to the pricing of reassigned capacity. We also
propose a new definition of ``pre-confirmed application'' in section
1.40 of the revised pro forma OATT incident to our proposal to give
priority to requests that are pre-confirmed.

E. Enforcement

1. General Policy
a. Compliance Review Regime
Comments
    465. A number of commenters indicate that a strong program to audit
compliance with the pro forma OATT is crucial to preventing undue
discrimination in the provision of transmission service. APPA argues
that the Commission should establish a regime of systematic tariff
compliance reviews because the OATT is at bottom a behavioral remedy
rather than a structural one, so active Commission oversight is
necessary. In addition, APPA notes that OATT transmission customers
(especially network customers that are dependent upon the transmission
systems of their neighboring public utility OATT transmission
providers) are often reluctant to open the ``can of worms'' that filing
a section 206 complaint against their transmission providers entails.
Powerex urges the Commission to establish systematic tariff compliance
audits as a monitoring tool because remedies and penalties alone are
structurally ill-suited to address the myriad of idiosyncratic
deviations from the Commission's policies and standards that currently
exist. TAPS asserts that, while customer complaints are an indication
that something is awry, the lack of transparency makes it very hard for
customers to detect discrimination and tariff violations on the part of
the transmission provider. TAPS suggests that customers often conclude
that a complaint process is not cost effective because even if they
ultimately prevail, they will have lost out on the purchase opportunity
that prompted the complaint.
Discussion
    466. The Commission intends to maintain a strong audit program to
determine whether transmission providers and transmission customers are
in compliance with the new pro forma OATT. This audit program will
include operational audits similar to the OATT compliance components of
audits conducted by Commission staff in the past.
    467. These audits will determine compliance with specific
provisions of the OATT. Staff's findings and recommendations will be
detailed in public audit reports issued in accordance with the
Commission's authority. If an audit is contested, it will be disposed
of consistent with the Commission's final rule on disposition of
contested operational audits. The Commission staff's compliance audits
historically have included the collection of information regarding the
audit target's overall operations. In this vein, the Commission staff's
OATT compliance audits may also collect information regarding
implementation of a transmission provider's OATT, with the intent that
Commission staff may share the information it gathers with the
Commission subject to all applicable ex parte rules.
b. Use of Independent Third Party Audits
Comments
    468. A number of commenters indicate that the Commission should not
rely on third party audits as the primary means of ensuring compliance
with the OATT. APPA states that if an OATT Transmission Provider
retains and pays an ``independent reviewer'' to prepare compliance
audit reports, someone will inevitably question the reviewer's
independence. Therefore, APPA argues that it might be better for the
Commission itself to prepare the reports, or to retain a consultant to
do so. Southern suggests that the Commission's existing mechanisms,
coupled with new rules that will ensure that all regulated entities
subject to investigations or audits are afforded their full due process
rights, should be adequate to ensure compliance with OATT provisions.
    469. A number of commenters also indicate that the Commission
should require third party audits for frequent abusers. EEI suggests
that a transmission provider that is found to have a systematic or
continuing violation of the OATT could be required to hire an
independent reviewer to monitor its future compliance for a period of
time after the violation occurred. TVA suggests that, if a particular
transmission provider repeatedly misapplies its OATT, the Commission
should at that point consider requiring that transmission provider to
hire an independent monitor for a defined period of time as a remedy
for those actual infractions. NRECA argues that those transmission
providers who are consistently in violation or who do not cure audit
findings in a timely manner should see both an increase in frequency
and further scrutiny from the audit process.
Discussion
    470. We propose to have Commission staff conduct audits of
compliance with the new OATT. Commission staff is in a unique position
to conduct OATT compliance audits and recommend remedial action
consistent with previous audits. In addition, entities audited by
Commission staff now have clear and assured due process rights as the
result of Order No. 675.
    471. We may require third party audits as part of an individual
compliance plan we order an audited party to undertake when we issue
the Commission staff's audit report. The Commission staff monitors
compliance with all of its audit recommendations as part of its regular
practice. We may, in selected cases, decide to enhance this regular
monitoring by requiring an audited party to hire an independent
reviewer to continue compliance audits after the Commission staff's
audit has ended. We could take such action in response to a number of
circumstances, including, but not limited to, identification of
systematic OATT violations, violations that require on-going
monitoring, or a pattern of repeated OATT violations. Under these
circumstances, the audited party should bear the burden of on-going
compliance monitoring. If we decide to order independent OATT
compliance audits as part of an individual audited party's compliance
plan, we will specify the scope and duration of the audits.

2. Civil Penalties
a. Background
    472. The NOI observed that the existing OATT allows transmission
providers to impose certain operational penalties on customers for
tariff violations, but does not address the adverse consequences to a
transmission provider who violates its OATT. It also summarized the
broad variety of remedies and sanctions available for enforcement of
its rules and regulations, including the enhanced civil penalty
authority provided by EPAct 2005.\413\
---------------------------------------------------------------------------

    \413\ EPAct 2005 expanded the Commission's civil penalty
authority under the FPA to encompass violations of all provisions of
FPA Part II (EPAct 2005 section 1284(e)(1) (to be codified at
section 316A of the FPA, 16 U.S.C. 825o-1)), and established the
maximum civil penalty the Commission can assess under FPA Part II as
$1 million per day per violation (EPAct 2005 section 1284(e)(2) (to
be codified at section 316A of the FPA, 16 U.S.C. 825o-1)).
---------------------------------------------------------------------------

    473. In the NOI, the Commission asked for comments on whether we
should address the issue of remedies or penalties against transmission
providers as part of OATT reform. It also asked if transmission
providers should be subject to revocation of their market-based rate
authority for certain OATT violations, and if certain violatins should
be considered market manipulation under the Market Behavior Rules \414\
and section 1283 of EPAct 2005.\415\
---------------------------------------------------------------------------

    \414\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, 105 FERC ] 61,218 (2003), order on
reh'g, 107 FERC ] 61,175 (2004).
    \415\ NOI at P 15.
---------------------------------------------------------------------------

    474. Subsequent to the NOI, on October 20, 2005 the Commission
issued its Enforcement Policy Statement, which discusses the factors
the Commission will take into account in determining remedies and
sanctions for violations, including civil penalties.\416\ Also, in
EPAct 2005, Congress provided the Commission with specific anti-
manipulation authority.\417\ On January 19, 2006, to implement this new
authority, the Commission issued Order No. 670 (Anti-manipulation
Rule),\418\ adopting a new Part 1c of its regulations, under which it
is ``unlawful for any entity, directly or indirectly, in connection
with the purchase or sale of electric energy or the purchase or sale of
transmission services subject to the jurisdiction of the Commission,
(1) to use or employ any device, scheme, or artifice to defraud, (2) to
make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading,
or (3) to engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon any entity.'' \419\
The Anti-manipulation Rule made it unnecessary to retain Market
Behavior Rules 2 or 6. Accordingly, on February 16, 2006, the
Commission rescinded Market Behavior Rules 2 and 6 and codified the
substance of Market Behavior Rules 1, 3, 4, and 5 in the Commission's
regulations.\420\
---------------------------------------------------------------------------

