[Federal Register Volume 61, Number 92 (Friday, May 10, 1996)]
[Proposed Rules]
[Pages 21847-21854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10692]
Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Proposed
Rules
[[Page 21847]]
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM96-11-000]
Capacity Reservation Open Access Transmission Tariffs
April 24, 1996.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
proposing a rule that specifies filing requirements to be followed by
public utilities in making transmission tariff filings based on
capacity reservations for all transmission users. The proposed capacity
reservation open access transmission tariff, if adopted, would replace
the open access transmission tariff required by the Commission in
Promoting Wholesale Competition Through Open Access Non-discriminatory
Transmission Services by Public Utilities; Recovery of Stranded Costs
by Public Utilities and Transmitting Utilities, Order No. 888, FERC
Stats. & Regs. para. 31,036 (1996). The Commission is seeking public
comment on whether to require this type of tariff for all public
utilities that must comply with the Commission's open access
requirements, and on the specific provisions that should be contained
in a capacity reservation tariff. The Commission will convene a
technical conference on these issues.
DATES: Written comments must be received by the Commission by August 1,
1996. The Commission also will convene a technical conference to be
held over two days in September 1996 at the Commission, 888 First
Street NE., Washington, D.C. 20426. The Commission will announce the
dates, time, and agenda of the technical conference at a later date.
FOR FURTHER INFORMATION CONTACT:
Jan Macpherson (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE., Washington,
D.C. 20426, Telephone: (202) 208-0921
Roland W. Wentworth (Technical Information), Office of Economic Policy,
Federal Energy Regulatory Commission, 888 First Street NE., Washington,
D.C. 10426, Telephone: (202) 208-1288.
ADDRESSES: Send comments to: Office of the Secretary, Federal Energy
Regulatory Commission, 888 First Street NE., Washington, D.C. 20426.
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 the Public Reference Room
at 888 First Street NE., 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 202-208-1997 if dialing locally or 1-800-856-3520 if dialing
long distance. CIPS is also available through the Fed World system (by
modem or Internet). To access CIPS, set your communications software to
19200, 14400, 12000, 9600, 7200, 4800, 2400, or 1200 bps, full duplex,
no parity, 8 data bits and 1 stop bit. The full text of this order will
be available on CIPS indefinitely in ASCII and WordPerfect 5.1 format.
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 the Public Reference Room at 888 First
Street NE., Washington, D.C. 20426.
I. Introduction
The Federal Energy Regulatory Commission (Commission) is today
adopting a final rule (Open Access Final Rule) 1 requiring each
public utility that owns, operates or controls facilities used for the
transmission of electric energy in interstate commerce to file an open
access non-discriminatory transmission tariff (Final Rule tariff). The
Open Access Final Rule also requires these utilities to take
transmission service for their own wholesale sales and purchases of
electric energy under this tariff. The Final Rule tariff specifies that
service is to be provided on both a network basis and a flexible point-
to-point basis; the network service is a load-based service, while the
point-to-point service is based on transmission capacity reservations.
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\1\ Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities, Docket No.
RM95-8-000, Order No. 888, FERC Stats. & Regs. para. 31,036 (1996).
The Open Access Final Rule is being published concurrently in the
Federal Register.
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This Notice of Proposed Rulemaking (``NOPR'') requests comment on
whether there are certain disadvantages inherent in offering
transmission service on both a network and a point-to-point basis. If
so, the Commission requests comment on whether comparability of
transmission service can be better accomplished by requiring that
transmission service be rendered using a single methodology. In
particular, the Commission requests comment on the capacity reservation
tariff (``CRT'') approach described herein. The Commission also
requests comment on whether there are other methodologies that can
fulfill the policy goals served by a single capacity allocation
methodology as well as, or better than, the proposed CRT approach.
The proposed CRT approach would be based on the point-to-point
service in the Final Rule tariff and would allow all transmission
customers to have the same degree of flexibility in reserving and using
transmission service. This NOPR proposes that no later than December
31, 1997, the Open Access Final Rule's network and point-to-point
tariff be replaced by a CRT that provides only reservation-based
transmission service for all jurisdictional service.
The Commission will hold a technical conference on this proposal
prior to adopting a final rule.
II. Public Reporting Burden
The proposed rule specifies filing requirements to be followed by
public utilities in making tariff filings that reflect transmission
capacity reservations for all wholesale transmission customers and any
unbundled retail transmission customers and would replace the open
access transmission tariffs required by the Commission in the Open
Access Final Rule. The information collection requirements of the
proposed rule are attributable to FERC-516 ``Electric Rate Schedule
Filings.'' The current total annual reporting burden for FERC-516 is
828,300 hours.
