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FERC-920, Electric Quarterly Report (EQR) [OMB No.: TBD] 11

(NOPR, in RM10-12-000, Issued 4/21/2011; RIN 1902-AD96)

Supporting Statement for

FERC-920, Electric Quarterly Report (EQR)

(In Notice of Proposed Rulemaking in Docket No. RM10-12-000, Issued 4/21/2011)

The Federal Energy Regulatory Commission (Commission or FERC) requests Office of Management and Budget (OMB) review and approval of FERC-920, Electric Quarterly Report (EQR; an existing data requirement that is currently a part of the FERC-516). In Docket No. RM10-12, the Commission issued a Notice of Proposed Rulemaking (NOPR) on 4/21/2011 that is being submitted to OMB for review and approval. The NOPR proposes revisions to the EQR.

In the NOPR in Docket RM10-12 (available at http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=12630477 , and errata at http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=12635677 ), FERC stated the EQR collection is part of the FERC-516 (Electric Rate Schedules and Tariff Filings; OMB Control No. 1902-0096). A clearance package for FERC-516 (related to a rulemaking in another FERC docket that does not affect the EQR) is currently under review at OMB. Only one package per OMB Control No. can be submitted to OMB for review at a time. Therefore FERC is submitting this clearance package with a new “FERC-920” collection number, to be used for this submittal related to the EQR. In footnote 139, the NOPR mentions that “[f]or administrative purposes, the Commission will consider whether to separate the EQR requirements from the remaining reporting requirements under FERC-516. If that is done, FERC would then request a separate OMB Control No. for EQR.” At the final rule stage, we also plan to use this new “FERC-920” for the EQR (rather than continuing to include the EQR as a part of the FERC-516) and to request a separate OMB Control Number for it. Correspondingly, EQR would then be removed from the FERC-516.

Additional information on the EQR is available on the FERC website at http://www.ferc.gov/docs-filing/eqr.asp .

BACKGROUND

To facilitate price transparency in markets for the sale and transmission of electric energy in interstate commerce, the Federal Energy Regulatory Commission (Commission) proposes to revise its regulations to require market participants that are excluded from the Commission’s jurisdiction under section 205 of the Federal Power Act (FPA) and have more than a de minimis market presence to file Electric Quarterly Reports (EQR) with the Commission. In doing so, the Commission proposes to exercise its authority under section 220 of the FPA, as adopted in the Energy Policy Act of 2005 (EPAct 2005). This proposal would allow the Commission and the public to gain a more complete picture of wholesale power and transmission markets in interstate commerce by providing additional information concerning price formation and market concentration in these markets. Public access to additional sales and transmission-related information in the EQR would improve market participants’ ability to assess supply and demand fundamentals and to price interstate wholesale market transactions. It also would strengthen the Commission’s ability to identify potential exercises of market power or manipulation and to better evaluate the competitiveness of the interstate wholesale markets.

In addition, the Commission proposes to make certain revisions to the existing EQR filing requirements and apply those revisions to all market participants filing EQRs. The Commission proposes to revise the EQRs currently filed by public utilities under FPA section 205(c) and that will be filed by non-public utilities under FPA section 220. These revisions include the addition of new fields for: (1) reporting the transaction date and time, as well as the type of rate; (2) indicating whether the sales transaction was reported to an index publisher; (3) identifying the broker or exchange used for a sales transaction, if applicable; and (4) reporting electronic tag (e-Tag) ID data. The Commission also proposes to eliminate the time zone from the contract section and the Data Universal Numbering System (DUNS) data requirement. Further, the Commission proposes to standardize the unit for reporting energy and capacity transactions. These refinements to the existing EQR filing requirements reflect the evolving nature of electricity markets, would increase market transparency for the Commission and the public, and would allow market participants to file the information in the most efficient manner possible.

The Commission's regulations at 18 CFR 35.10b require public utilities to file Electric Quarterly Reports.

