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