75 FERC 61,080

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

ORDER NO. 888
FINAL RULE
(Issued April 24, 1996)

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. Part 35 is amended by revising 35.15, by redesignating 35.28 as 35.29, and by adding new 35.26, 35.27, and 35.28 to read as follows:

35.15 - Notices of cancellation or termination.

(a) General rule. When a rate schedule or part thereof required to be on file with the Commission is proposed to be cancelled or is to terminate by its own terms and no new rate schedule or part thereof is to be filed in its place, each party required to file the schedule shall notify the Commission of the proposed cancellation or termination on the form indicated in _ 131.53 of this chapter at least sixty days but not more than one hundred-twenty days prior to the date such cancellation or termination is proposed to take effect. A copy of such notice to the Commission shall be duly posted. With such notice each filing party shall submit a statement giving the reasons for the proposed cancellation or termination, and a list of the affected purchasers to whom the notice has been mailed. For good cause shown, the Commission may by order provide that the notice of cancellation or termination shall be effective as of a date prior to the date of filing or prior to the date the filing would become effective in accordance with these rules.

(b) Applicability.

(1) The provisions of paragraph (a) of this section shall apply to all contracts for unbundled transmission service and all power sale contracts:

(i) executed prior to [insert date 60 days after date of publication of the Final Rule in the Federal Register]; or

(ii) if unexecuted, filed with the Commission prior to [insert date 60 days after date of publication of the Final Rule in the Federal Register].

(2) Any power sales contract executed on or after [insert date 60 days after date of publication of the Final Rule in the Federal Register] that is to terminate by its own terms shall not be subject to the provisions of paragraph (a) of this section.

(c) Notice. Any public utility providing jurisdictional services under a power sales contract that is not subject to the provisions of paragraph (a) of this section shall notify the Commission of the date of the termination of such contract within 30 days after such termination takes place. _

35.26 - Recovery of Stranded Costs by Public Utilities and Transmitting Utilities.

(a) Purpose. This section establishes the standards that a public utility or transmitting utility must satisfy in order to recover stranded costs.

(b) Definitions.

(1) Wholesale stranded cost means any legitimate, prudent and verifiable cost incurred by a public utility or a transmitting utility to provide service to:

(i) a wholesale requirements customer that subsequently becomes, in whole or in part, an unbundled wholesale transmission services customer of such public utility or transmitting utility; or

(ii) a retail customer, or a newly created wholesale power sales customer, that subsequently becomes, in whole or in part, an unbundled wholesale transmission services customer of such public utility or transmitting utility.

(2) Wholesale requirements customer means a customer for whom a public utility or transmitting utility provides by contract any portion of its bundled wholesale power requirements.

(3) Wholesale transmission services has the same meaning as provided in section 3(24) of the Federal Power Act (FPA): the transmission of electric energy sold, or to be sold, at wholesale in interstate commerce.

(4) Wholesale requirements contract means a contract under which a public utility or transmitting utility provides any portion of a customer's bundled wholesale power requirements.

(5) Retail stranded cost means any legitimate, prudent and verifiable cost incurred by a public utility or transmitting utility to provide service to a retail customer that subsequently becomes, in whole or in part, an unbundled retail transmission services customer of that public utility or transmitting utility.

(6) Retail transmission services means the transmission of electric energy sold, or to be sold, in interstate commerce directly to a retail customer.

(7) New wholesale requirements contract means any wholesale requirements contract executed after July 11, 1994, or extended or renegotiated to be effective after July 11, 1994.

(8) Existing wholesale requirements contract means any wholesale requirements contract executed on or before July 11, 1994.

(c) Recovery of Wholesale Stranded Costs.

(1) General requirement. A public utility or transmitting utility will be allowed to seek recovery of wholesale stranded costs only as follows:

(i) No public utility or transmitting utility may seek recovery of wholesale stranded costs if such recovery is explicitly prohibited by a contract or settlement agreement, or by any power sales or transmission rate schedule or tariff.

(ii) No public utility or transmitting utility may seek recovery of stranded costs associated with a new wholesale requirements contract if such contract does not contain an exit fee or other explicit stranded cost provision.

(iii) If wholesale stranded costs are associated with a new wholesale requirements contract containing an exit fee or other explicit stranded cost provision, and the seller under the contract is a public utility, the public utility may seek recovery of such costs, in accordance with the contract, through rates for electric energy under sections 205-206 of the FPA. The public utility may not seek recovery of such costs through any transmission rate for FPA section 205 or 211 transmission services.

(iv) If wholesale stranded costs are associated with a new wholesale requirements contract, and the seller under the contract is a transmitting utility but not also a public utility, the transmitting utility may not seek an order from the Commission allowing recovery of such costs.