A. Justification

1. CIRCUMSTANCES THAT MAKE THE COLLECTION OF INFORMATION NECESSARY

The Commission set forth the EQR filing requirements in Order No. 2001 (Docket No. RM01-8-000, issued April 25, 2002, at http://elibrary.ferc.gov/idmws/search/intermediate.asp?link_file=yes&doclist=2270047). Order No. 2001 requires public utilities to electronically file EQRs summarizing transaction information for short-term and long-term cost-based sales and market-based rate sales and the contractual terms and conditions in their agreements for all jurisdictional services. The Commission established the EQR reporting requirements to help ensure the collection of information needed to perform its regulatory functions over transmission and sales, while making data more useful to the public and allowing public utilities to better fulfill their responsibility under FPA section 205(c) to have rates on file in a convenient form and place. As noted in Order No. 2001, the EQR data is designed to “provide greater price transparency, promote competition, enhance confidence in the fairness of the markets, and provide a better means to detect and discourage discriminatory practices.”

Since issuing Order No. 2001, the Commission has provided guidance and refined the reporting requirements, as necessary, to simplify the filing requirements and to reflect changes in the Commission’s rules and regulations. For instance, in 2007 the Commission adopted an Electric Quarterly Report Data Dictionary, which provides in one document the definitions of certain terms and values used in filing EQR data. Moreover, in 2007, the Commission required transmission capacity reassignment to be reported in the EQR. The refinements to the existing EQR requirements that we are proposing in this NOPR build upon the Commission’s prior improvements to the reporting requirements and further enhance the goals of providing greater price transparency, promoting competition, instilling confidence in the fairness of the markets, and providing a better means to detect and discourage discriminatory and manipulative practices.

In EPAct 2005, Congress added section 220 to the FPA, directing the Commission to “facilitate price transparency in markets for the sale and transmission of electric energy in interstate commerce” with “due regard for the public interest, the integrity of those markets, fair competition, and the protection of consumers.” FPA section 220 grants the Commission authority to obtain and disseminate “information about the availability and prices of wholesale electric energy and transmission service to the Commission, State commissions, buyers and sellers of wholesale electric energy, users of transmission services, and the public.” The statute specifies that the Commission may obtain this information from “any market participant,” except for entities with a de minimis market presence. EPAct 2005 added similar transparency provisions in the Natural Gas Act.

In 2006, Commission staff conducted an extensive outreach effort to formulate options for implementing EPAct 2005’s transparency provisions for wholesale natural gas and electricity markets. As a result, the Commission used its new transparency authority to adopt additional filing and posting requirements for the sale or transportation of physical natural gas in interstate commerce in Orders No. 704 and 720. Order No. 704 requires buyers and sellers of more than a de minimis volume of natural gas to report aggregate volumes of relevant transactions in an annual filing. In Order No. 720, the Commission required major non-interstate pipelines to post daily scheduled volume and other data for certain receipt and delivery points. Order No. 720 also requires interstate pipelines to post information regarding no-notice service.

The Commission declined to extend such requirements to wholesale electricity markets because, at the time of the Natural Gas Transparency Notice of Proposed Rulemaking, the Commission was considering other reforms to its regulation of electricity markets. In particular, the Commission was undertaking open access transmission service reforms and the more general review of competition in wholesale electricity markets. As a result of these efforts, the Commission issued two final rules. In Order No. 890, the Commission exercised its remedial authority “to limit further opportunities for undue discrimination, by minimizing areas of discretion, addressing ambiguities and clarifying various aspects of the pro forma [Open Access Transmission Tariff].” Moreover, in Order No. 719, the Commission made reforms “to improve the operation [and competitiveness] of organized wholesale electric power markets” in connection with “fulfilling its statutory mandate to ensure supplies of electric energy at just, reasonable and not unduly discriminatory or preferential rates.” Although these final rules improved transparency in wholesale markets in a number of ways, the Commission believes the revisions proposed in this docket are necessary to facilitate price transparency in wholesale electricity markets.

