97-17314. Central Hudson Enterprise Corporation; and Central Hudson Gas & Electric Corporation; Order Conditionally Accepting For Filing Proposed Market-Based Rates, And Announcing Policy With Respect To New Power Sales That Do Not Reflect ...  

  • [Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)]
    [Notices]
    [Pages 35793-35795]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-17314]
    
    
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    DEPARTMENT OF ENERGY
    
    Federal Energy Regulatory Commission
    [Docket Nos. ER97-2869-000 and ER97-2872-000]
    
    
    Central Hudson Enterprise Corporation; and Central Hudson Gas & 
    Electric Corporation; Order Conditionally Accepting For Filing Proposed 
    Market-Based Rates, And Announcing Policy With Respect To New Power 
    Sales That Do Not Reflect Unbundling of Transmission and Ancillary 
    Services
    
    Issued June 26, 1997.
        In this order, we conditionally accept for filing, without hearing 
    or suspension, the proposed market-based power sales rates filed by 
    Central Hudson Gas & Electric Corporation (Central Hudson). In 
    addition, we accept for filing, without conditions, hearing or 
    suspension, the proposed market-based power sales rates filed Central 
    Hudson's power marketer affiliate, Central Hudson Enterprise 
    Corporation (Enterprise).
        We also take this opportunity to remind public utilities that all 
    new power sales (i.e., those made on or after July 9, 1996) must 
    separately unbundle transmission and ancillary services. We announce 
    that any power sales filing made after the date this order is published 
    in the Federal Register that does not provide for the unbundling of 
    transmission and ancillary services will be rejected, regardless of 
    whether the sales agreement or tariff is market-based or cost-based.
    
    Background
    
        Central Hudson is a public utility in upstate New York which owns 
    and operates facilities for the generation, transmission and 
    distribution of electric power. Enterprise is a power marketer which is 
    a wholly-owned subsidiary of Central Hudson. Enterprise does not own or 
    operate any electric generation, transmission or distribution 
    facilities and currently has no retail or wholesale electric service 
    customers.
        On May 6, 1997, Enterprise and Central Hudson filed separate 
    applications in Docket Nos. ER97-2869-000 and ER97-2872-000 for 
    Commission authorization to engage in the wholesale sale of electric 
    energy and capacity at market-based rates. Among other things, 
    Enterprise and Central Hudson request the same waivers and 
    authorizations afforded to other power marketers and franchised 
    utilities with market-based rate authorization.
        Notice of Enterprise's and Central Hudson's filings were published 
    in the Federal Register, 62 FR 29,139 (May 29, 1997), with comments, 
    protests and interventions due on or before June 4, 1997. Electric 
    Clearinghouse, Inc. (Electric Clearinghouse) filed a timely motion to 
    intervene in each of the proceedings, raising no substantive issues. 
    The Public Service Commission of the State of New York (New York 
    Commission) filed a notice of intervention in each of the proceedings, 
    raising no substantive issues.
    
    Discussion
    
        Pursuant to Rule 214 of the Commission's Rules of Practice and 
    Procedure, 18 CFR 385.214(c), the timely, unopposed motions to 
    intervene of Electric Clearinghouse and the notices of intervention of 
    the New York Commission serve to make them parties to the proceedings 
    in Docket Nos. ER97-2869-000 and ER97-2872-000.
    
    Market-Based Rates
    
        The Commission allows power sales at market-based rates if the 
    seller and its affiliates do not have, or have adequately mitigated, 
    market power in generation and transmission and cannot erect other 
    barriers to entry. In order to demonstrate the absence or mitigation of 
    market power, a transmission-owning public utility must have on file 
    with the Commission an open access transmission tariff for the 
    provision of comparable services. The Commission also considers whether 
    there is evidence of affiliate abuse or reciprocal dealing.\1\
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        \1\ E.g., Progress Power Marketing, Inc., 76 FERC para. 61,155 
    at 61,919 (1996); Northwest Power Marketing Company, L.L.C., 75 FERC 
    para. 61,281 at 61,889 (1996); accord Heartland Energy Services, 
    Inc., et al., 68 FERC para. 61,223 at 62,060-63 (1994) (Heartland).
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        As we explain below, we find that, with Central Hudson's filing of 
    an open access pro forma compliance transmission tariff,\2\ 
    Enterprise's market-based rate application and Central Hudson's market-
    based rate application, as modified, meet these standards. Accordingly, 
    we will accept the proposed market-based rates for filing, to become 
    effective on the date of this order, subject to the condition that 
    Central Hudson revise its power sales tariff as discussed below.
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        \2\ See 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, 61 FR 21,540 (1996), FERC Stats. & Regs. para. 31,036 
    (1996), order on reh'g, Order No. 888-A, 62 FR 12,274 (1997), FERC 
    Stats. & Regs. para. 31,048, reh'g pending (Open Access Rule).
    
