
[Federal Register: March 25, 2009 (Volume 74, Number 56)]
[Proposed Rules]               
[Page 12747-12769]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr09-47]                         

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket Nos. RM08-19-000, RM08-19-001, RM09-5-000, RM06-16-005]

 
Mandatory Reliability Standards for the Calculation of Available 
Transfer Capability, Capacity Benefit Margins, Transmission Reliability 
Margins, Total Transfer Capability, and Existing Transmission 
Commitments and Mandatory Reliability Standards for the Bulk-Power 
System

Issued March 19, 2009.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking.

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

SUMMARY: Pursuant to section 215 of the Federal Power Act, the 
Commission proposes to approve six Modeling, Data, and Analysis 
Reliability Standards submitted to the Commission for approval by the 
North American Electric Reliability Corporation, the Electric 
Reliability Organization certified by the Commission. The proposed 
Reliability Standards require certain users, owners, and operators of 
the Bulk-Power System to develop consistent methodologies for the 
calculation of available transfer capability or available flowgate 
capability.

DATES: Comments are due May 26, 2009.

ADDRESSES: You may submit comments, identified by docket number by any 
of the following methods:
     Agency Web site: http://ferc.gov. Documents created 
electronically using word processing software should be filed in native 
applications or print-to-PDF format and not in a scanned format.
     Mail/Hand Delivery: Commenters unable to file comments 
electronically must mail or hand deliver an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Secretary of 
the Commission, 888 First Street, NE., Washington, DC 20426.

FOR FURTHER INFORMATION CONTACT: Mason Emnett (Legal Information), 
Office of the General Counsel, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, (202) 502-6540, Cory 
Lankford (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426, (202) 502-6711, Keith O'Neal (Technical Information), Office of 
Electric Reliability, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 502-6339, Christopher Young 
(Technical Information), Office of Electric Reliability, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6403.

SUPPLEMENTARY INFORMATION:

Table of Contents



                                                              Paragraph
                                                               numbers

I. Background..............................................            4
    A. Order Nos. 888 and 889..............................            4
    B. Order Nos. 890 and 693..............................            8
II. Proposed Reliability Standards.........................           12
    A. Coordination with Business Practice Standards.......           17
    B. Available Transmission System Capability, MOD-001-1.           19
    C. Capacity Benefit Margin Methodology, MOD-004-1......           26
    D. Transmission Reliability Margin Methodology, MOD-008-          41
     1.....................................................

[[Page 12748]]


    E. Three Methodologies for Calculating Available                  51
     Transfer Capability...................................
        1. Area Interchange Methodology, MOD-028-1.........           53
        2. Rated System Path Methodology, MOD-029-1........           61
        3. Flowgate Methodology, MOD-030-2.................           65
    F. Implementation Plan.................................           72
III. Discussion............................................           75
    A. Implementation of the Reliability Standards.........           80
        1. Available Transfer Capability Implementation               87
         Documents.........................................
        2. Capacity Benefit Margin Implementation Documents           95
        3. Transmission Reliability Margin Implementation             98
         Documents.........................................
    B. Proposed Modifications of the Reliability Standards.          102
        1. Availability of Implementation Documents........          103
        2. Consistent Treatment of Assumptions.............          106
        3. Capacity Benefit Margin (MOD-004-1).............          109
        4. Calculation of Total Transfer Capability under            112
         the Rated System Path Methodology (MOD-029-1).....
        5. Treatment of Network Resource Designations......          116
    C. Violation Risk Factors and Violation Severity Levels          121
    D. Disposition of Other Reliability Standards..........          130
        1. MOD-010-1 through MOD-025-1.....................          130
        2. Reliability Standards Proposed to be Retired or           133
         Withdrawn.........................................
    E. Definitions.........................................          139
IV. Information Collection Statement.......................          143
V. Environmental Analysis..................................          148
VI. Regulatory Flexibility Act Certification...............          149
VII. Comment Procedures....................................          151
VIII. Document Availability................................          155


    1. Pursuant to section 215 of the Federal Power Act (FPA),\1\ the 
Federal Energy Regulatory Commission (Commission) proposes to approve, 
and direct modifications to, six Modeling, Data and Analysis (MOD) 
Reliability Standards submitted to the Commission by the North American 
Electric Reliability Corporation (NERC), which has been certified by 
the Commission as the Electric Reliability Organization (ERO) for the 
United States.\2\ The proposed Reliability Standards pertain to 
methodologies for the consistent and transparent calculation of 
available transfer capability or available flowgate capability. The 
Commission also proposes to retire the existing MOD Reliability 
Standards replaced by the versions proposed here. The retirement of 
these Reliability Standards would be effective upon the effective date 
of the proposed MOD Reliability Standards.
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824o.
    \2\ North American Electric Reliability Corp., 116 FERC ] 61,062 
(ERO Certification Order), order on reh'g & compliance, 117 FERC ] 
61,126 (ERO Rehearing Order) (2006), appeal docketed sub nom. Alcoa, 
Inc. v. FERC, No. 06-1426 (DC Cir. Dec. 29, 2006).
---------------------------------------------------------------------------

    2. In Order No. 890, the Commission found that the lack of a 
consistent and transparent methodology for calculating available 
transfer capability is a significant problem because the calculation of 
available transfer capability, which varies greatly depending on the 
criteria and assumptions used, may allow the transmission service 
provider to discriminate in subtle ways against its competitors.\3\ The 
calculation of available transfer capability is one of the most 
critical functions under the open access transmission tariff (OATT) 
because it determines whether transmission customers can access 
alternative power supplies. Improving transparency and consistency of 
available transfer capability calculation methodologies will eliminate 
transmission service providers' wide discretion in calculating 
available transfer capability and ensure that customers are treated 
fairly in seeking alternative power supplies. The Commission believes 
that the Reliability Standards proposed here address the potential for 
undue discrimination by requiring industry-wide transparency and 
increased consistency regarding all components of the available 
transfer capability calculation methodology and certain definitions, 
data, and modeling assumptions.
---------------------------------------------------------------------------

    \3\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12266 (Mar. 15, 2007), 
FERC Stats. & Regs. ] 31,241 (2007), order on reh'g, Order No. 890-
A, 73 FR 2984 (Jan. 16, 2008), FERC Stats & Regs. ] 31,261 (2007), 
order on reh'g, Order No. 890-B, 73 FR 39092 (July 8, 2008), 123 
FERC ] 61,299 (2008), order on reh'g, Order No. 890-C, 126 FERC ] 
61,228 (2009).
---------------------------------------------------------------------------

    3. The Commission proposes to approve the Reliability Standards 
filed by NERC in this proceeding as just, reasonable, not unduly 
discriminatory or preferential, and in the public interest. These 
Reliability Standards represent a step forward in eliminating the broad 
discretion previously afforded transmission service providers in the 
calculation of available transfer capability. The proposed Reliability 
Standards will enhance transparency in the calculation of available 
transfer capability, requiring transmission operators and transmission 
service providers to calculate available transfer capability using a 
specific methodology that is both explicitly documented and available 
to reliability entities who request it.\4\ The proposed Reliability 
Standards also require documentation of the detailed representations of 
the various components that comprise the available transfer capability 
equation, including the specification of modeling and risk assumptions 
and the disclosure of outage processing rules to other reliability 
entities. These actions will make the processes to calculate available 
transfer capability and its various components more transparent,

[[Page 12749]]

which in turn will allow the Commission and others to ensure 
consistency in their application.
---------------------------------------------------------------------------

    \4\ Reliability entities include: transmission service 
providers, planning coordinators, reliability coordinators, and 
transmission operators as those entities are defined in the NERC 
Glossary. Standards adopted by the North American Energy Standards 
Board (NAESB) govern disclosure of this information to other 
entities. The Commission addresses the proposed NAESB business 
practices in a Notice of Proposed Rulemaking issued concurrently in 
Docket No. RM05-5-013. See Standards for Business Practices and 
Communication Protocols for Public Utilities, 126 FERC ] 61,248 
(2009).
---------------------------------------------------------------------------

I. Background

A. Order Nos. 888 and 889

    4. In April 1996, as part of its statutory obligation under 
sections 205 and 206 of the FPA \5\ to remedy undue discrimination, the 
Commission adopted Order No. 888 prohibiting public utilities from 
using their monopoly power over transmission to unduly discriminate 
against others.\6\ In that order, the Commission required all public 
utilities that own, control or operate facilities used for transmitting 
electric energy in interstate commerce to file open access non-
discriminatory transmission tariffs that contained minimum terms and 
conditions of non-discriminatory service. It also obligated such public 
utilities to ``functionally unbundle'' their generation and 
transmission services. This meant that public utilities had to take 
transmission service (including ancillary services) for their own new 
wholesale sales and purchases of electric energy under the open access 
tariffs, and to separately state their rates for wholesale generation, 
transmission and ancillary services.\7\ Each public utility was 
required to file the pro forma OATT included in Order No. 888 without 
any deviation (except a limited number of terms and conditions that 
reflect regional practices).\8\ After their OATTs became effective, 
public utilities were allowed to file, pursuant to section 205 of the 
FPA, deviations that were consistent with or superior to the pro forma 
OATT's terms and conditions.
---------------------------------------------------------------------------

    \5\ 16 U.S.C. 824d, 824e.
    \6\ 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 (DC 
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
    \7\ This is known as ``functional unbundling'' because the 
transmission element of a wholesale sale is separated or unbundled 
from the generation element of that sale, although the public 
utility may provide both functions.
    \8\ See Order No. 888, FERC Stats. & Regs. ] 31,036 at 31,769-70 
(noting that the pro forma OATT expressly identified certain non-
rate terms and conditions, such as the time deadlines for 
determining available transfer capability in section 18.4 or 
scheduling changes in sections 13.8 and 14.6, that may be modified 
to account for regional practices if such practices are reasonable, 
generally accepted in the region, and consistently adhered to by the 
transmission service provider).
---------------------------------------------------------------------------

    5. The same day it issued Order No. 888, the Commission issued a 
companion order, Order No. 889,\9\ addressing the separation of 
vertically integrated utilities' transmission and merchant functions, 
the information transmission service providers were required to make 
public, and the electronic means they were required to use to do so. 
Order No. 889 imposed Standards of Conduct governing the separation of, 
and communications between, the utility's transmission and wholesale 
power functions, to prevent the utility from giving its merchant arm 
preferential access to transmission information. All public utilities 
that owned, controlled or operated facilities used in the transmission 
of electric energy in interstate commerce were required to create or 
participate in an Open Access Same-Time Information System (OASIS) that 
was to provide existing and potential transmission customers the same 
access to transmission information.
---------------------------------------------------------------------------

    \9\ Open Access Same-Time Information System (Formerly Real-Time 
Information Networks) and Standards of Conduct, Order No. 889, 61 FR 
21737 (May 10, 1996), FERC Stats. & Regs. ] 31,035 (1996), order on 
reh'g, Order No. 889-A, FERC Stats. & Regs. ] 31,049 (1997), order 
on reh'g, Order No. 889-B, 81 FERC ] 61,253 (1997).
---------------------------------------------------------------------------

    6. Among the information public utilities were required to post on 
their OASIS was the transmission service provider's calculation of 
available transfer capability. Though the Commission acknowledged that 
before-the-fact measurement of the availability of transmission service 
is ``difficult,'' the Commission concluded that it was important to 
give potential transmission customers ``an easy-to-understand indicator 
of service availability.'' \10\ Because formal methods did not then 
exist to calculate available transfer capability and total transfer 
capability, the Commission encouraged industry efforts to develop 
consistent methods for calculating available transfer capability and 
total transfer capability.\11\ Order No. 889 ultimately required 
transmission service providers to base their calculations on ``current 
industry practices, standards and criteria'' and to describe their 
methodology in an Attachment C to their tariffs.\12\ The Commission 
noted that the requirement that transmission service providers purchase 
only available transfer capability that is posted as available ``should 
create an adequate incentive for them to calculate available transfer 
capability and total transfer capability as accurately and as uniformly 
as possible.'' \13\
---------------------------------------------------------------------------

    \10\ Order No. 889, FERC Stats. & Regs. ] 31,035 at 21749.
    \11\ Id. at 21750.
    \12\ Id.
    \13\ Id.
---------------------------------------------------------------------------

    7. Although Order No. 888 obligated each public utility to 
calculate the amount of transfer capability on its system available for 
sale to third parties, the Commission did not standardize the 
methodology for calculating available transfer capability, nor did it 
impose any specific requirements regarding the disclosure of the 
methodologies used by each transmission service provider.\14\ As a 
result, a variety of available transfer capability calculation 
methodologies have been used with very few clear rules governing their 
use. Moreover, there was often very little transparency about the 
nature of these calculations, given that many transmission service 
providers historically filed only summary explanations of their 
available transfer capability methodologies in Attachment C to their 
OATTs.
---------------------------------------------------------------------------

    \14\ Order No. 888, FERC Stats. & Regs. ] 31,036 n.610.
---------------------------------------------------------------------------

B. Order Nos. 890 and 693

    8. Section 215 of the FPA requires a Commission-certified ERO to 
develop mandatory and enforceable Reliability Standards, which are 
subject to Commission review and approval. If approved, the Reliability 
Standards are enforced by the ERO, subject to Commission oversight, or 
by the Commission independently. As the ERO, NERC worked with industry 
to develop Reliability Standards improving consistency and transparency 
of available transfer capability calculation methodologies. On April 4, 
2006, as modified on August 28, 2006, NERC submitted to the Commission 
a petition seeking approval of 107 proposed Reliability Standards, 
including 23 Reliability Standards pertaining to Modeling, Data and 
Analysis (MOD). The MOD group of Reliability Standards is intended to 
standardize methodologies and system data needed for traditional 
transmission system operation and expansion planning, reliability 
assessment and the calculation of available transfer capability in an 
open access environment.
    9. On February 16, 2007, the Commission issued Order No. 890, which 
addressed and remedied opportunities for undue discrimination under the 
pro forma OATT adopted in Order No. 888. Among other things, the 
Commission required industry-wide consistency and transparency of all 
components of available transfer

[[Page 12750]]

capability calculation and certain definitions, data and modeling 
assumptions. The Commission concluded that the lack of industry-wide 
standards for the consistent calculation of available transfer 
capability poses a threat to the reliable operation of the Bulk-Power 
System, particularly with respect to the inability of one transmission 
service provider to know with certainty its neighbors' system 
conditions affecting its own available transfer capability values. As a 
result of this reliability concern, the Commission asserted that the 
proposed available transfer capability reforms were also supported by 
FPA section 215, through which the Commission has the authority to 
direct the ERO to submit a Reliability Standard that addresses a 
specific matter.\15\ Thus, the Commission in Order No. 890 directed 
industry to develop Reliability Standards, using the ERO's Reliability 
Standards development procedures, that provide for consistency and 
transparency in the methodologies used by transmission owners to 
calculate available transfer capability.
---------------------------------------------------------------------------

    \15\ FPA section 215(d)(5). 16 U.S.C. 824o(d)(5).
---------------------------------------------------------------------------

    10. The Commission stated in Order No. 890 that the available 
transfer capability-related Reliability Standards should, at a minimum, 
provide a framework for available transfer capability, total transfer 
capability and existing transmission commitments calculations. The 
Commission did not require a single computational process for 
calculating available transfer capability because, among other things, 
it found that the potential for discrimination and decline in 
reliability level does not lie primarily in the choice of an available 
transfer capability calculation methodology, but rather in the 
consistent application of its components, input and exchange data, and 
modeling assumptions.\16\ The Commission found that, if all of the 
available transfer capability components, and certain data inputs and 
assumptions are consistent, the three available transfer capability 
calculation methodologies would produce predictable and sufficiently 
accurate, consistent, equivalent and replicable results.\17\
---------------------------------------------------------------------------

    \16\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 1029.
    \17\ Id. P 1030.
---------------------------------------------------------------------------

    11. On March 16, 2007, the Commission issued Order No. 693, 
approving 83 of the 107 Reliability Standards filed by NERC in April 
2006.\18\ Of the 83 approved Reliability Standards, the Commission 
approved ten MOD Reliability Standards.\19\ However, the Commission 
directed NERC to prospectively modify nine of the ten approved MOD 
Reliability Standards to be consistent with the requirements of Order 
No. 890.\20\ The Commission reiterated the requirement from Order No. 
890 that all available transfer capability components (i.e., total 
transfer capability, existing transmission commitments, capacity 
benefit margin, and transmission reliability margin) and certain data 
input, data exchange, and assumptions be consistent and that the number 
of industry-wide available transfer capability calculation formulas be 
few in number, transparent and produce equivalent results.\21\ The 
Commission directed public utilities, working through the NERC 
Reliability Standards and NAESB business practices development 
processes, to produce workable solutions to implement the available 
transfer capability-related reforms adopted by the Commission. The 
Commission also deferred action on 24 proposed Reliability Standards, 
which did not contain sufficient information to enable the Commission 
to propose a disposition.\22\
---------------------------------------------------------------------------