2. HOW, BY WHOM, AND FOR WHAT PURPOSE THE INFORMATION IS TO BE USED AND THE CONSEQUENCES OF NOT COLLECTING THE INFORMATION

EQR information from non-public utilities would allow the public to assess supply and demand fundamentals and to price interstate wholesale market transactions. This in turn would result in greater market confidence, lower transaction costs, and ultimately support competitive markets. In addition, the data filed in the EQR strengthens the Commission’s ability to exercise its wholesale electric rate and electric power transmission oversight and enforcement responsibilities in accordance with the Federal Power Act. Without this information, the Commission would lack some of the data it needs to examine and approve or modify electric rates. The Commission is also authorized as appropriate to employ enforcement proceedings when violations occur.

The Commission is proposing to enact requirements that would facilitate price transparency in wholesale markets for the sale and transmission of electric energy in interstate commerce by requiring certain non-public utilities to file the EQR. This proposal would allow the Commission and the public to gain a more complete picture of wholesale power and transmission markets in interstate commerce by providing additional information concerning price formation and market concentration in these markets. It also would strengthen the Commission’s ability to identify potential exercises of market power or manipulation and to better evaluate the competitiveness of the interstate wholesale markets. In addition, the Commission proposes to make certain revisions to the existing EQR filing requirements and apply those revisions to all market participants filing EQRs. These refinements to the existing EQR filing requirements reflect the evolving nature of electricity markets, would increase market transparency for the Commission and the public, and would allow market participants to file the information in the most efficient manner possible.

3. DESCRIBE ANY CONSIDERATION FOR THE USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN AND TECHNICAL OR LEGAL OBSTACLES TO REDUCING BURDEN

There is an ongoing effort to determine the potential and value of improved information technology to reduce the burden. The Commission adopted user friendly electronic formats and software in order to facilitate the required electronic filings. As of 2011, nearly all filings submitted to FERC (except for Protected materials) may be submitted in an electronic format.

Order 2001 (issued 4/25/2002, in Docket No. RM01-8-000) required “public utilities to electronically file Electric Quarterly Reports summarizing the contractual terms and conditions in their agreements for all jurisdictional services (including market-based power sales, cost-based power sales, and transmission service) and transaction information for short-term and long-term market- based power sales and cost-based power sales during the most recent calendar quarter.” Electronically filed EQRs improved the efficiency, convenience, and overall management of the filing process, facilitated public access to tariff information, and reduced the industry’s burden and expense associated with paper tariffs and tariff changes.

In addition, in Order No. 714 (issued September 19, 2008, in RM01-5-000¹), FERC revised its regulations to require that all tariffs, tariff revisions and rate change applications for the public utility, natural gas pipeline and oil pipeline industries be filed according to a set of standards developed in conjunction with the North American Standards Board. The electronic filing of tariffs (eTariffs) was phased in and completed September 2010. [ETariffs are included in FERC-516 (OMB Control No. 1902-0096).]

4. DESCRIBE EFFORTS TO IDENTIFY DUPLICATION AND SHOW SPECIFICALLY WHY ANY SIMILAR INFORMATION ALREADY AVAILABLE CANNOT BE USED OR MODIFIED FOR USE FOR THE PURPOSE(S) DESCRIBED IN INSTRUCTION NO. 2.

Filing requirements are periodically reviewed as OMB review dates arise or as the Commission may deem necessary in carrying out its regulatory responsibilities under the Act in an effort to alleviate duplication. As discussed in the proposed rule, we have reviewed existing publications and we believe that the additional data that would be required under this NOPR is not available through existing sources and is necessary to provide a complete picture of price formation in wholesale power markets.

5. METHODS USED TO MINIMIZE BURDEN IN COLLECTION OF INFORMATION INVOLVING SMALL ENTITIES

The Regulatory Flexibility Act (RFA)² generally requires a description and analysis of rules that will have significant economic impact on a substantial number of small entities. The RFA mandates consideration of regulatory alternatives that accomplish the stated objectives of a proposed rule and that minimize any significant economic impact on a substantial number of small entities. The SBA’s Office of Size Standards develops the numerical definition of a small business.³ The SBA has established a size standard for electric utilities, stating that a firm is small if, including its affiliates, it is primarily engaged in the transmission, generation and/or distribution of electric energy for sale and its total electric output for the preceding twelve months did not exceed four million MWh.⁴

As discussed in Order No. 2000,⁵ in making this determination, the Commission is required to examine only the direct compliance costs that a rulemaking imposes upon small businesses. It is not required to consider indirect economic consequences, nor is it required to consider costs that an entity incurs voluntarily.

