| Promoting Wholesale Competition Through Open Access Services by Public Utilities
Recovery of Stranded Costs by Public Utilities and Transmitting Utilities | Docket No. RM95-8-000 Docket No. RM94-7-001 |
In the NOPR, the Commission did not propose any changes to its information filing requirements for public utilities.
Many IOUs argue that the current information filing requirements competitively disadvantage traditional public utilities and unfairly benefit sellers, such as power marketers, that are not required to provide comparable information. 904/ They urge the Commission to eliminate the requirement for public disclosure of competitively sensitive, proprietary, or otherwise confidential Form No. 1 data. They contend that requiring such disclosure only from traditional public utilities harms such public utilities and compromises the development of efficient competition. Illinois Power asks the Commission to review all information that utilities must file, including EIA 860, EIA 767, and FERC Form No. 715.
A number of commenters believe that some type of information requirement must also be placed on non-public utility entities. 905/ PacifiCorp suggests that the Commission should require transmitting utilities that do not file a Form No. 1 to file similar information annually with the Commission. Ohio Edison asserts that the Commission should extend its use of the reciprocity concept to require the filing of operating data with the Commission. Further, if non-public utility entities are not required to disclose certain information, Ohio Edison asserts that all public utilities that have received approval to sell power at market-based rates, including traditional utilities, should also be free from having to disclose such information.
Arizona argues that enforcing comparability vis-a-vis non- public utility transmitting utilities would seem to invite jurisdictional challenge. Thus, it would support legislation to broaden the Commission's jurisdiction. 906/
We will not adopt the suggestion made by a number of commenters that we now eliminate the public disclosure of allegedly competitively sensitive, proprietary, or otherwise confidential data submitted to the Commission on Form No. 1, as well as on other Commission forms. The information that we collect from public utilities is necessary to carry out our jurisdictional responsibilities and is used, among other things, to evaluate the reasonableness of cost-based rates subject to our jurisdiction and the operation of power markets. 907/ Moreover, as we explained in ConEd,
[r]eports required to be submitted by Commission rule and necessary for the Commission's jurisdictional activities are considered public information. 18 C.F.R. _ 388.106. In addition, the Commission has long required jurisdictional utilities to submit Form 1 data on a form that states on its cover that the Commission does not consider the material to be confidential. [908/]
We are sensitive to the lack of symmetry in the generation information we require from traditional public utilities, particularly those that have market-based rate authority, and the generation information we require from other public utilities (e.g., public utility marketers) authorized to sell at market- based rates. 909/ However, the record in this proceeding is insufficiently developed for us to make and support a well- informed decision requiring a different reporting scheme, particularly given the industry's current rapid pace of change. Also, we are not persuaded that the burdens borne by traditional public utilities (primarily annual reports submitted months after-the-fact) are impairing the competitiveness of these utilities so much that we must act hastily now, instead of deferring a decision to a more appropriate proceeding. Moreover, we are required to regulate the rates of public utilities and, although we are moving toward greater reliance on market-based generation rates, we continue to regulate generation on a cost basis for most traditional public utilities, particularly rates for sales from existing generation. To assure that these rates are just and reasonable, we, as well as the customers of public utilities, need the more detailed information our regulations require public utilities to submit.
Accordingly, at this time, we will not change our information reporting requirements. As the industry becomes more competitive, we will monitor our reporting requirements to make sure that they are needed, fair to all segments of the industry, and consistent with the workings of a competitive environment.
In the NOPR, we did not address whether special provisions were needed for small public utilities and small transmission customers because of the possible burden of unbundling, open access tariffs, and the OASIS requirement.
A number of commenters assert that the unbundling requirement poses significant problems for smaller public utilities and that small utilities should not be subject to the same requirements as larger utilities. 910/ St. Joseph notes that in small utilities one system operator typically runs the system operations center. Functional unbundling, it asserts, would require the addition of another operator for each shift at great cost to the small utility. Central Hudson estimates that unbundling would result in an approximately 10 percent increase in the wholesale price, putting small utilities at a competitive disadvantage.
Several commenters assert that many small utilities enjoy little or no transmission market power because their systems tend to be in parallel with large systems and are bypassed as a result. They say that customers prefer to deal with one large regional utility rather than pay pancaked transmission rates for service through two or more small utilities.