    \18\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, 72 FR 16416 (Apr. 4, 2007), FERC Stats. & Regs. ] 
31,242, order on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
    \19\ Id. P 1010.
    \20\ Id.
    \21\ Id. P 1029-30; see also Order No. 890, FERC Stats. & Regs. 
] 31,241 at P 207.
    \22\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 287-303. 
Some of these Reliability Standards required the regional 
reliability organizations to develop criteria for use by users, 
owners or operators within each region. The Commission set aside 
such Reliability Standards and directed NERC to provide additional 
details prior to considering them for approval. Id. P 287-303.
---------------------------------------------------------------------------

II. Proposed Reliability Standards

    12. In response to the requirements of Order No. 890 and related 
directives of Order No. 693,\23\ on August 29, 2008, NERC submitted for 
Commission approval five MOD Reliability Standards: MOD-001-1--
Available Transmission System Capability, MOD-008-1--TRM Calculation 
Methodology (hereinafter Transmission Reliability Margin Methodology), 
MOD-028-1 Area Interchange Methodology, MOD-029-1--Rated System Path 
Methodology, and MOD-030-1--Flowgate Methodology.\24\ On November 21, 
2008, NERC submitted for Commission approval a sixth MOD Reliability 
Standard: MOD-004-1--Capacity Benefit Margin (hereinafter Capacity 
Benefit Margin Methodology). On March 6, 2009, NERC submitted for 
Commission approval: MOD-030-2--a revised Flowgate Methodology 
Reliability Standard and withdrew its request for approval of MOD-030-
1.
---------------------------------------------------------------------------

    \23\ The Reliability Standards were originally due on December 
10, 2007. See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 223. 
NERC requested additional time to develop the Reliability Standards 
in order to address concerns raised in its stakeholder process. See 
NERC November 21, 2007 Request for Extension of Time, Docket Nos. 
RM05-17-000, et al, at 7. The Commission ultimately granted three 
requests for extension of time, extending NERC's deadline by over 
seven months, so that NERC could develop the Reliability Standards 
proposed here.
    \24\ NERC designates the version number of a Reliability 
Standard as the last digit of the Reliability Standard number. 
Therefore, version zero Reliability Standards end with ``-0'' and 
version one Reliability Standards end with ``-1.''
---------------------------------------------------------------------------

    13. The Available Transmission System Capability Reliability 
Standard (MOD-001-1) serves as an ``umbrella'' Reliability Standard 
that requires each applicable entity to select and implement one or 
more of the three available transfer capability methodologies found in 
MOD-028-1, MOD-029-1, or MOD-030-2. MOD-004-1 and MOD-008-1 provide for 
the calculation of capacity benefit margin and transmission reliability 
margin, which are inputs into the available transfer capability 
calculation. If approved, NERC states that its filing wholly addresses 
eight of the 24 Reliability Standards that the Commission did not 
approve in Order No. 693 because further information was needed.
    14. NERC contends that the proposed Reliability Standards will have 
no undue negative effect on competition, nor will they unreasonably 
restrict available transfer capability on the Bulk-Power System beyond 
any restriction necessary for reliability and do not limit use of the 
Bulk-Power System in an unduly preferential manner. NERC contends that 
the increased rigor and transparency introduced in the development of 
available transfer capability and available flowgate capability 
calculations serve to mitigate the potential for undue advantages of 
one competitor over another. Under the proposed Reliability Standards, 
applicable entities are prohibited from making transmission capability 
available on a more conservative basis for commercial purposes than for 
either planning for native load or use in actual operations, thereby 
mitigating the potential for differing treatment of native load 
customers and transmission service customers. NERC states that data 
exchange, which has been heretofore voluntary, is now mandatory and it 
is required that the data be used in the available transfer capability/
available flowgate capability calculations. None of these requirements 
exist in the

[[Page 12751]]

current available transfer capability-related Reliability Standards. 
NERC contends that these improvements help the Commission achieve many 
of the primary objectives of Order No. 890 regarding transparency, 
standardization and consistency in available transfer capability 
calculations.
    15. NERC states that all three methodology Reliability Standards 
(MOD-028-1, MOD-029-1, and MOD-030-2) share fundamental equations that, 
while mathematically equivalent, are written in slightly different 
forms. As a result, the manner of determining the components varies 
between methodologies. The employment of any two methodologies, given 
the same inputs, may produce similar, but not identical, results. As 
noted by NERC there are fundamental differences in the proposed 
methodologies that can keep them from producing identical results. For 
example, the rated system path methodology does not use the same 
frequent simulations of power flow used by the other two methodologies. 
NERC states that the rated system path methodology therefore will 
rarely generate numbers that identically match those determined by an 
entity using the other two methodologies.
    16. NERC proposes to make the MOD Reliability Standards proposed 
here applicable to transmission operators and transmission service 
providers. NERC states that the drafting team considered applying the 
Reliability Standards to the transmission operator instead of the 
transmission service provider. According to NERC, the Reliability 
Standard drafting team believes that the NERC Functional Model supports 
a determination that responsibility for several of the requirements 
lies with the transmission operator.\25\ NERC also states that a number 
of entities argued in the NERC drafting process that the transmission 
service provider actually undertakes efforts to meet those 
requirements. NERC states that the drafting team believes this points 
to a delegation of tasks to a larger entity that is the byproduct of a 
regional transmission organization and its regional transmission 
tariff. Accordingly, NERC states that the MOD Reliability Standards 
retain the use of transmission operators in the Reliability Standards, 
and explained to entities how delegation or joint registration 
organizations address the compliance implications of the assignment.
---------------------------------------------------------------------------

    \25\ NERC has developed a ``Functional Model'' that defines the 
set of functions that must be performed to ensure the reliability of 
the Bulk-Power System. The Functional Model identifies 14 functions 
and the name of a corresponding entity responsible for fulfilling 
each function. NERC's functional model can be found at http://
www.nerc.com/page.php?cid=2/247/108.
---------------------------------------------------------------------------

A. Coordination With Business Practice Standards

    17. NERC states that it has worked closely and collaboratively with 
NAESB, conducting numerous joint meetings and conference calls, to 
develop the Reliability Standards proposed here and related NAESB 
business-practice standards.\26\ NERC states that the focus of the 
proposed Reliability Standards is to address only the reliability 
aspects of available transfer capability and available flowgate 
capability and not to address the commercial aspects of available 
transfer capability, except to the extent that commercial system 
availability closely matches actual remaining system capability. The 
associated NAESB business practice standards are intended to focus on 
the competitive aspects of these processes. Through implementation of 
these Reliability Standards, access to the grid may indirectly be 
restricted, but NERC states that NAESB business practices and 
Commission orders related to these Reliability Standards ensure that 
any limitation will be applied in a manner that ensures open access and 
promotes competition.
---------------------------------------------------------------------------

    \26\ As noted above, the Commission addresses the proposed NAESB 
business practices in a Notice of Proposed Rulemaking issued 
concurrently in Docket No. RM05-5-013.
---------------------------------------------------------------------------

    18. According to NERC, it and NAESB have coordinated the 
development of these business practices and the Reliability Standards 
to ensure that there are no duplications or double counting between the 
business practice standards and the Reliability Standards, and they 
will continue to coordinate as necessary so that the available transfer 
capability-related Reliability Standards are compatible and consistent.

B. Available Transmission System Capability, MOD-001-1

    19. NERC proposes the Available Transmission System Capability 
Reliability Standard (MOD-001-1) as part of a set of Reliability 
Standards which are designed to work together to support a common 
reliability goal: to ensure that transmission service providers 
maintain awareness of available system capability and future flows on 
their own systems as well as those of their neighbors. NERC states 
that, historically, differences in implementation of available transfer 
capability methodologies and a lack of coordination between 
transmission service providers have resulted in cases where available 
transfer capability has been overestimated. As a result, systems have 
been oversold, resulting in potential or actual system operating limits 
and interconnection reliability operating limits being exceeded. NERC 
states that MOD-001-1 is the foundational Reliability Standard that 
obliges entities to select a methodology and then calculate available 
transfer capability or available flowgate capability using that 
methodology, thereby ensuring that the determination of available 
transfer capability is accurate and consistent across North America and 
that the transmission system is neither oversubscribed nor 
underutilized.
    20. NERC states that, unlike the current set of voluntary available 
transfer capability standards, MOD-001-1 requires adherence to a 
specific documented and transparent methodology. NERC states that it 
requires applicable entities to calculate available transfer capability 
on a consistent schedule and for specific timeframes. According to 
NERC, MOD-001-1 requires users, owners and operators to disclose 
counterflow assumptions and outage processing rules to other 
reliability entities. NERC states that this Reliability Standard 
prohibits applicable entities from making transmission capability 
available on a more conservative basis for commercial purposes than the 
system's capability in actual operations. NERC's MOD-001-1 also 
requires entities, for the first time, to exchange and use available 
transfer capability data. NERC states that the Reliability Standard 
reflects industry's consensus best practices for determining available 
transfer capability.
    21. As proposed, this Reliability Standard includes nine 
requirements, which would be applicable to all transmission service 
providers and transmission operators. To ensure consistency of 
enforcement, NERC states that each requirement is supported by a 
measure that identifies what is required and how the requirement will 
be enforced.
    22. Under NERC's proposed Requirement R1, a transmission operator 
must select one of three methodologies for calculating available 
transfer capability or available flowgate capability for each available 
transfer capability path for each time frame (hourly, daily or monthly) 
for the facilities in its area. As stated above, the three proposed 
methodologies are: The area interchange methodology, the rated system 
path methodology, and the flowgate methodology.
    23. Several proposed requirements within this Reliability Standard 
address

[[Page 12752]]

the calculation of available transfer capability or available flowgate 
capability. Requirement R2 requires each transmission service provider 
to calculate available transfer capability or available flowgate 
capability values hourly for the next 48 hours, daily for the next 31 
calendar days and monthly for the next 12 months. Requirement R6 
requires each transmission operator in its calculation of total 
transfer capability or total flowgate capability to use assumptions no 
more limiting than those used in its planning of operations. NERC 
contends that, consistent with the requirements of Order No. 890 and 
related directives of Order No. 693, Requirement R6 will minimize the 
differences between total transfer capability and total flowgate 
capability for transmission and transfer capability used in native load 
and reliability assessment studies.\27\ Similarly, Requirement R7 
requires each transmission service provider, in its calculation of 
available transfer capability or available flowgate capability, to use 
assumptions no more limiting than those used in its planning of 
operations. NERC contends that this requirement addresses the 
Commission's directive in Order No. 693 for the ERO to modify the 
available transfer capability Reliability Standards to include a 
requirement that the assumptions used in available transfer capability 
and available flowgate capability calculations be consistent with those 
used for planning the expansion or operation of the Bulk-Power System 
to the maximum extent possible.\28\ Requirement R8 requires each 
transmission service provider to recalculate available transfer 
capability at a certain specified interval (hourly, daily, monthly) 
unless the input values specified in the available transfer capability 
calculation have not changed. NERC contends that Requirement R8 
satisfies the Commission's directive to calculate available transfer 
capability on a consistent time interval.\29\
---------------------------------------------------------------------------

    \27\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 237; 
Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1051.
    \28\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1057; see 
also Order No. 890, FERC Stats. & Regs. ] 31,241 at P 292.
    \29\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 301; 
Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1057.
---------------------------------------------------------------------------

    24. MOD-001-1 also proposes several record keeping and information 
sharing requirements for transmission service providers. Requirement R3 
requires each transmission service provider to keep an available 
transfer capability implementation document that explains the 
implementation of its chosen methodology(ies), its use of counterflows, 
the identities of entities with which it exchanges information for 
coordination purposes, any capacity allocation processes, and the 
manner in which it considers outages. Requirement R4 requires 
transmission service providers to keep specific reliability entities 
advised regarding changes to the available transfer capability 
implementation document.\30\ Requirement R5 requires the transmission 
service provider to make the available transfer capability 
implementation document available to those same reliability 
entities.\31\ Finally, proposed Requirement R9 allows a transmission 
service provider thirty calendar days to begin to respond to a request 
from any other transmission service provider, planning coordinator, 
reliability coordinator or transmission operator for certain data to be 
used in the requestor's available transfer capability or available 
flowgate capability calculations.
---------------------------------------------------------------------------

    \30\ These include: Each planning coordinator, reliability 
coordinator, and transmission operator associated with the 
transmission service provider's area; and each planning coordinator, 
reliability coordinator, and transmission service provider adjacent 
to the transmission service provider's area.
    \31\ Although the Reliability Standards only require the 
transmission service provider to make the available transfer 
capability implementation document available to certain reliability 
entities, the NAESB standard on OASIS posting requirements (Standard 
001-13.1.5) requires transmission service providers to provide a 
link to the document on OASIS.
---------------------------------------------------------------------------

    25. In Order No. 693, the Commission directed the ERO to develop 
modifications to the available transfer capability Reliability 
Standards to include a requirement that applicable entities make 
available assumptions and contingencies underlying available transfer 
capability and total transfer capability calculations. NERC contends 
that this Reliability Standard addresses this issue by requiring 
disclosure in the available transfer capability implementation document 
under Requirement R3.1 and part of the data exchange required by 
Requirement R9. NERC states that it has agreed with NAESB that 
requirements for posting information are more appropriately addressed 
through the NAESB process. Accordingly, NERC states that NAESB will be 
addressing the requirements associated with posting this information, 
instead of NERC.

C. Capacity Benefit Margin Methodology, MOD-004-1

    26. As proposed, the Capacity Benefit Margin Methodology 
Reliability Standard (MOD-004-1) provides for the calculation of 
capacity benefit margin, which is defined by NERC as the amount of firm 
transmission capability preserved by the transmission service provider 
for load-serving entities, whose loads are located on that transmission 
service provider's system, to enable access by the load-serving 
entities to generation from interconnected systems to meet generation 
reliability requirements.\32\ The purpose of this Reliability Standard 
is to promote the consistent and reliable calculation, verification, 
preservation, and use of capacity benefit margin to support analysis 
and system operations. NERC states that preservation of capacity 
benefit margin for a load-serving entity allows that entity to reduce 
its installed generating capacity below that which may otherwise have 
been necessary without interconnections to meet its generation 
reliability requirements. NERC states that the transmission transfer 
capability preserved as capacity benefit margin is intended to be used 
by the load-serving entities only in times of emergency generation 
deficiencies.
---------------------------------------------------------------------------

    \32\ See North American Electric Reliability Council, Glossary 
of Terms Used in Reliability Standards (Effective February 12, 
2008), available at: http://www.nerc.com/docs/standards/rs/
Glossary_12Feb08.pdf.
---------------------------------------------------------------------------

    27. NERC proposes to apply MOD-004-1 to transmission service 
providers, transmission planners, load-serving entities, resource 
planners and balancing authorities. As discussed more fully below, NERC 
states that it does not specify a particular methodology for 
calculating capacity benefit margin, but rather improves transparency 
by requiring adherence to specific documented and transparent 
methodology to ensure consistent and reliable calculation, 
verification, preservation and use of capacity benefit margin.
    28. To improve consistency and transparency in the calculation of 
capacity benefit margin, the proposed Reliability Standard imposes 
twelve requirements on entities electing to use a capacity benefit 
margin. Requirement R1 requires the transmission service provider that 
maintains capacity benefit margin to prepare and keep current a 
capacity benefit margin implementation document that includes at a 
minimum: (1) The process through which a load-serving entity within a 
balancing authority associated with the transmission service provider, 
or the resource planner associated with that balancing authority area, 
may ensure that its need for transmission capacity to be set aside as 
capacity benefit margin will be reviewed and accommodated by the 
transmission service provider to the extent transmission capacity is

