18 CFR 35.35h

Federal Energy Regulatory Commission
multi-state agreements to review and
approve new transmission facilities.
The Regional Transmission Organization’s planning and expansion process
must be coordinated with programs of
existing Regional Transmission Groups
(See § 2.21 of this chapter) where appropriate.
(iii) If the Regional Transmission Organization is unable to satisfy this requirement when it commences operation, it must file with the Commission
a plan with specified milestones that
will ensure that it meets this requirement no later than three years after
initial operation.
(8) Interregional coordination. The Regional Transmission Organization must
ensure the integration of reliability
practices within an interconnection
and market interface practices among
regions.
(l) Open architecture. (1) Any proposal
to participate in a Regional Transmission Organization must not contain
any provision that would limit the capability of the Regional Transmission
Organization to evolve in ways that
would improve its efficiency, consistent with the requirements in paragraphs (j) and (k) of this section.
(2) Nothing in this regulation precludes an approved Regional Transmission Organization from seeking to
evolve with respect to its organizational design, market design, geographic scope, ownership arrangements, or methods of operational control, or in other appropriate ways if the
change is consistent with the requirements of this section. Any future filing
seeking approval of such changes must
demonstrate that the proposed changes
will meet the requirements of paragraphs (j), (k) and (l) of this section.
[Order 2000–A, 65 FR 12110, Mar. 8, 2000, as
amended by Order 679, 71 FR 43338, July 31,
2006]

erowe on DSK2VPTVN1PROD with CFR

Subpart G—Transmission
structure Investment
sions

InfraProvi-

§ 35.35 Transmission infrastructure investment.
(a) Purpose. This section establishes
rules for incentive-based (including
performance-based) rate treatments for
transmission of electric energy in

§ 35.35
interstate commerce by public utilities
for the purpose of benefiting consumers
by ensuring reliability and reducing
the cost of delivered power by reducing
transmission congestion.
(b) Definitions. (1) Transco means a
stand-alone
transmission
company
that has been approved by the Commission and that sells transmission services at wholesale and/or on an
unbundled retail basis, regardless of
whether it is affiliated with another
public utility.
(2) Transmission Organization means a
Regional Transmission Organization,
Independent System Operator, independent transmission provider, or
other transmission organization finally
approved by the Commission for the
operation of transmission facilities.
(c) General rule. All rates approved
under the rules of this section, including any revisions to the rules, are subject to the filing requirements of sections 205 and 206 of the Federal Power
Act and to the substantive requirements of sections 205 and 206 of the
Federal Power Act that all rates,
charges, terms and conditions be just
and reasonable and not unduly discriminatory or preferential.
(d) Incentive-based rate treatments for
transmission infrastructure investment.
The Commission will authorize any incentive-based rate treatment, as discussed in this paragraph (d), for transmission
infrastructure
investment,
provided that the proposed incentivebased rate treatment is just and reasonable and not unduly discriminatory
or preferential. A public utility’s request for one or more incentive-based
rate treatments, to be made in a filing
pursuant to section 205 of the Federal
Power Act, or in a petition for a declaratory order that precedes a filing pursuant to section 205, must include a detailed explanation of how the proposed
rate treatment complies with the requirements of section 219 of the Federal Power Act and a demonstration
that the proposed rate treatment is
just, reasonable, and not unduly discriminatory or preferential. The applicant must demonstrate that the facilities for which it seeks incentives either
ensure reliability or reduce the cost of
delivered power by reducing transmission congestion consistent with the

309

VerDate Mar<15>2010

11:37 May 24, 2012

Jkt 226058

PO 00000

Frm 00319

Fmt 8010

Sfmt 8010

Y:\SGML\226058.XXX

226058

erowe on DSK2VPTVN1PROD with CFR

§ 35.35

18 CFR Ch. I (4–1–12 Edition)

requirements of section 219, that the
total package of incentives is tailored
to address the demonstrable risks or
challenges faced by the applicant in
undertaking the project, and that resulting rates are just and reasonable.
For purposes of this paragraph (d), incentive-based rate treatment means
any of the following:
(1) For purposes of this paragraph (d),
incentive-based rate treatment means
any of the following:
(i) A rate of return on equity sufficient to attract new investment in
transmission facilities;
(ii) 100 percent of prudently incurred
Construction Work in Progress (CWIP)
in rate base;
(iii) Recovery of prudently incurred
pre-commercial operations costs;
(iv) Hypothetical capital structure;
(v) Accelerated depreciation used for
rate recovery;
(vi) Recovery of 100 percent of prudently incurred costs of transmission
facilities that are cancelled or abandoned due to factors beyond the control of the public utility;
(vii) Deferred cost recovery; and
(viii) Any other incentives approved
by the Commission, pursuant to the requirements of this paragraph, that are
determined to be just and reasonable
and not unduly discriminatory or preferential.
(2) In addition to the incentives in
§ 35.35(d)(1), the Commission will authorize the following incentive-based
rate treatments for Transcos, provided
that the proposed incentive-based rate
treatment is just and reasonable and
not unduly discriminatory or preferential:
(i) A return on equity that both encourages Transco formation and is sufficient to attract investment; and
(ii) An adjustment to the book value
of transmission assets being sold to a
Transco to remove the disincentive associated with the impact of accelerated
depreciation on federal capital gains
tax liabilities.
(e) Incentives for joining a Transmission Organization. The Commission
will authorize an incentive-based rate
treatment, as discussed in this paragraph (e), for public utilities that join
a Transmission Organization, if the applicant demonstrates that the proposed

