[Federal Register Volume 60, Number 102 (Friday, May 26, 1995)]
[Rules and Regulations]
[Pages 27878-27882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12990]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 2
[Docket No. RM93-19-001]
Inquiry Concerning the Commission's Pricing Policy for
Transmission Services Provided by Public Utilities Under the Federal
Power Act
Issued May 22, 1995.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule; order on reconsideration and clarifying policy
statement.
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SUMMARY: The Commission in its Transmission Pricing Policy Statement,
issued on October 26, 1994, announced a new policy regarding the
pricing of transmission services provided by public utilities and
transmitting utilities under the Federal Power Act that allows greater
transmission pricing flexibility than was allowed under previous
Commission policies. The Commission traditionally had allowed only
postage-stamp, contract-path pricing. the Policy Statement announced
that the Commission also will allow a variety of other pricing methods
that may be more suitable for competitive wholesale power markets,
including distance-sensitive and flow-based pricing. In response to
filings by certain entities, the Commission is denying requests for
reconsideration of the Policy Statement; however, the Commission is
clarifying certain matters concerning non-conforming transmission
pricing proposals.
EFFECTIVE DATE: This order is effective as of May 22, 1995.
FOR FURTHER INFORMATION CONTACT:
Deborah B. Leahy, Office of the General Counsel, Federal Energy
Regulatory Commission, 825 North Capitol Street NE, Washington, D.C.
20426, Telephone: (202) 208-2039, (legal issues)
Stephen J. Henderson, Office of Economic Policy, Federal Energy
Regulatory Commission, 825 North Capitol Street NE, Washington, D.C.
20426, Telephone: (202) 208-0100, (technical issues)
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 3104, at 941 North
Capitol Street, N.E., Washington, D.C. 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397. To access CIPS, set your communications
software to 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or 300
bps, full duplex, no parity, 8 data bits and 1 stop bit. The full text
of this document will be available on CIPS for 60 days from the date of
issuance in ASCII and WordPerfect 5.1 format. After 60 days the
document will be archived, but still accessible. The complete text on
diskette in WordPerfect format may also be purchased from the
Commission's copy contractor, La Dorn Systems Corporation, also located
in Room 3104, 941 North Capitol Street NE., Washington, D.C. 20426.
Order on Reconsideration and Clarifying Policy Statement
Issued May 22, 1995.
On October 26, 1994, the Commission issued a Transmission Pricing
Policy Statement.\1\ We announced a new policy regarding the pricing of
transmission services provided by public utilities and transmitting
utilities under the Federal Power Act (FPA) that allows greater
transmission pricing flexibility than was allowed under previous
Commission policies. The Commission traditionally had allowed only
postage-stamp, contract-path pricing. The Policy Statement announced
that the Commission also will allow a variety of other pricing methods
that may be more suitable for competitive wholesale power markets,
including distance-sensitive and flow-based pricing.
\1\Inquiry Concerning the Commission's Pricing Policy for
Transmission Services Provided by Public Utilities Under the Federal
Power Act, Policy Statement, III FERC Stats. & Regs. para.31,005
(1994); 59 FR 55031, Nov. 3, 1994. (Policy Statement).
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The Policy Statement identified five principles for evaluating
transmission pricing proposals. The first principle is that
transmission pricing should conform to the traditional embedded cost
revenue requirement. However, the Commission also provided procedures
whereby utilities can propose rates that do not conform to the
traditional revenue requirement and thus do not meet the first
principle, i.e., non-conforming proposals. The second principle
requires that any new transmission pricing proposal, conforming or non-
conforming, must meet the Commission's comparability standard.\2\ The
remaining three principles (concerning economic efficiency, fairness,
and practicality) reflect goals that an applicant must try to meet, but
that may need to be balanced against one another in the Commission's
determination of whether the proposed rates are just and reasonable.