    \416\ Enforcement of Statutes, Order, Rules and Regulations,
Policy Statement on Enforcement, 113 FERC ] 61,068 at P 17-20 (2005)
(Enforcement Policy Statement).
    \417\ EPAct 2005 sec. 1283 (to be codified at section 222 of the
FPA, 16 U.S.C. 824v). Congress prohibited the use or employment of
``any manipulative or deceptive device or contrivance'' in
connection with the purchase or sale of electric energy or
transmission services subject to the jurisdiction of the Commission.
Congress directed the Commission to give these terms the same
meaning as under the Securities Exchange Act of 1934, 15 U.S.C.
78j(b) (2000).
    \418\ Prohibition of Energy Market Manipulation, Order No. 670,
71 FR 4244 (Jan. 26, 2006), FERC Stats. & Regs. ] 31,202, reh'g
denied, 114 FERC ] 61,300 (2006).
    \419\ Id., 71 FR 4244, 4258 (Jan. 26, 2006) (to be codified at
18 CFR 1c.2(a)).
    \420\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, 114 FERC ] 61,165 (2005). The
primary purpose of the Market Behavior Rules was to prohibit market
manipulation by public utility sellers acting under market-based
rate authority.
---------------------------------------------------------------------------

b. Whether Civil Penalties Should Be Specified in the OATT
Comments
    475. Commenters often did not distinguish between operational
penalties and civil penalties in their comments about the need for
additional penalties in the OATT. EEI and MidAmerican made the
distinction, asserting that civil penalties should not be specified in
the OATT. They and others contend that: enforcement actions, including
civil penalties, should be reviewed on a case-by-case basis; \421\
civil penalties should be based upon the seriousness of the violation;
\422\ penalties should require proof of intent or willfulness; \423\
penalties should only apply for repeated violations; \424\ and, penalty
procedures should provide for due process.\425\
---------------------------------------------------------------------------

    \421\ E.g., Entergy, Santa Clara, Steel Manufacturers
Association, WAPA, and Williams.
    \422\ Steel Manufacturers Association.
    \423\ E.g., EEI, KCP&L, Progress Energy, Public Power Council,
Southern, and Xcel.
    \424\ E.g., Alberta Intervenors, Public Power Council,
Snohomish, Suez Energy NA, and TDU Systems.
    \425\ E.g., Bonneville, EEI, Southern, and Nevada Companies.
---------------------------------------------------------------------------

Discussion
    476. The Commission intends to enforce OATT provisions in a firm
but fair manner. For example, the Commission elsewhere is proposing
that transmission providers as well as transmission customers be
subject to specified operational penalties for violations of certain
OATT provisions. However, aside from these operational penalties, the
Commission does not intend to provide a schedule of enforcement
remedies and sanctions in the OATT. Instead, the Commission prefers to
examine violations and determine the appropriate response for a
violation on a case-by-case basis. The Commission has a broad array of
equitable remedies and sanctions for violations.\426\ Our enhanced
civil penalties, as provided by EPAct 2005, are among the available
sanctions for violations of the Commission's statutes, rules,
regulations and orders, including instances of undue discrimination and
market manipulation.
---------------------------------------------------------------------------

    \426\ Enforcement Policy Statement at P 4. The ``enhanced civil
penalty authority will operate in tandem with our existing authority
to require disgorgement of unjust profits obtained through
misconduct and/or to condition, suspend, or revoke certificate
authority or other authorizations, such as market-based rate
authority for sellers of electric energy.'' Id. at P 12.
---------------------------------------------------------------------------

    477. Although we will look at violations on a case-by-case basis
and not identify in this proposed rule specific penalties for different
violations, the Enforcement Policy Statement provides guidance and
regulatory certainty regarding enforcement and places entities subject
to our jurisdiction on notice of the consequences of violations.\427\
As we noted, ``[I]t is important that we retain the discretion and
flexibility to address each case on its merits, and to fashion remedies
appropriate to the facts presented, including any mitigating factors.''
\428\
---------------------------------------------------------------------------

    \427\ Id. at P 1.
    \428\ Id. at P 13. Several commenters supported the application
of the Enforcement Policy Statement to OATT violations. E.g., APPA,
EEI, Midwest SATs, National Grid, and TAPS.
---------------------------------------------------------------------------

    478. As the facts of a specific matter warrant, we will seek
disgorgement of unjust profits that are the result of a violation.
Violators should not retain the gains acquired as the result of the
violation. OATT violators will be expected to disgorge unjust profits
whenever they can be determined or reasonably estimated.\429\ In
addition, as warranted by the facts, civil penalties may also be
assessed. Those penalties (up to $1 million per day per violation),
however, can be mitigated by the factors set forth in the Enforcement
Policy Statement, such as self-reporting, compliance programs, and
cooperation

with staff from the Commission's Office of Enforcement.\430\
---------------------------------------------------------------------------

    \429\ Enforcement Policy Statement at P 19 and P 23.
    \430\ Id. at P 6 and P 21-27.
---------------------------------------------------------------------------

c. Whether Transmission Providers Should Be Subject to Revocation of
Their Market-Based Rates for OATT Violations.
Comments
    479. In the NOI, the Commission also asked if transmission
providers should be subject to revocation of their market-based rate
authority for certain OATT violations.\431\ Some commenters agree that
revocation of market-based rates could be an appropriate remedy.\432\
EPSA asserts that revocation of market-based rate authority should be
among the penalties the Commission could impose for serious violations
of the OATT, such as when more transmission capacity is set aside than
is actually needed to serve native load, or undue preferences are
extended to native load or affiliate transactions. TAPS states that
where lack of ATC forecloses network customer access to alternatives, a
transmission provider should not be able to make sales of electric
power at market-based rates and should be required to offer embedded-
cost-based sales. APPA asserts that whether a transmission provider's
violation of the OATT merits possible revocation of its market-based
rate authority depends on the nature and severity of the violation.
APPA argues that if the violation concerns practices that favor the
transmission provider's own wholesale merchant function at the expense
of its third-party competitors, and if that violation is willful or
repeated, then revocation or conditioning of the market-based rate
authority of the transmission provider's merchant function may be
warranted.\433\
---------------------------------------------------------------------------

    \431\ NOI at P 15.
    \432\ E.g., Arkansas Cities, NRECA, Occidental, Snohomish, and
Williams.
    \433\ APPA at 32.
---------------------------------------------------------------------------

    480. Other commenters argue that revocation of market-based rate
authority should be reserved for market behavior violations, not OATT
violations.\434\ EEI and MidAmerican argue that the Commission has
separated public utilities' transmission functions from their marketing
functions and, thus, penalties for violation of the OATT should be kept
separate from penalties imposed for market behavior violations.
PacifiCorp contends that the Commission's new penalty authority is
sufficient to ensure compliance with the OATT and that there no longer
is a need to consider revocation of market-based rate authority.
Progress Energy states that the Commission should not penalize the
utility's merchant function for violations of the OATT caused by the
utility's transmission function. Ameren and Southern would add a
``willful'' or ``intent'' requirement to revoking market-based rates
for an OATT violation.
---------------------------------------------------------------------------

    \434\ E.g., EEI, MidAmerican, PacifiCorp, PNM-TNMP, and Progress
Energy.
---------------------------------------------------------------------------