The proposed rule requires public utilities filing capacity
reservation transmission tariffs to provide certain information to the
Commission. The public reporting burden for the information collection
requirements contained in the proposed rule is estimated to average 250
hours per response. This estimate includes time for reviewing the
requirements of the Commission's regulations, searching existing data
sources, gathering and maintaining the necessary data, completing and
reviewing the collection of information, and filing the required
information.
There are approximately 328 public utilities, including marketers
and wholesale generation entities. The Commission estimates that
approximately 166 of these entities own, operate, or control facilities
used for the
[[Page 21848]]
transmission of electric energy in interstate commerce and will respond
to the information collection. The respondents would be the same as
those for the Open Access Final Rule, i.e., all public utilities
required to file non-discriminatory open access tariffs. Accordingly,
the public reporting burden is estimated to be 41,000 hours.
Interested persons may send comments regarding the burden estimates
or other aspects of this collection of information, including
suggestions for reducing this burden, to the Federal Energy Regulatory
Commission, 888 First Street NE., Washington, DC 20426 [Attention:
Michael Miller, (202) 208-1415], and to the Office of Information and
Regulatory Affairs of the Office of Management and Budget, Washington,
DC 20503 (Attention: Desk Officer for the Federal Energy Regulatory
Commission (202) 395-3087).
III. Background
In the Open Access Final Rule, the Commission has adopted a pro
forma tariff containing the minimum acceptable terms and conditions of
transmission service for network service and for flexible point-to-
point service. This type of tariff, in conjunction with other
requirements imposed in the Open Access Final Rule and in the related
final rule in Open Access Same-Time Information System,2 is
sufficient to remedy undue discrimination in the provision of
transmission services. However, in analyzing the comments in the Open
Access proceeding, it became apparent that a single service open access
tariff might better accommodate competitive changes occurring in the
industry while ensuring that all interstate transmission service
subject to the Commission's jurisdiction is provided in a fair and non-
discriminatory manner.
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\2\ Open Access Same-Time Information System (formerly Real-Time
Information Networks) and Standards of Conduct, Docket No. RM95-9-
000, Order No. 889, FERC Stats. & Regs. para. 31,037 (1996) (OASIS
Final Rule). This rule also is being published concurrently in the
Federal Register.
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Network transmission service, in the Open Access Final Rule,
defines rights and sets prices based on customer load. It allows the
transmission customer to use the transmission provider's entire grid to
serve designated loads from designated resources without having to pay
a separate charge for each pairing of resource and load. Thus, network
service enables the transmission customer to use the network flexibly
to integrate its resources and loads efficiently and to dispatch
economically its system, in the same way as the owner of the
transmission system.
Firm flexible point-to-point service in the Open Access Final Rule,
on the other hand, defines rights and sets prices based on transmission
capacity reservations. The transmission user designates points of
delivery (PODs) and points of receipt (PORs) and makes a capacity
reservation for each POD and for each POR. Consistent with the
comparability principle that is one of the cornerstones of the Open
Access Final Rule, firm point-to-point transmission service provided to
a customer must be comparable to that which the utility provides to
itself. For example, the customer should be able to use any available
unreserved service without an additional charge, as long as the use
does not exceed its capacity reservation.
The Commission proposes to replace the network and point-to-point
services in the Open Access Final Rule tariff with a CRT that would
accommodate both network and point-to-point needs. The CRT would be
based on the point-to-point service in the Final Rule tariff and would
allow all jurisdictional transmission customers to have the same degree
of flexibility in reserving and using transmission service. Under the
CRT, all transmission customers would specify the amount of power to be
received and delivered at multiple receipt and delivery points, and
would have substantial flexibility in rearranging these receipt and
delivery points. All nominations for capacity reservations would be
evaluated in the same manner.3
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\3\ A ``nomination'' is a request; a ``reservation'' is a
confirmed nomination that can be held or traded.
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IV. Reasons for Proposing a CRT
In adopting the Final Rule tariff in the Open Access Final Rule,
our purpose was to remedy undue discrimination in the provision of
interstate transmission service, not to reform traditional tariff
design. We believe that the Final Rule tariff, in conjunction with the
OASIS Final Rule, remedies undue discrimination in transmission
service. The network section of the Final Rule tariff is based on the
prevailing industry practice of traditional load-ratio pricing.
Many commenters responded to our initial proposed open access pro
forma tariffs by asking us to adopt either more flexible or more
innovative tariffs in the Open Access Final Rule. Some commenters
suggested that the basic design of the Open Access NOPR pro forma
tariffs may be too inflexible to accommodate industry innovations. The
capacity reservation tariff proposed here is an alternative that may
better suit the needs of the changing electric power industry.
The Final Rule tariff offers two types of transmission service.
Network service provides enough transmission capacity to satisfy a
customer's consumption of electric power. Point-to-point service sets
aside as much transmission capacity as the customer reserves. Thus,
network service is based on use, and point-to-point service is based on
reservations.