\2\See American Electric Power Service Corporation (AEP), 67
FERC para.61,168 (1994), reh'g pending. The comparability standard
generally provides that ``[a]n open access tariff that is not unduly
discriminatory or anticompetitive should offer third parties access
on the same or comparable basis, and under the same or comparable
terms and conditions, as the transmission provider's uses of its
system.'' Id. at 61,490. The Commission explained in the Policy
Statement that comparability of service applies to price as well as
to terms and conditions. Policy Statement at 31,142. The Commission
recently issued a Notice of Proposed Rulemaking in which it proposes
to require all public utilities to have on file non-discriminatory
open access transmission tariffs and provides guidance on the
comparability standard. See Promoting Wholesale Competition Through
Open Access Non-discriminatory Transmission Services by Public
Utilities; Recovery of Stranded Costs by Public Utilities and
Transmitting Utilities, Docket Nos. RM95-8-000 and RM94-7-001,
Notice of Proposed Rulemaking, 60 FR 17662 (Apr. 7, 1995), IV FERC
Stats. & Regs. para.32,514 (1995) (Open Access NOPR).
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On November 22, 1994, the Vermont Department of Public Service
(Vermont Department) filed a request for reconsideration of the
Commission's decision to treat opportunity cost pricing as a form of
marginal cost pricing consistent with comparability principles. On
November 23, 1994, the American Forest and Paper Association (American
Forest and Paper) filed a request for rehearing and motion for
reconsideration concerning several aspects of the Policy Statement.
American Forest and Paper asks the Commission to replace the Policy
Statement with a Notice of Proposed Rulemaking. Further, it opposes the
Commission's decision to allow opportunity cost pricing and marginal
[[Page 27879]] cost pricing. In addition, it asks the Commission to
clarify that non-conforming proposals are subject to the notice and
filing requirements of the FPA. Also on November 23, 1994, Catex Vitol
Electric, Inc. (Catex) filed a request for reconsideration. Catex
argues, among other things, that a generic approach specifying a
standard method of transmission pricing is preferable to a case-by-case
approach that allows experimentation.\3\
\3\On November 28, 1994, the Rural Utilities Service (RUS), a
credit agency in the U.S. Department of Agriculture, filed comments
in response to the Policy Statement. RUS asks the Commission to
consider the impact of transmission pricing decisions on the RUS
electric program, under which RUS provides low-cost financial
assistance to rural electric distribution and power generation and
transmission cooperatives pursuant to the Rural Electrification Act
(RE-Act). RUS suggests, for example, that in considering pricing
mechanisms involving RUS borrowers, the Commission should not permit
non-RE-Act beneficiaries to get the benefit of RUS loan subsidies to
the detriment of RUS borrowers. Although styled as comments, RUS's
pleading was submitted after the deadline for comments in this
proceeding had closed. Accordingly, we will treat RUS's pleading as
a motion for reconsideration and deny it because we believe the
issues raised by RUS are best addressed on a case-by-case basis as
they may arise in connection with a particular transmission pricing
proposal.
As discussed below, the requests for reconsideration of the Policy
Statement are denied.\4\ However, the Commission clarifies certain
matters concerning non-conforming transmission pricing proposals.
\4\We stated in the Policy Statement that we would accept
motions for reconsideration to help us refine the principles
established therein and to provide an opportunity to respond to any
questions or clarify any ambiguity. Policy Statement at 31,150.
Although American Forest and Paper styled its pleading as both a
request for rehearing and a motion for reconsideration, we will
treat it as a motion for reconsideration only, as we find that
rehearing does not lie. First, contrary to American Forest and
Paper's argument that the Policy Statement has the force of a final
rule ``because it changes the filing requirements for electric
transmission rates'' (American Forest and Paper pleading at 1 n.1),
as discussed below, the Policy Statement makes no such change in the
filing requirements. Second, we find that rehearing does not lie
because the Policy Statement constitutes a general statement of
policy to be applied to transmission pricing proposals submitted in
individual cases. See, e.g., Pacific Gas & Electric Company v. FPC,
506 F.2d 33 (D.C. Cir. 1974).
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Discussion
A. Policy Statement or Rulemaking
American Forest and Paper and Catex support a generic approach to
transmission pricing in lieu of the case-by-case approach envisioned in
the Policy Statement. American Forest and Paper argues that the Policy
Statement will increase uncertainty concerning transmission rates and
thus inhibit the development of competitive power markets. It contends
that the Policy Statement will allow utilities to propose widely
varying tariffs that will make it difficult for a prospective customer
to calculate transmission rates. American Forest and Paper and Catex
argue that the customer will be forced to bear litigation costs and to
wait until the completion of rate proceedings and any court review to
know with certainty what rates, terms and conditions will be in effect.