Discussion

    481. As discussed in the Enforcement Policy Statement, the better
approach is to look at all of the facts and circumstances of each
violation before deciding on any remedy or sanction.\435\ There may be
OATT violations in circumstances that, after applying the factors in
the Enforcement Policy Statement, merit revocation or limitation of
market-based rate authority. However, before the Commission will
consider revoking an entity's market-based rate authority for a
violation of the OATT, there must be a nexus between the specific facts
relating to the OATT violation and the entity's market-based rate
authority. The Commission proposes that if it determines, as a result
of a significant OATT violation, that the market-based rate authority
of a transmission provider will be revoked within a particular market,
each affiliate of the transmission provider that possesses market-based
rate authority will have it revoked in that market on the effective
date of revocation of the transmission provider's market-based rate
authority.
---------------------------------------------------------------------------

    \435\ Enforcement Policy Statement at P 18. Among the factors
examined are ``willfulness'' and ``intent'' of the violator. Id. at
P 20.
---------------------------------------------------------------------------

d. Whether Certain OATT Violations Should Be Considered Market
Manipulation Under the Market Behavior Rules and Section 1283 of EPAct
2005.
Comments
    482. In the NOI, the Commission asked if specific OATT violations
should be considered market manipulation under the Market Behavior
Rules and section 1283 of EPAct 2005.\436\ The Commission then
suggested that one such type of violation might be when a transmission
provider sets aside more transmission capacity than is needed to serve
native load, but uses the capacity for third-party sales.\437\
---------------------------------------------------------------------------

    \436\ NOI at P 15. Section 1283 of EPAct 2005 establishes
section 222 of the FPA (to be codified at 16 U.S.C. 824v).
    \437\ NOI at P 15.
---------------------------------------------------------------------------

    483. None of the commenters want specific violations identified in
the OATT to be deemed per se market manipulation. Some commenters
prefer to have the Commission approach these matters on case-by-case
basis.\438\
---------------------------------------------------------------------------

    \438\ E.g., APPA, Entergy, Nevada Companies, Public Power
Council, and Southern.
---------------------------------------------------------------------------

    484. Some commenters, like Constellation, identify OATT violations
that may constitute market manipulation. Ameren, EEI, and Occidental
argue that intentionally setting aside more transmission capacity than
is needed to serve native load could constitute market manipulation.
LG&E states that the key factor is ``intent.'' LG&E provides an example
in which ATC becomes available as a result of less-than-expected native
load requirements, and not because the transmission owner intentionally
overstated native load requirements, and the transmission owner's
affiliate followed proper reservation and scheduling protocol in a
manner applicable to all potential transmission customers. Under these
circumstances, LG&E contends, the Commission's imposition of a civil
penalty would be inappropriate given the absence of intent to impart
false or misleading information into the marketplace or hoard
transmission.
    485. Occidental suggests that curtailments of firm transmission
service designed to permit wholesale power sales by the merchant
function of the transmission provider or an affiliate should also be
considered market manipulation. Suez Energy NA argues that incidents of
affiliate abuse by a transmission provider may be considered market
manipulation pursuant to section 1283 of EPAct 2005. TAPS states that
certain withholding of transmission capacity can rise to the level of a
violation of the Commission's market behavior rules and its new anti-
manipulation authority if the withholding reduces the supply of both
transmission and generation in a market, which artificially raises
prices.
Discussion
    486. As explained above, we now are examining market manipulation
in the context of Part 1c of our regulations. We do not propose to
identify in the OATT specific conduct as per se market manipulation. As
noted in Order No. 670, market manipulation is a fact-intensive
determination.\439\ We do not want to restrict our fact-finding to
specific types of violations. Although certain fraudulent or deceptive
practices concerning the OATT could qualify as market manipulation
under Order No. 670, the Commission declines to address such
circumstances generically

in this rulemaking and instead will consider them on a case-by-case
basis, if and when they arise, under the standards set forth in Order
No. 670.
---------------------------------------------------------------------------

    \439\ Anti-manipulation Rule at P 72.
---------------------------------------------------------------------------

VI. Information Collection Statement

    487. The following collections of information contained in this
proposed rule have been submitted to the Office of Management and
Budget (OMB) for review under section 3507(d) of the Paperwork
Reduction Act of 1995.\440\ OMB's regulations require OMB to approve
certain information collection requirements imposed by agency
rule.\441\
---------------------------------------------------------------------------

    \440\ 44 U.S.C. 3507(d) (2000).
    \441\ 5 CFR 1320.11 (2005).
---------------------------------------------------------------------------

    488. Comments are solicited on the need for this information,
whether the information will have practical utility, ways to enhance
the quality, utility, and clarity of the information to be collected,
and any suggested methods for minimizing respondents' burden, including
the use of automated information techniques.
    Burden Estimate: The public reporting and records retention burdens
for the proposed reporting requirements and the records retention
requirement are as follows.\442\
---------------------------------------------------------------------------

    \442\ These burden estimates apply only to this NOPR and do not
reflect upon all of FERC-516 or FERC-717.

----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Hours per     Total annual
                 Data collection                    respondents      responses       response          hours
----------------------------------------------------------------------------------------------------------------
Part 35 (FERC-516):
Conforming tariff changes.......................             176               1              25           4,400
Revision of Imbalance Charges...................             176               1               5             880
ATC revisions...................................             176               1              40           7,040
Planning (Attachment K).........................             176               1             100          17,600
Congestion studies..............................             176               1             250          44,000
Attestation of network resource commitment......             176               1               1             176
Quarterly Reports for capacity reassignment.....             176               1              60          10,560
Operational Penalty annual filing...............             176               1              10           1,760
Creditworthiness--include criteria in the tariff             176               1              40           7,040
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
    Sub Total Part 35...........................  ..............  ..............  ..............          93,456
Part 37 (FERC-717):
ATC-related standards...........................
NERC/NAESB Team to develop......................               1               1           1,920           1,920
Review and comment by utility...................             176               1              20           3,520
Implementation by each utility..................             176               1              40           7,040
Mandatory data exchanges........................             176               1              80          14,080
Explanation of change of ATC values.............             176               1             100          17,600
Reevaluate CBM and post quarterly...............             176               1              20           3,520
Post OASIS metrics; requests accepted/denied....             176               1              80          14,080
Posting of metrics for System Impact Studies....             176               1             100          17,600
Post all rules to OASIS.........................             176               1               5             880
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
    Sub Total (Part 37).........................  ..............  ..............  ..............          80,240
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
        Total (Part 35 + Part 37)...............  ..............  ..............  ..............         173,696
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Recordkeeping...................................             176               1              30           5,280
----------------------------------------------------------------------------------------------------------------

Total Annual Hours for Collection:
    Reporting + recordkeeping hours = 173,696 + 5,280 = 178,976 hours.
Cost to Comply:
Reporting = $19,801,344
hour), consultant ($150), technical ($80), and administrative support
($25))
Recordkeeping = $1,392,160
$89,760
$1,302,400
Total costs = $21,193,504
    Labor $ ($19,801,344 + $89,760) + Recordkeeping Storage Costs
($1,302,400)
    OMB's regulations require it to approve certain information
collection requirements imposed by an agency rule. The Commission is
submitting notification of this proposed rule to OMB. If the proposed
requirements are adopted they will be mandatory requirements.
    Title: FERC-516, Electric Rate Schedules and Tariff Filings; FERC-
717 Standards for Business Practices and Communication Protocols for
Public Utilities.
    Action: Proposed Collections.
    OMB Control Nos. 1902-0096 and 1902-0173.
    Respondents: Business or other for profit.
    Frequency of responses: On occasion.
    Necessity of the Information:
    489. The Federal Energy Regulatory Commission is proposing
amendments to its regulations adopted in Order Nos. 888 and 889, and to
the pro forma open access transmission tariff, to ensure that
transmission services are provided on a basis that is just, reasonable
and not unduly discriminatory or preferential. The purpose of this
rulemaking is to strengthen the pro forma OATT to ensure that it
achieves its original purpose--remedying undue discrimination--not to
create new market structures. We propose to achieve this goal by
increasing the clarity and transparency of the rules applicable to the
planning and use of the transmission system and by addressing
ambiguities and the lack of sufficient detail in several important
areas of the pro forma OATT. The lack of specificity in the pro forma
OATT creates opportunities for undue discrimination as well as making
the undue discrimination that does occur more difficult to detect. To
accomplish this we are proposing five objectives: (1) To improve
transparency and