Network customers get and pay for the capacity they use, and point-
to-point customers get and pay for the capacity they reserve. The fixed
costs of the transmission system are allocated among network customers
on the basis of use, that is, the customers' loads. The fixed costs of
the transmission system are allocated among point-to-point customers on
the basis of their reservations, that is, their contract demands.
Offering two types of service in one tariff may have disadvantages.
At the end of this NOPR we ask questions about whether this is so. If
it is, a solution may be to put all jurisdictional transmission users
on the same basis: The transmission provider would serve and charge all
customers (including its own jurisdictional uses of the system) on the
basis of how much transmission capacity they either use or ask for.
That is, it would make the entire tariff either load-based or
reservation-based. If we do reform the tariff to put all transmission
users on the same basis, we believe that, for the reasons set out next,
putting all on a reservation basis may be more consistent with the
industry's direction in its competitive restructuring. We seek comment
on whether this premise concerning reservation-based service is in fact
correct.
First, reservation-based service appears to be more compatible with
our new OASIS and the requirement that market participants know how
much transmission is available for their use. In the OASIS Final Rule,
we require public utilities to post electronically their available
transmission capability, or ATC. They must do this by calculating total
transmission capability and subtracting transmission capacity committed
to other uses. It is relatively easy to subtract point-to-point service
reservations, but there is no amount of transmission capacity
explicitly reserved for network customers or for the transmission
provider's own network uses.
The transmission provider is committed to having available enough
transmission capacity to serve its native
[[Page 21849]]
load and the loads of its network customers. But the transmission
provider knows only the customers' historical loads, not their future
loads. Although the customers (as well as the transmission provider
itself) must forecast their loads, they may have no incentive to
forecast accurately because the utility must meet all transmission
needs for serving load regardless of the forecast. This requires the
transmission provider to predict its future native load and that of
each of its network customers in order to determine its ATC.
While this process can work reasonably well in a regime in which
utilities make bundled generation and transmission sales to
requirements customers, it may not work as well now that various kinds
of power sellers and marketers are eligible for unbundled network
service. The transmission provider may not have any good way to
forecast the increases or decreases in the loads of customers that it
has no obligation to serve. It seems appropriate to ask all
transmission customers, including the transmission provider, to state
explicitly how much transmission capacity they want set aside for their
needs. In this way, they effectively would be making a capacity
reservation. This would simplify the transmission provider's
determination of ATC and make the information available on the OASIS.
Under a CRT approach, each transmission customer (including the
transmission provider for its own uses) would have to state its
transmission capacity needs, as in the current point-to-point tariff.
The requirement that reservations be stated in order to be subtracted
from total transmission capability would ensure that all customers are
treated comparably without the transmission provider having to make
forecasts only for some.
On the other hand, an argument can be made that the CRT approach
may lead to an understatement of ATC. For example, in reserving
transmission service, customers might base such reservations on an
estimate of their maximum non-coincident peak (``NCP'') load. This
conceivably could result in an understatement of ATC, because the
diversity of customer loads at the time of the system peak would no
longer be a relevant factor in determining ATC. The Commission requests
comment on whether in practice this would be a problem and, if so,
whether it can be remedied.
Second, a reservation-based tariff would put all jurisdictional
transmission customers, including the transmission provider for its own
jurisdictional uses, on the same basis. All customers would not only
have to reserve transmission capacity but also would have to pay for
the transmission capacity that they reserve.
It may be disadvantageous to have different bases for the pricing
of two services in a tariff. For example, suppose a transmission
provider has two nearly identical transmission customers. Each has a
load of 50 MW, and each thinks its load next year could be as little as
40 MW or as much as 60 MW. However, one takes network service, and the
other takes 60 MW of point-to-point service. Suppose these are the only
customers on the system and they have coincident peak loads; if each
actually uses 60 MW next year, each pays half the cost of the
transmission system. But if each uses 40 MW, the point-to-point
customer pays 60 percent of the cost 4 while the network customer
pays only 40 percent.
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\4\ This is based on a 60-MW reservation divided by the sum of
the network loads and the capacity reservations at the time of
system peak.
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Customers also may attempt to exploit to their advantage the
different terms and conditions of the two services. As commenters in
the Open Access proceeding pointed out, the many differences between
capacity reservation-based (point-to-point) and load-based (network)
services mean that transmission customers are treated differently.
Having two services in a tariff may create an incentive for a customer
to switch back and forth from one service to another in a way that may
allow it to avoid paying a fair share of system costs. This would not
be the case if all customers are served under a reservation-based (or
load-based) tariff.
