
[Federal Register: July 8, 2008 (Volume 73, Number 131)]
[Rules and Regulations]               
[Page 39091-39156]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy08-22]                         


[[Page 39091]]

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Part II





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Part 37



Preventing Undue Discrimination and Preference in Transmission Service; 
Final Rule


[[Page 39092]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 37

[Docket Nos. RM05-17-003 and RM05-25-003; Order No. 890-B]

 
Preventing Undue Discrimination and Preference in Transmission 
Service

Issued June 23, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Order on rehearing and clarification.

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SUMMARY: The Federal Energy Regulatory Commission affirms its basic 
determinations in Order Nos. 890 and 890-A, granting rehearing and 
clarification regarding certain revisions to its regulations and the 
pro forma open-access transmission tariff, or OATT, adopted in Order 
Nos. 888 and 889 to ensure that transmission services are provided on a 
basis that is just, reasonable, and not unduly discriminatory. The 
reforms affirmed in this order are designed to: Strengthen the pro 
forma OATT to ensure that it achieves its original purpose of remedying 
undue discrimination; provide greater specificity to reduce 
opportunities for undue discrimination and facilitate the Commission's 
enforcement; and increase transparency in the rules applicable to 
planning and use of the transmission system.

DATES: Effective Date: This rule will become effective September 8, 
2008.

FOR FURTHER INFORMATION CONTACT:
W. Mason Emnett (Legal Information), Office of the General Counsel--
Energy Markets, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-6540.
Daniel Hedberg (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-6243.

SUPPLEMENTARY INFORMATION:

                            Table of Contents

                                                              Paragraph
                                                                Number

I. Introduction............................................            1
II. Reforms of the OATT....................................            7
    A. Consistency and Transparency of ATC Calculations....            7
        1. Consistency.....................................            8
        2. Transparency....................................           25
    B. Transmission Pricing................................           38
        1. Energy and Generation Imbalances................           38
        2. Credits for Network Customers...................           46
        3. Capacity Reassignment...........................           68
        4. Operational Penalties...........................           87
        5. ``Higher Of'' Pricing Policy....................          102
        6. Other Ancillary Services........................          109
    C. Non-Rate Terms and Conditions.......................          116
        1. Modifications to Long-Term Firm Point-to-Point            116
         Service...........................................
        2. Rollover Rights.................................          141
        3. Acquisition of Transmission Service.............          155
        4. Designation of Network Resources................          162
        5. Clarifications Related to Network Service.......          216
        6. OATT Definitions................................          220
III. Information Collection Statement......................          250
IV. Document Availability..................................          251
V. Effective Date and Congressional Notification...........          254
Appendix A: Petitioners' Acronyms
Appendix B: Pro Forma Open Access Transmission Tariff


Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

Order on Rehearing and Clarification

I. Introduction

    1. On February 16, 2007, the Commission issued Order No. 890,\1\ 
addressing and remedying opportunities for undue discrimination under 
the pro forma Open Access Transmission Tariff (OATT) adopted in Order 
No. 888.\2\ The pro forma OATT was intended to foster greater 
competition in wholesale power markets by reducing barriers to entry in 
the provision of transmission service. In the ten years since Order No. 
888, however, flaws in the pro forma OATT undermined its ability to 
realize the core objective of remedying undue discrimination. The 
Commission acted in Order No. 890 to correct these flaws by reforming 
the terms and conditions of the pro forma OATT in several critical 
areas, including the calculation of available transfer capability 
(ATC), the planning of transmission facilities, and the conditions of 
services offered by each transmission provider.
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    \1\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12266 (March 15, 2007), 
FERC Stats. & Regs. ] 31,241 (2007) (Order No. 890), order on reh'g, 
Order No. 890-A, 73 FR 2984 (Jan. 16, 2008), FERC Stats. & Regs. ] 
31,261 (2007) (Order No. 890-A).
    \2\ 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 21540 (May 10, 1996), FERC Stats. & Regs. ] 
31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar. 
14, 1997), FERC Stats. & Regs. ] 31,048 (1997), order on reh'g, 
Order No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 
888-C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. 
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. 
Cir. 2000) (TAPS v. FERC), aff'd sub nom. New York v. FERC, 535 U.S. 
1 (2002).
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    2. In Order No. 890-A, the Commission largely affirmed the reforms 
adopted in Order No. 890. The Commission noted that work was well 
underway to develop consistent practices governing the calculation of 
ATC in coordination with the North American Electric Reliability 
Corporation (NERC) and the North American Energy Standards Board 
(NAESB). When complete, the reliability standards developed through 
NERC and the business practices developed

[[Page 39093]]

through NAESB will eliminate the broad discretion that transmission 
providers have in calculating ATC, increasing nondiscriminatory access 
to the grid and ensuring that customers are treated fairly in seeking 
alternative power supplies.
    3. The Commission also noted the substantial resources that 
transmission providers have dedicated to the development of 
transmission planning processes in response to Order No. 890. 
Transmission planning is critical because it is the means by which 
customers consider and access new sources of energy and have an 
opportunity to explore the feasibility of non-transmission 
alternatives. It is therefore vital for each transmission provider to 
open its transmission planning process to customers, coordinate with 
customers regarding future system plans, and share necessary planning 
information with customers.
    4. In addition, transmission providers have implemented new service 
options for long-term firm point-to-point customers and adopted 
modifications to other services. Instead of denying a long-term request 
for point-to-point service because as little as one hour of service is 
unavailable, transmission providers now consider their ability to offer 
a modified form of planning redispatch or a new conditional firm option 
to accommodate the request. This increases opportunities to efficiently 
utilize transmission by eliminating artificial barriers to use of the 
grid. Charges for energy and generation imbalances also have been 
standardized, including relaxed penalties for intermittent resources. 
This standardization reduces the potential for undue discrimination, 
increases transparency, and reduces confusion in the industry that 
resulted from the prior lack of consistency.
    5. The Commission concluded that, taken together, these and other 
reforms adopted in Order No. 890 will better enable the pro forma OATT 
to achieve the core objective of remedying undue discrimination in the 
provision of transmission service. The Commission therefore rejected 
requests to eliminate, or substantially modify, the various reforms 
adopted in Order No. 890. The Commission did, however, grant rehearing 
and clarification regarding certain revisions to its regulations and 
the pro forma OATT.
    Several petitioners have sought further rehearing and clarification 
of the Commission's determinations in Order No. 890-A.\3\
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    \3\ A list of petitioners filing requests for rehearing and/or 
clarification is provided in Appendix A.
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    6. The Commission largely affirms the determinations reached in 
Order No. 890-A, granting limited rehearing and clarification to 
address certain specific matters raised by petitioners. Revisions to 
the pro forma OATT are required to implement several of these 
determinations, although none disturb the fundamental nature of the 
reforms adopted in Order No. 890. We therefore do not anticipate any 
difficulty in their implementation or disruption in on-going compliance 
efforts. We direct transmission providers that have not been approved 
as RTOs or ISOs, and whose facilities are not in the footprint of an 
RTO or ISO, to submit a Federal Power Act (FPA) section 206 filing that 
contains the revised non-rate terms and conditions of the pro forma 
OATT stated in Appendix B within 60 days of publication of this order 
in the Federal Register. We direct RTO and ISO transmission providers, 
transmission providers whose facilities are in the footprint of an RTO 
or ISO, and WSPP to submit an FPA section 206 filing that contains the 
revised non-rate terms and conditions of the pro forma OATT as stated 
in Appendix B within 90 days of publication of this order in the 
Federal Register.

II. Reforms of the OATT

A. Consistency and Transparency of ATC Calculations

    7. In Order No. 890-A, the Commission affirmed its conclusion in 
Order No. 890 that the lack of consistency and transparency in the 
methodology for calculating ATC creates the potential for undue 
discrimination in the provision of open access transmission service. To 
remedy this lack of consistency and transparency, the Commission 
directed public utilities, working through the NERC reliability 
standards and NAESB business practices development processes, to 
produce workable solutions to implement ATC-related reforms adopted by 
the Commission. A number of petitioners seek rehearing and/or 
clarification regarding the Commission's ATC-related determinations in 
Order No. 890-A, which we address below.
1. Consistency
a. Necessary Degree of and Process To Achieve Consistency
    8. The Commission affirmed the decision in Order No. 890 to require 
consistency of all ATC components \4\ and certain definitions, data 
inputs, data exchange, and modeling assumptions in order to reduce the 
potential for undue discrimination in the provision of transmission 
service. In response to petitioner requests, the Commission clarified 
that adjacent transmission providers must coordinate and exchange data 
and assumptions to achieve consistent ATC values on either side of a 
single interface, regardless of whether they use the same or different 
ATC methodologies. The Commission also reiterated that its regulations 
require the posting of ATC values associated with a particular path, 
not available flowgate capacity (AFC) values associated with a 
flowgate. The Commission clarified, however, that a transmission 
provider is free to post both ATC and AFC values. The Commission 
further clarified that transmission-owning utilities in an RTO region 
can request waiver of the requirement to convert AFC calculations into 
ATC for posting purposes in the event the RTO has been granted such a 
waiver.
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    \4\ The ATC components are total transfer capability (TTC), 
existing transmission commitments (ETC), capacity benefit margin 
(CBM), and transmission reserve margin (TRM).
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Requests for Rehearing and Clarification
    9. Duke, EEI, and E.ON U.S. object to the requirement that ATC 
values be consistent on either side of an interface and suggest 
alternatively that transmission providers be required to achieve 
consistent TTC values on either side of the interface. Duke contends 
that achieving consistency in TTC values will not necessarily result in 
consistent ATC values. EEI agrees, arguing that ATC will be identical 
on both sides of an interface only in the unlikely event that the 
transmission providers each simultaneously receive and process 
corresponding transmission requests and schedules for the same type of 
product. EEI contends that transmission providers therefore will have 
to expend substantial effort and resources to constantly monitor and 
investigate differences in ATC values, the burden of which EEI argues 
outweighs any benefit realized.
    10. Joined by E.ON U.S., Southern suggests that the Commission 
clarify that ``consistent ATC values'' does not mean that ATC or TTC 
values on either side of an interface must be identical. Southern 
argues that interpreting ``consistent'' to mean ``identical'' would be 
contrary to reliable planning and not reasonably achievable. Southern 
contends that there are a number of reasons why adjacent transmission

[[Page 39094]]

providers may have varying ATC and TTC values on an interface, 
including partial path transmission service, CBM and TRM, and the 
impacts of multiple interfaces.
    11. EEI and E.ON U.S. also request the Commission clarify that the 
process of achieving consistency of TTC values should occur through the 
ongoing NERC and NAESB processes. They argue that the Commission in 
Order No. 890 only required the consistency of components, definitions, 
data and assumptions with respect to ATC and its components, including 
TTC. They contend that the Commission did not require consistency in 
ATC values or provide for a means to reconcile differences in ATC 
calculations performed by multiple transmission providers. EEI and E.ON 
U.S. suggest that it may take additional time for NERC and NAESB to 
develop standards and business practices to achieve consistency in TTC 
values or reconcile differences between ATC values at common 
interfaces. Duke requests confirmation that compliance with the NERC 
and NAESB methodologies regarding TTC and related calculations, once 
they have been adopted and implemented, is sufficient to comply with 
the consistency requirement imposed in Order No. 890-A.
    12. Entergy requests the Commission to clarify that Order No. 890-A 
was not intended to reverse the Commission's prior determination that 
Entergy and other transmission providers can rely on the scenario 
analyzer to satisfy the ATC posting requirements in part 37 of the 
Commission's regulations.\5\ Although Entergy uses an AFC methodology, 
it posts ATC values on a path-specific basis by providing transmission 
customers a scenario analyzer tool that allows them to instantaneously 
evaluate transfer capability on a source-to-sink basis. Entergy states 
that its scenario analyzer is also relied on by other transmission 
providers, such as the Southwest Power Pool, Inc. and the Midwest 
Independent Transmission System Operator, Inc. Entergy states that the 
scenario analyzer will notify the customer the proposed request could 
be approved if sufficient AFC exists.
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    \5\ Citing Entergy Servs., Inc., 106 FERC ] 61,115 (2004); 18 
CFR 37.6(b)(2)(i) (2007).
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    13. Entergy notes that the Commission has previously concluded that 
``Entergy's AFC methodology meets the established minimum posting 
requirements for transmission capability set forth in Order No. 889,'' 
\6\ which Entergy argues were not changed in Order Nos. 890 or 890-A. 
If the Commission intended in Order No. 890-A to modify the 
requirements for posting ATC, or reverse its determination that the 
scenario analyzer complies with the posting requirements, Entergy 
requests clarification regarding what specific actions are required of 
transmission providers that rely on the AFC process. Entergy also asks 
that those transmission providers be allowed to continue using the 
scenario analyzer until those measures are in place. Entergy states 
that the sole purpose of the scenario analyzer has been to comply with 
the Commission's posting requirements and that transmission providers 
should not be required to maintain two different and duplicative 
systems for meeting those requirements.
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    \6\ See Entergy Servs., Inc., 106 FERC ] 61,115 at P 50.
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    14. E.ON U.S. requests clarification that all transmission-owning 
utilities within an RTO region can request waiver of the requirement to 
convert AFC calculations into ATC for posting purposes in the event the 
RTO has been granted such a waiver, and not just transmission-owning 
utilities that are members of the RTO. E.ON U.S. states that many of 
its neighboring systems utilize AFC instead of ATC, requiring it to 
calculate AFC in order to transact with the adjacent RTO members, to 
alleviate seams issues with these neighboring systems, and increase 
transparency for across the border transactions. E.ON U.S. contends 
that AFC calculations are much more accurate means to determine if 
capacity is available on a flowgate than are ATC calculations. If the 
Commission declines to grant the requested clarification, E.ON U.S. 
seeks rehearing on the grounds that the Commission is creating new 
seams where they do not currently exist by requiring transmission 
capacity to be calculated differently on both sides of the border for 
such transactions.
Commission Determination
    15. The Commission affirms the clarification provided in Order No. 
890-A that adjacent transmission providers must coordinate and exchange 
data and assumptions to achieve consistent ATC values on either side of 
a single interface.\7\ We disagree with petitioners arguing that 
``consistent'' ATC values should not be interpreted as identical. We 
recognize that factors such as timing of reservation requests, 
acceptances, and confirmations, and multiple interfaces between and 
among transmission providers, can make it difficult to achieve 
coincidental, identical postings of ATC values on both sides of an 
interface. However, as the Commission explained in Order No. 890, if 
all of the ATC components and certain data inputs and assumptions are 
consistent, the ATC calculation methodologies being finalized by NERC 
through the reliability standards development process should produce 
predictable and sufficiently accurate, consistent, equivalent, and 
replicable results.\8\ We therefore disagree that the directive to 
coordinate and exchange data and assumptions to achieve consistent ATC 
values on either side of an interface was newly imposed in Order No. 
890-A. The Commission simply clarified that the requirement stated in 
Order No. 890 applies equally to calculations of ATC on either side of 
an interface.
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    \7\ See Order No. 890-A at P 52.
    \8\ See Order No. 890 at P 210.
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    16. Public utilities have already been directed to work through the 
NERC and NAESB processes to achieve such consistency in ATC and TTC 
values. In response to Duke, the Commission will address whether the 
resulting reliability standards and business practices adequately 
satisfy this consistency requirement on review of those reliability 
standards and business practices. We note that public utilities were 
recently granted an extension of time to finalize their work through 
the NERC and NAESB processes. In Order No. 890, the Commission directed 
each transmission provider to file a revised Attachment C to its OATT 
to incorporate any changes associated with the revised reliability 
standards and business practices within 60 days of completion of the 
NERC and NAESB processes. We clarify that these revised Attachment C 
filings are due 60 days after the date on which the relevant 
reliability standards or business practices takes effect, not their 
submission for Commission review.
    17. We grant the clarification requested by Entergy regarding the 
Commission's February 11, 2004 determination that Entergy's AFC 
methodology meets the minimum posting requirements for transmission 
capability set forth in Order No. 889.\9\ The Commission did not amend 
in Order Nos. 890 or 890-A the obligation for transmission providers to 
post ATC values associated with a particular path instead of AFC values 
associated with a flowgate.\10\ Prior determinations by the Commission 
that a particular practice satisfies that obligation, or waiving that

[[Page 39095]]

obligation altogether, therefore remain intact.\11\
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    \9\ See Entergy Servs., Inc., 106 FERC ] 61,115 at P 50.
    \10\ See 18 CFR 37.6(b)(1)(i); see also Order No. 890 at P 211; 
Order No. 890-A at P 51.
    \11\ See Order No. 890-A at P 36.
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    18. We disagree with E.ON U.S. that non-member transmission-owning 
utilities within an RTO region are similarly situated to member 
transmission-owning utilities, which the Commission noted in Order No. 
890-A may request waiver of the requirement to convert AFC calculations 
into ATC for posting purposes in the event the RTO has been granted 
such a waiver. RTO members that have retained control over certain 
transmission facilities operate those transmission facilities in 
coordination with the RTO. In comparison, non-RTO members provide 
transmission service independently and, therefore, for purposes of ATC 
calculation are similar to a transmission provider outside the RTO 
region. Nevertheless, we reiterate that a transmission provider is free 
to post both ATC and AFC values if it believes such postings provide 
additional transparency.\12\
b. ATC Components--CBM and TRM
    19. In Order No. 890-A, the Commission affirmed the decision in 
Order No. 890 to require public utilities, working through NERC and 
NAESB, to develop clear standards and business practices for how the 
CBM value is determined, allocated across transmission paths and 
flowgates, and used. The Commission also affirmed the requirement that 
transmission providers design their transmission charges so that the 
class of customers not benefiting from the CBM set-aside, i.e., point-
to-point customers, does not pay a transmission charge that includes 
the cost of the CBM set-aside. The Commission explained that only 
network customers and the transmission provider on behalf of its native 
load may request that transmission capacity be set aside as CBM and, 
therefore, only those users of the system should bear its costs. The 
Commission also rejected requests to use CBM for reserve-sharing 
arrangements, reiterating that TRM is the appropriate category for 
reserve-sharing.
Requests for Rehearing and Clarification
    20. Southern requests rehearing of the Commission's statement that 
non-firm point-to-point transmission customers only receive an indirect 
benefit from CBM. Southern contends that under normal conditions 
without generation deficiencies, non-firm point-to-point customers may 
use CBM set-aside capacity. Southern states that it has not called upon 
CBM to meet a generation deficit emergency in six years, resulting in 
that capacity consistently being made available to non-firm customers. 
Southern argues that non-firm customers therefore directly benefit from 
CBM and should bear transmission charges that include the cost of the 
capacity they are actually utilizing. If the Commission does not wish 
to make a generic determination, Southern asks the Commission to 
clarify that the issue of whether non-firm customers benefit from CBM 
will be addressed on a case-by-case basis.
    21. TDU Systems request clarification of the Commission's statement 
in Order No. 890-A that TRM is the appropriate category for reserve 
sharing arrangements. TDU Systems request confirmation that, if a 
transmission provider is using another form of set-aside for reserve 
sharing purposes, such as CBM, the transmission providers' customers 
are entitled to comparable use of the form of set-aside. TDU Systems 
argue that comparability cannot be achieved where the transmission 
provider does not offer use of transmission capacity set-asides to LSE 
customers comparable to the use that the transmission provider allows 
itself.
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    \12\ See Order No. 890-A at P 51.
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Commission Determination
    22. The Commission affirms the requirement adopted in Order No. 
890, and affirmed in Order No. 890-A, that transmission providers 
design their transmission charges so that the class of customers not 
benefiting from the CBM set-aside, i.e., point-to-point customers, does 
not pay a transmission charge that includes the cost of the CBM set-
aside.\13\ We disagree with Southern that non-firm customers benefit 
directly from the CBM set-aside. The Commission acknowledged in Order 
No. 890-A that capacity set aside for CBM may be made available to non-
firm customers when not otherwise in use.\14\ That benefit, however, is 
indirect and inferior to the direct benefits enjoyed by those entities 
that have the exclusive right to request the set-aside in the first 
instance.
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    \13\ See Order No. 890 at P 263; Order No. 890-A at P 86.
    \14\ See Order No. 890-A at P 87.
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    23. The Commission acknowledged in Order No. 890-A that use of 
capacity set aside for CBM by non-firm customers may result in revenues 
that are credited to the transmission provider's cost of service, to 
the benefit of point-to-point customers.\15\ The Commission stated its 
expectation that transmission providers would address in rate design 
filings any possibility for particular customers to receive an 
inappropriate credit for non-firm use of capacity set aside for CBM. 
Further clarification is unnecessary.
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    \15\ Id.
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    24. With regard to reserve sharing arrangements, the Commission 
clearly stated in Order No. 890-A that TRM is the appropriate category 
for reserve sharing arrangements and that, in comparison, CBM is used 
to meet generation reliability criteria in times of emergency 
generation deficiencies.\16\ Therefore, transmission providers must use 
TRM, not CBM, for reserve sharing arrangements and make ATC set aside 
for that purpose available to all LSEs on a comparable basis for any 
reserve sharing arrangements they may have.
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    \16\ Id. P 85.
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2. Transparency
    25. In Order No. 890-A, the Commission clarified that all data used 
to calculate ATC and TTC for any constrained paths and any system 
planning studies or specific network impact studies performed for 
customers are to be made available on request, regardless of whether 
the customer is non-affiliated or affiliated with the transmission 
provider. The Commission also clarified that underlying load forecast 
assumptions to be posted on OASIS should include economic and weather-
related assumptions. The Commission concluded that posting load 
forecast and actual load data on a control area and LSE level does not 
raise serious competitive implications. The Commission stated that it 
would consider requests for exemption from this posting requirement on 
a case-by-case basis if there is customer-specific information deemed 
confidential by the affected customer that impedes the ability of the 
transmission provider to post this data.\17\
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    \17\ Id. P 143.
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    26. The Commission further clarified that transmission providers 
must make available, upon request and subject to appropriate 
confidentiality protections and CEII requirements, certain modeling 
data including load flow base cases and generation dispatch methodology 
and, subject to additional reasonable and applicable generator 
confidentiality limitations, production cost models (including 
assumptions, settings, study results, input data, etc.). The Commission 
declined to require transmission providers to post this information on 
OASIS.
Requests for Rehearing and Clarification
    27. Duke seeks clarification of the requirement to post information 
requested by an affiliate when that information is already available to 
the

[[Page 39096]]

public. Duke suggests that only a notice that an affiliate requested a 
publicly-available study needs to be posted, and not the actual study, 
because the additional effort of posting the actual study would be 
redundant, burdensome, and without purpose.
    28. Duke, EEI and Southern request rehearing to eliminate the 
requirement to post the underlying assumptions used to develop load 
forecasts on a daily basis, including economic and weather-related 
assumptions. They claim that the requirement is a substantial 
modification of regulations adopted in Order No. 890, is unduly 
burdensome, and may cause transmission providers to violate their 
contractual obligations by releasing proprietary assumptions and 
forecasts obtained from forecasting service providers. Southern also 
complains that it is unclear what is meant by ``economic assumptions'' 
and any requirement to provide daily updates of such assumptions would 
be unduly burdensome given the amount of effort required and negligible 
benefit that customers might gain from the information.
    29. Duke argues that the Commission's expansion of posting 
requirements to include load forecast assumptions daily is an entirely 
new requirement for which notice and comment has not been provided. 
Duke contends that Constellation's request for rehearing of Order No. 
890 mentioning load forecast assumptions was inadequate to provide 
notice because Constellation did not request that load forecast 
assumptions be posted on a daily basis or that load forecast 
assumptions unrelated to ATC calculations be posted.
    30. If the Commission declines to eliminate this posting 
requirement, Duke suggests that it be amended to require a one-time 
(i.e., not daily) posting of a list of factors that go into the peak 
load forecast, such as day of the week, a day's status as holiday or 
non-holiday, temperature, dew point, precipitation forecast, etc. If 
the Commission continues to require the daily posting of information, 
Duke seeks clarification regarding the granularity of such information 
given that it could vary widely over a control area. Duke questions 
whether, for example, PJM would have to post weather forecasts for each 
of its subregions. Until the Commission grants the requested 
clarification, Duke argues that the posting requirement should be 
waived or transmission providers should be permitted to satisfy the 
requirement by reference to commercial/government weather websites.
    31. Southern seeks clarification of the requirement to make 
available, on request, the modeling data identified in paragraph 148 of 
Order No. 890-A. Southern states that it does not use all of the 
specified modeling data to calculate ATC, TTC, CBM and/or TRM. In 
particular, Southern argues that neither production cost models nor 
special protection systems and operation guides are used in its ATC 
calculations and that production cost models in particular are not even 
maintained by its transmission function given its highly sensitive 
nature. Southern asks the Commission to clarify that transmission 
providers are required to provide only the specified modeling data 
actually used in performing those calculations and that a transmission 
provider is not required to manufacture and/or produce the data in the 
event it does not use a particular input in its ATC calculations.
    32. Duke also argues that production cost models and generation 
dispatch methodologies typically contain commercially sensitive or 
proprietary information or information that should not be released to 
the public. Duke acknowledges that the Commission stated that 
availability of production cost models would be subject to reasonable 
and applicable generator confidentiality limitations,\18\ but argues 
that still would allow employees or consultants of competing entities 
to be provided access to sensitive data. Duke therefore asks the 
Commission to confirm that reasonable and applicable generator 
confidentiality limitations means that the proprietary/sensitive 
information may be released only to transmission function personnel 
that are restricted from further disclosure, including to their own 
merchant functions. Duke also requests clarification that the 
transmission provider's merchant/generation function and third-parties 
are to be treated identically as to their right to classify which 
information that they have given to a transmission provider is 
proprietary/sensitive, in accordance with Commission policies.
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    \18\ Citing Order No. 890-A at P 148.
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Commission Determination
    33. The Commission clarifies in response to Duke that, when an 
affiliate requests information that is already available to the public, 
the transmission provider need only post a notice that an affiliate 
requested the particular information, not the actual information. This 
clarification applies, however, only to those instances in which the 
actual information is already publicly available.
    34. We affirm the requirement that each transmission provider post 
on a daily basis its load forecast, including underlying assumptions, 
and actual daily peak load for the prior day.\19\ In the NOPR, the 
Commission specifically raised the possibility of requiring 
transmission providers to make available their underlying load forecast 
assumptions for all ATC calculations.\20\ The Commission adopted that 
proposal in Order No. 890, but failed to amend its regulations 
accordingly.\21\ The Commission corrected that oversight in Order No. 
890-A.\22\ We therefore disagree with Duke that transmission providers 
were not on notice that posting of load forecast data and related 
assumptions might be required.
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    \19\ 18 CFR 37.6(b)(3)(iv) (2007).
    \20\ See Preventing Undue Discrimination and Preference in 
Transmission Services, Notice of Proposed Rulemaking, FERC Stats. & 
Regs. ] 32,603, at P 194 (2006) (NOPR).
    \21\ See Order No. 890 at P 416.
    \22\ See Order No. 890-A at P 143.
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    35. We clarify, however, that the Commission intended for 
transmission providers to post the underlying factors used to make load 
forecasts that have a significant impact on calculations, such as 
temperature forecasts, not all economic and other data that underlies 
each and every daily load forecast. Transmission providers must post a 
description of their load forecast method including how economic and 
weather assumptions are used in load forecasting. The Commission's 
intent is to increase transparency in the transmission provider's 
process of forecasting, providing assurance to customers that loads are 
consistently being forecast using methodologies which are not subject 
to daily manipulation to favor affiliates.
    36. We also affirm the requirement to make available, upon request 
and subject to appropriate confidentiality protections and CEII 
requirements, certain modeling data including load flow base cases and 
generation dispatch methodology and, subject to additional reasonable 
and applicable generator confidentiality limitations, production cost 
models (including assumptions, settings, study results, input data, 
etc.).\23\ We clarify in response to Southern that a transmission 
provider is not required under Order Nos. 890 or 890-A to manufacture 
or otherwise make available modeling data that it does not use in its 
ATC calculations. However, if the specified modeling data are used for 
the calculation of ATC, or any of its components, they must be

[[Page 39097]]

made available as required in Order No. 890-A.
---------------------------------------------------------------------------

    \23\ See Order No. 890-A at P 148.
---------------------------------------------------------------------------

    37. We agree with Duke that production cost models and generation 
dispatch methodologies may contain commercially sensitive or 
proprietary information. Transmission providers are therefore permitted 
to condition the release of such information on appropriate 
confidentiality restrictions. With regard to production costs models, 
reasonable applicable generator confidentiality limitations could 
include, among other things, restrictions on the release of proprietary 
and commercially sensitive information to those engaged in the 
marketing, sale, or purchase of electric power at wholesale. We agree 
that the transmission provider's merchant and/or generation personnel 
and third-parties are to be treated identically as to their right to 
classify proprietary or commercially sensitive information that they 
provide to a transmission provider, as well as their right to receive 
such data from the transmission provider.

B. Transmission Pricing

1. Energy and Generation Imbalances
a. Generator Imbalance Penalties
    38. In Order No. 890-A, the Commission affirmed the decision in 
Order No. 890 to adopt standardized generator imbalance provisions in 
Schedule 9 of the pro forma OATT. The Commission clarified that a 
transmission provider only has to provide generator imbalance service 
from its own resources to the extent that it is physically feasible to 
do so (i.e., the transmission provider is able to manage the additional 
potential imbalances without compromising reliability). Each 
transmission provider may state on its OASIS the maximum amount of 
generator imbalance service that it is able to offer from its resources 
based on an analysis of the physical characteristics of its system. 
Alternatively, a transmission provider may consider requests for 
generator imbalance service on a case-by-case basis, performing as 
necessary a system impact study to determine the precise amount of 
additional generation it can accommodate and still reliably respond to 
the imbalances that could occur.
    39. The Commission clarified that neither of these options relieves 
the transmission provider of its obligation to provide generator 
imbalance service if it is able to acquire additional resources to do 
so. If it is not physically feasible for the transmission provider to 
offer generator imbalance service using its own resources, either 
because they do not exist or they are fully subscribed, the 
transmission provider must attempt to procure alternatives to provide 
the service, taking appropriate steps to offer an option that customers 
can use to satisfy their obligation to acquire generator imbalance 
service as a condition of taking transmission service. If no such 
resources are available, the transmission provider must accept the use 
of dynamic scheduling to the extent a transmission customer has 
negotiated an appropriate arrangement with a neighboring control area.
Request for Clarification
    40. E.ON U.S. seeks clarification of the time frame within which 
the transmission provider must post the availability of service (e.g., 
an hourly, 24-hour, or monthly interval). E.ON U.S. also asks the 
Commission to clarify the time frame required for obtaining imbalance 
service from other sources and the extent to which a transmission 
provider is obligated to seek such resources. E.ON U.S. suggests that 
this obligation could be interpreted as requiring only a single search 
or a constant search for resources over a long period of time. E.ON 
U.S. seeks further clarification regarding the point in the process 
when the transmission provider must inform the generator that it must 
arrange for dynamic scheduling because no other option is available.
Commission Determination
    41. The Commission affirms the decision in Order No. 890-A to allow 
a transmission provider to post on its OASIS the maximum amount of 
generator imbalance service it is able to offer without impairing 
reliability.\24\ To the extent necessary, we clarify that a 
transmission provider must post the availability of generator imbalance 
service and seek imbalance service from other sources in a manner that 
is reasonable in light of the transmission provider's operations and 
the needs of its imbalance customers. What is reasonable for some 
imbalance customers and transmission providers may be unreasonable for 
others. We therefore decline to set a specific time frame within which 
the transmission provider must post the availability of generator 
imbalance service. For the same reason, we decline to set a generic 
time frame for obtaining imbalance service from other sources in the 
event it is not physically feasible to offer generator imbalance 
service using the transmission provider's resources.
---------------------------------------------------------------------------

    \24\ Order No. 890-A at P 289.
---------------------------------------------------------------------------

    42. In the event that there are no additional resources available 
to enable the transmission provider to meet its obligation to provide 
generator imbalance service, the transmission provider must accept the 
use of dynamic scheduling by a transmission customer.\25\ The 
transmission provider cannot, however, require the use of dynamic 
scheduling, since the customer may choose to make other alternative 
comparable arrangements to self supply generator imbalance service. If 
a customer chooses to use dynamic scheduling in this circumstance, it 
is the option and the responsibility of the transmission customer to 
seek out and appropriately negotiate dynamic scheduling with a 
neighboring control area. The transmission provider is required to 
accommodate the use of dynamic scheduling only to the extent the 
transmission provider is unable to provide generator imbalance service 
and the customer has negotiated appropriate arrangements with the 
relevant control areas.
---------------------------------------------------------------------------

    \25\ Id. P 290.
---------------------------------------------------------------------------

b. Definition of Incremental Cost
    43. In Order No. 890-A, the Commission granted rehearing of its 
decision to calculate incremental costs for the purpose of assessing 
imbalance charges based on the last 10 MW dispatched to supply the 
transmission provider's native load. The Commission determined that it 
is more reasonable to base imbalance charges on the actual cost to 
correct the imbalance, which may be different than the cost of serving 
native load. Accordingly, the Commission modified the definition to 
require transmission providers to use the cost of the last 10 MWs 
dispatched for any purpose, i.e., to serve native load, correct 
imbalances, or to make an off-system sale.
Requests for Rehearing and Clarification
    44. EEI and Southern argue that the Commission mistakenly used 
``i.e.'' instead of ``e.g.'' when referring to the costs to be included 
in the calculation of charges for energy imbalance service and 
generator imbalance service. EEI contends that the specified purposes 
exclude costs to serve other customers, such as on-system customers who 
take partial requirements service from the transmission provider. EEI 
asks the Commission to clarify that it meant to use ``e.g.'' to 
indicate that the list of examples provided were non-exclusive. 
Southern similarly requests that Schedules 4 and 9 of the pro forma 
OATT be revised to use ``e.g.'' instead of ``i.e.''

[[Page 39098]]

Commission Determination
    45. The Commission grants rehearing of the definition of 
incremental cost as described in the preamble of Order No. 890-A and in 
Schedules 4 and 9 of the pro forma OATT. Those schedules define 
incremental cost and decremental cost as ``the Transmission Provider's 
actual average hourly cost of the last 10 MW dispatched for any 
purpose.'' \26\ We agree that use of the term ``e.g.'' instead of 
``i.e.'' when referring to the types of energy to be included in the 
incremental cost calculation better reflects the Commission's intent to 
include within that calculation the last 10 MW dispatched for any 
purpose. We revise the pro forma OATT accordingly.\27\
---------------------------------------------------------------------------

    \26\ Schedules 4, 9 of the pro forma OATT.
    \27\ We note in response to EEI, however, that the existing 
reference to native load in Schedules 4 and 9 already includes on-
system customers taking requirements service under section 1.23 of 
the pro forma OATT.
---------------------------------------------------------------------------

2. Credits for Network Customers
    46. In Order No. 890-A, the Commission affirmed its decision in 
Order No. 890 to sever the link in the pro forma OATT between joint 
planning and credits for new facilities owned by network customers. As 
the Commission explained in Order No. 890, the linkage between credits 
and joint planning gave the transmission provider an incentive to deny 
coordinated planning to avoid granting credits for customer-owned 
facilities. The Commission concluded that any efficiencies that may be 
lost by severing that link should be offset by the increased 
efficiencies resulting from the coordinated planning reforms adopted in 
Order No. 890, which the Commission noted will ensure that most, if not 
all, transmission facilities are planned on a coordinated basis.
    47. The Commission similarly affirmed the decision to adopt a 
revised test to determine whether a network customer is eligible to 
receive credits for new facilities. Under the revised section 30.9 of 
the pro forma OATT, customers are eligible for credits for those 
facilities that are integrated with the operations of the transmission 
provider's facilities; provided, that integration will be presumed for 
customer-owned facilities that, if owned by the transmission provider, 
would be eligible for inclusion in the transmission provider's annual 
transmission revenue requirement as specified in Attachment H of the 
pro forma OATT. The Commission clarified in Order No. 890 that this 
revision did not alter the underlying integration standard. In order to 
satisfy the integration standard, the customer must show that its new 
facility is integrated with the transmission provider's system, 
provides additional benefits to the transmission grid in terms of 
capability and reliability, and can be relied on by the transmission 
provider for the coordinated operation of the grid.\28\
---------------------------------------------------------------------------

    \28\ Order No. 890 at P 754, n. 436 (citing Southwest Power 
Pool, Inc., 108 FERC ] 61,078 (2004), reh'g denied, 114 FERC ] 
61,028 (2006)).
---------------------------------------------------------------------------

    48. The Commission explained in Order No. 890-A that adoption of 
the presumption of credits in section 30.9 was necessary to ensure 
comparability between network customers and transmission providers 
serving load. To that end, the Commission clarified that the 
presumption of integration is rebuttable as applied to both the 
transmission provider and the network customer. A transmission provider 
may challenge the presumption that the customer's facilities are 
integrated by showing that the customer's facilities do not actually 
meet the integration standard, notwithstanding the fact that they are 
similar to facilities in the transmission provider's rate base. 
Similarly, a customer could challenge the presumption that a 
transmission provider's facilities are integrated by showing that the 
facilities, for example, do not provide network benefits. As a result, 
the Commission clarified that denial of credits for a network customer 
no longer triggers a need for the transmission provider to demonstrate 
that its own facilities satisfy the integration standard.
Requests for Clarification and Rehearing
    49. NRECA and TAPS ask the Commission to clarify whether it 
intended to apply a single integration standard to both transmission 
customer and transmission provider facilities and, if so, what standard 
will apply. These petitioners contend that several passages in Order 
No. 890-A suggest that the Commission will now apply a single 
integration standard, no matter whose facilities are under 
consideration. They note, for example, the Commission's statement in 
paragraph 353 of Order No. 890-A that ``[a] transmission provider may 
overcome the network customer's presumed integration by demonstrating, 
with reference to its own facilities that meet the integration 
standard, that the network customer's facilities do not meet the 
standard.'' \29\ They point to another statement that it is 
``appropriate for both the transmission provider and its customers to 
be subject to the integration standard to the extent the presumption of 
integration is overcome.'' \30\ These petitioners express concern, 
however, regarding the Commission's statement that the integration 
standard for credits under section 30.9 remains unchanged and that 
precedents applying that standard will continue to apply. They argue 
that those precedents establish and apply a significantly more 
stringent test for integration of customer-owned facilities than for 
facilities of the transmission provider.\31\
---------------------------------------------------------------------------

    \29\ Order No. 890-A at P 353.
    \30\ Id. P 354.
    \31\ Citing East Texas Elec. Coop., Inc. v. Central & South West 
Services, Inc. 108 FERC ] 61,079 (2004), reh'g denied, 114 FERC ] 
61,027 (2006) (ETEC); Northeast Tex. Elec. Coop., Inc., 108 FERC ] 
61,108, at P 48 (2004), reh'g denied, 111 FERC ] 61,189 (2005) 
(NTEC).
---------------------------------------------------------------------------

    50. TAPS suggests that the Commission's new policy for new 
transmission facilities must mean one of three things. Its first and 
preferred possibility is that, in assessing whether the new integration 
presumption has been overcome, the Commission will apply a single 
integration standard to both the transmission provider and the 
transmission customer, i.e., the relaxed standard that has long applied 
in determining whether a transmission provider's facilities should be 
rolled into its rate base. Under a second possibility, a single 
integration standard also would apply, but transmission providers would 
be held to the same strict integration standard to which transmission 
customers seeking section 30.9 credits have long been subject. As a 
final interpretation, TAPS states that, to overcome the presumption 
applicable to new transmission facilities, the Commission could 
continue to apply two different tests: The more stringent one 
applicable to customers seeking credits and the more relaxed one for 
transmission providers to include facilities in rate base. TAPS notes, 
however, that this would be inconsistent with Order No. 890-A's 
repeated references to a single, comparable integration standard that 
applies to both customer and transmission providers.
    51. East Texas Cooperatives agree that the case law establishes a 
different and harder test for integration of customer-owned facilities. 
East Texas Cooperatives state that, under that precedent, a 
transmission provider needs only to run the load flow study used in 
ETEC to challenge credits for a customer-owned facility. East Texas 
Cooperatives argue that this load flow study cannot be satisfied by any 
transmission facilities, since it takes out both customer facilities 
and load and asks if the grid can still run reliably. In comparison, 
East Texas Cooperatives

[[Page 39099]]

contend that the cost of transmission provider facilities would 
continue to be presumptively rolled in subject to challenge unless a 
party can show that those facilities are so isolated from the grid that 
they are and will likely remain non-integrated and thus provide no 
benefit to the system.
    52. East Texas Cooperatives therefore argue that the Commission's 
statement in Order No. 890-A regarding the continued applicability of 
integration precedent mandates discrimination in favor of transmission 
provider facilities in violation of the FPA. They contend that 
eligibility for rolled-in rate treatment of the same facilities would 
vary solely as a result of their ownership, since customer-owned 
facilities that are found not to be integrated under a load flow 
integration test would become integrated if purchased by the 
transmission provider, which is subject to a more relaxed application 
of the integration standard. East Texas Cooperatives suggest that the 
Commission justified its application of a more difficult test to 
network customers on a presumption that the customer-owned facilities 
are less integrated than transmission provider facilities. Joined by 
NRECA and TAPS, East Texas Cooperatives argue that customer-owned 
facilities are built to serve customer loads just as transmission 
provider facilities are built to serve transmission provider loads. 
These petitioners contend that there is no basis in the record for 
presuming that transmission provider facilities are more integrated 
than customer facilities.
    53. FMPA, NRECA and TDU Systems contend that contradictory 
statements in Order No. 890-A could be read to apply the more stringent 
integration standard to customer-owned facilities and a more relaxed 
integration standard for transmission provider facilities.\32\ In 
particular, these petitioners question what standard the Commission was 
referring to in paragraph 353 of Order No. 890-A when it stated that 
the transmission provider may overcome the network customer's presumed 
integration by demonstrating, with reference to its own facilities that 
meet the integration standard, that the network customer's new 
facilities do not meet the standard, i.e., the ``integration standard'' 
or the ``similar in purpose and design'' standard. NRECA and TDU 
Systems argue that the appropriate standard to apply when both claiming 
and rebutting the presumption of integration is whether the customer's 
facilities are similar in design and purpose to those of the 
transmission provider that are in rates.
---------------------------------------------------------------------------

    \32\ Citing Order No. 890-A at P 351-52.
---------------------------------------------------------------------------

    54. Florida Power also requests clarification of language in 
paragraph 353 of Order No. 890-A. Florida Power asks the Commission to 
confirm that this statement applies only to determine whether the 
customer is entitled to the presumption in the first place, not to 
rebut of the presumption once established, and that the standard to 
which the Commission was referring is whether the customer-owned 
facilities are similar in design and purpose to facilities owned by the 
transmission provider that are included in rates. Florida Power also 
asks the Commission to confirm that the transmission provider could 
oppose a customer's initial attempt to establish a presumption of 
credits by showing, by reference to the transmission provider's own 
facilities that meet the integration standard, that the customer-owned 
facilities are not similar in design and purpose to facilities owned by 
the transmission provider that are included in rates.
    55. With regard to rebutting the presumption once established, 
Florida Power requests confirmation that the transmission provider can 
overcome the presumption by showing that the customer-owned facilities 
do not meet the integration standard, i.e., that it does not need the 
network customer's facility to serve the network customer, the 
transmission provider's other transmission customers, or the 
transmission provider's retail customers.\33\ Florida Power contends 
that it would not be just and reasonable, or consistent with the cost 
causation principle, to shift the cost of customer-owned facilities if 
those facilities do not benefit the transmission provider's system.
---------------------------------------------------------------------------

    \33\ Citing Southern California Edison Co., 108 FERC ] 61,085, 
at P 9 n.11 (2004); Southwest Power Pool, Inc., 108 FERC ] 61,078, 
at P 18 n.7 (2004), reh'g denied, 114 FERC ] 61,028 (2006); ETEC, 
108 FERC ] 61,079, at P 26 n.11; Northern States Power Co., 87 FERC 
] 61,121 at 61,488 (1999).
---------------------------------------------------------------------------

    56. E.ON U.S. argues that the rebuttable presumption of integration 
should apply only to customer-owned facilities that are planned through 
the Attachment K or similar process. If the Commission's expectation 
that most, if not all, transmission upgrades eligible for credits will 
be planned in the Attachment K process is true, E.ON U.S. suggests that 
the rebuttable presumption of integration most reasonably applies only 
to facilities planned through that process.\34\ E.ON U.S. contends that 
linking credits for customer-owned facilities to the Attachment K 
planning process would allow the transmission provider an opportunity 
to coordinate with customers on facilities, while preventing any 
opportunities for undue discrimination given the non-discretionary 
nature of the planning obligation. E.ON U.S. argues that failure to 
plan facilities through the Attachment K or similar process should 
trigger a presumption against receiving credits for such facilities.
---------------------------------------------------------------------------

    \34\ Citing Order No. 890-A at P 426.
---------------------------------------------------------------------------

    57. Several petitioners request rehearing of the Commission's 
determination that denial of credits for a network customer would no 
longer trigger a need for the transmission provider to demonstrate that 
its own facilities satisfy the integration standard. East Texas 
Cooperatives contend that this decision improperly reverses the 
approach adopted in FP&L \35\ and prohibits a network customer from 
challenging the rolled-in rate treatment of transmission provider 
facilities even when the customer's own facilities are found ineligible 
for credits. TAPS contends that reversing this policy is inconsistent 
with notions of comparability unless the Commission clarifies, as 
requested above, that the relaxed integration standard applies to both 
network customers and transmission providers. If a network customer's 
facilities are disqualified from eligibility for credits due to 
application of a more stringent integration standard, TAPS and TDU 
Systems argue that comparability requires the removal of the 
transmission provider's similar facilities from rates. NRECA agrees, 
arguing that the transmission provider must be required to remove its 
facilities from rates if customer-owned facilities that are similar in 
design and purpose to those transmission provider facilities are found 
ineligible for credits under the integration standard.
---------------------------------------------------------------------------

    \35\ Florida Mun. Power Agency v. Florida Power and Light Co., 
74 FERC ] 61,006, at 61,010 (1996), reh'g denied, 96 FERC ] 61,130, 
at 61,544-45 (2001), aff'd sub nom. Florida Mun. Power Agency v. 
FERC, 315 F.3d 362 (D.C. Cir. 2003) (FP&L).
---------------------------------------------------------------------------

    58. TAPS and FMPA ask the Commission to clarify that removal of the 
trigger applies only to denial of credit for new facilities to which 
the new presumption of integration applies. TAPS and FMPA point to 
language in paragraph 352 of Order No. 890-A providing that ``the 
denial of credits for a network customer no longer triggers a need for 
the transmission provider to demonstrate that its own facilities 
satisfy the integration standard.'' Both FMPA and TAPS interpret this 
language as applying to new facilities only. TAPS contends that the 
Commission does not and cannot offer any justification for

[[Page 39100]]

dispensing with the trigger in cases involving requests for credits for 
existing facilities, in which the presumption of integration adopted in 
Order No. 890 does not apply. TAPS is concerned that transmission 
providers will seek to remove the trigger for existing facilities, 
relying, inter alia, on the more general reference in Order No. 890-A 
to elimination of trigger.
    59. Finally, FMPA seeks clarification on how the Commission's 
determinations on transmission credits will affect pending cases. FMPA 
asks the Commission to confirm that Order No. 890-A will not be applied 
to deny or weaken the comparability requirement for facilities at issue 
in Docket No. ER93-465-000, et al. FMPA also asks the Commission to 
clarify that the transmission credit policy articulated in Order No. 
890 and Order No. 890-A will not preclude FMPA's ability to obtain full 
relief if the D.C. Circuit remands the Commission's decisions at issue 
in Fla. Mun. Power Agency v. FERC regarding charges for transmission 
that a network customer is physically unable to use.\36\
---------------------------------------------------------------------------

    \36\ No. 06-1285 (D.C. Cir. filed July 26, 2006).
---------------------------------------------------------------------------

Commission Determination
    60. The Commission affirms the decision in Order Nos. 890 and 890-A 
to revise the test for determining whether a network customer is 
eligible to receive credits for new facilities. Under the revised 
section 30.9 of the pro forma OATT, a network customer is eligible for 
credits if it demonstrates that its facilities are integrated with the 
operations of the transmission provider's facilities, provided that 
integration will be presumed for new customer-owned facilities that, if 
owned by the transmission provider, would be eligible for inclusion in 
the transmission provider's annual transmission revenue requirement as 
specified in Attachment H of the pro forma OATT. As the Commission 
explained in Order No. 890-A, the adoption of this presumption ensures 
comparability between network customers and transmission providers 
serving native load given that transmission providers are now obligated 
to plan their systems on an open and coordinated basis.\37\
---------------------------------------------------------------------------

    \37\ See Order No. 890-A at P 350.
---------------------------------------------------------------------------

    61. Several petitioners question how this revised test is 
consistent with the Commission's statements that the integration 
standard applicable to new facilities remains unchanged and that 
Commission precedent regarding application of that standard will 
continue to apply.\38\ As these petitioners note, the integration 
standard has historically been applied differently to network customers 
and transmission providers.\39\ Transmission facilities owned by the 
transmission provider enjoyed a presumption of rolled-in rate treatment 
so long as any degree of integration was shown, while network customers 
were required to demonstrate affirmatively that their facilities were 
relied upon by the transmission provider to provide service to its 
customers.\40\ The Commission therefore described the test for 
integration for network customer facilities as being more stringent 
than the test applied to transmission provider facilities.\41\ The 
application of the integration standard was, in fact, more stringent as 
applied to network customers because they did not enjoy the benefit of 
presumed integration, as did the transmission provider. The underlying 
integration standard, however, has been and continues to be the same 
for all transmission facilities. Only those facilities that are, in 
fact, integrated with the transmission grid and used by the 
transmission provider to serve customers should be subject to rolled-in 
rate treatment. It is in this sense that the precedent continues to 
apply, providing guidance regarding the treatment of facilities that 
benefit from the presumption of integration and those that do not.
---------------------------------------------------------------------------

    \38\ See Order No. 890-A at P 349.
    \39\ Compare Utah Power & Light Co., 27 FERC ] 61,258, at 
61,485-87 (1984), reh'g denied, 28 FERC ] 61,088, at 61,165 (1984) 
(citing Utah Power & Light Co., Opinion No. 113, 14 FERC ] 61,112, 
reh'g denied, 15 FERC ] 61,076 (1981)) with ETEC, 114 FERC ] 61,027 
at P 42.
    \40\ NTEC, 111 FERC ] 61,189 at P 17.
    \41\ Id. P 15.
---------------------------------------------------------------------------

    62. The presumption of integration enjoyed by the transmission 
provider has never been absolute. Customers have always been able to 
challenge the inclusion of certain transmission provider facilities by 
showing that the facilities did not actually provide a systemwide 
benefit to the transmission grid.\42\ In most instances, however, this 
has not been the case given that the transmission provider generally 
plans, constructs and owns its facilities, from the very beginning, to 
meet delivery obligations, which justifies the presumption of 
integration.\43\ In the event the transmission provider denied credits 
to a network customer, however, the transmission provider lost the 
benefit of the presumption and the same integration standard applied to 
customer-owned facilities was applied to the transmission provider's 
facilities.\44\ This again demonstrates that the same underlying 
integration standard has applied to all facilities, regardless of 
ownership, notwithstanding the presumed integration generally enjoyed 
by the transmission provider.
---------------------------------------------------------------------------

    \42\ See Idaho Power Co., 3 FERC ] 61,108 (1978), reh'g denied, 
5 FERC ] 61,009 (1978); Minnesota Power & Light Co., 16 FERC ] 
63,012 (1981), aff'd 21 FERC ] 61,233 (1982).
    \43\ See Niagara Mohawk Power Corp., 42 FERC ] 61,143, at 61,531 
(1988); Otter Tail Power Co., 12 FERC ] 61,169, at 61,420 (1980).
    \44\ See Florida Power & Light Co., 105 FERC ] 61,287, at P 16 
(2003).
---------------------------------------------------------------------------

    63. In light of the planning-related reforms implemented in Order 
No. 890, the Commission determined it is now appropriate to grant the 
same presumption of integration to new customer-owned facilities that 
are similar in scope and design to those transmission provider 
facilities that are in rates. Implementation of planning-related 
reforms will now ensure that most, if not all, transmission facilities 
are planned on a coordinated basis.\45\ However, only those new 
customer-owned facilities that are similar in design and purpose to the 
transmission provider's facilities that are in rates will be eligible 
for the presumption of rolled-in rate treatment. Other customer-owned 
facilities will be eligible for credits only if the network customer is 
able to make an affirmative showing that the facilities satisfy the 
integration standard, i.e., that the facilities are nonetheless 
integrated notwithstanding their ineligibility for the presumption of 
integration.\46\
---------------------------------------------------------------------------

    \45\ See Order No. 890 at P 736; Order No. 890-A at P 337.
    \46\ See, e.g., Ne. Tex. Elec. Coop., Inc., 111 FERC ] 61,189 at 
P 16.
---------------------------------------------------------------------------

    64. To be clear, if the transmission provider disagrees that the 
customer-owned facilities are similar in design and purpose to its own 
facilities, it may challenge the threshold application of the 
presumption with a comparative analysis of its facilities and those for 
which credits are claimed. Neither the transmission provider nor the 
network customer need analyze complete satisfaction of the integration 
standard in order to determine whether, as a threshold matter, the 
presumption of integration applies. Assuming that the network customer 
prevails in its claim for presumed integration, then the network 
customer will enjoy the same rolled-in rate treatment enjoyed by the 
transmission provider for its similar facilities. As the Commission 
explained in Order No. 890, this is appropriate to ensure comparability 
between the transmission provider and network customer now that all 
transmission facilities will be planned pursuant to an open and 
coordinated process.\47\
---------------------------------------------------------------------------

    \47\ Order No. 890 at P 435.