Based on EIA Form 861, there are 372 non-public utilities that made wholesale sales in 2009.⁶ As discussed in the NOPR, the Commission is proposing to exempt from the EQR filing requirements non-public utilities with a de minimis market presence. The Commission estimates that 311 of the 372 non-public utilities will be exempt from this rulemaking because they make four million MWh or less of annual wholesale sales and are not Balancing Authorities. Of the 372, 309 are considered small entities because they make four million MWh or less of annual wholesale and retail sales. In balancing the need for information with the burden on small utilities, the Commission is proposing to base the de minimis threshold on wholesale sales and thus will exempt a majority of small non-public utilities from this proposed rulemaking. In fact, the Commission believes that the proposed rule, if finalized, would apply to only five non-public utilities (Balancing Authorities) that are considered small entities. The Commission believes that the direct, economic impact on these five small non-public utilities may be significant in terms of initial start-up costs (estimated to be $39,148), but that the recurring costs ($2,349 per quarterly filing, or $9,396 per year) will likely be small. However, the Commission does not consider five non-public utilities to be a substantial number of small entities. Using this de minimis threshold, the proposed rule will apply to approximately 16 percent of the 372 non-public utilities with wholesale sales, while capturing approximately 85 percent of the total volume of non-jurisdictional sales.

This rulemaking also proposes changes to the existing filing requirements and thus current EQR filers also will be impacted. Based on analysis of EIA Form 861, there are 186 public utilities and, of these, 51 make four million MWh or less of annual wholesale and retail sales. When considering annual wholesale and retail sales from these 51 entities together with sales by their affiliates, only 28 combined entities had annual wholesale and retail sales of or below four million MWh. The Commission does not consider this to be a substantial number of small entities. Furthermore, we note that public utilities may request, on an individual basis, waiver from the EQR reporting requirements.⁷ In addition, the Commission expects that the direct, economic cost to comply will be less significant. While public utilities will need to modify their systems to capture and report the additional data, they already have the system in place. The estimated additional costs from the proposed rule are: (1) for implementation of the changes, $15,659, and (2) for each quarterly report, $783 (or $3,132 annually). Thus, the proposed rule will not have a significant impact on a substantial number of small entities.

6. CONSEQUENCE TO FEDERAL PROGRAM IF COLLECTION WERE CONDUCTED LESS FREQUENTLY

If the collection were conducted less frequently, the Commission would be unable to perform its mandated oversight and review responsibilities with respect to electric rates.

This proposal would enable the Commission and the public to gain a more complete picture of wholesale power and transmission markets in interstate commerce by providing additional information concerning price formation and market concentration in these markets. Public access to additional sales and transmission-related information in the EQR would improve market participants’ ability to assess supply and demand fundamentals and to price interstate wholesale market transactions. It also would strengthen the Commission’s ability to identify potential exercises of market power or manipulation and to better evaluate the competitiveness of the interstate wholesale markets.

7. EXPLAIN ANY SPECIAL CIRCUMSTANCES RELATING TO THE INFORMATION COLLECTION

The EQR meets OMB's section 1320.5 requirements.

8. DESCRIBE EFFORTS TO CONSULT OUTSIDE THE AGENCY: SUMMARIZE PUBLIC COMMENTS AND AGENCY'S RESPONSE TO THESE COMMENTS

On 1/21/2010, FERC issued a Notice of Inquiry⁸ (at http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=12249482) requesting public “comments on whether the Commission’s Electric Quarterly Report (EQR) filing requirements should be applied to market participants that are excluded from the Commission’s jurisdiction under section 205 of the Federal Power Act (FPA).” In response to the Transparency NOI, the Commission received 40 comments. Of those comments, twenty-eight discuss extending the EQR filings to non-public utilities; five discuss EQR refinements; and six discuss both. FERC reviewed the comments and is now issuing a Notice of Proposed Rulemaking in the docket and inviting further comments on these proposals.