Third, a reservation-based approach may be a better basis for
accommodating electric industry innovations and pricing reforms. The
industry is in a period of rapid change, and many ideas are being
considered for independent system operators (ISOs), regional
transmission groups, regional power exchanges, generation divestiture,
distribution company spin-offs, unified regional transmission
ownership, regional transmission tariffs, megawatt-mile transmission
pricing, marginal cost pricing, and congestion pricing, among other
innovations. Innovations are being considered or implemented in such
places as California, the Midwest, the large eastern power pools, and
other places. Most proposals assume that all jurisdictional users of
the transmission system will be treated alike.
Many commenters in the Open Access proceeding raised concerns that
our pro forma tariffs with two separate services, one based on load and
another based on capacity reservation, may be an obstacle to putting
all transmission customers on the same basis and hence an obstacle to
innovation. For example, the Commission would need to make special
tariff accommodations to permit California public utilities to carry
out the reforms mandated by the California Public Utilities Commission
for an ISO, a regional power exchange, and congestion pricing. Although
we have indicated that we are prepared to accept other tariff designs
that further the goal of fostering robust competition in the bulk power
market, the number of parties concerned with the traditional nature of
our tariff suggests that our tariff may inhibit other parties from
considering innovative industry structures and pricing policies.
This NOPR, among other things, indicates that the Commission is not
committed to traditional tariff design. Further, it proposes a tariff
design that supports calculation of ATC and treats all jurisdictional
transmission users alike. We believe that the proposed CRT concept
would provide a flexible base on which industry participants can build
a variety of innovative tariff designs. We expect the CRT concept to be
more compatible with various ISO and power pool pricing proposals than
the traditional Open Access Final Rule tariff. We ask for comment on
whether this is so. In addition, we request comment on whether there
are other transmission capacity allocation methodologies (for instance,
an ``all network service'' methodology) that, when compared to the two-
service approach in the Final Rule, are more compatible with proposed
and contemplated marketplace innovations.
In particular, we expect that a CRT would provide a better basis
for regional flow-based transmission pricing. In the comments we
received in the Open Access proceeding, a large number of industry
participants stressed that the Commission should not codify contract
path pricing in its Final Rule. As we explain more fully in the Open
Access Final Rule, they were concerned that the proposed pro forma
tariffs would codify the contract path approach to pricing. We explain
in the Open Access Final Rule that this is not our intention; we
continue to encourage the industry to explore solutions to regional
loop flow problems through innovative regional flow-based pricing
proposals.
It is unlikely that an efficient tariff for a large region would
allocate some transmission costs on the basis of various subregional
loads and other costs on the basis of capacity reserved over various
multipath interfaces within
[[Page 21850]]
the region. Most regional tariff proposals would allocate costs on the
latter basis alone, recognizing, of course, that the configuration of
regional loads is a starting point for any load flow study. For this
reason, we believe that the proposed CRT approach to tariff design may
be more compatible with the intent of some in the industry to move to
flow-based pricing than a tariff that combines services based on usage
and reservations. We ask for comments on whether this is the case. In
addition, we ask for comment on whether there are other non-CRT
approaches that may be more compatible with flow-based pricing.
Fourth, as discussed in the Open Access Final Rule, load-based
network service generally cannot be resold. This reduces the amount of
transmission products and services that can enter the secondary market.
As a result, the secondary market could be thinner and less effective
as a risk management tool for market participants. In addition,
independent generators and marketers could be hampered in making
efficiency-enhancing transactions that do not involve a load-serving
entity, such as trading power between generators in different market
centers. The Commission seeks comments on whether a capacity
reservation service or some other alternative to the two-service
approach in the Final Rule would better allow market participants to
freely make efficient deals that involve combining transmission
entitlements with power products in new and creative ways.
Fifth, we believe that additional comments should be received on
whether the goal of unbundling transmission and generation services can
be fully achieved under load-based network service. It would appear
that transmission service would be fully unbundled from generation
service under a CRT because the generation and transmission products
are reserved and used independently. For example, reservations for
flexible grid use, including interface capacity, could be held
independently of load. In addition, generation resources and load would
not need to be designated as under the network service; a transmission
customer would have to pay for the capacity it reserved at PODs and
PORs, but it would not have to designate any resources or loads.
Sixth, a capacity reservation approach may facilitate transmission
planning. Under a CRT, all wholesale transmission users and unbundled
retail transmission customers would be required to specify and pay for
all of their transmission needs, including capacity needed for
contingencies. The costs of contingency margins needed by only some
users would not be allocated to all users of the grid. A CRT would
allow each customer flexibility in managing its own risk, e.g., a
customer could factor reasonable reserve margins into its reservation
for contingencies. This approach may be consistent with some innovative
proposals that seek to accommodate customer-driven transmission
expansion, in addition to traditional utility-planned transmission
expansion.