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[[Page 39101]]

    65. The transmission provider may nevertheless overcome the 
presumption of integration by demonstrating, with reference to its own 
facilities that meet the integration standard, that the customer-owned 
facilities are not, in fact, integrated and do not provide benefits to 
the system. The same is true of transmission provider facilities 
previously presumed to be integrated. In either case, the challenging 
party will bear the burden in overcoming the presumption of integration 
and rolled-in rate treatment. It is for this reason that it would no 
longer be appropriate to remove the presumption of integration enjoyed 
by the transmission provider, i.e., apply the more strict integration 
standard, upon denial of credits to a network customer. In the past, 
only the transmission provider enjoyed the presumption of integration, 
which justified elimination of the presumption in the event credits 
were denied to a network customer. Both transmission providers and 
network customers now enjoy the benefits of presumed integration, and 
both may challenge application of the presumption to each other's 
facilities. We continue to believe that this will ensure that all 
similar facilities that are, in fact, not part of the integrated 
network that serves all customers are excluded from rates.\48\ We 
acknowledge that this approach departs from the approach adopted in 
FP&L.\49\ Our departure is justified, however, because the presumption 
of integration is now shared with new customer-owned facilities, 
shifting to the transmission provider the burden of demonstrating that 
credits for similar customer-owned facilities are not warranted.
---------------------------------------------------------------------------

    \48\ See Order No. 890-A at P 351.
    \49\ FP&L, 74 FERC at 61,010 (finding that the integration of 
facilities into the plans or operations of a transmitting utility is 
the proper test for cost recognition).
---------------------------------------------------------------------------

    66. We reject the suggestion by E.ON U.S. to reestablish a link 
between credits and joint planning by applying the presumption of 
integration only to upgrades planned through the transmission 
provider's Attachment K process. Although we support coordinated, open, 
and transparent planning, transmission providers are not required to 
develop transmission plans on a co-equal basis with customers.\50\ It 
would therefore be unfair to network customers to condition the receipt 
of credits for new facilities on planning activities that are out of 
their control. Indeed, restablishing a link between joint planning and 
credits would revive disincentives the Commission sought to correct by 
severing the link between planning and credits in Order No. 890. We 
therefore affirm our decision to sever the link between credits and 
joint planning.
---------------------------------------------------------------------------

    \50\ Order No. 890-A at P 188.
---------------------------------------------------------------------------

    67. To the extent necessary, we clarify that none of the reforms 
regarding transmission credits adopted in Order No. 890 were intended 
to apply to facilities existing prior to the effectiveness of the 
revised section 30.9 nor to pending cases involving such facilities. 
Denial of credits to a network customer's previously existing 
facilities therefore still triggers review of the transmission 
provider's rate base. Similarly, a network customer may not rely on the 
presumption of integration for its previously existing facilities.
3. Capacity Reassignment
    68. In Order No. 890-A, the Commission granted rehearing of its 
decision in Order No. 890 to remove the price cap on reassignments of 
transmission capacity, concluding that it is more appropriate to allow 
reassignments above the cap only during a study period ending on 
October 1, 2010. The Commission directed staff to closely monitor the 
development of the secondary market for transmission capacity during 
this period. To assist staff in this effort, the Commission affirmed 
the requirement for transmission providers to aggregate and summarize 
in an electronic quarterly report (EQR) the data contained in service 
agreements and related OASIS schedules for reassigned capacity. The 
Commission also directed staff to prepare a report on staff's findings 
within 6 months of the receipt of two years worth of data, i.e., by May 
1, 2010. Upon review of the staff report and any feedback from the 
industry, the Commission will determine whether it is appropriate to 
continue to allow reassignments of capacity above the price cap beyond 
the study period. In the absence of further Commission action, the 
price cap will resume effect as of October 1, 2010 under section 23.1 
of the pro forma OATT.
    69. The Commission clarified in Order No. 890-A that, as of the 
effective date of the reforms adopted in Order No. 890, all 
reassignments of capacity must take place under the terms and 
conditions of the transmission provider's OATT. As a result, there is 
no longer a need for the assigning party to have on file with the 
Commission a rate schedule governing reassigned capacity. To the extent 
that a reseller has a market-based rate tariff on file, the provisions 
of that tariff, including a price cap or reporting obligations, will 
not apply to the reassignment since such transactions no longer take 
place pursuant to the authorization of that tariff.
Request for Rehearing
    70. The APPA Joint Filers argue on rehearing that the decision to 
remove the price cap for reassignments of transmission capacity during 
the study period is not supported by substantial evidence that the 
price cap has discouraged development of a secondary transmission 
market.\51\ The APPA Joint Filers also contend that lifting the price 
cap on reassigned capacity will harm consumers by making transmission 
artificially scarce and overpriced. The APPA Joint Filers argue that 
the existence of congestion creates constrained regions within which 
market power can be exercised.
---------------------------------------------------------------------------

    \51\ The APPA Joint Filers include: APPA, NRECA, TAPS and TDU 
Systems.
---------------------------------------------------------------------------

    71. To further protect consumers, the APPA Joint Filers suggest 
that the Commission limit the experimental lifting of price caps to 
short-term reassignments.\52\ The APPA Joint Filers state that long-
term firm point-to-point transmission service is particularly important 
to LSEs looking to secure economic and reliable power supply and that 
non-firm releases of unscheduled transmission capacity will not help 
those LSEs needing long-term firm service. The APPA Joint Filers also 
argue that, by extending the experiment to long-term sales, including 
reassignments by the transmission provider's merchant function or 
affiliate, the Commission has discouraged needed transmission 
construction. If the secondary market is clearing at prices above the 
transmission provider's rate ceiling, the APPA Joint Filers contend 
that the parent corporation will have incentives to put as much 
capacity in the hands of its merchant function or affiliates as 
possible and to avoid new transmission construction. That result, the 
APPA Joint Filers argue, would reduce the access of LSEs to the long-
term firm transmission service they require to meet their service 
obligations, in violation of FPA section 217(b)(4). The APPA Joint 
Filers suggest that the Commission can achieve its goal of determining 
whether the price cap encourages development of a secondary market and 
whether there is competition in such a market by lifting the price cap 
only for short-term reassignments.
---------------------------------------------------------------------------

    \52\ Citing Interstate Natural Gas Ass'n of Am. v. FERC, 285 
F.3d 18 (D.C. Cir. 2002).
---------------------------------------------------------------------------

    72. The APPA Joint Filers also contend that the affirmative 
obligation

[[Page 39102]]

of the transmission provider to expand its system in order to 
accommodate requests for service is inadequate to ensure customers are 
protected. The APPA Joint Filers note that this obligation has existed 
since 1996, yet the Commission in Order No. 890 found that it had not 
succeeded in overcoming transmission providers' incentives to avoid 
transmission investment, especially in favor of their own 
generation.\53\ The APPA Joint Filers contend that the Commission has 
no factual basis to conclude that entry in the form of expanded 
transmission capacity will be timely, likely and sufficient to defeat 
price increases due to transmission market power.
---------------------------------------------------------------------------

    \53\ Citing Order No. 890 at P 424.
---------------------------------------------------------------------------

    73. The APPA Joint Filers acknowledge that Commission staff will be 
monitoring the EQRs and other data during the two-year period with the 
goal of preparing its report, but argue that this does not alleviate 
the Commission of its obligation to actively monitor resale of 
transmission capacity during the period to ensure that rates for 
customers remain just and reasonable and that there are no abuses of 
market power. The APPA Joint Filers ask the Commission to explicitly 
establish its intent to continue to exercise its obligations under 
sections 205 and 206 throughout this period so that resellers are on 
notice that they cannot charge unjust and unreasonable rates. If the 
Commission discovers evidence of unjust and unreasonable rates at any 
time, the APPA Joint Filers urge the Commission to address this as it 
occurs, including if necessary by terminating the experiment prior to 
October 1, 2010.
    74. With regard to the staff report, the APPA Joint Filers ask the 
Commission to prescribe the parameters, procedures and data to be 
collected and provide guidance as to the issues that should be 
addressed. The APPA Joint Filers suggest that the Commission direct 
staff to address the following specific matters in the report: Identify 
whether there is an increase in reassignments by examining data on the 
amount of reassignments before and after the price caps were lifted; 
examine prices both offered and accepted to determine the level of 
market interest in reassigned capacity, whether prices increased, the 
cause of price changes, and whether prices remained within a zone of 
reasonableness; examine whether competition among resellers is 
sufficient to protect consumers from excessive rates; identify the 
kinds of products resold, such as the length of reassignments and 
whether reassigning customers redirected service; consider whether 
reservations by the transmission provider's merchant function or 
affiliates increased, whether they reassigned the capacity reserved, 
and to whom and at what price they reassigned service; indicate whether 
the transmission provider's interactions with affiliated resellers were 
covered by the Standards of Conduct; and, assess whether those needing 
transmission capacity were able to obtain it, whether in the primary or 
secondary market.
    75. To the extent the EQR data or other sources do not provide this 
information, the APPA Joint Filers suggest that the Commission 
institute data reporting and collection requirements to obtain that 
information. The APPA Joint Filers state particular concern regarding 
the elimination of the reporting requirement under the reseller's 
market-based rate tariff. The APPA Joint Filers contend that lifting 
the price cap will allow market-based sellers to use transmission 
capacity reassignment to support attempts to exercise market power in 
sales of transmission, electricity, or both. Because a market-based 
seller no longer needs to report its own transmission reassignments and 
because the transmission provider will report reassignments only on an 
aggregate, summary basis, the APPA Joint Filers argue that the EQR data 
will not permit monitoring to detect patterns or conduct that suggest 
efforts to manipulate or exercise market power in transmission markets. 
The APPA Joint Filers contend that, by separating data on the market-
based seller's electricity sales from the data on the same seller's 
transmission reassignments, the Commission has made it difficult to 
determine whether a market-based seller is manipulating transmission 
resales to favor its market-based sales because it will be impossible 
to determine whether a particular capacity reassignment supported a 
market-based sale. The APPA Joint Filers therefore request that the 
Commission grant rehearing and retain the requirement that all holders 
of market-based rate authority report both their electricity sales and 
their capacity reassignments in the same EQR.
    76. Finally, once the staff report is issued, the APPA Joint Filers 
ask that it be noticed and that the public be provided an opportunity 
to comment. The APPA Joint Filers contend that the data underlying the 
report must be made public, with sensitive information subject to 
appropriate confidentiality protections. If the Commission believes 
that further extension of the experiment is merited, the APPA Joint 
Filers ask the Commission to use full notice and comment rulemaking 
procedures to ensure a complete record is developed to support any 
further Commission action.
Commission Determination
    77. The Commission affirms its decision to remove the price cap on 
reassignments of transmission capacity to accommodate a study period 
expiring on October 1, 2010. For the reasons stated in Order Nos. 890 
and 890-A, we continue to believe that lifting the price cap during the 
study period will foster the development of a more robust secondary 
market for transmission capacity.\54\ Point-to-point transmission 
service customers will have increased incentives to make their service 
available to others that place a higher value on it, which in turn will 
send more accurate signals that promote efficient use of the 
transmission system by fostering the reassignment of unused capacity.
---------------------------------------------------------------------------

    \54\ Order No. 890 at P 808; Order No. 890-A at P 388-89.
---------------------------------------------------------------------------

    78. Although the Commission agrees with the APPA Joint Filers that 
transmission capacity, and in particular long-term transmission 
capacity, is of great importance to LSEs and other customers, we 
disagree that restricting transactions above the price cap only to 
short-term reassignments is necessary to preserve access to service 
under the pro forma OATT. As the Commission emphasized in Order Nos. 
890 and 890-A, transmission providers are under an affirmative 
obligation to offer all available capacity to customers on a non-
discriminatory basis and to expand their systems as necessary to 
accommodate additional requests for service.\55\ The pro forma OATT 
does not, and will not, permit the withholding of transmission capacity 
by the transmission provider and effectively establishes a price 
ceiling for long-term reassignments at the transmission provider's cost 
of expanding its system. The fact that a transmission provider's 
affiliate may profit from congestion on the system does not relieve the 
transmission provider of its obligation to offer all available 
transmission capacity and expand its system as necessary to accommodate 
requests for service. We therefore disagree that allowing reassignments 
of transmission capacity above the price cap will reduce the access of 
any customer to service under the pro forma OATT.
---------------------------------------------------------------------------

    \55\ Order No. 890 at P 814; Order No. 890-A at P 392.
---------------------------------------------------------------------------

    79. The APPA Joint Filers are therefore incorrect that lifting the 
price cap will make transmission capacity

[[Page 39103]]

artificially scarce and overpriced during the study period. 
Transmission providers must continue to make primary capacity available 
at the rates specified in their individual OATTs. Customers that do not 
wish to participate in the secondary market may continue to take 
service from the transmission provider directly, just as if the price 
cap had not been lifted. For those customers participating in the 
secondary market, however, lifting the price cap will create additional 
incentives for others to make service available, increasing the ability 
to obtain transmission capacity.
    80. The APPA Joint Filers incorrectly characterize the Commission's 
statement in paragraph 392 of Order No. 890 as finding that the 
transmission provider's obligation to expand the system in response to 
service requests was inadequate to overcome incentives to avoid 
transmission investment. In the passage cited, the Commission instead 
found that this requirement was inadequate to overcome incentives to 
exclude customers from the transmission planning process.\56\
---------------------------------------------------------------------------

    \56\ Id. P 424.
---------------------------------------------------------------------------

    To remedy that disincentive, the Commission required transmission 
providers to implement open and transparent planning processes that 
allow customers and other stakeholders to provide input in the 
development of transmission plans. The Commission specifically noted 
that those planning obligations did not address or dictate which 
investments identified in a transmission plan should be undertaken by 
the transmission provider.\57\
---------------------------------------------------------------------------

    \57\ Id. P 438.
---------------------------------------------------------------------------

    81. The APPA Joint Filers inappropriately discount the importance 
of the transmission provider's affirmative obligation to expand its 
system in response to requests for service. The Commission has 
historically relied on these and other obligations under the pro forma 
OATT sufficient to mitigate the potential exercise of transmission 
market power by transmission providers and their affiliates.\58\ 
Lifting the price cap on reassignments of transmission capacity does 
not alter those obligations in any way and, therefore, does not impair 
the ability of load-serving entities to meet their load service 
obligations. By lifting the price cap on capacity reassignments, the 
Commission has instead enhanced the options available to customers 
seeking transmission service by increasing the incentives for customers 
with transmission reservations to make capacity available to others 
placing a higher value on it.
---------------------------------------------------------------------------

    \58\ See Order No. 697 at P 408.
---------------------------------------------------------------------------

    82. We are nevertheless sensitive to the concerns expressed 
regarding the potentially negative competitive effects of lifting the 
price cap on reassignments of transmission capacity. It is for that 
very reason that the Commission granted rehearing in Order No. 890-A, 
at the request of the APPA Joint Filers, to limit the period in which 
the price cap is lifted. During the study period, continuing rate 
regulation of the transmission provider's primary capacity, competition 
among resellers, and reforms to the secondary market for transmission 
capacity, combined with enforcement proceedings, audits, and other 
regulatory controls, will assure that prices in the secondary market 
remain within a zone of reasonableness.\59\ Should any customer believe 
that capacity is being preferentially allocated to a transmission 
provider's affiliates, that particular holders of transmission capacity 
are attempting to exercise market power through hoarding or other 
tactics, or that the transmission provider is failing to meet its 
expansion obligations, the customer should bring the matter to the 
Commission's attention through a complaint or other appropriate 
procedural mechanisms. If the Commission finds evidence of market 
abuse, it can act to restrict the ability of an offending reseller (and 
possibly its affiliates) to participate in the secondary market or 
impose other remedies, including civil penalties, as appropriate to 
ensure that rates for secondary transmission capacity are just and 
reasonable.
---------------------------------------------------------------------------

    \59\ See Order No. 890 at P 811; Order No. 890-A at P 391.
---------------------------------------------------------------------------

    83. With respect to our expectations for the report to be prepared 
by Commission staff, we clarify that staff should focus on the 
competitive effects of removing the price cap for reassigned capacity. 
Staff should consider the number of reassignments occurring over the 
study period, the magnitude and variability of resale prices, the term 
of the reassignments, and any relationship between resale prices and 
price differentials in related energy markets. Staff should also 
examine the nature and scope of reassignments undertaken by the 
transmission provider's affiliates and include in its report any 
evidence of abuse in the secondary market for transmission capacity, 
whether by those affiliates or other customers.\60\
---------------------------------------------------------------------------

    \60\ See id. P 406.
---------------------------------------------------------------------------

    84. As requested by the Joint APPA Filers, we have reconsidered our 
reporting requirements and determined that it would be useful to direct 
transmission providers to include certain additional information in 
their EQRs. We direct transmission providers to include in their EQRs 
the identity of the reseller and indicate whether the reseller is 
affiliated with the transmission provider. Each transmission provider 
also must include the rate that would have been charged under its OATT 
had the secondary customer purchased primary service from the 
transmission provider for the term of the reassignment. We direct 
transmission providers to submit this additional data for all resales 
during the study period and to update, as necessary, any previously-
filed EQRs on or before the date they submit their next EQR.
    85. We disagree that elimination of the reporting requirement under 
the reseller's market-based rate tariff will impair the ability of 
staff to perform its analyses. All reassignments of transmission 
capacity now take place under the transmission provider's OATT and, 
therefore, it is appropriate for the transmission provider to report 
those transactions on its EQR. We reiterate that the EQR must contain 
all relevant transaction data, whether stated in the service agreement 
governing the reassignment or in a related OASIS schedule.\61\ 
Transmission providers should not aggregate multiple transactions into 
single line items on the EQR. All terms must instead be fully described 
and rates provided for each reassignment.\62\
---------------------------------------------------------------------------

    \61\ See Order No. 890 at P 423, n.162.
    \62\ See Order No. 890 at P 818, n.499. The Commission's 
reference to ``aggregate[ing] and summarize[ing] in an EWQ the data 
contained in the service agreements for reassigned capacity'' in 
Order Nos. 890 and 890-A was intended to refer to the transmission 
provider's obligation to compile reassignments involving multiple 
parties in a single EQR, not consolidate multiple reassignments into 
single line items on the EQR.
---------------------------------------------------------------------------

    86. Upon review of the staff report, the Commission will determine 
whether it is appropriate to institute further rulemaking procedures to 
amend the pro forma OATT to allow reassignments of transmission 
capacity above the price cap after October 1, 2010. The report will be 
made public and subject to comment, with sensitive information subject 
to appropriate confidentiality protections. In the absence of 
Commission action, the rate charged by the transmission provider for 
each reassignment, and the corresponding credit to the reseller, may 
not exceed the higher of (i) the original rate paid by the reseller, 
(ii) the transmission provider's maximum rate on file at the time of 
the assignment, or (iii) the reseller's

[[Page 39104]]

opportunity cost capped at the transmission provider's cost of 
expansion.\63\
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    \63\ See section 23.1 of the pro forma OATT.
---------------------------------------------------------------------------

4. Operational Penalties
    87. In Order No. 890-A, the Commission affirmed the decision in 
Order No. 890 to subject all transmission providers, including RTOs and 
ISOs, to operational penalties when they routinely fail to meet the 
deadlines prescribed in sections 19.2, 19.4, 32.3 and 32.4 of the pro 
forma OATT. The Commission explained that the 60-day due diligence 
deadlines set forth in those sections serve as a good measure of a 
transmission provider's use of due diligence since, in its experience, 
the vast majority of transmission studies can be completed in that time 
period.
    88. The Commission rejected requests to change section 19.9 of the 
pro forma OATT, concluding that transmission providers will have the 
ability to explain in notification filings the extenuating 
circumstances that lead to delay in processing transmission service 
request studies and, in turn, demonstrate their use of due diligence 
notwithstanding the inability to meet the 60-day target. The Commission 
also rejected requests to create broad categories or lists of 
extenuating circumstances that would exempt transmission providers from 
late study penalties or related posting requirements.
Requests for Rehearing and Clarification
    89. E.ON U.S., EEI, and Southern contend that the Commission has 
failed to justify the use of 60 days as the time frame for processing 
transmission service request studies with due diligence. These 
petitioners argue that the Commission's stated experience that the vast 
majority of studies are completed within 60 days is unsupported by data 
or any other evidence. Southern further argues that any experience 
regarding processing times does not reflect the increased redispatch 
and conditional firm study obligations imposed under Order No. 890. 
Southern argues that transmission planners are also facing additional 
workforce pressures due to development of reliability standards, worker 
shortages, and Attachment K planning processes. Southern suggests that 
the Commission grant rehearing to allow for an additional 30 days to 
process transmission studies or, at a minimum, to process conditional 
firm and redispatch options. Southern acknowledges that the Commission 
determined in Order No. 890-A that the mere possibility of penalties 
did not justify extension of the 60-day study period. Southern argues, 
however, that the notification and additional posting requirements are 
in and of themselves penalties, as are the requirements to then 
complete 90 percent of studies within 60 days.
    90. E.ON U.S., EEI, and Southern also ask the Commission to add a 
clearer due diligence standard to section 19.9 of the pro forma OATT. 
They contend that it is necessary to specify in the tariff the 
circumstances that will excuse the transmission provider from 
penalties. These petitioners argue that failure to articulate a clear 
standard gives the Commission too much discretion in applying penalties 
and leaves transmission providers guessing as to what due diligence 
means. Southern argues that a lack of clarity violates due process and 
the Commission's enforcement policies because transmission providers do 
not have adequate notice of the circumstances that will subject them to 
penalties. Southern contends that the risk of late study penalties 
creates a guilty until proven innocent standard that will result in 
transmission providers favoring speed over accuracy, which could harm 
reliability.
    91. EEI agrees that failure to expressly include a due diligence 
standard in section 19.9 provides the Commission undue discretion to 
apply penalties even if the transmission provider has used due 
diligence in processing request studies. EEI argues that the language 
of section 19.9 does not adequately reflect that the inability to 
complete a study within the 60-day timeframe may be due to customer 
actions or the need to complete other interdependent studies. At a 
minimum, EEI asks the Commission to amend section 19.9(iii) to state 
that the transmission provider will not be subject to penalties if it 
demonstrates that it exercised due diligence but nonetheless failed to 
complete a sufficient percentage of its studies within 60 days. EEI 
also requests that the Commission provide additional guidance in this 
proceeding as to what factors constitute due diligence that are 
sufficiently clear and specific that a transmission provider can 
reasonably determine whether its actions satisfy those guidelines.
    92. E.ON U.S., EEI, and Southern further argue that operational 
penalties should not be imposed until the Commission makes an 
affirmative finding that the transmission provider did not exercise due 
diligence in processing request studies. EEI and Southern argue that 
due process and the Commission's enforcement policies require notice 
and hearing procedures prior to application of penalties. If a 
transmission provider fails to complete 90 percent of studies within a 
60-day period, EEI suggests that the transmission provider be 
rebuttably presumed to have failed to exercise due diligence in 
processing request studies and that penalties apply only after notice 
and an opportunity for hearing.
    93. Southern suggests that the explanation of extenuating 
circumstances in a notification filing should automatically suspend the 
obligation to post additional metrics, the obligation to process 90 
percent of study requests within 60 days, and the threat of monetary 
penalties until the Commission determines that the extenuating 
circumstances did not exist. Southern states that this would shift the 
burden of proof to the Commission and no longer treat transmission 
providers as guilty until proven innocent. E.ON U.S. argues that 
deferring the obligation to pay penalties until after the Commission 
has rejected the transmission provider's explanation for delay would be 
more efficient because transmission providers would not need to seek 
refunds from customers to whom it has made distribution of penalties 
for delays the Commission later finds justifiable.
    94. E.ON U.S. seeks clarification that not-for-profit transmission 
providers are responsible for processing transmission request studies 
within the same time period prescribed for other transmission providers 
and are equally responsible for paying late study penalties. E.ON U.S. 
argues that the ability to request cost recovery of late study 
penalties on a case-by-case basis should not be used to skirt the 
obligations established in Order No. 890.
    95. NYISO asks the Commission to clarify that it did not intend in 
Order No. 890-A to preclude transmission providers from proposing 
alternative study deadlines pursuant to FPA section 205. NYISO states 
that, because it provides a financial reservation based transmission 
service reservation, it does not receive, or deny, requests for 
transmission service in the way that Order Nos. 888 and 890 
contemplate. NYISO states it conducts transmission studies only in 
unusual situations, such as when a customer wants to explore whether it 
would be more economical to pay congestion charges or to fund the 
construction of new transmission facilities in order to obtain 
incremental congestion hedging rights from NYISO. As a result, only a 
handful of system impact study requests have been submitted to the 
NYISO in the last nine

[[Page 39105]]

years and, according to NYISO, each take substantial time to process.
    96. NYISO also requests clarification regarding the transmission 
provider's liability when delegating responsibilities for conducting 
transmission studies. NYISO states that it has responsibility for 
conducting system impact studies under its OATT, while its member 
transmission owning utilities retained responsibility for conducting 
facilities studies. NYISO asks the Commission to clarify that its 
member transmission owning utilities are responsible for ensuring that 
facilities studies are conducted in a timely manner. NYISO argues that 
it would be arbitrary and capricious to hold NYISO responsible for 
failures by the member transmission-owning utilities to comply with 
their own obligations.
Commission Determination
    97. The Commission affirms the decision in Order Nos. 890 and 890-A 
to subject transmission providers to operational penalties when they 
routinely fail to meet the 60-day due diligence deadlines prescribed in 
sections 19.2, 19.4, 32.3, and 32.4 of the pro forma OATT.\64\ 
Transmission providers must have a meaningful stake in meeting study 
timeframes, and the operational penalty structure adopted by the 
Commission provides reasonable financial incentives for transmission 
providers to exercise due diligence in processing service requests in a 
timely and nondiscriminatory manner.
---------------------------------------------------------------------------

    \64\ See Order No. 890 at P 1340; Order No. 890-A at P 741.
---------------------------------------------------------------------------

    98. We disagree that the notice procedures adopted in Order No. 890 
give inadequate opportunities to explain why studies have been 
completed late. Due process does not require the use of notice and 
hearing procedures prior to applying operational penalties for failing 
to exercise due diligence in processing transmission service request 
studies within the 60-day study period, nor must the Commission make an 
affirmative finding regarding the justifications provided in a 
notification filing prior to the application of penalties. Section 19.9 
of the pro forma OATT requires the submission of a notification filing 
and the application of penalties when certain clearly identified 
triggering conditions occur, i.e., failure to complete studies within 
the prescribed timeframes. Transmission providers therefore have 
adequate notice of the actions that may lead to penalties. We note that 
transmission customers that pay other operational penalties, like 
unreserved use penalties, do not receive notice or have hearing 
procedures prior to paying the penalty.
    99. At the same time, to ensure that penalties are not applied to 
transmission providers when study delays are justified, the Commission 
has provided an opportunity for each transmission provider to explain 
the extenuating circumstances that prevented it from meeting the 60-day 
study completion deadline. Upon review of the notification filing, the 
Commission will waive the penalties if a transmission provider 
establishes that its non-compliance is the result of extenuating 
circumstances.\65\ If the Commission is unable to act on the 
notification filing prior to the date on which the penalties would 
apply, the transmission provider will remain liable for paying the 
penalties, but is not required to distribute those penalties while the 
notification filing remains pending.\66\ The Commission concluded in 
Order No. 890, and we affirm here, that this adequately balances the 
transmission provider's due process rights with the need to provide an 
incentive to the transmission provider to complete studies on a timely 
basis.\67\ It is therefore unnecessary, as petitioners argue, to amend 
the language of section 19.9 of the pro forma OATT to specifically 
include a due diligence standard or otherwise identify in the tariff or 
elsewhere the circumstances that will excuse the transmission provider 
from penalties. Consideration of the particular extenuating 
circumstances causing a transmission provider to repeatedly miss study 
deadlines is best left to a case-by-case analysis.
---------------------------------------------------------------------------

    \65\ See Order No. 890 at P 1343.
    \66\ See id. P 1349.
    \67\ Id.
---------------------------------------------------------------------------

    100. We also affirm the decision in Order No. 890-A not to extend 
the 60-day deadline as petitioners request.\68\ The 60-day deadlines 
have existed for many years.\69\ Although petitioners challenge that 
conclusion as unsupported, none dispute the proposition that 60 days is 
generally sufficient to complete most transmission studies and, 
instead, contend that certain types of studies take longer or that 
certain transmission providers have less ability to process studies 
within that period. Yet that is precisely why the Commission has 
provided an opportunity for each transmission provider to demonstrate 
that extenuating circumstances prevented it from timely processing the 
relevant studies notwithstanding its inability to meet the 60-day 
target. Transmission providers are free to discuss in their 
notification filings any factors they believe are relevant, including 
any of the factors cited by Southern.
---------------------------------------------------------------------------

    \68\ Order No. 890-A P 746.
    \69\ See Order No. 888-A at 30,324.
---------------------------------------------------------------------------

    101. In response to E.ON U.S., we affirm that all transmission 
providers, including RTOs and ISOs, are bound by the 60-day timelines 
of sections 19.2, 19.4, 32.3 and 32.4 and the requirements of section 
19.9. The Commission clarifies, in response to NYISO, that transmission 
providers are free to make filings under FPA section 205 to seek 
variations from the pro forma OATT and demonstrate that alternative 
tariff provisions are consistent with or superior to the pro forma 
OATT. With regard to the allocation of study responsibilities between 
NYISO and its transmission owning members, we note that the Commission 
in Docket No. OA08-13-000 determined that the responsibility for 
facility studies, and penalties associated with such studies, rests 
with the transmission owning members under the NYISO tariff.\70\
---------------------------------------------------------------------------

    \70\ See N.Y. Indep. Sys. Operator, Inc., 123 FERC ] 61,134 
(2008).
---------------------------------------------------------------------------

5. ``Higher Of'' Pricing Policy
    102. In Order No. 890, the Commission concluded that changes to the 
pro forma OATT were not needed to address the practice by some 
transmission providers of quoting incremental rates as lump sum 
payments, a practice that is inconsistent with our ratemaking policy. 
The Commission explained that the transmission provider must continue 
to include a proposed monthly incremental rate with its offer of 
service whenever it proposes to charge the customer an incremental 
rate. The transmission provider also must provide cost support for the 
derivation of the rate consistent with the cost support that the 
transmission provider would provide to the Commission in a section 205 
rate filing.
    103. The Commission affirmed this decision in Order No. 890-A, 
noting that the capital costs of upgrades, as estimated in a facilities 
study and eventually specified in a service agreement through an 
incremental rate, are not subject to change once the customer has 
executed the service agreement. The Commission explained that it would 
not be appropriate to vary capital costs over the term of such 
contracts.
Request for Rehearing
    104. Duke, E.ON U.S., and EEI argue that the Commission's statement 
that

[[Page 39106]]

capital costs of network upgrades may not vary during the term of a 
service agreement is inconsistent with other sections of the pro forma 
OATT. Duke notes that section 19.4 of the pro forma OATT requires 
execution (or filing) of a service agreement a mere thirty days after 
completion of the facilities study and, therefore, the service 
agreement can only contain a good faith estimate of network upgrade 
costs. EEI and E.ON U.S. agree, noting section 19.5 further allows for 
revisions to the good faith estimate to reflect certain changed 
circumstances. EEI and E.ON U.S. contend that transmission providers 
generally are not able to determine the actual cost of required 
facilities until construction is completed, which is long after 
execution of the service agreement.
    105. EEI and E.ON U.S. argue that not allowing capital costs of 
upgrades to vary after execution of the service agreement will result 
in the transmission provider either under-recovering the cost of the 
incremental facilities or the customer overpaying the cost of those 
facilities and, as a result, charges will not be just and reasonable. 
These petitioners suggest that the transmission provider be allowed to 
modify a service agreement to reflect the actual costs of 
incrementally-charged network upgrades after the facilities are placed 
in service. Duke agrees, arguing that providing for a true-up at a 
later date is routine when facility costs are directly assigned, rather 
than rolled in. Duke suggests that customers be free to negotiate the 
ability to terminate the service agreement if a cost estimate turns out 
to far understate actual costs. Duke contends that the Commission's 
statement regarding the inability of capital costs to vary was merely a 
general observation and that the Commission should review rate changes 
on a case-by-case basis.
    106. Duke, EEI, and E.ON U.S. further argue that prohibiting 
recovery of additional capital costs that the transmission provider is 
likely to incur when repairing or replacing portions of incrementally-
charged upgrades during the term of a service agreement denies the 
transmission provider of its rights under section 205 of the FPA. While 
the incremental facilities on which the cost of service is based (e.g., 
a specific substation or line segment) should not be allowed to vary, 
EEI contends that transmission providers should be allowed recover the 
additional capital costs associated with repair or replacement of those 
facilities. EEI and E.ON U.S. suggest that remedies such as formula 
rates or a section 205 filing should be available to a transmission 
provider to recover these additional costs.
Commission Determination
    107. The Commission affirms the determination in Order No. 890 that 
capital costs specified in a service agreement are not subject to 
change once the customer has executed the service agreement.\71\ We 
clarify, however, that this statement was intended to refer to 
agreements in which a customer and transmission provider have 
specifically identified particular upgrade costs to be paid by the 
customer, allowing for a clear comparison of incremental costs to the 
transmission provider's embedded cost rate. In such instances, it would 
violate fundamental concepts of contract law, as well as undermine the 
``higher of'' pricing policy, to allow either the customer or the 
transmission provider to unilaterally change the costs previously 
agreed to by the parties. The Commission therefore explained in Order 
No. 890-A that it would not be appropriate to vary, i.e., change, 
capital costs specified in such contracts.
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    \71\ See Order No. 890-A at P 491.
---------------------------------------------------------------------------

    108. Nothing in Order Nos. 890 or 890-A, however, altered the 
ability of the transmission provider and transmission customer to 
negotiate alternative pricing arrangements such as recovering estimated 
costs subject to a true-up when upgrades are complete. The Commission 
did not mean to imply in Order No. 890-A that such alternative pricing 
arrangements are necessarily prohibited. As the Commission explained in 
Order No. 890, application of the ``higher of'' policy to particular 
cases, including proposals to adopt flexible pricing arrangements, is 
largely fact-specific and best addressed on a case-by-case basis during 
particular rate proceedings.\72\
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    \72\ See Order No. 890-A at P 883.
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6. Other Ancillary Services
    109. In Order No. 890-A, the Commission denied a request by Sempra 
Global to require the transmission provider to offer and make available 
operating reserves under schedules 5 and 6 of the pro forma OATT when 
transmission service is used to serve load outside the transmission 
provider's control area. The Commission explained that operating 
reserves are needed to serve load within the control area in the event 
of system contingencies and, unless alternative arrangements are made, 
the transmission provider provides these reserves from its own 
resources. The Commission found that it would be inappropriate to 
require the transmission provider to use its resources to provide 
additional operating reserves to loads in other control areas because 
the transmission providers in those control areas are under their own 
obligations to make operating reserves available. The Commission 
affirmed those obligations and stated that modifications to the pro 
forma OATT were not necessary to enable generators to engage in firm 
power sales to loads outside of their control area.
Request for Clarification
    110. Sempra Global argues that the Commission did not fully 
appreciate the problems faced by generators in obtaining operating 
reserves in the WECC. If transmission providers are not required to 
offer operating reserves when transmission service is used to serve 
load outside the transmission provider's control area, Sempra Global 
asks that the Commission, at a minimum, clarify that generator 
imbalance service under Schedule 9 of the pro forma OATT may be 
utilized to provide sufficient imbalance energy to keep a customer's 
schedule whole for at least two hours following a generator derating or 
forced outage, if necessary to allow the generator sufficient time to 
find and schedule replacement energy. Sempra Global states that 
clarification is needed because, if a generator trips within 20 minutes 
prior to the beginning of the hour, it is too late to schedule 
replacement energy for the hour that is about to begin.
    111. Sempra Global disagrees that the existing requirements of the 
pro forma OATT are sufficient to ensure that operating reserves are 
available to merchant generators in the WECC, pointing to the differing 
definitions for ``reserves'' in the West. Sempra Global explains that 
in the WECC ``Operating Reserves'' consist of two main components: 
Regulating Reserve and Contingency Reserve.\73\ According to Sempra 
Global, WECC's Regulating Reserve could include, but would not 
necessarily be limited to, regulation service offered under schedule 3 
of the pro forma OATT, while WECC's Contingency Reserve could include, 
but would not necessarily be limited to, operating reserve services 
under Schedules 5 and 6 of the pro forma OATT.
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    \73\ Citing WECC Standard BAL-STD-002-0--Operating Reserves.
---------------------------------------------------------------------------

    112. Although independent power generators have access to 
regulation service under schedule 3 and generator

[[Page 39107]]

imbalance service under Schedule 9 from their source balancing 
authority, Sempra Global states that they may not have access to any 
Contingency Reserves for exports from their host balancing authority. 
Sempra Global contends that it can be difficult, if not impossible, for 
generators to contract for Contingency Reserves from a third party 
without switching to that party's balancing authority or having a 
dynamic schedule or other telemetry to enable the provider of 
Contingency Reserves to know when the generator trips and to have the 
reserves provider's generation respond within ten minutes. Sempra 
Global contends that intra-hour schedule changes are not normally 
allowed by most balancing authorities in the West and that Operating 
and/or Contingency Reserve service can most logically be provided to a 
balancing authority or reserve sharing group, not an individual 
customer. Sempra Global states that this complex type of arrangement 
could not be practicably implemented for short-term transactions, or 
when the output of a generator is split between multiple buyers and 
ultimately delivered into multiple balancing authorities.
    113. Even if a generator were able to contract with a third party 
to provide operating reserves, Sempra Global states that it is unaware 
of any workable mechanism to assure a load (or ``sink'') balancing 
authority that it will have access to such reserves when needed. Sempra 
Global also notes that a generator, as a seller, may not necessarily 
have a load since transactions frequently involve numerous parties 
between the generator and the load. Sempra Global states that a 
generator may not know who the load is until the NERC eTags are 
generated during the WECC pre-scheduling process, which typically takes 
place the day before the power flows. Even if the sink balancing 
authority is known at the time a long-term transaction is entered into, 
Sempra Global states that a generator still may be unable to procure 
operating reserves to support the transaction. Sempra Global describes 
a transaction it entered into in 2002 in which none of the host 
transmission provider, the purchaser's transmission provider, nor the 
purchaser itself was willing to offer to provide Sempra Global with 
operating reserves to support the transaction. Since many LSE 
purchasers in the West enter into firm energy import transactions 
specifically to reduce their operating reserves obligations, Sempra 
Global states that it would be rarely fruitful for a generator to 
request, as part of its negotiation with a customer, that the customer 
acquire reserves from its transmission provider.
Commission Determination
    114. The Commission affirms the decision in Order No. 890-A not to 
require transmission providers to offer and make available operating 
reserves under Schedules 5 and 6 of the pro forma OATT when 
transmission is used to serve load outside the transmission provider's 
control area. As the Commission explained, operating reserves are 
needed to serve load within the control area in the event of system 
contingencies. Unless alternative arrangements are made, the 
transmission provider would serve as the provider of last resort for 
these reserves. We continue to believe it would be inappropriate to 
require the transmission provider to provide additional operating 
reserves to loads in other control areas because the transmission 
providers in those areas are under their own obligation to make 
operating reserves available.
    115. We appreciate Sempra Global's concern that these obligations 
may be insufficient to enable merchant generators in the WECC to obtain 
operating reserves in certain circumstances. Since its adoption, 
however, the pro forma OATT has placed the obligation to procure 
operating reserves squarely on load.\74\ It appears that market rules 
have developed in the WECC in a way that transfers that responsibility 
from transmission customers serving load to those providing resources. 
It does not follow, however, that the pro forma OATT--a tariff of 
general applicability--must be amended to accommodate that regional 
practice. To the extent transmission providers in the WECC wish to 
amend their tariffs to accommodate the WECC market rules, they may 
submit such variations to the Commission for consideration. 
Alternatively, the market rules themselves could be amended to reflect 
the structure of obligations under the pro forma OATT.\75\
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    \74\ See Section 3 of the pro forma OATT.
    \75\ We understand that WECC is in the process of developing a 
revised standard to address the responsibility for procuring 
contingency reserves. WECC Standard BAL-002-WECC-1--Contingency 
Reserves, available at http://www.wecc.biz/documents/library/
Standards/2007/BAL-002/BAL-002-WECC-1_1-25-08.pdf. To the extent 
that there are any conflicts between the revised WECC standard and 
the pro forma OATT, Sempra Global should raise those concerns when 
that revised standard is submitted for consideration by the 
Commission.
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C. Non-Rate Terms and Conditions