By that time, the customer may have lost the opportunity to win a
competitive bid or otherwise finalize a long-term power plant
financing. American Forest and Paper also argues that the Policy
Statement will create a heavy administrative burden because the
Commission will be required to adjudicate a high number of transmission
rate cases. It requests that the Commission replace the Policy
Statement with a Notice of Proposed Rulemaking of greater specificity.
Catex similarly asks the Commission to consider adopting a generic
approach to transmission pricing, arguing that transmitting utilities
will use the case-by-case approach to file experimental tariffs that
will inhibit the transition to competition and open access. It submits
that power marketers may be foreclosed for economic reasons from
participating in all of the rate cases that they deem important. Catex
also argues that the case-by-case approach will create a patchwork of
rate structures that will make it difficult for transmission customers
to arrange multi-utility transactions or calculate rates.
While we understand the concerns voiced by American Forest and
Paper and Catex, we nevertheless do not believe that a ``simple,
generic approach to transmission pricing''\5\ is advisable. As we noted
in the Policy Statement, there was a strong consensus among the 165
entities from whom the Commission received comments that we should
allow greater pricing flexibility. We provided several reasons in the
Policy Statement why greater pricing flexibility is required.\6\ First,
exclusive use of methods that worked reasonably well in the past does
not provide sufficient flexibility to accommodate the evolving needs of
transmission owners and users in a more competitive era. Second, our
existing ``or'' pricing policy may not always encourage the most
efficient investments in and use of the transmission grid. Third,
regional differences, such as power flow patterns and population
densities, justify a more flexible policy that can account for such
differences. Fourth, a more flexible pricing policy may be necessary to
implement effectively our regional transmission group (RTG) policy,
which encourages RTGs to deal with a broad range of issues, including
pricing, and which indicates that the Commission will afford deference
to RTG decision-making.
\5\Catex pleading at 2.
\6\Policy Statement at 31,139.
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Our conclusion at this juncture in the transition to competitive
bulk power markets is that, if the pricing flexibility envisioned in
the Policy Statement is to be achieved, a case-by-case approach to
transmission pricing, not a generic approach, is appropriate. As a
result, we will deny the requests of American Forest and Paper and
Catex to replace the Policy Statement with a generic proceeding.
With regard to the concerns of American Forest and Paper and Catex
as to transmission pricing certainty, as the Policy Statement makes
clear, the Commission, too, supports pricing certainty. Indeed, the
Policy Statement states that the comparability principle includes
comparable pricing certainty.\7\ In addition, the fifth pricing
principle is that transmission pricing should be practical and as easy
to administer as appropriate given the other pricing principles. The
Policy Statement recognizes, however, that certain of the Commission's
goals may have to be balanced against one another. For example, we
recognize the inevitability of tradeoffs between the sometimes
competing goals of simplicity and better price signals.\8\ Some pricing
proposals may be so complex that they are difficult to understand and
analyze. The Policy Statement indicates that while such complexity is
not fatal, it should be balanced by efficiency gains or other
advantages.\9\
\7\Id. at 31,143.
\8\Id. at 31,139.
\9\Id. at 31,144.
B. Opportunity Cost and Marginal Cost Pricing
In the Policy Statement, the Commission explained that when the
transmission grid is constrained and a utility chooses not to expand
its system, we have allowed the utility to charge transmission-only
customers the higher of embedded costs or legitimate and verifiable
opportunity costs, but not the sum of the two (``or'' pricing). The
opportunity costs are capped by incremental expansion costs.\10\ The
Policy Statement reflects the Commission's support for the use of
marginal cost pricing to promote efficient decision-making by both
transmission owners and users. It states that, to the extent
practicable, [[Page 27880]] transmission rates should be designed to
reflect marginal costs, rather than embedded costs, in a manner
consistent with the remaining pricing principles. As we explained, when
lines are not congested, marginal transmission costs are primarily line
losses. When lines are congested, marginal transmission costs are
opportunity costs.\11\
\10\Id. at 31,138.