consistency in several critical areas, by providing for greater
consistency in the calculation of ATC, (2) to reform the transmission
planning requirements of the pro forma OATT to eliminate potential
undue discrimination and support the construction of adequate
transmission facilities to meet the needs of all load-serving entities,
(3) to remedy certain portions of the pro forma OATT that may have
permitted utilities to discriminate against new merchant generation,
including intermittent generation, (4) to provide for greater
transparency in the provision of transmission service to allow
transmission customers better access to information to make their
resource procurement and investment decisions, as well as to increase
the Commission's ability to detect any remaining incidents of undue
discrimination, and (5) to reform and provide greater clarity in areas
that have generated recurring disputes over the past 10 years, such as
rollover rights, ``redirects,'' and generation redispatch. The reforms
proposed in this NOPR are intended to address deficiencies in the pro
forma OATT that have become apparent since the implementation of Order
No. 888 in 1996 and to facilitate improved planning and operation of
transmission facilities.
    490. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, [Attention:
Michael Miller, Office of the Executive Director, Phone: (202) 502-
8415, fax:<PHONE_NUMBER>, e-mail<EMAIL_ADDRESS>    491. For submitting comments concerning the collections of
information and the associated burden estimate(s), please send your
comments to the contact listed above and to the Office of Information
and Regulatory Affairs, Office of Management and Budget, 725 17th
Street, NW., Washington, DC 20503 [Attention: Desk Officer for the
Federal Energy Regulatory Commission, phone<PHONE_NUMBER>, fax: (202)
395-7285. Due to security concerns, comments should be sent
electronically to the following e-mail address:
<EMAIL_ADDRESS>Please reference the docket number of this

rulemaking in your submission.

VII. Environmental Analysis

    492. 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.\443\ The
Commission concludes that neither an Environmental Assessment nor an
Environmental Impact Statement is required for this NOPR 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.\444\
---------------------------------------------------------------------------

    \443\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
] 30,783 (1987).
    \444\ 18 CFR 380.4(a)(15) (2005).
---------------------------------------------------------------------------

VIII. Regulatory Flexibility Act Analysis

    493. The Regulatory Flexibility Act of 1980 (RFA) \445\ generally
requires a description and analysis of proposed rules that will have
significant economic impact on a substantial number of small entities.
This rule applies to public utilities that own, control or operate
interstate transmission facilities, not to electric utilities per se.
The total number of public utilities that, absent waiver, would have to
modify their current OATTs by filing the revised pro forma OATT is
176.\446\ Of these only six public utilities, or less than two percent,
dispose of four million MWh or less per year.\447\ The Commission does
not consider this a substantial number, and in any event, these small
entities may seek waiver of these requirements.\448\ Moreover, the
criteria for waiver that would be applied under this rulemaking for
small entities is unchanged from that used to evaluate requests for
waiver under Order Nos. 888 and 889. Thus, small entities who have
received waiver of the requirements to have on file an open access
tariff or to operate an OASIS would be unaffected by the requirements
of this proposed rulemaking.
---------------------------------------------------------------------------

    \445\ 5 U.S.C. 601-612 (2000).
    \446\ The sources for this figure are FERC Form No. 1 and FERC
Form No. 1-F data.
    \447\ Id.
    \448\ The Regulatory Flexibility Act defines a ``small entity''
as ``one which is independently owned and operated and which is not
dominant in its field of operation.'' See 5 U.S.C. 601(3) and
601(6)(2000); 15 U.S.C. 632(a)(1)(2000). In Mid-Tex Elec. Coop. v.
FERC, 773 F.2d 327, 340-343 (D.C. Cir. 1985), the court accepted the
Commission's conclusion that, since virtually all of the public
utilities that it regulates do not fall within the meaning of the
term ``small entities'' as defined in the Regulatory Flexibility
Act, the Commission did not need to prepare a regulatory flexibility
analysis in connection with its proposed rule governing the
allocation of costs for construction work in progress (CWIP). The
CWIP rules applied to all public utilities. The revised pro forma
OATT will apply only to those public utilities that own, control or
operate interstate transmission facilities. These entities are a
subset of the group of public utilities found not to require
preparation of a regulatory flexibility analysis for the CWIP rule.
---------------------------------------------------------------------------

IX. Comment Procedures

    494. The Commission invites interested persons to submit comments
on the matters and issues proposed in this notice to be adopted,
including any related matters or alternative proposals that commenters
may wish to discuss. Comments are due August 7, 2006. Reply comments
are due September 5, 2006. Comments must refer to Docket Nos. RM05-25-
000 and RM05-17-000, and must include the commenters' name, the
organization they represent, if applicable, and their address in their
comments. Comments may be filed either in electronic or paper format.
    495. To facilitate the Commission's review of the comments,
commenters are requested to provide an executive summary of their
position, not to exceed ten pages. Commenters are requested to identify
each section of the NOPR that their discussion addresses and to use
conforming headings. Additional issues the commenters wish to raise
should be clearly identified in a separate section entitled ``Other
Issues,'' which should be organized by the relevant pro forma OATT
section (if applicable). Furthermore, we also request that commenters
with specific tariff language suggestions submit a redline/strikeout
version showing their proposed changes to the language that appears in
the pro forma OATT attached to this NOPR.\449\ The commenters should
double space their comments. To assist commenters in their review, the
Commission has posted a copy of the proposed revised pro forma OATT
with changes from the current version of the pro forma OATT shown in
redline/strikeout on the following location on our Web site at http://www.ferc.gov/industries/electric/indus-act/oatt-reform.asp
.

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

    \449\ The pro forma OATT includes two amendments that have been
made since the tariff was finalized in Order No. 888-B. First, the
tariff was amended to include protocols for curtailment of multi-
system transactions and parallel flows. See North American
Reliability Council, 85 FERC ] 61,353 (1998), reh'g denied, 87 FERC
] 61,161 (1999) and recently updated in North American Electric
Reliability Council, 110 FERC ] 61,388 (2005). The second amendment
incorporates standardized generator interconnection procedures. See
Order No. 2003. The standardized generator interconnection
procedures are not included in the pro forma OATT attached to this
NOPR because we do not propose changes to them.
---------------------------------------------------------------------------

    496. Comments and reply comments may be filed electronically via
the

eFiling link on the Commission's Web site at http://www.ferc.gov. The

Commission accepts most standard word processing formats and commenters
may attach additional files with supporting information in certain
other file formats. Documents created electronically using word
processing software should be filed in the native application or print-
to-PDF format and not in a scanned format. This will enhance document
retrieval for both the Commission and the public. Attachments that
exist only in paper form may be scanned. Commenters filing
electronically should not make a paper filing. Service of rulemaking
comments is not required. Commenters that are not able to file comments
electronically must send an original and 14 copies of their comments
to: Federal Energy Regulatory Commission, Office of the Secretary, 888
First Street, NE., Washington, DC 20426.
    497. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters on this proposal are
not required to serve copies of their comments on other commenters.