1. Modifications to Long-Term Firm Point-to-Point Service
    116. In Order No. 890, the Commission concluded that the methods 
for evaluating requests for long-term point-to-point transmission 
service may not be comparable to the manner in which transmission 
service is planned for bundled retail native load and, therefore, may 
no longer be just, reasonable and not unduly discriminatory. To remedy 
this potential for undue discrimination, the Commission amended the pro 
forma OATT to modify planning redispatch requirements and require 
transmission providers, other than most RTOs and ISOs, to offer a 
conditional firm option to long-term point-to-point customers. The 
Commission affirmed that decision in Order No. 890-A and provided 
certain clarifications regarding the transmission provider's obligation 
with regard to planning redispatch and conditional firm service.
a. Requirement To Offer Conditional Firm Service
    117. In Order No. 890-A, the Commission denied rehearing of its 
decision not to require transmission providers to offer conditional 
firm service to network customers. The Commission explained that 
network customers can designate network resources any time firm 
transmission is available and that the term of the designation can 
include periods of less than a year. Network customers can also use 
secondary network service to access resources during times when firm 
service is not available. The Commission concluded that this 
flexibility to use designated network resources and secondary network 
service to access undesignated resources already provides a service 
that is like conditional firm that can be used to integrate new 
resources. The Commission noted, however, that transmission providers 
employ automatic devices, such as special protection schemes, to take 
resources offline during certain system conditions. The Commission 
determined that comparability requires the study of these automatic 
devices for network customers seeking to designate network resources 
and revised section 32.3 of the pro forma OATT to require the study of 
automatic devices at the request of a network customer.
Requests for Rehearing and Clarification
    118. NRECA and TAPS repeat arguments made on rehearing of Order No. 
890 that the Commission must make

[[Page 39108]]

conditional firm service available to network customers. NRECA contends 
that a transmission provider will not reject a resource for its own 
bundled retail load simply because it may be unavailable for a few 
hours per year due to congestion. NRECA argues that a transmission 
provider will, however, reject a request by a network customer to 
designate that same resource because of the same limited availability. 
NRECA concludes that conditional firm network service is therefore 
necessary to eliminate undue discrimination between network customers 
serving network load and the transmission provider serving its load.
    119. NRECA acknowledges that network customers may designate 
network resources any time firm transmission is available and use 
secondary network service to access resources when firm service is not 
available. NRECA notes, however, that the Commission justified granting 
conditional firm service to point-to-point customers by stating that it 
made little sense to ask point-to-point customers to cobble together a 
collection of firm and non-firm requests when only the transmission 
provider has information about when service may be available or 
unavailable.\76\ NRECA argues that network customers should not be 
required to cobble together service comparable to that enjoyed by the 
transmission provider by designating a resource at some times and 
accessing it through secondary network service at others.
---------------------------------------------------------------------------

    \76\ Citing Order No. 890 at P 925.
---------------------------------------------------------------------------

    120. NRECA also argues that the Commission improperly assumed that 
secondary network service can provide a service that resembles 
conditional firm service. NRECA contends that the curtailment priority 
of secondary network service is inferior to conditional firm service. 
NRECA provides a scenario in which the transmission provider, a 
conditional firm customer and a network customer using secondary 
network service are taking power from the same generator in a location 
that is constrained ten hours per year. NRECA argues that the network 
customer will be curtailed before the transmission owner and before the 
conditional firm customer. NRECA adds that conditional firm customers 
are considered firm customers and will be able to request service far 
in advance and to the detriment of secondary network customers. NRECA 
concludes that a network customer can only protect itself from loss of 
service and loss of scheduling priority by paying for a network 
upgrade, which is an obligation not imposed on either the transmission 
provider or the point-to-point customer.
    121. TAPS agrees that the rights of network customers are 
significantly inferior to those of conditional firm customers. TAPS 
contends that a network customer would be required to have perfect 
knowledge, at the time of a network resource designation, as to the 
effects of constraints in order to limit its decision to periods when 
transmission is adequate to accommodate the request. TAPS argues that 
information about constraints gained as a result of an initial 
designation request is of minimal value since a reframed request would 
take a later place in the queue.
    122. TAPS also argues that the clarification provided in Order 890-
A that excess capacity created by transmission upgrades should be 
allocated first to conditional firm customers based on their initial 
order in the queue further degrades the benefit of network service. 
Even if network customers could predict periods for which to request 
secondary network service and firm designations, TAPS argues that they 
still could not create a service comparable to conditional firm service 
given the potential benefit of being firmed up by excess capacity 
produced by later upgrades. TAPS contends that the exclusion of network 
customers is discriminatory given the Commission's finding that 
transmission providers provide conditional service to themselves and 
the requirement under section 28.2 of the pro forma OATT that 
transmission providers ``designate resources and loads in the same 
manner as any Network Customer under Part III of this Tariff.'' TAPS 
further asserts that the Commission should clarify whether the customer 
supporting the upgrade is protected from having its upgrade sized to 
meet the needs of earlier-queued conditional firm customers.
Commission Determination
    123. The Commission again affirms the decision not to create a 
conditional firm network service.\77\ As the Commission explained in 
Order No. 890-A, the flexibility to use designated network resources 
and secondary network service to access undesignated resources already 
provides a service that is like conditional firm service that can be 
used to integrate new resources. The Commission also revised section 
32.3 of the pro forma OATT to make clear that network customers have 
the right to request the study of special protection schemes like those 
used by transmission providers in designating resources for their 
native loads.\78\ Further, Order No. 890 provided that network 
customers may designate off-system resources supported by conditional 
firm point-to-point service.\79\ All of these provisions collectively 
allow network customers to designate resources in the same manner that 
transmission providers designate resources for their loads. We 
therefore reject arguments that denial of conditional firm network 
service results in network service that is inferior to the transmission 
provider's own use of the system to serve its load.
---------------------------------------------------------------------------

    \77\ Order No. 890-A at P 558.
    \78\ Id. P 559.
    \79\ Order No. 890 at P 1091.
---------------------------------------------------------------------------

    124. While we agree with NRECA that conditional firm customers will 
be able to request service in advance of secondary network customers, 
we find this provides no reason to create a new conditional firm 
service for network customers. Those seeking conditional firm service 
should have the ability to request service ahead of secondary network 
service, a non-firm service. Network customers seeking to designate 
their resources and avoid the use of secondary network service may 
request the study of special protection schemes in their system impact 
study. Taken together, the rights of network customers are therefore 
not inferior to those of conditional firm customers. Indeed, network 
customers enjoy advantages over conditional firm customers, including 
access to reliability redispatch to avoid curtailment of their loads. 
In any event, we remind NRECA and TAPS that network service and point-
to-point service were not designed to be identical and the rights and 
obligations of each type of customer need not be the same.\80\ 
Comparability does not require the same service be made available to 
network customers and point-to-point customers; rather, the concept 
applies to the service taken for transmission provider's load by the 
transmission provider as compared to the service for network customer 
loads.
---------------------------------------------------------------------------

    \80\ Order No. 890-A at P 559.
---------------------------------------------------------------------------

    125. Additionally, we disagree with the conclusions that NRECA 
draws from its hypothetical scenario involving a network customer using 
secondary network service, a conditional firm customer, and the 
transmission provider taking power from the same generator. NRECA's 
assertion that the transmission provider will not curtail its own 
deliveries from the resource incorrectly assumes that the transmission 
provider will employ redispatch instead of something akin to 
conditional firm service. If the transmission provider is

[[Page 39109]]

designating network resources using service analogous to conditional 
firm service, it will use a special protection scheme to curtail or 
limit the transmission service for the resource at the same time a 
network customer's secondary network service is curtailed. The 
conditional firm customer also should be curtailed about the same 
amount as the secondary network service customer because the 
conditional firm service, by definition, should be subject to 
curtailment at the secondary network service level during the forecast 
constraints.\81\ NRECA's objection to conditional firm service is 
therefore based on a misunderstanding of the new service and the way 
that transmission providers use similar mechanisms to designate 
resources on their systems.
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    \81\ We note, however, that network customer load is unlikely to 
be curtailed due to provision of reliability redispatch. In 
contrast, conditional firm customers' transactions are more likely 
to be curtailed during conditional periods because reliability 
redispatch is not required for point-to-point service.
---------------------------------------------------------------------------

    126. In Order No. 890-A, the Commission clarified that customers 
supporting upgrades have priority access to the capability created by 
those upgrades even if conditional firm customers earlier in the queue 
opt not to support upgrades.\82\ The Commission also stated that ``any 
capacity created in excess of the service request should be allocated 
to those planning redispatch and conditional firm customers earlier in 
the queue, based on their order in the queue.'' \83\ TAPS requests 
clarification of the former determination and objects to the latter 
determination. We clarify that customers supporting upgrades, whether 
through direct assignment or rolled-in pricing, will not have their 
upgrades sized based on the needs of planning redispatch and 
conditional firm customers that opt not to support upgrades. Upon 
further consideration, we grant rehearing of Order No. 890-A with 
regard to how excess capacity created by upgrades should be allocated 
among transmission customers.\84\ We conclude that it is premature to 
make this determination given that the complicated series of events 
leading to such an allocation may never come to pass.\85\ Should 
transmission providers encounter this series of events, they should 
file, prior to completion of the transmission upgrades, proposed tariff 
provisions to address the allocation of the transmission capacity.
---------------------------------------------------------------------------

    \82\ Order No. 890-A at P 584.
    \83\ Id.
    \84\ We note that the clarification provided in Order No. 890-A 
with regard to the allocation of excess capacity was not required to 
address the original issue raised by Southern. See id. P 571, 584.
    \85\ For this circumstance to present itself, all of the 
following, at a minimum, must occur: (1) Conditional firm or 
planning redispatch service is granted to a customer unwilling to 
support upgrades; (2) a customer seeking service over the same 
transmission capacity agrees to support transmission upgrades to 
secure its service; (3) the upgrade construction is completed; (4) 
the upgrades create additional capacity that the customer supporting 
the upgrades did not request; and (5) the conditional firm or 
planning redispatch customer will be taking service when 
construction is completed.
---------------------------------------------------------------------------

b. Implementation of Planning Redispatch and Conditional Firm Service
(1) Characteristics of Service
    127. The Commission reiterated in Order No. 890-A that both the 
transmission provider and reliability coordinator play a role in 
ensuring that adequate reliability is maintained when a customer uses 
third-party provided reliability dispatch. The Commission stated that 
this would entail review of redispatch plans submitted by the 
customers, coordination between the transmission provider and 
reliability coordinator, and signaling third-party generators when the 
redispatch is needed. It is the customer's ultimate responsibility, 
however, to ensure that any technical arrangements required by the 
reliability coordinator are in place in order to maintain reliability.
    128. With regard to the conditional firm option, the Commission 
reiterated that transmission providers are allowed to add a risk factor 
to their calculation of annual curtailment hours to account for 
forecasting risks. The Commission clarified that the modeling of 
conditions to determine the number of non-firm curtailments for any 
conditional firm request should not incorporate unexpected events, such 
as hurricanes and ice storms.

Requests for Rehearing and Clarification

    129. E.ON U.S. requests that the Commission clarify that the 
reliability coordinator oversees third-party-provided planning 
redispatch to ensure there is no conflict with reliability redispatch. 
E.ON U.S. also states, however, that third-party planning redispatch 
may have a negative impact on system reliability and ATC and, 
therefore, the transmission provider should not be completely separated 
from the third-party planning redispatch process. E.ON U.S. nonetheless 
argues that the reliability coordinator is in the best position to 
monitor the reliability impacts of third-party planning redispatch. 
E.ON U.S. notes that the reliability coordinator and transmission 
provider sometimes are separate entities, as in E.ON U.S.'s case where 
Tennessee Valley Authority is the reliability coordinator.
    130. E.ON U.S. asks for further clarification that unexpected 
events that are not incorporated into the calculation of annual 
curtailment hours for a conditional firm customer do not impact the 
number of hours the customer can be curtailed. Although the Commission 
acknowledged in Order No. 890-A the need for flexibility in modeling 
various conditions, E.ON U.S. notes the Commission did not specify a 
level of appropriate risk factor to apply when making annual 
curtailment calculations and further found that unexpected events 
should not be included in calculating annual curtailment analysis.\86\ 
E.ON U.S. requests that the Commission clarify whether unexpected 
events that are not included in the curtailment hours calculation also 
do not count towards the annual curtailment hours for customers taking 
conditional firm service.
---------------------------------------------------------------------------

    \86\ Citing Order No. 890-A at P 588.
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Commission Determination
    131. In Order No. 890, the Commission directed transmission 
providers to modify their OASIS sites to allow for posting of third-
party offers for planning redispatch and to work with NAESB to develop 
the OASIS functionality and any necessary business practice standards 
to allow for third-party planning redispatch.\87\ The Commission noted 
that provision of third-party planning redispatch required coordination 
between the customer, transmission provider and reliability 
coordinator, but determined that the customer bears the burden to 
ensure that the necessary contractual and technical arrangements are in 
place to maintain reliability.
---------------------------------------------------------------------------

    \87\ Order No. 890 at P 1007.
---------------------------------------------------------------------------

    132. We clarify in response to E.ON U.S. that the role of the 
reliability coordinator in coordinating third-party planning redispatch 
is very limited. The transmission provider should have primary 
responsibility for overseeing the coordination of third-party planning 
redispatch. For example, if third-party planning redispatch impacts 
ATC, as E.ON U.S. suggests, the transmission provider will make this 
determination and relay that information to the customer. It is 
important to distinguish reliability redispatch, for which reliability 
coordinators generally play a larger role, from planning redispatch. 
Planning redispatch is used to create additional transmission capacity 
in order to accommodate a request for

[[Page 39110]]

long-term firm transmission service.\88\ The transmission provider or 
third-party generation operator must plan to dispatch its generator(s) 
so that the requested transmission service, otherwise shown unavailable 
by the transmission provider's ATC model, may be granted. In 
comparison, reliability redispatch is used to relieve actual system 
constraints that would otherwise cause curtailment of network customer 
or transmission provider loads. While the reliability coordinator has a 
larger role to play in reliability redispatch, its role in coordinating 
third-party provision of planning redispatch is very limited.
---------------------------------------------------------------------------

    \88\ See Order No. 890-A at P 603.
---------------------------------------------------------------------------

    133. With regard to our determination that unexpected events should 
not be incorporated into the analysis to determine the number of annual 
curtailment hours applying in any transmission service agreement, we 
clarify that whether such events impact the accounting for annual 
curtailment hours depends on the curtailment priority of the service at 
the time of the event. If an unexpected event occurs when the 
conditional firm customer is curtailed pursuant to a firm curtailment 
priority, then the curtailment will not count against the annual hours. 
In determining whether the annual conditional curtailments are met, 
transmission providers should count curtailments made when the service 
is otherwise conditional, i.e., tagged with a secondary network 
curtailment priority, regardless of whether the curtailment occurred 
during an unexpected event.
(2) Pricing of Planning Redispatch
    134. The Commission affirmed the determination in Order No. 890 
that customers taking long-term point-to-point service with planning 
redispatch will have the option of paying either (i) the higher of (a) 
actual incremental costs of redispatch or (b) the applicable embedded 
cost transmission rate on file with the Commission or (ii) a fixed rate 
for redispatch to be negotiated by the transmission provider and 
customer and subject to a cap representing the total fixed and variable 
costs of the resources expected to provide the service. The Commission 
clarified that, in months in which generation-related payments are 
collected for planning redispatch, these payments should be treated as 
a revenue credit to offset the native load customers' fuel adjustment 
clause. In months in which the embedded cost rate of transmission is 
collected for planning redispatch, those revenues should be included in 
the numerator of the rate calculation as a revenue credit. The 
Commission stated that transmission providers may propose in an FPA 
section 205 filing any rate design change that may be necessary through 
an amendment to its formula rate or in a single rate case filing.
Requests for Rehearing and Clarification
    135. E.ON U.S. and EEI request rehearing of the Commission's 
pricing provisions with respect to the crediting of transmission 
revenues from planning redispatch. Both repeat arguments that the 
Commission has forced transmission providers' native load to bear the 
cost of planning redispatch on behalf of point-to-point customers. They 
ask the Commission to grant rehearing to require that, when 
transmission revenues exceed the cost of planning redispatch on a 
monthly basis, only the amount of the excess transmission revenues 
should be credited against the cost of transmission service and the 
remainder should be credited against the fuel adjustment clause. In the 
alternative, EEI asks the Commission to clarify that, when the 
transmission revenues exceed the cost of redispatch, all of the 
revenues should be included as a credit in developing the transmission 
cost of service that is used to determine the transmission rate, and 
the generation redispatch costs should be included as a debit in 
determining the transmission cost of service and also should be 
credited against the fuel adjustment clause.
    136. Southern repeats arguments made on rehearing of Order No. 890 
that transmission providers should be able to charge planning 
redispatch customers the embedded costs of transmission as well as the 
generation-related costs of providing redispatch. Southern contends 
that it is unduly discriminatory and arbitrary and capricious to allow 
a transmission customer to be charged both the costs of generation 
redispatch and the embedded transmission rate when the redispatch is 
provided by a third party, but not when redispatch is provided by the 
transmission provider. In months in which redispatch costs are higher 
than the embedded cost rate, Southern contends that the transmission 
provider is similarly situated to a third party generator that provides 
redispatch because neither would receive transmission revenues for the 
additional transmission capability created by their redispatch. 
Southern therefore argues that the policy against ``and pricing'' is 
unduly discriminatory as applied to transmission providers and that 
this disparate treatment of transmission providers and third-party 
providers of planning redispatch does not withstand scrutiny.
    137. Southern also repeats arguments that the Commission 
incorrectly concluded in Order No. 890-A that planning redispatch 
creates additional transmission capacity and does not take away firm 
service from native load and network customers. Southern contends that 
planning redispatch merely reallocates, rather than creates, 
transmission capability by forcing certain generators to run and others 
not to run, thereby changing power flows. Southern, raising a new 
argument, asserts that the provision of planning redispatch could 
result in reduced subsequent, later-queued sales of long-term or short-
term transmission service that might have produced higher transmission 
revenues than the provision of planning redispatch. Southern adds that 
planning redispatch could prevent a network customer from designating a 
new network resource by taking all of the transmission capacity near a 
generating source. Southern therefore contends that the Commission's 
conclusion in Order No. 890-A that the provision of planning redispatch 
provides purely incremental service without effect to existing 
transmission capacity is arbitrary and capricious.
Commission Determination
    138. The Commission grants clarification regarding the rate 
treatment of generation-related revenues and revenues from the embedded 
cost rate of transmission associated with planning redispatch. In Order 
No. 888, the Commission concluded that revenues from direct assignment 
of redispatch costs must be credited to the costs of fuel and purchased 
power expense included in the transmission provider's wholesale fuel 
adjustment clause.\89\ This rate treatment is appropriate for all 
generation-related incremental costs, whether the customer pays the 
embedded cost transmission rate or the costs of planning redispatch in 
any particular month. Therefore, we direct that in months in which the 
embedded cost transmission rate is higher than the generation-related 
costs of providing redispatch, the revenues in excess of the 
generation-related costs should be credited against the costs of 
transmission service and the remaining revenues, those representing the 
monthly costs of reconfiguring generation resources, should be credited 
against the fuel adjustment clause.
---------------------------------------------------------------------------

    \89\ See Order No. 888 at 31,740.
---------------------------------------------------------------------------

    139. We affirm our decision in Order No. 890-A to deny requests to 
depart

[[Page 39111]]

from our long-standing prohibition of ``and'' pricing for planning 
redispatch service first adopted in Order No. 888 and followed in Order 
No. 890.\90\ In Order No. 890, the Commission modified pre-existing 
planning redispatch obligations and lessened the impact on transmission 
providers (and their customers) with the continuing support of many 
transmission providers, including Southern. The Commission also 
modified pricing provisions to allow for the comparison of monthly 
generation-related costs of planning redispatch to determine the 
applicable rate. In directing this monthly comparison, the Commission 
rejected the former provisions for basing the charge on a life of the 
contract comparison, concluding that it was appropriate to make 
planning redispatch service more attractive for transmission providers 
to provide.\91\
---------------------------------------------------------------------------

    \90\ See Order No. 890 at P 1028.
    \91\ Order No. 890 at P 1025.
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    140. We also affirm, as the Commission did in Order Nos. 890 and 
890-A, the determination in Order No. 888 that planning redispatch 
creates additional transmission capability.\92\ We agree with Southern 
that provision of planning redispatch may have an impact on subsequent, 
later-queued requests to use the transmission grid. It is the nature of 
networked transmission grids that granting any firm point-to-point or 
network service will impact the ability of those seeking to use the 
system in the future. The impact of planning redispatch, or any other 
firm service, on subsequent uses of the grid does not provide a valid 
reason for lifting the long-standing prohibition on ``and'' pricing, 
nor does it undermine the determination in Order No. 888-A that 
planning redispatch creates additional transmission capacity. To the 
extent that Southern argues it could collect additional revenues from 
network customers' designation of additional resources were Southern 
not providing planning redispatch, we find this unconvincing as network 
customers are charged for service based on their load not the number of 
resources designated.
---------------------------------------------------------------------------

    \92\ Order No. 888-A at 30,267; Order No. 890 at P 1028; Order 
No. 890-A at P 602, n.241.
---------------------------------------------------------------------------

2. Rollover Rights
    141. In Order No. 890-A, the Commission affirmed the decision in 
Order No. 890 to limit rollover rights to contracts with a minimum term 
of five years. The Commission rejected requests to condition 
application of the minimum five-year term on a demonstration that the 
relevant generation markets support five-year power supply contracts. 
The Commission explained that the purpose of its reform of the rollover 
policy is to align the rights and obligations of the customer with 
those of the transmission provider, not with the availability of 
supplies within a market or particular commercial practices in a 
region. The Commission noted that a point-to-point customer does not 
need to have a five-year power contract in order to secure a five-year 
transmission service contract and that the length of the network 
customer's service agreement, not the length of the power contract 
supporting a network resource designation, determines whether a 
customer is eligible for rollover.
    142. The Commission also affirmed the decision in Order No. 890 not 
to eliminate the requirement to match competing requests in order to 
retain rollover rights. With regard to the effectiveness of the 
rollover reforms, the Commission acknowledged that requiring a five-
year contract term for pending transmission service requests could 
cause significant disruption to those transmission customers already in 
the transmission queue at the time of the effective date of Order No. 
890. The Commission therefore revised section 2.2 of the pro forma OATT 
to provide that the current one-year contract commitment requirement 
will continue to apply to all transmission service requests that were 
in a transmission provider's transmission queue as of the effective 
date of the reforms adopted in Order No. 890 (i.e., July 13, 2007).
Requests for Rehearing and Clarification
    143. Entergy objects to the Commission's statement in Order No. 
890-A that the term of the network customer's underlying service 
agreement establishes whether a network service reservation is eligible 
for rollover rights, rather than the term of the relevant designated 
network resources.\93\ Entergy argues that this determination is an 
unexplained departure from existing rollover policy providing that a 
network service reservation's eligibility for a rollover is based on 
the term of the underlying network resource.\94\ Entergy argues that 
network customers most often execute long-term service agreements, 
sometimes up to as many as 30 years in length, that act as umbrella 
agreements under which network customers designate and undesignate 
different network resources as needed to serve network load. Entergy 
explains that the transmission provider studies these reservations as 
they are submitted and, if they are deliverable to the relevant network 
load on a firm basis, then they are designated as network resources.
---------------------------------------------------------------------------

    \93\ Citing Order No. 890-A at P 645.
    \94\ Citing Wis. Pub. Power, Inc. v. Wis. Pub. Serv. Corp., 84 
FERC ] 61,120, at 61,659 (1998) (WPPI).
---------------------------------------------------------------------------

    144. Entergy argues that granting rollover rights based solely on 
the term of a network service agreement, rather than the term of the 
network resource designation, would effectively ignore the firm 
deliverability requirement underlying all network resources, allowing a 
network customer to execute a multi-year service agreement and obtain 
rollover rights even though it actually may have only designated 
network resources for as little as one day. Entergy contends that this 
is not the intent of allowing transmission customers to designate 
network resources on a short-term basis and constitutes bad 
transmission policy and undermines reliability.
    145. Cargill objects to the revision of section 2.2 of the pro 
forma OATT requiring existing customers to match the longest-term 
competing request in order to rollover service. Cargill contends that 
the Commission in Order No. 890 determined that a rollover customer 
must agree to another five-year contract term or match any longer-term 
competing request in order to be eligible for a subsequent 
rollover,\95\ but imposed no similar requirement when exercising a 
rollover right when a subsequent rollover is not desired. Cargill 
argues that the new requirement to match the longest-term competing 
request in order to roll over service violates the first-come, first-
served principles affirmed in Order No. 890. Cargill suggests, for 
example, that one potential customer could submit a competing request 
well in advance of the incumbent's rollover, followed by a second 
longer-term competing request submitted by another potential customer 
closer in time to the incumbent's rollover. Cargill contends that the 
revision to section 2.2 would allow the second customer to effectively 
preempt the earlier submitted competing request simply because both are 
vying for capacity subject to the incumbent's rollover right.
---------------------------------------------------------------------------

    \95\ Citing Order No. 890 at P 1231.
---------------------------------------------------------------------------

    146. Cargill argues that the revised language of section 2.2 
therefore violates the first-come, first-served principle of section 
13.2 of the pro forma OATT and Commission precedent regarding the 
application of rollover rights,\96\ nullifying the benefit of being the 
first competitor to submit a competing

[[Page 39112]]

request for capacity subject to a rollover right. Cargill contends that 
the Commission provided no justification in Order No. 890-A for 
revising its rollover policy to require a customer to match the 
longest-term competing request in order to rollover its service. 
Cargill also argues that the Commission provided no notice or 
opportunity to comment on this change in Commission policy.
---------------------------------------------------------------------------

    \96\ Citing Tenaska Power Services Co. v. Midwest ISO, 106 FERC 
] 61,230 at P 28, reh'g denied, 107 FERC ] 61,308 (2004) (Tenaska).
---------------------------------------------------------------------------

    147. TranServ requests clarification of the Commission's 
determination regarding the application of the new rollover policies to 
customer requests queued prior to the effective date of the reforms 
adopted in Order 890. TranServ states that there is continued confusion 
over exactly when customers would be required to request long-term 
service for five years or longer to be granted rollover rights. 
TranServ contends that customers submitting long-term service requests 
after July 13, 2007, but prior to the effectiveness of revised section 
2.2 of the OATT, are not granted the right to rollover service under 
the previous one-year term rollover policy. TranServ suggests that it 
may be more appropriate to allow transmission customers that submitted 
requests for one year or longer after July 13, 2007, but executed a 
service agreement prior to the effective date of the revised section 
2.2, to also be allowed to operate under the one-year term rollover 
policy through their first rollover date.
Commission Determination
    148. The Commission affirms the determination in Order No. 890-A 
that the length of a network customer's network service agreement, not 
the length of a power contract supporting a network service agreement, 
determines whether the network customer is eligible for rollover 
rights.\97\ A network customer's eligibility for rollover rights is 
distinct from its ability to rollover a particular resource 
designation. In order for a network customer to qualify for rollover 
rights, it must have a network service agreement that satisfies the 
minimum term necessary for rollover rights. The network customer may 
then continue to designate and undesignate resources pursuant to that 
service agreement, subject to the availability of adequate transmission 
capability to accommodate the request.
---------------------------------------------------------------------------

    \97\ See Order No. 890-A at P 645.
---------------------------------------------------------------------------

    149. This does not, as Entergy argues, depart from Commission 
precedent regarding the network customer's eligibility for rollover 
rights. At issue in WPPI was whether a network customer is required to 
compete with other firm uses of the system in order to continue its 
resource designation at the time of rollover.\98\ In considering that 
issue, the Commission first addressed whether rollover rights are 
available to network customers, concluding that all network customers 
of the transmission system are long-term users of the system and, 
therefore, meet the minimum term required to qualify for rollover 
rights. That determination was appropriate when the one-year contract 
commitment was in effect, since network service agreements are not 
short-term in nature. However, when the Commission extended the minimum 
contract commitment for rollover rights from one year to five years, it 
was necessary to state more clearly that a network customer's threshold 
eligibility for rollover rights is linked to the term of its network 
service agreement.
---------------------------------------------------------------------------

    \98\ See WPPI, 84 FERC at 61,659.
---------------------------------------------------------------------------

    150. We disagree that this determination undermines the ability of 
the transmission provider to study the potential impact that future 
resource designations may have on the system. Although a network 
customer rolling over its network service may match a competing point-
to-point request by extending its network service agreement rather than 
the power contract supporting the resource designation, the Commission 
specifically noted that any subsequent request to designate a network 
resource would remain subject to the requirements of the pro forma 
OATT, as with any other request to designate a network resource.\99\ 
The transmission provider will therefore continue to be able to 
consider the deliverability of a particular resource at the time of 
designation. We note that this does not relieve the transmission 
provider of its obligation under section 28.2 of the pro forma OATT to 
plan, construct, operate and maintain its transmission system in order 
to provide the network customer with network service over the 
transmission system.
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    \99\ See Order No. 890-A at P 666, n.264. With regard to 
competing network resource designations, the Commission affirmed in 
Order No. 890-A that the network customer seeking rollover must 
match the term of the competing network resource power contract, 
consistent with WPPI. See Order No. 890-A at P 666.
---------------------------------------------------------------------------

    151. We agree with Cargill, however, that the revisions to the 
language of section 2.2 of the pro forma OATT adopted in Order No. 890-
A do not properly reflect the obligation of customers rolling over 
their service to match competing requests for service. Section 2.2 of 
the Order No. 888 pro forma OATT required customers rolling over their 
service to accept a contract term for their new service at least as 
long as that offered by another potential customer.\100\ This 
obligation was independent of the separate requirement for the rollover 
customer to request a term of at least one year in order to be eligible 
for rollover rights on the new service. In amending section 2.2 in 
Order No. 890, the Commission inadvertently misstated the matching 
requirement as requiring the customer to match the longer of the term 
of a competing request or five years in order to roll over its 
service.\101\ That was incorrect, as the requirement to commit to at 
least five years of service is relevant only to whether the new service 
has rollover rights, not to whether the customer may roll over its 
existing service.
---------------------------------------------------------------------------

    \100\ See Order No. 888 at 31,665.
    \101\ See Order No. 890 at Appendix C, pro forma OATT section 
2.2.
---------------------------------------------------------------------------

    152. The Commission corrected this misstatement in Order No. 890-A 
by amending section 2.2 to require customers rolling over the service 
to match the longest competing request.\102\ As Cargill points out, the 
Commission's reference to the longest-term competing request could 
require a rollover customer taking long-term service to match the 
length of any competing long-term request. Under the Commission's 
existing precedent regarding section 2.2 of the pro forma OATT, 
however, there would be only one potential competitor for rollover 
customers seeking long-term service, i.e., the first customer in the 
queue requesting competing service.\103\ We did not intend to modify 
this policy and, therefore, revise the language of section 2.2 to 
require customers rolling over their service to accept a contract term 
at least equal to a competing request. Any such competing request 
should be identified by the transmission provider consistent with the 
reservation priorities stated in the pro forma OATT.
---------------------------------------------------------------------------

    \102\ See Order No. 890-A at P 695 (``An existing customer may 
rollover its service for a term of less than five years, but will 
not then retain a rollover right for this service. We revise section 
2.2 of the pro forma OATT to make these requirements clear.'').
    \103\ See Tenaska, 106 FERC ] 61,230 at P 48; see also Cargill 
Power Marketers, LLC v. Southwest Power Pool, Inc., 122 FERC ] 
61,068 (2008) (distinguishing the ``equal to a competing request'' 
language of section 2.2 of the pro forma OATT from the ``longest 
confirmed competing request'' language of SPP's tariff).
---------------------------------------------------------------------------

    153. We affirm the decision in Order No. 890-A to continue to apply 
the current one-year contract commitment requirement to all 
transmission service requests that were in the transmission provider's 
transmission queue as of the effective date of the reforms adopted in 
Order No. 890, i.e., July 13, 2007.\104\ This does not mean, as 
TranServ implies, that the five-year contract

[[Page 39113]]

commitment requirement applies to a customer executing a service 
agreement after that date, but prior to the effectiveness of rollover 
reforms for the particular transmission provider. The Commission 
reiterated in Order No. 890-A that the previously existing rollover 
provisions will remain in effect for the transmission provider until 
such time as the Commission accepts the transmission provider's 
Attachment K compliance filing.\105\ We therefore agree with TranServ 
that the one-year contract commitment requirement continues to apply to 
any customer executing a service agreement prior to the effective date 
of the transmission provider's revised section 2.2, regardless of when 
the customer's service request was submitted.
---------------------------------------------------------------------------

    \104\ See Order No. 890-A at P 691.
    \105\ See id. P 684.
---------------------------------------------------------------------------

    154. Finally, we take this opportunity to clarify the statement in 
Order No. 890-A that the transmission provider may file the revised 
rollover language only after the transmission provider's Attachment K 
planning process is accepted by the Commission.\106\ Transmission 
providers may file the revised rollover language adopted in this 
proceeding at any point after the Commission has accepted the 
transmission provider's Attachment K compliance filing, even if such 
acceptance is subject to further compliance obligations, unless 
otherwise provided by the Commission in the order addressing the 
Attachment K compliance filing. The effective date of that revised 
tariff language should be commensurate with the date of the filing 
containing the revised language.
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    \106\ See id.
---------------------------------------------------------------------------

3. Acquisition of Transmission Service
a. Reservation Priority
    155. The Commission confirmed in Order No. 890-A that longer 
duration service requests will continue to have priority over shorter 
duration service requests, with pre-confirmation serving as a tie-
breaker for requests of equal duration. Order No. 890-A also affirmed 
the decision to limit priority for pre-confirmation status to short-
term firm and long-term non-firm requests for service. The Commission 
also revised sections 1.39, 17.2 and 18.2 of the pro forma OATT to make 
clear that pre-confirmation service should be available to all eligible 
customers seeking short-term firm and non-firm transmission services.
Requests for Rehearing and Clarification
    156. Schedule 20A Service Providers request rehearing of the 
Commission's decision to revise the pro forma OATT to allow pre-
confirmation by eligible customers that have not yet executed service 
agreements. They argue that this revision is inconsistent with how 
service is reserved on the Phase I/II HVDC-TR transmission system 
operated by ISO New England and Hydro-Quebec TransEnergie. The Schedule 
20A Service Providers state that they have therefore requested approval 
of a variation from the pro forma OATT in their October 11, 2007 
compliance filing to accommodate their reservation practices.
    157. The Schedule 20A Service Providers also argue more generally 
that OASIS is not set up to take pre-confirmed applications and, 
therefore, there is no means by which an eligible customer that is not 
yet a transmission customer can request pre-confirmed service. They 
argue that limiting pre-confirmation status to transmission customers 
does not preclude new customers from seeking service on an equal 
footing since the obligation to execute a service agreement does not 
impose an undue burden. To the contrary, they argue that substantial 
implementation difficulties would arise if transmission providers are 
forced to recognize pre-confirmation status for eligible customers that 
do not have access to OASIS. The Schedule 20A Service Providers 
therefore ask the Commission to grant rehearing to provide that the 
modifications to sections 1.39, 17.2 and 18.2 of the pro forma changes 
are not necessary or appropriate when applications are not a means for 
requesting service through OASIS.
Commission Determination
    158. The Commission affirms the decision in Order No. 890-A to 
allow eligible customers to submit pre-confirmed requests for 
transmission service.\107\ The ability to submit pre-confirmed requests 
should not be limited to existing short-term and non-firm transmission 
customers. To the extent this policy conflicts with the operations of 
any given transmission provider, as the Schedule 20A Service Providers 
suggest, the transmission provider may seek a variation from the terms 
and conditions of the pro forma OATT as necessary to accommodate its 
operations. We note, for example, that the Commission approved the 
variation requested by the Schedule 20A Service Providers in Docket No. 
ER08-54-000.\108\
---------------------------------------------------------------------------

    \107\ Order No. 890-A at P 790.
    \108\ See ISO New England, Inc., 123 FERC ] 61,133 (2008).
---------------------------------------------------------------------------

b. Right of First Refusal and Preemption
    159. The Commission affirmed in Order No. 890-A the decision not to 
change the first-come, first-served nature of the reservation process 
and the right of first refusal. In response to comments that 
administration of the right of first refusal has the potential to 
create complicated scenarios, such as when scarce capacity exists, the 
Commission declined to expand upon the language of the pro forma OATT 
to account for every factual scenario that could arise. The Commission 
recognized that certain unique cases can present difficult allocation 
issues, but concluded that such cases arise infrequently and that 
sections 13.2 and 14.2 of the pro forma OATT provide adequate guidance 
for the vast majority of requests.
Request for Rehearing and Clarification
    160. Duke asks the Commission to clarify that a transmission 
provider need not offer a right of first refusal if it cannot be done 
in a single offering to other eligible customers. Duke argues that it 
is unduly complicated to offer a right of first refusal when the offer 
triggers other transmission customers' rights of first refusal. If it 
is the Commission's intention that the transmission provider offer 
cascading rights of first refusal, Duke requests guidance that can be 
used by NAESB to develop adequate business practices.
Commission Determination
    161. The Commission declines to address in this rulemaking 
proceeding how transmission providers should resolve complicated and 
fact-specific scenarios such as the cascading rights of first refusal 
described by Duke. Sections 13.2 and 14.2 of the pro forma OATT provide 
adequate guidance for transmission providers to fairly administer the 
vast majority of competing requests, including priorities for 
determining which reservations or requests trump one another as well as 
the timeframes for eligible customers to respond to competing requests. 
As the Commission explained in Order No. 890-A, we expect that more 
complex circumstances such as those suggested by Duke will be 
relatively limited and, therefore, are best addressed on a case-by-case 
basis.\109\ Transmission providers remain free, however, to develop 
through the NAESB process standard procedures for processing 
complicated request scenarios.
---------------------------------------------------------------------------

    \109\ See Order No. 890-A at P 816.

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[[Page 39114]]

4. Designation of Network Resources
    162. In Order No. 890-A, the Commission clarified certain 
determinations regarding the qualification, documentation and 
undesignation of resources by a network customer. A number of 
petitioners request additional rehearing and clarification regarding 
these issues. We address each of these issues in turn.
a. Qualification as a Network Resource
(1) LD Contracts
    163. In Order No. 890, the Commission affirmed its existing policy 
that a power purchase agreement may be designated as a network resource 
provided it is not interruptible for economic reasons, does not allow 
the seller to fail to perform under the contract for economic reasons, 
and requires the network customer to pay for the purchase. The 
Commission concluded that power purchases with a firm liquidated 
damages (LD) provision may be eligible for designation as a network 
resource if the contract obligates the supplier, in the case of 
interruption for reasons other than force majeure, to make the 
aggrieved buyer financially whole by reimbursing them for the 
additional costs, if any, of replacement power. The Commission found 
that the ``make whole'' LD provisions in EEI's Master Power Purchase 
and Sale Agreement's Firm LD product (EEI's Firm LD Product) and the 
WSPP Service Schedule C agreement satisfy this requirement. In Order 
No. 890-A, the Commission affirmed its finding that the make whole LD 
provisions in the EEI Firm LD Product and the WSPP Service Schedule C 
agreement are sufficiently firm to make those agreements eligible for 
designation as a network resource.
Requests for Rehearing and Clarification
    164. Duke asks the Commission to confirm that firm LD contracts 
that are not strictly limited to interruption for reliability reasons, 
such as the EEI Master Agreement Firm LD Product, no longer can be 
designated as network resources in the future. Duke contends that the 
Commission's statement in Order No. 890-A that ``the make whole LD 
provisions in the EEI firm LD product and WSPP Schedule C agreement are 
sufficiently firm to make those agreements eligible for designation as 
a network resource'' implies that LD contracts with make-whole 
provisions may serve as network resources, even if not coupled with 
provisions that also restrict interruption for reasons other than 
reliability.\110\ Duke requests clarification that both a make-whole 
provision and a restriction on the grounds for interruption, such as 
the restriction added to the WSPP Schedule C agreement, are required 
for an LD contract to be eligible for network resource status.
---------------------------------------------------------------------------

    \110\ Citing Order No. 890-A at 832.
---------------------------------------------------------------------------

Commission Determination
    165. The Commission reiterates that a power purchase agreement must 
meet all of the requirements for designation as a network resource in 
order to be designated by the network customer or transmission 
provider's merchant function. The fact that a firm LD contract with a 
make whole provision is sufficient to satisfy one aspect of these 
requirements does not mean that it can be designated as a network 
resource. The remaining requirements must also be met.\111\ As the 
Commission made clear in Order No. 890, one of those other requirements 
is that such contracts expressly prohibit interruption for reasons 
other than reliability.
---------------------------------------------------------------------------

    \111\ See, e.g., id. P 864 (``The Commission did not state that 
every firm LD contract can be designated as a network resource, but 
rather that they are eligible for designation.'') (emphasis in 
original); Order No. 890 at n. 869 and P 1460 (finding that the then 
current WSPP Schedule C agreement, while meeting requirements for LD 
provisions, otherwise allows interruptions for reasons other than 
reliability and, as a result, would not be eligible for designation 
as a network resource).
---------------------------------------------------------------------------

    166. We disagree with Duke that the EEI firm LD product fails to 
prohibit interruptions for reasons other than reliability. Duke raised 
a similar argument in its NOPR comments, suggesting that the EEI firm 
LD product allows power to be interrupted for any reason. The 
Commission expressly disagreed, finding that power cannot be 
interrupted for economic reasons under the EEI firm LD product and that 
the supplier is obligated to provide power except in cases of force 
majeure.\112\ Duke is therefore mistaken in implying that the EEI firm 
LD product is not eligible for designation under Commission policy 
because of its interruptibility.
---------------------------------------------------------------------------

    \112\ Order No. 890 at P 1452.
---------------------------------------------------------------------------

(2) Off-System Resources
    167. In Order No. 890, the Commission modified section 29.2(v) to 
state more clearly the information that must be provided for the 
designation of off-system network resources. Among other things, the 
network customer must provide its transmission arrangements on the 
external transmission system(s). In Order No. 890-A, the Commission 
clarified that this requirement applies to the transmission leg from 
the resource being designated to the transmission provider's 
transmission system. If an off-system power purchase is sufficiently 
firm to satisfy the designation requirements, the transmission provider 
need not be concerned with the upstream transmission leg(s) from the 
generator(s) to the point where the buyer takes title of the firm 
power. The Commission concluded that the firm contract itself is the 
resource being designated and, therefore, it is not necessary to 
demonstrate the firmness of the upstream transmission.
Requests for Rehearing and Clarification
    168. Entergy requests clarification that customers designating an 
LD contract as an off-system network resource must still arrange a firm 
transmission path from the generator to the transmission system in 
order for the purchase to qualify as a network resource, regardless of 
where title of energy and/or capacity actually passes. If the point 
where title to energy and/or capacity underlying a network resource 
transfers is now relevant, Entergy argues that the Commission at a 
minimum should clarify how that information should be relayed to the 
transmission provider in the network customer's attestation and the 
procedures, if any, that the transmission provider must undertake in 
order to ensure the veracity of information provided regarding title. 
Entergy argues that elimination of the requirement to support an LD 
contract with a firm transmission path from the source generator would 
violate the long-standing obligation that third-party transmission 
arrangements delivering purchases be firm and depart from prior 
governing precedent without a reasoned explanation.\113\
---------------------------------------------------------------------------

    \113\ Citing WPPI, 84 FERC at 61,660.
---------------------------------------------------------------------------

Commission Determination
    169. The Commission affirms the determination in Order No. 890-A 
that the requirement in section 29.2(v) of the pro forma OATT to 
identify the transmission arrangements on external systems applies only 
to the transmission leg from the resource being designated to the 
transmission provider's transmission system.\114\ If an off-system 
power purchase is sufficiently firm to satisfy the designation 
requirements, then the transmission provider need not be concerned with 
the upstream transmission leg(s) from the generator(s) to the point 
where the buyer takes title of the firm power. As the Commission 
explained in Order No. 890-A, the resource being designated is the firm

[[Page 39115]]

contract. The network customer therefore must provide to the 
transmission provider information regarding its transmission 
arrangements only from the point that the network customer takes title 
to the power to the point of delivery to the transmission provider's 
transmission system, to the extent such points are distinct.
---------------------------------------------------------------------------

    \114\ See Order No. 890-A at P 867.
---------------------------------------------------------------------------

    170. We disagree that this determination conflicts with the 
Commission's decision in WPPI. In that case, the Commission clarified 
that the transmission provider could require network customers to 
document compliance with specific requirements for obtaining tariff 
service and that such documentation might include contractual 
materials.\115\ The Commission did not address whether those 
requirements include the requirement to provide information regarding 
transmission arrangements between a designated power purchase agreement 
and the source generator. The Commission concluded in Order No. 890-A 
that they do not, given that the designated purchased power contract is 
itself firm.\116\ Entergy provides no justification for granting 
rehearing of this determination, which is well-founded in the record of 
this proceeding.\117\
---------------------------------------------------------------------------

    \115\ See WPPI, 84 FERC at 61,660.
    \116\ See Order No. 890-A at P 867.
    \117\ See id. P 854-55.
---------------------------------------------------------------------------

    171. We disagree that a network customer must separately identify 
in its attestation the location at which the network customer takes 
title of purchased power. Section 30.2 of the pro forma OATT requires 
the network customer to attest that, among other things, the network 
customer owns or has committed to purchase the resource being 
designated. Implicit in the identification of a resource, then, is the 
requirement that the network customer has or has committed to acquire 
title to the resource at that location. As the Commission explained in 
Order No. 890-A, it is the responsibility of the network customer to 
assure that the requirements of the pro forma OATT are satisfied prior 
to requesting the designation of a network resource and executing the 
attestation.\118\ Review of the network customer's power supply 
contracts by the transmission provider is therefore not necessary. 
Submitting an attestation with incorrect information as to its 
ownership of purchased power would violate section 30.2, subjecting the 
network customer to potential penalties.\119\
---------------------------------------------------------------------------