[[Page 12753]]

available; (2) the procedure and assumptions for establishing capacity 
benefit margin for each available transfer capability path or flowgate; 
and (3) the procedure for a load-serving entity or balancing authority 
to use transmission capacity set aside as capacity benefit margin, 
including the manner in which the transmission service provider will 
manage situations where the requested use of capacity benefit margin 
exceeds the amount of capacity benefit margin available.
    29. Requirement R2 requires the transmission service provider to 
make its current capacity benefit margin implementation document 
available to the transmission operators, transmission service 
providers, reliability coordinators, transmission planners, resource 
planners, and planning coordinators that are within or adjacent to the 
transmission service provider's area, and to the load-serving entities 
and balancing authorities within the transmission service providers 
area, and notify those entities of any changes to the capacity benefit 
margin implementation document prior to the effective date of the 
change.
    30. Requirements R3 and R4 require each load-serving entity and 
resource planner determining the need for transmission capacity to be 
set aside as capacity benefit margin for imports into a balancing 
authority to develop that need by using one or more of the following to 
determine the generation capability import requirement: \33\ loss of 
load expectation studies, loss of load probability studies, 
deterministic risk-analysis studies, and reserve margin or resource 
adequacy requirements established by other entities, such as 
municipalities, state commissions, regional transmission organizations, 
independent system operators, regional reliability organizations, or 
regional entities.
---------------------------------------------------------------------------

    \33\ NERC defines the generation capability import requirement 
as the amount of generation capability from external sources 
identified by a load-serving entity or resource planner to meet its 
generation reliability or resource adequacy requirement as an 
alternative to internal resources.
---------------------------------------------------------------------------

    31. Requirement R5 requires the transmission service provider to 
establish at least every 13 months a capacity benefit margin value for 
each available transfer capability path or flowgate to be used for 
available transfer capability or available flowgate capability during 
the 13 full calendar months (months 2-14) following the current month 
(the month in which the transmission service provider is establishing 
the capacity benefit margin values). Similarly, Requirement R6 requires 
the transmission planner to establish a capacity benefit margin value 
for each available transfer capability path or flowgate to be used in 
planning during each of the full calendar years two through ten 
following the current year (the year in which the transmission planner 
is establishing the capacity benefit margin values). All values must 
reflect consideration of each of the following, if available: (1) Any 
studies performed by load-serving entities or resource planners 
pursuant to Requirement R3 for loads within the transmission service 
provider's area; or (2) any reserve margin or resource adequacy 
requirements for loads within the transmission service provider's area 
established by other entities, such as municipalities, state 
commissions, regional transmission organizations, independent system 
operators, regional reliability organizations, or regional entities. 
Once determined, the capacity benefit margin values will be allocated 
along available transfer capability paths based on the expected import 
paths or source regions provided by load-serving entities or resource 
planners. Capacity Benefit Margin values for flowgates will be 
allocated based on the expected import paths or source regions provided 
by load-serving entities or resource planners and the distribution 
factors associated with those paths or regions, as determined by the 
transmission service provider.
    32. Requirements R7 and R8 require the transmission service 
provider and the transmission planner to notify, within 31 calendar 
days after the establishment of capacity benefit margin, all load-
serving entities and resource planners that determined they had a need 
for capacity benefit margin of the amount, or the amount planned, of 
capacity benefit margin set aside.
    33. Requirement R9 requires the transmission service provider that 
maintains capacity benefit margin and the transmission planner to 
provide, subject to confidentiality and security requirements, copies 
of the applicable supporting data, including any models, used for 
determining capacity benefit margin or allocating capacity benefit 
margin over each available transfer capability path or flowgate to each 
of the associated transmission operators and to any transmission 
service provider, reliability coordinator, transmission planner, 
resource planner, or planning coordinator within 30 calendar days of 
their making a request for the data.
    34. Requirement R10 requires the load-serving entity or balancing 
authority to request to import energy over firm transfer capability set 
aside as capacity benefit margin only when experiencing a declared 
level 2 or higher NERC energy emergency alert.
    35. When reviewing an arranged interchange using capacity benefit 
margin, Requirement R11 requires all balancing authorities and 
transmission service providers to waive, within the bounds of reliable 
operation, any real-time timing and ramping requirements.
    36. Requirement R12 requires all transmission service providers 
maintaining capacity benefit margin to approve, within the bounds of 
reliable operation, any arranged interchange using capacity benefit 
margin that is submitted by an ``energy deficient entity'' \34\ under 
an energy emergency alert level 2 if the capacity benefit margin is 
available, the emergency is declared within the balancing authority 
area of the energy deficient entity, and the load of the energy 
deficient entity is located within the transmission service provider's 
area.
---------------------------------------------------------------------------

    \34\ Energy deficient entities are defined by NERC in the 
Capacity and Energy Emergencies Reliability Standard. See EOP-002-2, 
Attachment 1.
---------------------------------------------------------------------------

    37. NERC states that the proposed Reliability Standard complies 
with the requirements of Order No. 890 and related directives of Order 
No. 693 because it sets standards that allow load-serving entities to 
request transfer capability to be set aside in the form of capacity 
benefit margin in a consistent and transparent manner. Consistent with 
the Commission's direction, the Reliability Standard provides an 
approach for determining capacity benefit margin that is flexible and 
does not mandate a particular methodology.\35\ NERC contends that this 
is appropriate because various parts of the country have already 
developed robust methodologies for determining capacity benefit margin. 
NERC states that Requirements R3 and R4 allow load-serving entities or 
resource planners to perform specific studies to determine their need 
for capacity benefit margin. By specifying the types of studies load-
serving entities or resource planners must perform, NERC contends that 
MOD-004-1 ensures that capacity benefit margin and transmission 
reliability margin are not used for the same purpose.\36\ In response 
to the Commission's transparency requirement,\37\ NERC states that 
Requirement R9 ensures that capacity benefit margin studies are made 
available to the appropriate reliability entities for their review and

[[Page 12754]]

analysis. With regard to public disclosure, NERC states that it has 
agreed with NAESB that requirements for posting information are more 
appropriately addressed through the NAESB process.
---------------------------------------------------------------------------

    \35\ Citing Order No. 693, FERC Stats. & Regs. ] 31,242 at P 
1078; see also Order No. 890, FERC Stats. & Regs. ] 31,241 at P 257.
    \36\ Citing Order No. 693, FERC Stats. & Regs. ] 31,242 at P 
1105.
    \37\ Citing id. P 1077.
---------------------------------------------------------------------------

    38. Requirements R5 and R6 require that the transmission service 
provider and transmission planner utilize the information contained in 
the studies if it has been provided to them when establishing capacity 
benefit margin values and mandate the re-evaluation of capacity benefit 
margin at least once every thirteen months.\38\ NERC states that, 
consistent with Order Nos. 890 and 693, Requirements R5 and R6 also 
require allocation of capacity benefit margin based on the available 
transfer methodology chosen under MOD-001-1.\39\ NERC states that 
Requirements R10, R11 and R12 specify the manner in which capacity 
benefit margin is to be used.\40\ NERC states that any additional 
requirements specified by the transmission service provider must be 
identified in the capacity benefit margin implementation document, as 
mandated in Requirement R1.3.
---------------------------------------------------------------------------

    \38\ Citing Order No. 890, FERC Stats. & Regs. ] 31,241 at P 
358. NERC states that it chose thirteen months to ensure enough 
flexibility for a yearly update without being so prescriptive as to 
require it on a specific day.
    \39\ Citing id. at P 257; Order No. 693, FERC Stats. & Regs. ] 
31,242 at P 1082.
    \40\ Citing Order No. 890, FERC Stats. & Regs. ] 31,241 at P 
256-7.
---------------------------------------------------------------------------

    39. In response to the requirement that capacity benefit margins be 
verifiable,\41\ NERC states that Requirements R5, R6 and R9 ensure that 
the studies used to establish a need for capacity benefit margin are 
made available to any of the reliability entities specified in 
Requirement R9 that request them. NERC explains that the Reliability 
Standard does not mandate the verification of requested amounts of 
capacity benefit margin because it would place a functional entity 
(either the transmission service provider or transmission planner) in 
the position of having to judge the quality of each request, which 
could create conflicts of interest or potentially result in liability 
for that entity. Rather than mandate any particular approach for 
validation, NERC states that Requirements R3 and R4 mandate the 
specific kinds of studies to be performed and supporting information 
that is to be maintained when determining the underlying need for 
capacity benefit margin. To the extent that entities do not use these 
methods or maintain this supporting information, NERC states that they 
will be in violation of the Reliability Standard.
---------------------------------------------------------------------------

    \41\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1077.
---------------------------------------------------------------------------

    40. In response to the Commission's call for clarity in the process 
for requesting capacity benefit margin,\42\ NERC states that 
Requirement R1.1 requires the transmission service provider explain the 
process by which load-serving entities and resource planners may ensure 
that their need for transmission capacity to be set aside as capacity 
benefit margin is reviewed and accommodated by the transmission service 
provider to the extent transmission capacity is available. Requirement 
R1.3 requires the transmission service provider to describe the 
procedure for load-serving entities and resource planners to use 
transmission capacity that has been set aside as capacity benefit 
margin. If the requested use of capacity benefit margin exceeds the 
amount of capacity benefit margin available, Requirement R1.3 also 
requires a description of how the transmission service provider will 
manage such situations. In addition, NERC states that Requirements R7 
and R8 mandate that the transmission service provider notify load-
serving entities and resource planners that determined they had a need 
for capacity benefit margin of the amount of capacity benefit margin 
set aside, so that they may make informed decisions about how to 
proceed if their full request for capacity benefit margin could not be 
accommodated.
---------------------------------------------------------------------------

    \42\ Id. P 1081.
---------------------------------------------------------------------------

D. Transmission Reliability Margin Methodology, MOD-008-1

    41. As proposed, the Transmission Reliability Margin Methodology 
Reliability Standard (MOD-008-1) provides for the calculation of 
transmission reliability margin, which describes the reliability 
aspects of determining and maintaining a transmission reliability 
margin and the components of uncertainty that may be considered when 
making that determination. The purpose of this Reliability Standard is 
to promote the consistent and reliable calculation, verification, 
preservation, and use of transmission reliability margin to support 
analysis and system operations. Transmission reliability margin is 
transmission transfer capability set aside to mitigate risks to 
operations, such as deviations in dispatch, load forecast, outages, and 
similar such conditions. It is distinctly different from capacity 
benefit margin, which is transmission transfer capability set aside to 
allow for the import of generation upon the occurrence of a generation 
capacity deficiency.
    42. NERC proposes to apply MOD-008-1 only to transmission operators 
that have elected to keep a transmission reliability margin. As 
discussed more fully in the discussion section below, NERC states that 
the Reliability Standard does not specify one approach for calculating 
transmission reliability margin, but rather improves transparency by 
providing the key requirements and items that must be contained in any 
transmission reliability margin methodology.\43\
---------------------------------------------------------------------------

    \43\ NERC August 29, 2008 Filing, Docket No. RM08-19-000 at 38 
(NERC Filing).
---------------------------------------------------------------------------

    43. To improve the transparency of transmission reliability margin 
calculations, the proposed Reliability Standard imposes five 
requirements on transmission service providers electing to keep a 
transmission reliability margin. Requirement R1 provides that a 
transmission operator must keep a transmission reliability margin 
implementation document that explains how specific risks such as 
aggregate load forecast uncertainty, load distribution uncertainty, and 
forecast uncertainty in transmission system topology \44\ are accounted 
for in the transmission reliability margin, how transmission 
reliability margin is allocated, and how transmission reliability 
margin is determined for various time frames.
---------------------------------------------------------------------------

    \44\ This includes, but is not limited to, forced or unplanned 
outages and maintenance outages; allowances for parallel path (loop 
flow) impacts; allowances for simultaneous path interactions; 
variations in generation dispatch (including, but not limited to, 
forced or unplanned outages, maintenance outages and location of 
future generation); short-term system operator response (operating 
reserve actions); reserve sharing requirements; and inertial 
response and frequency bias.
---------------------------------------------------------------------------

    44. Requirement R2 allows a transmission operator to account only 
for the risks identified in Requirement R1 in transmission reliability 
margin, and prohibits the transmission operator from incorporating 
risks that are addressed in capacity benefit margin.\45\ It allows 
reserve sharing to be included in transmission reliability margin.
---------------------------------------------------------------------------

    \45\ The capacity benefit margin Reliability Standard, MOD-004-
1, was filed on November 21, 2008 in Docket No. RM09-5-000.
---------------------------------------------------------------------------

    45. Requirement R3 requires each applicable entity to make the 
transmission reliability margin implementation document and associated 
information available to the following reliability entities if 
requested: Transmission service provider, reliability coordinator, 
planning coordinator, transmission planner, and transmission operator.

[[Page 12755]]

    46. Requirement R4 provides that each applicable transmission 
operator must determine the transmission reliability margin value per 
the methods described in the transmission reliability margin 
implementation document at least once every thirteen months. Finally, 
Requirement R5 states that each applicable transmission operator must 
provide that transmission reliability margin value to its transmission 
service providers and transmission planners no more than seven days 
after it has been determined.
    47. NERC states that MOD-008-1 complies with Order No. 890 by 
specifying the critical areas of analysis required for transmission 
reliability margin.\46\ Further, it states that it has specified the 
appropriate uses of transmission reliability margin in Requirement R1 
and prohibited the use of other values and double counting in 
Requirement R1. In addition, it maintains that MOD-008-1 complies with 
Order No. 693 by imposing clear requirements for making documents 
supporting the transmission reliability margin determination available 
through Requirements R1 and R3.
---------------------------------------------------------------------------

    \46\ NERC Filing at 32 (citing Order No. 890, FERC Stats. & 
Regs. ] 31,241 at P 273).
---------------------------------------------------------------------------

    48. In response to the requirement to expand the applicability of 
the transmission reliability margin Reliability Standard to planning 
authorities and reliability coordinators,\47\ NERC states that the 
drafting team was not able to identify any requirements for these 
entities, based on the current drafting of the Reliability Standard. 
Therefore, these entities are not included in the proposed Reliability 
Standard. NERC states that, until such time as the transmission 
reliability margin methodology becomes more detailed, there does not 
seem to be any measurable action that can be imposed on the planning 
coordinator \48\ or reliability coordinator.
---------------------------------------------------------------------------

    \47\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1126.
    \48\ The Commission notes that NERC uses the terms planning 
coordinator and planning authority interchangeably in its standards, 
as indicated in the proposed additions to the glossary of terms, 
addressed below. The interchangeable use of these terms may lack the 
clarity generally preferred, but the Commission understands that 
NERC is currently working on modifications to address this issue.
---------------------------------------------------------------------------

    49. In response to the Commission's statement that it would not 
require transfer capability that is set aside as transmission 
reliability margin to be sold on a non-firm basis,\49\ NERC states that 
it has included this requirement in each of the three methodologies as 
a part of firm and non-firm equations. NERC states that, because some 
of the uncertainties included in the transmission reliability margin 
may reduce or be eliminated as one approaches real time, the non-firm 
equations allow for the partial release of transmission reliability 
margin. In the Area Interchange Methodology (MOD-028-1), this is 
addressed in Requirement R11; in the Rated System Path Methodology 
(MOD-029-1), this is addressed in Requirement R8; and in the Flowgate 
Methodology (MOD-030-2), this is addressed in Requirement R9.
---------------------------------------------------------------------------

    \49\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 273.
---------------------------------------------------------------------------

    50. NERC contends that choosing a ``best'' approach to transmission 
reliability margin calculation would require a much more thorough 
technical effort. NERC therefore requests that the Commission provide 
additional guidance on this topic regarding its priority and a 
determination whether or not such an effort should be included in 
NERC's annual planning process.