The Commission's procedures require that the rulemaking notice be published in the Federal Register, thereby allowing all public utilities, natural gas and oil pipeline companies, state commissions, federal agencies, and other interested parties an opportunity to submit comments, or suggestions concerning the proposal. This proposed rule is requesting public comments.

9. EXPLAIN ANY PAYMENT OR GIFTS TO RESPONDENTS

Not applicable. The Commission does not provide compensation or remuneration to entities subject to its jurisdiction.

10. DESCRIBE ANY ASSURANCE OF CONFIDENTIALITY PROVIDED TO RESPONDENTS

An entity seeking confidential treatment of the information must ask the Commission to treat this information as confidential and non-public, consistent with 18 CFR 388.112 of the Commission’s regulations. Generally, the Commission does not consider this information to be confidential.

11. PROVIDE ADDITIONAL JUSTIFICATION FOR ANY QUESTIONS OF A SENSITIVE NATURE THAT ARE CONSIDERED PRIVATE.

There are no questions of a sensitive nature that are considered private.

11. ESTIMATED BURDEN ON COLLECTION OF INFORMATION and

12. ESTIMATED OF THE TOTAL COST BURDEN TO RESPONDENTS

The Commission’s estimate of the additional average annual Public Reporting Burden and cost⁹ related to the proposed rule in Docket RM10-12-000 follow.

In calculating the number of current respondents filing EQRs, the Commission looked at the number of agents responsible for submitting the filings of the EQR, which came to 1,291 filers. Out of those 1,291 filers, only 831 reported transactions during 2009. Therefore, the Commission proposes to use 831 as the number of respondents.¹⁰ Although the Commission estimates the total number of current respondents to be 831, this figure overstates the number of corporate families filing the EQR because some of the filings were made separately by affiliates from the same company. For instance, of the 831 filer names, 28 began with FPL, 24 began with NRG, 12 began with Wheelabrator, and 11 began with Dynegy. This trend was common among other filers.

For non-public utility filers, the Commission separately estimated the burden for non-balancing authorities with more than 4 million MWh of annual wholesale sales; balancing authorities with more than 4 million MWh of annual wholesale and retail sales; and balancing authorities with 1 million MWh or more of annual wholesale and retail sales. In the RFA section in the NOPR, the Commission uses the SBA definition of a small utility to determine how many small entities will be impacted by the proposed rule. The SBA defines a utility as small if, including its affiliates, it is primarily engaged in the transmission, generation and/or distribution of electric energy for sale and its total electric output for the preceding twelve months did not exceed four million MWh.¹¹ We also used the SBA definition to determine the burden on respondents in the table above.

The Commission recognizes that there will be an increased burden involved in the initial implementation associated with filing EQRs. This burden includes the set-up software on a utility’s computers, the initial entry of the contract data, and the mapping of the transaction data from the utility’s internal computer systems into the format required by the Commission. For non-public utility filers, we estimate a burden of 400 hours per year for the initial implementation phase. For current EQR filers, we estimate that the additional data requirements will involve a burden of 160 hours. This burden is lower than that for non-public utility filers because of current filers’ familiarity with EQR reporting.

For the recurring effort involved in filing the EQR each subsequent quarter, we anticipate that the burden will be minimal, particularly as filing transaction data will be automated for companies that have mapped their systems to the required format. Thus, we estimate a recurring burden of 24 hours per response (rather than per year) for all non-public filers if the requirements of this rulemaking are to be implemented. We have estimated that current filers spend about 16 hours to meet the existing recurring requirements of filing EQRs.  With the additional data proposed to be required, we estimate that current filers’ recurring burden will increase by 8 hours.