    \118\ See id. P 921.
    \119\ See Order No. 890 at P 1523-25. As we note below, the 
Commission can audit a network customer's compliance with a 
transmission provider's OATT in a variety of circumstances.
---------------------------------------------------------------------------

b. General
    172. In Order No. 890-A, the Commission affirmed the decision to 
allow off-system resources supported by conditional firm point-to-point 
service to be designated as network resources. The Commission declined 
to require a network customer with a designated off-system resource 
supported by conditional firm service to obtain reserves or backup 
resources to cover the periods when the resource supported with 
conditional firm point-to-point transmission service might not be 
delivered. The Commission explained that, in the event conditional firm 
service is curtailed, the network customer would be required to serve 
its network load from other resources, just as when the transmission 
provider curtails the network customer's use of secondary network 
service. The Commission reiterated that it is not the responsibility of 
the transmission provider to ensure that the network customer has 
sufficient resources to meet its load.
Requests for Rehearing and Clarification
    173. Duke argues that the Commission, in its finding that 
transmission providers are not to serve as provider of last resort for 
their network customers, did not explain how transmission providers can 
realistically avoid this role or how transmission providers or their 
merchant function should be compensated in the likely event that the 
transmission provider will continue to provide power to network 
customers that are short of energy resources. Duke argues that several 
of the Commission's policies on designation of network resources create 
or exacerbate risks that network customers may at times be short of 
resources. First, Duke cites the Commission's decision to allow a 
network customer to deliver power from off-system network resources 
using conditional firm point-to-point service, which it argues may be 
curtailed with much greater frequency than network resources supported 
by firm point-to-point service. Second, Duke cites the Commission's 
rejection of requests to allow transmission providers to verify that a 
network resource is supported by firm transmission service upstream of 
the location of the purchase. Third, Duke cites the Commission's policy 
of allowing power sales contracts that permit interruption by the 
seller in order to reliably serve native load to qualify as network 
resources, arguing that such policy may permit double-counting of 
resources. Fourth, Duke states concern regarding the grandfathering of 
existing designations for resources that may be curtailed by the seller 
for any reason. Finally, Duke argues that the Commission's attestation 
requirement will not adequately curb the practice of designating 
unqualified resources as network resources due to a lack of audit 
resources.
    174. Duke requests clarification that transmission providers or 
their merchant functions may make section 205 filings to provide for 
penalty rates for network customers that fail to provide enough energy 
to serve load because network resources were not delivered for reasons 
that could be expected. Duke explains that the most severe penalty for 
energy imbalance service under Schedule 4, 125 percent of incremental 
cost, is not particularly onerous and thus may be insufficient to 
motivate appropriate behavior. Duke suggests that a rate of two times 
system incremental costs would be appropriate.
Commission Determination
    175. The Commission reiterates that it is not the responsibility of 
the transmission provider to ensure that the network customer has 
sufficient resources to meet its load. The Commission has made clear 
that the requirements for the designation of network resources are not 
intended to replace or replicate resource adequacy requirements, which 
impose distinct obligations on the transmission provider and its 
customers.\120\ To that end, the Commission has determined that a 
resource's qualification for network resource status does not 
necessarily mean that the resource can or should be counted as firm 
capacity for the purposes of resource adequacy.\121\ We therefore 
disagree with Duke that the Commission's policies regarding the 
designation of network resources creates or exacerbates risks that 
inadequate resources will be available to meet network load.
---------------------------------------------------------------------------

    \120\ See Order No. 890 at P 1584; Order No. 890-A at P 835, 
837.
    \121\ Midwest Indep. Transmission Sys. Operator, Inc., 122 FERC 
] 61,283, at PP 274-76 (2008), reh'g pending.
---------------------------------------------------------------------------

    176. We decline to address Duke's suggestion that increased penalty 
rates may be appropriate for network customers that fail to provide 
enough energy to serve network load because their network resources 
were not delivered for reasons that could be expected. The Commission 
has already made clear that it will consider on a case-by-case basis 
proposals to adopt enhanced imbalance penalties subject to

[[Page 39116]]

a showing that they are necessary under the circumstances.\122\
---------------------------------------------------------------------------

    \122\ Order No. 890 at P 676.
---------------------------------------------------------------------------

c. Documentation for Network Resources
    177. In Order No. 890, the Commission required network customers 
and the transmission provider's merchant function to include a 
statement with each application for network service or to designate a 
new network resource that attests, for each new network resource 
identified, that (1) the transmission customer owns the resource, or 
has committed to purchase the resource pursuant to an executed contract 
or where execution of a contract is contingent upon the availability of 
transmission service, and (2) the resource comports with the 
requirements for designated network resources. The Commission stated 
that these attestations are not required to be submitted until the 
service request is confirmed. In Order No. 890-A, the Commission 
affirmed the requirement that each network customer designating network 
resources must submit an attestation using the language set forth in 
sections 29.2 and 30.2 of the pro forma OATT.
    178. The Commission also affirmed the decision to require each 
transmission provider to verify that third-party transmission 
arrangements used to deliver an off-system designated network resource 
to the transmission provider's system are firm. The Commission 
explained that, under normal circumstances, this verification 
requirement should not present a significant burden for the 
transmission provider because it only requires review of the 
transmission arrangements from the designated network resource to the 
transmission provider's system.
Requests for Rehearing and Clarification
    179. NRECA and TDU Systems seek confirmation that network customers 
are not required to submit attestations until the customer confirms the 
service request on OASIS. These petitioners state that clarification is 
necessary because some of their members have been told by transmission 
providers that this attestation is required at the time of application 
for service, despite the Commission's guidance in the preambles of both 
Order Nos. 890 and 890-A.\123\ NRECA and TDU Systems contend that the 
language of section 29.2 of the pro forma OATT is inconsistent with the 
preamble and should be amended because courts have held that language 
in the preamble of a regulation is not controlling over the language in 
the regulation itself.\124\ If the Commission actually intended to 
require the attestation at the application stage, they request 
rehearing on the grounds that a network customer cannot be expected to 
commit to purchase a resource before the resource has even been studied 
by the transmission provider.
---------------------------------------------------------------------------

    \123\ Citing Order No. 890 at P 1531; Order No. 890-A at P 909.
    \124\ Citing Wyoming Outdoor Council v. U.S. Forest Serv., 165 
F.3d 43, 53 (D.C. Cir. 1999) (citing Jurgensen v. Fairfax County, 
Va., 745 F.2d 868, 885 (4th Cir. 1984)) and Rowell v. Andrus, 631 
F.2d 699, 705 (10th Cir. 1980).
---------------------------------------------------------------------------

    180. Duke states continued concern regarding the effectiveness of 
the attestation requirement submitted by network customers that are not 
subject to the Commission's ratemaking jurisdiction. Duke maintains 
that, while the Commission plainly has the authority to penalize 
nonjurisdictional entities that submit false attestations, the 
Commission has never routinely audited such entities. Unless the 
Commission begins an audit program that routinely reviews the 
designation attestations and supporting contracts of nonjurisdictional 
network customers, Duke argues that noncompliance could be viewed as 
nearly risk-free. Duke contends that this would be inequitable given 
that merchant functions of transmission providers are routinely 
audited. If the Commission lacks the resources to begin routine, random 
auditing of nonjurisdictional entities' attestations, Duke suggests 
that the Commission consider permitting market monitors or independent 
entities to at least perform spot checks and report to the Commission 
if a questionable attestation has been made.
    181. TranServ requests clarification of the means by which a 
transmission provider may comply with its obligation to verify the 
firmness of off-system transmission service to deliver designated 
network resources to the transmission provider's system. TranServ 
requests that only long-term designations of network resources should 
require an up-front verification of any off-system transmission 
arrangements. For shorter-term designations, TranServ suggests that it 
is sufficient for the transmission provider to verify that all 
transmission arrangements upstream of the provider's system are 
supported by firm transmission at the time the transactions from the 
resource are scheduled. TranServ contends that this would allow more 
flexibility on the part of the transmission customer in terms of 
balancing the use of a portfolio of point-to-point transmission rights, 
while still providing the necessary assurance to the transmission 
provider that the designated resource is backed by firm transmission up 
to the point of delivery to the provider's system.
Commission Determination
    182. The Commission grants rehearing to more accurately state the 
requirement to provide an attestation supporting the designation of 
network resources pursuant to sections 29.2(viii) and 30.2 of the pro 
forma OATT. In order to designate a network resource, section 30.7 of 
the Order No. 888 pro forma OATT required each network customer to 
demonstrate that (i) it owns or has committed to purchase generation 
pursuant to an executed contract or (ii) execution of a contract is 
contingent upon the availability of transmission service in order to 
designate a generating resource. In Order No. 890, the Commission 
adopted the attestation requirement as the means by which the network 
customer can make this demonstration, revising sections 29.2 and 30.2 
accordingly. We affirm this requirement, consistent with the network 
customer's obligations under section 30.7, and grant rehearing of the 
Commission's statements in this proceeding indicating that the 
attestation can instead be submitted at the time a resource designation 
is confirmed, rather than requested.
    183. We disagree with NRECA and TDU Systems that a customer 
submitting an attestation pursuant to section 29.2(viii) or 30.2 of the 
pro forma OATT must commit to purchase the resources for which 
designation is requested irrespective of the outcome of the network 
service request. Consistent with section 30.7, a network customer may 
attest that execution of a contract is contingent upon the availability 
of transmission service under Part III of the pro forma OATT. Network 
customers are therefore not required to commit to purchasing a resource 
prior to submitting a request to designate that resource.
    184. In response to Duke, we disagree that it is necessary to 
establish audit programs specifically for nonjurisdictional entities in 
order to verify attestations supporting their network resource 
designations. The Commission could audit any network customer's 
compliance with a transmission provider's OATT in a variety of 
circumstances. For instance, network customers (including 
nonjurisdictional entities) and the transmission provider's merchant 
function could be asked to support selected attestations during audits 
of the transmission providers to whom the

[[Page 39117]]

attestations were submitted. Thus, no special audit programs are 
necessary.
    185. We deny TranServ's request that the firmness of transmission 
service used to deliver short-term designations of network resources be 
verified at the time of scheduling, rather than at the time of 
designation. The time of designation is when the transmission provider 
determines that power from a network resource is deliverable to 
associated network load and, therefore, it is appropriate to require 
the verification of related transmission service at that time.
d. Undesignation of Network Resources
(1) Risk to ATC Rights
    186. In Order No. 890, the Commission clarified that a request for 
termination of a network resource that is concurrently paired with a 
request to redesignate that resource at a specific point in time will 
not result in the network customer permanently forfeiting rights to use 
that resource as a designated network resource. Any change in ATC that 
is determined by the transmission provider to have resulted from the 
temporary termination shall be posted on OASIS during this temporary 
period. The Commission directed transmission providers to develop OASIS 
functionality and, working through NAESB, business standards describing 
the procedures for submitting temporary terminations of network 
resources, including the identification of any related transmission 
service requests to be evaluated concomitantly with the request for 
temporary termination.
Requests for Rehearing and Clarification
    187. TranServ requests clarification of the sequence of events and 
requirements for releasing transmission capability as a result of a 
customer's request to undesignate one network resource and replace it 
with an alternate resource. TranServ argues that the process should be 
deemed similar in nature and treatment to a redirect of firm point-to-
point service or a network service request related to the temporary 
termination of a resource designation, which must be evaluated 
concomitantly.\125\ Although TranServ acknowledges that network 
customers should not be ``first-in-line'' for ATC made available from 
an undesignation, it contends that transmission providers should 
evaluate simultaneous transmission service requests with the knowledge 
that both resource designations will not run concurrently.
---------------------------------------------------------------------------

    \125\ Citing Order No. 890 at P 1541.
---------------------------------------------------------------------------

Commission Determination
    188. In Order No. 890, the Commission directed transmission 
providers to evaluate as a single request a request for temporary 
undesignation and related requests for transmission service. 
Transmission providers were therefore directed to develop, working 
through NAESB, business practices allowing for electronic 
identification of related transmission service requests to be evaluated 
concomitantly with the request for temporary undesignation. This was 
appropriate in light of the Commission's decision to allow network 
customers to temporarily undesignate their network resources without 
forfeiting the right to use the resource at a specified point in the 
future, provided they pair the temporary undesignation with a request 
to redesignate the resource.
    189. We find that similar procedures for permanent undesignations 
of network resources are unnecessary given the transmission provider's 
obligation to consider clustering transmission service requests at the 
request of customers. If a network customer or the transmission 
provider's merchant function wishes for the transmission provider to 
take into consideration the effect of a request to terminate a network 
resource on a concomitant request to designate another network 
resource, it may request the transmission provider to cluster the 
requests. As TranServ acknowledges, this will not alter the priority of 
the network customer or the transmission provider's merchant function 
with regard to any ATC that may be made available by undesignating the 
network resource.
(2) System Sales
    190. In Order No. 890-A, the Commission clarified the circumstances 
in which a network customer must undesignate its resources on a unit-
specific basis when making a system sale. The Commission determined 
that portions of the seller's individual network resources supporting a 
sale of system power do not need to be undesignated so long as the 
system sale is itself designated as a network resource by the buyer. 
Instead, the seller should undesignate a portion of its system equal to 
the amount of the system sale, but which is not attributed to any 
specific generators. If the system sale is not designated as a network 
resource by the buyer, the seller must submit undesignations for each 
portion of each resource supporting the third-party sale. The 
Commission stated that most, if not all, system sales sourced from 
designated network resources are themselves designated as network 
resources by the buyer and, therefore, few system sales would require 
undesignation on a unit-by-unit basis.
Requests for Clarification and Rehearing
    191. Several petitioners request rehearing and clarification of the 
requirement that generating units supporting a sale of system power 
that is not designated as a network resource by the buyer must be 
undesignated by the seller on a unit-by-unit basis.\126\ Petitioners 
generally argue that a seller should not be required to undesignate 
individual resources used to support any system sale of power.
---------------------------------------------------------------------------

    \126\ E.g., Deseret, Duke, EEI, NRECA, Pacific Northwest IOUs, 
Southern, and TranServ.
---------------------------------------------------------------------------

    192. Various petitioners argue that requiring unit-by-unit 
undesignations by sellers for system sales to buyers who use point-to-
point service to deliver the power to their load has certain 
undesirable effects, including increased cost and administrative burden 
for system sales, increased tendency of sellers to discriminate against 
point-to-point buyers, foreclosed opportunities for transactions, 
decreased liquidity, decreased revenues for sellers, decreased 
efficiency in transmission use, and further discouragement of network 
customers from making system sales that do not qualify for designation 
by the buyer, such as sales into day-ahead RTO markets.\127\
---------------------------------------------------------------------------

    \127\ E.g., Deseret, NRECA, Southern, and TAPS.
---------------------------------------------------------------------------

    193. Deseret argues that an LSE's access to system sales, rather 
than a unit-specific or hub-based sales, further assures delivery of a 
product necessary to fulfill native load requirements. Deseret contends 
that limiting the flexible undesignation of network resources 
supporting system sales to instances where the buyer designates the 
purchase as a network resource is therefore contrary to section 217 of 
the FPA. Deseret also argues that the Commission's policy unduly 
preferences buyers that designate the purchase as a network resource. 
Deseret contends that the Commission has failed to justify why system 
sales to point-to-point customers are more problematic than sales to 
network customers, even where the two buyers would be using the 
resource in the same way. Southern agrees, arguing that there is no 
support in the record for the Commission's determination regarding the 
undesignation of resources used for system sales.\128\ Duke states 
similar concerns, noting that all commenters

[[Page 39118]]

addressing the issue took the opposite position with regard to slice-
of-system sales, i.e., that in all cases the slice, not units, should 
be undesignated.
---------------------------------------------------------------------------

    \128\ Citing National Fuel Gas Supply Corp. v. FERC, 468 F.3d 
831 (D.C. Cir. 2006).
---------------------------------------------------------------------------

    194. Several petitioners challenge the Commission's statement that 
buyers taking advantage of system purchases are almost always network 
customers.\129\ Deseret explains that, in part due to the remote nature 
of its loads and the composition of the integrated transmission grid in 
its region, it is more efficient, both from a cost perspective and a 
transmission use perspective, for LSEs like itself to serve their loads 
using point-to-point service, either pursuant to an OATT or under pre-
Order No. 888 transmission arrangements. NRECA and TAPS similarly argue 
that some LSEs rely on point-to-point service instead of network 
service to serve their native loads. Pacific Northwest IOUs state that 
the majority of system purchases they make are not designated as 
network resources, due at least in part to the fact that many purchases 
are imported for short-term balancing purposes where flexibility is 
important. Southern agrees that the bulk of system purchases occur in 
the short-term markets and suggests that buyers may simply not want to 
bother with designating the purchases as network resources.
---------------------------------------------------------------------------

    \129\ E.g., Deseret, NRECA, Pacific Northwest IOUs, Southern, 
and TAPS.
---------------------------------------------------------------------------

    195. TAPS argues that the Commission's assumption that unit-
specific undesignations will rarely be required supports elimination of 
the unit-specific undesignations for all transactions. TAPS argues that 
the better course is to allow system-based undesignation for all system 
sales given that the ATC refinement efforts remain under development by 
NERC and NAESB and the Commission will have the opportunity to revisit 
the undesignation requirements once that work is complete.
    196. Some petitioners challenge the Commission's underlying 
concern, as expressed in Order No. 888 and referenced in Order No. 890-
A, that network customers may have an incentive to designate unlimited 
generation resources absent a prohibition on network resources 
including any portion of a resource that is committed for sale to a 
third party.\130\ Pacific Northwest IOUs argue that a buyer's decision 
as to whether or not to designate a system sale as a network resource 
has no bearing on the seller's incentive or disincentive to 
overdesignate network resources. Pacific Northwest IOUs contend that 
the seller will designate those resources which it believes are 
necessary to serve its load regardless of how a buyer chooses to use a 
system sale from the seller. Southern agrees, arguing that the costs 
associated with acquiring resources that meet all the requirements for 
designation serve as an appropriate economic incentive not to 
overdesignate. These petitioners note that the Commission already 
addressed concerns regarding over-designation of network resources in 
Order No. 888 by determining that ``a transmission customer, like a 
transmission provider, has an incentive not to oversubscribe its 
capacity requirements because the cost of excessive reserve margins 
will be prohibitive.'' \131\ Pacific Northwest IOUs argue that the 
procedural complexities associated with designating network resources 
provide further incentives not to overdesignate and that such 
incentives exist regardless of how a buyer uses a system purchase.
---------------------------------------------------------------------------

    \130\ E.g., EEI, Pacific Northwest IOUs, and Southern (citing 
Order No. 888 at 31,753-53; Order No. 890 at P 951).
    \131\ Quoting Order No. 888 at 31,754.
---------------------------------------------------------------------------

    197. EEI contends that a seller will charge more for a power sale 
that it cannot recall without paying a penalty, or that it cannot 
recall at all, than it will charge for a sale that it can recall. EEI 
argues that there is therefore an additional financial disincentive to 
overdesignate network resources regardless of whether a seller 
undesignates a slice of its entire system or a portion of each 
generator involved in the sale. EEI acknowledges that transmission 
service that the buyer takes in connection with a system sale might 
affect ATC associated with the transaction. EEI suggests, however, that 
the Commission address any concerns about reservations of transmission 
service by buyers of slice-of-system energy directly through 
requirements that apply to buyers rather than sellers. EEI argues that 
restricting the type of transmission service the buyer may choose with 
respect to a slice-of-system purchase violates the basic tenet of open 
access transmission service that a transmission customer has the 
freedom to take whatever transmission service is available to it under 
the pro forma OATT.
    198. Some petitioners argue that the policy of requiring resource-
specific undesignations for system sales which are not designated as 
network resources by the buyer creates implementation problems.\132\ 
These petitioners state that the entity making the sale may have no 
knowledge as to whether the sale is being used as a network resource 
and, thus, would not know which undesignation rule to apply. 
Petitioners also note confusion over what the seller's undesignation 
obligation would be were the buyer to undesignate its purchase after 
the sale is made, particularly when such activity is not known to the 
seller. E.ON U.S. requests clarification that the seller in a slice-of-
system sale will not have violated the transmission provider's OATT as 
a result of its counterparty's failure to designate or undesignate the 
network resource as required, so long as the seller treated the slice-
of-system sale appropriately by relying on the counterparty's actions 
at the commencement of the transaction. Pacific Northwest IOUs question 
whether an undesignation may be made on a project basis when the 
resource has been designated on a project basis.
---------------------------------------------------------------------------

    \132\ E.g., Duke, E.ON U.S., EEI, and Pacific Northwest IOUs.
---------------------------------------------------------------------------

    199. Several petitioners question the relevance of an off-system 
buyer's designation of a system sale as a network resource on another 
transmission provider system. Duke argues that a sale by its merchant 
function to an off-system network customer designating the purchase as 
a resource and a sale by its merchant function to an off-system power 
marketer intending to resale the power elsewhere must both be 
accomplished by scheduling point-to-point service from Duke to the 
neighboring system. Duke contends that it makes no sense to require its 
merchant to undesignate generating units used to serve one sale but not 
the other, particularly since its merchant would have no knowledge of 
subsequent changes in the designation status of the resource purchased 
by the off-system network customer.
    200. EEI states similar concern regarding the ability of a seller 
to know the sink where energy from a system power sale is delivered to 
an off-system buyer since the buyer may resell it to another customer. 
EEI contends that the seller may not have access to the OASIS of the 
transmission provider where the buyer is located and, therefore, may 
not be able to determine whether the buyer has designated the purchase 
as a network resource. EEI notes that, while the Commission directed 
NERC and NAESB to develop processes to allow transmission personnel to 
obtain access to the OASIS of other transmission providers to verify 
the firmness of transmission arrangements delivering off-system 
designated network resources, the Commission did not grant the same 
level of OASIS access to the merchant function making sales of system 
power.
    201. Pacific Northwest IOUs ask the Commission to specifically 
clarify that

[[Page 39119]]

the limitations stated in Order No. 890-A apply only to on-system sales 
and that sellers may undesignate a slice of their system used to 
support off-system sales regardless of how the buyer treats, 
designates, or uses the purchased power. Pacific Northwest IOUs state 
that this would be consistent with the Commission's apparent focus on 
on-system sales in its discussion of this issue in Order No. 890-A. In 
support of their request, Pacific Northwest IOUs state that the off-
system buyer's use of the system sale has no impact on the seller's 
transmission system, including ATC.
Commission Determination
    202. The Commission affirms the determination in Order No. 890-A 
that a network customer and the transmission provider's merchant 
function must undesignate each portion of each resource that is used to 
support a sale of system power if the buyer has not designated the 
purchase as a network resource.\133\ The requirement that network 
customers undesignate their network resources when making firm third-
party sales was first imposed in Order No. 888 to ensure that all 
designated network resources can, in fact, be called upon by the 
transmission provider to serve network load:
---------------------------------------------------------------------------

    \133\ See Order No. 890-A at P 947.

    Absent a requirement that network resources always be available 
to meet a customer's network loads, reliability of service to the 
network customer as well as to native load and other network 
customers could be affected * * *. If a network customer desires to 
enter into a firm sale from its designated network resource * * *, 
it must eliminate the appropriate resources or portions thereof from 
its designated network resources pursuant to pro forma tariff 
section 30.[134]
---------------------------------------------------------------------------

    \134\ See Order No. 888-A at 30,326.

    203. The restriction on third-party sales from designated network 
resources therefore enhances the ability of the transmission provider 
to plan and operate its system to integrate designated resources with 
the customer's loads. Without the restriction, transmission providers 
could reduce ATC by maintaining the same existing transmission 
commitments for anticipated uses of the network customer's designated 
resources even though the network customer has otherwise committed 
those same resources to other parties on a firm basis.
    204. The Commission in Order No. 890 therefore retained the 
requirement to undesignate network resources that are used to support 
firm third-party sales, reiterating that the undesignation and 
redesignation requirements work together to promote reliability, 
prevent undue discrimination, promote comparable treatment of 
customers, and increase the accuracy of ATC calculations.\135\ In Order 
No. 890-A, however, the Commission clarified that the requirement to 
undesignate on a resource-by-resource basis does not apply to system 
sales in the event the buyer has also designated the purchase as a 
network resource.\136\ This clarification was provided in response to 
complaints by various petitioners that keeping track of individual 
generating units and amounts of generation from each unit being used to 
support system sales is unduly burdensome or impossible.\137\
---------------------------------------------------------------------------

    \135\ See Order No. 890 at P 1576.
    \136\ See Order No. 890-A at P 947.
    \137\ See id. P 936-37.
---------------------------------------------------------------------------

    205. At the outset, we note that the discussion in Order No. 890-A 
appears to have caused confusion by not specifically stating that the 
exception to the requirement to undesignate capacity supporting a 
system sale on a resource-by-resource basis for system sales that are 
designated as network resources by the buyer applies only to 
transactions in which the buyer and seller are located on the same 
transmission system. As the Commission explained in Order No. 890-A, 
when a seller's network resources are used to support an on-system 
system sale, the buyer meets the informational requirements of section 
29.2(v) simply by identifying the seller's system as the resource, 
because the detailed operating characteristics for those generators 
were already provided when they were designated by the seller.\138\ The 
transmission provider is therefore already modeling power transfers 
from those resources to the seller's load. The designation of a system 
sale as a network resource by the buyer provides the transmission 
provider adequate information to also simulate power transfers from 
that resource to the buyer's load given that the transmission provider 
already has information on the system resources resulting from the 
seller's designation of the underlying resources. It is not necessary 
to require the seller to undesignate individual resources and, instead, 
the undesignation can be done on a system basis, i.e., by undesignating 
an aggregate portion of network resources equal to the amount of the 
system sale, but which is not attributed to any specific resource.
---------------------------------------------------------------------------

    \138\ See id. P 889.
---------------------------------------------------------------------------

    206. In comparison, when the buyer does not designate the system 
purchase as a resource, the buyer will not be using network service to 
take delivery of associated energy. In order for the buyer to schedule 
point-to-point service to take delivery, the transmission customer must 
identify the points of receipt and delivery for the transaction, i.e., 
the points on the host transmission system where capacity and energy 
will be received from the seller and delivered to the buyer.\139\ The 
point-to-point transmission reservation and the corresponding resource-
specific undesignation provide the transmission provider with the 
information it needs regarding location of the particular resources 
being used by the seller to source the transaction in order to model 
the effect of the transaction on its transmission system and set aside 
ATC accordingly. Without this information, transmission capacity 
associated with integrating the seller's resources with its load could 
continue to be set aside for the seller's benefit, even though the 
resources have been committed for sale to third parties on a firm 
basis.\140\
---------------------------------------------------------------------------

    \139\ See pro forma OATT, sections 1.35, 1.36 and 13.7. The 
Commission therefore stated in Order No. 890-A its expectation that 
most, if not all, system sales sources from designated network 
resources are themselves designated as network resources by the 
buyer. See Order No. 890-A at P 947. Even if this is not the case, 
as a number of petitioners argue, the Commission continues to be 
concerned that system sales from units that are not designated by 
the buyer as a network resource may impair the reliable planning and 
operation of the transmission provider's system.
    \140\ We clarify in response to the Pacific Northwest IOUs that 
the Commission's reference to the undesignation of ``units'' in 
paragraph 947 of Order No. 890-A was unintentionally narrow. The 
restriction on certain third-party sales from a designated network 
resource applies to each resource or portion thereof under section 
30.4 of the pro forma OATT.
---------------------------------------------------------------------------

    207. We therefore disagree that there is no support for 
distinguishing sales of system power that have been designated as 
network resources by the buyer and those that have not. Several 
petitioners argue that the individual undesignation of network 
resources used to supply system sales will not have an effect on ATC or 
the reliable operation of the transmission system regardless of the 
type of transmission service used to deliver the power to the buyer. 
EEI, however, acknowledges that the type of transmission service used 
by the buyer of system power may affect ATC associated with the 
transaction, and we agree. It is for that reason that the Commission 
directed transmission providers to address the effect on ATC of 
designating and undesignating network resources as part of the on-going 
NERC/NAESB ATC

[[Page 39120]]

standardization effort.\141\ This does not mean, as EEI suggests, that 
distinguishing the seller's undesignation obligation on the actions of 
the buyer undermines the buyer's access to service under the pro forma 
OATT. The buyer is free to request either network or point-to-point 
service as it believes best fits its needs in light of the resources it 
wishes to deliver.
---------------------------------------------------------------------------

    \141\ See Mandatory Reliability Standards for the Bulk-Power 
System, Order No. 693, FERC Stats. & Regs. ] 31,242, at P 1041, 
order on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
---------------------------------------------------------------------------

    208. We disagree that it is unduly burdensome or complicated to 
condition the seller's ability to make system sales from designated 
network resources on the buyer's decision to designate the purchase as 
a network resource. As explained above, the Commission has long 
prohibited firm sales to third parties from any designated network 
resource. The Commission has made an exception for system sales that 
also have been designated as a network resource by a buyer located on 
the same transmission system. This increases, not decreases, 
opportunities for network customers and the transmission providers' 
merchant functions to engage in transactions. Although the Commission 
could further expand these opportunities by eliminating the 
undesignation requirement altogether, to do so could adversely affect 
the transmission provider's ability to reliably plan and operate its 
system. Because the undesignation restrictions apply equally to all 
designated resources and are necessary to ensure that the transmission 
provider can provide reliable service to all customers, they are 
therefore consistent with our obligations under FPA section 217.
    209. We also conclude that concerns regarding the ability to verify 
or monitor the buyer's decision to designate a purchase of system power 
as a network resource are overstated in light of the clarification that 
the buyer and seller must be on the same transmission system. In Order 
No. 890, the Commission directed transmission providers, working 
through NERC, to develop OASIS functionality for the designation of 
network resources and for queries of information provided with 
designation requests.\142\ Parties to a sale of system power on the 
same transmission system will therefore have ready access to the 
treatment of the resource. Sellers also may rely on commitments made by 
the buyer to designate the purchase as a network resource.
---------------------------------------------------------------------------

    \142\ See Order No. 890 at P 1477.
---------------------------------------------------------------------------

    210. We reiterate that, if the particular ATC methodology used by a 
transmission provider allows for flexibility in implementing the 
undesignation requirements for system sales, the transmission provider 
may propose a variation to the pro forma OATT in an FPA section 205 
filing. In Order No. 890-A, the Commission stated that such requests 
should address the Commission's concern, as stated in Order No. 888, 
that network customers may have the incentive to designate unlimited 
generation resources absent a prohibition on network resources 
including any portion of a resource that is committed for sale to a 
third party.\143\ Several petitioners argue that the Commission 
mischaracterized the concern stated in Order No. 888, since there the 
Commission found that the cost of excessive reserve margins acts as a 
financial disincentive to overdesignate resources.\144\ However, the 
reason the cost of reserve margins acts as a disincentive to 
overdesignate resources is because designated resources may be used 
only for certain specified purposes. It therefore remains appropriate 
to require those seeking a variation from the pro forma OATT with 
respect to eligibility for network resource status to address the 
Commission's concern regarding overdesignation of resources. In 
addition, to the extent necessary, we clarify that the transmission 
provider should also address the Commission's concern, also stated in 
Order No. 888-A and reiterated above, that sales from designated 
network resources not impair the reliable planning and operation of the 
transmission provider's system.
---------------------------------------------------------------------------

    \143\ See Order No. 890-A at P 951.
    \144\ Quoting Order No. 888 at 31,754.
---------------------------------------------------------------------------

(3) General
    211. In response to requests for rehearing, the Commission in Order 
No. 890-A amended sections 1.26 and 30.4 of the pro forma OATT to make 
clear that network resources do not have to be undesignated before they 
are used to support the provision of reserve energy under a Commission-
approved reserve sharing agreement.
Requests for Rehearing and Clarification
    212. E.ON U.S. requests clarification that the exception to the 
requirement for undesignation for resources used to support the 
provision of reserve energy under a Commission-approved reserve sharing 
agreement also applies to back-up power sales, which E.ON U.S. 
describes as long-term, cost-based sales aimed at substituting power 
for generation that is not available for reasons such as planned or 
forced outages, curtailments, or unit de-ratings. E.ON U.S. argues 
that, like reserve sharing arrangements, back-up power sales are made 
for reliability purposes and may require the provision of energy within 
a timeframe that is too short for the seller to undesignate the 
resource. E.ON U.S. states that back-up power sales are not limited to 
per se emergency situations, but rather are necessary to avert 
emergencies.
    213. TDU Systems seek clarification of the determination in Order 
No. 890-A that network resources do not have to be undesignated before 
they are used to support the provision of reserve energy under a 
Commission-approved reserve sharing agreement. TDU Systems question 
whether the Commission intended to impose an additional approval 
process for reserve-sharing agreements being made from designated 
network resources. TDU Systems seek guidance regarding which reserve 
sharing agreements qualify as Commission-approved and what criteria a 
reserve sharing agreement must meet in order to be approved. TDU 
Systems ask whether, for example, existing Commission-approved 
bilateral interchange agreements providing for emergency and 
maintenance services between and among utilities qualify. TDU Systems 
also seek clarification that Order No. 890-A is not excluding from this 
exception interchange agreements or reserve-sharing agreements among 
non-jurisdictional entities.
Commission Determination
    214. The Commission declines to expand the categories of third-
party sales that can be made from designated network resources to 
include back-up power sales, as requested by E.ON U.S. Network 
customers and the transmission provider's merchant function are 
permitted to use designated network resources to fulfill obligations 
under reserve-sharing agreements given the particular nature of those 
transactions, which involve the need to deliver power to counterparties 
promptly during emergency situations. E.ON. U.S. acknowledges that, 
unlike reserve-sharing agreements, back-up power sales are not limited 
to emergency situations. E.ON U.S. has not justified further expanding 
the categories of third-party sales that may be made from designated 
network resources.
    215. In response to TDU Systems, we grant rehearing of Order No. 
890-A to eliminate the requirement that a reserve sharing program be 
approved by the Commission in order for a network customer or the 
transmission provider's

[[Page 39121]]

merchant function to use a designated network resource to meet its 
reserve sharing obligations.\145\ As TDU Systems explain, certain 
reserve sharing arrangements may not be subject to our jurisdiction, 
and the Commission did not intend in Order No. 890-A to establish new 
criteria for reviewing and approving reserve sharing arrangements in 
this proceeding. We clarify, however, that, for purposes of sections 
1.26 and 30.4 of the pro forma OATT, a reserve sharing program must 
limit service to the sharing of contingency reserves among the members 
for emergencies \146\ and the ability to use designated network 
resources to support reserve sharing obligations does not extend to 
other types of third-party sales. Any use of designated network 
resources for reserve sharing events would be subject to justification 
during an audit.
---------------------------------------------------------------------------

    \145\ We also revise sections 29.2(viii), 30.1 and 30.2 of the 
pro forma OATT to include references to the use of network resources 
to meet reserve sharing obligations. These tariff revisions do not 
relieve participants to an otherwise jurisdictional reserve sharing 
arrangement of any obligations they may have under FPA section 205 
to obtain Commission approval for that arrangement.
    \146\ See, e.g., Sw. Reserve Sharing Group, 83 FERC ] 61,314 
(1998), reh'g denied, 95 FERC ] 61,071 (2001).
---------------------------------------------------------------------------

5. Clarifications Related to Network Service
    216. In Order No. 890-A, the Commission reiterated that the pro 
forma OATT permits transmission customers to exclude the entirety of a 
discrete load from network service and serve such load with the 
customer's behind the meter generation and through any needed point-to-
point service, thereby reducing the network customer's load ratio 
share. In other situations, use of point-to-point service by network 
customers is in addition to network service and, therefore, does not 
serve to reduce their network load. With regard to concerns about 
insufficient transmission to serve a network customers' entire load, 
the Commission stated that it failed to understand how, under normal 
circumstances, the transmission provider has no capacity to serve a 
load that has been designated by the network customer. Once a load has 
been designated, it is the obligation of the transmission provider to 
serve that load and to plan its system so that the load can be 
accommodated in the future.
Requests for Rehearing and Clarification
    217. Pacific Northwest IOUs request clarification that there is no 
per se prohibition on a transmission customer using both point-to-point 
and network service to serve load in the same balancing authority area, 
provided that the point-to-point service is acquired in addition to the 
customer's network service payment obligation and provided that all 
other conditions for the use of point-to-point service are satisfied. 
Pacific Northwest IOUs argue that, for certain compliance and 
commercial reasons (e.g., lack of sufficient allocated network 
service), point-to-point service can be an appropriate and important 
adjunct to network service even considering the added cost of the 
point-to-point purchase. Where load ratio share obligations are not at 
issue, Pacific Northwest IOUs argue that transmission customers should 
be permitted to use both point-to-point and network service.
    218. EEI and E.ON U.S. request clarification of the Commission's 
statement in Order No. 890-A that, once a load has been designated by 
the network customer, it is the obligation of the transmission provider 
to serve that load and to plan its system so that the load can be 
accommodated in the future.\147\ These petitioners ask the Commission 
to confirm that a transmission provider has the obligation to serve and 
plan for a network customer's load only to the extent that the customer 
has designated sufficient network resources to serve that load. In 
their view, section 28.2 of the pro forma OATT requires only that a 
transmission provider plan for and construct transmission facilities 
sufficient to deliver energy from the network customer's network 
resources to meet the customer's network load on a basis comparable to 
the transmission provider's delivery of its own generating and 
purchased resources to its native load customers. EEI contends that the 
requirement of section 29.2(v) to provide projections of network 
resources further confirms that the transmission provider is only 
required to plan for and construct transmission facilities required to 
deliver the network customer's energy from resources designated or 
forecasted by the network customer. E.ON U.S. argues that failure to 
provide the requested clarification could result in transmission 
providers having to guess where facilities will need to be built in 
order to serve load.
---------------------------------------------------------------------------

    \147\ See Order No. 890-A at P 971.
---------------------------------------------------------------------------

Commission Determination
    219. The Commission clarifies, to the extent necessary, that there 
is no per se prohibition on a transmission customer using both point-
to-point and network transmission service, but that any use of point-
to-point service by a network customer does not decrease the size of 
the network customer's load for purposes of calculating its load ratio 
share payment obligations except to the extent the discrete load being 
served has been excluded in its entirety from network service. In 
response to EEI and E.ON U.S., we clarify that the Commission did not 
intend in Order No. 890-A to modify the obligation of transmission 
providers under section 28.2 of the pro forma OATT to endeavor to 
construct and place into service sufficient transfer capability to 
deliver the network customer's network resources to serve its network 
load on a basis comparable to the transmission provider's delivery of 
its own generating and purchased resources to its native load 
customers. The statement questioned by petitioners was made in response 
to requests for an exception from load ratio pricing when a particular 
network load cannot be entirely served by the transmission provider's 
system without upgrades.\148\ The Commission rejected that request, 
explaining that the transmission provider should be planning its system 
to serve its network customers' designated loads and that situations in 
which a particular designated load cannot be served are best addressed 
on a case-by-case basis. We agree, however, that the obligation of the 
transmission provider to adequately plan for the needs of its network 
customers is of course dependent on the network customer designating 
adequate network resources as well as providing information regarding 
its forecasted loads and resources, as required under section 29.2 of 
the pro forma OATT.
---------------------------------------------------------------------------

    \148\ See Order No. 890-A at P 971.
---------------------------------------------------------------------------

6. OATT Definitions
a. Non-Firm Sales
    220. In Order No. 890, the Commission adopted the following 
definition of Non-Firm Sales to identify more clearly those types of 
sales that are permitted from designated network resources: ``An energy 
sale for which receipt or delivery may be interrupted for any reason or 
no reason, without liability on the part of either the buyer or 
seller.'' The Commission concluded that it would be inappropriate to 
adopt commenter suggestions to relax the definition of a Non-Firm Sale 
to include any sale that is not otherwise firm enough to be designated 
as a network resource.
    221. In Order No. 890-A, the Commission clarified that, under 
normal circumstances, a system sale that permits curtailment without 
penalty to serve the seller's native load

[[Page 39122]]

would fall within the definition of a Non-Firm Sale since the seller 
would have the right to rely on that capacity in the event it is needed 
to serve native load, which the Commission stated is the principle 
concern in restricting sales from designated network resources to non-
firm sales. The Commission disagreed with petitioners arguing that the 
definition of Non-Firm Sales includes transactions that permit 
interruption with financial liability, whether make whole or limited to 
certain penalties, explaining that any interruption in service that 
would create liability on the part of the seller would create 
conflicting incentives regarding use of the network resource.
    222. The Commission also denied requests to amend the definition of 
Non-Firm Sales to accommodate the particular market operations of each 
RTO and ISO. The Commission acknowledged that centralized dispatch in 
those markets may very well eliminate any effect that temporary 
resource undesignations and redesignations have on dispatch or ATC 
calculations and, therefore, tailoring the rules governing the 
designation of network resources to each RTO/ISO market could be 
appropriate.
Requests for Rehearing and Clarification
    223. TAPS argues that the Commission's determinations in Order No. 
890 regarding the sales that may be made from a network resource 
without undesignation leaves the OATT in a state of confusion that will 
make compliance by transmission providers and network customers 
hazardous. TAPS contends allowing sales that are curtailable for native 
load reliability purposes, not economics, to be considered non-firm 
sales is in conflict with the plain language of the definition, which 
is strictly limited to sales that are interruptible for any or no 
reason. TAPS contends this modifies without explanation the 
Commission's clarification provided in Order No. 890 that energy sales 
that can be interrupted to maintain system reliability are considered 
firm sales.\149\
---------------------------------------------------------------------------

    \149\ Citing Order No. 890 at P 1688, 1692.
---------------------------------------------------------------------------

    224. TAPS argues that the Commission's focus in Order No. 890-A on 
the ability to curtail sales (without liability) for native or network 
load is inconsistent with the Non-Firm Sales definition and produces 
illogical results, allowing the same recallable sale to be 
simultaneously both non-firm for the seller and firm for the buyer and, 
as a result, be designated twice. At the same time, TAPS argues, the 
Commission expanded the class of sales that are neither firm nor non-
firm sales by clarifying that sales that may be interrupted for any 
reason, but with potential liability, do not fall within the definition 
of Non-Firm Sales. TAPS contends that finding a total bar on recall for 
native load economic purposes, as in the case of curtailable sales, to 
be less of a disincentive than the ability to recall for native load 
with potential liability, no matter how small, defies common sense and 
is not supported by evidence. TAPS notes that commenters at the July 30 
technical conference in this proceeding stated that sellers were moving 
away from participation in the Midwest ISO day-ahead market because of 
uncertainties about redesignation if an undesignated resource selling 
into that market were needed in real time to serve native load due to a 
real-time contingency. TAPS argues that the obligation to pay the real-
time locational marginal price (LMP) would not create a disincentive to 
recall the sale if needed for native load and, to the contrary, the 
flexibility to interrupt for any reason or no reason to meet native 
load needs is so valuable that uncertainties associated with 
undesignation deter sales into RTO markets from resources that are 
designated within and outside the RTO.
    225. TAPS contends that distinguishing between curtailable sales 
that may be made from designated network resources and fully 
interruptible sales that entail some financial liability runs counter 
to the fundamental principle that it is the nature of the delivery 
obligation, not the LD provisions, that determine whether a resource is 
sufficiently firm to qualify for designation as a network 
resource.\150\ TAPS states that Order No. 890 suggested that the 
existence of any financial liability controls whether a sale may be 
deemed a non-firm sale, regardless of the nature of the seller's 
obligation to deliver, while Order No. 890-A relies on restrictions to 
warrant exclusion of unit contingent sales from the definition of Non-
Firm Sales.\151\ TAPS argues that the Commission has failed to provide 
any consistently applied standard that network customers and 
transmission providers can use to determine whether a sale qualifies as 
a non-firm sale, much less one that conforms to the new definition.
---------------------------------------------------------------------------

    \150\ Citing id. P 1452; Dynegy Midwest Generation, Inc. v. 
Commonwealth Edison Co., 101 FERC ] 61,295, at P 1 (2002), reh'g 
dismissed as moot, 108 FERC ] 61,175 (2004).
    \151\ Citing Order No. 890-A at P 1016.
---------------------------------------------------------------------------

    226. TAPS also argues that the Commission's determinations do not 
make sense from the standpoint of freeing up ATC since sales that are 
curtailable for reliability reasons may be designated as network 
resources by both the buyer and seller. TAPS contends that dual 
designation potentially double counts resources for ATC purposes, tying 
up firm ATC potentially on a long-term basis. In contrast, TAPS 
continues, day-ahead hourly sales that can be interrupted for any or no 
reason, that have been treated as non-firm, and that are not and could 
not be designated as network resources by the buyer require 
undesignation because the potential for any financial consequence of 
interruption disqualifies them as Non-Firm Sales. TAPS argues that the 
only ATC that might be created by such undesignations would be very 
short-term. Pending the results of on-going standards development work 
with NERC and NAESB, TAPS contends it is not clear whether such short-
term undesignations will create firm capacity more useable than the 
unused non-firm capacity released by the transmission provider without 
undesignation.
    227. TAPS objects to the Commission's determination in Order No. 
890-A that issues related to sales into RTO markets should be dealt 
with in the context of individual requests for deviation from the pro 
forma OATT. Although issues pertaining to the ability of a network 
customer within an RTO to use its network resources to participate in 
the RTO's day-ahead market can be addressed in the RTO tariff, TAPS 
argues that restrictions on use by a network customer outside the RTO 
of its network resources designated on another transmission provider's 
system cannot be addressed through modifications to the RTO's tariff. 
TAPS therefore argues that the Commission can avoid discouraging 
network customers (and transmission providers) located outside an RTO 
from selling into the RTO's day-ahead market only by modifying the pro 
forma OATT.
    228. TAPS maintains that the Commission's application and 
interpretation of the Non-Firm Sales definition creates new barriers to 
precisely the type of cross-border sales the Commission is trying to 
encourage.\152\ TAPS argues that supply limitations resulting from 
applying undesignation requirements to sales into RTO day-ahead markets 
could needlessly increase prices in such markets and potentially affect 
reliability. Those located outside RTO markets, TAPS continues, would 
be most reluctant to sell into RTO markets

[[Page 39123]]

during peak conditions, when transmission is scarce and there are 
concerns about redesignation in the event the energy is needed for 
native load, thus depriving RTOs of supply offers when they need them 
the most.
---------------------------------------------------------------------------

    \152\ Citing Wis. Pub. Serv. Corp. v. Midwest Indep. 
Transmission Sys. Operator, Inc., 120 FERC ] 61,269, at P 58 (2007).
---------------------------------------------------------------------------