incentive-based rate treatment is just
and reasonable and not unduly discriminatory or preferential. Applicants
for the incentive-based rate treatment
must make a filing with the Commission under section 205 of the Federal
Power Act. For purposes of this paragraph (e), an incentive-based rate
treatment means a return on equity
that is higher than the return on equity the Commission might otherwise
allow if the public utility did not join
a Transmission Organization. The
Commission will also permit transmitting utilities or electric utilities that
join a Transmission Organization the
ability to recover prudently incurred
costs associated with joining the
Transmission
Organization,
either
through transmission rates charged by
transmitting utilities or electric utilities or through transmission rates
charged by the Transmission Organization that provides services to such utilities.
(f) Approval of prudently-incurred
costs. The Commission will approve recovery of prudently-incurred costs necessary to comply with the mandatory
reliability standards pursuant to section 215 of the Federal Power Act, provided that the proposed rates are just
and reasonable and not unduly discriminatory or preferential.
(g) Approval of prudently incurred costs
related to transmission infrastructure development. The Commission will approve recovery of prudently-incurred
costs related to transmission infrastructure development pursuant to section 216 of the Federal Power Act, provided that the proposed rates are just
and reasonable and not unduly discriminatory or preferential.
(h) FERC–730, Report of transmission
investment activity. Public utilities that
have been granted incentive rate treatment for specific transmission projects
must file FERC–730 on an annual basis
beginning with the calendar year incentive rate treatment is granted by
the Commission. Such filings are due
by April 18 of the following calendar
year and are due April 18 each year
thereafter. The following information
must be filed:
(1) In dollar terms, actual transmission investment for the most recent

310

VerDate Mar<15>2010

11:37 May 24, 2012

Jkt 226058

PO 00000

Frm 00320

Fmt 8010

Sfmt 8010

Y:\SGML\226058.XXX

226058

Federal Energy Regulatory Commission

erowe on DSK2VPTVN1PROD with CFR

calendar year, and projected, incremental investments for the next five
calendar years;
(2) For all current and projected investments over the next five calendar
years, a project by project listing that
specifies for each project the most upto-date, expected completion date, percentage completion as of the date of
filing, and reasons for delays. Exclude
from this listing projects with projected costs less than $20 million; and
(3) For good cause shown, the Commission may extend the time within
which any FERC–730 filing is to be filed
or waive the requirements applicable
to any such filing.
(i) Rebuttable presumption. (1) The
Commission will apply a rebuttable
presumption that an applicant has
demonstrated that its project is needed
to ensure reliability or reduces the cost
of delivered power by reducing congestion for:
(i) A transmission project that results from a fair and open regional
planning process that considers and
evaluates projects for reliability and/or
congestion and is found to be acceptable to the Commission; or
(ii) A project that has received construction approval from an appropriate
state commission or state siting authority.
(2) To the extent these approval processes do not require that a project ensures reliability or reduce the cost of
delivered power by reducing congestion, the applicant bears the burden of
demonstrating that its project satisfies
these criteria.
(j) Commission authorization to site
electric transmission facilities in interstate
commerce. If the Commission pursuant
to its authority under section 216 of the
Federal Power Act and its regulations
thereunder has issued one or more permits for the construction or modification of transmission facilities in a national interest electric transmission
corridor designated by the Secretary,
such facilities shall be deemed to either ensure reliability or reduce the
cost of delivered power by reducing
congestion for purposes of section
219(a).
[Order 679, 71 FR 43338, July 31, 2006, as
amended by Order 679–A, 72 FR 1172, Jan. 10,
2007, Order 691, 72 FR 5174, Feb. 5, 2007]

§ 35.36

Subpart H—Wholesale Sales of
Electric Energy, Capacity and
Ancillary Services at MarketBased Rates
SOURCE: Order 697, 72 FR 40038, July 20,
2007, unless otherwise noted.

§ 35.36

Generally.

(a) For purposes of this subpart:
(1) Seller means any person that has
authorization to or seeks authorization
to engage in sales for resale of electric
energy, capacity or ancillary services
at market-based rates under section 205
of the Federal Power Act.
(2) Category 1 Sellers means wholesale
power marketers and wholesale power
producers that own or control 500 MW
or less of generation in aggregate per
region; that do not own, operate or
control transmission facilities other
than limited equipment necessary to
connect individual generating facilities
to the transmission grid (or have been
granted waiver of the requirements of
Order No. 888, FERC Stats. & Regs. ¶
31,036); that are not affiliated with anyone that owns, operates or controls
transmission facilities in the same region as the seller’s generation assets;
that are not affiliated with a franchised public utility in the same region
as the seller’s generation assets; and
that do not raise other vertical market
power issues.
(3) Category 2 Sellers means any Sellers not in Category 1.
(4) Inputs to electric power production
means intrastate natural gas transportation, intrastate natural gas storage
or distribution facilities; sites for generation capacity development; physical
coal supply sources and ownership of or
control over who may access transportation of coal supplies.
(5) Franchised public utility means a
public utility with a franchised service
obligation under State law.
(6) Captive customers means any
wholesale or retail electric energy customers served by a franchised public
utility under cost-based regulation.
(7) Market-regulated power sales affiliate means any power seller affiliate
other than a franchised public utility,
including a power marketer, exempt
wholesale generator, qualifying facility

311

VerDate Mar<15>2010

11:37 May 24, 2012

Jkt 226058

PO 00000

Frm 00321

Fmt 8010

Sfmt 8010

Y:\SGML\226058.XXX

226058