(v) If wholesale stranded costs are associated with an existing wholesale requirements contract, if the seller under such contract is a public utility, and if the contract does not contain an exit fee or other explicit stranded cost provision, the public utility may seek recovery of stranded costs only as follows:

(A) If either party to the contract seeks a stranded cost amendment pursuant to a section 205 or section 206 filing under the FPA made prior to the expiration of the contract, and the Commission accepts or approves an amendment permitting recovery of stranded costs, the public utility may seek recovery of such costs through FPA section 205-206 rates for electric energy.

(B) If the contract is not amended to permit recovery of stranded costs as described in paragraph (c)(1)(v)(A) of this section, the public utility may file a proposal, prior to the expiration of the contract, to recover stranded costs through FPA section 205-206 or section 211-212 rates for wholesale transmission services to the customer.

(vi) If wholesale stranded costs are associated with an existing wholesale requirements contract, if the seller under such contract is a transmitting utility but not also a public utility, and if the contract does not contain an exit fee or other explicit stranded cost provision, the transmitting utility may seek recovery of stranded costs through FPA section 211-212 transmission rates.

(vii) If a retail customer becomes a legitimate wholesale transmission customer of a public utility or transmitting utility, e.g., through municipalization, and costs are stranded as a result of the retail-turned-wholesale customer's access to wholesale transmission, the utility may seek recovery of such costs through FPA section 205-206 or section 211-212 rates for wholesale transmission services to that customer.

(2) Evidentiary Demonstration for Wholesale Stranded Cost Recovery. A public utility or transmitting utility seeking to recover wholesale stranded costs in accordance with paragraphs (c)(1)(v)-(vii) of this section must demonstrate that:

(i) it incurred stranded costs on behalf of its wholesale requirements customer or retail customer based on a reasonable expectation that the utility would continue to serve the customer; (ii) the stranded costs are not more than the customer would have contributed to the utility had the customer remained a wholesale requirements customer of the utility, or, in the case of a retail-turned-wholesale customer, had the customer remained a retail customer of utility; and

(iii) the stranded costs are derived using the following formula: Stranded Cost Obligation = (Revenue Stream Estimate - Competitive Market Value Estimate) x Length of Obligation (reasonable expectation period).

(3) Rebuttable Presumption. If a public utility or transmitting utility seeks recovery of wholesale stranded costs associated with an existing wholesale requirements contract, as permitted in paragraph (c)(1) of this section, and the existing wholesale requirements contract contains a notice provision, there will be a rebuttable presumption that the utility had no reasonable expectation of continuing to serve the customer beyond the term of the notice provision.

(4) Procedure for Customer to Obtain Stranded Cost Estimate. A customer under an existing wholesale requirements contract with a public utility seller may obtain from the seller an estimate of the customer's stranded cost obligation if it were to leave the public utility's generation supply system by filing with the public utility a request for an estimate at any time prior to the termination date specified in its contract.

(i) The public utility must provide a response within 30 days of receiving the request. the response must include:

(A) an estimate of the customer's stranded cost obligation based on the formula in paragraph (c)(2)(iii) of this section;

(B) supporting detail indicating how each element in the formula was derived;

(C) a detailed rationale justifying the basis for the utility's reasonable expectation of continuing to serve the customer beyond the termination date in the contract;

(D) an estimate of the amount of released capacity and associated energy that would result from the customer's departure; and

(E) the utility's proposal for any contract amendment needed to implement the customer's payment of stranded costs.

(ii) If the customer disagrees with the utility's response, it must respond to the utility within 30 days explaining why it disagrees. If the parties cannot work out a mutually agreeable resolution, they may exercise their rights to Commission resolution under the FPA.

(5) A customer must be given the option to market or broker a portion or all of the capacity and energy associated with any stranded costs claimed by the public utility.

(i) To exercise the option, the customer must so notify the utility in writing no later than 30 days after the public utility files its estimate of stranded costs for the customer with the Commission.

(A) Before marketing or brokering can begin, the utility and customer must execute an agreement identifying, at a minimum, the amount and the price of capacity and associated energy the customer is entitled to schedule, and the duration of the customer's marketing or brokering of such capacity and energy.

(ii) If agreement over marketing or brokering cannot be reached, and the parties seek Commission resolution of disputed issues, upon issuance of a Commission order resolving the disputed issues, the customer may reevaluate its decision in paragraph (c)(5)(i) of this section to exercise the marketing or brokering option. The customer must notify the utility in writing within 30 days of issuance of the Commission's order resolving the disputed issues whether the customer will market or broker a portion or all of the capacity and energy associated with stranded costs allowed by the Commission.

(iii) If a customer undertakes the brokering option, and the customer's brokering efforts fail to produce a buyer within 60 days of the date of the brokering agreement entered into between the customer and the utility, the customer shall relinquish all rights to broker the released capacity and associated energy and will pay stranded costs as determined by the formula in paragraph (c)(2)(iii) of this section.