\11\Id. at 31,143.
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The Vermont Department asks us to reconsider our holding that
opportunity cost pricing is a form of marginal cost pricing consistent
with comparability principles. It argues that opportunity cost pricing
is not marginal cost pricing because marginal cost pricing contemplates
that all customers will be assessed the same marginal cost price and
because opportunity costs are inherently unverifiable. The Vermont
Department further contends that opportunity cost pricing makes rates
unpredictable, contrary to the comparability requirement.\12\ The
Vermont Department requests that the Commission either find that
opportunity cost pricing is inconsistent with the comparability
standard or provide that filings proposing opportunity cost pricing
will be treated as non-conforming proposals.
\12\The Vermont Department notes that the Policy Statement
provides that comparability of pricing includes certainty of pricing
and that a transmission customer should have the same price
certainty as does the transmitting utility. Policy Statement at
31,143. The Vermont Department (as well as American Forest and
Paper) argue that price certainty is particularly important in light
of the court's decision in Cajun Electric Power Cooperative, Inc. v.
FERC, F.3d 173 (D.C. Cir. 1994).
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American Forest and Paper similarly urges the Commission to
reconsider whether utilities should be permitted to propose opportunity
cost pricing. It argues that opportunity cost pricing is unfair and
anticompetitive. According to American Forest and Paper, the
requirement that the utility charge itself the same opportunity costs
as it charges others is unenforceable because the determination that
opportunity costs exist is a subjective decision made by the utility.
American Forest and Paper also opposes the use of marginal cost
pricing, arguing that it will not create efficient transmission and
generation siting decisions, as anticipated by the Policy Statement, in
the absence of a competitive market for transmission. It suggests that
the expansion of transmission capacity and the location of new
generators and new load will be based on critical environmental, fuel
supply, and siting factors rather than on marginal cost-based
transmission rates.
We stand by our policy of allowing utilities to include opportunity
cost charges in their transmission rates. The rationale for that policy
is discussed in the Policy Statement, is set forth in prior Commission
orders, and has been affirmed by the Court of Appeals for the District
of Columbia Circuit.\13\
\13\See, e.g., Policy Statement at 31,137-38; Pennsylvania
Electric Company, 58 FERC para.61,278, reh'g denied and pricing
policy clarified, 60 FERC para.61,034, reh'g denied, 60 FERC
para.61,244 (1992), affirmed sub nom. Pennsylvania Electric Company
v. FERC, 11 F.3d 207 (D.C. Cir. 1993).
Moreover, because any new transmission pricing proposal, whether
conforming or non-conforming, must meet the comparability standard, we
will have ample opportunity to address any concerns that opportunity
cost pricing may be unfair and anticompetitive or otherwise
inconsistent with the comparability standard in the course of our
evaluation of a particular transmission pricing proposal. With regard
to the Vermont Department's argument that opportunity cost pricing is
not the equivalent of marginal cost pricing because marginal cost
pricing contemplates that all customers will be charged the same price,
we do not agree that marginal cost pricing requires that all customers
be charged the same price. 14
\14\Marginal cost pricing could be implemented either by
charging all customers the same price or by charging a customer for
marginal costs at the time it signs a contract. Under the contract
version of marginal cost pricing, customers who sign contracts at
different times would be charged different prices.
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With regard to American Forest and Paper's opposition to marginal
cost pricing, while we agree that environmental, fuel supply, and
siting factors are important considerations in the expansion of
transmission capacity and the location of new generators and load, we
also believe that providing more efficient price signals through the
use of marginal cost pricing can influence efficient siting decisions.
As we make clear in the Policy Statement, we believe that marginal cost
pricing will promote efficient decision-making by both transmission
owners and users. 15 As a result, we encourage experimentation
regarding marginal cost pricing proposals, but we expect such proposals
to be fully supported. In the end, the Commission will determine the
appropriateness of marginal cost pricing proposals on a case-by-case
basis.
\15\Policy Statement at 31,143.