Citizens Utilities argues that some systems are radial spurs of much larger systems and merely serve to link points of interconnection. It claims that a network tariff is not applicable in such a case and that it is unlikely that third parties would request service over such small or isolated systems. It recommends that if a utility is basically a spur system and faces little present or future demand for third-party service, the Commission should either relax the open access requirements or defer them until a section 211 request is submitted.
East Kentucky proposes that the Commission exempt not-for- profit utilities from the requirement to separate the functions related to operation and marketing, since small G&T cooperatives exist solely to serve the needs of their owner-member distribution cooperatives.
VT DPS suggests that waiver of marketing and transmission personnel separation requirements may be appropriate in the case of smaller utilities that do not operate control areas. St. Joseph proposes that the Commission establish a threshold level based on system demand of 1000 MW, below which unbundling of wholesale transmission functions from other dispatching functions would not be required. Alternatively, St. Joseph proposes an exemption from unbundling where the utility can demonstrate that it has no market power and that unbundling would not materially improve the level of competition in the generating market.
Central Hudson believes that the Commission should allow the development of a short form tariff or else defer the functional unbundling requirement for smaller utilities and use the section 211 process in the interim to provide flexibility for these utilities.
Oregon Trail EC, a small rural electric, public utility cooperative, requests that the Commission revise proposed section 35.28 of its regulations to provide that the generic open access transmission requirements apply only to public utilities that operate facilities used for the transmission of electric energy in interstate commerce. It explains that it owns one transmission line that it leases to BPA, which operates the line as part of its integrated transmission network. Thus, Oregon Trail EC states that it cannot meet the requirements of the open access rule. It also points out that the Commission exempted Oregon Trail EC and other similarly situated utilities from the transmission reporting requirements of Form No. 715 because they did not engage in transmission planning.
ALCOA suggests that the default tariffs for smaller utilities with transmission systems unlikely to be used by others should not become effective automatically. Rather, the default tariffs should become effective only when service is requested. Citizens Utilities suggests that relaxed tariff requirements be established for small utilities with insignificant demand for transmission service.
BG&E believes that a utility using its system on a network basis for economic dispatch should not be required to file a network service tariff if there is no customer to take the service. It suggests that if municipalization were to occur, the Commission could then require the utility to file, within 60 days, a network service tariff to serve the new municipal.
We are sympathetic to the array of concerns raised by small public utilities and small transmission customers. The regulations we are adopting include waiver provisions under which public utilities and transmission customers, and non-public utility entities seeking exemption from the reciprocity condition, may file requests for waivers from all or part of the Commission's regulations or for special treatment. 911/ However, it is difficult to imagine any circumstance that would justify waiving the requirements of this Rule for any public utility that is also a control area operator.
We recognize, for example, that it might be a financial burden on small public utilities to unbundle generation from transmission, follow standards of conduct that separate transmission personnel from wholesale marketing personnel, and maintain an OASIS. These requirements may be particularly burdensome for small public utilities that own no generation and buy at wholesale on a radial transmission line from another utility's grid. In addition, if a small public utility's service territory is part of another utility's control area, the small public utility should be permitted to make a showing that it should be exempt from all or some of the Rule. In this circumstance, we will consider granting a waiver if the utility can show that: (1) it does not own transmission facilities, (2) it has turned control of its facilities over to someone else (such as the control area operator) who complies with the Rule as its agent, or (3) no one is likely to ask to use its facilities (e.g., because they are radial lines), and it commits to file an open access tariff within 60 days of a request to use its facilities and to comply with the Rule in all other ways.
Because the possible scenarios under which small entities may seek waivers from the Final Rule are diverse, they are not susceptible to resolution on a generic basis and we will require applications and fact-specific determinations in each instance. We note here that any waivers that we may grant depend upon the facts presented in each case. If the circumstances that give rise to the exemption change, the waiver may no longer be appropriate. For example, a radial line today could very easily become part of a network tomorrow and a portion of a grid that no one is interested in using today could become an important transmission link tomorrow, especially if retail access is allowed.