E. Three Methodologies for Calculating Available Transfer Capability

    51. In Order No. 890, the Commission did not require a uniform 
methodology for calculating available transfer capability. The 
Commission noted that NERC was developing Reliability Standards for 
three available transfer capability calculation methodologies and 
concluded that, if all of the available transfer capability components 
and certain data inputs and assumptions are consistent, the three 
available transfer capability calculation methodologies being developed 
by NERC will produce predictable and sufficiently accurate, consistent, 
equivalent and replicable results.\50\ Consistent with Order No. 890, 
NERC proposes three methodologies for calculating available transfer 
capability as detailed in the following Reliability Standards: MOD-028-
1, MOD-029-1 and MOD-030-2. NERC contends that these three 
methodologies meet the requirements established by the Commission in 
Order No. 890, as well as those established in Order No. 693.
---------------------------------------------------------------------------

    \50\ Id. P 210.
---------------------------------------------------------------------------

    52. NERC asserts that the three methodologies are a significant 
improvement over the existing available transfer capability related 
requirements. While current MOD-001-0 is essentially a ``fill-in-the-
blank'' Reliability Standard,\51\ the proposed methodologies replace 
the original fill-in-the-blank standard by specifying in detail how 
total transfer capability is to be determined--from modeling 
requirements, to the simulation of dispatch to determine native load 
impacts, to the treatment of reservations and to the incorporation of 
neighboring data. According to NERC, MOD-001-1 specifies how existing 
transmission commitments and available transfer capability are to be 
determined in detail and clearly describes the treatment of capacity 
benefit margin and transmission reliability margin in the available 
transfer capability equations. Thus, NERC contends, these Reliability 
Standards reduce the potential for seams discrepancies and improve the 
wide-area understanding of the Bulk-Power System on a forward-looking 
basis. NERC states that, by promoting consistency, standardization and 
transparency, they directly support and improve the reliability of the 
Bulk-Power System and help achieve the Commission's objectives stated 
in Order No. 890.
---------------------------------------------------------------------------

    \51\ A fill-in-the-blank Reliability Standard requires the 
regional entities to develop criteria for use by users, owners or 
operators within each region. In Order No. 693, the Commission held 
24 Reliability Standards (mainly fill-in-the-blank standards) as 
pending until further information was provided on each standard and 
requires users, owners and operators to follow these pending 
standards as ``good utility practice'' pending their approval by the 
Commission.
---------------------------------------------------------------------------

1. Area Interchange Methodology, MOD-028-1
    53. NERC states that the area interchange methodology is 
characterized by determination of incremental transfer capability via 
simulation, from which total transfer capability can be mathematically 
derived. Capacity benefit margin, transmission reliability margin, and 
existing transmission commitments are subtracted from the total 
transfer capability, and postbacks and counterflows are added, to 
derive available transfer capability. NERC also states that, under the 
area interchange methodology, total transfer capability results are 
generally reported on an area to area basis.
    54. MOD-028-1 describes the area interchange methodology 
(previously referred to as the network response available transfer 
capability methodology) for determining available transfer capability. 
NERC intends to use the Area Interchange Methodology Reliability 
Standard to increase consistency and reliability in the development and 
documentation of transfer capability calculation for short-term use 
performed by entities using the area interchange methodology to support 
analysis and system operations.
    55. This Reliability Standard would apply only to transmission 
operators and transmission service providers that

[[Page 12756]]

have elected to implement this particular methodology as part of their 
compliance with MOD-001-1, Requirement R1. The proposed Reliability 
Standard consists of eleven requirements. Requirement R1 provides the 
additional information that a transmission service provider using the 
area interchange methodology must include in its available transfer 
capability implementation document. This includes information 
describing how the selected methodology has been implemented, in such 
detail that, given the same information used by the transmission 
operator, the results of the total transfer capability calculations can 
be validated; a description of the manner in which the transmission 
operator will account for interchange schedules in the calculation of 
total transfer capability; any contractual obligations for allocation 
of total transfer capability; a description of the manner in which 
contingencies are identified for use in the total transfer capability 
process; and information on how sources and sinks for transmission 
service are accounted for in available transfer capability 
calculations.
    56. Pursuant to Requirement R2, each transmission operator must 
calculate total transfer capability using a model that meets the scope 
specified in the requirement and includes rating information specified 
by generator owners and transmission owners whose equipment is 
represented in the model.
    57. Requirement R3 details the information the transmission 
operator must include in its determination of total transfer capability 
for the on-peak and off-peak intra-day and next day time periods, as 
well as days two through 31 and for months two through 13.\52\ 
Requirement R4 requires each transmission operator to determine total 
transfer capability while modeling contingencies and reservations 
consistently, and respect any contractual allocations of total transfer 
capability.
---------------------------------------------------------------------------

    \52\ This information includes: Expected generation and 
transmission outages, additions, and retirements; load forecasts; 
and unit commitment and dispatch order.
---------------------------------------------------------------------------

    58. Requirement R5 provides that each transmission operator must 
determine total transfer capability on a periodic basis (as specified 
in the requirement) or upon certain operating conditions significantly 
affecting bulk electric system topology.
    59. Requirement R6 provides the detailed process by which each 
transmission operator must establish total transfer capability, which 
must be provided to the transmission service provider within the time 
frames specified in Requirement R7.
    60. Requirements R8 through R11 specify the formulas and detailed 
specifications of the variables for calculating firm and non-firm 
existing transmission commitments and firm and non-firm available 
transfer capability.
2. Rated System Path Methodology, MOD-029-1
    61. NERC states that the rated system path methodology is 
characterized by an initial total transfer capability, determined via 
simulation. As with the area interchange methodology, capacity benefit 
margin, transmission reliability margin, and existing transmission 
commitments are subtracted from the total transfer capability, and 
postbacks and counterflows are added, to derive available transfer 
capability. NERC also states that, under the rated system path 
methodology, total transfer capability results are generally reported 
as specific transmission path capabilities.
    62. MOD-029-1 describes the rated system path methodology for 
determining available transfer capability. NERC intends to use this 
Reliability Standard to increase consistency and reliability in the 
development and documentation of transfer capability calculations for 
short-term use performed by entities using the rated system path 
methodology to support analysis and system operations.
    63. This Reliability Standard would apply only to transmission 
operators and transmission service providers that have elected to 
implement rated system path methodology as part of their compliance 
with MOD-001-1 Requirement R1. To implement this calculation, this 
Reliability Standard consists of eight requirements. Under Requirement 
R1, a transmission operator must calculate total transfer capability 
using a model that meets the scope and criteria specified in the 
requirement. Requirement R2 lists a detailed process by which the 
transmission operator must establish total transfer capability. 
Pursuant to Requirement R3, the transmission operator must establish 
total transfer capability as the lesser of the system operating limit 
or the value determined in Requirement R2. The transmission operator 
must then provide a transmission service provider with the appropriate 
total transfer capability values and study report within seven days of 
finalization of the study report required in Requirement R4.
    64. Requirements R5 through R8 provide that each applicable 
transmission service provider must calculate firm and non-firm existing 
transmission commitments and firm and non-firm available transfer 
capability using a specified formula and detailed specification of the 
variables.
3. Flowgate Methodology, MOD-030-2
    65. NERC states that the flowgate methodology is characterized by 
identification of key facilities as flowgates. Total flowgate 
capabilities are determined based on facility ratings and voltage and 
stability limits. The impacts of existing transmission commitments are 
determined by simulation. To determine the available flowgate 
commitments, the transmission service provider or operator must 
subtract the impacts of existing transmission commitments, capacity 
benefit margin, and transmission reliability margin, and add the 
impacts of postbacks and counterflows. Available flowgate capability 
can be used to determine available transfer capability.
    66. MOD-030-2 describes the flowgate methodology (previously 
referred to as the flowgate network response available transfer 
capability methodology) for determining available transfer capability. 
NERC states that the purpose of the Flowgate Methodology Reliability 
Standard is to increase consistency and reliability in the development 
and documentation of transfer capability calculations for short-term 
use performed by entities using the flowgate methodology to support 
analysis and system operations.
    67. This Reliability Standard would apply only to transmission 
operators and transmission service providers that have elected to 
implement this particular methodology as part of their compliance with 
MOD-001-2. As proposed, the Flowgate Methodology consists of eleven 
requirements. Requirement R1 states that a transmission service 
provider implementing this methodology must include the following 
information in its available transfer capability implementation 
document in addition to that already required in the Available 
Transmission System Capability Reliability Standard (MOD-001-1): the 
criteria used by the transmission operator to identify sets of 
transmission facilities as flowgates that are to be considered in 
available flowgate capability calculations, and information on how 
sources and sinks for transmission service are accounted for in 
available flowgate capability calculations.
    68. Under Requirement R2, each applicable transmission operator 
must determine and manage the flowgates used in the methodology based 
on the criteria listed in the requirement,

[[Page 12757]]

establish its total flowgate capability based on the criteria listed in 
the requirement, and provide total flowgate capability to the 
transmission service provider within seven days of their 
determination.\53\ To achieve consistency in each component of the 
available transfer capability calculation, the Commission, in Order No. 
890, directed public utilities, working through NERC, to develop an 
available flowgate capability definition and requirements used to 
identify a particular set of transmission facilities in a flowgate.\54\ 
As part of the development of the Flowgate Methodology, NERC states 
that the Reliability Standard drafting team developed a definition of 
available flowgate capability. In addition, NERC states that 
Requirement R2 of this Reliability Standard contains a list of minimum 
characteristics that are to be used to identify a particular set of 
transmission facilities as a flowgate.
---------------------------------------------------------------------------

    \53\ MOD-030-2 is identical to MOD-030-1 except for certain 
modifications to Requirements R2 and R11. First, NERC added new sub-
requirements R2.1.1.3 and R2.1.2.3. to clarify that, if any limiting 
element is kept within its limit for its associated worst 
contingency by operating within the limits of another flowgate, then 
no new flowgate needs to be established for such limiting elements 
or contingencies. Second, NERC modified sub-requirement R2.1.3. to 
state that the list of flowgates does not need to include any 
flowgates created to address temporary operating conditions. 
Finally, NERC modified Requirement R11 to eliminate the obligation 
to convert total flowgate capability to total transfer capability. 
The Commission notes that the modification to Requirement R11 does 
not alter the posting requirements of 18 CFR 37.6(b)(3).
    \54\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 313.
---------------------------------------------------------------------------

    69. Requirement R3 requires the transmission operator to provide 
the transmission service provider with a transmission model that meets 
a specified criteria and Requirement R4 provides that the transmission 
service provider must evaluate reservations consistently when 
determining available flowgate capability. When determining available 
flowgate capability, Requirement R5 provides that each transmission 
service provider must use the models given to it as described in 
Requirement R3, include appropriate outages, and use the available 
flowgate capability on external flowgates as provided by the 
transmission service provider calculating available flowgate capability 
for those flowgates.
    70. Requirements R6 and R7 require each transmission service 
provider to calculate the impact of firm and non-firm existing 
transmission commitments using a specified process. The transmission 
service provider must calculate firm and non-firm available flowgate 
capability using the formula and detailed specification of the 
variables found in Requirements R8 and R9.
    71. Under Requirement R10, each transmission service provider shall 
recalculate available flowgate capability at a certain specified 
interval (hourly once per hour, daily once per day, monthly once per 
week) unless the input values specified in the available flowgate 
capability calculation have not changed. NERC contends that this 
requirement satisfies the requirement in Order No. 890 and Order No. 
693 that transmission service providers recalculate available transfer 
capability on a consistent time interval. Finally, Requirement R11 
provides the formula and variables that a transmission service provider 
must use if it desires to convert available flowgate capability to 
available transfer capability.\55\
---------------------------------------------------------------------------

    \55\ Requirement R11 of MOD-030-1 would have directed 
transmission service providers to use the same formula to convert 
total flowgate capability to total transfer capability. The formula 
provided in Requirement R11 of MOD-030-2 eliminates this obligation. 
As noted above, this modification does not alter the posting 
requirements of 18 CFR 37.6(b)(3).
---------------------------------------------------------------------------

F. Implementation Plan

    72. NERC proposes that the Available Transmission System Capability 
Reliability Standard and the three methodology Reliability Standards 
become effective the first day of the first quarter no sooner than one 
calendar year after approval of all of these four Reliability Standards 
by all appropriate regulatory authorities where approval is required or 
is otherwise effective in those jurisdictions where approval is not 
explicitly required. According to NERC, since the three methodology 
Reliability Standards require information from neighboring reliability 
entities for use in the development of its available transfer 
capability and available flowgate capability values that is compulsory 
under Requirement R9 of the Available Transmission System Capability 
Reliability Standard (MOD-001-1), none of the methodology Reliability 
Standards can be effectively implemented unless and until that 
Reliability Standard has been implemented by all entities in all 
jurisdictions.
    73. NERC states that, although some entities may already be 
implementing the requirements in the Reliability Standards, many others 
are not, especially with regard to the data exchange requirements 
listed in Requirement R9 of MOD-001-1. Accordingly, software changes, 
associated testing, and possible tariff filings will be required to 
comply with the proposed Reliability Standards. Therefore, NERC 
maintains that a minimum of one year from regulatory approval should be 
allowed for entities to comply.
    74. NERC proposes that each of the Capacity Benefit Margin (MOD-
004-1) and Transmission Reliability Margin (MOD-008-1) Reliability 
Standards require compliance on the first day of the first quarter no 
sooner than one calendar year after approval of the Reliability 
Standard by appropriate regulatory authorities where approval is 
required or, where approval is not explicitly required, when the 
Reliability Standard is otherwise effective. According to NERC, unlike 
the other four proposed Reliability Standards included in this filing, 
the Transmission Reliability Margin Reliability Standard replaces the 
existing Reliability Standard MOD-008-0 and the Capacity Benefit Margin 
Reliability Standard replaces MOD-004-0. As such, they do not require 
coordinated implementation, as entities may rely on the previous 
version of the Reliability Standards if any delay in implementing the 
Reliability Standards occurs. NERC states that, although many entities 
already use transmission reliability margin and capacity benefit 
margin, compliance with these Reliability Standards may require 
software changes, software regression testing, and possible tariff 
changes. To accommodate these needs, NERC believes a one-year 
implementation period is appropriate.

III. Discussion

    75. The Commission proposes to approve the revised MOD Reliability 
Standards and related additions to the glossary of terms, to be 
effective as proposed by NERC, as just, reasonable, not unduly 
discriminatory or preferential, and in the public interest. These 
Reliability Standards represent a step forward in eliminating the broad 
discretion previously afforded transmission service providers in the 
calculation of available transfer capability. As the Commission 
explained in Order No. 890, excessive discretion in the calculation of 
available transfer capability gives transmission service providers the 
opportunity to discriminate in subtle ways in the provision of open 
access transmission service.\56\ On systems where transmission capacity 
is constrained, a lack of transparency and consistency in the 
calculation of available transfer capability has led to recurring 
disputes over whether transmission service providers have performed 
those

[[Page 12758]]

calculations in a way that discriminates against competitors.
---------------------------------------------------------------------------

    \56\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 68.
---------------------------------------------------------------------------

    76. The Commission acted in Order No. 890 to limit this remaining 
opportunity for discrimination by directing public utilities, working 
through NERC, to develop Reliability Standards to govern the consistent 
and transparent calculation of available transfer capability by 
transmission service providers. In Order No. 693, the Commission 
implemented that directive by requiring NERC to prospectively modify 
the MOD Reliability Standards it filed in April 2006 to address the 
requirements of Order No. 890. The proposed Reliability Standards 
satisfy these requirements by enhancing transparency and consistency in 
the calculation of available transfer capability, mandating that 
transmission service providers and transmission operators perform their 
calculations in accordance with methodologies that are both explicitly 
documented and available to reliability entities who request them. The 
proposed Reliability Standards also require documentation of the 
detailed representations of the various components that comprise the 
available transfer capability equation, and require transmission 
service providers and transmission operators to specify modeling and 
risk assumptions and disclosure of outage processing rules to other 
reliability entities. These actions will make the processes to 
calculate available transfer capability and its various components more 
transparent which, in turn, will allow the Commission and others to 
ensure that those calculations are performed consistently.
    77. Although the Commission believes that the proposed Reliability 
Standards generally comply with the requirements of Order No. 890 and 
related directives of Order No. 693, the Commission is concerned that 
the implementation documents used by each transmission service provider 
to implement the Reliability Standards could provide continuing 
opportunities to discriminate in the provision of transmission service. 
As discussed in further detail below, the Commission proposes to direct 
the ERO to perform an audit of the implementation documents to 
determine if they provide sufficient transparency to enable the 
Commission and others to replicate and verify each transmission service 
provider's calculations. Without adequate transparency, it will be 
impossible for the Commission to ensure that transmission service 
providers are consistently performing their available transfer 
capability calculations when responding to requests for transmission 
service. Ensuring adequate transparency also will enable the Commission 
and others to verify that data and modeling assumptions used to 
calculate available transfer capability are being used consistently 
during relevant timeframes, such as in the calculation of short-term 
available transfer capability and the planning of operations, as 
required by the proposed Reliability Standards.\57\
---------------------------------------------------------------------------

    \57\ MOD-001-1, Requirements R6 and R7.
---------------------------------------------------------------------------

    78. The Commission also has concern regarding several of the 
substantive requirements of the proposed Reliability Standards. To 
address these concerns, the Commission proposes to direct the ERO to 
develop modifications to the Reliability Standards to address the 
discrete issues involving: the availability of each transmission 
service provider's implementation documents; the consistent treatment 
of assumptions in the calculation of available transfer capability; the 
calculation, allocation, and use of capacity benefit margin; the 
calculation of total transfer capability under the Rated System Path 
Methodology; and, the treatment of network resource designations in the 
calculation of available transfer capability.
    79. Finally, we note that the Commission in this proceeding 
addresses only those revisions to the Reliability Standards filed to 
comply with the available transfer capability-related requirements of 
Order No. 890, as implemented by Order No. 693. In Order No. 693, the 
Commission also directed the ERO to develop modifications to a number 
of other Reliability Standards. The Commission expects the ERO to 
comply in a timely and complete manner with those directives, to the 
extent it has not already done so.