    229. TAPS further argues that the lack of clarity in the 
Commission's application of the Non-Firm Sales definition may 
discourage sales into organized markets even in situations where there 
is a trivial financial consequence to permissible interruptions that 
the Commission could not rationally conclude would pose any 
disincentive to recall for network load needs. TAPS states that RTO 
scheduling deadlines may result in some short period of liability for 
real-time LMPs even where market participants retain rights to change 
their bids and schedules. For example, TAPS explains, market 
participants submitting offers into MISO's real-time market from 
external generators must provide notice prior to 30 minutes before the 
operating hour in order to make effective their right to change their 
offers in the real-time market, i.e., to interrupt for any or no 
reason. TAPS states that the network customer seeking to recall its 
interruptible sale would therefore be subject to financial consequences 
during the notice period. TAPS questions whether that financial 
responsibility is sufficient to bar sales without undesignation.
    230. TAPS suggests that the Commission reassess what it was seeking 
to achieve through clarification of the non-firm sales that can be made 
from network resources without undesignation, remove the definition of 
Non-Firm Sales, and enunciate clear and consistent principles for 
discerning whether, considering the nature of the delivery obligation, 
a sale can be made from a network resource without undesignation. Such 
principles, TAPS argues, should not assume that the mere existence of 
any financial liability creates improper incentives, thereby giving 
undue emphasis to what is likely to be a minor factor affecting a 
network customer's ability to interrupt the sale in favor of native 
load, assuming the contract permits interruption for any reason or no 
reason. TAPS contends that the Commission should expressly permit 
short-term sales, such as sales into organized day-ahead and real-time 
markets, that involve no obligation to deliver (and can be entered by 
virtual traders with nothing to deliver) to be made from a network 
resource without undesignation.
    231. If the Commission retains the Non-Firm Sale definition, TAPS 
asks the Commission to construe it consistently with the firmness of 
the delivery obligation and make clear that it takes more than the 
liabilities associated with sales into day-ahead, and to eliminate any 
doubt same-day, RTO markets to disqualify such interruptible sales from 
treatment as Non-Firm Sales. Because of the importance of supporting 
short-term competitive markets, TAPS alternatively requests that the 
Commission make this clear by creating an additional exception to 
section 30.4 of the pro forma OATT, like the new exception for sales 
pursuant to Commission-approved reserve sharing agreements, to permit 
use of network resources without undesignation for day-ahead and same-
day sales that are subject to interruptions, without regard to the 
liabilities associated with such interruptions.
    232. At a bare minimum, TAPS argues, the Commission should provide 
more realistic guidelines for the level of liability it views as 
providing incentives that disqualify an interruptible sale from being 
considered a Non-Firm Sale so that concerns about avoiding potential 
tariff violations do not discourage transactions that the Commission 
intends to permit without undesignation. TAPS suggests, for example, 
that the Commission might reasonably conclude that liabilities 
restricted to notice periods applicable to the interruption of a sale 
do not trigger the need for undesignation. TAPS argues that it is 
plainly inconsistent with market realities for the Commission to assume 
that any liability for interruption of a third-party sale, no matter 
how insignificant, will create incentives incompatible with the use of 
network resources for network load.
    233. E.ON U.S. agrees with TAPS that excluding sales into the 
Midwest ISO market is a disincentive for sellers to participate in that 
market because the Commission's undesignation requirements are not 
easily adaptable to such market activity. E.ON U.S. also asks the 
Commission to revise the definition of Non-Firm Sales to include sales 
into organized RTO markets. In the alternative, E.ON U.S. requests that 
the Commission clarify that it will consider transmission providers' 
modifications to the definition of Non-Firm Sales in order to 
accommodate sales into RTO/ISO markets.
Commission Determination
    234. The Commission affirms the decision in Order No. 890-A not to 
amend the definition of Non-Firm Sales adopted in Order No. 890.\153\ 
Section 30.4 of the pro forma OATT, as amended in this order, restricts 
the operation of a network customer's designated network resources such 
that the output of those facilities does not exceed the sum of the 
network customer's designated load, non-firm sales, losses, and sales 
under a reserve sharing agreement. This prohibits the transmission 
provider or a network customer from using a designated resource for 
third-party sales that do not fall within one of the specified 
categories. At times, the Commission has generally referred to this 
prohibition as a limitation on firm third-party sales from designated 
network resources.\154\ To be more specific, network customers may not 
operate designated network resources except for those purposes 
specified in section 30.4.
---------------------------------------------------------------------------

    \153\ See Order No. 890-A at P 1016.
    \154\ See NOPR at P 422; Order No. 890 at P 1539; Order No. 890-
A at P 951.
---------------------------------------------------------------------------

    235. The limitation on the use of designated network resources is 
closely related to the restriction on the type of resources that may be 
designated for use to serve network or native load. Together, these 
rules ensure that only the appropriate amount of network resources is 
designated and, in turn, that excessive amounts of transmission 
capacity for network and native load uses are not set aside and 
therefore made unavailable to others seeking transmission service. We 
recognize that there is a trade off between the long-term structural 
efficiencies promoted by the network resource rules and the real-time 
market efficiencies that would come from allowing alternative, flexible 
use of designated network resources. In Order No. 888, the Commission 
balanced these considerations and determined that concerns regarding 
the over-designation of resources and the reliable operation of the 
system supported the more restrictive rules to which TAPS objects.
    236. In Order No. 888, the Commission explained that restricting 
the ability to designate resources only to those resources that are 
owned or committed for purchase provides a financial incentive for 
network customers and the transmission provider's merchant function not 
to oversubscribe their capacity requirements.\155\ Because a designated 
network resource must be owned or committed for purchase and may be 
used only for certain purposes, network customers and the transmission 
provider's merchant function are encouraged to designate only those 
resources that they anticipate needing to serve network load. 
Otherwise, costs

[[Page 39124]]

would be incurred to acquire resources that could go unused. These 
financial incentives are essential to ensuring just and reasonable 
transmission service to all customers since, each time a network 
resource is designated, the transmission provider sets aside ATC as 
necessary to allow that resource to be used to serve network or native 
load. If network customers and the transmission providers' merchant 
function were allowed to earn revenues from alternative sales without 
appropriate limitations, the financial disincentive to over-designate 
network resources would be diminished. This in turn could negatively 
impact other customers since an increase in the number of resource 
designations can decrease the amount of ATC that is available for 
competing uses.
---------------------------------------------------------------------------

    \155\ See Order No. 888 at 31,754.
---------------------------------------------------------------------------

    237. TAPS fails to address this broader policy consideration and, 
instead, focuses solely on the short-term benefits that may result from 
relaxing the designation rules. We agree that more flexible use of 
designated network resources could increase efficiencies in the short-
term, but conclude that such efficiencies would come at the expense of 
long-term efficiency in the operation of the transmission system. 
Allowing designated network resources to be used for additional short-
term purposes as proposed by TAPS would undermine competing incentives 
not to over-designate resources in the first place and could lead to 
transmission capacity being set aside for network and native load use 
to the detriment of other customers.\156\
---------------------------------------------------------------------------

    \156\ Because rates for network service are calculated on a 
load-ratio basis, the amount of resources designated has no impact 
on the transmission rate paid by the customer and, therefore, does 
not discourage the over-designation of resources by network 
customers.
---------------------------------------------------------------------------

    238. In light of these competing considerations, the Commission in 
Order No. 890 carefully crafted the definition of Non-Firm Sales to 
ensure that, pursuant to section 30.4, network resources are not used 
to support sales in a way that creates conflicting incentives regarding 
the designation and use of network resources.\157\ Petitioners have 
failed to demonstrate that elimination or amendment of this definition 
is either necessary or appropriate. TAPS contends that the obligation 
of a seller to pay the real-time LMP if it fails to deliver in response 
to bids in a day-ahead market may be negligible and, therefore, such 
sales should be considered non-firm for purposes of the network 
resource rules. While that obligation may be minimal in some 
circumstances, it may be substantial in others, particularly during 
conditions when sellers are most likely to want or need to recall such 
power. The sales that TAPS argues are non-firm enough to be made from a 
network resource do have financial implications, potentially creating 
disincentives to interrupt delivery if capacity is actually needed for 
native or network load, even though ATC may have otherwise been set 
aside for that use.
---------------------------------------------------------------------------

    \157\ See Order No. 890 at P 1691; Order No. 890-A at P 1017.
---------------------------------------------------------------------------

    239. We agree with TAPS, however, that the language of the 
definition does not accurately capture the clarification provided in 
Order No. 890-A that designated network resources may be used to 
support third-party sales that permit curtailment without penalty to 
serve the seller's network or native load.\158\ There the Commission 
stated that such sales fall within the definition of Non-Firm Sales 
since the seller would have the right to rely on that capacity in the 
event it is needed to serve native load. Upon further consideration, we 
conclude that such sales do not fall within the definition of Non-Firm 
Sales because they do not permit interruption for any or no reason, as 
required by the definition. We therefore grant rehearing of the 
determination that such sales fall within the definition of Non-Firm 
Sales.
---------------------------------------------------------------------------

    \158\ See Order No. 890-A at P 1016.
---------------------------------------------------------------------------

    240. We nevertheless affirm the underlying conclusion in Order No. 
890-A that designated network resources may be used to support sales 
that permit curtailment without penalty to serve the seller's native or 
network load and amend section 30.4 of the pro forma OATT to make that 
clear. As the Commission explained in Order No. 890-A, those 
transactions give the seller the right to rely on the underlying 
capacity in the event it is needed to serve native or network 
load.\159\ In Order No. 890-A, the Commission characterized this as its 
principal concern in restricting sales from designated network 
resources to non-firm sales. TAPS misconstrues this statement as 
indicating the Commission is not also concerned about competing 
incentives created by third-party sales from designated network 
resources or the effect of such sales on the calculation of ATC. As we 
explain above, that is not the case and, to the extent necessary, we 
clarify that the contractual ability of the seller to rely on capacity 
to serve native or network load is but one of the concerns underlying 
the Commission's policy restricting the type of third-party sales that 
can be made from network resources.
---------------------------------------------------------------------------

    \159\ See Order No. 890-A at P 1016. From the seller's 
perspective, then, the resource satisfies the definition of Network 
Resource in section 1.26 of the pro forma OATT because it can be 
called upon to meet the seller's load on a non-interruptible basis 
during system reliability conditions.
---------------------------------------------------------------------------

    241. We acknowledge that, under the Commission's designation 
policies, sales that may be curtailed without penalty to serve native 
or network load may be designated as a network resource by both the 
seller and the buyer.\160\ We also acknowledge that allowing these 
sales from designated network resources could be viewed as inconsistent 
with the policy considerations that cause us to otherwise limit the 
type of sales that may be made from those resources. We conclude, 
however, that this exception is necessary to ensure that the seller is 
able to access these resources during curtailment conditions, when 
power is needed by the seller to meet its load. Curtailments are 
triggered by system reliability conditions, and requiring the seller to 
redesignate a network resource in order to recall a curtailed delivery 
would impede the seller's ability to quickly respond to those 
conditions. We note that transmission providers have been directed to 
address the effect on ATC of designating and undesignating network 
resources as part of the on-going NERC/NAESB standardization 
effort.\161\ Any concerns regarding the proper modeling of designations 
involving resources that have been sold to others on a curtailable 
basis should be addressed through the NERC/NAESB process.
---------------------------------------------------------------------------

    \160\ See WPPI, 84 FERC at 61,652 (contracts curtailable by the 
seller to preserve service to native load are eligible for 
designation as a network resource).
    \161\ See Order No. 693 at P 1041.
---------------------------------------------------------------------------

    242. We disagree with TAPS that allowing sales that are curtailable 
without penalty to be supplied from designated network resources is 
inconsistent with Order No. 890. TAPS contends that the Commission 
adopted in Order No. 890 the NOPR proposal to clarify that, for the 
purposes of applying section 30.4, energy sales that can only be 
interrupted to maintain system reliability would be considered firm 
sales.\162\ Although the Commission noted that proposal in Order No. 
890, it did not specifically adopt it and, instead, simply adopted the 
proposed definition of Non-Firm Sale and incorporated that definition 
into section 30.4.\163\ Southern then requested clarification of Order 
No. 890 on this issue, asking whether sales permitting curtailment 
without penalty to serve the

[[Page 39125]]

seller's native load can be treated as non-firm sales under section 
30.4.\164\ The Commission ultimately addressed the issue, then, in 
Order No. 890-A by stating that such sales could be treated as non-firm 
sales.\165\ The Commission corrects that determination above, resolving 
the potential inconsistency cited by TAPS.
---------------------------------------------------------------------------

    \162\ See NOPR at P 462.
    \163\ Compare Order No. 890 at P 1688 with id. P 1692.
    \164\ See Order No. 890-A at P 1011.
    \165\ See id. P 1016.
---------------------------------------------------------------------------

    243. We also disagree that the Commission's treatment of sales 
curtailable without penalty to serve native or network load conflicts 
with the determination in Order No. 890-A that, under normal 
circumstances, unit contingent sales would not fall within the 
definition of a Non-Firm Sale because delivery typically can be 
interrupted only for the specific reasons identified in the underlying 
agreement.\166\ While it is true that sales curtailable without penalty 
to serve native or network load may be curtailed only for specified 
reasons, i.e., system reliability conditions, it does not follow that 
allowing those sales to be made from designated network resources 
conflicts with disallowing unit contingent sales. As we explain above, 
it is appropriate to allow curtailable sales from designated network 
resources because of the particular reliability-related situations 
giving rise to the seller's ability and need to curtail deliveries for 
the benefit of native or network load.
---------------------------------------------------------------------------

    \166\ See id. P 1016.
---------------------------------------------------------------------------

    244. We reiterate that the Commission is not insensitive to 
concerns about the effect the undesignation policies may have on RTO/
ISO markets. As the Commission explained in Order No. 890-A, RTOs and 
ISOs have adopted many variations from the pro forma OATT to facilitate 
development of their markets, with some entirely eliminating the 
designation/undesignation requirements for network resources.\167\ The 
Commission has since specifically directed the Midwest ISO to revise 
its OATT to eliminate the requirement that network resources be 
undesignated prior to selling into the Midwest ISO markets, finding 
that undesignation is not necessary to account for effects on ATC 
because those markets are centrally dispatched without regard to 
physical transmission rights.\168\
---------------------------------------------------------------------------

    \167\ See id. P 1017.
    \168\ See Midwest Indep. Sys. Operator, Inc., 123 FERC ] 61,154, 
at P 89 (2008).
---------------------------------------------------------------------------

    245. We disagree, however, that changes to the pro forma OATT are 
necessary to facilitate sales into the organized day-ahead markets from 
designated network resources located outside the RTO/ISO regions. Even 
if such sales are fully interruptible by the seller, the competing 
economic incentives that may arise from failure to deliver support the 
requirement to first undesignate the network resource prior to using it 
to support such sales. As we explain above, failing to require 
undesignation could result in the host transmission provider reducing 
ATC by maintaining the same existing transmission commitments for the 
seller's use of the designated network resource even though the seller 
is otherwise using the resource to support off-system sales.
    246. We therefore continue to believe that it is reasonable to 
require sellers to undesignate resources being used to supply third-
party sales for which there is liability for interruption except in 
those circumstances identified in section 30.4 of the pro forma OATT. 
However, we appreciate that the restrictions on the use of designated 
network resources can have a negative impact on real-time liquidity by 
limiting the flexibility of network customers and the transmission 
provider's merchant function. Since adoption of the pro forma OATT, the 
Commission has recognized that there may be circumstances in which a 
transmission provider believes that the pro forma OATT does not provide 
sufficient flexibility and, as a result, transmission providers have 
been given the opportunity to propose superior non-rate terms and 
conditions to address such concerns.\169\ We encourage network 
customers and transmission provider merchant functions to work with 
their transmission providers to explore ways to accommodate the more 
flexible use of designated network resources suggested by TAPS without 
adversely affecting other customers or the reliable operation of the 
system.
---------------------------------------------------------------------------

    \169\ Order No. 888 at 31,770.
---------------------------------------------------------------------------

b. Transmission Customer
    247. Section 1.49 of the pro forma OATT defines a Transmission 
Customer as ``Any Eligible Customer (or its Designated Agent) that (i) 
executes a Service Agreement, or (ii) requests in writing that the 
Transmission Provider file with the Commission, a proposed unexecuted 
Service Agreement to receive transmission service under Part II of the 
Tariff. This term is used in the Part I Common Service Provisions to 
include customers receiving transmission service under Part II and Part 
III of this Tariff.'' The Commission did not amend this definition in 
Order Nos. 890 or 890-A.
Requests for Rehearing and Clarification
    248. Southern requests rehearing of the Commission's definition of 
Transmission Customer to include an eligible customer with an executed 
or proper unexecuted service agreement under Part II or Part III of the 
pro forma OATT. Southern contends that the existing reference in the 
second sentence of the definition merely relates to how the term is 
used in Part I and that the proposed revision is therefore necessary to 
avoid the implication that a transmission customer does not include 
network customers in other portions of the pro forma OATT.
Commission Determination
    249. The Commission did not propose to amend the definition of 
Transmission Customer in the NOPR, nor did commenters propose such an 
amendment in response to the NOPR. As a result, the definition of 
Transmission Customer was not addressed in Order Nos. 890 or 890-A. 
Southern's request for rehearing is therefore beyond the scope of this 
proceeding.

III. Information Collection Statement

    250. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain information collection requirements imposed by 
an agency.\170\ The revisions to the information collection 
requirements for transmission providers adopted in Order No. 890 were 
approved under OMB Control Nos. 1902-0233. This order further revises 
these requirements in order to more clearly state the obligations 
imposed in Order No. 890, but does not substantively alter those 
requirements. OMB approval of this order is therefore unnecessary. 
However, the Commission will send a copy of this order to OMB for 
informational purposes only.
---------------------------------------------------------------------------

    \170\ 5 CFR 1320 (2007).
---------------------------------------------------------------------------

IV. Document Availability

    251. In addition to publishing the full text of this document in 
the Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    252. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and

[[Page 39126]]

Microsoft Word format for viewing, printing, and/or downloading. To 
access this document in eLibrary, type the docket number excluding the 
last three digits of this document in the docket number field.
    253. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or e-mail at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at 
public.referenceroom@ferc.gov.

V. Effective Date and Congressional Notification

    254. Changes to Order Nos. 890 and 890-A adopted in this order on 
rehearing and clarification will become effective September 8, 2008.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
    The following appendices will not appear in the Code of Federal 
Regulations:

Appendix A: Petitioners' Acronyms

----------------------------------------------------------------------------------------------------------------
                           Abbreviation                                           Petitioner names
----------------------------------------------------------------------------------------------------------------
APPA Joint Filers................................................  American Public Power Association, National
                                                                    Rural Electric Cooperative Association,
                                                                    Transmission Access Policy Study Group, and
                                                                    Transmission Dependent Utility Systems.
Cargill..........................................................  Cargill Power Marketers, LLC.
Deseret..........................................................  Desert Generation & Transmission Co-
                                                                    operative, Inc.
Duke.............................................................  Duke Energy Corp.
East Texas Cooperatives..........................................  East Texas Electric Cooperative, Inc.;
                                                                    Northeast Texas Electric Cooperative, Inc.;
                                                                    Sam Rayburn Generation and Electric
                                                                    Cooperative, Inc. and Tex-La Electric
                                                                    Cooperative of Texas, Inc.
EEI..............................................................  Edison Electric Institute.
Entergy..........................................................  Entergy Services, Inc.
E.ON U.S.........................................................  E.ON U.S. LLC.
East Texas Cooperatives..........................................  East Texas Electric Cooperative, Inc.;
                                                                    Northeast Texas Electric Cooperative, Inc.;
                                                                    Sam Rayburn Generation and Electric
                                                                    Cooperative, Inc. and Tex-La Electric
                                                                    Cooperative of Texas, Inc.
FMPA.............................................................  Florida Municipal Power Agency.
Florida Power....................................................  Florida Power & Light Co.
NRECA............................................................  National Rural Electric Cooperative
                                                                    Association.
NYISO............................................................  New York Independent System Operator.
Pacific Northwest IOUs...........................................  Avista Corp., Idaho Power Co., PacifiCorp,
                                                                    Portland General Electric Co., and Puget
                                                                    Sound Energy, Inc.
Schedule 20A Service Providers...................................  Bangor Hydro-Electric Co., Boston Edison Co.,
                                                                    Commonwealth Electric Co., and Cambridge
                                                                    Electric Light Co.
Sempra Global....................................................  Sempra Global.
Southern.........................................................  Southern Company Services, Inc.
TranServ.........................................................  TranServ International, Inc.
TAPS.............................................................  Transmission Access Policy Study Group.
TDU Systems......................................................  Transmission Dependent Utilities Systems.
----------------------------------------------------------------------------------------------------------------

Appendix B--RM05-17-003 & RM05-25-003 (Issued)

Pro Forma Open Access Transmission Tariff

Table of Contents

I. Common Service Provisions
    1 Definitions
    1.1 Affiliate
    1.2 Ancillary Services
    1.3 Annual Transmission Costs
    1.4 Application
    1.5 Commission
    1.6 Completed Application
    1.7 Control Area
    1.8 Curtailment
    1.9 Delivering Party
    1.10 Designated Agent
    1.11 Direct Assignment Facilities
    1.12 Eligible Customer
    1.13 Facilities Study
    1.14 Firm Point-To-Point Transmission Service
    1.15 Good Utility Practice
    1.16 Interruption
    1.17 Load Ratio Share
    1.18 Load Shedding
    1.19 Long-Term Firm Point-To-Point Transmission Service
    1.20 Native Load Customers
    1.21 Network Customer
    1.22 Network Integration Transmission Service
    1.23 Network Load
    1.24 Network Operating Agreement
    1.25 Network Operating Committee
    1.26 Network Resource
    1.27 Network Upgrades
    1.28 Non-Firm Point-To-Point Transmission Service
    1.29 Non-Firm Sale
    1.30 Open Access Same-Time Information System (OASIS)
    1.31 Part I
    1.32 Part II
    1.33 Part III
    1.34 Parties
    1.35 Point(s) of Delivery
    1.36 Point(s) of Receipt
    1.37 Point-To-Point Transmission Service
    1.38 Power Purchaser
    1.39 Pre-Confirmed Application
    1.40 Receiving Party
    1.41 Regional Transmission Group (RTG)
    1.42 Reserved Capacity
    1.43 Service Agreement
    1.44 Service Commencement Date
    1.45 Short-Term Firm Point-To-Point Transmission Service
    1.46 System Condition
    1.47 System Impact Study
    1.48 Third-Party Sale
    1.49 Transmission Customer
    1.50 Transmission Provider
    1.51 Transmission Provider's Monthly Transmission System Peak
    1.52 Transmission Service
    1.53 Transmission System
    2 Initial Allocation and Renewal Procedures
    2.1 Initial Allocation of Available Transfer Capability
    2.2 Reservation Priority For Existing Firm Service Customers
    3 Ancillary Services
    3.1 Scheduling, System Control and Dispatch Service
    3.2 Reactive Supply and Voltage Control from Generation or Other 
Sources Service
    3.3 Regulation and Frequency Response Service
    3.4 Energy Imbalance Service
    3.5 Operating Reserve--Spinning Reserve Service
    3.6 Operating Reserve--Supplemental Reserve Service
    3.7 Generator Imbalance Service
    4 Open Access Same-Time Information System (Oasis)
    5 Local Furnishing Bonds
    5.1 Transmission Providers That Own Facilities Financed by Local 
Furnishing Bonds
    5.2 Alternative Procedures for Requesting Transmission Service
    6 Reciprocity
    7 Billing and Payment
    7.1 Billing Procedure

[[Page 39127]]

    7.2 Interest on Unpaid Balances
    7.3 Customer Default
    8 Accounting for the Transmission Provider's Use of the Tariff
    8.1 Transmission Revenues
    8.2 Study Costs and Revenues
    9 Regulatory Filings
    10 Force Majeure and Indemnification
    10.1 Force Majeure
    10.2 Indemnification
    11 Creditworthiness
    12 Dispute Resolution Procedures
    12.1 Internal Dispute Resolution Procedures
    12.2 External Arbitration Procedures
    12.3 Arbitration Decisions
    12.4 Costs
    12.5 Rights Under the Federal Power Act
II. Point-To-Point Transmission Service
    13 Nature of Firm Point-To-Point Transmission Service
    13.1 Term
    13.2 Reservation Priority
    13.3 Use of Firm Transmission Service by the Transmission 
Provider
    13.4 Service Agreements
    13.5 Transmission Customer Obligations for Facility Additions or 
Redispatch Costs
    13.6 Curtailment of Firm Transmission Service
    13.7 Classification of Firm Transmission Service
    13.8 Scheduling of Firm Point-To-Point Transmission Service
    14 Nature of Non-Firm Point-To-Point Transmission Service
    14.1 Term
    14.2 Reservation Priority
    14.3 Use of Non-Firm Point-To-Point Transmission Service by the 
Transmission Provider
    14.4 Service Agreements
    14.5 Classification of Non-Firm Point-To-Point Transmission 
Service
    14.6 Scheduling of Non-Firm Point-To-Point Transmission Service
    14.7 Curtailment or Interruption of Service
    15 Service Availability
    15.1 General Conditions
    15.2 Determination of Available Transfer Capability
    15.3 Initiating Service in the Absence of an Executed Service 
Agreement
    15.4 Obligation to Provide Transmission Service that Requires 
Expansion or Modification of the Transmission System, Redispatch or 
Conditional Curtailment
    15.5 Deferral of Service
    15.6 Other Transmission Service Schedules
    15.7 Real Power Losses
    16 Transmission Customer Responsibilities
    16.1 Conditions Required of Transmission Customers
    16.2 Transmission Customer Responsibility for Third-Party 
Arrangements
    17 Procedures for Arranging Firm Point-To-Point Transmission 
Service
    17.1 Application
    17.2 Completed Application
    17.3 Deposit
    17.4 Notice of Deficient Application
    17.5 Response to a Completed Application
    17.6 Execution of Service Agreement
    17.7 Extensions for Commencement of Service
    18 Procedures for Arranging Non-Firm Point-To-Point Transmission 
Service
    18.1 Application
    18.2 Completed Application
    18.3 Reservation of Non-Firm Point-To-Point Transmission Service
    18.4 Determination of Available Transfer Capability
    19 Additional Study Procedures for Firm Point-To-Point 
Transmission Service Requests
    19.1 Notice of Need for System Impact Study
    19.2 System Impact Study Agreement and Cost Reimbursement
    19.3 System Impact Study Procedures
    19.4 Facilities Study Procedures
    19.5 Facilities Study Modifications
    19.6 Due Diligence in Completing New Facilities
    19.7 Partial Interim Service
    19.8 Expedited Procedures for New Facilities
    19.9 Penalties for Failure to Meet Study Deadlines
    20 Procedures if the Transmission Provider is Unable To Complete 
New Transmission Facilities for Firm Point-To-Point Transmission 
Service
    20.1 Delays in Construction of New Facilities
    20.2 Alternatives to the Original Facility Additions
    20.3 Refund Obligation for Unfinished Facility Additions
    21 Provisions Relating to Transmission Construction and Services 
on the Systems of Other Utilities
    21.1 Responsibility for Third-Party System Additions
    21.2 Coordination of Third-Party System Additions
    22 Changes in Service Specifications
    22.1 Modifications On a Non-Firm Basis
    22.2 Modification On a Firm Basis
    23 Sale or Assignment of Transmission Service
    23.1 Procedures for Assignment or Transfer of Service
    23.2 Limitations on Assignment or Transfer of Service
    23.3 Information on Assignment or Transfer of Service
    24 Metering and Power Factor Correction at Receipt and Delivery 
Point(s)
    24.1 Transmission Customer Obligations
    24.2 Transmission Provider Access to Metering Data
    24.3 Power Factor
    25 Compensation for Transmission Service
    26 Stranded Cost Recovery
    27 Compensation for New Facilities and Redispatch Costs
III. Network Integration Transmission Service
    28 Nature of Network Integration Transmission Service
    28.1 Scope of Service
    28.2 Transmission Provider Responsibilities
    28.3 Network Integration Transmission Service
    28.4 Secondary Service
    28.5 Real Power Losses
    28.6 Restrictions on Use of Service
    29 Initiating Service
    29.1 Condition Precedent for Receiving Service
    29.2 Application Procedures
    29.3 Technical Arrangements To Be Completed Prior to 
Commencement of Service
    29.4 Network Customer Facilities
    29.5 Filing of Service Agreement
    30 Network Resources
    30.1 Designation of Network Resources
    30.2 Designation of New Network Resources
    30.3 Termination of Network Resources
    30.4 Operation of Network Resources
    30.5 Network Customer Redispatch Obligation
    30.6 Transmission Arrangements for Network Resources Not 
Physically Interconnected With the Transmission Provider
    30.7 Limitation on Designation of Network Resources
    30.8 Use of Interface Capacity by the Network Customer
    30.9 Network Customer Owned Transmission Facilities
    31 Designation of Network Load
    31.1 Network Load
    31.2 New Network Loads Connected With the Transmission Provider
    31.3 Network Load Not Physically Interconnected With the 
Transmission Provider
    31.4 New Interconnection Points
    31.5 Changes in Service Requests
    31.6 Annual Load and Resource Information Updates
    32 Additional Study Procedures for Network Integration 
Transmission Service Requests
    32.1 Notice of Need for System Impact Study
    32.2 System Impact Study Agreement and Cost Reimbursement
    32.3 System Impact Study Procedures
    32.4 Facilities Study Procedures
    32.5 Penalties for Failure To Meet Study Deadlines
    33 Load Shedding and Curtailments
    33.1 Procedures
    33.2 Transmission Constraints
    33.3 Cost Responsibility for Relieving Transmission Constraints
    33.4 Curtailments of Scheduled Deliveries
    33.5 Allocation of Curtailments
    33.6 Load Shedding
    33.7 System Reliability
    34 Rates and Charges
    34.1 Monthly Demand Charge
    34.2 Determination of Network Customer's Monthly Network Load
    34.3 Determination of Transmission Provider's Monthly 
Transmission System Load
    34.4 Redispatch Charge
    34.5 Stranded Cost Recovery
    35 Operating Arrangements
    35.1 Operation under the Network Operating Agreement

[[Page 39128]]

    35.2 Network Operating Agreement
    35.3 Network Operating Committee
Schedule 1
    Scheduling, System Control and Dispatch Service
Schedule 2
    Reactive Supply and Voltage Control From Generation Sources 
Service
Schedule 3
    Regulation and Frequency Response Service
Schedule 4
    Energy Imbalance Service
Schedule 5
    Operating Reserve-Spinning Reserve Service
Schedule 6
    Operating Reserve-Supplemental Reserve Service
Schedule 7
    Long-Term Firm and Short-Term Firm Point-To-Point
Schedule 8
    Non-Firm Point-To-Point Transmission Service
Schedule 9
    Generator Imbalance Service
Attachment A
    Form of Service Agreement for Firm Point-To-Point Transmission 
Service
Attachment A-1
    Form of Service Agreement for the Resale, Reassignment or 
Transfer of Point-To-Point Transmission Service
Attachment B
    Form oF Service Agreement for Non-Firm Point-To-Point 
Transmission Service
Attachment C
    Methodology to Assess Available Transfer Capability
Attachment D
    Methodology for Completing a System Impact Study
Attachment E
    Index Of Point-To-Point Transmission Service Customers
Attachment F
    Service Agreement for Network Integration Transmission Service
Attachment G
    Network Operating Agreement
Attachment H
    Annual Transmission Revenue Requirement for Network Integration 
Transmission Service
Attachment I
    Index of Network Integration Transmission Service Customers
Attachment J
    Procedures for Addressing Parallel Flows
Attachment K
    Transmission Planning Process
Attachment L
    Creditworthiness Procedures

I. Common Service Provisions

1 Definitions

1.1 Affiliate
    With respect to a corporation, partnership or other entity, each 
such other corporation, partnership or other entity that directly or 
indirectly, through one or more intermediaries, controls, is controlled 
by, or is under common control with, such corporation, partnership or 
other entity.
1.2 Ancillary Services
    Those services that are necessary to support the transmission of 
capacity and energy from resources to loads while maintaining reliable 
operation of the Transmission Provider's Transmission System in 
accordance with Good Utility Practice.
1.3 Annual Transmission Costs
    The total annual cost of the Transmission System for purposes of 
Network Integration Transmission Service shall be the amount specified 
in Attachment H until amended by the Transmission Provider or modified 
by the Commission.
1.4 Application
    A request by an Eligible Customer for transmission service pursuant 
to the provisions of the Tariff.
1.5 Commission
    The Federal Energy Regulatory Commission.
1.6 Completed Application
    An Application that satisfies all of the information and other 
requirements of the Tariff, including any required deposit.
1.7 Control Area
    An electric power system or combination of electric power systems 
to which a common automatic generation control scheme is applied in 
order to:
    1. Match, at all times, the power output of the generators within 
the electric power system(s) and capacity and energy purchased from 
entities outside the electric power system(s), with the load within the 
electric power system(s);
    2. Maintain scheduled interchange with other Control Areas, within 
the limits of Good Utility Practice;
    3. maintain the frequency of the electric power system(s) within 
reasonable limits in accordance with Good Utility Practice; and
    4. provide sufficient generating capacity to maintain operating 
reserves in accordance with Good Utility Practice.
1.8 Curtailment
    A reduction in firm or non-firm transmission service in response to 
a transfer capability shortage as a result of system reliability 
conditions.
1.9 Delivering Party
    The entity supplying capacity and energy to be transmitted at 
Point(s) of Receipt.
1.10 Designated Agent
    Any entity that performs actions or functions on behalf of the 
Transmission Provider, an Eligible Customer, or the Transmission 
Customer required under the Tariff.
1.11 Direct Assignment Facilities
    Facilities or portions of facilities that are constructed by the 
Transmission Provider for the sole use/benefit of a particular 
Transmission Customer requesting service under the Tariff. Direct 
Assignment Facilities shall be specified in the Service Agreement that 
governs service to the Transmission Customer and shall be subject to 
Commission approval.
1.12 Eligible Customer
    i. Any electric utility (including the Transmission Provider and 
any power marketer), Federal power marketing agency, or any person 
generating electric energy for sale for resale is an Eligible Customer 
under the Tariff. Electric energy sold or produced by such entity may 
be electric energy produced in the United States, Canada or Mexico. 
However, with respect to transmission service that the Commission is 
prohibited from ordering by section 212(h) of the Federal Power Act, 
such entity is eligible only if the service is provided pursuant to a 
state requirement that the Transmission Provider offer the unbundled 
transmission service, or pursuant to a voluntary offer of such service 
by the Transmission Provider.
    ii. Any retail customer taking unbundled transmission service 
pursuant to a state requirement that the Transmission Provider offer 
the transmission service, or pursuant to a voluntary offer of such 
service by the Transmission Provider, is an Eligible Customer under the 
Tariff.
1.13 Facilities Study
    An engineering study conducted by the Transmission Provider to 
determine the required modifications to the Transmission Provider's 
Transmission System, including the cost and scheduled completion date 
for such modifications, that will be required to provide the requested 
transmission service.
1.14 Firm Point-To-Point Transmission Service
    Transmission Service under this Tariff that is reserved and/or 
scheduled

[[Page 39129]]

between specified Points of Receipt and Delivery pursuant to Part II of 
this Tariff.
1.15 Good Utility Practice
    Any of the practices, methods and acts engaged in or approved by a 
significant portion of the electric utility industry during the 
relevant time period, or any of the practices, methods and acts which, 
in the exercise of reasonable judgment in light of the facts known at 
the time the decision was made, could have been expected to accomplish 
the desired result at a reasonable cost consistent with good business 
practices, reliability, safety and expedition. Good Utility Practice is 
not intended to be limited to the optimum practice, method, or act to 
the exclusion of all others, but rather to be acceptable practices, 
methods, or acts generally accepted in the region, including those 
practices required by Federal Power Act section 215(a)(4).
1.16 Interruption
    A reduction in non-firm transmission service due to economic 
reasons pursuant to section 14.7.
1.17 Load Ratio Share
    Ratio of a Transmission Customer's Network Load to the Transmission 
Provider's total load computed in accordance with sections 34.2 and 
34.3 of the Network Integration Transmission Service under Part III of 
the Tariff and calculated on a rolling twelve month basis.
1.18 Load Shedding
    The systematic reduction of system demand by temporarily decreasing 
load in response to transmission system or area capacity shortages, 
system instability, or voltage control considerations under Part III of 
the Tariff.
1.19 Long-Term Firm Point-To-Point Transmission Service
    Firm Point-To-Point Transmission Service under Part II of the 
Tariff with a term of one year or more.
1.20 Native Load Customers
    The wholesale and retail power customers of the Transmission 
Provider on whose behalf the Transmission Provider, by statute, 
franchise, regulatory requirement, or contract, has undertaken an 
obligation to construct and operate the Transmission Provider's system 
to meet the reliable electric needs of such customers.
1.21 Network Customer
    An entity receiving transmission service pursuant to the terms of 
the Transmission Provider's Network Integration Transmission Service 
under Part III of the Tariff.
1.22 Network Integration Transmission Service
    The transmission service provided under Part III of the Tariff.
1.23 Network Load
    The load that a Network Customer designates for Network Integration 
Transmission Service under Part III of the Tariff. The Network 
Customer's Network Load shall include all load served by the output of 
any Network Resources designated by the Network Customer. A Network 
Customer may elect to designate less than its total load as Network 
Load but may not designate only part of the load at a discrete Point of 
Delivery. Where an Eligible Customer has elected not to designate a 
particular load at discrete points of delivery as Network Load, the 
Eligible Customer is responsible for making separate arrangements under 
Part II of the Tariff for any Point-To-Point Transmission Service that 
may be necessary for such non-designated load.
1.24 Network Operating Agreement
    An executed agreement that contains the terms and conditions under 
which the Network Customer shall operate its facilities and the 
technical and operational matters associated with the implementation of 
Network Integration Transmission Service under Part III of the Tariff.
1.25 Network Operating Committee
    A group made up of representatives from the Network Customer(s) and 
the Transmission Provider established to coordinate operating criteria 
and other technical considerations required for implementation of 
Network Integration Transmission Service under Part III of this Tariff.
1.26 Network Resource
    Any designated generating resource owned, purchased or leased by a 
Network Customer under the Network Integration Transmission Service 
Tariff. Network Resources do not include any resource, or any portion 
thereof, that is committed for sale to third parties or otherwise 
cannot be called upon to meet the Network Customer's Network Load on a 
non-interruptible basis, except for purposes of fulfilling obligations 
under a reserve sharing program.
1.27 Network Upgrades
    Modifications or additions to transmission-related facilities that 
are integrated with and support the Transmission Provider's overall 
Transmission System for the general benefit of all users of such 
Transmission System.
1.28 Non-Firm Point-To-Point Transmission Service
    Point-To-Point Transmission Service under the Tariff that is 
reserved and scheduled on an as-available basis and is subject to 
Curtailment or Interruption as set forth in Section 14.7 under Part II 
of this Tariff. Non-Firm Point-To-Point Transmission Service is 
available on a stand-alone basis for periods ranging from one hour to 
one month.
1.29 Non-Firm Sale
    An energy sale for which receipt or delivery may be interrupted for 
any reason or no reason, without liability on the part of either the 
buyer or seller.
1.30 Open Access Same-Time Information System (OASIS)
    The information system and standards of conduct contained in Part 
37 of the Commission's regulations and all additional requirements 
implemented by subsequent Commission orders dealing with OASIS.
1.31 Part I
    Tariff Definitions and Common Service Provisions contained in 
Sections 2 through 12.
1.32 Part II
    Tariff Sections 13 through 27 pertaining to Point-To-Point 
Transmission Service in conjunction with the applicable Common Service 
Provisions of Part I and appropriate Schedules and Attachments.
1.33 Part III
    Tariff Sections 28 through 35 pertaining to Network Integration 
Transmission Service in conjunction with the applicable Common Service 
Provisions of Part I and appropriate Schedules and Attachments.
1.34 Parties
    The Transmission Provider and the Transmission Customer receiving 
service under the Tariff.
1.35 Point(s) of Delivery
    Point(s) on the Transmission Provider's Transmission System where 
capacity and energy transmitted by the Transmission Provider will be 
made available to the Receiving Party under Part II of the Tariff. The 
Point(s) of Delivery shall be specified in the Service Agreement for 
Long-Term Firm Point-To-Point Transmission Service.

[[Page 39130]]

1.36 Point(s) of Receipt
    Point(s) of interconnection on the Transmission Provider's 
Transmission System where capacity and energy will be made available to 
the Transmission Provider by the Delivering Party under Part II of the 
Tariff. The Point(s) of Receipt shall be specified in the Service 
Agreement for Long-Term Firm Point-To-Point Transmission Service.
1.37 Point-To-Point Transmission Service
    The reservation and transmission of capacity and energy on either a 
firm or non-firm basis from the Point(s) of Receipt to the Point(s) of 
Delivery under Part II of the Tariff.
1.38 Power Purchaser
    The entity that is purchasing the capacity and energy to be 
transmitted under the Tariff.
1.39 Pre-Confirmed Application
    An Application that commits the Eligible Customer to execute a 
Service Agreement upon receipt of notification that the Transmission 
Provider can provide the requested Transmission Service.
1.40 Receiving Party
    The entity receiving the capacity and energy transmitted by the 
Transmission Provider to Point(s) of Delivery.
1.41 Regional Transmission Group (RTG)
    A voluntary organization of transmission owners, transmission users 
and other entities approved by the Commission to efficiently coordinate 
transmission planning (and expansion), operation and use on a regional 
(and interregional) basis.
1.42 Reserved Capacity
    The maximum amount of capacity and energy that the Transmission 
Provider agrees to transmit for the Transmission Customer over the 
Transmission Provider's Transmission System between the Point(s) of 
Receipt and the Point(s) of Delivery under Part II of the Tariff. 
Reserved Capacity shall be expressed in terms of whole megawatts on a 
sixty (60) minute interval (commencing on the clock hour) basis.
1.43 Service Agreement
    The initial agreement and any amendments or supplements thereto 
entered into by the Transmission Customer and the Transmission Provider 
for service under the Tariff.
1.44 Service Commencement Date
    The date the Transmission Provider begins to provide service 
pursuant to the terms of an executed Service Agreement, or the date the 
Transmission Provider begins to provide service in accordance with 
Section 15.3 or Section 29.1 under the Tariff.
1.45 Short-Term Firm Point-To-Point Transmission Service
    Firm Point-To-Point Transmission Service under Part II of the 
Tariff with a term of less than one year.
1.46 System Condition
    A specified condition on the Transmission Provider's system or on a 
neighboring system, such as a constrained transmission element or 
flowgate, that may trigger Curtailment of Long-Term Firm Point-to-Point 
Transmission Service using the curtailment priority pursuant to Section 
13.6. Such conditions must be identified in the Transmission Customer's 
Service Agreement.
1.47 System Impact Study
    An assessment by the Transmission Provider of (i) the adequacy of 
the Transmission System to accommodate a request for either Firm Point-
To-Point Transmission Service or Network Integration Transmission 
Service and (ii) whether any additional costs may be incurred in order 
to provide transmission service.
1.48 Third-Party Sale
    Any sale for resale in interstate commerce to a Power Purchaser 
that is not designated as part of Network Load under the Network 
Integration Transmission Service.
1.49 Transmission Customer
    Any Eligible Customer (or its Designated Agent) that (i) executes a 
Service Agreement, or (ii) requests in writing that the Transmission 
Provider file with the Commission, a proposed unexecuted Service 
Agreement to receive transmission service under Part II of the Tariff. 
This term is used in the Part I Common Service Provisions to include 
customers receiving transmission service under Part II and Part III of 
this Tariff.
1.50 Transmission Provider
    The public utility (or its Designated Agent) that owns, controls, 
or operates facilities used for the transmission of electric energy in 
interstate commerce and provides transmission service under the Tariff.
1.51 Transmission Provider's Monthly Transmission System Peak
    The maximum firm usage of the Transmission Provider's Transmission 
System in a calendar month.
1.52 Transmission Service
    Point-To-Point Transmission Service provided under Part II of the 
Tariff on a firm and non-firm basis.
1.53 Transmission System
    The facilities owned, controlled or operated by the Transmission 
Provider that are used to provide transmission service under Part II 
and Part III of the Tariff.

2 Initial Allocation and Renewal Procedures

2.1 Initial Allocation of Available Transfer Capability
    For purposes of determining whether existing capability on the 
Transmission Provider's Transmission System is adequate to accommodate 
a request for firm service under this Tariff, all Completed 
Applications for new firm transmission service received during the 
initial sixty (60) day period commencing with the effective date of the 
Tariff will be deemed to have been filed simultaneously. A lottery 
system conducted by an independent party shall be used to assign 
priorities for Completed Applications filed simultaneously. All 
Completed Applications for firm transmission service received after the 
initial sixty (60) day period shall be assigned a priority pursuant to 
Section 13.2.
2.2 Reservation Priority for Existing Firm Service Customers
    Existing firm service customers (wholesale requirements and 
transmission-only, with a contract term of five years or more), have 
the right to continue to take transmission service from the 
Transmission Provider when the contract expires, rolls over or is 
renewed. This transmission reservation priority is independent of 
whether the existing customer continues to purchase capacity and energy 
from the Transmission Provider or elects to purchase capacity and 
energy from another supplier. If at the end of the contract term, the 
Transmission Provider's Transmission System cannot accommodate all of 
the requests for transmission service, the existing firm service 
customer must agree to accept a contract term at least equal to a 
competing request by any new Eligible Customer and to pay the current 
just and reasonable rate, as approved by the Commission, for such 
service; provided

[[Page 39131]]

that, the firm service customer shall have a right of first refusal at 
the end of such service only if the new contract is for five years or 
more. The existing firm service customer must provide notice to the 
Transmission Provider whether it will exercise its right of first 
refusal no less than one year prior to the expiration date of its 
transmission service agreement. This transmission reservation priority 
for existing firm service customers is an ongoing right that may be 
exercised at the end of all firm contract terms of five years or 
longer. Service agreements subject to a right of first refusal entered 
into prior to [the date of the Transmission Provider's filing adopting 
the reformed rollover language herein in compliance with Order No. 890] 
or associated with a transmission service request received prior to 
July 13, 2007, unless terminated, will become subject to the five year/
one year requirement on the first rollover date after [the date of the 
Transmission Provider's filing adopting the reformed rollover language 
herein in compliance with Order No. 890]; provided that, the one-year 
notice requirement shall apply to such service agreements with five 
years or more left in their terms as of the [date of the Transmission 
Provider's filing adopting the reformed rollover language herein in 
compliance with Order No. 890].