In addition, we will apply the same standards to any entity seeking a waiver. This includes public utilities seeking waiver of some or all of the requirements of the Rule, as well as non- public utilities seeking waiver of the reciprocity provisions contained in the pro forma open access tariff. Thus, we would not apply the open access reciprocity provision to small non- public utilities that are not control area operators and either do not own or control transmission or have transmission that no one is likely to ask to use. They would not have to provide an open access tariff, establish an OASIS, or separate operators of transmission from wholesale purchasers in order to satisfy the reciprocity condition for obtaining transmission service. However, they will have to apply for this waiver and demonstrate that they qualify for the waiver.
In the NOPR, we again expressed our support for the voluntary formation of regional transmission groups (RTGs).
A number of commenters urge the Commission to provide incentives for the formation of RTGs within two years of the adoption of the final rule. 913/ Several commenters argue that the Commission should encourage a regional approach to transmission issues by expanding the role of RTGs. 914/ Com Ed also claims that contract path pricing problems probably will need to be resolved at the regional level.
Sierra Pacific Power, which views open access as the major benefit of RTGs, questions the need to provide incentives for the development of RTGs once open access is implemented. However, it does see that RTGs may help promote open access with non-public utility entities, who have shown an increased interest in joining RTGs. American Wind and MT Com request that the Commission adopt policies that will encourage a close working relationship between RTGs and state authorities.
Otter Tail contends that the final rule should stop short of establishing any conditions on the formation, governance, or functions of RTGs, arguing that such issues are complex and outside the scope of the NOPR. ALCOA and Missouri Joint Commission encourage the Commission to make certain that its policy regarding RTGs is not implemented in a manner that conflicts with the new open access regime.
We continue to support the development of RTGs and encourage the formation of regional tariffs. 915/ In our Policy Statement Regarding Regional Transmission Groups, we first explained our support for such voluntary associations. 916/ We again explained our support in the NOPR:
We believe that RTGs can speed the development of competitive markets, increase the efficiency of the operation of transmission systems, provide a framework for coordination of regional planning of the system and reduce the administrative burden on the Commission and on members of RTGs by providing for voluntary resolution of disputes. [917/]
To further encourage the development of RTGs, we will accept regional open access transmission tariffs developed by RTGs that are consistent with the objectives of this Rule. This should make it easier for all parties in a region to coordinate their activities.
A number of commenters urge the Commission to give considerable deference to RTGs on such issues as the formulation of pricing methods and RTG member duties. 918/ Nebraska Public Power District requests that the Commission consider permitting a megawatt-mile pricing mechanism for MAPP. NWRTA urges the Commission to define clearly how much deference it will accord to RTGs and explicitly grant deference to RTGs on such matters as dispute resolution and decisionmaking processes. It also asks that the Commission honor the reciprocity provisions related to Canadian participation that are contained in the NWRTA agreement. Nevada Power requests the Commission to accept, as not unduly discriminatory, RTG open access tariffs that reflect the members' specific terms and conditions so long as the tariffs satisfy the substantive requirements of the final rule. It proposes that such tariffs be allowed to become effective without hearing or refund obligation.
Texas-New Mexico, while encouraging deference to RTGs in general, argues that deference must be conditioned upon a requirement that the RTG provide not only equal access but also terms and conditions of service that are comparable to what a customer could otherwise obtain under the final rule tariff or under section 211 of the FPA.
Southwest TDU Group contends that RTGs should not be given deference, and RTG filings should be subject to the same standards and scrutiny as non-RTG filings.
As we explained in the RTG Policy Statement, we intend to give deference to the planning, dispute resolution, and decisionmaking processes of an RTG. With respect to pricing proposals submitted by RTGs, we believe that RTGs may be able to develop solutions to such problems as loop flows through innovative flow-based pricing methodologies. As we stated in the Transmission Pricing Policy Statement, we will afford considerable deference to an RTG.
Commenters in the Pacific Northwest ask the Commission to be flexible in reviewing tariffs that are based on regional practices, and that differ from the final rule tariff as a result. Public Generating Pool urges the Commission to recognize that the Northwest's transmission system has been developed and is operated to support the region's coordinated power system. That is, it wants all hydro spill to be treated equally with no preference between federal and non-federal power. Also, it asserts that firm available transmission capacity in the Northwest must be worked out by the NWRTA RTG to account for the contingent operation of generation to avoid hydro spill.