A. Implementation of the Reliability Standards

    80. The Available Transmission System Capability Reliability 
Standard (MOD-001-1) serves as an ``umbrella'' Reliability Standard 
that requires each applicable entity to select and implement one or 
more of the three available transfer capability methodologies found in 
MOD-028-1, MOD-029-1, or MOD-030-2. MOD-004-1 and MOD-008-1 provide for 
the calculation of capacity benefit margin and transmission reliability 
margin, which are inputs into the available transfer capability 
calculation. Together, these Reliability Standards require transmission 
service providers and transmission operators to prepare and keep 
current implementation documents that contain certain information 
specified in the Reliability Standards. The available transfer 
capability implementation documents must describe the available 
transfer capability methodology in such detail that the results of 
their calculations can be validated when given the same information 
used by the transmission service provider or transmission operator.\58\
---------------------------------------------------------------------------

    \58\ MOD-001-1, Requirement R3.
---------------------------------------------------------------------------

    81. The Commission is concerned that the proposed Reliability 
Standards could be implemented by a particular transmission service 
provider or transmission operator in a way that enables them to retain 
the ability to unduly discriminate in the provision of open access 
transmission service. Although the Reliability Standards require 
transmission service providers to include certain minimum information 
in each of the implementation documents, transmission service providers 
are also permitted to include additional, undefined parameters and 
assumptions in those documents. This could include criteria that are 
themselves not sufficiently transparent to allow the Commission and 
others to determine whether they have been consistently applied by the 
transmission service provider in particular circumstances. This 
discretion appears in the three available transfer capability 
methodologies (MOD-028-1, MOD029-1, and MOD-030-2), as well as the 
Reliability Standards governing the calculation of capacity benefit 
margin (MOD-004-1) and transmission reliability margin (MOD-008-1).
    82. It is appropriate for transmission service providers to retain 
some level of discretion in the calculation of available transfer 
capability. Requiring absolute uniformity in criteria and assumptions 
across all transmission service providers would preclude transmission 
service providers from calculating available transfer capability in a 
way that accommodates the operation of their particular systems. The 
Reliability Standards need not be so specific that they address every 
unique system difference or differences in risk assumptions when 
modeling expected flows. Each transmission service provider should 
retain some discretion to reflect unique system conditions or modeling 
assumptions in its available transmission capability methodology.\59\ 
Any such system conditions or modeling assumptions, however, must be 
made sufficiently transparent and be

[[Page 12759]]

implemented consistently for all transmission customers.
---------------------------------------------------------------------------

    \59\ Order No. 890-A, FERC Stats. & Regs. ] 31,261 at P 51.
---------------------------------------------------------------------------

    83. In order to ensure that this occurs, the Commission proposes to 
direct the ERO to conduct an audit of the various implementation 
documents developed by transmission service providers to confirm that 
the complete available transfer capability methodologies reflected 
therein, including the calculation of each component of available 
transfer capability, are sufficiently transparent to allow the 
Commission and others to replicate and verify those calculations and 
thereby ensure that they are being implemented consistently for all 
transmission customers. This audit would review the additional 
parameters and assumptions included by transmission service providers 
in their implementation documents as of the date the Reliability 
Standards become effective, analyzing all parameters and assumptions to 
determine if they are detailed enough to enable replication and 
verification of calculations. Upon review of this analysis, the 
Commission may direct the ERO to develop a modification to one or more 
of the Reliability Standards to address any lack of transparency that 
may exist in the calculation of available transfer capability and each 
of its components.
    84. The Commission proposes to direct the ERO to complete this 
audit no later than 180 days after the effective date of the 
Reliability Standards, as approved by a final rule in this docket.\60\ 
The Commission also proposes to direct NERC to submit a timeline for 
the completion of this audit within 30 days of the issuance of the 
final rule in this docket. The Commission discusses below the specific 
issues to be analyzed by NERC in its audit.
---------------------------------------------------------------------------

    \60\ The audit should be prepared and submitted by NERC staff 
(or any consultants it may choose to employ), rather than the 
drafting teams that developed the proposed Reliability Standards.
---------------------------------------------------------------------------

    85. Before turning to those issues, the Commission reiterates that 
our intent is not to require the development of a single, uniform 
methodology for calculating available transfer capability or its 
components. In Order No. 890, the Commission found that the potential 
for discrimination does not lie primarily in the choice of an available 
transfer capability calculation methodology, but rather in the 
consistent application of its components.\61\ The Commission 
acknowledged that NERC was developing standards for three available 
transfer capability calculation methodologies. The Commission concluded 
that, if all of the available transfer capability components and 
certain data inputs and assumptions are consistent, the three available 
transfer capability calculation methodologies being developed by NERC 
would produce predictable and sufficiently accurate, consistent, 
equivalent and replicable results.\62\
---------------------------------------------------------------------------

    \61\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 208.
    \62\ Id. P 210.
---------------------------------------------------------------------------

    86. As the Commission explains in Order No. 890-C, issued 
concurrently with this order, this does not mean that the results of 
available transfer capability calculations on either side of an 
interface must be identical in every instance. There are fundamental 
differences in the three available transfer capability methodologies 
set forth in the proposed Reliability Standards that may keep them from 
producing identical results. Even where the same methodology is used by 
transmission service providers on either side of an interface, unique 
system differences or differences in risk assumptions can lead to 
variations in available transfer capability values. The central goal of 
the available transfer capability reforms adopted in Order No. 890 was 
to limit remaining opportunities for discrimination by requiring each 
transmission service provider's available capability transfer 
methodology to be sufficiently transparent to allow for independent 
validation that it has been consistently applied. Subject to 
confirmation by NERC through its audit, the Commission believes that 
the Reliability Standards will provide the necessary level of 
transparency and, therefore, the results of available transfer 
capability calculations will be sufficiently accurate, consistent, 
equivalent and replicable.
1. Available Transfer Capability Implementation Documents
    87. First, the Commission proposes to direct the ERO to study 
whether each available transfer capability implementation document 
developed by each transmission service provider under the Reliability 
Standards contains a level of specificity sufficient to allow the 
Commission and others to replicate and verify calculations of available 
transfer capability and available flowgate capability. Although MOD-
028-1, MOD-029-1, and MOD-030-2 each improves transparency and 
consistency by requiring transmission service providers to use certain 
specified data and variables in their calculations, they also allow 
transmission service providers to use additional parameters and 
assumptions as long as they are specified in their implementation 
documents. Other than their inclusion in the available transfer 
capability implementation document, there do not appear to be any 
appreciable factors limiting a transmission service provider's 
discretion to use particular parameters and assumptions.
    88. For example, in the Area Interchange Methodology (MOD-028-1), 
Requirement R3.1 establishes variables to be used when calculating on-
peak and off-peak intra-day and next-day total transfer capabilities. 
The requirement also allows transmission operators to use ``any other 
values and additional parameters as specified in the [available 
transfer capability implementation document].''\63\ The requirement 
does not provide any further limitation on the other values and 
additional parameters. Thus, although the requirement promotes 
transparency and consistency, it could allow an entity to adopt values 
and parameters that are not sufficiently transparent to ensure that the 
transmission service provider is not discriminating in the provision of 
transmission service through its calculation of available transfer 
capability.
---------------------------------------------------------------------------

    \63\ MOD-028-1, Requirement R3.1.
---------------------------------------------------------------------------

    89. Similarly, Requirement R1 of the Rated System Path Methodology 
(MOD-029-1) requires a transmission operator, when calculating total 
transfer capabilities for available transfer capability, to use a 
transmission model that meets the criteria set forth in the sub-
requirements. Requirement R1.1.9 allows a transmission operator to use 
a model that ``models series compensation for each line at the expected 
operating level unless specified otherwise in the [available transfer 
capability implementation document].''\64\ Requirement R1.1.10 allows a 
transmission operator to use a model that ``includes any other modeling 
requirements or criteria specified in the [available transfer 
capability implementation document].''\65\
---------------------------------------------------------------------------

    \64\ MOD-029-1, Requirement R1.1.9.
    \65\ MOD-029-1, Requirement R1.1.10.
---------------------------------------------------------------------------

    90. The same unrestrained discretion is found in the Flowgate 
Methodology (MOD-030-2). Requirement R2.1 requires transmission 
operators to include flowgates used in the available flowgate 
capability based, at a minimum, on specified criteria. This criteria 
includes, at Requirement R2.1.3, any limiting element/contingency 
combination at least within the transmission model identified in

[[Page 12760]]

Requirement R3.4\66\ and R3.5\67\ that has been subjected to an 
interconnection-wide congestion management procedure within the last 12 
months, unless the limiting element/contingency combination is 
accounted for using another available transmission capability 
methodology. Requirement R2.1.4 allows transmission operators to 
consider any limiting element/contingency combination within the 
transmission model that has been requested to be included by any other 
transmission service provider using the flowgate methodology or area 
interchange methodology under certain circumstances.
---------------------------------------------------------------------------

    \66\ Requirement R3.4 requires the transmission operator to make 
available to the transmission service provider a transmission model 
to determine available flowgate capability that contains modeling 
data and system topology for the facilities within its reliability 
coordinator's area. Equivalent representation of radial lines and 
facilities 161kv or below is allowed.
    \67\ Requirement R3.5 requires the transmission operator to make 
available to the transmission service provider a transmission model 
to determine available flowgate capability that contains modeling 
data and system topology (or equivalent representation) for 
immediately adjacent and beyond reliability coordination areas.
---------------------------------------------------------------------------

    91. In Order No. 890, the Commission expressed particular concern 
regarding consistency in the use of counterflow assumptions in short-
term and long-term calculations of available transfer capability.\68\ 
The Reliability Standards achieve consistency by requiring each 
transmission service provider to identify in its available transfer 
capability implementation document how it accounts for counterflows and 
to calculate available transfer capability using assumptions no more 
limiting than those used in the planning of operations for the 
corresponding time period.\69\ However, the Reliability Standards again 
place no limit on the parameters the transmission service provider can 
use to account for counterflows. Under MOD-028-1, MOD-029-1, and MOD-
030-2, transmission service providers are permitted to make adjustments 
to available transfer capability or available flowgate capability to 
reflect counterflows so long as such adjustments are allowed under the 
counterflow methodology identified in the available transfer capability 
implementation document.\70\
---------------------------------------------------------------------------

    \68\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 292-93; 
Order 693, FERC Stats. & Regs. ] 31,242 at P 1039.
    \69\ MOD-001-1, Requirements R3.2, R7. NERC states in its filing 
that additional guidance from the Commission would be necessary in 
order to specify in greater detail a single ``best'' approach for 
treating counterflows. See NERC Filing at 101. The Commission did 
not require the development of a single approach for the treatment 
of counterflows. Rather, the Commission required the development of 
Reliability Standards that result in the use of counterflow 
assumptions for short-term and long-term available transfer 
capability calculations that are consistent with those used for the 
planning of operations and system expansion. See Order No. 890, FERC 
Stats. & Regs. ] 31,241 at P 292-93; Order 693, FERC Stats. & Regs. 
] 31,242 at P 1039. The proposed Reliability Standards adequately 
address that requirement by directing each transmission service 
provider to identify in its implementation document how it will 
address counterflows in its calculation of available transfer 
capability and available flowgate capacity.
    \70\ MOD-028-1, Requirement R10; MOD-029-1, Requirement R7; MOD-
030-2, Requirement R8.
---------------------------------------------------------------------------

    92. The Commission also expressed concern in Order No. 890 
regarding the treatment of reservations with the same point of receipt 
(generator), but multiple points of delivery (load), in setting aside 
existing transmission capacity.\71\ The Commission found that such 
reservations should not be modeled in the existing transmission 
commitments calculation simultaneously if their combined reserved 
transmission capacity exceeds the generator's nameplate capacity at the 
point of receipt. The Commission required the development of 
Reliability Standards that lay out clear instructions on how these 
reservations should be accounted for by the transmission service 
provider. The proposed Reliability Standards achieve this by requiring 
transmission service providers to identify in their implementation 
documents how they have implemented MOD-028-1, MOD-029-1, or MOD-030-2, 
including the calculation of existing transmission commitments.\72\ 
However, the Reliability Standards again place no limits on the 
parameters that each transmission service provider can use.
---------------------------------------------------------------------------

    \71\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 245; Order 
693, FERC Stats. & Regs. ] 31,242 at P 1033.
    \72\ MOD-001-1, Requirement R3.1. In its filing, NERC discusses 
several options should the Commission desire to impose a uniform 
approach regarding the treatment of reservations with the same point 
of receipt, but multiple points of delivery. See NERC Filing at 90-
92. Neither Order No. 890 nor Order No. 693 directed that a single 
approach be adopted to account for such reservations and, instead, 
required only that instructions on how these reservations are 
accounted for by the transmission service provider be clearly laid 
out. See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 245; Order 
693, FERC Stats. & Regs. ] 31,242 at P 1033. The obligation of each 
transmission service provider to identify in its implementation 
document how they have implemented MOD-028-1, MOD-029-1, or MOD-030-
2, including the calculation of existing transmission capacity, 
satisfies this requirement.
---------------------------------------------------------------------------

    93. The proposed Reliability Standards thus provide each 
transmission service provider with substantial discretion when 
implementing various aspects of its available transfer capability 
methodology. The Commission recognizes that there are aspects of 
calculations that require the use of parameters and assumptions 
tailored to the particular needs of a transmission service provider. In 
certain instances, however, this discretion could be used by a 
transmission service provider to include criteria that allow for 
discrimination in the provision of transmission service through 
inconsistent calculation of available transfer capability. For example, 
the use of parameters, modeling requirements, criteria, or assumptions 
that are undefined or ``black box'' in nature would provide the 
transmission service provider with the opportunity and ability to vary 
its calculations depending on the customer seeking service. Such 
discretion undermines the ability of the Commission and others to 
replicate and verify the results of a transmission service provider's 
calculations.
    94. In order to ensure that remaining opportunities for undue 
discrimination are identified and eliminated, the Commission proposes 
to direct the ERO to conduct a review of the additional parameters and 
assumptions included by each transmission service provider in its 
available transfer capability implementation document as of the date 
the Reliability Standards become effective. Based on its review, NERC 
would identify in the audit required above those instances in which 
parameters and assumptions are not sufficiently specific or transparent 
to allow the Commission and others to replicate and verify the results 
of the transmission service provider's calculation of available 
transfer capability or available flowgate capacity. Upon review of 
NERC's analysis, the Commission may direct the ERO to develop a 
modification to MOD-001-1 to address any lack of transparency. The 
Commission seeks comment whether additional requirements should be 
directed in this proceeding to ensure that the discretion provided 
under the available transfer capability implementation documents cannot 
be used to unduly discriminate in the provision of transmission 
service.
2. Capacity Benefit Margin Implementation Documents
    95. Second, the Commission proposes to direct the ERO to study 
whether the capacity benefit margin implementation documents developed 
by transmission service providers under MOD-004-1 contain a level of 
specificity sufficient to allow the Commission and others to replicate 
and verify the calculation, allocation, and use of capacity benefit 
margin by transmission service providers. As explained above, capacity

[[Page 12761]]

benefit margin is the amount of firm transmission capability preserved 
by the transmission service provider for load-serving entities, whose 
loads are located on that transmission service provider's system, to 
enable access by the load-serving entities to generation from 
interconnected systems to meet generation reliability requirements. As 
NERC explained in its filing, various entities have already developed 
methodologies for determining capacity benefit margin. Accordingly, 
NERC proposed a Reliability Standard that allows transmission service 
providers flexibility in choosing an appropriate methodology for 
calculating, allocating and using capacity benefit margins. Although 
MOD-004-1 specifies core elements that should be consistent among all 
methodologies, the transmission service provider has discretion to use 
any methodology to calculate, allocate, and use capacity benefit 
margins, provided that it is identified and described in the 
implementation document.
    96. For example, Requirements R5.1 and R6.1 of MOD-004-1 require 
the transmission service provider to establish capacity benefit margin 
values for each path and flowgate reflecting consideration of studies 
provided by load-serving entities and resource planners demonstrating a 
need for capacity benefit margin and applicable reserve margin or 
resource adequacy requirements. Although Requirement R1.2 requires the 
transmission service provider to identify in its capacity benefit 
margin implementation document the procedures and assumptions for 
establishing these path and flowgate values, the Reliability Standard 
places no limitations or parameters on those procedures or assumptions. 
As with MOD-001-1, MOD-004-1 would permit the transmission service 
provider to adopt procedures and assumptions that are not sufficiently 
transparent to ensure that the transmission provider is similarly 
treating similarly-situated customers. The Commission is therefore 
concerned that the Reliability Standard could be implemented by a 
transmission service provider in a way that allows for undue discretion 
in the provision of transmission service.
    97. In order to ensure that remaining opportunities for undue 
discrimination are identified and eliminated, the Commission proposes 
to direct the ERO to conduct a review of the procedures and assumptions 
included by each transmission service provider in its capacity benefit 
margin implementation document as of the date the Reliability Standards 
become effective. Based on its review, NERC would identify in the audit 
required above those instances in which additional procedures and 
assumptions are not sufficiently specific or transparent to allow the 
Commission and others to replicate and verify the calculation, 
allocation and use of capacity benefit margin by the transmission 
service provider.\73\ Upon review of NERC's analysis, the Commission 
may direct the ERO to develop a modification to MOD-004-1 to address 
any lack of transparency. The Commission seeks comment whether 
additional requirements should be directed in this proceeding to ensure 
that the discretion provided under the capacity benefit margin 
implementation documents cannot be used to unduly discriminate in the 
provision of transmission service.
---------------------------------------------------------------------------