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    [[Page 35794]]
    
    1. Generation Market Power
        In support of their market-based rate applications, Enterprise and 
    Central Hudson have submitted a generation dominance analysis. That 
    analysis indicates that Central Hudson's market share of installed and 
    uncommitted capacity will not exceed levels the Commission previously 
    has found to be acceptable.\3\
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        \3\ See, e.g., Southwestern Public Service Company, 72 FERC 
    para. 61,208 at 61,966-67 (1995), reh'g pending; Louisville Gas & 
    Electric Company, 62 FERC para. 61,016 at 61,146 (1993).
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        Accordingly, we find that Enterprise and Central Hudson meet the 
    Commission's generation market power standard for approval of market 
    based-rates.
    2. Transmission Market Power
        When a transmission-owning public utility or its affiliate seeks 
    authorization to charge market-based rates, the Commission has required 
    the public utility to have an open access transmission tariff on file 
    before granting such authorization.\4\ Central Hudson has filed an open 
    access pro forma compliance transmission tariff in Docket No. OA96-14-
    000. Accordingly, we find that Enterprise and Central Hudson have 
    satisfied the Commission's transmission market power standard for 
    approval of market-based rates.
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        \4\ See, e.g., Open Access Rule, FERC Stats. & Regs. at 31,656-
    57; accord Southern Company Services, Inc., 71 FERC para. 61,392 at 
    62,536 (1995); Heartland, 68 FERC at 62,059-60.
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    3. Other Barriers to Entry/Reciprocal Dealing
        Central Hudson owns and operates a natural gas distribution system 
    and associated pipeline and storage facilities. Should Central Hudson 
    or any of its affiliates deny, delay or require unreasonable terms, 
    conditions, or rates for natural gas service to a potential electric 
    competitor of Central Hudson or Enterprise in bulk power markets, then 
    that electric competitor may file a complaint with the Commission that 
    could result in the suspension of Central Hudson's or Enterprise's 
    authority to sell power at market-based rates.\5\
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        \5\ See, e.g., LG&E, 62 FERC at 61,148.
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        With this safeguard, we are satisfied with Enterprise's and Central 
    Hudson's explanation that there are no other barriers to entry or 
    reciprocal dealing considerations of concern here.
    4. Affiliate Abuse
        Enterprise and Central Hudson commit in their power sales tariffs 
    that they will not sell power to or purchase power from each other. In 
    addition, Enterprise and Central Hudson have submitted a code of 
    conduct (governing, among other things, the pricing of affiliate sales 
    and purchases of non-power goods and services and the exchange of 
    market information) that satisfies the Commission's requirements 
    concerning affiliate abuse.
        With these and other safeguards contained in the proposed power 
    sales tariffs and code of conduct, we are satisfied with Enterprise's 
    and Central Hudson's explanation that there are no affiliate abuse 
    considerations of concern here.
    
    Unbundling of Rates
    
    1. Announcement of Policy
        Order No. 888 provides (FERC Stats. & Regs. at 31,654) that, as 
    part of the functional unbundling of wholesale services, the prices for 
    wholesale generation, transmission and ancillary services must be 
    separately stated for sales under requirements or coordination 
    contracts executed after July 9, 1996. As discussed below, Central 
    Hudson has failed to satisfy this requirement. It is not, however, the 
    first utility to do so. In fact, this requirement has not been 
    satisfied in several recent cases,\6\ and we have unnecessarily 
    expended resources in preparing Commission orders addressing this 
    deficiency.
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        \6\ See E.G., Orange and Rockland Utilities, Inc., 78 FERC para. 
    61,344 (1997); Idaho Power Company, 78 FERC para. 61,343 (1997).
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        As a result, we take this opportunity to notify all public 
    utilities that any future filing of a power sales agreement or tariff, 
    after the date of publication of this order in the Federal Register, 
    that does not provide for unbundling of transmission and ancillary 
    services consistent with the requirements of Order Nos. 888 and 888-A 
    will be rejected by the Director of the office of Electric Power 
    Regulation or his designee.\7\
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        \7\ Any power sales filing before that date that does not 
    reflect the unbundling requirement will be made deficient.
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    2. Central Hudson's Filing
        Central Hudson's market-based power sales tariff does not address 
    the Commission's unbundling requirements. In addition, the tariff does 
    not address the circumstances under which transmission and ancillary 
    services will be provided under Central Hudson's open access 
    transmission tariff. Accordingly, we will direct Central Hudson to 
    revise its market-based power sales tariff to state explicitly separate 
    prices for generation, transmission and ancillary services. In 
    addition, we will require Central Hudson to revise its market-based 
    tariff to state that: (1) When transmission and ancillary services to 
    effectuate power sale transactions under Central Hudson's market-based 
    tariff are to be obtained by Central Hudson, Central Hudson must file a 
    service agreement placing itself under its open access transmission 
    tariff; and (2) when the customer itself is obtaining transmission and 
    ancillary services from Central Hudson, Central Hudson must file a 
    service agreement placing the customer under its open access 
    transmission tariff.\8\
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        \8\ See Public Service Electric & Gas Company, 78 FERC para. 
    61,119 (1997).
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        Since we are permitting Central Hudson to report prices for short-
    term market-based transactions (one year or less) in quarterly 
    summaries, as discussed below, the separate prices for the unbundled 
    services in such short-term transactions should be included in those 
    quarterly summaries. For long-term transactions (longer than one year), 
    the separate prices should be included in the service agreements filed 
    for specific transactions.
    