Similarly, other commenters note that the Northwest's integrated transmission system was constructed to support a unique regionwide hydroelectric-dependent generating system and that flexibility is needed to accommodate the characteristics of the system.
WA Com argues that imposition of a uniform national tariff would not reflect the region's specific system characteristics or operating practices. It argues that the final rule could impede rather than promote efficient competition in the Northwest. It believes that the Commission should defer to RTGs for defining and implementing wholesale transmission access terms and conditions at the regional level.
The Washington and Oregon Energy Offices, while supporting the adoption of regional practices, argues that uniform transmission principles should apply for all transmitting entities in the region. They argue that dispatch decisions are complicated by flood control, salmon passage, navigation, irrigation, and other constraints. Puget requests that the Commission give each transmitting utility the flexibility to file tariffs that fit unique or unusual circumstances and allow for regional market differences.
Because the terms and conditions offered by the smaller transmission owners in the Northwest are determined by the terms and conditions offered by Bonneville, Pacific Northwest Coop argues that the terms and conditions for wholesale power transmission, ancillary services, and RINs should be deferred until BPA's 1996 rate case is resolved and until appropriate regional and national systems and protocols are developed.
As we explained with respect to RTGs, we encourage the filing of regional open access transmission tariffs. 919/ The Final Rule pro forma tariff contains provisions allowing utilities to modify tariff terms to reflect prevailing regional practices. This should permit entities in the Pacific Northwest to address unique circumstances that exist in the Pacific Northwest and to incorporate prevailing regional practices (e.g., treatment of hydropower generation in the priority of dispatch) into their open access transmission tariffs. 920/ This should also encourage other regional solutions, such as the development of regional ISOs, to transmission problems.
In addition, although we will put the Final Rule pro forma tariff (which already allow for certain provisions consistent with regional practices) into effect for all public utilities 60 days after publication of this Rule in the Federal Register, utilities may file regional tariffs or propose deviations in the pro forma tariff based on additional regional needs to be effective at any time thereafter. Such proposals, however, will have to be consistent with the requirements of the Final Rule and be reasonable, generally accepted in the region and consistently adhered to by the transmission provider.. Further, we will not permit entities in a region to claim different sets of prevailing regional practices.
Washington Water Power explains that for open access transmission to be fully realized in the Pacific Northwest there must be federal legislation to remove the monopoly protections of federally generated power. Until then, Washington Water Power suggests certain mitigating measures that would increase competition in the Pacific Northwest. It also urges the Commission to take BPA's special characteristics into account in issuing the final rule.
Public Power Council encourages the Commission to make broad use of section 211 to mandate transmission access to ensure that BPA continues to provide comparable open access transmission. 921/
Public Generating Pool argues that the extent to which BPA's tariffs are allowed to deviate from the rule should be governed by the technical characteristics of the system and not by BPA's status. 922/
Direct Service Industries argues that the non-discrimination standard is made applicable to BPA by section 212(i) and that the Commission has the authority to review all BPA rates under the Northwest Power Act (citing Pacific Northwest Electric Power Planning and Conservation Act _ 7(a), 16 U.S.C. _ 839e(a)). It also argues that functional unbundling is particularly important for BPA because of BPA's market power and relative freedom from regulation. Clark also argues that the Commission should require BPA to meet the comparability standard. It alleges that BPA refuses to provide comparable service. It asserts that the Commission has authority to remedy the problem under the Energy Policy Act amendments to section 212, which Clark states gives the Commission authority over BPA's transmission practices. Clark also notes that BPA is a member of WRTA and, as such, must provide comparable service.
Pacific Northwest Coop argues that many of the issues presented in this rulemaking are currently being contested in the BPA rate case in Docket Nos. WP-96/TR-96 and TC-96. It says that the Commission should defer application of the rule to Pacific Northwest Coop and all of BPA's customers until conclusion of the rate case.
Washington and Oregon Energy Offices asserts that it would be proper for the Commission "to impose similar transmission price structures upon Bonneville under section 211 orders as it will for jurisdictional [public] utilities under sections 205, 206, and the NOPR."