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C. Procedures For Filing Non-Conforming Proposals
American Forest and Paper argues that two of the procedures in the
Policy Statement relating to non-conforming proposals may be
inconsistent with the FPA. First, it notes that the Policy Statement
would permit a utility to submit a non-conforming proposal in the form
of a petition for declaratory order. However, American Forest and Paper
suggests that the FPA requires utilities to file and support proposed
changes in rates and requires ``a hearing in which [the utilities']
customers can be afforded due process of law.'' 16 Second,
American Forest and Paper objects that the Policy Statement would
improperly exempt non-conforming proposals from the notice provisions
of section 205. It asks the Commission to clarify that the FPA controls
the notice and filing requirements for utilities submitting non-
conforming proposals.
\16\American Forest and Paper pleading at 7.
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The clarification that American Forest and Paper seeks concerning
non-conforming proposals submitted via a petition for declaratory order
is unnecessary. A non-conforming proposal that is submitted in a
petition for declaratory order will be subject to a notice and comment
period. If, at the end of the declaratory order proceeding, the
Commission finds that a non-conforming pricing proposal meets the
statutory criteria, the Policy Statement provides that ``the utility
would still need to file a rate reflecting the proposal pursuant to FPA
section 205.'' 17 As the Policy Statement suggests, ``[p]resumably
the section 205 proceeding would be straightforward (i.e. akin to a
compliance filing) * * * since the Commission would have already
addressed the merits of the proposal in the declaratory order.''
18 However, such a non-conforming proposal would, in any event, be
subject to the notice and filing requirements, and opportunity for
hearing, under section 205.
\17\Policy Statement at 31,148.
\18\Id.
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With regard to non-conforming proposals submitted under section 205
in conjunction with conforming proposals, the Policy Statement provides
that ``[t]he conforming proposal would be subject to the notice and
suspension procedures of section 205. The non-conforming proposal would
not.'' 19 The phrase ``notice and suspension procedures of section
205'' was intended to refer to those provisions of section 205 that
require a public utility to give 60 days' notice to the Commission and
the public before making a rate change and that permit the Commission
to suspend the effective [[Page 27881]] date of such rates. 20
These provisions are not applicable to non-conforming proposals
because, as the Policy Statement indicates, a non-conforming proposal
will be permitted to go into effect only prospectively from the date
the Commission determines that such a pricing proposal meets the
statutory requirements. 21 Although American Forest and Paper
apparently has interpreted the statement that non-conforming proposals
would not be subject to the notice and suspension procedures of section
205 to mean that public utilities would not be required to provide
notice of the submission of non-conforming proposals, that was not the
Commission's intention. Accordingly, we clarify that any non-conforming
proposal submitted in conjunction with a conforming proposal must still
be filed with the Commission. As with any rate filing under section
205, the Commission would notice the filing of both pricing proposals
(i.e., conforming and non-conforming) and provide a period for public
comment.
\19\Id. at 31,147.
\20\See 16 U.S.C. Secs. 824d(d),(e); Policy Statement at 31,136.
\21\Policy Statement at 31,136. As the Policy Statement
provides, if ``the Commission determines that the alternative, non-
conforming rate proposal is acceptable under the FPA, the Commission
will allow the utility to make a compliance rate filing, and the
rates will be put into effect prospectively.'' Id. at 31,147.
We also wish to clarify the procedures for filing non-conforming
pricing proposals. In the Policy Statement, the Commission described
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those procedures as follows:
Any public utility that seeks non-conforming pricing must have
on file with the Commission an open access transmission tariff
offering comparable services. Such comparability tariff must have
been accepted for filing by the Commission before a non-conforming
pricing proposal will be considered. Moreover, utilities proposing
non-conforming transmission pricing must submit such pricing
proposals either: (a) in conjunction with a section 205 conforming
transmission pricing proposal (the non-conforming proposal would be
reflected as alternative ``pro forma'' rate sheets to the conforming
proposal); or (b) in a petition for declaratory order.22
\22\Id.
The Policy Statement states that, for alternative (a) above, the
Commission and interested parties would review the non-conforming
proposal in conjunction with review of the companion conforming pricing
proposal.