Finally, some commenters in the Open Access proceeding encouraged
us to treat the retail function of a public utility transmission
provider as a separate wholesale customer for purposes of the
transmission tariff. While we do not require this in the Open Access
Final Rule, we propose here that the transmission used on behalf of the
transmission provider's bundled retail native load be nominated and
reserved in the same way as all other transmission service.5
Requiring the same reservation system for all transmission capacity
needs would help to assure that all uses of the transmission system are
treated in a comparable, non-discriminatory manner. We seek comment on
whether the retail function of a public utility transmission provider
should be treated as a separate wholesale customer for purposes of the
CRT tariff.
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\5\ As discussed below, this is not the same as requiring
bundled retail customers to take service under the CRT.
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V. Capacity Reservation Service
A. Discussion
The Commission's CRT proposal is as follows. Each public utility
subject to the Open Access Final Rule would be required to file a CRT
no later than December 31, 1997. Under the CRT, which would replace
existing transmission tariffs, all firm transmission users, including
the transmission owner on behalf of its wholesale requirements and
bundled retail customers, would nominate and reserve transmission
capacity; they would nominate and reserve firm rights to receive
specific amounts of power at specific grid PORs and to deliver specific
amounts of power at specific grid PODs. PORs could include
interconnections with other systems or generator bus bars. PODs could
include interconnections with other systems or substations where the
transmission provider's transmission and distribution systems are
connected. Reservation holders could flexibly schedule power among some
or all of their PORs and PODs within their reservation limits and could
reassign their reservations. Thus, capacity reservation service could
be used both for point-to-point types of transactions and in a network
manner (integration of a set of generating resources with a dispersed
load).
The capacity reservation approach would be based on the flexible
point-to-point service in the Open Access Final Rule. A customer could
specify a single POR and a single POD, or it could reserve service from
multiple PORs to multiple PODs. The transmission provider would set
aside sufficient transmission capacity to satisfy its firm reservation
needs for any potential combinations of power receipts and deliveries
among the designated receipt and delivery points.
An entity with dispersed generation and load could use CRT service
to dispatch its generation economically within its capacity
reservation. When one generating unit is ramped down, the customer
could ramp up another generating unit located at another designated
receipt point. The flexibility to serve load when the transmission
customer is using less than its capacity reservation would be the same
as under Final Rule network service. CRT service could also be used for
simple point-to-point transactions if the customer does not want or
need much flexibility.
Under a CRT, a customer also could have the flexibility to
rearrange, or modify, its firm reservation to deal with unforeseen
circumstances. Such a rearrangement could be accomplished as long as
the customer's capacity reservation is not exceeded and firm
transmission capacity is available. The flexibility of the proposed CRT
service would not be unlimited, however. For example, a transmission
customer might have very little flexibility to modify its reservation
on a firm basis to accommodate an unanticipated dispatch pattern when
the grid is operating at or close to capacity. Under such conditions,
modifications likely would infringe on other firm reservations. To
manage this risk, the customer would have two basic options. One would
be to take non-firm transmission or ancillary service on an as-
available basis (and potentially pay opportunity costs) when the need
to alter the planned operation arises. The other option would be to
subscribe to sufficient firm capacity in advance so as to build in the
desired operating flexibility. While either option would have financial
risks, all jurisdictional transmission customers would have the same
opportunity to manage this risk, since the transmission service would
be the same for all users.
[[Page 21851]]
Under a CRT, all unbundled transmission service in interstate
commerce, including unbundled retail service, would be taken under the
tariff unless the Commission in an individual case determined otherwise
(as discussed in the Open Access Final Rule in Section IV.I). The
rates, terms, and conditions for unbundled transmission service would
be in accordance with the tariff. In addition, all public utilities
would nominate and reserve firm transmission service under the tariffs,
including nominating and reserving transmission used for native load
(i.e., bundled wholesale requirements and bundled retail customers).
This means that nominations and reservations would have to be made for
specific receipt and delivery points for all firm transmission
services. The purpose of this requirement would be that it may better
ensure comparability. Moreover, the requirement for utilities to hold
reservations on behalf of bundled wholesale and retail customers would
be consistent with our responsibility under FPA section 213(b) to make
information available about ATC and transmission constraints. The
physical quantities of transmission service available to unbundled
users cannot be measured accurately as long as the physical quantities
used for bundled service are not measured in the same way.
However, we wish to emphasize that we are not proposing to set the
rates, terms or conditions for the transmission component of bundled
retail service. Nor would we determine the amount of capacity to be
reserved for retail load. Traditional ratemaking prerogatives of state
commissions would be unchanged by this nomination and reservation
requirement. If the CRT is adopted, the Commission would allocate
transmission costs based on the sum of all reservations for wholesale
customers, unbundled retail customers, and bundled retail customers.