With respect to stranded costs, BPA notes that it may be necessary to tailor a stranded cost policy for BPA that addresses the goals of open access and wholesale stranded cost recovery in a manner consistent with BPA's unique circumstances. BPA asks the Commission to defer consideration of its stranded investment and related cost recovery issues until it makes a rate filing with the Commission. 923/ It further argues that the rule should not address whether and how BPA stranded costs might be recovered in transmission rates approved by the Commission under authority other than sections 211 and 212. Clark argues that the Commission's stranded cost recovery policy is inapplicable to BPA.
NW Conservation Act Coalition makes the following suggestions:
BPA is not a public utility under section 201(e) of the FPA and, thus, is not subject to the requirements of this Rule to put the Final Rule pro forma tariff into effect. However, there are three circumstances under which the Commission may review BPA's transmission access and pricing policies. First, BPA could file an open access tariff and accompanying rates for review and confirmation under section 7 of the Pacific Northwest Electric Power Planning and Conservation Act (Northwest Power Act) 924/ and at that time could ask the Commission to find that its tariff meets the Commission's open access policies. Second, BPA is a transmitting utility subject to a request for mandatory transmission services under section 211 of the FPA. Transmission required of BPA under section 211 would have to be consistent with the requirements imposed on BPA under its organic statutes, the Northwest Power Act, and the Federal Columbia River Transmission System Act. 925/ Third, if BPA receives open access transmission from a public utility, it is subject to the reciprocity provision contained in the utility's Final Rule pro forma tariff. If BPA seeks to comply with the reciprocity provision, it could use the declaratory order procedures we have provided in this Rule for non-public utility transmission providers. Finally, we note that BPA has agreed to provide open access as a member of two RTGs approved by this Commission.
With respect to stranded costs, BPA has asked us to clarify that the Stranded Cost Rule does not address whether and how BPA stranded costs might be recovered in transmission rates approved by the Commission under authority other than sections 211 and 212 of the FPA (namely, section 7 of the Northwest Power Act). We clarify that this Rule addresses only stranded costs recovered by public utilities under the FPA and transmitting utilities (including BPA) that are subject to mandatory transmission requests under FPA section 211. It does not address stranded cost recovery by BPA under the Northwest Power Act.
SEPA requests that the final rule assure that SEPA can receive network transmission service when necessary. It also indicates that it has 58 customers that receive less than one MW of power, but that the NOPR pro forma point-to-point tariff contains a one MW minimum scheduling requirement. Thus, it requests that the final rule allow some flexibility with respect to this requirement so that it can carry forward its marketing program.
DOE notes that the Western Area and Southwestern Area Power Administrations have pledged to offer transmission services that are comparable to those required of public utilities to the extent not otherwise prohibited by law.
Federal power marketing agencies (PMAs) are not public utilities as defined under section 201(e) of the FPA and, thus, are not required by this Rule to file non-discriminatory open access transmission tariffs. 926/ However, to the extent a PMA receives open access transmission service from a public utility, it is subject to the reciprocity provisions in the utility's pro forma tariff. 927/ If a PMA seeks to comply with the reciprocity provision, it can file a proposed tariff and seek a declaratory ruling.
With respect to SEPA's concern that the proposed point-to- point tariff has a one MW minimum scheduling requirement, but many of its customers have loads of less than one MW, we clarify that the Final Rule pro forma tariff will allow SEPA to continue to schedule service for these customers. Under SEPA's current transmission arrangements, it is allowed to aggregate loads within a single control area that are less than one MW individually, but jointly are more than one MW, to meet the requirement at an interface. The revised language in the Final Rule tariff permits this practice to continue. We also clarify that SEPA, as a seller of power to multiple purchasers inside several control areas, is eligible to receive network service.
TVA is concerned that the final rule may place TVA at a disadvantage because its opportunities to participate in the electricity market outside the TVA area are so severely limited by statute. It explains that it is restricted from directly participating in the new competitive landscape except through limited power exchange opportunities with a few neighboring systems. It urges the Commission to recognize these circumstances in the final rule. TVA is also concerned that its regional customers may face stranded costs because its ability to mitigate those costs by making replacement sales to new customers is limited.
TVA is not a public utility under section 201(e) of the FPA and, thus, is not required to file a non-discriminatory open access transmission tariff under this Rule. 928/. However, if TVA receives open access transmission service from a public utility, it is subject to the reciprocity provision in the utility's pro forma tariff. If TVA seeks to comply with reciprocity, it may avail itself of the Commission's reciprocity safe harbor approach, through a declaratory ruling, if it is fearful that a public utility may deny it service simply on a claim that TVA's non-discriminatory open access tariff is not satisfactory. 929/ The details of this safe harbor procedure are set forth in Section IV.G.4.f.