    Waivers, Authorizations and Reporting Requirements
    
        Enterprise has requested the following authorizations and waivers 
    of various Commission regulations consistent with those granted other 
    power marketers: (1) Waiver of the filing requirements of Subparts B 
    and C of Part 35, except sections 35.12(a), 35.13(b), 35.15 and 35.16; 
    (2) waiver of the accounting and other requirements of Parts 41, 101 
    and 141; (3) abbreviated filings with respect to interlocking 
    directorates under Parts 45 and 46; (4) blanket authorization for 
    issuances of securities or assumptions of liabilities pursuant to FPA 
    section 204, 16 U.S.C. 824c (1994). We will grant Enterprise the 
    requested authorizations and waivers to the extent granted to other 
    power marketers.
        Consistent with previous Commission decisions, we will require 
    Enterprise to file quarterly reports detailing the purchase and sale 
    transactions undertaken in the prior quarter. This requirement is 
    necessary to ensure that contracts relating to rates and services are 
    on file as required by section 205(c) of the Federal Power Act (FPA), 
    16 U.S.C. 824d (1994), and to allow the Commission to evaluate the 
    reasonableness of the charges and to provide for ongoing monitoring of 
    the marketer's ability to exercise market power.\9\
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        \9\ See, e.g., Heartland, 68 FERC at 62,065-66.
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        Consistent with procedures we have adopted in other cases, Central 
    Hudson
    
    [[Page 35795]]
    
    may file umbrella service agreements for short-term (one year or less) 
    transactions within 30 days of the date of commencement of short-term 
    service, to be followed by quarterly transaction summaries of specific 
    sales. For long-term transactions (longer than one year), Central 
    Hudson must submit the actual individual service agreement for each 
    transaction within 30 days of the date of commencement of service.\10\
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        \10\ See, e.g., Plum Street Energy Marketing, Inc., et al., 76 
    FERC para. 61,319 at 62,556 (1996); Southern Company Services, Inc., 
    75 FERC para. 61,130 at 61,444-45 (1996).
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        To ensure the clear identification of filings, and in order to 
    facilitate the orderly maintenance of the Commission's files and public 
    access to the documents, long-term transaction service agreements 
    should not be filed together with short-term transaction summaries.
        Additionally, we will direct Enterprise and Central Hudson to 
    inform the Commission promptly of any change in status that would 
    reflect a departure from the characteristics the Commission has relied 
    upon in approving market-based pricing. These include, but are not 
    limited to: (1) Ownership of generation or transmission facilities or 
    inputs to electric power production other than fuel supplies; or (2) 
    affiliation with any entity not disclosed in the filings that owns 
    generation or transmission facilities or inputs to electric power 
    production, or affiliation with any entity that has a franchised 
    service area.\11\ Alternatively, rather than reporting continually, 
    Enterprise and Central Hudson may elect to report such changes every 
    three years in conjunction with an updated market analysis.\12\
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        \11\ See, e.g., Morgan Stanley Capital Group, Inc., 69 FERC 
    para. 61,175 at 61,695 (1994), order on reh'g, 72 FERC 61,082 
    (1995); Intercoast Power Marketing, Inc., 68 FERC para. 61,248 at 
    62,134, Clarified, 68 FERC para. 61,324 (1994).
        \12\ We reserve the right to require such an analysis at any 
    time.
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    The Commission Orders
    