3 Ancillary Services

    Ancillary Services are needed with transmission service to maintain 
reliability within and among the Control Areas affected by the 
transmission service. The Transmission Provider is required to provide 
(or offer to arrange with the local Control Area operator as discussed 
below), and the Transmission Customer is required to purchase, the 
following Ancillary Services (i) Scheduling, System Control and 
Dispatch, and (ii) Reactive Supply and Voltage Control from Generation 
or Other Sources.
    The Transmission Provider is required to offer to provide (or offer 
to arrange with the local Control Area operator as discussed below) the 
following Ancillary Services only to the Transmission Customer serving 
load within the Transmission Provider's Control Area (i) Regulation and 
Frequency Response, (ii) Energy Imbalance, (iii) Operating Reserve--
Spinning, and (iv) Operating Reserve--Supplemental. The Transmission 
Customer serving load within the Transmission Provider's Control Area 
is required to acquire these Ancillary Services, whether from the 
Transmission Provider, from a third party, or by self-supply.
    The Transmission Provider is required to provide (or offer to 
arrange with the local Control Area Operator as discussed below), to 
the extent it is physically feasible to do so from its resources or 
from resources available to it, Generator Imbalance Service when 
Transmission Service is used to deliver energy from a generator located 
within its Control Area. The Transmission Customer using Transmission 
Service to deliver energy from a generator located within the 
Transmission Provider's Control Area is required to acquire Generator 
Imbalance Service, whether from the Transmission Provider, from a third 
party, or by self-supply.
    The Transmission Customer may not decline the Transmission 
Provider's offer of Ancillary Services unless it demonstrates that it 
has acquired the Ancillary Services from another source. The 
Transmission Customer must list in its Application which Ancillary 
Services it will purchase from the Transmission Provider. A 
Transmission Customer that exceeds its firm reserved capacity at any 
Point of Receipt or Point of Delivery or an Eligible Customer that uses 
Transmission Service at a Point of Receipt or Point of Delivery that it 
has not reserved is required to pay for all of the Ancillary Services 
identified in this section that were provided by the Transmission 
Provider associated with the unreserved service. The Transmission 
Customer or Eligible Customer will pay for Ancillary Services based on 
the amount of transmission service it used but did not reserve.
    If the Transmission Provider is a public utility providing 
transmission service but is not a Control Area operator, it may be 
unable to provide some or all of the Ancillary Services. In this case, 
the Transmission Provider can fulfill its obligation to provide 
Ancillary Services by acting as the Transmission Customer's agent to 
secure these Ancillary Services from the Control Area operator. The 
Transmission Customer may elect to (i) have the Transmission Provider 
act as its agent, (ii) secure the Ancillary Services directly from the 
Control Area operator, or (iii) secure the Ancillary Services 
(discussed in Schedules 3, 4, 5, 6 and 9) from a third party or by 
self-supply when technically feasible.
    The Transmission Provider shall specify the rate treatment and all 
related terms and conditions in the event of an unauthorized use of 
Ancillary Services by the Transmission Customer.
    The specific Ancillary Services, prices and/or compensation methods 
are described on the Schedules that are attached to and made a part of 
the Tariff. Three principal requirements apply to discounts for 
Ancillary Services provided by the Transmission Provider in conjunction 
with its provision of transmission service as follows: (1) Any offer of 
a discount made by the Transmission Provider must be announced to all 
Eligible Customers solely by posting on the OASIS, (2) any customer-
initiated requests for discounts (including requests for use by one's 
wholesale merchant or an Affiliate's use) must occur solely by posting 
on the OASIS, and (3) once a discount is negotiated, details must be 
immediately posted on the OASIS. A discount agreed upon for an 
Ancillary Service must be offered for the same period to all Eligible 
Customers on the Transmission Provider's system. Sections 3.1 through 
3.7 below list the seven Ancillary Services.
3.1 Scheduling, System Control and Dispatch Service
    The rates and/or methodology are described in Schedule 1.
3.2 Reactive Supply and Voltage Control From Generation or Other 
Sources Service
    The rates and/or methodology are described in Schedule 2.
3.3 Regulation and Frequency Response Service
    Where applicable the rates and/or methodology are described in 
Schedule 3.
3.4 Energy Imbalance Service
    Where applicable the rates and/or methodology are described in 
Schedule 4.
3.5 Operating Reserve--Spinning Reserve Service
    Where applicable the rates and/or methodology are described in 
Schedule 5.
3.6 Operating Reserve--Supplemental Reserve Service
    Where applicable the rates and/or methodology are described in 
Schedule 6.
3.7 Generator Imbalance Service
    Where applicable the rates and/or methodology are described in 
Schedule 9.

4 Open Access Same-Time Information System (OASIS)

    Terms and conditions regarding Open Access Same-Time Information 
System and standards of conduct are set forth in 18 CFR part 37 of the 
Commission's

[[Page 39132]]

regulations (Open Access Same-Time Information System and Standards of 
Conduct for Public Utilities) and 18 CFR part 38 of the Commission's 
regulations (Business Practice Standards and Communication Protocols 
for Public Utilities). In the event available transfer capability as 
posted on the OASIS is insufficient to accommodate a request for firm 
transmission service, additional studies may be required as provided by 
this Tariff pursuant to Sections 19 and 32.
    The Transmission Provider shall post on OASIS and its public Web 
site an electronic link to all rules, standards and practices that (i) 
relate to the terms and conditions of transmission service, (ii) are 
not subject to a North American Energy Standards Board (NAESB) 
copyright restriction, and (iii) are not otherwise included in this 
Tariff. The Transmission Provider shall post on OASIS and on its public 
Web site an electronic link to the NAESB Web site where any rules, 
standards and practices that are protected by copyright may be 
obtained. The Transmission Provider shall also post on OASIS and its 
public Web site an electronic link to a statement of the process by 
which the Transmission Provider shall add, delete or otherwise modify 
the rules, standards and practices that are not included in this 
tariff. Such process shall set forth the means by which the 
Transmission Provider shall provide reasonable advance notice to 
Transmission Customers and Eligible Customers of any such additions, 
deletions or modifications, the associated effective date, and any 
additional implementation procedures that the Transmission Provider 
deems appropriate.

5 Local Furnishing Bonds

5.1 Transmission Providers That Own Facilities Financed by Local 
Furnishing Bonds
    This provision is applicable only to Transmission Providers that 
have financed facilities for the local furnishing of electric energy 
with tax-exempt bonds, as described in Section 142(f) of the Internal 
Revenue Code (``local furnishing bonds''). Notwithstanding any other 
provision of this Tariff, the Transmission Provider shall not be 
required to provide transmission service to any Eligible Customer 
pursuant to this Tariff if the provision of such transmission service 
would jeopardize the tax-exempt status of any local furnishing bond(s) 
used to finance the Transmission Provider's facilities that would be 
used in providing such transmission service.
5.2 Alternative Procedures for Requesting Transmission Service
    (i) If the Transmission Provider determines that the provision of 
transmission service requested by an Eligible Customer would jeopardize 
the tax-exempt status of any local furnishing bond(s) used to finance 
its facilities that would be used in providing such transmission 
service, it shall advise the Eligible Customer within thirty (30) days 
of receipt of the Completed Application.
    (ii) If the Eligible Customer thereafter renews its request for the 
same transmission service referred to in (i) by tendering an 
application under Section 211 of the Federal Power Act, the 
Transmission Provider, within ten (10) days of receiving a copy of the 
Section 211 application, will waive its rights to a request for service 
under Section 213(a) of the Federal Power Act and to the issuance of a 
proposed order under Section 212(c) of the Federal Power Act. The 
Commission, upon receipt of the Transmission Provider's waiver of its 
rights to a request for service under Section 213(a) of the Federal 
Power Act and to the issuance of a proposed order under Section 212(c) 
of the Federal Power Act, shall issue an order under Section 211 of the 
Federal Power Act. Upon issuance of the order under Section 211 of the 
Federal Power Act, the Transmission Provider shall be required to 
provide the requested transmission service in accordance with the terms 
and conditions of this Tariff.

6 Reciprocity

    A Transmission Customer receiving transmission service under this 
Tariff agrees to provide comparable transmission service that it is 
capable of providing to the Transmission Provider on similar terms and 
conditions over facilities used for the transmission of electric energy 
owned, controlled or operated by the Transmission Customer and over 
facilities used for the transmission of electric energy owned, 
controlled or operated by the Transmission Customer's corporate 
Affiliates. A Transmission Customer that is a member of, or takes 
transmission service from, a power pool, Regional Transmission Group, 
Regional Transmission Organization (RTO), Independent System Operator 
(ISO) or other transmission organization approved by the Commission for 
the operation of transmission facilities also agrees to provide 
comparable transmission service to the transmission-owning members of 
such power pool and Regional Transmission Group, RTO, ISO or other 
transmission organization on similar terms and conditions over 
facilities used for the transmission of electric energy owned, 
controlled or operated by the Transmission Customer and over facilities 
used for the transmission of electric energy owned, controlled or 
operated by the Transmission Customer's corporate Affiliates.
    This reciprocity requirement applies not only to the Transmission 
Customer that obtains transmission service under the Tariff, but also 
to all parties to a transaction that involves the use of transmission 
service under the Tariff, including the power seller, buyer and any 
intermediary, such as a power marketer. This reciprocity requirement 
also applies to any Eligible Customer that owns, controls or operates 
transmission facilities that uses an intermediary, such as a power 
marketer, to request transmission service under the Tariff. If the 
Transmission Customer does not own, control or operate transmission 
facilities, it must include in its Application a sworn statement of one 
of its duly authorized officers or other representatives that the 
purpose of its Application is not to assist an Eligible Customer to 
avoid the requirements of this provision.

7 Billing and Payment

7.1 Billing Procedure
    Within a reasonable time after the first day of each month, the 
Transmission Provider shall submit an invoice to the Transmission 
Customer for the charges for all services furnished under the Tariff 
during the preceding month. The invoice shall be paid by the 
Transmission Customer within twenty (20) days of receipt. All payments 
shall be made in immediately available funds payable to the 
Transmission Provider, or by wire transfer to a bank named by the 
Transmission Provider.
7.2 Interest on Unpaid Balances
    Interest on any unpaid amounts (including amounts placed in escrow) 
shall be calculated in accordance with the methodology specified for 
interest on refunds in the Commission's regulations at 18 CFR 
35.19a(a)(2)(iii). Interest on delinquent amounts shall be calculated 
from the due date of the bill to the date of payment. When payments are 
made by mail, bills shall be considered as having been paid on the date 
of receipt by the Transmission Provider.
7.3 Customer Default
    In the event the Transmission Customer fails, for any reason other 
than a billing dispute as described below, to

[[Page 39133]]

make payment to the Transmission Provider on or before the due date as 
described above, and such failure of payment is not corrected within 
thirty (30) calendar days after the Transmission Provider notifies the 
Transmission Customer to cure such failure, a default by the 
Transmission Customer shall be deemed to exist. Upon the occurrence of 
a default, the Transmission Provider may initiate a proceeding with the 
Commission to terminate service but shall not terminate service until 
the Commission so approves any such request. In the event of a billing 
dispute between the Transmission Provider and the Transmission 
Customer, the Transmission Provider will continue to provide service 
under the Service Agreement as long as the Transmission Customer (i) 
continues to make all payments not in dispute, and (ii) pays into an 
independent escrow account the portion of the invoice in dispute, 
pending resolution of such dispute. If the Transmission Customer fails 
to meet these two requirements for continuation of service, then the 
Transmission Provider may provide notice to the Transmission Customer 
of its intention to suspend service in sixty (60) days, in accordance 
with Commission policy.

8 Accounting for the Transmission Provider's Use of the Tariff

    The Transmission Provider shall record the following amounts, as 
outlined below.
8.1 Transmission Revenues
    Include in a separate operating revenue account or subaccount the 
revenues it receives from Transmission Service when making Third-Party 
Sales under Part II of the Tariff.
8.2 Study Costs and Revenues
    Include in a separate transmission operating expense account or 
subaccount, costs properly chargeable to expense that are incurred to 
perform any System Impact Studies or Facilities Studies which the 
Transmission Provider conducts to determine if it must construct new 
transmission facilities or upgrades necessary for its own uses, 
including making Third-Party Sales under the Tariff; and include in a 
separate operating revenue account or subaccount the revenues received 
for System Impact Studies or Facilities Studies performed when such 
amounts are separately stated and identified in the Transmission 
Customer's billing under the Tariff.

9 Regulatory Filings

    Nothing contained in the Tariff or any Service Agreement shall be 
construed as affecting in any way the right of the Transmission 
Provider to unilaterally make application to the Commission for a 
change in rates, terms and conditions, charges, classification of 
service, Service Agreement, rule or regulation under Section 205 of the 
Federal Power Act and pursuant to the Commission's rules and 
regulations promulgated thereunder.
    Nothing contained in the Tariff or any Service Agreement shall be 
construed as affecting in any way the ability of any Party receiving 
service under the Tariff to exercise its rights under the Federal Power 
Act and pursuant to the Commission's rules and regulations promulgated 
thereunder.

10 Force Majeure and Indemnification

10.1 Force Majeure
    An event of Force Majeure means any act of God, labor disturbance, 
act of the public enemy, war, insurrection, riot, fire, storm or flood, 
explosion, breakage or accident to machinery or equipment, any 
Curtailment, order, regulation or restriction imposed by governmental 
military or lawfully established civilian authorities, or any other 
cause beyond a Party's control. A Force Majeure event does not include 
an act of negligence or intentional wrongdoing. Neither the 
Transmission Provider nor the Transmission Customer will be considered 
in default as to any obligation under this Tariff if prevented from 
fulfilling the obligation due to an event of Force Majeure. However, a 
Party whose performance under this Tariff is hindered by an event of 
Force Majeure shall make all reasonable efforts to perform its 
obligations under this Tariff.
10.2 Indemnification
    The Transmission Customer shall at all times indemnify, defend, and 
save the Transmission Provider harmless from, any and all damages, 
losses, claims, including claims and actions relating to injury to or 
death of any person or damage to property, demands, suits, recoveries, 
costs and expenses, court costs, attorney fees, and all other 
obligations by or to third parties, arising out of or resulting from 
the Transmission Provider's performance of its obligations under this 
Tariff on behalf of the Transmission Customer, except in cases of 
negligence or intentional wrongdoing by the Transmission Provider.

11 Creditworthiness

    The Transmission Provider will specify its Creditworthiness 
procedures in Attachment L.

12 Dispute Resolution Procedures

12.1 Internal Dispute Resolution Procedures
    Any dispute between a Transmission Customer and the Transmission 
Provider involving transmission service under the Tariff (excluding 
applications for rate changes or other changes to the Tariff, or to any 
Service Agreement entered into under the Tariff, which shall be 
presented directly to the Commission for resolution) shall be referred 
to a designated senior representative of the Transmission Provider and 
a senior representative of the Transmission Customer for resolution on 
an informal basis as promptly as practicable. In the event the 
designated representatives are unable to resolve the dispute within 
thirty (30) days [or such other period as the Parties may agree upon] 
by mutual agreement, such dispute may be submitted to arbitration and 
resolved in accordance with the arbitration procedures set forth below.
12.2 External Arbitration Procedures
    Any arbitration initiated under the Tariff shall be conducted 
before a single neutral arbitrator appointed by the Parties. If the 
Parties fail to agree upon a single arbitrator within ten (10) days of 
the referral of the dispute to arbitration, each Party shall choose one 
arbitrator who shall sit on a three-member arbitration panel. The two 
arbitrators so chosen shall within twenty (20) days select a third 
arbitrator to chair the arbitration panel. In either case, the 
arbitrators shall be knowledgeable in electric utility matters, 
including electric transmission and bulk power issues, and shall not 
have any current or past substantial business or financial 
relationships with any party to the arbitration (except prior 
arbitration). The arbitrator(s) shall provide each of the Parties an 
opportunity to be heard and, except as otherwise provided herein, shall 
generally conduct the arbitration in accordance with the Commercial 
Arbitration Rules of the American Arbitration Association and any 
applicable Commission regulations or Regional Transmission Group rules.
12.3 Arbitration Decisions
    Unless otherwise agreed, the arbitrator(s) shall render a decision 
within ninety (90) days of appointment and shall notify the Parties in 
writing of

[[Page 39134]]

such decision and the reasons therefor. The arbitrator(s) shall be 
authorized only to interpret and apply the provisions of the Tariff and 
any Service Agreement entered into under the Tariff and shall have no 
power to modify or change any of the above in any manner. The decision 
of the arbitrator(s) shall be final and binding upon the Parties, and 
judgment on the award may be entered in any court having jurisdiction. 
The decision of the arbitrator(s) may be appealed solely on the grounds 
that the conduct of the arbitrator(s), or the decision itself, violated 
the standards set forth in the Federal Arbitration Act and/or the 
Administrative Dispute Resolution Act. The final decision of the 
arbitrator must also be filed with the Commission if it affects 
jurisdictional rates, terms and conditions of service or facilities.
12.4 Costs
    Each Party shall be responsible for its own costs incurred during 
the arbitration process and for the following costs, if applicable:
    1. The cost of the arbitrator chosen by the Party to sit on the 
three member panel and one half of the cost of the third arbitrator 
chosen; or
    2. One half the cost of the single arbitrator jointly chosen by the 
Parties.
12.5 Rights Under The Federal Power Act
    Nothing in this section shall restrict the rights of any party to 
file a Complaint with the Commission under relevant provisions of the 
Federal Power Act.

II. Point-To-Point Transmission Service

Preamble

    The Transmission Provider will provide Firm and Non-Firm Point-To-
Point Transmission Service pursuant to the applicable terms and 
conditions of this Tariff. Point-To-Point Transmission Service is for 
the receipt of capacity and energy at designated Point(s) of Receipt 
and the transfer of such capacity and energy to designated Point(s) of 
Delivery.

 13 Nature of Firm Point-To-Point Transmission Service

13.1 Term
    The minimum term of Firm Point-To-Point Transmission Service shall 
be one day and the maximum term shall be specified in the Service 
Agreement.
13.2 Reservation Priority
    (i) Long-Term Firm Point-To-Point Transmission Service shall be 
available on a first-come, first-served basis, i.e., in the 
chronological sequence in which each Transmission Customer has 
requested service.
    (ii) Reservations for Short-Term Firm Point-To-Point Transmission 
Service will be conditional based upon the length of the requested 
transaction or reservation. However, Pre-Confirmed Applications for 
Short-Term Point-To-Point Transmission Service will receive priority 
over earlier-submitted requests that are not Pre-Confirmed and that 
have equal or shorter duration. Among requests or reservations with the 
same duration and, as relevant, pre-confirmation status (pre-confirmed, 
confirmed, or not confirmed), priority will be given to an Eligible 
Customer's request or reservation that offers the highest price, 
followed by the date and time of the request or reservation.
    (iii) If the Transmission System becomes oversubscribed, requests 
for service may preempt competing reservations up to the following 
conditional reservation deadlines: One day before the commencement of 
daily service, one week before the commencement of weekly service, and 
one month before the commencement of monthly service. Before the 
conditional reservation deadline, if available transfer capability is 
insufficient to satisfy all requests and reservations, an Eligible 
Customer with a reservation for shorter term service or equal duration 
service and lower price has the right of first refusal to match any 
longer term request or equal duration service with a higher price 
before losing its reservation priority. A longer term competing request 
for Short-Term Firm Point-To-Point Transmission Service will be granted 
if the Eligible Customer with the right of first refusal does not agree 
to match the competing request within 24 hours (or earlier if necessary 
to comply with the scheduling deadlines provided in section 13.8) from 
being notified by the Transmission Provider of a longer-term competing 
request for Short-Term Firm Point-To-Point Transmission Service. When a 
longer duration request preempts multiple shorter duration 
reservations, the shorter duration reservations shall have simultaneous 
opportunities to exercise the right of first refusal. Duration, price 
and time of response will be used to determine the order by which the 
multiple shorter duration reservations will be able to exercise the 
right of first refusal. After the conditional reservation deadline, 
service will commence pursuant to the terms of Part II of the Tariff.
    (iv) Firm Point-To-Point Transmission Service will always have a 
reservation priority over Non-Firm Point-To-Point Transmission Service 
under the Tariff. All Long-Term Firm Point-To-Point Transmission 
Service will have equal reservation priority with Native Load Customers 
and Network Customers. Reservation priorities for existing firm service 
customers are provided in Section 2.2.
13.3 Use of Firm Transmission Service by the Transmission Provider
    The Transmission Provider will be subject to the rates, terms and 
conditions of Part II of the Tariff when making Third-Party Sales under 
(i) agreements executed on or after September 8, 2008 or (ii) 
agreements executed prior to the aforementioned date that the 
Commission requires to be unbundled, by the date specified by the 
Commission. The Transmission Provider will maintain separate 
accounting, pursuant to Section 8, for any use of the Point-To-Point 
Transmission Service to make Third-Party Sales.
13.4 Service Agreements
    The Transmission Provider shall offer a standard form Firm Point-
To-Point Transmission Service Agreement (Attachment A) to an Eligible 
Customer when it submits a Completed Application for Long-Term Firm 
Point-To-Point Transmission Service. The Transmission Provider shall 
offer a standard form Firm Point-To-Point Transmission Service 
Agreement (Attachment A) to an Eligible Customer when it first submits 
a Completed Application for Short-Term Firm Point-To-Point Transmission 
Service pursuant to the Tariff. Executed Service Agreements that 
contain the information required under the Tariff shall be filed with 
the Commission in compliance with applicable Commission regulations. An 
Eligible Customer that uses Transmission Service at a Point of Receipt 
or Point of Delivery that it has not reserved and that has not executed 
a Service Agreement will be deemed, for purposes of assessing any 
appropriate charges and penalties, to have executed the appropriate 
Service Agreement. The Service Agreement shall, when applicable, 
specify any conditional curtailment options selected by the 
Transmission Customer. Where the Service Agreement contains conditional 
curtailment options and is subject to a biennial reassessment as 
described in Section 15.4, the Transmission Provider shall provide the 
Transmission Customer notice of any changes to the curtailment 
conditions no less than 90 days prior to the date for imposition of new 
curtailment conditions. Concurrent with such notice, the Transmission 
Provider shall provide the Transmission

[[Page 39135]]

Customer with the reassessment study and a narrative description of the 
study, including the reasons for changes to the number of hours per 
year or System Conditions under which conditional curtailment may 
occur.
13.5 Transmission Customer Obligations for Facility Additions or 
Redispatch Costs
    In cases where the Transmission Provider determines that the 
Transmission System is not capable of providing Firm Point-To-Point 
Transmission Service without (1) degrading or impairing the reliability 
of service to Native Load Customers, Network Customers and other 
Transmission Customers taking Firm Point-To-Point Transmission Service, 
or (2) interfering with the Transmission Provider's ability to meet 
prior firm contractual commitments to others, the Transmission Provider 
will be obligated to expand or upgrade its Transmission System pursuant 
to the terms of Section 15.4. The Transmission Customer must agree to 
compensate the Transmission Provider for any necessary transmission 
facility additions pursuant to the terms of Section 27. To the extent 
the Transmission Provider can relieve any system constraint by 
redispatching the Transmission Provider's resources, it shall do so, 
provided that the Eligible Customer agrees to compensate the 
Transmission Provider pursuant to the terms of Section 27 and agrees to 
either (i) compensate the Transmission Provider for any necessary 
transmission facility additions or (ii) accept the service subject to a 
biennial reassessment by the Transmission Provider of redispatch 
requirements as described in Section 15.4. Any redispatch, Network 
Upgrade or Direct Assignment Facilities costs to be charged to the 
Transmission Customer on an incremental basis under the Tariff will be 
specified in the Service Agreement prior to initiating service.
13.6 Curtailment of Firm Transmission Service
    In the event that a Curtailment on the Transmission Provider's 
Transmission System, or a portion thereof, is required to maintain 
reliable operation of such system and the system directly and 
indirectly interconnected with Transmission Provider's Transmission 
System, Curtailments will be made on a non-discriminatory basis to the 
transaction(s) that effectively relieve the constraint. Transmission 
Provider may elect to implement such Curtailments pursuant to the 
Transmission Loading Relief procedures specified in Attachment J. If 
multiple transactions require Curtailment, to the extent practicable 
and consistent with Good Utility Practice, the Transmission Provider 
will curtail service to Network Customers and Transmission Customers 
taking Firm Point-To-Point Transmission Service on a basis comparable 
to the curtailment of service to the Transmission Provider's Native 
Load Customers. All Curtailments will be made on a non-discriminatory 
basis, however, Non-Firm Point-To-Point Transmission Service shall be 
subordinate to Firm Transmission Service. Long-Term Firm Point-To-Point 
Service subject to conditions described in Section 15.4 shall be 
curtailed with secondary service in cases where the conditions apply, 
but otherwise will be curtailed on a pro rata basis with other Firm 
Transmission Service. When the Transmission Provider determines that an 
electrical emergency exists on its Transmission System and implements 
emergency procedures to Curtail Firm Transmission Service, the 
Transmission Customer shall make the required reductions upon request 
of the Transmission Provider. However, the Transmission Provider 
reserves the right to Curtail, in whole or in part, any Firm 
Transmission Service provided under the Tariff when, in the 
Transmission Provider's sole discretion, an emergency or other 
unforeseen condition impairs or degrades the reliability of its 
Transmission System. The Transmission Provider will notify all affected 
Transmission Customers in a timely manner of any scheduled 
Curtailments.
13.7 Classification of Firm Transmission Service
    (a) The Transmission Customer taking Firm Point-To-Point 
Transmission Service may (1) change its Receipt and Delivery Points to 
obtain service on a non-firm basis consistent with the terms of Section 
22.1 or (2) request a modification of the Points of Receipt or Delivery 
on a firm basis pursuant to the terms of Section 22.2.
    (b) The Transmission Customer may purchase transmission service to 
make sales of capacity and energy from multiple generating units that 
are on the Transmission Provider's Transmission System. For such a 
purchase of transmission service, the resources will be designated as 
multiple Points of Receipt, unless the multiple generating units are at 
the same generating plant in which case the units would be treated as a 
single Point of Receipt.
    (c) The Transmission Provider shall provide firm deliveries of 
capacity and energy from the Point(s) of Receipt to the Point(s) of 
Delivery. Each Point of Receipt at which firm transmission capacity is 
reserved by the Transmission Customer shall be set forth in the Firm 
Point-To-Point Service Agreement for Long-Term Firm Transmission 
Service along with a corresponding capacity reservation associated with 
each Point of Receipt. Points of Receipt and corresponding capacity 
reservations shall be as mutually agreed upon by the Parties for Short-
Term Firm Transmission. Each Point of Delivery at which firm transfer 
capability is reserved by the Transmission Customer shall be set forth 
in the Firm Point-To-Point Service Agreement for Long-Term Firm 
Transmission Service along with a corresponding capacity reservation 
associated with each Point of Delivery. Points of Delivery and 
corresponding capacity reservations shall be as mutually agreed upon by 
the Parties for Short-Term Firm Transmission. The greater of either (1) 
the sum of the capacity reservations at the Point(s) of Receipt, or (2) 
the sum of the capacity reservations at the Point(s) of Delivery shall 
be the Transmission Customer's Reserved Capacity. The Transmission 
Customer will be billed for its Reserved Capacity under the terms of 
Schedule 7. The Transmission Customer may not exceed its firm capacity 
reserved at each Point of Receipt and each Point of Delivery except as 
otherwise specified in Section 22. The Transmission Provider shall 
specify the rate treatment and all related terms and conditions 
applicable in the event that a Transmission Customer (including Third-
Party Sales by the Transmission Provider) exceeds its firm reserved 
capacity at any Point of Receipt or Point of Delivery or uses 
Transmission Service at a Point of Receipt or Point of Delivery that it 
has not reserved.
13.8 Scheduling of Firm Point-To-Point Transmission Service
    Schedules for the Transmission Customer's Firm Point-To-Point 
Transmission Service must be submitted to the Transmission Provider no 
later than 10 a.m. [or a reasonable time that is generally accepted in 
the region and is consistently adhered to by the Transmission Provider] 
of the day prior to commencement of such service. Schedules submitted 
after 10 a.m. will be accommodated, if practicable. Hour-to-hour 
schedules of any capacity and energy that is to be delivered must be 
stated in increments of 1,000 kW per hour [or a reasonable increment 
that is generally accepted in the region and is consistently adhered to 
by the Transmission Provider]. Transmission Customers within the 
Transmission Provider's service area with multiple requests for 
Transmission Service at a

[[Page 39136]]

Point of Receipt, each of which is under 1,000 kW per hour, may 
consolidate their service requests at a common point of receipt into 
units of 1,000 kW per hour for scheduling and billing purposes. 
Scheduling changes will be permitted up to twenty (20) minutes [or a 
reasonable time that is generally accepted in the region and is 
consistently adhered to by the Transmission Provider] before the start 
of the next clock hour provided that the Delivering Party and Receiving 
Party also agree to the schedule modification. The Transmission 
Provider will furnish to the Delivering Party's system operator, hour-
to-hour schedules equal to those furnished by the Receiving Party 
(unless reduced for losses) and shall deliver the capacity and energy 
provided by such schedules. Should the Transmission Customer, 
Delivering Party or Receiving Party revise or terminate any schedule, 
such party shall immediately notify the Transmission Provider, and the 
Transmission Provider shall have the right to adjust accordingly the 
schedule for capacity and energy to be received and to be delivered.

14 Nature of Non-Firm Point-To-Point Transmission Service

14.1 Term
    Non-Firm Point-To-Point Transmission Service will be available for 
periods ranging from one (1) hour to one (1) month. However, a 
Purchaser of Non-Firm Point-To-Point Transmission Service will be 
entitled to reserve a sequential term of service (such as a sequential 
monthly term without having to wait for the initial term to expire 
before requesting another monthly term) so that the total time period 
for which the reservation applies is greater than one month, subject to 
the requirements of Section 18.3.
14.2 Reservation Priority
    Non-Firm Point-To-Point Transmission Service shall be available 
from transfer capability in excess of that needed for reliable service 
to Native Load Customers, Network Customers and other Transmission 
Customers taking Long-Term and Short-Term Firm Point-To-Point 
Transmission Service. A higher priority will be assigned first to 
requests or reservations with a longer duration of service and second 
to Pre-Confirmed Applications. In the event the Transmission System is 
constrained, competing requests of the same Pre-Confirmation status and 
equal duration will be prioritized based on the highest price offered 
by the Eligible Customer for the Transmission Service. Eligible 
Customers that have already reserved shorter term service have the 
right of first refusal to match any longer term request before being 
preempted. A longer term competing request for Non-Firm Point-To-Point 
Transmission Service will be granted if the Eligible Customer with the 
right of first refusal does not agree to match the competing request: 
(a) Immediately for hourly Non-Firm Point-To-Point Transmission Service 
after notification by the Transmission Provider; and, (b) within 24 
hours (or earlier if necessary to comply with the scheduling deadlines 
provided in section 14.6) for Non-Firm Point-To-Point Transmission 
Service other than hourly transactions after notification by the 
Transmission Provider. Transmission service for Network Customers from 
resources other than designated Network Resources will have a higher 
priority than any Non-Firm Point-To-Point Transmission Service. Non-
Firm Point-To-Point Transmission Service over secondary Point(s) of 
Receipt and Point(s) of Delivery will have the lowest reservation 
priority under the Tariff.
14.3 Use of Non-Firm Point-To-Point Transmission Service by the 
Transmission Provider
    The Transmission Provider will be subject to the rates, terms and 
conditions of Part II of the Tariff when making Third-Party Sales under 
(i) agreements executed on or after September 8, 2008 or (ii) 
agreements executed prior to the aforementioned date that the 
Commission requires to be unbundled, by the date specified by the 
Commission. The Transmission Provider will maintain separate 
accounting, pursuant to Section 8, for any use of Non-Firm Point-To-
Point Transmission Service to make Third-Party Sales.
14.4 Service Agreements
    The Transmission Provider shall offer a standard form Non-Firm 
Point-To-Point Transmission Service Agreement (Attachment B) to an 
Eligible Customer when it first submits a Completed Application for 
Non-Firm Point-To-Point Transmission Service pursuant to the Tariff. 
Executed Service Agreements that contain the information required under 
the Tariff shall be filed with the Commission in compliance with 
applicable Commission regulations.
14.5 Classification of Non-Firm Point-To-Point Transmission Service
    Non-Firm Point-To-Point Transmission Service shall be offered under 
terms and conditions contained in Part II of the Tariff. The 
Transmission Provider undertakes no obligation under the Tariff to plan 
its Transmission System in order to have sufficient capacity for Non-
Firm Point-To-Point Transmission Service. Parties requesting Non-Firm 
Point-To-Point Transmission Service for the transmission of firm power 
do so with the full realization that such service is subject to 
availability and to Curtailment or Interruption under the terms of the 
Tariff. The Transmission Provider shall specify the rate treatment and 
all related terms and conditions applicable in the event that a 
Transmission Customer (including Third-Party Sales by the Transmission 
Provider) exceeds its non-firm capacity reservation. Non-Firm Point-To-
Point Transmission Service shall include transmission of energy on an 
hourly basis and transmission of scheduled short-term capacity and 
energy on a daily, weekly or monthly basis, but not to exceed one 
month's reservation for any one Application, under Schedule 8.
14.6 Scheduling of Non-Firm Point-To-Point Transmission Service
    Schedules for Non-Firm Point-To-Point Transmission Service must be 
submitted to the Transmission Provider no later than 2 p.m. [or a 
reasonable time that is generally accepted in the region and is 
consistently adhered to by the Transmission Provider] of the day prior 
to commencement of such service. Schedules submitted after 2 p.m. will 
be accommodated, if practicable. Hour-to-hour schedules of energy that 
is to be delivered must be stated in increments of 1,000 kW per hour 
[or a reasonable increment that is generally accepted in the region and 
is consistently adhered to by the Transmission Provider]. Transmission 
Customers within the Transmission Provider's service area with multiple 
requests for Transmission Service at a Point of Receipt, each of which 
is under 1,000 kW per hour, may consolidate their schedules at a common 
Point of Receipt into units of 1,000 kW per hour. Scheduling changes 
will be permitted up to twenty (20) minutes [or a reasonable time that 
is generally accepted in the region and is consistently adhered to by 
the Transmission Provider] before the start of the next clock hour 
provided that the Delivering Party and Receiving Party also agree to 
the schedule modification. The Transmission Provider will furnish to 
the Delivering Party's system operator, hour-to-hour schedules equal to 
those furnished by the Receiving Party (unless reduced for losses) and 
shall deliver the capacity and energy provided by such schedules. 
Should the Transmission Customer, Delivering

[[Page 39137]]

Party or Receiving Party revise or terminate any schedule, such party 
shall immediately notify the Transmission Provider, and the 
Transmission Provider shall have the right to adjust accordingly the 
schedule for capacity and energy to be received and to be delivered.
14.7 Curtailment or Interruption of Service
    The Transmission Provider reserves the right to Curtail, in whole 
or in part, Non-Firm Point-To-Point Transmission Service provided under 
the Tariff for reliability reasons when an emergency or other 
unforeseen condition threatens to impair or degrade the reliability of 
its Transmission System or the systems directly and indirectly 
interconnected with Transmission Provider's Transmission System. 
Transmission Provider may elect to implement such Curtailments pursuant 
to the Transmission Loading Relief procedures specified in Attachment 
J. The Transmission Provider reserves the right to Interrupt, in whole 
or in part, Non-Firm Point-To-Point Transmission Service provided under 
the Tariff for economic reasons in order to accommodate (1) a request 
for Firm Transmission Service, (2) a request for Non-Firm Point-To-
Point Transmission Service of greater duration, (3) a request for Non-
Firm Point-To-Point Transmission Service of equal duration with a 
higher price, (4) transmission service for Network Customers from non-
designated resources, or (5) transmission service for Firm Point-to-
Point Transmission Service during conditional curtailment periods as 
described in Section 15.4. The Transmission Provider also will 
discontinue or reduce service to the Transmission Customer to the 
extent that deliveries for transmission are discontinued or reduced at 
the Point(s) of Receipt. Where required, Curtailments or Interruptions 
will be made on a non-discriminatory basis to the transaction(s) that 
effectively relieve the constraint, however, Non-Firm Point-To-Point 
Transmission Service shall be subordinate to Firm Transmission Service. 
If multiple transactions require Curtailment or Interruption, to the 
extent practicable and consistent with Good Utility Practice, 
Curtailments or Interruptions will be made to transactions of the 
shortest term (e.g., hourly non-firm transactions will be Curtailed or 
Interrupted before daily non-firm transactions and daily non-firm 
transactions will be Curtailed or Interrupted before weekly non-firm 
transactions). Transmission service for Network Customers from 
resources other than designated Network Resources will have a higher 
priority than any Non-Firm Point-To-Point Transmission Service under 
the Tariff. Non-Firm Point-To-Point Transmission Service over secondary 
Point(s) of Receipt and Point(s) of Delivery will have a lower priority 
than any Non-Firm Point-To-Point Transmission Service under the Tariff. 
The Transmission Provider will provide advance notice of Curtailment or 
Interruption where such notice can be provided consistent with Good 
Utility Practice.

15 Service Availability

15.1 General Conditions
    The Transmission Provider will provide Firm and Non-Firm Point-To-
Point Transmission Service over, on or across its Transmission System 
to any Transmission Customer that has met the requirements of Section 
16.
15.2 Determination of Available Transfer Capability
    A description of the Transmission Provider's specific methodology 
for assessing available transfer capability posted on the Transmission 
Provider's OASIS (Section 4) is contained in Attachment C of the 
Tariff. In the event sufficient transfer capability may not exist to 
accommodate a service request, the Transmission Provider will respond 
by performing a System Impact Study.
15.3 Initiating Service in the Absence of an Executed Service Agreement
    If the Transmission Provider and the Transmission Customer 
requesting Firm or Non-Firm Point-To-Point Transmission Service cannot 
agree on all the terms and conditions of the Point-To-Point Service 
Agreement, the Transmission Provider shall file with the Commission, 
within thirty (30) days after the date the Transmission Customer 
provides written notification directing the Transmission Provider to 
file, an unexecuted Point-To-Point Service Agreement containing terms 
and conditions deemed appropriate by the Transmission Provider for such 
requested Transmission Service. The Transmission Provider shall 
commence providing Transmission Service subject to the Transmission 
Customer agreeing to (i) compensate the Transmission Provider at 
whatever rate the Commission ultimately determines to be just and 
reasonable, and (ii) comply with the terms and conditions of the Tariff 
including posting appropriate security deposits in accordance with the 
terms of Section 17.3.
15.4 Obligation To Provide Transmission Service That Requires Expansion 
or Modification of the Transmission System, Redispatch or Conditional 
Curtailment
    (a) If the Transmission Provider determines that it cannot 
accommodate a Completed Application for Firm Point-To-Point 
Transmission Service because of insufficient capability on its 
Transmission System, the Transmission Provider will use due diligence 
to expand or modify its Transmission System to provide the requested 
Firm Transmission Service, consistent with its planning obligations in 
Attachment K, provided the Transmission Customer agrees to compensate 
the Transmission Provider for such costs pursuant to the terms of 
Section 27. The Transmission Provider will conform to Good Utility 
Practice and its planning obligations in Attachment K, in determining 
the need for new facilities and in the design and construction of such 
facilities. The obligation applies only to those facilities that the 
Transmission Provider has the right to expand or modify.
    (b) If the Transmission Provider determines that it cannot 
accommodate a Completed Application for Long-Term Firm Point-To-Point 
Transmission Service because of insufficient capability on its 
Transmission System, the Transmission Provider will use due diligence 
to provide redispatch from its own resources until (i) Network Upgrades 
are completed for the Transmission Customer, (ii) the Transmission 
Provider determines through a biennial reassessment that it can no 
longer reliably provide the redispatch, or (iii) the Transmission 
Customer terminates the service because of redispatch changes resulting 
from the reassessment. A Transmission Provider shall not unreasonably 
deny self-provided redispatch or redispatch arranged by the 
Transmission Customer from a third party resource.
    (c) If the Transmission Provider determines that it cannot 
accommodate a Completed Application for Long-Term Firm Point-To-Point 
Transmission Service because of insufficient capability on its 
Transmission System, the Transmission Provider will offer the Firm 
Transmission Service with the condition that the Transmission Provider 
may curtail the service prior to the curtailment of other Firm 
Transmission Service for a specified number of hours per year or during 
System Condition(s). If the Transmission Customer accepts the service, 
the Transmission Provider will use due diligence to provide the service 
until (i) Network Upgrades are

[[Page 39138]]

completed for the Transmission Customer, (ii) the Transmission Provider 
determines through a biennial reassessment that it can no longer 
reliably provide such service, or (iii) the Transmission Customer 
terminates the service because the reassessment increased the number of 
hours per year of conditional curtailment or changed the System 
Conditions.
15.5 Deferral of Service
    The Transmission Provider may defer providing service until it 
completes construction of new transmission facilities or upgrades 
needed to provide Firm Point-To-Point Transmission Service whenever the 
Transmission Provider determines that providing the requested service 
would, without such new facilities or upgrades, impair or degrade 
reliability to any existing firm services.
15.6 Other Transmission Service Schedules
    Eligible Customers receiving transmission service under other 
agreements on file with the Commission may continue to receive 
transmission service under those agreements until such time as those 
agreements may be modified by the Commission.
15.7 Real Power Losses
    Real Power Losses are associated with all transmission service. The 
Transmission Provider is not obligated to provide Real Power Losses. 
The Transmission Customer is responsible for replacing losses 
associated with all transmission service as calculated by the 
Transmission Provider. The applicable Real Power Loss factors are as 
follows: [To be completed by the Transmission Provider].

16 Transmission Customer Responsibilities

16.1 Conditions Required of Transmission Customers
    Point-To-Point Transmission Service shall be provided by the 
Transmission Provider only if the following conditions are satisfied by 
the Transmission Customer:
    (a) The Transmission Customer has pending a Completed Application 
for service;
    (b) The Transmission Customer meets the creditworthiness criteria 
set forth in Section 11;
    (c) The Transmission Customer will have arrangements in place for 
any other transmission service necessary to effect the delivery from 
the generating source to the Transmission Provider prior to the time 
service under Part II of the Tariff commences;
    (d) The Transmission Customer agrees to pay for any facilities 
constructed and chargeable to such Transmission Customer under Part II 
of the Tariff, whether or not the Transmission Customer takes service 
for the full term of its reservation;
    (e) The Transmission Customer provides the information required by 
the Transmission Provider's planning process established in Attachment 
K; and
    (f) The Transmission Customer has executed a Point-To-Point Service 
Agreement or has agreed to receive service pursuant to Section 15.3.
16.2 Transmission Customer Responsibility for Third-Party Arrangements
    Any scheduling arrangements that may be required by other electric 
systems shall be the responsibility of the Transmission Customer 
requesting service. The Transmission Customer shall provide, unless 
waived by the Transmission Provider, notification to the Transmission 
Provider identifying such systems and authorizing them to schedule the 
capacity and energy to be transmitted by the Transmission Provider 
pursuant to Part II of the Tariff on behalf of the Receiving Party at 
the Point of Delivery or the Delivering Party at the Point of Receipt. 
However, the Transmission Provider will undertake reasonable efforts to 
assist the Transmission Customer in making such arrangements, including 
without limitation, providing any information or data required by such 
other electric system pursuant to Good Utility Practice.

17 Procedures for Arranging Firm Point-To-Point Transmission Service

17.1 Application
    A request for Firm Point-To-Point Transmission Service for periods 
of one year or longer must contain a written Application to: 
[Transmission Provider Name and Address], at least sixty (60) days in 
advance of the calendar month in which service is to commence. The 
Transmission Provider will consider requests for such firm service on 
shorter notice when feasible. Requests for firm service for periods of 
less than one year shall be subject to expedited procedures that shall 
be negotiated between the Parties within the time constraints provided 
in Section 17.5. All Firm Point-To-Point Transmission Service requests 
should be submitted by entering the information listed below on the 
Transmission Provider's OASIS. Prior to implementation of the 
Transmission Provider's OASIS, a Completed Application may be submitted 
by (i) transmitting the required information to the Transmission 
Provider by telefax, or (ii) providing the information by telephone 
over the Transmission Provider's time recorded telephone line. Each of 
these methods will provide a time-stamped record for establishing the 
priority of the Application.
17.2 Completed Application
    A Completed Application shall provide all of the information 
included in 18 CFR 2.20 including but not limited to the following:
    (i) The identity, address, telephone number and facsimile number of 
the entity requesting service;
    (ii) A statement that the entity requesting service is, or will be 
upon commencement of service, an Eligible Customer under the Tariff;
    (iii) The location of the Point(s) of Receipt and Point(s) of 
Delivery and the identities of the Delivering Parties and the Receiving 
Parties;
    (iv) The location of the generating facility(ies) supplying the 
capacity and energy and the location of the load ultimately served by 
the capacity and energy transmitted. The Transmission Provider will 
treat this information as confidential except to the extent that 
disclosure of this information is required by this Tariff, by 
regulatory or judicial order, for reliability purposes pursuant to Good 
Utility Practice or pursuant to RTG transmission information sharing 
agreements. The Transmission Provider shall treat this information 
consistent with the standards of conduct contained in Part 37 of the 
Commission's regulations;
    (v) A description of the supply characteristics of the capacity and 
energy to be delivered;
    (vi) An estimate of the capacity and energy expected to be 
delivered to the Receiving Party;
    (vii) The Service Commencement Date and the term of the requested 
Transmission Service;
    (viii) The transmission capacity requested for each Point of 
Receipt and each Point of Delivery on the Transmission Provider's 
Transmission System; customers may combine their requests for service 
in order to satisfy the minimum transmission capacity requirement;
    (ix) A statement indicating that, if the Eligible Customer submits 
a Pre-Confirmed Application, the Eligible Customer will execute a 
Service Agreement upon receipt of notification that the Transmission 
Provider can provide the requested Transmission Service; and

[[Page 39139]]

    (x) Any additional information required by the Transmission 
Provider's planning process established in Attachment K.
    The Transmission Provider shall treat this information consistent 
with the standards of conduct contained in Part 37 of the Commission's 
regulations.
17.3 Deposit
    A Completed Application for Firm Point-To-Point Transmission 
Service also shall include a deposit of either one month's charge for 
Reserved Capacity or the full charge for Reserved Capacity for service 
requests of less than one month. If the Application is rejected by the 
Transmission Provider because it does not meet the conditions for 
service as set forth herein, or in the case of requests for service 
arising in connection with losing bidders in a Request For Proposals 
(RFP), said deposit shall be returned with interest less any reasonable 
costs incurred by the Transmission Provider in connection with the 
review of the losing bidder's Application. The deposit also will be 
returned with interest less any reasonable costs incurred by the 
Transmission Provider if the Transmission Provider is unable to 
complete new facilities needed to provide the service. If an 
Application is withdrawn or the Eligible Customer decides not to enter 
into a Service Agreement for Firm Point-To-Point Transmission Service, 
the deposit shall be refunded in full, with interest, less reasonable 
costs incurred by the Transmission Provider to the extent such costs 
have not already been recovered by the Transmission Provider from the 
Eligible Customer. The Transmission Provider will provide to the 
Eligible Customer a complete accounting of all costs deducted from the 
refunded deposit, which the Eligible Customer may contest if there is a 
dispute concerning the deducted costs. Deposits associated with 
construction of new facilities are subject to the provisions of Section 
19. If a Service Agreement for Firm Point-To-Point Transmission Service 
is executed, the deposit, with interest, will be returned to the 
Transmission Customer upon expiration or termination of the Service 
Agreement for Firm Point-To-Point Transmission Service. Applicable 
interest shall be computed in accordance with the Commission's 
regulations at 18 CFR 35.19a(a)(2)(iii), and shall be calculated from 
the day the deposit check is credited to the Transmission Provider's 
account.
17.4 Notice of Deficient Application
    If an Application fails to meet the requirements of the Tariff, the 
Transmission Provider shall notify the entity requesting service within 
fifteen (15) days of receipt of the reasons for such failure. The 
Transmission Provider will attempt to remedy minor deficiencies in the 
Application through informal communications with the Eligible Customer. 
If such efforts are unsuccessful, the Transmission Provider shall 
return the Application, along with any deposit, with interest. Upon 
receipt of a new or revised Application that fully complies with the 
requirements of Part II of the Tariff, the Eligible Customer shall be 
assigned a new priority consistent with the date of the new or revised 
Application.
17.5 Response to a Completed Application
    Following receipt of a Completed Application for Firm Point-To-
Point Transmission Service, the Transmission Provider shall make a 
determination of available transfer capability as required in Section 
15.2. The Transmission Provider shall notify the Eligible Customer as 
soon as practicable, but not later than thirty (30) days after the date 
of receipt of a Completed Application either (i) if it will be able to 
provide service without performing a System Impact Study or (ii) if 
such a study is needed to evaluate the impact of the Application 
pursuant to Section 19.1. Responses by the Transmission Provider must 
be made as soon as practicable to all completed applications (including 
applications by its own merchant function) and the timing of such 
responses must be made on a non-discriminatory basis.
17.6 Execution of Service Agreement
    Whenever the Transmission Provider determines that a System Impact 
Study is not required and that the service can be provided, it shall 
notify the Eligible Customer as soon as practicable but no later than 
thirty (30) days after receipt of the Completed Application. Where a 
System Impact Study is required, the provisions of Section 19 will 
govern the execution of a Service Agreement. Failure of an Eligible 
Customer to execute and return the Service Agreement or request the 
filing of an unexecuted service agreement pursuant to Section 15.3, 
within fifteen (15) days after it is tendered by the Transmission 
Provider will be deemed a withdrawal and termination of the Application 
and any deposit submitted shall be refunded with interest. Nothing 
herein limits the right of an Eligible Customer to file another 
Application after such withdrawal and termination.
17.7 Extensions for Commencement of Service
    The Transmission Customer can obtain, subject to availability, up 
to five (5) one-year extensions for the commencement of service. The 
Transmission Customer may postpone service by paying a non-refundable 
annual reservation fee equal to one-month's charge for Firm 
Transmission Service for each year or fraction thereof within 15 days 
of notifying the Transmission Provider it intends to extend the 
commencement of service. If during any extension for the commencement 
of service an Eligible Customer submits a Completed Application for 
Firm Transmission Service, and such request can be satisfied only by 
releasing all or part of the Transmission Customer's Reserved Capacity, 
the original Reserved Capacity will be released unless the following 
condition is satisfied. Within thirty (30) days, the original 
Transmission Customer agrees to pay the Firm Point-To-Point 
transmission rate for its Reserved Capacity concurrent with the new 
Service Commencement Date. In the event the Transmission Customer 
elects to release the Reserved Capacity, the reservation fees or 
portions thereof previously paid will be forfeited.