Total average annual costs = $8,309,293 ($6,940,157 for public utilities plus $1,369,136 for non-public utilities). The Commission estimates that the hours to complete the EQR reporting requirements will be divided among an entity’s accounting, legal and support staff. We estimate an average hourly cost of $97.87 (including a senior accountant at $50.22/hr., a financial analyst at $67.00/hr., legal services at $250/hr., and support staff at $24.25/hr.).¹²

14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

The estimated annualized cost to the Federal Government related only to the data collection requirements as proposed in the Notice of Proposed Rulemaking in RM10-12 is as follows:

Analysis and Processing (3 FTE’s at $142,372 per FTE [staff year]) $427,116

Estimated Average Annual Forms Clearance Review $1,575

Total of $428,691 ($427,116 + $1,575)

15. REASONS FOR CHANGES IN BURDEN INCLUDING THE NEED FOR ANY INCREASE

As discussed earlier, this NOPR would allow FERC and the public to gain a more complete picture of wholesale power and transmission markets in interstate commerce by providing additional information concerning price formation and market concentration in these markets. Public access to additional sales and transmission-related information in the EQR would improve market participants’ ability to assess supply and demand fundamentals and to price interstate wholesale market transactions. It also would strengthen the FERC’s ability to identify potential exercises of market power or manipulation and to better evaluate the competitiveness of the interstate wholesale markets.

16. TIME SCHEDULE FOR THE PUBLICATION OF DATA

The data are being collected for regulatory purposes and not for the purposes of publication.

17. DISPLAY OF EXPIRATION DATE

The OMB Control No. and expiration date are posted on www.ferc.gov at http://www.ferc.gov/docs-filing/forms.asp#516 .

18. EXCEPTION TO THE CERTIFICATION STATEMENT

The data collected for these reporting and recordkeeping requirements are not used for statistical purposes.

B. COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS

This is not a collection of information employing statistical methods.

1 Electronic Tariff Filings, Order No. 714, 73 FR 57515 (Oct. 3, 2008), FERC Stats. & Regs ¶ 31,276 (2008).

2 5 U.S.C. 601-612.

3 13 CFR 121.101.

4 13 CFR 121.201, Sector 22, Utilities & n.1.

5 See Regional Transmission Organizations, Order No. 2000, 65 FR 809 (January 6, 2000), FERC Stats. & Regs. ¶ 31,089, at 31,237 & n.754 (1999), order on reh’g, Order No. 2000-A, 65 FR 12,088 (Mar. 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000), aff'd sub nom. Pub. Util. Dist. No. 1 of Snohomish, County Washington v. FERC, 272 F.3d 607, 348 U.S. App. D.C. 205 (D.C. Cir. 2001) (citing Mid-Tex Elec. Coop. v. FERC, 773 F.2d 327 (D.C. Cir. 1985) (Commission need only consider small entities “that would be directly regulated”); Colorado State Banking Bd. v. RTC, 926 F.2d 931 (10th Cir. 1991) (Regulatory Flexibility Act not implicated where regulation simply added an option for affected entities and did not impose any costs)).

6 We excluded non-public utilities that are located in Alaska, Hawaii, and Texas.

7 The Commission has granted requests for waiver of the EQR filing requirements. See Bridger Valley Elect. Assoc., Inc., 101 FERC ¶ 61,146 (2002). Entities with a waiver will continue to have a waiver and will not need to file a new request for waiver.

8 Electricity Market Transparency Provisions of Section 220 of the Federal Power Act, Notice of Inquiry, 75 FR 4805 (Jan. 29, 2010), FERC Stats. & Regs. ¶ 35,565 (2010) (Transparency NOI).

9 For purposes of calculating the annual averages, the implementation burden and cost have been averaged, spread over the 3-year period, and added to the recurring burden and cost.

10 There were 1,435 unique respondents to the EQR reporting for 1,638 unique sellers during the third quarter of 2010. Neither the number of respondents nor the number of unique sellers accurately reflects the number of entities and affiliated entities that respond to the EQR. For instance, respondents will often report sales for unique sellers, either individual generation units or affiliated entities, separately in the EQR. Similarly, affiliate relationships exist for unique respondents. These respondents may share EQR filing software and techniques or may even be filed by the same staff.

11 13 CFR 121.101.

12 Hourly average wage is an average and was calculated using Bureau of Labor Statistics (BLS), Occupational Employment Statistics data for May, 2009 (at http://www.bls.gov/oes/) for the accounting, financial, and support staffs. The average hourly figure for legal support is a composite from BLS and other resources, taking into account the hourly cost for both in-house and contractor organizations.