State commissions could adopt a similar approach; however, they would
remain free to use an inter-jurisdictional allocation formula of their
own choosing, just as they may now. We note that in the Open Access
Final Rule we have provided for procedures to facilitate jurisdictional
line-drawing regarding cost allocation, and for deference to state
recommendations. Therefore, we do not expect significant conflicts.
Under a CRT, a public utility would have an opportunity to recover
all of its transmission fixed costs, just as it does today. While it is
possible that the federal and state allocations could add up to less or
more than 100 percent of the utility's fixed transmission costs, that
is a risk that a utility faces anytime it is subject to the rate
jurisdiction of more than one regulatory authority. Moreover, we would
work with state commissions to develop compatible cost allocation
procedures and to minimize the possibility of any over- or under-
recovery of transmission costs.
B. Proposed Principles
A capacity reservation tariff might have terms and conditions very
much like those for point-to-point service in the Final Rule tariff.
These would need to be modified to accommodate former network service
customers. It is premature to specify detailed terms and conditions of
capacity reservation service in advance of the comments and technical
conference. However, we propose certain general capacity reservation
tariff principles for comment.
1. Purpose of Reservation Service
Transmission products and services should be provided on an open
access, comparable basis. In order to ensure comparability,
transmission service should be nominated and reserved on a non-
discriminatory basis. Transmission for wholesale sales of electric
energy should be made available on an unbundled basis.
2. Basic Service Concept
All firm transmission service would be reserved, and all reserved
service would be firm service. Reservations of transmission capacity
should permit the customer to receive up to a specific amount of power
into the grid at specified PORs, and to deliver up to a specific amount
of power from the grid at specified PODs, on a firm basis. Individual
PORs and PODs need not be ``paired'' with each other. The customer's
capacity reservation would be the higher of either (1) the sum of the
reservations at all PORs or (2) the sum of the reservations at all
PODs. All nominations for a capacity reservation would be evaluated
using the same standard; for example, the utility could apply a
feasibility criterion that states that the grid must be able to
accommodate the scheduled use of all capacity reservations
simultaneously.
3. Use of Capacity Reservations
A customer with a capacity reservation could use the reservation to
deliver or receive any type of power product (such as firm or non-firm
power). That is, use of the capacity reservation should not be
restricted to particular power products. Any such restriction would be
inconsistent with unbundling. This would allow the capacity reservation
holder to combine transmission and power products in any way that
satisfies its needs.
4. Applicability to All Customers
Capacity reservations for all firm transmission service would be
made under the CRT, including reservations nominated on behalf of the
transmission provider's bundled wholesale and retail customers. This
would make it possible to allocate capacity and costs comparably among
all transmission users. This would not require the unbundling of the
transmission component of bundled retail rates or affect state
authority with regard to the rates, terms, and conditions of service to
bundled retail customers.
5. Application of Penalties for Overuse
Any charges for exceeding capacity reservations should be non-
discriminatory. If a CRT penalizes use in excess of reserved amounts,
these penalties should be applied comparably to all reservations. Any
dispositions of penalties assessed against the utility for violating
bundled retail capacity reservations would be under the state
commission's ratemaking authority. If penalties are not authorized by
the state commission's ratemaking authority, the Commission would not
authorize recovery of such penalties from other transmission customers.
6. Standard for Accepting Nominations
A nomination for a capacity reservation would be accepted if the
transmission provider determines that it can be reliably accommodated
without infringing on other firm reservations. If transmission capacity
expansion is needed and approved by state siting authorities, a
nomination should be accepted if the nominating customer is willing to
pay its appropriate share of the cost of the expansion.
7. Non-firm Transmission Service
In addition to reserved firm service, transmission providers would
offer non-firm transmission service. Non-firm service could be provided
from transmission capacity not scheduled by customers with reservations
or from capacity that is not previously reserved. Non-firm service
would be allocated to the highest valued use by opportunity cost
pricing as described in the Open Access Final Rule or by some other
pricing consistent with the Commission's Transmission Pricing Policy
Statement.
[[Page 21852]]
8. Open Season for New Facilities
We would anticipate requiring a transmission provider to publicly
announce its plans for capacity expansion projects to allow market
participants to reserve capacity. Participants would pay an appropriate
share of the costs of the project. All market participants would be
treated comparably in securing additional transmission capacity
reservations when the grid capacity is expanded.
9. Cost Allocation and Pricing
The fixed costs of the transmission network would be allocated
among reservation holders on the basis of their capacity reservations.
Rates would be designed to recover these costs and would be revised
from time to time to reflect changes in the level of fixed costs or
changes in reserved amounts. In this way, transmission providers would
have an opportunity to fully recover their fixed costs. Transmission
providers would be expected to propose specific mechanisms for
recovering fixed costs from transmission customers.