    \73\ The scope of this audit should not include review of the 
studies supporting requests for capacity benefit margin. The 
Commission agrees with NERC that it would be inappropriate to place 
a functional entity, such as the transmission service provider, in 
the position of having to judge the quality of a study supporting a 
customer's request for capacity benefit margin. Requirements R3 and 
R4 of MOD-004-1 identify the specific kinds of studies that must be 
performed and supporting information that is to be maintained when 
determining a need for capacity benefit margin. Compliance with 
these requirements can be audited by NERC and the regional entities 
in the normal course of their compliance review. See Guidance Order 
on Compliance Audits Conducted by the Electric Reliability 
Organization and Regional Entities, 126 FERC ] 61,038 (2009).
---------------------------------------------------------------------------

3. Transmission Reliability Margin Implementation Documents
    98. Finally, the Commission proposes to direct the ERO to study 
whether the transmission reliability margin implementation documents 
developed by each transmission operator under the Reliability Standards 
contain a level of specificity sufficient to allow the Commission and 
others to replicate and verify the calculation and use of transmission 
reliability margin. Transmission reliability margin is transmission 
transfer capability set aside to mitigate risks to operations, such as 
deviations in dispatch, load forecast, outages, and similar such 
conditions. As NERC explains in its filing, transmission reliability 
margin is a subjective quantity as it is almost entirely based on the 
principles of risk management and risk tolerance, which vary from 
entity to entity.\74\ Therefore, although MOD-008-1 identifies the 
particular categories of uncertainty that transmission operators may 
consider when establishing transmission reliability margin, the 
transmission operator is permitted to use any methodology to calculate, 
allocate, and use transmission reliability margins, provided that it is 
identified and described in the implementation document.
---------------------------------------------------------------------------

    \74\ NERC Filing at 97.
---------------------------------------------------------------------------

    99. NERC states in its filing that guidance from the Commission 
would be necessary in order to specify in greater detail a single 
``best'' methodology to govern the calculation of a maximum 
transmission reliability margin.\75\ The Commission does not believe 
that it is necessary to establish a single methodology for calculating, 
allocating and using transmission reliability margin. In Order Nos. 890 
and 693, the Commission directed NERC to clarify how transmission 
reliability margin should be calculated and allocated across paths or 
flowgates and how to establish an appropriate maximum transmission 
reliability margin.\76\ The Commission directed NERC to specify the 
parameters for entities to use in determining uncertainties for which 
transmission reliability margin can be set aside and used. The 
Commission also directed the ERO to modify its Reliability Standards to 
prevent the use of capacity benefit margin and transmission reserve 
margin for the same purposes (i.e. double counting). The proposed 
Reliability Standard accomplishes these directives by requiring each 
transmission operator to identify in its transmission reliability 
margin implementation document the components that will be used to 
calculate transmission reliability margin, how those components will be 
used, and how resulting transmission reliability margin values will be 
allocated across paths or flowgates.\77\ This level of detail satisfies 
the requirements of Order No. 890 and related directives of Order No. 
693 by making each transmission operator's transmission reliability 
margin methodologies transparent.
---------------------------------------------------------------------------

    \75\ Id.
    \76\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 275; Order 
No. 693, FERC Stats. & Regs. ] 31,242 at P 1122-23, 1126.
    \77\ MOD-008-1, Requirement R1.
---------------------------------------------------------------------------

    100. However, as with MOD-001-1 and MOD-004-1, the Commission is 
concerned that MOD-008-1 could be implemented by a transmission 
operator in a way that allows for undue discrimination in the provision 
of transmission service. For example, Requirements R1.1 and R1.2 of 
MOD-008-1 require each transmission operator to include in its 
transmission reliability margin implementation document the components 
of uncertainty used in establishing a transmission reliability margin, 
a description of how those components

[[Page 12762]]

are used in the calculation of transmission reliability margin, and a 
description of how transmission reliability margin is allocated across 
paths or flowgates. The transmission reliability margin implementation 
document developed by transmission operators could include parameters, 
modeling requirements, criteria or assumptions that are insufficiently 
transparent, providing the transmission operator the opportunity and 
ability to vary its calculations depending on the customer requesting 
transmission service.
    101. In order to ensure that remaining opportunities for undue 
discrimination are identified and eliminated, the Commission proposes 
to direct the ERO to conduct a review of the procedures identified in 
each transmission operator's transmission reserve margin implementation 
document as of the date the Reliability Standards become effective. 
Based on its review, NERC would identify in the audit required above 
those instances in which procedures, criteria, or assumptions are not 
sufficiently specific or transparent to allow the Commission and others 
to replicate and verify the results of the transmission operator's 
calculation of transmission reserve margin. Upon review of NERC's 
analysis, the Commission may direct the ERO to develop a modification 
to MOD-008-1 to address any lack of transparency. The Commission seeks 
comment whether additional requirements should be directed in this 
proceeding to ensure that the discretion provided under the 
transmission reserve margin implementation documents cannot be used to 
unduly discriminate in the provision of transmission service.

B. Proposed Modifications of the Reliability Standards

    102. While the Commission generally proposes to approve the 
Reliability Standards as in compliance with Order No. 890 and the 
related directives of Order No. 693, the Commission also proposes to 
direct the ERO to develop modifications of the Reliability Standards to 
comply with the following discrete issues: The availability of each 
transmission service provider's implementation documents; the 
consistent treatment of assumptions in the calculation of available 
transfer capability; the calculation, allocation and use of capacity 
benefit margin; the calculation of total transfer capability under the 
Rated System Path Methodology; and, the treatment of network resource 
designations in the calculation of available transfer capability. Each 
of these issues is discussed below.
1. Availability of Implementation Documents
a. NERC Proposal
    103. The proposed Reliability Standards require that the available 
transfer capacity, capacity benefit margin, and transmission 
reliability margin implementation documents be made available to 
specified entities. Requirement R4 of MOD-001-1 requires that the 
following entities have access to the available transfer capability 
implementation document: Each planning coordinator, reliability 
coordinator, and transmission operator associated with the transmission 
service provider's area; and each planning coordinator, reliability 
coordinator, and transmission service provider adjacent to the 
transmission service provider's area. Requirement R2 of MOD-004-1 
requires each transmission service provider to make its capacity 
benefit margin implementation document available to transmission 
operators, transmission service providers, reliability coordinators, 
transmission planners, resource planners, and planning coordinators 
that are within or adjacent to the transmission service provider's 
area, and to load-serving entities and balancing authorities within the 
transmission service provider's area. Requirement R3 of MOD-008-1 
requires each transmission operator to provide its transmission 
reliability implementation document upon request by transmission 
service providers, reliability coordinators, transmission planners, and 
transmission operators. NERC states that it and NAESB have agreed that 
requirements for making information available to other entities are 
more appropriately addressed through the NAESB process.
b. Commission Proposal
    104. The Commission is concerned that the proposed Reliability 
Standards potentially restrict the disclosure of the available transfer 
capability, capacity benefit margin, and transmission reliability 
margin implementation documents. NERC does not explain in its filings 
why only certain entities would have access to these materials, nor why 
the specified list of recipients varies for each document. While the 
Commission notes that the proposed NAESB standards accompanying the 
Reliability Standards would require transmission service providers to 
post a link to the implementation documents on their OASIS, which would 
result in disclosure beyond the specified entities listed in the 
Reliability Standards, the Commission believes that it is important for 
reliability purposes to require disclosure of the implementation 
documents to a broader audience than provided in the Reliability 
Standards. The Commission's jurisdiction under section 215 of the FPA 
is broader than our jurisdiction to require compliance with the NAESB 
standards under sections 205 and 206 of the FPA. These documents will 
describe how the transmission provider will implement the Reliability 
Standards and, therefore, should be disclosed by all transmission 
service providers, not only those who are also public utilities.
    105. Therefore, to ensure sufficient transparency, the Commission 
proposes to direct the ERO, pursuant to section 215(d)(5) of the FPA 
and section 35.19(f) of our regulations, to modify the proposed 
Reliability Standards to make the available transfer capability, 
capacity benefit margin, and transmission reliability margin 
implementation documents available to all customers eligible for 
transmission service in a manner that is consistent with relevant NAESB 
standards. The Commission seeks comment on any improvements that may be 
necessary to improve access by transmission customers to the 
implementation documents.
2. Consistent Treatment of Assumptions
a. NERC Proposal
    106. Under each of the methodologies contained in the proposed 
Reliability Standards, available transfer capability is calculated as 
total transfer capability minus existing transmission commitments, 
capacity benefit margin, and transmission reliability margin, plus 
postbacks and counterflows. NERC contends that the Reliability 
Standards work together to ensure that similar risks will not be double 
counted in the calculation of capacity benefit margin and transmission 
reliability margin. Specifically, Requirement R2 of MOD-008-1 prohibits 
a transmission operator from including any of the components of 
capacity benefit margin in the components of uncertainty used to 
calculate transmission reliability margin. NERC contends that MOD-004-1 
addresses this prohibition by describing the specific type of studies 
and requirements that may be used to determine a need for capacity 
benefit margin.
b. Commission Proposal
    107. The Commission is concerned that proposed Reliability 
Standards do not preclude a transmission service

[[Page 12763]]

provider from using data and assumptions in a way that double counts 
their impact on available transfer capability and thereby skews the 
amount of capacity made available to others. NERC states that MOD-004-1 
and MOD-008-1 have been drafted to preclude the double counting of 
similar risks in the calculation of capacity benefit margin and 
transmission reliability margin. However, other components of the 
available transfer capability calculation could be affected by the same 
data or assumptions, and there is no apparent restriction in the 
Reliability Standards from such data or assumptions in a way that 
double counts their impact on available transfer capability.
    108. For example, the Reliability Standards would appear to allow 
the transmission service provider to factor a reserve margin for 
facility outages into more than one of the components of the available 
transfer capability calculation. If the effect of the reserve margin 
were to appear in multiple components of the available transfer 
capability calculation in a similar way, under certain modeling 
approaches the results of that calculation would be skewed. While it 
may be appropriate for some variables to be factored into multiple 
components of the available transfer capability calculation, such as 
facility ratings, the Reliability Standards do not require that 
assumptions affecting multiple components of the available transfer 
capability calculation are implemented in a way that is consistent with 
their actual effect on available transfer capability. The Commission 
proposes to direct the ERO, pursuant to section 215(d)(5) of the FPA 
and section 35.19(f) of our regulations, to modify the proposed 
Reliability Standards to ensure that the proposed Reliability Standards 
preclude a transmission service provider from using data and 
assumptions in a way that double counts their impact on available 
transfer capability and thereby skews the amount of capacity made 
available to others.
3. Capacity Benefit Margin (MOD-004-1)
a. NERC Proposal
    109. As noted above, Requirements R5.1 and R6.1 of MOD-004-1 
require transmission service providers to establish capacity benefit 
margin values for each path and flowgate ``reflect[ing] consideration 
of'' both (i) studies provided by load-serving entities and resource 
planners demonstrating a need for capacity benefit margin and (ii) 
applicable reserve margin or resource adequacy requirements. In 
preparing their studies, Requirements R3.1 and R4.1 direct load-serving 
entities and resource planners to use one or more of the following to 
determine the generation capability import requirement: (i) Loss of 
load expectation studies, (ii) loss of load probability studies, (iii) 
deterministic risk-analysis studies, and (iv) applicable reserve margin 
or resource adequacy requirements. With regard to the allocation and 
use of transmission capacity set aside as capacity benefit margin, 
Requirement R1.3 requires the transmission service provider to include 
in its capacity benefit margin implementation document the procedure 
for a load-serving entity or balancing authority to use transmission 
capacity set aside as capacity benefit margin, including the manner in 
which the transmission service provider ``will manage'' situations 
where the requested use of capacity benefit margin exceeds the capacity 
benefit margin available.
b. Commission Proposal
    110. In Order Nos. 890 and 693, the Commission emphasized that each 
load-serving entity has the right to request that capacity benefit 
margin be set aside, and to use transmission capacity set aside for 
that purpose, to meet its verifiable generation reliability criteria 
requirement.\78\ The Commission is concerned that, as proposed, the 
Reliability Standard would allow a transmission service provider to 
calculate, allocate, and use capacity benefit margin in a way that 
impairs the reliable operation of the Bulk-Power System. Under the 
Reliability Standard, the transmission service provider is to ``reflect 
consideration'' of studies provided by load-serving entities and 
resource planners demonstrating a need for capacity benefit margin and 
``manage'' situations where the requested use of capacity benefit 
margin exceeds the capacity benefit margin available. The Reliability 
Standard places no bounds on this ``consideration'' and ``management'' 
and, for example, would permit a transmission service provider to make 
decisions regarding the use of capacity benefit margin based solely on 
economic considerations notwithstanding a demonstration of need for 
capacity benefit margin by a load-serving entity or resource planner. 
The Commission proposes, pursuant to section 215(d)(5) of the FPA and 
section 39.5(f) of our regulations, to direct the ERO to develop a 
modification to the Capacity Benefit Margin Methodology (MOD-004-1) to 
ensure that the Reliability Standard would not allow a transmission 
service provider to calculate, allocate, and use capacity benefit 
margin in a way that impairs the reliable operation of the Bulk-Power 
System.
---------------------------------------------------------------------------

    \78\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1080. see 
also Order No. 890, FERC Stats. & Regs. ] 31,241 at P 259; Order No. 
890-A, FERC Stats. & Regs. ] 31,261 at P 82.
---------------------------------------------------------------------------

    111. In addition, the Commission has concern regarding references 
to applicable reserve margin and resource adequacy requirements in the 
determination of the generation capability import requirements by load-
serving entities and resource planners under Requirements R3.1 and 
R4.1. Under the phrasing of those provisions, load-serving entities and 
resource planners must determine their generation capability import 
requirement by using one or more of loss of load expectation studies, 
loss of load probability studies, deterministic risk-analysis studies, 
and applicable reserve margin or resource adequacy requirements. As a 
result, a load-serving entity or resource planner could rely solely on 
reserve margin and resource adequacy requirements to demonstrate a need 
for capacity benefit margin without any analysis of loss of load 
expectations, loss of load probabilities, or deterministic risk. In 
comparison, Requirements 5.1 and 6.1 obligate the transmission service 
provider to consider both the studies provided by load-serving entities 
and resource planners and applicable reserve margin and resource 
adequacy requirements when calculating capacity benefit margin and 
allocating it to particular paths or flowgates. The Commission 
proposes, pursuant to section 215(d)(5) of the FPA and section 39.5(f) 
of our regulations, to direct the ERO to develop a modification to MOD-
004-1 to require load-serving entities and resource planners to 
determine generation capability import requirements by reference to 
relevant studies and applicable reserve margin or resource adequacy 
requirements, as relevant.
4. Calculation of Total Transfer Capability Under the Rated System Path 
Methodology (MOD-029-1)
a. NERC Proposal
    112. Requirement R2 of the Rated System Path Methodology (MOD-029-
1) provides the process a transmission operator must use to determine 
total transfer capability. Requirement R2.7 of that Reliability 
Standard requires the transmission operator to set the total transfer 
capability of an available transfer capability path to a value

[[Page 12764]]

determined prior to 1994 in certain instances:

    R2.7. For available transfer capability Paths whose path rating, 
adjusted for seasonal variance, was established, known and used in 
operation since January 1, 1994, and no action has been taken to 
have the path rated using a different method, set the total transfer 
capability at that previously established amount.
b. Commission Proposal
    113. In Order No. 890, the Commission required the use of 
consistent practices to calculate total transfer capability.\79\ In 
Order No. 890-A, the Commission clarified that, while total transfer 
capability need not be recalculated at consistent time intervals, the 
transmission operator should consider whether any changes in system 
topology, contingency outages, or other factors are substantial enough 
to merit recalculation of total transfer capability.\80\
---------------------------------------------------------------------------