X. Document Availability

    498. 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.
    499. From the Commission's Home Page on the Internet, this
information is available in the Commission's document management
system, 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 ``RM05-25'' or
``RM05-17'' in the docket number field.
    500. User assistance is available for eLibrary and the Commission's
website during normal business hours. For assistance, please contact
the Commission's Online Support at 1-866-208-3676 (toll free) or 202-
502-6652 (e-mail at FERCOnlineSupport@FERC.gov), or the Public
Reference Room at<PHONE_NUMBER>, TTY<PHONE_NUMBER> (e-mail at
public.referenceroom@ferc.gov).

List of Subjects

18 CFR Part 35

    Electric power rates, Electric utilities, Reporting and
recordkeeping requirements.

18 CFR Part 37

    Conflict of interests, Electric power plants, Electric utilities,
Reporting and recordkeeping requirements.

    By direction of the Commission.
Magalie R. Salas,
Secretary.

    In consideration of the foregoing, the Commission proposes to amend
parts 35 and 37, Chapter I, Title 18 of the Code of Federal
Regulations, as follows:

PART 35--FILING OF RATE SCHEDULES AND TARIFFS

    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. 71-7352.

    2. Amend Sec.  35.28 as follows:
    a. paragraph (c) is revised.
    b. paragraphs (d)(i) and d(ii) are redesignated as d(1) and d(2).
    c. newly redesignated paragraph d(1) is revised.
    d. paragraph (e)(1) (introductory text) is revised.
    e. paragraph (e)(1)(ii) is revised.

Sec.  35.28  Non-discriminatory open access transmission tariff.

* * * * *
    (c) Non-discriminatory open access transmission tariffs.
    (1) Every public utility that owns, controls, or operates
facilities used for the transmission of electric energy in interstate
commerce must have on file with the Commission a tariff of general
applicability for transmission services, including ancillary services,
over such facilities. Such tariff must be the open access pro forma
tariff contained in Order No. 888, FERC Stats. & Regs. ] 31,036, as
revised by the open access pro forma tariff contained in Order No. ----
, FERC Stats. & Regs. ] ----, or such other open access tariff as may
be approved by the Commission consistent with Order No. ----, FERC
Stats. & Regs. ] ----.
    (i) Subject to the exceptions in paragraphs (c)(1)(ii),
(c)(1)(iii), (c)(1)(iv) and (c)(1)(v) of this section, the pro forma
tariff contained in Order No. 888, FERC Stats. & Regs. ]31,036, as
revised by the open access pro forma tariff contained in Order No. ----
, FERC Stats. & Regs. ] ----, and accompanying rates, must be filed no
later than 60 days prior to the date on which a public utility would
engage in a sale of electric energy at wholesale in interstate commerce
or in the transmission of electric energy in interstate commerce.
    (ii) If a public utility owns, controls, or operates facilities
used for the transmission of electric energy in interstate commerce as
of ----, it must file the revisions to the pro forma tariff contained
in Order No. ----, FERC Stats. & Regs. ] ---- pursuant to section 206
of the FPA and accompanying rates pursuant to section 205 of the FPA,
no later than ----.
    (iii) If a public utility owns, controls, or operates transmission
facilities used for the transmission of electric energy in interstate
commerce as of ----, such facilities are jointly owned with a non-
public utility, and the joint ownership contract prohibits transmission
service over the facilities to third parties, the public utility with
respect to access over the public utility's share of the jointly owned
facilities must file no later than ---- the revisions to the pro forma
tariff contained in Order No. ----, FERC Stats. & Regs. ] ----,
pursuant to section 206 of the FPA and accompanying rates pursuant to
section 205 of the FPA.
    (iv) Any public utility whose transmission facilities are under the
independent control of a Commission-approved ISO or RTO may satisfy its
obligation under paragraph (c)(1) of this section, with respect to such
facilities, through the open access transmission tariff filed by the
ISO or RTO.
    (v) If a public utility obtains a waiver of the tariff requirement
pursuant to paragraph (d) of this section, it does not need to file the
pro forma tariff required by this section.
    (vi) Any public utility that seeks a deviation from the pro forma
tariff contained in Order No. 888, FERC Stats. & Regs. ]31,036, as
revised in Order No. ----, FERC Stats. & Regs. ] ----, must demonstrate
that the deviation is consistent with the principles of Order No., ----
FERC Stats. & Regs. ] ----.
    (vii) Each public utility's open access transmission tariff must
include the standards incorporated by reference in part 38 of this
chapter.
    (2) Subject to the exceptions in paragraphs (c)(2)(i) and
(c)(3)(iii) of this section, every public utility that owns, controls,
or operates facilities used for the transmission of electric energy in
interstate commerce, and that uses those facilities to engage in
wholesale sales and/or purchases of electric energy, or unbundled
retail sales of electric energy, must take transmission service for
such sales and/or purchases under the open access tariff filed pursuant
to this section.

    (i) For sales of electric energy pursuant to a requirements service
agreement executed on or before July 9, 1996, this requirement will not
apply unless separately ordered by the Commission. For sales of
electric energy pursuant to a bilateral economy energy coordination
agreement executed on or before July 9, 1996, this requirement is
effective on December 31, 1996. For sales of electric energy pursuant
to a bilateral non-economy energy coordination agreement executed on or
before July 9, 1996, this requirement will not apply unless separately
ordered by the Commission.
    (ii) [Reserved.]
    (3) Every public utility that owns, controls, or operates
facilities used for the transmission of electric energy in interstate
commerce, and that is a member of a power pool, public utility holding
company, or other multi-lateral trading arrangement or agreement that
contains transmission rates, terms or conditions, must have on file a
joint pool-wide or system-wide open access transmission pro forma
tariff, which tariff must be the open access pro forma tariff contained
in Order No. 888, FERC Stats. & Regs. ] 31,036, as revised by the open
access pro forma tariff contained in Order No. ----, FERC Stats. &
Regs. ] ----, or such other open access tariff as may be approved by
the Commission consistent with Order No. ----, FERC Stats. & Regs. ] --
--.
    (i) For any power pool, public utility holding company or other
multi-lateral arrangement or agreement that contains transmission
rates, terms or conditions and that is executed after July 9, 1996,
this requirement is effective on the date that transactions begin under
the arrangement or agreement.
    (ii) For any power pool, public utility holding company or other
multi-lateral arrangement or agreement that contains transmission
rates, terms or conditions and that is executed on or before July 9,
1996, a public utility member of such power pool, public utility
holding company or other multi-lateral arrangement or agreement that
owns, controls, or operates facilities used for the transmission of
electric energy in interstate commerce must file the revisions to its
joint pool-wide or system-wide contained in Order No. ----, FERC Stats.
& Regs. ] ----, pursuant to section 206 of the FPA and accompanying
rates pursuant to section 205 of the FPA, no later than ----.
    (iii) A public utility member of a power pool, public utility
holding company or other multi-lateral arrangement or agreement that
contains transmission rates, terms or conditions and that is executed
on or before July 9, 1996 must take transmission service under a joint
pool-wide or system-wide pro forma tariff filed pursuant to this
section for wholesale trades among the pool or system members.
    (4) Consistent with paragraph (c)(1) of this section, every
Commission-approved ISO or RTO must have on file with the Commission a
tariff of general applicability for transmission services, including
ancillary services, over such facilities. Such tariff must be the open
access pro forma tariff contained in Order No. 888, FERC Stats. & Regs.
] 31,036, as revised by the open access pro forma tariff contained in
Order No. ----, FERC Stats. & Regs. ] ----, or such other open access
tariff as may be approved by the Commission consistent with Order No.
----, FERC Stats. & Regs. ] ----.
    (i) Subject to paragraph (c)(4)(ii) of this section, a Commission-
approved ISO or RTO must file the revisions to the pro forma tariff
contained in Order No. ----, FERC Stats. & Regs. ] ----, pursuant to
section 206 of the FPA and accompanying rates pursuant to section 205
of the FPA, no later than ----.
    (ii) If a Commission-approved ISO or RTO can demonstrate that its
existing open access tariff is consistent with or superior to the
revisions to the pro forma tariff contained in Order No. ----, FERC
Stats. & Regs. ] ----, or any portions thereof, the Commission-approved
ISO or RTO may instead set forth such demonstration in its filing
pursuant to section 206 no later than ----.
    (d) Waivers. * * *
    (1) No later than ----, or
* * * * *
    (e) Non-public utility procedures for tariff reciprocity
compliance. (1) A non-public utility may submit a transmission tariff
and a request for declaratory order that its voluntary transmission
tariff meets the requirements of Order No. 888, FERC Stats. & Regs. ]
31,036 and Order No. ----, FERC Stats. & Regs. ] ----.
    (i) * * *
    (ii) If the submittal is found to be an acceptable transmission
tariff, an applicant in a Federal Power Act (FPA) section 211 or 211A
proceeding against the non-public utility shall have the burden of
proof to show why service under the open access tariff is not
sufficient and why a section 211 or 211A order should be granted.
* * * * *