ID Com believes that the NOPR unfairly discriminates against hydro-based utilities. It argues that utilities that rely heavily on hydropower need to engage in non-firm market transactions that depend on water levels; e.g., during low water years, a utility must have access to the transmission system to make non-firm, off-system purchases. It asserts that the NOPR treats non-firm sales and purchases as subordinate to firm transactions and does not allow the utility to reserve capacity for its critical, but non-firm, transactions. ID Com also asserts that the NOPR would, in effect, strand the utility's investment in the production plant being used to generate power for the non-firm sales.
Idaho complains that the NOPR unfairly allows a customer to buy and reserve firm transmission rights surplus to its needs, but does not permit a utility to do the same. It explains that this problem is particularly acute for hydro utilities and argues that they must be allowed to reserve at tariff rates at least a portion of available transmission capacity for firm and non-firm wholesale transactions. In the alternative, Idaho asserts that the transmission owner should not be required to provide point- to-point service for transmission uses other than from demonstrated firm obligations.
National Hydropower argues that in light of the NOPR the Commission should reexamine the manner in which it exercises its FPA Part I authority with respect to (1) economic feasibility determinations, (2) section 10(a) findings, (3) determinations of section 10(j) recommendations, and (4) section 13. For example, it states that the NOPR suggests that all future electric resource selection decisions should be based exclusively on short-run marginal cost comparisons. Because, it asserts, hydroelectric power provides many public interest benefits not susceptible to precise quantification, the Commission should clarify how non-price factors are to be considered in a post- final rule wholesale electric marketplace.
As we explained above with respect to the Pacific Northwest, we will permit entities to incorporate prevailing regional practices (e.g., treatment of hydropower generation in the priority of dispatch) into regional open access transmission tariffs. This should permit entities in a region to resolve concerns over the scheduling of non-firm hydropower. In addition, if a utility and its customers can agree on the scheduling of non-firm hydropower and the disruption of firm transactions, we would permit that resolution to be incorporated into the utility's tariff. Utilities are permitted to consider seasonal variations in hydropower availability in the determination of Available Transmission Capacity to be posted on the OASIS.
The issues raised by National Hydropower with respect to our hydroelectric licensing practices are beyond the scope of this rulemaking. Indeed, National Hydropower has already raised its concerns in a petition to the Commission to revise our hydroelectric licensing procedures, filed on July 10, 1995. That is the proper proceeding in which to address our hydroelectric licensing practices.
Several commenters are concerned that the rule may undermine the financial position of public utilities so that they will not be able to provide many of the programs that benefit low-income residents (e.g., assistance to low-income and elderly consumers, weatherization and energy conservation programs, and payment of taxes that provide many city services). 930/
La Raza is concerned that the rule will permit large preferred customers to opt out of the regulated structure, leaving behind a smaller and less affluent base to support the long-term investments made under the previous regulatory environment.
Home Builders is concerned that utilities may compensate for reduced profits under the proposed rule by raising infrastructure charges and hookup fees for new homes, thus reducing new home sales.
State and City Supervised Housing for Equity in Electric Rates states that publicly supervised housing is uniquely qualified to obtain open access electricity from wholesale markets, and that the Commission should adopt policies that bring competitive benefits to residents of such housing.
While some residential consumers may be apprehensive about the changes that this Rule may have on the electric industry, we are convinced that the changes we are proposing for wholesale markets will benefit them. As wholesale transmission open access becomes a reality, residential consumers should reap the benefits of more competitive bulk power markets and associated lower costs. This Rule does not require retail transmission access for retail customers of any size. Moreover, this Rule does not require any changes in programs such as assistance to low-income and elderly consumers and weatherization and energy conservation. As discussed in Section IV.I, those programs are under the jurisdiction of the individual states, and will remain under their jurisdiction. Indeed, this Rule contains several safeguards to maintain the ability of states to impose conditions on retail access, such as conditions that help to protect residential customers from becoming the residual payer of stranded costs.
Convergence Research - 5/2/96