    \79\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 237.
    \80\ Order No. 890-A, FERC Stats. & Regs. ] 31,261 at P 105.
---------------------------------------------------------------------------

    114. NERC has not explained the inclusion of Requirement R2.7 in 
the Rated System Path Methodology. It is not clear to the Commission 
why certain applicable entities would be required to use pre-1994 total 
transfer capability values. The Commission is concerned that requiring 
pre-1994 total transfer capability values to remain in place without 
adequate explanation essentially exempts certain paths from the total 
transfer capability requirements in the Rated System Path Methodology 
and may result in total transfer capability values that are incorrectly 
based on stale assumptions and criteria.
    115. While the Commission proposes to approve the proposed 
Reliability Standard overall as just and reasonable and an improvement 
on available transfer capability transparency, as discussed above, 
pursuant to section 215(d)(5) of the FPA and section 39.5(f) of our 
regulations, the Commission seeks comment on whether it should direct 
the ERO to develop a modification to the Rated System Path Methodology 
(MOD-029-1) to remove Requirement R2.7 as unsupported.
5. Treatment of Network Resource Designations
a. NERC Proposal
    116. In each of the proposed Reliability Standards, transmission 
service providers are required to identify as part of their calculation 
of existing transmission commitments the amount of capacity that is set 
aside for network integration transmission service.\81\ However, the 
specificity of that requirement varies among the proposed Reliability 
Standards.
---------------------------------------------------------------------------

    \81\ See MOD-028-001, Requirement R8; MOD-029-1, Requirement R5; 
MOD-030-2, Requirement R6.1.
---------------------------------------------------------------------------

    117. Under the Flowgate Methodology (MOD-030-2), Requirements R6.1 
and 6.2 provide for calculation of the impact of network integration 
transmission service based on a modeling of load forecasts for the time 
period being calculated and unit commitment and dispatch order, 
including all designated network resources and other resources that are 
committed or have the legal obligation to run as specified in the 
transmission service provider's implementation document. Requirement R8 
of the Area Interchange Methodology (MOD-028-1) and Requirement R5 of 
the Rated System Path Methodology (MOD-029-1) provide for the inclusion 
of firm capacity reserved for network integration transmission service, 
but do not describe how the transmission service provider is to 
identify that amount of capacity.
    118. With regard to the frequency of these calculations, 
Requirement R8 of MOD-001-1 would require every transmission service 
provider calculating available transfer capability to perform 
recalculations of available transfer capability at specified 
frequencies, unless none of the calculated values identified in the 
available transfer capability equation have changed.
b. Commission Proposal
    119. In Order No. 693, the Commission directed the ERO to develop 
requirements specifying how transmission service providers should 
determine which generators should be modeled in service when 
calculating available transfer capability.\82\ Among other things, the 
Commission directed the ERO to revise the Reliability Standards to 
specify that base generation dispatch schedules will reflect the 
modeling of all designated network resources and other resources that 
are committed to or have the legal obligation to run, as they are 
expected to run. The Commission also directed transmission service 
providers to address the effect on available transfer capability of 
designating and undesignating a network resource.
---------------------------------------------------------------------------

    \82\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1041.
---------------------------------------------------------------------------

    120. NERC has not explained the failure to include in each of the 
available transfer capability methodologies a requirement that base 
generation dispatch schedules will reflect the modeling of all 
designated network resources and other resources that are committed to 
or have the legal obligation to run, as they are expected to run. It is 
therefore unclear whether the proposed Reliability Standards address 
the effect on available transfer capability of designating and 
undesignating a network resource. While the Commission proposes to 
approve the proposed Reliability Standards as just and reasonable and 
an improvement on available transfer capability transparency, pursuant 
to section 215(d)(5) of the FPA and section 39.5(f) of our regulations, 
the Commission proposes to direct the ERO to develop a modification to 
the Reliability Standards to address these requirements.

C. Violation Risk Factors and Violation Severity Levels

    121. To determine a base penalty amount for a violation of a 
requirement within a Reliability Standard, NERC must first determine an 
initial range for the base penalty amount. To do so, NERC will assign a 
violation risk factor for each requirement of a Reliability Standard 
that relates to the expected or potential impact of a violation of the 
requirement on the reliability of the Bulk-Power System. For that 
requirement, the ERO assigns a lower, medium or high violation risk 
factor for each mandatory Reliability Standard requirement.\83\ The 
Commission has established guidelines for evaluating the validity of 
each violation risk factor assignment.\84\
---------------------------------------------------------------------------

    \83\ The specific definitions of high, medium and lower are 
provided in North American Electric Reliability Corp., 119 FERC ] 
61,145 at P 9, order on reh'g, 120 FERC ] 61,145 (2007) (Violation 
Risk Factor Rehearing Order).
    \84\ The guidelines are: (1) Consistency with the conclusions of 
the blackout report; (2) consistency within a Reliability Standard; 
(3) consistency among Reliability Standards; (4) consistency with 
NERC's definition of the violation risk factor level; and (5) 
treatment of requirements that co-mingle more than one obligation. 
The Commission also explained that this list was not necessarily 
all-inclusive and that it retained the flexibility to consider 
additional guidelines in the future. A detailed explanation is 
provided in the Violation Risk Factor Rehearing Order, 120 FERC ] 
61,145 at P 8-13.
---------------------------------------------------------------------------

    122. NERC will also define up to four violation severity levels--
lower, moderate, high and severe--as measurements for the degree to 
which the requirement was violated in a specific circumstance. For a 
specific violation of a particular requirement, NERC or the Regional 
Entity will establish the initial value range for the base penalty 
amount by finding the intersection of the applicable violation

[[Page 12765]]

risk factor and violation severity level in the base penalty amount 
table in appendix A of its sanction guidelines.
    123. On June 19, 2008, the Commission issued an order establishing 
four guidelines for the development of violation severity levels.\85\ 
First, the violation severity level assignments should not have the 
unintended consequence of lowering the current level of compliance. 
Second, the violation severity levels should ensure uniformity and 
consistency in the determination of penalties. Third, a violation 
severity level assignment should be consistent with the corresponding 
requirement. Fourth, a violation severity level assignment should be 
based on a single violation, not on a cumulative number of violations.
---------------------------------------------------------------------------

    \85\ North American Electric Reliability Corp., 123 FERC ] 
61,284, at P 20-35 (Violation Severity Level Order), order on reh'g 
& compliance, 125 FERC ] 61,212 (2008).
---------------------------------------------------------------------------

1. NERC Proposal
    124. In its August 29, 2008 filing, NERC proposes violation 
severity levels that are specific to the individual requirements of the 
proposed Reliability Standards. NERC states that it developed violation 
severity level assignments for MOD-001-1, MOD-008-1, MOD-028-1, MOD-
029-1, and MOD-030-1 prior to issuance of the Violation Severity Level 
Order. As a result, NERC states that it has not analyzed the proposed 
violation severity levels relative to the Commission's guidelines 
established in the Violation Severity Level Order.
    125. In addition, NERC states that it is not filing the associated 
violation risk factors with these Reliability Standards. While 
violation risk factors have been developed and balloted for each of the 
five proposed Reliability Standards, NERC states that its Board 
believes further review of the violation risk factors is warranted 
given recent Commission actions in general and the development history 
of these violation risk factors in particular. In accordance with its 
Rules of Procedure, NERC states that it will submit violation risk 
factors for these proposed Reliability Standards in a future filing.
    126. NERC states that each balloted Reliability Standard included a 
violation risk factor for each main requirement in the Reliability 
Standard. For all the requirements in the balloted MOD Reliability 
Standards, the applicable violation risk factors were ``lower.'' In 
developing the violation risk factor assignments, NERC states that 
there were opposing viewpoints with respect to the appropriate 
assignments. According to NERC, one view offered that available 
transfer capability and its associated methodologies do not directly 
affect the electrical state of the system or the ability to monitor or 
control it as would be required under the ``medium'' violation risk 
factor assignment. NERC states that an incorrect available transfer 
capability calculation may lead to oversubscribing or undersubscribing 
the system. According to NERC, undersubscribing, while affecting the 
potential for commercial activity, actually benefits reliability. 
Oversubscribing the system as a result of an optimistic available 
transfer capability value, while somewhat beneficial to commercial 
activity, may lead to a reliability concern that if realized can be 
managed by the operator's adherence to system limits, to the extent 
that the operator has options to implement some measure of transmission 
loading relief to reduce flows due to transactions. NERC states that 
for an incorrect available transfer capability to become a reliability 
issue requires an optimistic available transfer capability value, 
coupled with the sale of that available transfer capability, and an 
operator who is not mindful to the system limits, the last of which is 
governed by other transmission operator and interconnection operating 
Reliability Standards. On this argument, according to NERC, assigning a 
``medium'' violation risk factor due to the ``direct'' impact is 
questionable.
    127. On this basis, the drafting team evaluated the scope of the 
remaining work to meet the Commission deadline and focused its 
attention to the technical issues, adjusting the violation risk factors 
to ``lower'' based on the industry comments and the arguments presented 
above. However, NERC states that its Board believes that a more 
thorough review of the violation risk factors is warranted given recent 
Commission actions in general and the development history of these 
violation risk factors in particular. NERC's board has asked NERC staff 
to review these violation risk factors through an open stakeholder 
process to ensure that they are consistent with the intent of the 
violation risk factor definitions and prior Commission decisions on 
violation risk factors. Accordingly, NERC states that it is not filing 
the associated violation risk factors with these Reliability Standards 
at this time. NERC states that it will submit violation risk factors 
for these proposed Reliability Standards in a future filing.
    128. In its November 21, 2008 and March 6, 2009 filings, NERC 
proposes violations severity levels for MOD-004-1 and MOD-030-2, 
respectively. Similar to the violation severity levels proposed for 
MOD-001-1, MOD-008-1, MOD-028-1, MOD-029-1, and MOD-030-1, NERC does 
not propose any violation severity levels for the sub-requirements. In 
addition, NERC states that its board of trustees deferred action on the 
violation risk factors associated with these Reliability Standards and 
asked that they be reviewed through an open stakeholder process, with a 
report back to the board, to ensure that they are consistent with the 
intent of the violation risk factor definitions and Commission 
precedent. NERC states that it will submit violation risk factors for 
these Reliability Standards in a future filing.
2. Commission Proposal
    129. The Commission proposes to accept NERC's commitment to file 
violation severity levels and violation risk factors at a later time. 
The Violation Severity Level Order was issued after NERC developed the 
violation severity level assignments for the Reliability Standards at 
issue in this proceeding. As a result, NERC was unable to evaluate and 
modify the proposed violation severity levels to comply with our 
guidelines prior to filing the proposed Reliability Standards. The 
Commission proposes to direct the ERO to reevaluate the violation 
severity levels associated with all of the proposed Reliability 
Standards based on the Commission's guidelines outlined in the 
Violation Severity Level Order and prepare appropriate revisions. In 
addition, the Commission proposes to accept NERC's proposal to allow 
NERC staff to review the violation risk factors through an open 
stakeholder process to ensure that they are consistent with the intent 
of the violation risk factor definitions and guidance provided in the 
Violation Risk Factor Order and the Violation Risk Factor Rehearing 
Order. The Commission proposes to direct NERC to file revised violation 
severity levels and violation risk factors no later than 120 days 
before the Reliability Standards become effective.

D. Disposition of Other Reliability Standards

1. MOD-010-1 through MOD-025-1
    130. Order No. 890 directed public utilities, working through NERC, 
to modify the reliability standards MOD-010 through MOD-025 \86\ to 
incorporate

[[Page 12766]]

a requirement for the periodic review and modification of models for 
(1) load flow base cases with contingency, subsystem, and monitoring 
files, (2) short circuit data, and (3) transient and dynamic stability 
simulation data, in order to ensure that they are up to date. The 
Commission found that this requirement is essential in order to have an 
accurate simulation of the performance of the grid and from which to 
comparably calculate available transfer capability, therefore 
increasing transparency and decreasing the potential for undue 
discrimination by transmission service providers.\87\
---------------------------------------------------------------------------

    \86\ The MOD-010 through MOD-025 Reliability Standards establish 
data requirements, reporting procedures, and system model 
development and validation for use in the reliability analysis of 
the interconnected transmission systems.
    \87\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 290.
---------------------------------------------------------------------------

a. NERC Proposal
    131. NERC states that this modeling activity is outside the scope 
of the available transfer capability Reliability Standards drafting 
team effort because it requires a different skill set and expertise 
than that required for developing available transfer capability and 
should be addressed by a separate drafting team. NERC states that these 
Reliability Standards are part of its Reliability Standards Development 
Plan. NERC states that this is consistent with Order No. 693, which 
identified nine Reliability Standards, none of which were MOD-010 
through MOD-025, as the core of the available transfer capability 
initiative directed in Order No. 890.\88\
---------------------------------------------------------------------------

    \88\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 206.
---------------------------------------------------------------------------

b. Commission Proposal
    132. The Commission proposes to allow NERC to address revisions to 
MOD-010 through MOD-025 through a separate project. Those Reliability 
Standards are generally intended to establish consistent data 
requirements, reporting procedures and system models for use in 
reliability analysis. As such, the Commission proposes to find that 
NERC is correct that they were not a part of the available transfer 
capability modifications required in Order Nos. 890 and 693.
2. Reliability Standards Proposed To Be Retired or Withdrawn
a. NERC Proposal
    133. NERC requests that FAC-013-1, MOD-006-0, and MOD-007-0 be 
retired when the available transfer capability-related Reliability 
Standards become effective. In addition, NERC requests to withdraw its 
request for approval of the following Reliability Standards that were 
neither approved nor remanded in Order No. 693, effective upon approval 
of the available transfer capability-related MOD Reliability Standards 
in this proceeding: FAC-012-1, MOD-001-0, MOD-002-0, MOD-003-0, MOD-
004-0, MOD-005-0, MOD-008-0, and MOD-009-0. According to NERC, these 
Reliability Standards are wholly superseded by the MOD Reliability 
Standards addressed in this proceeding.
b. Commission Proposal
    134. The Commission proposes to approve NERC's request to retire 
MOD-006-0 and MOD-007-0 and to withdraw its request for approval of 
MOD-001-0, MOD-002-0, MOD-003-0, MOD-004-0, MOD-005-0, MOD-008-0, and 
MOD-009-0. The Commission also proposes to find that MOD-001-0, MOD-
002-0, MOD-003-0, MOD-004-0, MOD-005-0, MOD-008-0, and MOD-009-0 are 
all superseded by the available transfer capability calculations 
required by the proposed MOD Reliability Standards in this proceeding 
and are, upon the effectiveness of the proposed MOD Reliability 
Standards, no longer necessary.
    135. With regard to FAC-012-1 and FAC-013-1, the Commission 
disagrees with NERC that these Reliability Standards are wholly 
superseded by the MOD Reliability Standards addressed in this 
proceeding. Under FAC-012-1, reliability coordinators and planning 
authorities would be required to document the methodology used to 
establish inter-regional and intra-regional transfer capabilities and 
to state whether the methodology is applicable to the planning horizon 
or the operating horizon. Under FAC-013-1, reliability coordinators and 
planning authorities are required to establish a set of inter-regional 
and intra-regional transfer capabilities that are consistent with the 
methodology documented under FAC-012-1, which could require the 
calculation of transfer capabilities for both the planning horizon and 
the operating horizon. In comparison, the proposed MOD Reliability 
Standards provide only for the calculation of available transfer 
capability and its components, including total transfer capability, in 
the operating horizon.\89\ The proposed MOD Reliability Standards do 
not govern the calculation of transfer capabilities in the planning 
horizon, i.e., beyond 13 months in the future.
---------------------------------------------------------------------------

    \89\ See MOD-001-1, Requirement R2.3.
---------------------------------------------------------------------------

    136. In Order No. 693, the Commission approved FAC-013-1, but 
declined to approve or remand FAC-012-1. The Commission expressed 
concern that FAC-012-1 merely required the documentation of a transfer 
capability methodology without providing a framework for that 
methodology including data inputs and modeling assumptions.\90\ The 
Commission also expressed concern that the criteria used to calculate 
transfer capabilities for use in determining available transfer 
capability must be identical to those used in planning and operating 
the system.\91\ The Commission directed the ERO to modify FAC-012-1 to 
provide a framework for the transfer capability calculation methodology 
that takes account of the need for consistency in the criteria used to 
calculate transfer capabilities.\92\
---------------------------------------------------------------------------

    \90\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 777.
    \91\ Id. P 782.
    \92\ Id. P 779, 782.
---------------------------------------------------------------------------

    137. The available transfer capability methodologies set forth in 
MOD-028-1, MOD-029-1, and MOD-030-2 each provide a framework for the 
calculation of total transfer capability and total flowgate capability 
that specifies certain data inputs and modeling assumptions to be 
used.\93\ Requirement R7 of MOD-001-1 also provides that, when 
calculating available transfer capability or available flowgate 
capability, the transmission provider shall use assumptions no more 
limiting than those used in the planning of operations for the 
corresponding time period studied. It therefore appears that the MOD 
Reliability Standards provide a framework for the consistent 
calculation of total transfer capability for the operating horizon. 
However, NERC has not addressed the requirements of Order No. 693 with 
regard to the calculation of transfer capabilities in the planning 
horizon.
---------------------------------------------------------------------------

    \93\ See MOD-028-1, Requirements R3 and R4; MOD-029-1, 
Requirements R2 and R3; MOD-030-2, Requirement R2.4.
---------------------------------------------------------------------------

    138. The Commission therefore proposes not to grant NERC's request 
to withdraw FAC-012-1, nor approve the retirement of FAC-013-1. 
Instead, the Commission proposes, pursuant to section 215(d)(5) of the 
FPA and section 39.5(f) of our regulations, to direct the ERO to submit 
a revised FAC-012-1 and a modification to FAC-013-1 to comply with the 
relevant directives of Order No. 693 and as otherwise necessary to make 
the requirements of those Reliability Standards consistent with those 
of the proposed MOD Reliability Standards and the final rule in this 
proceeding. The Commission proposes to direct the ERO to submit a 
revised FAC-012-1 and a modification

[[Page 12767]]

to FAC-013-1, as well as violation severity levels and violation risk 
factors for FAC-012-1 and FAC-013-1, no later than 120 days before the 
MOD Reliability Standards become effective.