PART 37--OPEN ACCESS SAME-TIME INFORMATION SYSTEMS

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

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

    4. Amend Sec.  37.6 as follows:
    a. paragraph (a)(1) is revised.
    b. paragraph (b)(introductory text) is revised.
    c. paragraphs (b)(1)(v) through (b)(1)(viii) are added.
    d. paragraphs (b)(2)(i) and b(2)(ii) are revised.
    e. paragraph (b)(3) is revised.
    f. paragraph (c)(2) is revised.
    g. paragraphs (e)(1) and (e)(2)(ii) are revised.
    h. paragraph (e)(3)(ii) is revised.
    i. paragraphs (h) and (i) are added.

Sec.  37.6  Information to be posted on the OASIS.

    (a) * * *
    (1) Make requests for transmission services offered by Transmission
Providers, Resellers and other providers of ancillary services, request
the designation of a network resource, and request the termination of
the designation of a network resource;
* * * * *
    (b) Posting transfer capability. The available transfer capability
on the Transmission Provider's system (ATC) and the total transfer
capability (TTC) of that system shall be calculated and posted for each
Posted Path as set out in this section.
    (1) * * *
    (v) Available transfer capability or ATC means the transfer
capability remaining in the physical transmission network for further
commercial activity over and above already committed uses, or such
definition as contained in Commission-approved Reliability Standards.
    (vi) Total transfer capability or TTC means the amount of electric
power that can be moved or transferred reliably from one area to
another area of the interconnected transmission systems by way of all
transmission lines (or paths) between those areas under specified
system conditions, or such definition as contained in Commission-
approved Reliability Standards.
    (vii) Capacity Benefit Margin or CBM means the amount of TTC
preserved by the Transmission Provider for load-serving entities, whose
loads are located on that Transmission Provider's system, to enable
access by the load-serving entities to generation from interconnected
systems to meet generation reliability requirements, or such definition
as contained in Commission-approved Reliability Standards.
    (viii) Transmission Reliability Margin or TRM means the amount of
TTC necessary to provide reasonable

assurance that the interconnected transmission network will be secure,
or such definition as contained in Commission-approved Reliability
Standards.
    (2) * * *
    (i) Information used to calculate any posting of ATC and TTC must
be dated and time-stamped and all calculations shall be performed
according to consistently applied methodologies referenced in the
Transmission Provider's transmission tariff and shall be based on
Commission-approved Reliability Standards as well as current industry
practices, standards and criteria
    (ii) On request, the Responsible Party must make all data used to
calculate ATC, TTC, CBM, and TRM for any constrained posted paths
publicly available (including the limiting element(s) and the cause of
the limit (e.g., thermal, voltage, stability)) in electronic form
within one week of the posting. The information is required to be
provided only in the electronic format in which it was created, along
with any necessary decoding instructions, at a cost limited to the cost
of reproducing the material. This information is to be retained for six
months after the applicable posting period.
* * * * *
    (3) Posting. The ATC, TTC, CBM, and TRM for all Posted Paths must
be posted in megawatts by specific direction and in the manner
prescribed in this subsection.
    (i) Constrained posted paths--(A) For Firm ATC and TTC. (1) The
posting shall show ATC, TTC, CBM, and TRM for a 30-day period. For this
period postings shall be: By the hour, for the current hour and the 168
hours next following; and thereafter, by the day. If the Transmission
Provider charges separately for on-peak and off-peak periods in its
tariff, ATC, TTC, CBM, and TRM will be posted daily for each period.
    (2) Postings shall also be made by the month, showing for the
current month and the 12 months next following.
    (3) If planning and specific requested transmission studies have
been done, seasonal capability shall be posted for the year following
the current year and for each year following to the end of the planning
horizon but not to exceed 10 years.
    (B) For Non-Firm ATC and TTC. The posting shall show ATC, TTC, CBM
and TRM for a 30-day period by the hour and days prescribed under
paragraph (b)(3)(i)(A)(1) of this section and, if so requested, by the
month and year as prescribed under paragraph (b)(3)(i)(A) (2) and (3)
of this section. The posting of non-firm ATC and TTC shall show CBM as
zero.
    (C) Updating Posted Information for Constrained Paths. (1) The
capability posted under paragraphs (b)(3)(i) (A) and (B) of this
section must be updated when transactions are reserved or service ends
or whenever the TTC estimate for the Path changes by more than 10
percent.
    (2) All updating of hourly information shall be made on the hour.
    (3) When the monthly and yearly capability posted under paragraphs
(b)(3)(i)(A) and (B) are updated, the Transmission Provider shall post
a brief, but specific, narrative explanation of the reason for the
update. This narrative should include, if relevant, scheduling of
planned outages and occurrence of forced transmission outages, de-
ratings of transmission facilities, scheduling of planned generation
outages and occurrence of forced generation outages, changes in load
forecast, changes in new facilities' in-service dates, or other events
or assumption changes that caused the update.
    (ii) Unconstrained posted paths. (A) Postings of firm and nonfirm
ATC, TTC, CBM, and TRM shall be posted separately by the day, showing
for the current day and the next six days following and thereafter, by
the month for the 12 months next following. If the Transmission
Provider charges separately for on-peak and off-peak periods in its
tariff, ATC, TTC, CBM, and TRM will be posted separately for the
current day and the next six days following for each period. These
postings are to be updated whenever the ATC changes by more than 20
percent of the Path's TTC.
    (B) If planning and specific requested transmission studies have
been done, seasonal capability shall be posted for the year following
the current year and for each year following until the end of the
planning horizon but not to exceed 10 years.
    (iii) Calculation of CBM.
    (A) The Transmission Provider must reevaluate its CBM needs at
least quarterly.
    (B) The Transmission Provider must post its practices for
reevaluating its CBM needs.
    (c) Posting Transmission Service Products and Prices.
    (1) * * *
    (2) Transmission Providers must provide a downloadable file of
their complete tariffs in the same electronic format as the tariff that
is filed with the Commission. Transmission Providers also must post all
of their rules, standards and practices that relate to transmission
services.
* * * * *
    (e) Posting specific transmission and ancillary service requests
and responses--(1) General rules. (i) All requests for transmission and
ancillary service offered by Transmission Providers under the pro forma
tariff, including requests for discounts, and all requests to designate
or terminate a network resource, must be made on the OASIS and posted
prior to the Transmission Provider responding to the request, except as
discussed in paragraphs (e)(1) (ii) and (iii) of this section. The
Transmission Provider must post all requests for transmission service,
for ancillary service, and for the designation or termination of a
network resource comparably. Requests for transmission service,
ancillary service, and to designate and terminate a network resource,
as well as the responses to such requests, must be conducted in
accordance with the Transmission Provider's tariff, the Federal Power
Act, and Commission regulations.
    (ii) The requirement in paragraph (e)(1)(i) of this section, to
post requests for transmission and ancillary service offered by
Transmission Providers under the pro forma tariff, including requests
for discounts, prior to the Transmission Provider responding to the
request, does not apply to requests for next-hour service made during
Phase I.
    (iii) In the event that a discount is being requested for ancillary
services that are not in support of basic transmission service provided
by the Transmission Provider, such request need not be posted on the
OASIS.
    (iv) In processing a request for transmission or ancillary service,
the Responsible Party shall post the same information as required in
paragraphs (c)(4) and (d)(3) of this section, and the following
information: the date and time when the request is made, its place in
any queue, the status of that request, and the result (accepted,
denied, withdrawn). In processing a request to designate or terminate
the designation of a network resource, the Responsible Party shall post
the date and time when the request is made.
    (v) For any request to designate or terminate a network resource,
the Transmission Provider (at the time when the request is received),
must post on the OASIS (and make available for download) information
describing the request (including: name of requestor, identification of
the resource, effective time for the designation or termination,