The above-quoted language is somewhat unclear. On one hand, it
states that the Commission will not consider a non-conforming proposal
unless a comparability tariff has already been accepted for filing. On
the other hand, it contemplates that a utility may file a non-
conforming pricing proposal simultaneously with the filing of a
conforming pricing proposal--one that has not already been accepted for
filing.
We wish to clarify that if a public utility does not already have
on file an open access comparability tariff, it may simultaneously file
both a conforming pricing proposal and a non-conforming pricing
proposal in conjunction with its filing of an open access comparability
tariff;23 however, the non-conforming proposal must consist of
``pro forma'' rate sheets that can take effect, if at all, only on a
prospective basis at the end of the section 205 proceeding. If a public
utility chooses to submit a non-conforming proposal via a petition for
a declaratory order, it must already have a comparability tariff that
has been accepted for filing by the Commission.
\23\We note that in Entergy Services, Inc., et al., 70 FERC
para.61,006 (1995) (Entergy), the Commission rejected the non-
conforming pricing proposal that Entergy Services, Inc. (Entergy)
filed simultaneously with a conforming pricing proposal. The
Commission gave three reasons for its decision, one of which was
that Entergy's non-conforming proposal was premature because Entergy
did not have on file (i.e., accepted by the Commission) an open
access tariff offering comparable services. Although our
clarification in this order of the procedures for submitting non-
conforming pricing proposals eliminates prematurity as a basis for
rejecting Entergy's non-conforming proposal, the other two bases
remain valid. As a result, our clarification here does not require
reversal of the Entergy result.
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We also clarify that if a utility already has an open access
comparability tariff on file and later seeks to file a non-conforming
pricing proposal, the utility can submit the non-conforming proposal
either in a section 205 filing or in a petition for a declaratory
order. In other words, the utility may submit the non-conforming
proposal alone in a section 205 filing, to take effect, if at all, only
on a prospective basis at the end of the section 205 proceeding; it
does not have to re-file the conforming proposal that already has been
accepted or file a new conforming proposal. In any event, the open
access comparability tariff must be filed before or simultaneously with
the non-conforming proposal.
Similarly, we clarify that if a public utility already has an
approved non-conforming proposal and seeks to submit a replacement non-
conforming proposal, the utility can submit the new non-conforming
proposal either in a section 205 filing, to take effect, if at all,
only on a prospective basis at the end of the section 205 proceeding
(the utility need not file a conforming proposal) or in a petition for
a declaratory order. In those cases in which the utility chooses the
declaratory order procedure, and the Commission finds that the
utility's proposal meets the statutory criteria, the utility would
still need to file a rate reflecting the proposal pursuant to FPA
section 205.24
\24\See Policy Statement at 31,148.
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We hope that this clarification removes any uncertainty that may
have existed regarding the procedures for filing non-conforming pricing
proposals. As we noted in the Policy Statement, we believe that those
procedures are flexible enough to permit utilities to propose non-
conforming pricing innovations which they believe will benefit
ratepayers and promote the development of a competitive bulk power
market.25
\25\Id. at 31,150.
In addition to allowing utilities to propose non-conforming pricing
proposals, the Policy Statement also allows considerable flexibility in
the types of conforming proposals that may be filed. As we stated in
the Policy Statement, we anticipate that a wide variety of pricing
proposals may be reconciled with the traditional revenue
requirement.26 However, only a few such proposals have been filed
to date.27 Accordingly, we reiterate here that many varieties of
cost-based pricing are possible and encourage utilities to consider
innovative pricing approaches that conform to the traditional revenue
requirement. We anticipate that many utilities will consider filing
such pricing proposals in conjunction with non-discriminatory open
access (comparability) tariffs that could be filed either prior to
issuance of a final rule on open access or in Stage Two proceedings
following issuance of any final rule.28
\26\Id. at 31,144-46.
\27\We are aware of only two pricing proposals filed since the
issuance of the Policy Statement that propose an alternative to
postage-stamp, contract-path pricing. See Jersey Central Power &
Light Company, et al., Docket No. ER95-791-000; Southern Company
Services, Inc., Docket No. ER95-969-000.