10. Standardized Products and Priority Protocols
Just as the Commission has required under the Open Access Final
Rule tariff, the CRT would offer standardized transmission products and
services, defining reserved and non-reserved transmission service and
setting reservation priorities and curtailment protocols. This would
reduce uncertainty and facilitate the trading of any transmission
capacity in a secondary market. Such trading can be an important tool
in price discovery and risk management.
11. Service Modifications
Customers with a capacity reservation would be allowed to modify
their capacity reservations at no additional charge if the modification
can be accommodated without infringing upon any other firm capacity
reservations. Modifications should not result in the customer's
capacity reservation being exceeded. Modifications could include
reallocation among the customer's already specified receipt and
delivery points or reallocation from existing to new receipt and
delivery points.
12. Scheduling Flexibility
Customers with capacity reservations would be given the option of
scheduling (using) less than their full capacity reservation at each
POR or POD. In addition, the transmission provider also could offer an
``obligation'' type of capacity reservation under which the customer
would be required to use all of the capacity it has reserved.
13. Reassigning Reservations
Customers would be allowed to reassign their reservations to other
entities eligible to take service under the CRT at no additional cost,
subject to certain limitations, such as those in the Open Access Final
Rule point-to-point tariff provisions.
14. Opportunity Cost Pricing
Opportunity cost pricing would still be an option under a capacity
reservation service. Under a CRT, a holder of a capacity reservation
would not pay opportunity costs for use of its own capacity when the
utility encounters a transmission constraint; instead, it would be
eligible to receive opportunity cost payments if it did not use its
full capacity reservation across the constrained interface. In
contrast, a customer seeking a capacity reservation or using non-firm
service might have to pay opportunity costs.
15. Planning Obligation
Each market participant would be responsible for planning its own
transmission needs. The transmission provider would not be responsible
under Federal rules for planning the CRT nominations of others, even
relatively small customers. Transmission providers, of course, would be
free to enter voluntary arrangements to perform this task, or they may
be required to do so under state laws. The Commission would consider
approving negotiated rates and conditions between a small customer and
a transmission utility that reflect different risks accepted by each
party when one plans for the other.
VI. Questions
In addition to the questions discussed above, the Commission also
seeks comments on the following questions:
1. What are the advantages and disadvantages of having two services
in one tariff?
2. What are the advantages and disadvantages of having all
transmission users on a load-based network service tariff? Are there
ways of overcoming the disadvantages without moving away from network
service?
3. Does network service provide any transmission use that could not
be provided under a CRT?
4. Is the CRT or a network approach better suited to encouraging
efficiency-enhancing transactions and encouraging wholesale power
markets in which the greatest number of sellers have a chance to
compete? Are they equally-suited to achieving these goals?
5. The proposed rule would require that all transmission uses,
including bundled retail service, be reserved. Is this appropriate? The
Commission intends that bundled wholesale and retail load would have
reservation priority and seeks comments on how best to achieve this. Is
it appropriate or necessary to have federal rules regarding such
matters as physical scheduling and reservation priority for bundled
retail load as well as for other transmission customers? How can
transmission service for bundled retail load be separated from
transmission service for others and how would such a separation be
implemented?
6. Would a CRT requirement by the Commission facilitate or hinder
any of the industry's current restructuring efforts?
7. Would a CRT facilitate or hinder any of the innovative
transmission pricing approaches now being considered by the industry?
Specifically, would it accommodate flow-based pricing that does not
depend on a contract path?
8. Should nominations for longer-term capacity reservation receive
priority over those for shorter terms? Are there other ways to allocate
capacity nominations? Would an initial open season, with bundled
wholesale and retail load priority, be appropriate?
9. How should points of receipt and points of delivery be defined?
Is the distinction between transmission and distribution relevant in
determining eligible points?
VII. Regulatory Flexibility Act Certification
The Regulatory Flexibility Act (RFA) \6\ requires rulemakings to
contain either a description and analysis of the effect that the
proposed rule will have on small entities or a certification that the
rule will not have a significant economic impact on a substantial
number of small entities. We note, if this proposed rule is adopted,
only public utilities that are subject to the Open Access Final Rule
will have to file CRTs. In other words, the proposed rule would be
applicable to public utilities that own, control or operate interstate
transmission facilities, not to electric utilities per se. Almost all
public utilities that own, control or operate interstate transmission
facilities do not fall within the RFA definition of small entities.
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\6\ 5 U.S.C. Secs. 601-612.
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[[Page 21853]]
In Mid-Tex Electric Coop., Inc. v. FERC,7 the court accepted
with 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 RFA,8 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).9 The CWIP rules applied to
all public utilities. The proposed rule in contrast would apply to only
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. Further, the Commission expects
that public utilities for good cause shown could seek waivers of the
proposed rule's requirement, just as they are able to seek waiver of
the Open Access Final Rule.
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\7\ 773 F.2d 327, 340-343 (D.C. Cir. 1985) (Mid-Tex).