        (A) Central Hudson is hereby directed to revise its market-based 
    power sales tariff, within 15 days of the date of this order, to 
    reflect the revision discussed in the body of this order.
        (B) Central Hudson's market-based power sales tariff is hereby 
    conditionally accepted for filing, to become effective on the date of 
    issuance of this order, on the condition that Central Hudson makes the 
    compliance filing directed in Ordering Paragraph (A) above.
        (C) Enterprise's market-based power sales tariff is hereby accepted 
    for filing, to become effective on the date of issuance of this order.
        (D) Enterprise's request for waiver of Parts 41, 101 and 141 of the 
    Commission's regulations is hereby granted.
        (E) Within 30 days of the date of issuance of this order, any 
    person desiring to be heard or to protest the Commission's blanket 
    approval of issuances of securities or assumptions of liabilities by 
    Enterprise should file a motion to intervene or protest with the 
    Federal Energy Regulatory Commission, 888 First Street, N.E., 
    Washington, D.C. 20426, in accordance with Rules 211 and 214 of the 
    Commission's Rules of Practice and Procedure, 18 CFR 385.211 and 
    385.214.
        (F) Absent a request to be heard within the period set forth in 
    Ordering Paragraph (E) above, Enterprise is hereby authorized, pursuant 
    to section 204 of the FPA, to issue securities and assume obligations 
    and liabilities as guarantor, endorser, surety, or otherwise in respect 
    of any security of another person; provided that such issue or 
    assumption is for some lawful object within the corporate purposes of 
    Enterprise, compatible with the public interest, and reasonably 
    necessary or appropriate for such purposes.
        (G) Until further order of this Commission, the full requirements 
    of Part 45 of the Commission's regulations, except as noted, are hereby 
    waived with respect to any person now holding or who may hold an 
    otherwise proscribed interlocking directorate involving Enterprise. Any 
    such person instead shall file a sworn application providing the 
    following information:
        (1) full name and business address; and
        (2) all jurisdictional interlocks, identifying the affected 
    companies and the positions held by that person.
        (H) The Commission reserves the right to modify this order to 
    require a further showing that neither public nor private interests 
    will be adversely affected by continued Commission approval of 
    Enterprise's issuance of securities or assumptions of liabilities, or 
    by the continued holding of any affected interlocks.
        (I) Enterprise's requests for waiver of the provisions of Subparts 
    B and C of Part 35 of the Commission's regulations, with the exception 
    of sections 35.12(a), 35.13(b), 35.15 and 35.16, is hereby granted.
        (J) Enterprise and Central Hudson are hereby directed to conform 
    with the filing and reporting requirements specified in this order. If 
    Enterprise or Central Hudson transacts under its market-based power 
    sales tariff prior to July 1, 1997, the first quarterly report of 
    transactions undertaken by it will be due within 30 days of the 
    calendar quarter ending June 30, 1997. If not, the first quarterly 
    report of transactions will be due within 30 days of the calendar 
    quarter ending September 30, 1997.
        (K) Enterprise and Central Hudson are hereby directed to file an 
    updated market analysis within three years of the date of this order, 
    and every three years thereafter.
        (L) Enterprise and Central Hudson are hereby directed to inform the 
    Commission promptly of any change in status that would reflect a 
    departure from the characteristics that the Commission has relied upon 
    in approving market-based pricing. Alternatively, as discussed in the 
    body of this order, Enterprise and Central Hudson may elect to report 
    any such changes every three years with the updated market analysis 
    filed pursuant to three years with the updated market analysis filed 
    pursuant to Ordering Paragraph (K) above. Enterprise and Central Hudson 
    shall notify the Commission of which option they elect in the first 
    quarterly report filed pursuant to Ordering Paragraph (J) above.
        (M) Enterprise and Central Hudson are hereby informed of the rate 
    schedule designations shown on the Attachment to this order.
        (N) The Secretary shall promptly publish a copy of this order in 
    the Federal Register.
    
        By the Commission.
    Lois D. Cashell,
    Secretary.
    
    Attachment
    
    Central Hudson Enterprise Corporation
    
    Docket No. ER97-2869-000
    
    Rate Schedule FERC No. 1
    
    Supplement No. 1 to Rate Schedule No. 1--Code of Conduct
    
    Central Hudson Gas & Electric Corporation
    
    Docket No. ER97-2872-000
    
    FERC Electric Tariff Original Volume No. 3
    
    Supplement No. 1 to FERC Electric Tariff Original Volume No. 3--Code of 
    Conduct
    
    [FR Doc. 97-17314 Filed 7-1-97; 8:45 am]
    BILLING CODE 6717-01-M
    
    
    

Document Information

Published:
07/02/1997
Department:
Federal Energy Regulatory Commission
Entry Type:
Notice
Document Number:
97-17314
Pages:
35793-35795 (3 pages)
Docket Numbers:
Docket Nos. ER97-2869-000 and ER97-2872-000
PDF File:
97-17314.pdf