(d) Recovery of Retail Stranded Costs.

(1) General requirement. A public utility may seek to recover retail stranded costs through rates for retail transmission services only if the state regulatory authority does not have authority under state law to address stranded costs at the time the retail wheeling is required.

(2) Evidentiary Demonstration Necessary for Retail Stranded Cost Recovery. A public utility seeking to recover retail stranded costs in accordance with paragraph (d)(1) of this section must demonstrate that:

(i) it incurred stranded costs on behalf of a retail customer that obtains retail wheeling based on a reasonable expectation that the utility would continue to serve the customer; and

(ii) the stranded costs are not more than the customer would have contributed to the utility had the customer remained a retail customer of the utility. _ 35.27 -- Power Sales at Market-based Rates.

(a) Notwithstanding any other requirements, any public utility seeking authorization to engage in sales for resale of electric energy at market-based rates shall not be required to demonstrate any lack of market power in generation with respect to sales from capacity for which construction has commenced on or after [insert date 60 days after date of publication of the Final Rule in the Federal Register].

(b) Nothing in this part

(1) shall be construed as preempting or affecting any jurisdiction a state commission or other state authority may have under applicable state and federal law, or

(2) limits the authority of a state commission in accordance with state and federal law to establish

(i) competitive procedures for the acquisition of electric energy, including demand-side management, purchased at wholesale, or

(ii) non-discriminatory fees for the distribution of such electric energy to retail consumers for purposes established in accordance with state law.

35.28 -- Non-discriminatory Open Access Transmission Tariff.

(a) Applicability. This section applies to any public utility that owns, controls or operates facilities used for the transmission of electric energy in interstate commerce and to any non-public utility that seeks voluntary compliance with jurisdictional transmission tariff reciprocity conditions.

(b) Definitions.

(1) Requirements service agreement means a contract or rate schedule under which a public utility provides any portion of a customer's bundled wholesale power requirements.

(2) Economy energy coordination agreement means a contract, or service schedule thereunder, that provides for trading of electric energy on an "if, as and when available" basis, but does not require either the seller or the buyer to engage in a particular transaction.

(3) Non-economy energy coordination agreement means any non-requirements service agreement, except an economy energy coordination agreement as defined in paragraph (b)(2) of this section.

(c) Non-discriminatory Open Access Transmission Tariffs.

(1) Every public utility that owns, controls or operates facilities used for the transmission of electric energy in interstate commerce must have on file with the Commission a tariff of general applicability for transmission services, including ancillary services, over such facilities. Such tariff must be the open access pro forma tariff contained in Order No. 888, FERC Stats. & Regs. _ 31,036 (Final Rule on Open Access and Stranded Costs) or such other open access tariff as may be approved by the Commission consistent with Order No. 888, FERC Stats. & Regs. _ 31,036.

(i) Subject to the exceptions in paragraphs (c)(1)(ii), (c)(1)(iii), and (c)(1)(iv) of this section, the pro forma tariff contained in Order No. 888, FERC Stats. & Regs. _ 31,036, and accompanying rates, must be filed no later than 60 days prior to the date on which a public utility would engage in a sale of electric energy at wholesale in interstate commerce or in the transmission of electric energy in interstate commerce.

(ii) If a public utility owns, controls or operates facilities used for the transmission of electric energy in interstate commerce as of [insert date 60 days after date of publication of the Final Rule in the Federal Register], it must file the pro forma tariff contained in Order No. 888, FERC Stats. & Regs. _ 31,036, pursuant to section 206 of the FPA and accompanying rates pursuant to section 205 of the FPA, no later than [insert date 60 days after date of publication of the Final Rule in the Federal Register]. However, if a public utility has already filed, or has on file, an open access tariff and accompanying rates as of April 24, 1996, it may, but is not required to, file new rates with its section 206 pro forma tariff filing.

(iii) If a public utility owns, controls or operates transmission facilities used for the transmission of electric energy in interstate commerce as of [insert date 60 days after date of publication of the Final Rule in the Federal Register], such facilities are jointly owned with a non-public utility, and the joint ownership contract prohibits transmission service over the facilities to third parties, the public utility with respect to access over the public utility's share of the jointly owned facilities must file no later than December 31, 1996 the pro forma tariff contained in Order No. 888, FERC Stats. & Regs. _ 31,036, pursuant to section 206 of the FPA and accompanying rates pursuant to section 205 of the FPA.

(iv) If a public utility obtains a waiver of the tariff requirement pursuant to paragraph (d) of this section, it does not need to file the pro forma tariff required by this section.

(iv) Any public utility that seeks a deviation from the pro forma tariff contained in Order No. 888, FERC Stats. & Regs. _ 31,036, must demonstrate that the deviation is consistent with the principles of Order No. 888, FERC Stats. & Regs. _ 31,036.