identification of whether the transaction involves the Transmission
Provider's wholesale merchant function or any affiliate; and any other
relevant terms and conditions) and shall keep such information posted
on the OASIS for at least 30 days. A record of the transaction must be
retained and kept available as part of the audit log required in Sec.
37.7.
    (vi) The Transmission Provider shall post a list of its current
designated network resources and all network customers' current
designated network resources on OASIS. The list of network resources
should include the name of the resource, its geographic and electrical
location, its total installed capacity, and the amount of capacity to
be designated as a network resource.
    (2) * * *
    (ii) Information to support the reason for the denial, including
the operating status of relevant facilities, must be maintained for
five years and provided, upon request, to the potential Transmission
Customer.
* * * * *
    (3) Posting when a transaction is curtailed or interrupted. (ii)
Information to support any such curtailment or interruption, including
the operating status of the facilities involved in the constraint or
interruption, must be maintained and made available upon request, to
the curtailed or interrupted customer, the Commission's Staff, and any
other person who requests it, for five years.
* * * * *
    (h) Posting information summarizing the time to complete
transmission service request studies. (1) For each calendar quarter,
the Responsible Party must post the set of measures detailed in
paragraph (h)(1)(i) through paragraph (h)(1)(vi) of this section
related to the Responsible Party's processing of transmission service
request system impact studies and facilities studies. The Responsible
Party must calculate and post the measures in paragraph (h)(1)(i)
through paragraph (h)(1)(vi) of this section separately for requests
for short-term firm point-to-point transmission service, long-term firm
point-to-point transmission service, and requests to designate a new
network resource and must be calculated and posted separately for
transmission service requests from Affiliates and transmission service
requests from Transmission Customers who are not Affiliates. The
Responsible Party is required to include in the calculations of the
measures in paragraph (h)(1)(i) through paragraph (h)(1)(vi) of this
section all studies the Responsible Party conducts of transmission
service requests on another Transmission Provider's OASIS.
    (i) Process Time from Initial Service Request to Offer of System
Impact Study Agreement.
    (A) Number of new system impact study agreements delivered during
the reporting quarter to entities that request transmission service,
    (B) Number of new system impact study agreements delivered during
the reporting quarter to entities that request transmission service
more than thirty (30) days after the Responsible Party received the
request for transmission service,
    (C) Mean time (in days), for all requests acted on by the
Responsible Party during the reporting quarter, from the date when the
Responsible Party received the request for transmission service to when
the Responsible Party changed the transmission service request status
to indicate that the Responsible Party could offer transmission service
or needed to perform a system impact study,
    (D) Mean time (in days), for all system impact study agreements
delivered by the Responsible Party during the reporting quarter, from
the date when the Responsible Party received the request for
transmission service to the date when the Responsible Party delivered a
system impact study agreement, and
    (E) Number of new system impact study agreements executed during
the reporting quarter.
    (ii) System Impact Study Processing Time. (A) Number of system
impact studies completed by the Responsible Party during the reporting
quarter,
    (B) Number of system impact studies completed by the Responsible
Party during the reporting quarter more than 60 days after the
Responsible Party received an executed system impact study agreement,
    (C) Mean time (in days), for all system impact studies completed by
the Responsible Party during the reporting quarter, from the date when
the Responsible Party received the executed system impact study
agreement to the date when the Responsible Party provided the system
impact study to the entity who executed the system impact study
agreement, and
    (D) Mean cost of system impact studies completed by the Responsible
Party during the reporting quarter.
    (iii) Transmission Service Requests Withdrawn from the System
Impact Study Queue. (A) Number of transmission service requests
withdrawn from the Responsible Party's system impact study queue during
the reporting quarter,
    (B) Number of transmission service requests withdrawn from the
Responsible Party's system impact study queue during the reporting
quarter more than 60 days after the Responsible Party received the
executed system impact study agreement, and
    (C) Mean time (in days), for all transmission service requests
withdrawn from the Responsible Party's system impact study queue during
the reporting quarter, from the date the Responsible Party received the
executed system impact study agreement to date when request was
withdrawn from the Responsible Party's system impact study queue.
    (iv) Process Time from Completed System Impact Study to Offer of
Facilities Study. (A) Number of new facilities study agreements
delivered during the reporting quarter to entities that request
transmission service,
    (B) Number of new facilities study agreements delivered during the
reporting quarter to entities that request transmission service more
than thirty (30) days after the Responsible Party completed the system
impact study,
    (C) Mean time (in days), for all facilities study agreements
delivered by the Responsible Party during the reporting quarter, from
the date when the Responsible Party completed the system impact study
to the date when the Responsible Party delivered a facilities study
agreement, and
    (D) Number of new facilities study agreements executed during the
reporting quarter.
    (v) Facilities Study Processing Time. (A) Number of facilities
studies completed by the Responsible Party during the reporting
quarter,
    (B) Number of facilities studies completed by the Responsible Party
during the reporting quarter more than 60 days after the Responsible
Party received an executed facilities study agreement,
    (C) Mean time (in days), for all facilities studies completed by
the Responsible Party during the reporting quarter, from the date when
the Responsible Party received the executed facilities study agreement
to the date when the Responsible Party provided the facilities study to
the entity who executed the facilities study agreement,
    (D) Mean cost of facilities studies completed by the Responsible
Party during the reporting quarter, and
    (E) Mean cost of upgrades recommended in facilities studies
completed during the reporting quarter.
    (vi) Service Requests Withdrawn from Facilities Study Queue.