E. Definitions

    139. In Order Nos. 890 and 693, the Commission noted that there was 
not a definition of available flowgate capability/total flowgate 
capability in the ERO's glossary and directed the ERO to develop 
available flowgate capability/total flowgate capability definitions 
used to identify a particular set of transmission facilities as 
flowgates.
1. NERC Proposal
    140. NERC proposes to modify its Glossary of Terms to add the 
following twenty definitions that are used in the five proposed 
Reliability Standards, two of which wholly replace existing terms in 
the Commission-approved NERC Glossary: \94\
---------------------------------------------------------------------------

    \94\ These include Available Transfer Capability and Flowgate.

    Area Interchange Methodology: The Area Interchange Methodology 
is characterized by determination of incremental transfer capability 
via simulation, from which Total Transfer Capability (TTC) can be 
mathematically derived. Capacity Benefit Margin (CBM), Transmission 
Reliability Margin (TRM), and Existing Transmission Commitments 
(ETC) are subtracted from the TTC, and Postbacks and counterflows 
are added, to derive Available Transfer Capability (ATC). Under the 
Area Interchange Methodology, TTC results are generally reported on 
an area to area basis.
    ATC Path: Any combination of Point of Receipt (POR) and Point of 
Delivery (POD) for which Available Transfer Capability (ATC) is 
calculated; and any Posted Path.\95\
---------------------------------------------------------------------------

    \95\ See 18 CFR 37.6(b)(1) (2008).
---------------------------------------------------------------------------

    Available Flowgate Capability (AFC): A measure of the flow 
capability remaining on a Flowgate for further commercial activity 
over and above already committed uses. It is defined as Total 
Flowgate Capability (TFC) less Existing Transmission Commitments 
(ETC), less a Capacity Benefit Margin (CBM), less a Transmission 
Reliability Margin (TRM), plus Postbacks, and plus counterflows.
    Available Transfer Capability (ATC): A measure of the transfer 
capability remaining in the physical transmission network for 
further commercial activity over and above already committed uses. 
It is defined as Total Transfer Capability (TTC) less Existing 
Transmission Commitments (ETC) (including retail customer service), 
less a Capacity Benefit Margin (CBM), less a Transmission 
Reliability Margin (TRM), plus Postbacks, plus counterflows.
    Available Transfer Capability Implementation Document (ATCID): A 
document that describes the implementation of a methodology for 
calculating Available Transfer Capability (ATC) or Available 
Flowgate Capability (AFC), and provides information related to a 
Transmission Service Provider's calculation of ATC or AFC.
    Block Dispatch: A set of dispatch rules such that given a 
specific amount of load to serve, an approximate generation dispatch 
can be determined. To accomplish this, the capacity of a given 
generator is segmented into loadable ``blocks,'' each of which is 
grouped and ordered relative to other blocks (based on 
characteristics including, but not limited to, efficiency, run of 
river or fuel supply considerations, and/or ``must-run'' status).
    Business Practices: Those business rules contained in the 
Transmission Service Provider's applicable tariff, rules, or 
procedures; associated Regional Reliability Organization or Regional 
Entity business practices; or North American Energy Standards Board 
(NAESB) Business Practices.
    Capacity Benefit Margin Implementation Document (CBMID): A 
document that describes the implementation of a Capacity Benefit 
Margin methodology.
    Dispatch Order: A set of dispatch rules such that given a 
specific amount of load to serve, an approximate generation dispatch 
can be determined. To accomplish this, each generator is ranked by 
priority.
    Existing Transmission Commitments (ETC): Committed uses of a 
Transmission Service Provider's Transmission system considered when 
determining Available Transfer Capability (ATC) or Available 
Flowgate Capability (AFC).
    Flowgate:
    (1) A portion of the Transmission system through which the 
Interchange Distribution Calculator calculates the power flow from 
Interchange Transactions.
    (2) A mathematical construct, comprised of one or more monitored 
transmission Facilities and optionally one or more contingency 
Facilities, used to analyze the impact of power flows upon the Bulk 
Electric System.
    Flowgate Methodology: The Flowgate methodology is characterized 
by identification of key Facilities as Flowgates. Total Flowgate 
Capabilities (TFC) are determined based on Facility Ratings and 
voltage and stability limits. The impacts of Existing Transmission 
Commitments (ETCs) are determined by simulation. The impacts of ETC, 
Capacity Benefit Margin (CBM) and Transmission Reliability Margin 
(TRM) are subtracted from the TFC, and Postbacks and counterflows 
are added, to determine the Available Flowgate Capability (AFC) 
value for that Flowgate. AFCs can be used to determine Available 
Transfer Capability (ATC).
    Generation Capability Import Requirement (GCIR): The amount of 
generation capability from external sources identified by a Load-
Serving Entity (LSE) or Resource Planner (RP) to meet its generation 
reliability or resource adequacy requirements as an alternative to 
internal resources.
    Outage Transfer Distribution Factor (OTDF): In the post-
contingency configuration of a system under study, the electric 
Power Transfer Distribution Factor (PTDF) with one or more system 
Facilities removed from service (outaged).
    Participation Factors: A set of dispatch rules such that given a 
specific amount of load to serve, an approximate generation dispatch 
can be determined. To accomplish this, generators are assigned a 
percentage that they will contribute to serve load.
    Planning Coordinator: See Planning Authority.
    Postback: Positive adjustments to Available Transfer Capability 
(ATC) or Available Flowgate Capability (AFC) as defined in Business 
Practices. Such Business Practices may include processing of 
redirects and unscheduled service.
    Power Transfer Distribution Factor (PTDF): In the pre-
contingency configuration of a system under study, a measure of the 
responsiveness or change in electrical loadings on transmission 
system Facilities due to a change in electric power transfer from 
one area to another, expressed in percent (up to 100%) of the change 
in power transfer.
    Rated System Path Methodology: The Rated System Path Methodology 
is characterized by an initial Total Transfer Capability (TTC), 
determined via simulation. Capacity Benefit Margin (CBM), 
Transmission Reliability Margin (TRM), and Existing Transmission 
Commitments (ETC) are subtracted from TTC, and Postbacks and 
counterflows are added as applicable, to derive Available Transfer 
Capability (ATC). Under the Rated System Path Methodology, TTC 
results are generally reported as specific transmission path 
capabilities.
    Total Flowgate Capability (TFC): The maximum flow capability on 
a Flowgate, is not to exceed its thermal rating, or in the case of a 
flowgate used to represent a specific operating constraint (such as 
a voltage or stability limit), is not to exceed the associated 
System Operating Limit.
    Transmission Operator Area: The collection of Transmission 
assets over which the Transmission Operator is responsible for 
operating.
    Transmission Reliability Margin Implementation Document (TRMID): 
A document that describes the implementation of a Transmission 
Reliability Margin (TRM) methodology, and provides information 
related to a Transmission Operator's calculation of TRM.
2. Commission Proposal
    141. The Commission proposes to approve the addition of these terms 
to the NERC Glossary with minor modification. The Commission believes 
that the definition of Postback is not fully determinative. NERC should 
be able to define this term without reference to Business Practices, 
another defined term. The Commission therefore proposes to direct NERC 
to modify the definition of Postback.
    142. The definition of Business Practices includes a reference to 
the ``regional reliability organization.'' In Order No. 693, the 
Commission directed NERC to eliminate references to regional 
reliability organizations as responsible entities in the Reliability 
Standards

[[Page 12768]]

because such entities are not users, owners or operators of the Bulk-
Power System.\96\ Accordingly, the Commission proposes to direct NERC 
to remove from the proposed definition of Business Practices, the 
reference to regional reliability organizations and replace it with the 
term Regional Entity. However, Regional Entity is not currently defined 
in the NERC Glossary. The Commission therefore proposes to direct NERC 
to develop a definition of Regional Entity consistent with section 
215(a) of the FPA \97\ and 18 CFR 39.1 (2008), to be included in the 
NERC Glossary.
---------------------------------------------------------------------------

    \96\ Order No. 693, FERC Stats. & Regs.] 31,242 at P 157.
    \97\ 16 U.S.C. 824o.
---------------------------------------------------------------------------

IV. Information Collection Statement

    143. The following collections of information contained in this 
proposed rule have been submitted to the Office of Management and 
Budget (OMB) for review under section 3507(d) of the Paperwork 
Reduction Act of 1995.\98\ OMB's regulations require OMB to approve 
certain information collection requirements imposed by agency rule.\99\
---------------------------------------------------------------------------

    \98\ 44 U.S.C. 3507(d).
    \99\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    144. Comments are solicited on the need for this information, 
whether the information will have practical utility, ways to enhance 
the quality, utility, and clarity of the information to be collected, 
and any suggested methods for minimizing respondents' burden, including 
the use of automated information techniques.
    Burden Estimate: The public reporting and records retention burdens 
for the proposed reporting requirements and the records retention 
requirement are as follows.\100\
---------------------------------------------------------------------------

    \100\ These burden estimates apply only to this NOPR and do not 
reflect upon all of FERC-516 or FERC-717.

----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Hours per     Total annual
                 Data collection                    respondents      responses       response          hours
----------------------------------------------------------------------------------------------------------------
Mandatory data exchanges........................             137               1              80          10,960
Explanation of change of ATC values.............             137               1             100          13,700
Recordkeeping...................................             137               1              30           3,480
----------------------------------------------------------------------------------------------------------------

    Total Annual Hours for Collection:

Reporting + recordkeeping hours = 3,480 + 24,660 = 28,140 hours.

    Cost to Comply:

Reporting = $2,811,240
    24,660 hours @ $114 an hour (average cost of attorney ($200 per 
hour), consultant ($150), technical ($80), and administrative support 
($25))
Recordkeeping = $185,875 (same as below)
    Labor (file/record clerk @ $17 an hour) 3,480 hours @ $17/hour = 
$59,150
    Storage 137 respondents @ 8,000 sq. ft. x $925 (off site storage) = 
$126,725
Total costs = $2,997,115
    Labor $ ($2,811,240+ $59,150) + Recordkeeping Storage Costs 
($126,725)

    OMB's regulations require it to approve certain information 
collection requirements imposed by an agency rule. The Commission is 
submitting notification of this proposed rule to OMB. If the proposed 
requirements are adopted they will be mandatory requirements.
    Title: Mandatory Reliability Standards for the Calculation of 
Available Transfer Capability, Capacity Benefit Margins, Transmission 
Reliability Margins, Total Transfer Capability, and Existing 
Transmission Commitments and Mandatory Reliability Standards for the 
Bulk-Power System.
    Action: Proposed Collections.
    OMB Control Nos. [to be determined].
    Respondents: Business or other for profit.
    Frequency of responses: On occasion.
    Necessity of the Information:
    145. Internal Review: The Commission has reviewed the proposed 
reliability standards and made a determination that these requirements 
are necessary to implement section 215 of the Energy Policy Act of 
2005. These requirements conform to the Commission's plan for efficient 
information collection, communication and management within the energy 
industry. The Commission has to assure itself, by means of internal 
review, that there is specific, objective support for the burden 
estimates associated with the information requirements.
    146. Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE. Washington, DC 20426 [Attention: 
Michael Miller, Office of the Executive Director, Phone: (202) 502-
8415, fax: (202) 273-0873, e-mail: michael.miller@ferc.gov].
    147. For submitting comments concerning the collection(s) of 
information and the associated burden estimate(s), please send your 
comments to the contact listed above and to the Office of Information 
and Regulatory Affairs, Office of Information and Regulatory Affairs, 
Washington, DC 20503 [Attention: Desk Officer for the Federal Energy 
Regulatory Commission, phone (202) 395-4650, fax: (202) 395-7285, e-
mail: oira_submission@omb.eop.gov].

V. Environmental Analysis

    148. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\101\ The 
actions proposed here fall within the categorical exclusion in the 
Commission's regulations for rules that are clarifying, corrective or 
procedural, for information gathering, analysis, and 
dissemination.\102\
---------------------------------------------------------------------------

    \101\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
] 30,783 (1987).
    \102\ 18 CFR 380.4(a)(5).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act Certification

    149. The Regulatory Flexibility Act of 1980 (RFA) \103\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The MOD Reliability Standards apply to transmission service providers 
and transmission operators, most of which do not fall within the 
definition of small entities.\104\
---------------------------------------------------------------------------

    \103\ 5 U.S.C. 601-612.
    \104\ The definition of ``small entity'' under the Regulatory 
Flexibility Act refers to the definition provided in the Small 
Business Act, which defines a ``small business concern'' as a 
business that is independently owned and operated and that is not 
dominant in its field of operation. See 15 U.S.C. 632 (2000).
---------------------------------------------------------------------------

    150. As indicated above, approximately 137 entities will be 
responsible for compliance with the three new Reliability Standards. Of 
these only six, or less than five percent, have output of four million 
MWh or less

[[Page 12769]]

per year.\105\ The Commission does not consider this a substantial 
number.\106\ Based on this understanding, the Commission certifies that 
this rule will not have a significant economic impact on a substantial 
number of small entities. Accordingly, no regulatory flexibility 
analysis is required.
---------------------------------------------------------------------------

    \105\ Id.
    \106\ The Regulatory Flexibility Act defines a ``small entity'' 
as ``one which is independently owned and operated and which is not 
dominant in its field of operation.'' See 5 U.S.C. 601(3) and 
601(6); 15 U.S.C. 632(a)(1). In Mid-Tex Elec. Coop. v. FERC, 773 
F.2d 327, 340-43 (DC Cir. 1985), the court accepted the Commission's 
conclusion that, since virtually all of the public utilities that it 
regulates do not fall within the meaning of the term small entities 
as defined in the Regulatory Flexibility Act, the Commission did not 
need to prepare a regulatory flexibility analysis in connection with 
its proposed rule governing the allocation of costs for construction 
work in progress (CWIP). The CWIP rules applied to all public 
utilities. The revised pro forma OATT will apply only to those 
public utilities that own, control or operate interstate 
transmission facilities. These entities are a subset of the group of 
public utilities found not to require preparation of a regulatory 
flexibility analysis for the CWIP rule.
---------------------------------------------------------------------------

VII. Comment Procedures

    151. The Commission invites interested persons to submit comments 
on the matters and issues proposed in this notice to be adopted, 
including any related matters or alternative proposals that commenters 
may wish to discuss. Comments are due May 26, 2009. Comments must refer 
to Docket Nos. RM08-19-000, RM08-19-001, RM09-5-000 and RM06-16-005, 
and must include the commenter's name, the organization they represent, 
if applicable, and their address in their comments.
    152. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's Web site at http://
www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    153. Commenters that are not able to file comments electronically 
must send an original and 14 copies of their comments to: Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street NE., Washington, DC 20426.
    154. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

VIII. Document Availability

    155. 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.
    156. 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 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.
    157. 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.

    By direction of the Commission.
Kimberly D. Bose,
Secretary.
 [FR Doc. E9-6505 Filed 3-24-09; 8:45 am]

BILLING CODE 6717-01-P