18 Procedures for Arranging Non-Firm Point-To-Point Transmission 
Service

18.1 Application
    Eligible Customers seeking Non-Firm Point-To-Point Transmission 
Service must submit a Completed Application to the Transmission 
Provider. Applications should be submitted by entering the information 
listed below on the Transmission Provider's OASIS. Prior to 
implementation of the Transmission Provider's OASIS, a Completed 
Application may be submitted by (i) transmitting the required 
information to the Transmission Provider by telefax, or (ii) providing 
the information by telephone over the Transmission Provider's time 
recorded telephone line. Each of these methods will provide a time-
stamped record for establishing the service priority of the 
Application.
18.2 Completed Application
    A Completed Application shall provide all of the information 
included in 18 CFR 2.20 including but not limited to the following:
    (i) The identity, address, telephone number and facsimile number of 
the entity requesting service;

[[Page 39140]]

    (ii) A statement that the entity requesting service is, or will be 
upon commencement of service, an Eligible Customer under the Tariff;
    (iii) The Point(s) of Receipt and the Point(s) of Delivery;
    (iv) The maximum amount of capacity requested at each Point of 
Receipt and Point of Delivery; and
    (v) The proposed dates and hours for initiating and terminating 
transmission service hereunder.
    In addition to the information specified above, when required to 
properly evaluate system conditions, the Transmission Provider also may 
ask the Transmission Customer to provide the following:
    (vi) The electrical location of the initial source of the power to 
be transmitted pursuant to the Transmission Customer's request for 
service; and
    (vii) The electrical location of the ultimate load.
    The Transmission Provider will treat this information in (vi) and 
(vii) as confidential at the request of the Transmission Customer 
except to the extent that disclosure of this information is required by 
this Tariff, by regulatory or judicial order, for reliability purposes 
pursuant to Good Utility Practice, or pursuant to RTG transmission 
information sharing agreements. The Transmission Provider shall treat 
this information consistent with the standards of conduct contained in 
Part 37 of the Commission's regulations.
    (viii) A statement indicating that, if the Eligible Customer 
submits a Pre-Confirmed Application, the Eligible Customer will execute 
a Service Agreement upon receipt of notification that the Transmission 
Provider can provide the requested Transmission Service.
18.3 Reservation of Non-Firm Point-to-Point Transmission Service
    Requests for monthly service shall be submitted no earlier than 
sixty (60) days before service is to commence; requests for weekly 
service shall be submitted no earlier than fourteen (14) days before 
service is to commence, requests for daily service shall be submitted 
no earlier than two (2) days before service is to commence, and 
requests for hourly service shall be submitted no earlier than noon the 
day before service is to commence. Requests for service received later 
than 2 p.m. prior to the day service is scheduled to commence will be 
accommodated if practicable [or such reasonable times that are 
generally accepted in the region and are consistently adhered to by the 
Transmission Provider].
18.4 Determination of Available Transfer Capability
    Following receipt of a tendered schedule the Transmission Provider 
will make a determination on a non-discriminatory basis of available 
transfer capability pursuant to Section 15.2. Such determination shall 
be made as soon as reasonably practicable after receipt, but not later 
than the following time periods for the following terms of service (i) 
thirty (30) minutes for hourly service, (ii) thirty (30) minutes for 
daily service, (iii) four (4) hours for weekly service, and (iv) two 
(2) days for monthly service. [Or such reasonable times that are 
generally accepted in the region and are consistently adhered to by the 
Transmission Provider].

19 Additional Study Procedures for Firm Point-to-Point Transmission 
Service Requests

19.1 Notice of Need for System Impact Study
    After receiving a request for service, the Transmission Provider 
shall determine on a non-discriminatory basis whether a System Impact 
Study is needed. A description of the Transmission Provider's 
methodology for completing a System Impact Study is provided in 
Attachment D. If the Transmission Provider determines that a System 
Impact Study is necessary to accommodate the requested service, it 
shall so inform the Eligible Customer, as soon as practicable. Once 
informed, the Eligible Customer shall timely notify the Transmission 
Provider if it elects to have the Transmission Provider study 
redispatch or conditional curtailment as part of the System Impact 
Study. If notification is provided prior to tender of the System Impact 
Study Agreement, the Eligible Customer can avoid the costs associated 
with the study of these options. The Transmission Provider shall within 
thirty (30) days of receipt of a Completed Application, tender a System 
Impact Study Agreement pursuant to which the Eligible Customer shall 
agree to reimburse the Transmission Provider for performing the 
required System Impact Study. For a service request to remain a 
Completed Application, the Eligible Customer shall execute the System 
Impact Study Agreement and return it to the Transmission Provider 
within fifteen (15) days. If the Eligible Customer elects not to 
execute the System Impact Study Agreement, its application shall be 
deemed withdrawn and its deposit, pursuant to Section 17.3, shall be 
returned with interest.
19.2 System Impact Study Agreement and Cost Reimbursement
    (i) The System Impact Study Agreement will clearly specify the 
Transmission Provider's estimate of the actual cost, and time for 
completion of the System Impact Study. The charge shall not exceed the 
actual cost of the study. In performing the System Impact Study, the 
Transmission Provider shall rely, to the extent reasonably practicable, 
on existing transmission planning studies. The Eligible Customer will 
not be assessed a charge for such existing studies; however, the 
Eligible Customer will be responsible for charges associated with any 
modifications to existing planning studies that are reasonably 
necessary to evaluate the impact of the Eligible Customer's request for 
service on the Transmission System.
    (ii) If in response to multiple Eligible Customers requesting 
service in relation to the same competitive solicitation, a single 
System Impact Study is sufficient for the Transmission Provider to 
accommodate the requests for service, the costs of that study shall be 
pro-rated among the Eligible Customers.
    (iii) For System Impact Studies that the Transmission Provider 
conducts on its own behalf, the Transmission Provider shall record the 
cost of the System Impact Studies pursuant to Section 20.
19.3 System Impact Study Procedures
    Upon receipt of an executed System Impact Study Agreement, the 
Transmission Provider will use due diligence to complete the required 
System Impact Study within a sixty (60) day period. The System Impact 
Study shall identify (1) any system constraints, identified with 
specificity by transmission element or flowgate, (2) redispatch options 
(when requested by an Eligible Customer) including an estimate of the 
cost of redispatch, (3) conditional curtailment options (when requested 
by an Eligible Customer) including the number of hours per year and the 
System Conditions during which conditional curtailment may occur, and 
(4) additional Direct Assignment Facilities or Network Upgrades 
required to provide the requested service. For customers requesting the 
study of redispatch options, the System Impact Study shall (1) identify 
all resources located within the Transmission Provider's Control Area 
that can significantly contribute toward relieving the system 
constraint and (2) provide a measurement of each

[[Page 39141]]

resource's impact on the system constraint. If the Transmission 
Provider possesses information indicating that any resource outside its 
Control Area could relieve the constraint, it shall identify each such 
resource in the System Impact Study. In the event that the Transmission 
Provider is unable to complete the required System Impact Study within 
such time period, it shall so notify the Eligible Customer and provide 
an estimated completion date along with an explanation of the reasons 
why additional time is required to complete the required studies. A 
copy of the completed System Impact Study and related work papers shall 
be made available to the Eligible Customer as soon as the System Impact 
Study is complete. The Transmission Provider will use the same due 
diligence in completing the System Impact Study for an Eligible 
Customer as it uses when completing studies for itself. The 
Transmission Provider shall notify the Eligible Customer immediately 
upon completion of the System Impact Study if the Transmission System 
will be adequate to accommodate all or part of a request for service or 
that no costs are likely to be incurred for new transmission facilities 
or upgrades. In order for a request to remain a Completed Application, 
within fifteen (15) days of completion of the System Impact Study the 
Eligible Customer must execute a Service Agreement or request the 
filing of an unexecuted Service Agreement pursuant to Section 15.3, or 
the Application shall be deemed terminated and withdrawn.
19.4 Facilities Study Procedures
    If a System Impact Study indicates that additions or upgrades to 
the Transmission System are needed to supply the Eligible Customer's 
service request, the Transmission Provider, within thirty (30) days of 
the completion of the System Impact Study, shall tender to the Eligible 
Customer a Facilities Study Agreement pursuant to which the Eligible 
Customer shall agree to reimburse the Transmission Provider for 
performing the required Facilities Study. For a service request to 
remain a Completed Application, the Eligible Customer shall execute the 
Facilities Study Agreement and return it to the Transmission Provider 
within fifteen (15) days. If the Eligible Customer elects not to 
execute the Facilities Study Agreement, its application shall be deemed 
withdrawn and its deposit, pursuant to Section 17.3, shall be returned 
with interest. Upon receipt of an executed Facilities Study Agreement, 
the Transmission Provider will use due diligence to complete the 
required Facilities Study within a sixty (60) day period. If the 
Transmission Provider is unable to complete the Facilities Study in the 
allotted time period, the Transmission Provider shall notify the 
Transmission Customer and provide an estimate of the time needed to 
reach a final determination along with an explanation of the reasons 
that additional time is required to complete the study. When completed, 
the Facilities Study will include a good faith estimate of (i) the cost 
of Direct Assignment Facilities to be charged to the Transmission 
Customer, (ii) the Transmission Customer's appropriate share of the 
cost of any required Network Upgrades as determined pursuant to the 
provisions of Part II of the Tariff, and (iii) the time required to 
complete such construction and initiate the requested service. The 
Transmission Customer shall provide the Transmission Provider with a 
letter of credit or other reasonable form of security acceptable to the 
Transmission Provider equivalent to the costs of new facilities or 
upgrades consistent with commercial practices as established by the 
Uniform Commercial Code. The Transmission Customer shall have thirty 
(30) days to execute a Service Agreement or request the filing of an 
unexecuted Service Agreement and provide the required letter of credit 
or other form of security or the request will no longer be a Completed 
Application and shall be deemed terminated and withdrawn.
19.5 Facilities Study Modifications
    Any change in design arising from inability to site or construct 
facilities as proposed will require development of a revised good faith 
estimate. New good faith estimates also will be required in the event 
of new statutory or regulatory requirements that are effective before 
the completion of construction or other circumstances beyond the 
control of the Transmission Provider that significantly affect the 
final cost of new facilities or upgrades to be charged to the 
Transmission Customer pursuant to the provisions of Part II of the 
Tariff.
19.6 Due Diligence in Completing New Facilities
    The Transmission Provider shall use due diligence to add necessary 
facilities or upgrade its Transmission System within a reasonable time. 
The Transmission Provider will not upgrade its existing or planned 
Transmission System in order to provide the requested Firm Point-To-
Point Transmission Service if doing so would impair system reliability 
or otherwise impair or degrade existing firm service.
19.7 Partial Interim Service
    If the Transmission Provider determines that it will not have 
adequate transfer capability to satisfy the full amount of a Completed 
Application for Firm Point-To-Point Transmission Service, the 
Transmission Provider nonetheless shall be obligated to offer and 
provide the portion of the requested Firm Point-To-Point Transmission 
Service that can be accommodated without addition of any facilities and 
through redispatch. However, the Transmission Provider shall not be 
obligated to provide the incremental amount of requested Firm Point-To-
Point Transmission Service that requires the addition of facilities or 
upgrades to the Transmission System until such facilities or upgrades 
have been placed in service.
19.8 Expedited Procedures for New Facilities
    In lieu of the procedures set forth above, the Eligible Customer 
shall have the option to expedite the process by requesting the 
Transmission Provider to tender at one time, together with the results 
of required studies, an ``Expedited Service Agreement'' pursuant to 
which the Eligible Customer would agree to compensate the Transmission 
Provider for all costs incurred pursuant to the terms of the Tariff. In 
order to exercise this option, the Eligible Customer shall request in 
writing an expedited Service Agreement covering all of the above-
specified items within thirty (30) days of receiving the results of the 
System Impact Study identifying needed facility additions or upgrades 
or costs incurred in providing the requested service. While the 
Transmission Provider agrees to provide the Eligible Customer with its 
best estimate of the new facility costs and other charges that may be 
incurred, such estimate shall not be binding and the Eligible Customer 
must agree in writing to compensate the Transmission Provider for all 
costs incurred pursuant to the provisions of the Tariff. The Eligible 
Customer shall execute and return such an Expedited Service Agreement 
within fifteen (15) days of its receipt or the Eligible Customer's 
request for service will cease to be a Completed Application and will 
be deemed terminated and withdrawn.
19.9 Penalties for Failure To Meet Study Deadlines
    Sections 19.3 and 19.4 require a Transmission Provider to use due 
diligence to meet 60-day study completion deadlines for System Impact 
Studies and Facilities Studies.

[[Page 39142]]

    (i) The Transmission Provider is required to file a notice with the 
Commission in the event that more than twenty (20) percent of non-
Affiliates' System Impact Studies and Facilities Studies completed by 
the Transmission Provider in any two consecutive calendar quarters are 
not completed within the 60-day study completion deadlines. Such notice 
must be filed within thirty (30) days of the end of the calendar 
quarter triggering the notice requirement.
    (ii) For the purposes of calculating the percent of non-Affiliates' 
System Impact Studies and Facilities Studies processed outside of the 
60-day study completion deadlines, the Transmission Provider shall 
consider all System Impact Studies and Facilities Studies that it 
completes for non-Affiliates during the calendar quarter. The 
percentage should be calculated by dividing the number of those studies 
which are completed on time by the total number of completed studies. 
The Transmission Provider may provide an explanation in its 
notification filing to the Commission if it believes there are 
extenuating circumstances that prevented it from meeting the 60-day 
study completion deadlines.
    (iii) The Transmission Provider is subject to an operational 
penalty if it completes ten (10) percent or more of non-Affiliates' 
System Impact Studies and Facilities Studies outside of the 60-day 
study completion deadlines for each of the two calendar quarters 
immediately following the quarter that triggered its notification 
filing to the Commission. The operational penalty will be assessed for 
each calendar quarter for which an operational penalty applies, 
starting with the calendar quarter immediately following the quarter 
that triggered the Transmission Provider's notification filing to the 
Commission. The operational penalty will continue to be assessed each 
quarter until the Transmission Provider completes at least ninety (90) 
percent of all non-Affiliates' System Impact Studies and Facilities 
Studies within the 60-day deadline.
    (iv) For penalties assessed in accordance with subsection (iii) 
above, the penalty amount for each System Impact Study or Facilities 
Study shall be equal to $500 for each day the Transmission Provider 
takes to complete that study beyond the 60-day deadline.

20 Procedures if the Transmission Provider Is Unable To Complete New 
Transmission Facilities for Firm Point-to-Point Transmission Service

20.1 Delays in Construction of New Facilities
    If any event occurs that will materially affect the time for 
completion of new facilities, or the ability to complete them, the 
Transmission Provider shall promptly notify the Transmission Customer. 
In such circumstances, the Transmission Provider shall within thirty 
(30) days of notifying the Transmission Customer of such delays, 
convene a technical meeting with the Transmission Customer to evaluate 
the alternatives available to the Transmission Customer. The 
Transmission Provider also shall make available to the Transmission 
Customer studies and work papers related to the delay, including all 
information that is in the possession of the Transmission Provider that 
is reasonably needed by the Transmission Customer to evaluate any 
alternatives.
20.2 Alternatives to the Original Facility Additions
    When the review process of Section 20.1 determines that one or more 
alternatives exist to the originally planned construction project, the 
Transmission Provider shall present such alternatives for consideration 
by the Transmission Customer. If, upon review of any alternatives, the 
Transmission Customer desires to maintain its Completed Application 
subject to construction of the alternative facilities, it may request 
the Transmission Provider to submit a revised Service Agreement for 
Firm Point-To-Point Transmission Service. If the alternative approach 
solely involves Non-Firm Point-To-Point Transmission Service, the 
Transmission Provider shall promptly tender a Service Agreement for 
Non-Firm Point-To-Point Transmission Service providing for the service. 
In the event the Transmission Provider concludes that no reasonable 
alternative exists and the Transmission Customer disagrees, the 
Transmission Customer may seek relief under the dispute resolution 
procedures pursuant to Section 12 or it may refer the dispute to the 
Commission for resolution.
20.3 Refund Obligation for Unfinished Facility Additions
    If the Transmission Provider and the Transmission Customer mutually 
agree that no other reasonable alternatives exist and the requested 
service cannot be provided out of existing capability under the 
conditions of Part II of the Tariff, the obligation to provide the 
requested Firm Point-To-Point Transmission Service shall terminate and 
any deposit made by the Transmission Customer shall be returned with 
interest pursuant to Commission regulations 35.19a(a)(2)(iii). However, 
the Transmission Customer shall be responsible for all prudently 
incurred costs by the Transmission Provider through the time 
construction was suspended.

21 Provisions Relating to Transmission Construction and Services on the 
Systems of Other Utilities

21.1 Responsibility for Third-Party System Additions
    The Transmission Provider shall not be responsible for making 
arrangements for any necessary engineering, permitting, and 
construction of transmission or distribution facilities on the 
system(s) of any other entity or for obtaining any regulatory approval 
for such facilities. The Transmission Provider will undertake 
reasonable efforts to assist the Transmission Customer in obtaining 
such arrangements, including without limitation, providing any 
information or data required by such other electric system pursuant to 
Good Utility Practice.
21.2 Coordination of Third-Party System Additions
    In circumstances where the need for transmission facilities or 
upgrades is identified pursuant to the provisions of Part II of the 
Tariff, and if such upgrades further require the addition of 
transmission facilities on other systems, the Transmission Provider 
shall have the right to coordinate construction on its own system with 
the construction required by others. The Transmission Provider, after 
consultation with the Transmission Customer and representatives of such 
other systems, may defer construction of its new transmission 
facilities, if the new transmission facilities on another system cannot 
be completed in a timely manner. The Transmission Provider shall notify 
the Transmission Customer in writing of the basis for any decision to 
defer construction and the specific problems which must be resolved 
before it will initiate or resume construction of new facilities. 
Within sixty (60) days of receiving written notification by the 
Transmission Provider of its intent to defer construction pursuant to 
this section, the Transmission Customer may challenge the decision in 
accordance with the dispute resolution procedures

[[Page 39143]]

pursuant to Section 12 or it may refer the dispute to the Commission 
for resolution.

22 Changes in Service Specifications

22.1 Modifications on a Non-Firm Basis
    The Transmission Customer taking Firm Point-To-Point Transmission 
Service may request the Transmission Provider to provide transmission 
service on a non-firm basis over Receipt and Delivery Points other than 
those specified in the Service Agreement (``Secondary Receipt and 
Delivery Points''), in amounts not to exceed its firm capacity 
reservation, without incurring an additional Non-Firm Point-To-Point 
Transmission Service charge or executing a new Service Agreement, 
subject to the following conditions.
    (a) Service provided over Secondary Receipt and Delivery Points 
will be non-firm only, on an as-available basis and will not displace 
any firm or non-firm service reserved or scheduled by third-parties 
under the Tariff or by the Transmission Provider on behalf of its 
Native Load Customers.
    (b) The sum of all Firm and non-firm Point-To-Point Transmission 
Service provided to the Transmission Customer at any time pursuant to 
this section shall not exceed the Reserved Capacity in the relevant 
Service Agreement under which such services are provided.
    (c) The Transmission Customer shall retain its right to schedule 
Firm Point-To-Point Transmission Service at the Receipt and Delivery 
Points specified in the relevant Service Agreement in the amount of its 
original capacity reservation.
    (d) Service over Secondary Receipt and Delivery Points on a non-
firm basis shall not require the filing of an Application for Non-Firm 
Point-To-Point Transmission Service under the Tariff. However, all 
other requirements of Part II of the Tariff (except as to transmission 
rates) shall apply to transmission service on a non-firm basis over 
Secondary Receipt and Delivery Points.
22.2 Modification on a Firm Basis
    Any request by a Transmission Customer to modify Receipt and 
Delivery Points on a firm basis shall be treated as a new request for 
service in accordance with Section 17 hereof, except that such 
Transmission Customer shall not be obligated to pay any additional 
deposit if the capacity reservation does not exceed the amount reserved 
in the existing Service Agreement. While such new request is pending, 
the Transmission Customer shall retain its priority for service at the 
existing firm Receipt and Delivery Points specified in its Service 
Agreement.

23 Sale or Assignment of Transmission Service

23.1 Procedures for Assignment or Transfer of Service
    Subject to Commission approval of any necessary filings, a 
Transmission Customer may sell, assign, or transfer all or a portion of 
its rights under its Service Agreement, but only to another Eligible 
Customer (the Assignee). The Transmission Customer that sells, assigns 
or transfers its rights under its Service Agreement is hereafter 
referred to as the Reseller. Compensation to Resellers shall not exceed 
the higher of (i) the original rate paid by the Reseller, (ii) the 
Transmission Provider's maximum rate on file at the time of the 
assignment, or (iii) the Reseller's opportunity cost capped at the 
Transmission Provider's cost of expansion; provided that, for service 
prior to October 1, 2010, compensation to Resellers shall be at rates 
established by agreement between the Reseller and the Assignee.
    The Assignee must execute a service agreement with the Transmission 
Provider governing reassignments of transmission service prior to the 
date on which the reassigned service commences. The Transmission 
Provider shall charge the Reseller, as appropriate, at the rate stated 
in the Reseller's Service Agreement with the Transmission Provider or 
the associated OASIS schedule and credit the Reseller with the price 
reflected in the Assignee's Service Agreement with the Transmission 
Provider or the associated OASIS schedule; provided that, such credit 
shall be reversed in the event of non-payment by the Assignee. If the 
Assignee does not request any change in the Point(s) of Receipt or the 
Point(s) of Delivery, or a change in any other term or condition set 
forth in the original Service Agreement, the Assignee will receive the 
same services as did the Reseller and the priority of service for the 
Assignee will be the same as that of the Reseller. The Assignee will be 
subject to all terms and conditions of this Tariff. If the Assignee 
requests a change in service, the reservation priority of service will 
be determined by the Transmission Provider pursuant to Section 13.2.
23.2 Limitations on Assignment or Transfer of Service
    If the Assignee requests a change in the Point(s) of Receipt or 
Point(s) of Delivery, or a change in any other specifications set forth 
in the original Service Agreement, the Transmission Provider will 
consent to such change subject to the provisions of the Tariff, 
provided that the change will not impair the operation and reliability 
of the Transmission Provider's generation, transmission, or 
distribution systems. The Assignee shall compensate the Transmission 
Provider for performing any System Impact Study needed to evaluate the 
capability of the Transmission System to accommodate the proposed 
change and any additional costs resulting from such change. The 
Reseller shall remain liable for the performance of all obligations 
under the Service Agreement, except as specifically agreed to by the 
Transmission Provider and the Reseller through an amendment to the 
Service Agreement.
23.3 Information on Assignment or Transfer of Service
    In accordance with Section 4, all sales or assignments of capacity 
must be conducted through or otherwise posted on the Transmission 
Provider's OASIS on or before the date the reassigned service commences 
and are subject to Section 23.1. Resellers may also use the 
Transmission Provider's OASIS to post transmission capacity available 
for resale.

24 Metering and Power Factor Correction at Receipt and Delivery 
Points(s)

24.1 Transmission Customer Obligations
    Unless otherwise agreed, the Transmission Customer shall be 
responsible for installing and maintaining compatible metering and 
communications equipment to accurately account for the capacity and 
energy being transmitted under Part II of the Tariff and to communicate 
the information to the Transmission Provider. Such equipment shall 
remain the property of the Transmission Customer.
24.2 Transmission Provider Access to Metering Data
    The Transmission Provider shall have access to metering data, which 
may reasonably be required to facilitate measurements and billing under 
the Service Agreement.
24.3 Power Factor
    Unless otherwise agreed, the Transmission Customer is required to 
maintain a power factor within the same range as the Transmission 
Provider pursuant to Good Utility Practices. The

[[Page 39144]]

power factor requirements are specified in the Service Agreement where 
applicable.

25 Compensation for Transmission Service

    Rates for Firm and Non-Firm Point-To-Point Transmission Service are 
provided in the Schedules appended to the Tariff: Firm Point-To-Point 
Transmission Service (Schedule 7); and Non-Firm Point-To-Point 
Transmission Service (Schedule 8). The Transmission Provider shall use 
Part II of the Tariff to make its Third-Party Sales. The Transmission 
Provider shall account for such use at the applicable Tariff rates, 
pursuant to Section 8.

26 Stranded Cost Recovery

    The Transmission Provider may seek to recover stranded costs from 
the Transmission Customer pursuant to this Tariff in accordance with 
the terms, conditions and procedures set forth in FERC Order No. 888. 
However, the Transmission Provider must separately file any specific 
proposed stranded cost charge under Section 205 of the Federal Power 
Act.

27 Compensation for New Facilities and Redispatch Costs

    Whenever a System Impact Study performed by the Transmission 
Provider in connection with the provision of Firm Point-To-Point 
Transmission Service identifies the need for new facilities, the 
Transmission Customer shall be responsible for such costs to the extent 
consistent with Commission policy. Whenever a System Impact Study 
performed by the Transmission Provider identifies capacity constraints 
that may be relieved by redispatching the Transmission Provider's 
resources to eliminate such constraints, the Transmission Customer 
shall be responsible for the redispatch costs to the extent consistent 
with Commission policy.

III. Network Integration Transmission Service

Preamble

    The Transmission Provider will provide Network Integration 
Transmission Service pursuant to the applicable terms and conditions 
contained in the Tariff and Service Agreement. Network Integration 
Transmission Service allows the Network Customer to integrate, 
economically dispatch and regulate its current and planned Network 
Resources to serve its Network Load in a manner comparable to that in 
which the Transmission Provider utilizes its Transmission System to 
serve its Native Load Customers. Network Integration Transmission 
Service also may be used by the Network Customer to deliver economy 
energy purchases to its Network Load from non-designated resources on 
an as-available basis without additional charge. Transmission service 
for sales to non-designated loads will be provided pursuant to the 
applicable terms and conditions of Part II of the Tariff.

28 Nature of Network Integration Transmission Service

28.1 Scope of Service
    Network Integration Transmission Service is a transmission service 
that allows Network Customers to efficiently and economically utilize 
their Network Resources (as well as other non-designated generation 
resources) to serve their Network Load located in the Transmission 
Provider's Control Area and any additional load that may be designated 
pursuant to Section 31.3 of the Tariff. The Network Customer taking 
Network Integration Transmission Service must obtain or provide 
Ancillary Services pursuant to Section 3.
28.2 Transmission Provider Responsibilities
    The Transmission Provider will plan, construct, operate and 
maintain its Transmission System in accordance with Good Utility 
Practice and its planning obligations in Attachment K in order to 
provide the Network Customer with Network Integration Transmission 
Service over the Transmission Provider's Transmission System. The 
Transmission Provider, on behalf of its Native Load Customers, shall be 
required to designate resources and loads in the same manner as any 
Network Customer under Part III of this Tariff. This information must 
be consistent with the information used by the Transmission Provider to 
calculate available transfer capability. The Transmission Provider 
shall include the Network Customer's Network Load in its Transmission 
System planning and shall, consistent with Good Utility Practice and 
Attachment K, endeavor to construct and place into service sufficient 
transfer capability to deliver the Network Customer's Network Resources 
to serve its Network Load on a basis comparable to the Transmission 
Provider's delivery of its own generating and purchased resources to 
its Native Load Customers.
28.3 Network Integration Transmission Service
    The Transmission Provider will provide firm transmission service 
over its Transmission System to the Network Customer for the delivery 
of capacity and energy from its designated Network Resources to service 
its Network Loads on a basis that is comparable to the Transmission 
Provider's use of the Transmission System to reliably serve its Native 
Load Customers.
28.4 Secondary Service
    The Network Customer may use the Transmission Provider's 
Transmission System to deliver energy to its Network Loads from 
resources that have not been designated as Network Resources. Such 
energy shall be transmitted, on an as-available basis, at no additional 
charge. Secondary service shall not require the filing of an 
Application for Network Integration Transmission Service under the 
Tariff. However, all other requirements of Part III of the Tariff 
(except for transmission rates) shall apply to secondary service. 
Deliveries from resources other than Network Resources will have a 
higher priority than any Non-Firm Point-To-Point Transmission Service 
under Part II of the Tariff.
28.5 Real Power Losses
    Real Power Losses are associated with all transmission service. The 
Transmission Provider is not obligated to provide Real Power Losses. 
The Network Customer is responsible for replacing losses associated 
with all transmission service as calculated by the Transmission 
Provider. The applicable Real Power Loss factors are as follows: [To be 
completed by the Transmission Provider].
28.6 Restrictions on Use of Service
    The Network Customer shall not use Network Integration Transmission 
Service for (i) sales of capacity and energy to non-designated loads, 
or (ii) direct or indirect provision of transmission service by the 
Network Customer to third parties. All Network Customers taking Network 
Integration Transmission Service shall use Point-To-Point Transmission 
Service under Part II of the Tariff for any Third-Party Sale which 
requires use of the Transmission Provider's Transmission System. The 
Transmission Provider shall specify any appropriate charges and 
penalties and all related terms and conditions applicable in the event 
that a Network Customer uses Network Integration Transmission Service 
or secondary service pursuant to Section

[[Page 39145]]

28.4 to facilitate a wholesale sale that does not serve a Network Load.

 29 Initiating Service

 29.1 Condition Precedent for Receiving Service
    Subject to the terms and conditions of Part III of the Tariff, the 
Transmission Provider will provide Network Integration Transmission 
Service to any Eligible Customer, provided that (i) the Eligible 
Customer completes an Application for service as provided under Part 
III of the Tariff, (ii) the Eligible Customer and the Transmission 
Provider complete the technical arrangements set forth in Sections 29.3 
and 29.4, (iii) the Eligible Customer executes a Service Agreement 
pursuant to Attachment F for service under Part III of the Tariff or 
requests in writing that the Transmission Provider file a proposed 
unexecuted Service Agreement with the Commission, and (iv) the Eligible 
Customer executes a Network Operating Agreement with the Transmission 
Provider pursuant to Attachment G, or requests in writing that the 
Transmission Provider file a proposed unexecuted Network Operating 
Agreement.
 29.2 Application Procedures
    An Eligible Customer requesting service under Part III of the 
Tariff must submit an Application, with a deposit approximating the 
charge for one month of service, to the Transmission Provider as far as 
possible in advance of the month in which service is to commence. 
Unless subject to the procedures in Section 2, Completed Applications 
for Network Integration Transmission Service will be assigned a 
priority according to the date and time the Application is received, 
with the earliest Application receiving the highest priority. 
Applications should be submitted by entering the information listed 
below on the Transmission Provider's OASIS. Prior to implementation of 
the Transmission Provider's OASIS, a Completed Application may be 
submitted by (i) transmitting the required information to the 
Transmission Provider by telefax, or (ii) providing the information by 
telephone over the Transmission Provider's time recorded telephone 
line. Each of these methods will provide a time-stamped record for 
establishing the service priority of the Application. A Completed 
Application shall provide all of the information included in 18 CFR 
2.20 including but not limited to the following:
    (i) The identity, address, telephone number and facsimile number of 
the party requesting service;
    (ii) A statement that the party requesting service is, or will be 
upon commencement of service, an Eligible Customer under the Tariff;
    (iii) A description of the Network Load at each delivery point. 
This description should separately identify and provide the Eligible 
Customer's best estimate of the total loads to be served at each 
transmission voltage level, and the loads to be served from each 
Transmission Provider substation at the same transmission voltage 
level. The description should include a ten (10) year forecast of 
summer and winter load and resource requirements beginning with the 
first year after the service is scheduled to commence;
    (iv) The amount and location of any interruptible loads included in 
the Network Load. This shall include the summer and winter capacity 
requirements for each interruptible load (had such load not been 
interruptible), that portion of the load subject to interruption, the 
conditions under which an interruption can be implemented and any 
limitations on the amount and frequency of interruptions. An Eligible 
Customer should identify the amount of interruptible customer load (if 
any) included in the 10 year load forecast provided in response to 
(iii) above;
    (v) A description of Network Resources (current and 10-year 
projection). For each on-system Network Resource, such description 
shall include:
     Unit size and amount of capacity from that unit to be 
designated as Network Resource
     VAR capability (both leading and lagging) of all 
generators
     Operating restrictions

--Any periods of restricted operations throughout the year
--Maintenance schedules
--Minimum loading level of unit
--Normal operating level of unit
--Any must-run unit designations required for system reliability or 
contract reasons

     Approximate variable generating cost ($/MWH) for 
redispatch computations
     Arrangements governing sale and delivery of power to third 
parties from generating facilities located in the Transmission Provider 
Control Area, where only a portion of unit output is designated as a 
Network Resource;
    For each off-system Network Resource, such description shall 
include:
     Identification of the Network Resource as an off-system 
resource
     Amount of power to which the customer has rights
     Identification of the control area from which the power 
will originate
     Delivery point(s) to the Transmission Provider's 
Transmission System
     Transmission arrangements on the external transmission 
system(s)
     Operating restrictions, if any

--Any periods of restricted operations throughout the year
--Maintenance schedules
--Minimum loading level of unit
--Normal operating level of unit
--Any must-run unit designations required for system reliability or 
contract reasons

     Approximate variable generating cost ($/MWH) for 
redispatch computations;
    (vi) Description of Eligible Customer's transmission system:
     Load flow and stability data, such as real and reactive 
parts of the load, lines, transformers, reactive devices and load type, 
including normal and emergency ratings of all transmission equipment in 
a load flow format compatible with that used by the Transmission 
Provider
     Operating restrictions needed for reliability
     Operating guides employed by system operators
     Contractual restrictions or committed uses of the Eligible 
Customer's transmission system, other than the Eligible Customer's 
Network Loads and Resources
     Location of Network Resources described in subsection (v) 
above
     10 year projection of system expansions or upgrades
     Transmission System maps that include any proposed 
expansions or upgrades
     Thermal ratings of Eligible Customer's Control Area ties 
with other Control Areas;
    (vii) Service Commencement Date and the term of the requested 
Network Integration Transmission Service. The minimum term for Network 
Integration Transmission Service is one year;
    (viii) A statement signed by an authorized officer from or agent of 
the Network Customer attesting that all of the network resources listed 
pursuant to Section 29.2(v) satisfy the following conditions: (1) The 
Network Customer owns the resource, has committed to purchase 
generation pursuant to an executed contract, or has committed to 
purchase generation where execution of a contract is contingent upon 
the

[[Page 39146]]

availability of transmission service under Part III of the Tariff; and 
(2) the Network Resources do not include any resources, or any portion 
thereof, that are committed for sale to non-designated third party load 
or otherwise cannot be called upon to meet the Network Customer's 
Network Load on a non-interruptible basis, except for purposes of 
fulfilling obligations under a reserve sharing program; and
    (ix) Any additional information required of the Transmission 
Customer as specified in the Transmission Provider's planning process 
established in Attachment K.
    Unless the Parties agree to a different time frame, the 
Transmission Provider must acknowledge the request within ten (10) days 
of receipt. The acknowledgement must include a date by which a 
response, including a Service Agreement, will be sent to the Eligible 
Customer. If an Application fails to meet the requirements of this 
section, the Transmission Provider shall notify the Eligible Customer 
requesting service within fifteen (15) days of receipt and specify the 
reasons for such failure. Wherever possible, the Transmission Provider 
will attempt to remedy deficiencies in the Application through informal 
communications with the Eligible Customer. If such efforts are 
unsuccessful, the Transmission Provider shall return the Application 
without prejudice to the Eligible Customer filing a new or revised 
Application that fully complies with the requirements of this section. 
The Eligible Customer will be assigned a new priority consistent with 
the date of the new or revised Application. The Transmission Provider 
shall treat this information consistent with the standards of conduct 
contained in Part 37 of the Commission's regulations.
 29.3 Technical Arrangements to be Completed Prior to Commencement of 
Service
    Network Integration Transmission Service shall not commence until 
the Transmission Provider and the Network Customer, or a third party, 
have completed installation of all equipment specified under the 
Network Operating Agreement consistent with Good Utility Practice and 
any additional requirements reasonably and consistently imposed to 
ensure the reliable operation of the Transmission System. The 
Transmission Provider shall exercise reasonable efforts, in 
coordination with the Network Customer, to complete such arrangements 
as soon as practicable taking into consideration the Service 
Commencement Date.
 29.4 Network Customer Facilities
    The provision of Network Integration Transmission Service shall be 
conditioned upon the Network Customer's constructing, maintaining and 
operating the facilities on its side of each delivery point or 
interconnection necessary to reliably deliver capacity and energy from 
the Transmission Provider's Transmission System to the Network 
Customer. The Network Customer shall be solely responsible for 
constructing or installing all facilities on the Network Customer's 
side of each such delivery point or interconnection.
 29.5 Filing of Service Agreement
    The Transmission Provider will file Service Agreements with the 
Commission in compliance with applicable Commission regulations.

 30 Network Resources

 30.1 Designation of Network Resources
    Network Resources shall include all generation owned, purchased or 
leased by the Network Customer designated to serve Network Load under 
the Tariff. Network Resources may not include resources, or any portion 
thereof, that are committed for sale to non-designated third party load 
or otherwise cannot be called upon to meet the Network Customer's 
Network Load on a non-interruptible basis, except for purposes of 
fulfilling obligations under a reserve sharing program. Any owned or 
purchased resources that were serving the Network Customer's loads 
under firm agreements entered into on or before the Service 
Commencement Date shall initially be designated as Network Resources 
until the Network Customer terminates the designation of such 
resources.
30.2 Designation of New Network Resources
    The Network Customer may designate a new Network Resource by 
providing the Transmission Provider with as much advance notice as 
practicable. A designation of a new Network Resource must be made 
through the Transmission Provider's OASIS by a request for modification 
of service pursuant to an Application under Section 29. This request 
must include a statement that the new network resource satisfies the 
following conditions: (1) The Network Customer owns the resource, has 
committed to purchase generation pursuant to an executed contract, or 
has committed to purchase generation where execution of a contract is 
contingent upon the availability of transmission service under Part III 
of the Tariff; and (2) The Network Resources do not include any 
resources, or any portion thereof, that are committed for sale to non-
designated third party load or otherwise cannot be called upon to meet 
the Network Customer's Network Load on a non-interruptible basis, 
except for purposes of fulfilling obligations under a reserve sharing 
program. The Network Customer's request will be deemed deficient if it 
does not include this statement and the Transmission Provider will 
follow the procedures for a deficient application as described in 
Section 29.2 of the Tariff.
30.3 Termination of Network Resources
    The Network Customer may terminate the designation of all or part 
of a generating resource as a Network Resource by providing 
notification to the Transmission Provider through OASIS as soon as 
reasonably practicable, but not later than the firm scheduling deadline 
for the period of termination. Any request for termination of Network 
Resource status must be submitted on OASIS, and should indicate whether 
the request is for indefinite or temporary termination. A request for 
indefinite termination of Network Resource status must indicate the 
date and time that the termination is to be effective, and the 
identification and capacity of the resource(s) or portions thereof to 
be indefinitely terminated. A request for temporary termination of 
Network Resource status must include the following:
    (i) Effective date and time of temporary termination;
    (ii) Effective date and time of redesignation, following period of 
temporary termination;
    (iii) Identification and capacity of resource(s) or portions 
thereof to be temporarily terminated;
    (iv) Resource description and attestation for redesignating the 
network resource following the temporary termination, in accordance 
with Section 30.2; and
    (v) Identification of any related transmission service requests to 
be evaluated concomitantly with the request for temporary termination, 
such that the requests for undesignation and the request for these 
related transmission service requests must be approved or denied as a 
single request. The evaluation of these related transmission service 
requests must take into account the termination of the network 
resources identified in (iii) above, as well as all competing 
transmission service requests of higher priority.
    As part of a temporary termination, a Network Customer may only 
redesignate

[[Page 39147]]

the same resource that was originally designated, or a portion thereof. 
Requests to redesignate a different resource and/or a resource with 
increased capacity will be deemed deficient and the Transmission 
Provider will follow the procedures for a deficient application as 
described in Section 29.2 of the Tariff.
30.4 Operation of Network Resources
    The Network Customer shall not operate its designated Network 
Resources located in the Network Customer's or Transmission Provider's 
Control Area such that the output of those facilities exceeds its 
designated Network Load, plus Non-Firm Sales delivered pursuant to Part 
II of the Tariff, plus losses, plus power sales under a reserve sharing 
program, plus sales that permit curtailment without penalty to serve 
its designated Network Load. This limitation shall not apply to changes 
in the operation of a Transmission Customer's Network Resources at the 
request of the Transmission Provider to respond to an emergency or 
other unforeseen condition which may impair or degrade the reliability 
of the Transmission System. For all Network Resources not physically 
connected with the Transmission Provider's Transmission System, the 
Network Customer may not schedule delivery of energy in excess of the 
Network Resource's capacity, as specified in the Network Customer's 
Application pursuant to Section 29, unless the Network Customer 
supports such delivery within the Transmission Provider's Transmission 
System by either obtaining Point-to-Point Transmission Service or 
utilizing secondary service pursuant to Section 28.4. The Transmission 
Provider shall specify the rate treatment and all related terms and 
conditions applicable in the event that a Network Customer's schedule 
at the delivery point for a Network Resource not physically 
interconnected with the Transmission Provider's Transmission System 
exceeds the Network Resource's designated capacity, excluding energy 
delivered using secondary service or Point-to-Point Transmission 
Service.
30.5 Network Customer Redispatch Obligation
    As a condition to receiving Network Integration Transmission 
Service, the Network Customer agrees to redispatch its Network 
Resources as requested by the Transmission Provider pursuant to Section 
33.2. To the extent practical, the redispatch of resources pursuant to 
this section shall be on a least cost, non-discriminatory basis between 
all Network Customers, and the Transmission Provider.
30.6 Transmission Arrangements for Network Resources Not Physically 
Interconnected With the Transmission Provider
    The Network Customer shall be responsible for any arrangements 
necessary to deliver capacity and energy from a Network Resource not 
physically interconnected with the Transmission Provider's Transmission 
System. The Transmission Provider will undertake reasonable efforts to 
assist the Network Customer in obtaining such arrangements, including 
without limitation, providing any information or data required by such 
other entity pursuant to Good Utility Practice.
30.7 Limitation on Designation of Network Resources
    The Network Customer must demonstrate that it owns or has committed 
to purchase generation pursuant to an executed contract in order to 
designate a generating resource as a Network Resource. Alternatively, 
the Network Customer may establish that execution of a contract is 
contingent upon the availability of transmission service under Part III 
of the Tariff.
30.8 Use of Interface Capacity by the Network Customer
    There is no limitation upon a Network Customer's use of the 
Transmission Provider's Transmission System at any particular interface 
to integrate the Network Customer's Network Resources (or substitute 
economy purchases) with its Network Loads. However, a Network 
Customer's use of the Transmission Provider's total interface capacity 
with other transmission systems may not exceed the Network Customer's 
Load.
30.9 Network Customer Owned Transmission Facilities
    The Network Customer that owns existing transmission facilities 
that are integrated with the Transmission Provider's Transmission 
System may be eligible to receive consideration either through a 
billing credit or some other mechanism. In order to receive such 
consideration the Network Customer must demonstrate that its 
transmission facilities are integrated into the plans or operations of 
the Transmission Provider, to serve its power and transmission 
customers. For facilities added by the Network Customer subsequent to 
[the effective date of a Final Rule in RM05-25-000], the Network 
Customer shall receive credit for such transmission facilities added if 
such facilities are integrated into the operations of the Transmission 
Provider's facilities; provided however, the Network Customer's 
transmission facilities shall be presumed to be integrated if such 
transmission facilities, if owned by the Transmission Provider, would 
be eligible for inclusion in the Transmission Provider's annual 
transmission revenue requirement as specified in Attachment H. 
Calculation of any credit under this subsection shall be addressed in 
either the Network Customer's Service Agreement or any other agreement 
between the Parties.