    (A) Number of transmission service requests withdrawn from the
Responsible Party's facilities study queue during the reporting
quarter,
    (B) Number of transmission service requests withdrawn from the
Responsible Party's facilities study queue during the reporting quarter
more than 60 days after the Responsible Party received the executed
facilities study agreement, and
    (C) Mean time (in days), for all transmission service requests
withdrawn from the Responsible Party's facilities study queue during
the reporting quarter, from the date the Responsible Party received the
executed facilities study agreement to date when request was withdrawn
from the Responsible Party's facilities study queue
    (2) The Responsible Party is required to post the measures in
paragraph (h)(1)(i) through paragraph (h)(1)(vi) of this section for
each calendar quarter within 15 days of the end of the calendar
quarter. The Responsible Party will keep the quarterly measures posted
on OASIS for three calendar years.
    (3) The Responsible Party will be required to post on OASIS the
measures in paragraph (h)(3)(i) through paragraph (h)(3)(iv) of this
section in the event the Responsible Party, for two consecutive
calendar quarters, completes more than twenty (20) percent of the
studies associated with requests for transmission service from entities
that are not Affiliates of the Responsible Party more than sixty (60)
days after the Responsible Party delivers the appropriate study
agreement. The Responsible Party will have to post the measures in
paragraph (h)(3)(i) through paragraph (h)(3)(iv) of this section until
it processes at least ninety (90) percent of all studies within 60 days
after it has received the appropriate executed study agreement. For the
purposes of calculating the percent of studies completed more than
sixty (60) days after the Responsible Party delivers the appropriate
study agreement, the Responsible Party should aggregate all system
impact studies and facilities studies that it completes during the
reporting quarter. The Responsible Party must calculate and post the
measures in paragraph (h)(3)(i) through paragraph (h)(3)(iv) of this
section separately for requests for short-term firm point-to-point
transmission service, long-term firm point-to-point transmission
service, and requests to designate a new network resource and must be
calculated and posted separately for transmission service requests from
Affiliates and transmission service requests from Transmission
Customers who are not Affiliates.
    (i) Mean, across all system impact studies the Responsible Party
completes during the reporting quarter, of the employee-hours expended
per system impact study the Responsible Party completes during
reporting period;
    (ii) Mean, across all facilities studies the Responsible Party
completes during the reporting quarter, of the employee-hours expended
per facilities study the Responsible Party completes during reporting
period;
    (iii) The number of employees the Responsible Party has assigned to
process system impact studies;
    (iv) The number of employees the Responsible Party has assigned to
process facilities studies.
    (4) The Responsible Party is required to post the measures in
paragraph (h)(3)(a) through paragraph (h)(3)(d) of this section for
each calendar quarter within 15 days of the end of the calendar
quarter. The Responsible Party will keep the quarterly measures posted
on OASIS for five calendar years.
    (i) Posting data related to grants and denials of service. The
Responsible Party is required to post data each month listing, by path
or flowgate, the number of transmission service requests that have been
accepted and the number of transmission service requests that have been
denied during the prior month. This posting must distinguish between
the length of the service request (e.g., short-term or long-term
requests) and between the type of service requested (e.g., firm point-
to-point, non-firm point-to-point or network service). The posted data
must show:
    (1) The number of non-Affiliate requests for transmission service
that have been rejected,
    (2) The total number of non-Affiliate requests for transmission
service that have been made,
    (3) The number of Affiliate requests for transmission service that
have been rejected, and
    (4) The total number of Affiliate requests for transmission service
that have been made.
    5. In Sec.  37.7, paragraph (b) is revised to read as follows:

Sec.  37.7  Auditing Transmission Service Information.

* * * * *
    (b) Audit data must remain available for download on the OASIS for
90 days, except ATC/TTC postings that must remain available for
download on the OASIS for 20 days. The audit data are to be retained
and made available upon request for download for five years from the
date when they are first posted in the same electronic form as used
when they originally were posted on the OASIS.
---------------------------------------------------------------------------

    \450\ A ``*'' indicates that the commenter filed a notice of
intervention only.

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

Appendix A: Commenter Acronyms

              Initial Commenters in Docket No. RM05-25-000
------------------------------------------------------------------------
              Abbreviation                 RM05-25-000 Initial comments
------------------------------------------------------------------------
AEP....................................  American Electric Power System
                                          (AEP Texas North Company; AEP
                                          Texas Central Company;
                                          Appalachian Power Company;
                                          Columbus Southern Power
                                          Company; Indiana Michigan
                                          Power Company; Kentucky Power
                                          Company; Kingsport Power
                                          Company; Ohio Power Company;
                                          Public Service Company of
                                          Oklahoma; Southwestern
                                          Electric Power Company and
                                          Wheeling Power Company).
Alabama MEA............................  Alabama Municipal Electric
                                          Authority.
Alberta Intervenors....................  Alberta Intervenors
                                          (TransCanada Energy Ltd.;
                                          ENMAX Energy Marketing, Inc.;
                                          EPCOR Merchant and Capital,
                                          LP; and TransAlta
                                          Corporation).
Alberta System Operator................  Alberta Electric System
                                          Operator.
Alcoa..................................  Alcoa Inc. and Alcoa Power
                                          Generating Inc.
Alliance of State Leaders..............  Alliance of State Leaders
                                          Protecting Electricity
                                          Consumers.

Ameren.................................  Ameren Services Company
                                          (Central Illinois Light
                                          Company d/b/a AmerenCILCO;
                                          Central Illinois Public
                                          Service Company d/b/a
                                          AmerenCIPS; Illinois Power
                                          Company d/b/a AmerenIP; Union
                                          Electric Company d/b/a
                                          AmerenUE; Ameren Energy
                                          Marketing Company; Ameren
                                          Energy Generating Company; and
                                          AmerenEnergy Resources
                                          Generating Company).
American Forest and Paper* \450\.......  American Forest and Paper
                                          Association.
American Transmission..................  American Transmission Company
                                          LLC.
AMP-Ohio...............................  American Municipal Power-Ohio,
                                          Inc.
APPA...................................  American Public Power
                                          Association.
APS....................................  Arizona Public Service Company.
Arkansas Cities........................  Arkansas Cities and Cooperative
                                          (Conway Corporation; West
                                          Memphis Utilities Commission;
                                          City of Osceola, Arkansas;
                                          City of Prescott, Arkansas;
                                          Hope Water & Light Commission;
                                          and Farmers Electric
                                          Cooperative Cooperation).
Arkansas Commission....................  Arkansas Public Service
                                          Commission.
AWEA...................................  American Wind Energy
                                          Association.
BC Transmission........................  British Columbia Transmission
                                          Corporation.
Bonneville.............................  Bonneville Power
                                          Administration.
Bureau of Reclamation..................  U.S. Bureau of Reclamation.
CAISO..................................  California Independent System
                                          Operator Corporation.
California Commission..................  Public Utilities Commission of
                                          the State of California.
Calpine................................  Calpine Corporation.
Canadian Electricity Association.......  Canadian Electricity