\8\ The RFA 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) and 15 U.S.C.
632(a)(1) (definition of ``small business concern'').
\9\ Mid-Tex, 773 F.2d at 340-43.
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Because: (a) Virtually all of the utilities that would be subject
to the proposed rule are not ``small entities'' as defined in the RFA;
and (b) the proposed rule will make adequate provision, through
allowances for waivers, for mitigation of the effects of the rule, the
Commission certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
VIII. Environmental Statement
The Commission concludes that promulgating the proposed rule would
not represent a major federal action having a significant adverse
impact on the human environment under the Commission's regulations
implementing the National Environmental Policy Act.10
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\10\ See 18 CFR 380.4(a)(15) (categorically excluding electric
tariff filings under sections 205 and 206 of the FPA from the
obligation to prepare an environmental assessment or an
environmental impact statement).
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IX. Information Collection Statement
The Office of Management and Budget's (OMB) regulations 11
require that OMB approve certain information and recordkeeping
requirements imposed by an agency.
---------------------------------------------------------------------------
\11\ 5 CFR 1320.12.
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The information collection requirements in the proposed rule are
contained in FERC-516 ``Electric Rate Filings.'' The Commission uses
the data collected in this information collection requirement to carry
out its regulatory responsibilities under Part II of the Federal Power
Act. The Commission's Office of Electric Power Regulation uses the data
to review electric rate filings.
The Commission is submitting notification of this proposed rule to
OMB. Interested persons may obtain information on the reporting
requirements by contacting the Federal Energy Regulatory Commission,
888 First Street NE., Washington, DC 20426 (Attention: Michael Miller,
Information Policy and Standards Branch, (202) 208-1415). Comments on
the requirements of this proposed rule can also be sent to the Office
of Information and Regulatory Affairs of OMB (Attention: Desk Officer
for Federal Energy Regulatory Commission).
X. Public Comment Procedures
The Commission invites comments on the proposed rule from
interested persons. An original and 14 copies of written comments on
the proposed rule must be filed with the Commission no later than
August 1, 1996.
In addition, commenters are requested to submit a copy of their
comments on a 3\1/2\ inch diskette formatted for MS-DOS based
computers. In light of our ability to translate MS-DOS based materials,
the text need be submitted only in the format and version in which it
was generated (i.e., MS Word, WordPerfect, ASCII, etc.). It is not
necessary to reformat word processor text to ASCII. For Macintosh and
Macintosh-based users, it would be helpful to save the documents in
Macintosh word processor format and then to write them to files on a
diskette formatted for MS-DOS machines. All comments should be
submitted to the Office of the Secretary, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, and should
refer to Docket No. RM96-11-000.
All written comments will be placed in the Commission's public
files and will be available for public inspection in the Commission's
public reference room at 888 First Street, N.E., Washington, DC 20426,
during regular business hours.
XI. Technical Conference
The Commission intends to convene a technical conference for two
days in September 1996 at the Commission's office, 888 First Street
NE., Washington, DC 20426, at a date and time to be announced. The
first day of the technical conference will address the issue of whether
the Commission should require CRTs. The second day will address the
issue of how to implement any such requirement.
List of Subjects in 18 CFR Part 35
Electric power rates, Electric utilities, Reporting and
recordkeeping requirements
By direction of the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission proposes to amend
part 35, chapter I, title 18, Code of Federal Regulations, as set forth
below.
PART 35--FILING OF RATE SCHEDULES
1. The authority citation for part 35 continues to read as follows:
Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
2. Section 35.28 is revised to read as follows:
Sec. 35.28 Non-discriminatory open access transmission tariffs.
(a) 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 capacity reservation tariff of
general applicability for transmission services, including ancillary
services, over these facilities consistent with the requirements of
Order No. ____, (Final Rule on Open Access Capacity Reservation
Tariffs). Subject to the exception in paragraph (b) of this section,
such tariff must be filed no later than the date on which the
Commission accepts for filing any agreement under which such public
utility would engage in a sale of electric energy at wholesale in
interstate commerce, or any agreement under which such public utility
would engage in the transmission of electric energy in interstate
commerce.
(b) If a public utility owns, controls or operates facilities used
for the transmission of electric energy in interstate commerce as of
July 9, 1996. it must file a capacity reservation tariff of general
applicability for transmission services, including ancillary services,
over these facilities consistent with the requirements of Order No. --
(Final Rule on Open Access Capacity Reservation Tariffs) no later than
December 31, 1997.
(c) Any 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
[[Page 21854]]
unbundled retail sales of electric energy, must take transmission
service for such sales and/or purchases under the tariff filed pursuant
to this section.
[FR Doc. 96-10692 Filed 5-09-96; 8:45 am]
BILLING CODE 6717-01-P