\28\Under the Commission's recently proposed Open Access NOPR,
if utilities have not filed open access comparability tariffs by the
time a final rule is issued, the Commission in Stage One would place
on file for such utilities open access tariffs reflecting postage-
stamp embedded cost rates. Such utilities could seek a different
rate methodology in Stage Two. See Open Access NOPR, IV FERC Stats.
& Regs. para.32,514 at ____, mimeo at 288-95.
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D. Miscellaneous
Catex urges the Commission to: (1) emphasize that rates must be
simple and predictable; (2) require a utility to give the same
transmission rate discounts to a competitor as are given to the
utility's affiliates or to support the utility's own sales; (3) avoid
subsidies and the loading of fixed costs onto non-firm
[[Page 27882]] transmission rates; and (4) require power pools to meet
the comparability standard. We will deny Catex's motion for
reconsideration with regard to these issues. The first three issues are
already adequately addressed in the pricing principles set forth in the
Policy Statement as discussed briefly below. The fourth (i.e., that
power pools be required to meet the comparability standard) has already
been proposed by the Commission in the Open Access NOPR.29
\29\See Open Access NOPR, IV FERC Stats. & Regs. para.32,514 at
____, mimeo at 96-97; 290-91.
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With regard to Catex's request that the Commission emphasize
simplicity and predictability in transmission rates, we note that the
Policy Statement already reflects the Commission's support of
transmission pricing that is simple and predictable. Indeed, one of the
Policy Statement's pricing principles is that transmission pricing
should be practical. To this end, the Policy Statement provides that a
transmission user should be able to calculate how much it will be
charged for transmission service.30 At the same time, however, the
Policy Statement recognizes that this principle may need to be balanced
on a case-by-case basis against the other pricing principles, such as
the principle that transmission pricing should promote economic
efficiency. In addition, although Catex contends that charges to a
transmission customer should not be raised after the fact, for example,
to compensate for loop flows on other systems, the Commission believes
that whether a transmission rate should be increased, as opposed to
fixed for the term of a transaction, is a matter to be determined based
on the facts and circumstances of a particular case.31
\30\Policy Statement at 31,144.
\31\However, we note that our ``or'' policy permits transmission
rates to reflect the higher of embedded or opportunity costs and
that the calculation of such costs can be on an annual basis. See
Florida Power & Light Company, 70 FERC para.61,158 at 61,483 (1995),
rehearing pending.
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With regard to Catex's concern about discounts, we note that the
Commission historically has prohibited preferential pricing to
affiliates.32 Moreover, such preferential pricing would be
inconsistent with the requirement of non-discriminatory open access
transmission.33 As the Policy Statement makes clear, the
requirement that transmission pricing must reflect comparability
prohibits the transmission owner from selling itself transmission
service at a discount.34
\32\See, e.g., Heartland Energy Services, Inc., 68 FERC
para.61,223 at 62,062-63 (1994); Ocean State Power, 44 FERC
para.61,261 at 61,983-85 (1988).
\33\See AEP, 67 FERC at 61,490; Open Access NOPR, IV FERC Stats.
& Regs. para.32,514 at ____, mimeo at 87-88.
\34\Policy Statement at 31,142-43.
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As to Catex's concern that subsidies be avoided, we reiterate that
the Policy Statement provides that, consistent with the principle that
transmission pricing must reflect comparability, a transmission owner
that uses its own transmission system to make off-system sales should
pay for transmission service at the same rate that third-party
customers pay for the same service. As a result, a transmission owner
is prohibited from selling itself transmission service at a discount
that would be subsidized by native load and transmission-only
customers.35 With respect to Catex's concerns about appropriate
pricing of non-firm transmission services, the Commission will consider
on a case-by-case basis whether non-firm transmission customers are
subsidizing other transmission users.
\35\Id. at 31,142-43.
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The Commission Orders
(A) The motions for reconsideration of American Forest and Paper,
Catex, the Vermont Department, and RUS are hereby denied as set forth
in the body of this order.
(B) The Commission's Policy Statement is hereby clarified as set
forth in the body of this order.
By the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 95-12990 Filed 5-25-95; 8:45 am]
BILLING CODE 6717-01-P