31 Designation of Network Load

31.1 Network Load
    The Network Customer must designate the individual Network Loads on 
whose behalf the Transmission Provider will provide Network Integration 
Transmission Service. The Network Loads shall be specified in the 
Service Agreement.
31.2 New Network Loads Connected With the Transmission Provider
    The Network Customer shall provide the Transmission Provider with 
as much advance notice as reasonably practicable of the designation of 
new Network Load that will be added to its Transmission System. A 
designation of new Network Load must be made through a modification of 
service pursuant to a new Application. The Transmission Provider will 
use due diligence to install any transmission facilities required to 
interconnect a new Network Load designated by the Network Customer. The 
costs of new facilities required to interconnect a new Network Load 
shall be determined in accordance with the procedures provided in 
Section 32.4 and shall be charged to the Network Customer in accordance 
with Commission policies.
31.3 Network Load Not Physically Interconnected With the Transmission 
Provider
    This section applies to both initial designation pursuant to 
Section 31.1 and the subsequent addition of new Network Load not 
physically interconnected with the Transmission Provider. To the extent 
that the Network Customer desires to obtain transmission service for a 
load outside the Transmission Provider's Transmission System, the 
Network Customer shall have the option of (1) electing to include the 
entire load as Network Load for all purposes under Part III of the 
Tariff and designating Network Resources in connection with such 
additional Network Load, or (2) excluding that

[[Page 39148]]

entire load from its Network Load and purchasing Point-To-Point 
Transmission Service under Part II of the Tariff. To the extent that 
the Network Customer gives notice of its intent to add a new Network 
Load as part of its Network Load pursuant to this section the request 
must be made through a modification of service pursuant to a new 
Application.
31.4 New Interconnection Points
    To the extent the Network Customer desires to add a new Delivery 
Point or interconnection point between the Transmission Provider's 
Transmission System and a Network Load, the Network Customer shall 
provide the Transmission Provider with as much advance notice as 
reasonably practicable.
31.5 Changes in Service Requests
    Under no circumstances shall the Network Customer's decision to 
cancel or delay a requested change in Network Integration Transmission 
Service (e.g. the addition of a new Network Resource or designation of 
a new Network Load) in any way relieve the Network Customer of its 
obligation to pay the costs of transmission facilities constructed by 
the Transmission Provider and charged to the Network Customer as 
reflected in the Service Agreement. However, the Transmission Provider 
must treat any requested change in Network Integration Transmission 
Service in a non-discriminatory manner.
31.6 Annual Load and Resource Information Updates
    The Network Customer shall provide the Transmission Provider with 
annual updates of Network Load and Network Resource forecasts 
consistent with those included in its Application for Network 
Integration Transmission Service under Part III of the Tariff 
including, but not limited to, any information provided under section 
29.2(ix) pursuant to the Transmission Provider's planning process in 
Attachment K. The Network Customer also shall provide the Transmission 
Provider with timely written notice of material changes in any other 
information provided in its Application relating to the Network 
Customer's Network Load, Network Resources, its transmission system or 
other aspects of its facilities or operations affecting the 
Transmission Provider's ability to provide reliable service.

32 Additional Study Procedures for Network Integration Transmission 
Service Requests

32.1 Notice of Need for System Impact Study
    After receiving a request for service, the Transmission Provider 
shall determine on a non-discriminatory basis whether a System Impact 
Study is needed. A description of the Transmission Provider's 
methodology for completing a System Impact Study is provided in 
Attachment D. If the Transmission Provider determines that a System 
Impact Study is necessary to accommodate the requested service, it 
shall so inform the Eligible Customer, as soon as practicable. In such 
cases, the Transmission Provider shall, within thirty (30) days of 
receipt of a Completed Application, tender a System Impact Study 
Agreement pursuant to which the Eligible Customer shall agree to 
reimburse the Transmission Provider for performing the required System 
Impact Study. For a service request to remain a Completed Application, 
the Eligible Customer shall execute the System Impact Study Agreement 
and return it to the Transmission Provider within fifteen (15) days. If 
the Eligible Customer elects not to execute the System Impact Study 
Agreement, its Application shall be deemed withdrawn and its deposit 
shall be returned with interest.
32.2 System Impact Study Agreement and Cost Reimbursement
    (i) The System Impact Study Agreement will clearly specify the 
Transmission Provider's estimate of the actual cost, and time for 
completion of the System Impact Study. The charge shall not exceed the 
actual cost of the study. In performing the System Impact Study, the 
Transmission Provider shall rely, to the extent reasonably practicable, 
on existing transmission planning studies. The Eligible Customer will 
not be assessed a charge for such existing studies; however, the 
Eligible Customer will be responsible for charges associated with any 
modifications to existing planning studies that are reasonably 
necessary to evaluate the impact of the Eligible Customer's request for 
service on the Transmission System.
    (ii) If in response to multiple Eligible Customers requesting 
service in relation to the same competitive solicitation, a single 
System Impact Study is sufficient for the Transmission Provider to 
accommodate the service requests, the costs of that study shall be pro-
rated among the Eligible Customers.
    (iii) For System Impact Studies that the Transmission Provider 
conducts on its own behalf, the Transmission Provider shall record the 
cost of the System Impact Studies pursuant to Section 8.
32.3 System Impact Study Procedures
    Upon receipt of an executed System Impact Study Agreement, the 
Transmission Provider will use due diligence to complete the required 
System Impact Study within a sixty (60) day period. The System Impact 
Study shall identify (1) any system constraints, identified with 
specificity by transmission element or flowgate, (2) redispatch options 
(when requested by an Eligible Customer) including, to the extent 
possible, an estimate of the cost of redispatch, (3) available options 
for installation of automatic devices to curtail service (when 
requested by an Eligible Customer), and (4) additional Direct 
Assignment Facilities or Network Upgrades required to provide the 
requested service. For customers requesting the study of redispatch 
options, the System Impact Study shall (1) identify all resources 
located within the Transmission Provider's Control Area that can 
significantly contribute toward relieving the system constraint and (2) 
provide a measurement of each resource's impact on the system 
constraint. If the Transmission Provider possesses information 
indicating that any resource outside its Control Area could relieve the 
constraint, it shall identify each such resource in the System Impact 
Study. In the event that the Transmission Provider is unable to 
complete the required System Impact Study within such time period, it 
shall so notify the Eligible Customer and provide an estimated 
completion date along with an explanation of the reasons why additional 
time is required to complete the required studies. A copy of the 
completed System Impact Study and related work papers shall be made 
available to the Eligible Customer as soon as the System Impact Study 
is complete. The Transmission Provider will use the same due diligence 
in completing the System Impact Study for an Eligible Customer as it 
uses when completing studies for itself. The Transmission Provider 
shall notify the Eligible Customer immediately upon completion of the 
System Impact Study if the Transmission System will be adequate to 
accommodate all or part of a request for service or that no costs are 
likely to be incurred for new transmission facilities or upgrades. In 
order for a request to remain a Completed Application, within fifteen 
(15) days of completion of the System

[[Page 39149]]

Impact Study the Eligible Customer must execute a Service Agreement or 
request the filing of an unexecuted Service Agreement, or the 
Application shall be deemed terminated and withdrawn.
32.4 Facilities Study Procedures
    If a System Impact Study indicates that additions or upgrades to 
the Transmission System are needed to supply the Eligible Customer's 
service request, the Transmission Provider, within thirty (30) days of 
the completion of the System Impact Study, shall tender to the Eligible 
Customer a Facilities Study Agreement pursuant to which the Eligible 
Customer shall agree to reimburse the Transmission Provider for 
performing the required Facilities Study. For a service request to 
remain a Completed Application, the Eligible Customer shall execute the 
Facilities Study Agreement and return it to the Transmission Provider 
within fifteen (15) days. If the Eligible Customer elects not to 
execute the Facilities Study Agreement, its Application shall be deemed 
withdrawn and its deposit shall be returned with interest. Upon receipt 
of an executed Facilities Study Agreement, the Transmission Provider 
will use due diligence to complete the required Facilities Study within 
a sixty (60) day period. If the Transmission Provider is unable to 
complete the Facilities Study in the allotted time period, the 
Transmission Provider shall notify the Eligible Customer and provide an 
estimate of the time needed to reach a final determination along with 
an explanation of the reasons that additional time is required to 
complete the study. When completed, the Facilities Study will include a 
good faith estimate of (i) the cost of Direct Assignment Facilities to 
be charged to the Eligible Customer, (ii) the Eligible Customer's 
appropriate share of the cost of any required Network Upgrades, and 
(iii) the time required to complete such construction and initiate the 
requested service. The Eligible Customer shall provide the Transmission 
Provider with a letter of credit or other reasonable form of security 
acceptable to the Transmission Provider equivalent to the costs of new 
facilities or upgrades consistent with commercial practices as 
established by the Uniform Commercial Code. The Eligible Customer shall 
have thirty (30) days to execute a Service Agreement or request the 
filing of an unexecuted Service Agreement and provide the required 
letter of credit or other form of security or the request no longer 
will be a Completed Application and shall be deemed terminated and 
withdrawn.
32.5 Penalties for Failure To Meet Study Deadlines
    Section 19.9 defines penalties that apply for failure to meet the 
60-day study completion due diligence deadlines for System Impact 
Studies and Facilities Studies under Part II of the Tariff. These same 
requirements and penalties apply to service under Part III of the 
Tariff.

33 Load Shedding and Curtailments

33.1 Procedures
    Prior to the Service Commencement Date, the Transmission Provider 
and the Network Customer shall establish Load Shedding and Curtailment 
procedures pursuant to the Network Operating Agreement with the 
objective of responding to contingencies on the Transmission System and 
on systems directly and indirectly interconnected with Transmission 
Provider's Transmission System. The Parties will implement such 
programs during any period when the Transmission Provider determines 
that a system contingency exists and such procedures are necessary to 
alleviate such contingency. The Transmission Provider will notify all 
affected Network Customers in a timely manner of any scheduled 
Curtailment.
33.2 Transmission Constraints
    During any period when the Transmission Provider determines that a 
transmission constraint exists on the Transmission System, and such 
constraint may impair the reliability of the Transmission Provider's 
system, the Transmission Provider will take whatever actions, 
consistent with Good Utility Practice, that are reasonably necessary to 
maintain the reliability of the Transmission Provider's system. To the 
extent the Transmission Provider determines that the reliability of the 
Transmission System can be maintained by redispatching resources, the 
Transmission Provider will initiate procedures pursuant to the Network 
Operating Agreement to redispatch all Network Resources and the 
Transmission Provider's own resources on a least-cost basis without 
regard to the ownership of such resources. Any redispatch under this 
section may not unduly discriminate between the Transmission Provider's 
use of the Transmission System on behalf of its Native Load Customers 
and any Network Customer's use of the Transmission System to serve its 
designated Network Load.
33.3 Cost Responsibility for Relieving Transmission Constraints
    Whenever the Transmission Provider implements least-cost redispatch 
procedures in response to a transmission constraint, the Transmission 
Provider and Network Customers will each bear a proportionate share of 
the total redispatch cost based on their respective Load Ratio Shares.
33.4 Curtailments of Scheduled Deliveries
    If a transmission constraint on the Transmission Provider's 
Transmission System cannot be relieved through the implementation of 
least-cost redispatch procedures and the Transmission Provider 
determines that it is necessary to Curtail scheduled deliveries, the 
Parties shall Curtail such schedules in accordance with the Network 
Operating Agreement or pursuant to the Transmission Loading Relief 
procedures specified in Attachment J.
33.5 Allocation of Curtailments
    The Transmission Provider shall, on a non-discriminatory basis, 
Curtail the transaction(s) that effectively relieve the constraint. 
However, to the extent practicable and consistent with Good Utility 
Practice, any Curtailment will be shared by the Transmission Provider 
and Network Customer in proportion to their respective Load Ratio 
Shares. The Transmission Provider shall not direct the Network Customer 
to Curtail schedules to an extent greater than the Transmission 
Provider would Curtail the Transmission Provider's schedules under 
similar circumstances.
33.6 Load Shedding
    To the extent that a system contingency exists on the Transmission 
Provider's Transmission System and the Transmission Provider determines 
that it is necessary for the Transmission Provider and the Network 
Customer to shed load, the Parties shall shed load in accordance with 
previously established procedures under the Network Operating 
Agreement.
33.7 System Reliability
    Notwithstanding any other provisions of this Tariff, the 
Transmission Provider reserves the right, consistent with Good Utility 
Practice and on a not unduly discriminatory basis, to Curtail Network 
Integration Transmission Service without liability on the Transmission 
Provider's part for the purpose of making necessary adjustments to, 
changes in, or repairs on its lines, substations and facilities, and in 
cases where the continuance of Network

[[Page 39150]]

Integration Transmission Service would endanger persons or property. In 
the event of any adverse condition(s) or disturbance(s) on the 
Transmission Provider's Transmission System or on any other system(s) 
directly or indirectly interconnected with the Transmission Provider's 
Transmission System, the Transmission Provider, consistent with Good 
Utility Practice, also may Curtail Network Integration Transmission 
Service in order to (i) limit the extent or damage of the adverse 
condition(s) or disturbance(s), (ii) prevent damage to generating or 
transmission facilities, or (iii) expedite restoration of service. The 
Transmission Provider will give the Network Customer as much advance 
notice as is practicable in the event of such Curtailment. Any 
Curtailment of Network Integration Transmission Service will be not 
unduly discriminatory relative to the Transmission Provider's use of 
the Transmission System on behalf of its Native Load Customers. The 
Transmission Provider shall specify the rate treatment and all related 
terms and conditions applicable in the event that the Network Customer 
fails to respond to established Load Shedding and Curtailment 
procedures.

34 Rates and Charges

    The Network Customer shall pay the Transmission Provider for any 
Direct Assignment Facilities, Ancillary Services, and applicable study 
costs, consistent with Commission policy, along with the following:
34.1 Monthly Demand Charge
    The Network Customer shall pay a monthly Demand Charge, which shall 
be determined by multiplying its Load Ratio Share times one twelfth (1/
12) of the Transmission Provider's Annual Transmission Revenue 
Requirement specified in Schedule H.
34.2 Determination of Network Customer's Monthly Network Load
    The Network Customer's monthly Network Load is its hourly load 
(including its designated Network Load not physically interconnected 
with the Transmission Provider under Section 31.3) coincident with the 
Transmission Provider's Monthly Transmission System Peak.
34.3 Determination of Transmission Provider's Monthly Transmission 
System Load
    The Transmission Provider's monthly Transmission System load is the 
Transmission Provider's Monthly Transmission System Peak minus the 
coincident peak usage of all Firm Point-To-Point Transmission Service 
customers pursuant to Part II of this Tariff plus the Reserved Capacity 
of all Firm Point-To-Point Transmission Service customers.
34.4 Redispatch Charge
    The Network Customer shall pay a Load Ratio Share of any redispatch 
costs allocated between the Network Customer and the Transmission 
Provider pursuant to Section 33. To the extent that the Transmission 
Provider incurs an obligation to the Network Customer for redispatch 
costs in accordance with Section 33, such amounts shall be credited 
against the Network Customer's bill for the applicable month.
34.5 Stranded Cost Recovery
    The Transmission Provider may seek to recover stranded costs from 
the Network Customer pursuant to this Tariff in accordance with the 
terms, conditions and procedures set forth in FERC Order No. 888. 
However, the Transmission Provider must separately file any proposal to 
recover stranded costs under Section 205 of the Federal Power Act.

35 Operating Arrangements

35.1 Operation under the Network Operating Agreement
    The Network Customer shall plan, construct, operate and maintain 
its facilities in accordance with Good Utility Practice and in 
conformance with the Network Operating Agreement.
35.2 Network Operating Agreement
    The terms and conditions under which the Network Customer shall 
operate its facilities and the technical and operational matters 
associated with the implementation of Part III of the Tariff shall be 
specified in the Network Operating Agreement. The Network Operating 
Agreement shall provide for the Parties to (i) operate and maintain 
equipment necessary for integrating the Network Customer within the 
Transmission Provider's Transmission System (including, but not limited 
to, remote terminal units, metering, communications equipment and 
relaying equipment), (ii) transfer data between the Transmission 
Provider and the Network Customer (including, but not limited to, heat 
rates and operational characteristics of Network Resources, generation 
schedules for units outside the Transmission Provider's Transmission 
System, interchange schedules, unit outputs for redispatch required 
under Section 33, voltage schedules, loss factors and other real time 
data), (iii) use software programs required for data links and 
constraint dispatching, (iv) exchange data on forecasted loads and 
resources necessary for long-term planning, and (v) address any other 
technical and operational considerations required for implementation of 
Part III of the Tariff, including scheduling protocols. The Network 
Operating Agreement will recognize that the Network Customer shall 
either (i) operate as a Control Area under applicable guidelines of the 
Electric Reliability Organization (ERO) as defined in 18 CFR 39.1, (ii) 
satisfy its Control Area requirements, including all necessary 
Ancillary Services, by contracting with the Transmission Provider, or 
(iii) satisfy its Control Area requirements, including all necessary 
Ancillary Services, by contracting with another entity, consistent with 
Good Utility Practice, which satisfies the applicable reliability 
guidelines of the ERO. The Transmission Provider shall not unreasonably 
refuse to accept contractual arrangements with another entity for 
Ancillary Services. The Network Operating Agreement is included in 
Attachment G.
35.3 Network Operating Committee
    A Network Operating Committee (Committee) shall be established to 
coordinate operating criteria for the Parties' respective 
responsibilities under the Network Operating Agreement. Each Network 
Customer shall be entitled to have at least one representative on the 
Committee. The Committee shall meet from time to time as need requires, 
but no less than once each calendar year.

Schedule 1--Scheduling, System Control and Dispatch Service

    This service is required to schedule the movement of power through, 
out of, within, or into a Control Area. This service can be provided 
only by the operator of the Control Area in which the transmission 
facilities used for transmission service are located. Scheduling, 
System Control and Dispatch Service is to be provided directly by the 
Transmission Provider (if the Transmission Provider is the Control Area 
operator) or indirectly by the Transmission Provider making 
arrangements with the Control Area operator that performs this service 
for the Transmission Provider's Transmission System. The Transmission 
Customer must purchase this service from the Transmission Provider or 
the Control Area operator. The charges for Scheduling, System Control 
and Dispatch Service are to be based on the rates set forth below. To 
the extent the Control Area operator performs this

[[Page 39151]]

service for the Transmission Provider, charges to the Transmission 
Customer are to reflect only a pass-through of the costs charged to the 
Transmission Provider by that Control Area operator.

Schedule 2--Reactive Supply and Voltage Control From Generation or 
Other Sources Service

    In order to maintain transmission voltages on the Transmission 
Provider's transmission facilities within acceptable limits, generation 
facilities and non-generation resources capable of providing this 
service that are under the control of the control area operator are 
operated to produce (or absorb) reactive power. Thus, Reactive Supply 
and Voltage Control from Generation or Other Sources Service must be 
provided for each transaction on the Transmission Provider's 
transmission facilities. The amount of Reactive Supply and Voltage 
Control from Generation or Other Sources Service that must be supplied 
with respect to the Transmission Customer's transaction will be 
determined based on the reactive power support necessary to maintain 
transmission voltages within limits that are generally accepted in the 
region and consistently adhered to by the Transmission Provider.
    Reactive Supply and Voltage Control from Generation or Other 
Sources Service is to be provided directly by the Transmission Provider 
(if the Transmission Provider is the Control Area operator) or 
indirectly by the Transmission Provider making arrangements with the 
Control Area operator that performs this service for the Transmission 
Provider's Transmission System. The Transmission Customer must purchase 
this service from the Transmission Provider or the Control Area 
operator. The charges for such service will be based on the rates set 
forth below. To the extent the Control Area operator performs this 
service for the Transmission Provider, charges to the Transmission 
Customer are to reflect only a pass-through of the costs charged to the 
Transmission Provider by the Control Area operator.

Schedule 3--Regulation and Frequency Response Service

    Regulation and Frequency Response Service is necessary to provide 
for the continuous balancing of resources (generation and interchange) 
with load and for maintaining scheduled Interconnection frequency at 
sixty cycles per second (60 Hz). Regulation and Frequency Response 
Service is accomplished by committing on-line generation whose output 
is raised or lowered (predominantly through the use of automatic 
generating control equipment) and by other non-generation resources 
capable of providing this service as necessary to follow the moment-by-
moment changes in load. The obligation to maintain this balance between 
resources and load lies with the Transmission Provider (or the Control 
Area operator that performs this function for the Transmission 
Provider). The Transmission Provider must offer this service when the 
transmission service is used to serve load within its Control Area. The 
Transmission Customer must either purchase this service from the 
Transmission Provider or make alternative comparable arrangements to 
satisfy its Regulation and Frequency Response Service obligation. The 
amount of and charges for Regulation and Frequency Response Service are 
set forth below. To the extent the Control Area operator performs this 
service for the Transmission Provider, charges to the Transmission 
Customer are to reflect only a pass-through of the costs charged to the 
Transmission Provider by that Control Area operator.

Schedule 4--Energy Imbalance Service

    Energy Imbalance Service is provided when a difference occurs 
between the scheduled and the actual delivery of energy to a load 
located within a Control Area over a single hour. The Transmission 
Provider must offer this service when the transmission service is used 
to serve load within its Control Area. The Transmission Customer must 
either purchase this service from the Transmission Provider or make 
alternative comparable arrangements, which may include use of non-
generation resources capable of providing this service, to satisfy its 
Energy Imbalance Service obligation. To the extent the Control Area 
operator performs this service for the Transmission Provider, charges 
to the Transmission Customer are to reflect only a pass-through of the 
costs charged to the Transmission Provider by that Control Area 
operator. The Transmission Provider may charge a Transmission Customer 
a penalty for either hourly energy imbalances under this Schedule or a 
penalty for hourly generator imbalances under Schedule 9 for imbalances 
occurring during the same hour, but not both unless the imbalances 
aggravate rather than offset each other.
    The Transmission Provider shall establish charges for energy 
imbalance based on the deviation bands as follows: (i) Deviations 
within +/-1.5 percent (with a minimum of 2 MW) of the scheduled 
transaction to be applied hourly to any energy imbalance that occurs as 
a result of the Transmission Customer's scheduled transaction(s) will 
be netted on a monthly basis and settled financially, at the end of the 
month, at 100 percent of incremental or decremental cost; (ii) 
deviations greater than +/-1.5 percent up to 7.5 percent (or greater 
than 2 MW up to 10 MW) of the scheduled transaction to be applied 
hourly to any energy imbalance that occurs as a result of the 
Transmission Customer's scheduled transaction(s) will be settled 
financially, at the end of each month, at 110 percent of incremental 
cost or 90 percent of decremental cost, and (iii) deviations greater 
than +/-7.5 percent (or 10 MW) of the scheduled transaction to be 
applied hourly to any energy imbalance that occurs as a result of the 
Transmission Customer's scheduled transaction(s) will be settled 
financially, at the end of each month, at 125 percent of incremental 
cost or 75 percent of decremental cost.
    For purposes of this Schedule, incremental cost and decremental 
cost represent the Transmission Provider's actual average hourly cost 
of the last 10 MW dispatched for any purpose, e.g., to supply the 
Transmission Provider's Native Load Customers, correct imbalances, or 
make off-system sales, based on the replacement cost of fuel, unit heat 
rates, start-up costs (including any commitment and redispatch costs), 
incremental operation and maintenance costs, and purchased and 
interchange power costs and taxes, as applicable.

Schedule 5--Operating Reserve--Spinning Reserve Service

    Spinning Reserve Service is needed to serve load immediately in the 
event of a system contingency. Spinning Reserve Service may be provided 
by generating units that are on-line and loaded at less than maximum 
output and by non-generation resources capable of providing this 
service. The Transmission Provider must offer this service when the 
transmission service is used to serve load within its Control Area. The 
Transmission Customer must either purchase this service from the 
Transmission Provider or make alternative comparable arrangements to 
satisfy its Spinning Reserve Service obligation. The amount of and 
charges for Spinning Reserve Service are set forth below. To the extent 
the Control Area operator performs this service for the Transmission 
Provider, charges to the Transmission Customer are to reflect only a 
pass-through of the costs charged to the Transmission Provider by that 
Control Area operator.

[[Page 39152]]

Schedule 6--Operating Reserve--Supplemental Reserve Service

    Supplemental Reserve Service is needed to serve load in the event 
of a system contingency; however, it is not available immediately to 
serve load but rather within a short period of time. Supplemental 
Reserve Service may be provided by generating units that are on-line 
but unloaded, by quick-start generation or by interruptible load or 
other non-generation resources capable of providing this service. The 
Transmission Provider must offer this service when the transmission 
service is used to serve load within its Control Area. The Transmission 
Customer must either purchase this service from the Transmission 
Provider or make alternative comparable arrangements to satisfy its 
Supplemental Reserve Service obligation. The amount of and charges for 
Supplemental Reserve Service are set forth below. To the extent the 
Control Area operator performs this service for the Transmission 
Provider, charges to the Transmission Customer are to reflect only a 
pass-through of the costs charged to the Transmission Provider by that 
Control Area operator.

Schedule 7--Long-Term Firm and Short-Term Firm Point-to-Point 
Transmission Service

    The Transmission Customer shall compensate the Transmission 
Provider each month for Reserved Capacity at the sum of the applicable 
charges set forth below:
    (1) Yearly delivery: one-twelfth of the demand charge of $------/KW 
of Reserved Capacity per year.
    (2) Monthly delivery: $------/KW of Reserved Capacity per month.
    (3) Weekly delivery: $------/KW of Reserved Capacity per week.
    (4) Daily delivery: $------/KW of Reserved Capacity per day.
    The total demand charge in any week, pursuant to a reservation for 
Daily delivery, shall not exceed the rate specified in section (3) 
above times the highest amount in kilowatts of Reserved Capacity in any 
day during such week.
    (5) Discounts: Three principal requirements apply to discounts for 
transmission service as follows (1) Any offer of a discount made by the 
Transmission Provider must be announced to all Eligible Customers 
solely by posting on the OASIS, (2) any customer-initiated requests for 
discounts (including requests for use by one's wholesale merchant or an 
Affiliate's use) must occur solely by posting on the OASIS, and (3) 
once a discount is negotiated, details must be immediately posted on 
the OASIS. For any discount agreed upon for service on a path, from 
point(s) of receipt to point(s) of delivery, the Transmission Provider 
must offer the same discounted transmission service rate for the same 
time period to all Eligible Customers on all unconstrained transmission 
paths that go to the same point(s) of delivery on the Transmission 
System.
    (6) Resales: The rates and rules governing charges and discounts 
stated above shall not apply to resales of transmission service, 
compensation for which shall be governed by section 23.1 of the Tariff.

Schedule 8--Non-Firm Point-to-Point Transmission Service

    The Transmission Customer shall compensate the Transmission 
Provider for Non-Firm Point-To-Point Transmission Service up to the sum 
of the applicable charges set forth below:
    (1) Monthly delivery: $------/KW of Reserved Capacity per month.
    (2) Weekly delivery: $------/KW of Reserved Capacity per week.
    (3) Daily delivery: $------/KW of Reserved Capacity per day.
    The total demand charge in any week, pursuant to a reservation for 
Daily delivery, shall not exceed the rate specified in section (2) 
above times the highest amount in kilowatts of Reserved Capacity in any 
day during such week.
    (4) Hourly delivery: The basic charge shall be that agreed upon by 
the Parties at the time this service is reserved and in no event shall 
exceed $------/MWH. The total demand charge in any day, pursuant to a 
reservation for Hourly delivery, shall not exceed the rate specified in 
section (3) above times the highest amount in kilowatts of Reserved 
Capacity in any hour during such day. In addition, the total demand 
charge in any week, pursuant to a reservation for Hourly or Daily 
delivery, shall not exceed the rate specified in section (2) above 
times the highest amount in kilowatts of Reserved Capacity in any hour 
during such week.
    (5) Discounts: Three principal requirements apply to discounts for 
transmission service as follows (1) Any offer of a discount made by the 
Transmission Provider must be announced to all Eligible Customers 
solely by posting on the OASIS, (2) any customer-initiated requests for 
discounts (including requests for use by one's wholesale merchant or an 
Affiliate's use) must occur solely by posting on the OASIS, and (3) 
once a discount is negotiated, details must be immediately posted on 
the OASIS. For any discount agreed upon for service on a path, from 
point(s) of receipt to point(s) of delivery, the Transmission Provider 
must offer the same discounted transmission service rate for the same 
time period to all Eligible Customers on all unconstrained transmission 
paths that go to the same point(s) of delivery on the Transmission 
System.
    (6) Resales: The rates and rules governing charges and discounts 
stated above shall not apply to resales of transmission service, 
compensation for which shall be governed by section 23.1 of the Tariff.

Schedule 9--Generator Imbalance Service

    Generator Imbalance Service is provided when a difference occurs 
between the output of a generator located in the Transmission 
Provider's Control Area and a delivery schedule from that generator to 
(1) another Control Area or (2) a load within the Transmission 
Provider's Control Area over a single hour. The Transmission Provider 
must offer this service, to the extent it is physically feasible to do 
so from its resources or from resources available to it, when 
Transmission Service is used to deliver energy from a generator located 
within its Control Area. The Transmission Customer must either purchase 
this service from the Transmission Provider or make alternative 
comparable arrangements, which may include use of non-generation 
resources capable of providing this service, to satisfy its Generator 
Imbalance Service obligation. To the extent the Control Area operator 
performs this service for the Transmission Provider, charges to the 
Transmission Customer are to reflect only a pass-through of the costs 
charged to the Transmission Provider by that Control Area Operator. The 
Transmission Provider may charge a Transmission Customer a penalty for 
either hourly generator imbalances under this Schedule or a penalty for 
hourly energy imbalances under Schedule 4 for imbalances occurring 
during the same hour, but not both unless the imbalances aggravate 
rather than offset each other.
    The Transmission Provider shall establish charges for generator 
imbalance based on the deviation bands as follows: (i) Deviations 
within +/-1.5 percent (with a minimum of 2 MW) of the scheduled 
transaction to be applied hourly to any generator imbalance that occurs 
as a result of the Transmission Customer's scheduled transaction(s) 
will be netted on a monthly basis and settled financially, at the end 
of each month, at 100 percent of incremental or decremental cost, (ii) 
deviations greater than +/-1.5 percent up to 7.5 percent (or greater 
than 2 MW up to 10 MW) of

[[Page 39153]]

the scheduled transaction to be applied hourly to any generator 
imbalance that occurs as a result of the Transmission Customer's 
scheduled transaction(s) will be settled financially, at the end of 
each month, at 110 percent of incremental cost or 90 percent of 
decremental cost, and (iii) deviations greater than +/-7.5 percent (or 
10 MW) of the scheduled transaction to be applied hourly to any 
generator imbalance that occurs as a result of the Transmission 
Customer's scheduled transaction(s) will be settled at 125 percent of 
incremental cost or 75 percent of decremental cost, except that an 
intermittent resource will be exempt from this deviation band and will 
pay the deviation band charges for all deviations greater than the 
larger of 1.5 percent or 2 MW. An intermittent resource, for the 
limited purpose of this Schedule is an electric generator that is not 
dispatchable and cannot store its fuel source and therefore cannot 
respond to changes in system demand or respond to transmission security 
constraints.
    Notwithstanding the foregoing, deviations from scheduled 
transactions in order to respond to directives by the Transmission 
Provider, a balancing authority, or a reliability coordinator shall not 
be subject to the deviation bands identified above and, instead, shall 
be settled financially, at the end of the month, at 100 percent of 
incremental and decremental cost. Such directives may include 
instructions to correct frequency decay, respond to a reserve sharing 
event, or change output to relieve congestion.
    For purposes of this Schedule, incremental cost and decremental 
cost represent the Transmission Provider's actual average hourly cost 
of the last 10 MW dispatched for any purpose, e.g., to supply the 
Transmission Provider's Native Load Customers, correct imbalances, or 
make off-system sales, based on the replacement cost of fuel, unit heat 
rates, start-up costs (including any commitment and redispatch costs), 
incremental operation and maintenance costs, and purchased and 
interchange power costs and taxes, as applicable.

Attachment A--Form of Service Agreement for Firm Point-To-Point 
Transmission Service

1.0 This Service Agreement, dated as of ------------, is entered into, 
by and between ------------ (the Transmission Provider), and ----------
-- (``Transmission Customer'').
2.0 The Transmission Customer has been determined by the Transmission 
Provider to have a Completed Application for Firm Point-To-Point 
Transmission Service under the Tariff.
3.0 The Transmission Customer has provided to the Transmission Provider 
an Application deposit in accordance with the provisions of Section 
17.3 of the Tariff.
4.0 Service under this agreement shall commence on the later of (l) the 
requested service commencement date, or (2) the date on which 
construction of any Direct Assignment Facilities and/or Network 
Upgrades are completed, or (3) such other date as it is permitted to 
become effective by the Commission. Service under this agreement shall 
terminate on such date as mutually agreed upon by the parties.
5.0 The Transmission Provider agrees to provide and the Transmission 
Customer agrees to take and pay for Firm Point-To-Point Transmission 
Service in accordance with the provisions of Part II of the Tariff and 
this Service Agreement.
6.0 Any notice or request made to or by either Party regarding this 
Service Agreement shall be made to the representative of the other 
Party as indicated below.

Transmission Provider:

-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Transmission Customer:

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-----------------------------------------------------------------------
-----------------------------------------------------------------------

7.0 The Tariff is incorporated herein and made a part hereof.
In witness whereof, the Parties have caused this Service Agreement to 
be executed by their respective authorized officials.

Transmission Provider:

By:--------------------------------------------------------------------
 Name------------------------------------------------------------------
Title------------------------------------------------------------------
Date-------------------------------------------------------------------

Transmission Customer:

By:--------------------------------------------------------------------
 Name------------------------------------------------------------------
Title------------------------------------------------------------------
Date-------------------------------------------------------------------

Specifications for Long-Term Firm Point-To-Point Transmission Service

1.0 Term of Transaction:-----------------------------------------------
Start Date:------------------------------------------------------------
Termination Date:------------------------------------------------------
2.0 Description of capacity and energy to be transmitted by 
Transmission Provider including the electric Control Area in which the 
transaction originates.
-----------------------------------------------------------------------

3.0 Point(s) of Receipt:-----------------------------------------------
Delivering Party:------------------------------------------------------
4.0 Point(s) of Delivery:----------------------------------------------
Receiving Party:-------------------------------------------------------
5.0 Maximum amount of capacity and energy to be transmitted (Reserved 
Capacity):-------------------------------------------------------------
6.0 Designation of party(ies) subject to reciprocal service obligation:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

7.0 Name(s) of any Intervening Systems providing transmission service:
-----------------------------------------------------------------------
-----------------------------------------------------------------------

8.0 Service under this Agreement may be subject to some combination of 
the charges detailed below. (The appropriate charges for individual 
transactions will be determined in accordance with the terms and 
conditions of the Tariff.)
8.1 Transmission Charge:-----------------------------------------------
8.2 System Impact and/or Facilities Study Charge(s):-------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
8.3 Direct Assignment Facilities Charge:-------------------------------
-----------------------------------------------------------------------

8.4 Ancillary Services Charges:----------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Attachment A-1--Form of Service Agreement for the Resale, Reassignment 
or Transfer of Point-To-Point Transmission Service

1.0 This Service Agreement, dated as of ------------, is entered into, 
by and between ------------ (the Transmission Provider), and ----------
-- (the Assignee).
2.0 The Assignee has been determined by the Transmission Provider to be 
an Eligible Customer under the Tariff pursuant to which the 
transmission service rights to be transferred were originally obtained.
3.0 The terms and conditions for the transaction entered into under 
this Service Agreement shall be subject to the terms and conditions of 
Part II of the Transmission Provider's Tariff, except for those terms 
and conditions negotiated by the Reseller of the reassigned 
transmission capacity (pursuant to Section 23.1 of this Tariff) and the 
Assignee, to include: contract effective and termination dates, the 
amount of reassigned capacity or energy, point(s) of receipt and 
delivery.

[[Page 39154]]

Changes by the Assignee to the Reseller's Points of Receipt and Points 
of Delivery will be subject to the provisions of Section 23.2 of this 
Tariff.
4.0 The Transmission Provider shall credit the Reseller for the price 
reflected in the Assignee's Service Agreement or the associated OASIS 
schedule.
5.0 Any notice or request made to or by either Party regarding this 
Service Agreement shall be made to the representative of the other 
Party as indicated below.

Transmission Provider:

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-----------------------------------------------------------------------
-----------------------------------------------------------------------

Assignee:

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-----------------------------------------------------------------------
-----------------------------------------------------------------------

6.0 The Tariff is incorporated herein and made a part hereof.
In witness whereof, the Parties have caused this Service Agreement to 
be executed by their respective authorized officials.

Transmission Provider:

By:--------------------------------------------------------------------
 Name
-----------------------------------------------------------------------
Title
-----------------------------------------------------------------------
Date

Assignee:

By:--------------------------------------------------------------------
 Name
-----------------------------------------------------------------------
Title
-----------------------------------------------------------------------
Date

Specifications For The Resale, Reassignment Or Transfer of Long-Term 
Firm Point-To-Point Transmission Service

1.0 Term of Transaction:-----------------------------------------------
Start Date:------------------------------------------------------------
Termination Date:------------------------------------------------------

2.0 Description of capacity and energy to be transmitted by 
Transmission Provider including the electric Control Area in which the 
transaction originates.

-----------------------------------------------------------------------
3.0 Point(s) of Receipt:-----------------------------------------------
Delivering Party:------------------------------------------------------
4.0 Point(s) of Delivery:----------------------------------------------
Receiving Party:-------------------------------------------------------

5.0 Maximum amount of reassigned capacity:-----------------------------

6.0 Designation of party(ies) subject to reciprocal service obligation:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
7.0 Name(s) of any Intervening Systems providing transmission service:
-----------------------------------------------------------------------
8.0 Service under this Agreement may be subject to some combination of 
the charges detailed below. (The appropriate charges for individual 
transactions will be determined in accordance with the terms and 
conditions of the Tariff.)
8.1 Transmission Charge:-----------------------------------------------

-----------------------------------------------------------------------
8.2 System Impact and/or Facilities Study Charge(s):

-----------------------------------------------------------------------
-----------------------------------------------------------------------
8.3 Direct Assignment Facilities Charge:
-----------------------------------------------------------------------
8.4 Ancillary Services Charges:----------------------------------------

-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
9.0 Name of Reseller of the reassigned transmission capacity:
-----------------------------------------------------------------------

Attachment B--Form of Service Agreement for Non-Firm Point-To-Point 
Transmission Service

1.0 This Service Agreement, dated as of ----, is entered into, by and 
between ---- (the Transmission Provider), and ---- (Transmission 
Customer).
2.0 The Transmission Customer has been determined by the Transmission 
Provider to be a Transmission Customer under Part II of the Tariff and 
has filed a Completed Application for Non-Firm Point-To-Point 
Transmission Service in accordance with Section 18.2 of the Tariff.
3.0 Service under this Agreement shall be provided by the Transmission 
Provider upon request by an authorized representative of the 
Transmission Customer.
4.0 The Transmission Customer agrees to supply information the 
Transmission Provider deems reasonably necessary in accordance with 
Good Utility Practice in order for it to provide the requested service.
5.0 The Transmission Provider agrees to provide and the Transmission 
Customer agrees to take and pay for Non-Firm Point-To-Point 
Transmission Service in accordance with the provisions of Part II of 
the Tariff and this Service Agreement.
6.0 Any notice or request made to or by either Party regarding this 
Service Agreement shall be made to the representative of the other 
Party as indicated below.

Transmission Provider:

-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Transmission Customer:

-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

7.0 The Tariff is incorporated herein and made a part hereof.
In witness whereof, the Parties have caused this Service Agreement to 
be executed by their respective authorized officials.

Transmission Provider:

By:--------------------------------------------------------------------
 Name
-----------------------------------------------------------------------
Title
-----------------------------------------------------------------------
Date
-----------------------------------------------------------------------

Transmission Customer:

By:--------------------------------------------------------------------
 Name
-----------------------------------------------------------------------
Title
-----------------------------------------------------------------------
Date
-----------------------------------------------------------------------

Attachment C--Methodology To Assess Available Transfer Capability

    The Transmission Provider must include, at a minimum, the following 
information concerning its ATC calculation methodology:
    (1) A detailed description of the specific mathematical algorithm 
used to calculate firm and non-firm ATC (and AFC, if applicable) for 
its scheduling horizon (same day and real-time), operating horizon (day 
ahead and pre-schedule) and planning horizon (beyond the operating 
horizon);
    (2) A process flow diagram that illustrates the various steps 
through which ATC/AFC is calculated; and
    (3) A detailed explanation of how each of the ATC components is 
calculated for both the operating and planning horizons.
    (a) For TTC, a Transmission Provider shall: (i) Explain its 
definition of TTC; (ii) explain its TTC calculation methodology; (iii) 
list the databases used in its TTC assessments; and (iv) explain the 
assumptions used in its TTC assessments regarding load levels, 
generation dispatch, and modeling of planned and contingency outages.
    (b) For ETC, a Transmission Provider shall explain: (i) Its 
definition of ETC;

[[Page 39155]]

(ii) the calculation methodology used to determine the transmission 
capacity to be set aside for native load (including network load), and 
non-OATT customers (including, if applicable, an explanation of 
assumptions on the selection of generators that are modeled in 
service); (iii) how point-to-point transmission service requests are 
incorporated; (iv) how rollover rights are accounted for; (v) its 
processes for ensuring that non-firm capacity is released properly 
(e.g., when real-time schedules replace the associated transmission 
service requests in its real-time calculations); and (vi) describe the 
step-by-step modeling study methodology and criteria for adding or 
eliminating flowgates (permanent and temporary).
    (c) If a Transmission Provider uses an AFC methodology to calculate 
ATC, it shall: (i) Explain its definition of AFC; (ii) explain its AFC 
calculation methodology; (iii) explain its process for converting AFC 
into ATC for OASIS posting; (iv) list the databases used in its AFC 
assessments; and (v) explain the assumptions used in its AFC 
assessments regarding load levels, generation dispatch, and modeling of 
planned and contingency outages.
    (d) For TRM, a Transmission Provider shall explain: (i) Its 
definition of TRM; (ii) its TRM calculation methodology (e.g., its 
assumptions on load forecast errors, forecast errors in system topology 
or distribution factors and loop flow sources); (iii) the databases 
used in its TRM assessments; (iv) the conditions under which the 
Transmission Provider uses TRM. A Transmission Provider that does not 
set aside transfer capability for TRM must so state.
    (e) For CBM, the Transmission Provider shall state a specific and 
self-contained narrative explanation of its CBM practice, including: 
(i) An identification of the entity who performs the resource adequacy 
analysis for CBM determination; (ii) the methodology used to perform 
generation reliability assessments (e.g., probabilistic or 
deterministic); (iii) an explanation of whether the assessment method 
reflects a specific regional practice; (iv) the assumptions used in 
this assessment; and (v) the basis for the selection of paths on which 
CBM is set aside.
    (f) In addition, for CBM, a Transmission Provider shall: (i) 
Explain its definition of CBM; (ii) list the databases used in its CBM 
calculations; and (iii) demonstrate that there is no double-counting of 
contingency outages when performing CBM, TTC, and TRM calculations.
    (g) The Transmission Provider shall explain its procedures for 
allowing the use of CBM during emergencies (with an explanation of what 
constitutes an emergency, the entities that are permitted to use CBM 
during emergencies and the procedures which must be followed by the 
transmission providers' merchant function and other load-serving 
entities when they need to access CBM). If the Transmission Provider's 
practice is not to set aside transfer capability for CBM, it shall so 
state.

Attachment D--Methodology for Completing a System Impact Study

    To be filed by the Transmission Provider

Attachment E--Index of Point-To-Point Transmission Service Customers

-----------------------------------------------------------------------
Customer


Date of Service Agreement----------------------------------------------

Attachment F--Service Agreement for Network Integration Transmission 
Service

    To be filed by the Transmission Provider

Attachment G-- Network Operating Agreement

    To be filed by the Transmission Provider

Attachment H--Annual Transmission Revenue Requirement for Network 
Integration Transmission Service

1. The Annual Transmission Revenue Requirement for purposes of the 
Network Integration Transmission Service shall be----------------------

    2. The amount in (1) shall be effective until amended by the 
Transmission Provider or modified by the Commission.

Attachment I--Index of Network Integration Transmission Service 
Customers

-----------------------------------------------------------------------
Customer


Date of Service Agreement----------------------------------------------

Attachment J--Procedures for Addressing Parallel Flows

    To be filed by the Transmission Provider

Attachment K--Transmission Planning Process

    The Transmission Provider shall establish a coordinated, open and 
transparent planning process with its Network and Firm Point-to-Point 
Transmission Customers and other interested parties, including the 
coordination of such planning with interconnected systems within its 
region, to ensure that the Transmission System is planned to meet the 
needs of both the Transmission Provider and its Network and Firm Point-
to-Point Transmission Customers on a comparable and nondiscriminatory 
basis. The Transmission Provider's coordinated, open and transparent 
planning process shall be provided as an attachment to the Transmission 
Provider's Tariff.
    The Transmission Provider's planning process shall satisfy the 
following nine principles, as defined in the Final Rule in Docket No. 
RM05-25-000: Coordination, openness, transparency, information 
exchange, comparability, dispute resolution, regional participation, 
economic planning studies, and cost allocation for new projects. The 
planning process shall also provide a mechanism for the recovery and 
allocation of planning costs consistent with the Final Rule in Docket 
No. RM05-25-000.
    The Transmission Provider's planning process must include 
sufficient detail to enable Transmission Customers to understand:
    (i) The process for consulting with customers and neighboring 
transmission providers;
    (ii) The notice procedures and anticipated frequency of meetings;
    (iii) The methodology, criteria, and processes used to develop 
transmission plans;
    (iv) The method of disclosure of criteria, assumptions and data 
underlying transmission system plans;
    (v) The obligations of and methods for customers to submit data to 
the transmission provider;
    (vi) The dispute resolution process;
    (vii) The transmission provider's study procedures for economic 
upgrades to address congestion or the integration of new resources; and
    (viii) The relevant cost allocation procedures or principles.

Attachment L--Creditworthiness Procedures

    For the purpose of determining the ability of the Transmission 
Customer to meet its obligations related to service hereunder, the 
Transmission Provider may require reasonable credit review procedures. 
This review shall be made in accordance with standard commercial 
practices and must specify quantitative and qualitative criteria to 
determine the level of secured and unsecured credit.

[[Page 39156]]

    The Transmission Provider may require the Transmission Customer to 
provide and maintain in effect during the term of the Service 
Agreement, an unconditional and irrevocable letter of credit as 
security to meet its responsibilities and obligations under the Tariff, 
or an alternative form of security proposed by the Transmission 
Customer and acceptable to the Transmission Provider and consistent 
with commercial practices established by the Uniform Commercial Code 
that protects the Transmission Provider against the risk of non-
payment.
    Additionally, the Transmission Provider must include, at a minimum, 
the following information concerning its creditworthiness procedures:
    (1) A summary of the procedure for determining the level of secured 
and unsecured credit;
    (2) A list of the acceptable types of collateral/security;
    (3) A procedure for providing customers with reasonable notice of 
changes in credit levels and collateral requirements;
    (4) A procedure for providing customers, upon request, a written 
explanation for any change in credit levels or collateral requirements;
    (5) A reasonable opportunity to contest determinations of credit 
levels or collateral requirements; and
    (6) A reasonable opportunity to post additional collateral, 
including curing any non-creditworthy determination.

 [FR Doc. E8-14948 Filed 7-7-08; 8:45 am]

BILLING CODE 6717-01-P