(2) Every public utility that owns, controls or operates facilities used for the transmission of electric energy in interstate commerce, and that uses those facilities to engage in wholesale sales and/or purchases of electric energy, or unbundled retail sales of electric energy, must take transmission service for such sales and/or purchases under the open access tariff filed pursuant to this section.

(i) Subject to the exceptions in paragraphs (c)(2)(ii) and (c)(3)(iv) of this section, this requirement is effective on the date that such public utility engages in a wholesale sale or purchase of electric energy or any unbundled retail sale of electric energy, but no earlier than [insert date 60 days after date of publication of the Final Rule in the Federal Register].

(ii) For sales of electric energy pursuant to a requirements service agreement executed on or before [insert date 60 days after date of publication of the Final Rule in the Federal Register], this requirement will not apply unless separately ordered by the Commission. For sales of electric energy pursuant to a bilateral economy energy coordination agreement executed on or before [insert date 60 days after date of publication of the Final Rule in the Federal Register], this requirement is effective on December 31, 1996. For sales of electric energy pursuant to a bilateral non-economy energy coordination agreement executed on or before [insert date 60 days after date of publication of the Final Rule in the Federal Register], this requirement will not apply unless separately ordered by the Commission.

(3) Every public utility that owns, controls or operates facilities used for the transmission of electric energy in interstate commerce, and that is a member of a power pool, public utility holding company, or other multi-lateral trading arrangement or agreement that contains transmission rates, terms or conditions, must file a joint pool-wide or system-wide open access transmission pro forma tariff.

(i) For any power pool, public utility holding company or other multi-lateral arrangement or agreement that contains transmission rates, terms or conditions and that is executed after [insert date 60 days after date of publication of the Final Rule in the Federal Register], this requirement is effective on the date that transactions begin under the arrangement or agreement.

(ii) For any public utility holding company arrangement or agreement that contains transmission rates, terms or conditions and that is executed on or before [insert date 60 days after date of publication of the Final Rule in the Federal Register], this requirement is effective [insert date 60 days after date of publication of the Final Rule in the Federal Register], except for the Central and South West System, which must comply no later than December 31, 1996.

(iii) For any power pool or multi-lateral arrangement or agreement other than a public utility holding company arrangement or agreement, that contains transmission rates, terms or conditions and that is executed prior to [insert date 60 daysafter date of publication of the Final Rule in the Federal Register], this requirement is effective on December 31, 1996.

(iv) A public utility member of a power pool, public utility holding company or other multi-lateral arrangement or agreement that contains transmission rates, terms or conditions and that is executed on or before [insert date 60 days after date of publication of the Final Rule in the Federal Register] must begin to take service under a joint pool-wide or system-wide pro forma tariff for wholesale trades among the pool or system members no later than December 31, 1996.

(d) Waivers. A public utility subject to the requirements of this section and Order No. 889, FERC Stats. & Regs. _ 31,037 (Final Rule on Open Access Same-Time Information System and Standards of Conduct) may file a request for waiver of all or part of the requirements of this section, or Part 37 (Open Access Same-Time Information System and Standards of Conduct for Public Utilities), for good cause shown. An application for waiver must be filed either:

(i) no later than [insert date 60 days after date of publication of the Final Rule in the Federal Register] or

ii) no later than 60 days prior to the time the public utility would otherwise have to comply with the requirement.

(e) Non-public utility procedures for tariff reciprocity compliance.

(1) A non-public utility may submit a transmission tariff and a request for declaratory order that its voluntary transmission tariff meets the requirements of Order No. 888 (Final Rule on Open Access and Stranded Costs).

(i) Any submittal and request for declaratory order submitted by a non-public utility will be provided an NJ (non- jurisdictional) docket designation.

(ii) If the submittal is found to be an acceptable transmission tariff, an applicant in a Federal Power Act (FPA) section 211 case against the non-public utility shall have the burden of proof to show why service under the open access is not sufficient and why a section 211 order should be granted.

(2) A non-public utility may file a request for waiver of all or part of the reciprocity conditions contained in a public utility open access tariff, for good cause shown. An application for waiver may be filed at any time.

PART 385 -- RULES OF PRACTICE AND PROCEDURE

1. The authority citation for Part 385 continues to read as follows: Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101- 7352; 49 U.S.C. 60502; 49 App. U.S.C. 1-85.

2. Part 385 is amended by adding paragraph (b)(5) to _ 385.2011 to read as follows:

385.2011 - Procedures for filing on electronic media (Rule 2011)

(b) * * *

(5) Non-discriminatory open access transmission tariffs filed pursuant to _ 35.28 of this chapter.

Convergence Research - 5/2/96