Transactions Subject to FPA Section 203, 58636-58646 [05-20311]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 70, Number 194 (Friday, October 7, 2005)]
[Proposed Rules]
[Pages 58636-58646]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20311]



[[Page 58636]]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 2 and 33

[Docket No. RM05-34-000]


Transactions Subject to FPA Section 203

Issued October 3, 2005.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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SUMMARY: Pursuant to Subtitle G (Market Transparency, Enforcement, and 
Consumer Protection), section 1289 (Merger Review Reform), of Title XII 
(Electricity Modernization Act of 2005), of the Energy Policy Act of 
2005 (EPAct 2005), Pub. L. 109-58, 119 Stat. 594 (2005), the Federal 
Energy Regulatory Commission (Commission) is proposing rules and 
amendments to the Commission's regulations to implement amended section 
203 of the Federal Power Act (FPA). The Commission seeks public comment 
on the rules and amended regulations proposed herein.

EFFECTIVE DATE: Comments are due November 7, 2005.

ADDRESSES: Comments may be filed electronically via the eFiling link on 
the Commission's Web site at https://www.ferc.gov. Commenters unable to 
file comments electronically must send an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Office of the 
Secretary, 888 First Street, NE., Washington, DC 20426. Refer to the 
Comment Procedures section of the preamble for additional information 
on how to file comments.

FOR FURTHER INFORMATION CONTACT:
Sarah McWane (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8372.
Phillip Nicholson (Technical Information), Office of Markets, Tariffs 
and Rates--West, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 502-8240.
Jan Macpherson (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8921.
James Akers (Technical Information), Office of Markets, Tariffs and 
Rates--West, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8101.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    1. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) 
\1\ was signed into law. Section 1289 (Merger Review Reform) of Title 
XII, Subtitle G (Market Transparency, Enforcement, and Consumer 
Protection),\2\ of EPAct 2005 amends section 203 of the Federal Power 
Act (FPA) \3\ and directs the Federal Energy Regulatory Commission 
(Commission) to adopt, by rule, procedures for the expeditious 
consideration of applications for the approval of dispositions, 
consolidations, or acquisitions under section 203 of the FPA. Amended 
section 203 also: (1) Increases (from $50,000 to $10 million) the value 
threshold for certain transactions subject to section 203; (2) extends 
the scope of section 203 to include transactions involving certain 
transfers of generation facilities and certain holding companies' 
acquisitions with a value in excess of $10 million; (3) limits the 
Commission's review of a public utility's acquisition of securities of 
another public utility to transactions greater than $10 million; and 
(4) requires that the Commission, when reviewing a proposed section 203 
transaction, examine cross-subsidization and pledges or encumbrances of 
utility assets. The Commission proposes rules and amendments to the 
Commission's regulations to implement amended section 203.\4\
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    \1\ Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 
(2005).
    \2\ EPAct 2005 Sec. Sec.  1281 et seq.
    \3\ 16 U.S.C. 824b (2000).
    \4\ As noted below, EPAct 2005's amendments to FPA section 203 
will not take effect until February 3, 2006. We will generally refer 
to EPAct 2005's amended section 203 of the FPA as ``amended section 
203.'' All other references to FPA section 203 are as it currently 
exists.
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    2. The Commission intends to issue a final rule within six months 
after EPAct 2005's enactment to coincide with the date on which amended 
section 203 of the FPA takes effect, February 8, 2006. The Commission 
seeks public comment on the rules proposed herein.

II. Background

A. Commission Merger Policy Before Effective Date of Amended FPA 
Section 203

1. Section 203 of the FPA
    3. Section 203 of the FPA currently provides that Commission 
authorization is required for various types of dispositions and 
acquisitions of jurisdictional facilities, such as public utility 
mergers and consolidations. Specifically, section 203(a) of the FPA 
states:

    No public utility shall sell, lease or otherwise dispose of the 
whole of its facilities subject to the jurisdiction of the 
Commission, or any part thereof of a value in excess of $50,000, or 
by any means whatsoever, directly or indirectly, merge or 
consolidate such facilities or any part thereof with those of any 
other person, or purchase, acquire, or take any security of any 
other public utility, without first having secured an order of the 
Commission authorizing it to do so.

    The Commission shall approve such transactions if they are 
consistent with the public interest.
2. The Commission's Merger Policy Statement
    4. In 1996, the Commission issued the Merger Policy Statement \5\ 
updating and clarifying the Commission's procedures, criteria, and 
policies concerning public utility mergers in light of dramatic and 
continuing changes in the electric power industry and the regulation of 
that industry. The purpose of the Merger Policy Statement was to ensure 
that mergers are consistent with the public interest and to provide 
greater certainty and expedition in the Commission's analysis of merger 
applications.
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    \5\ Inquiry Concerning the Commission's Merger Policy Under the 
Federal Power Act: Policy Statement, Order No. 592, 61 FR 68,595 
(Dec. 30, 1996), FERC Stats. and Regs. ] 31,044 (1996), 
reconsideration denied, Order No. 592-A, 62 FR 33,340 (June 19, 
1997), 79 FERC ] 61,321 (1997) (Merger Policy Statement).
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    5. The Merger Policy Statement sets out three factors the 
Commission generally considers when analyzing whether a proposed 
section 203 transaction is consistent with the public interest: effect 
on competition; effect on rates; and effect on regulation.\6\
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    \6\ Although the Commission applies these factors to all section 
203 transactions, not just mergers, the filing requirements and the 
level of detail required may differ. Id. at ] 30,113 n.7. See also 
18 CFR 2.26 (2005) (which codifies the Merger Policy Statement).
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    6. With respect to the effect on competition, the Merger Policy 
Statement adopts the Department of Justice (DOJ)/Federal Trade 
Commission (FTC) 1992 Horizontal Merger Guidelines (Guidelines) \7\ as 
the analytical framework for examining horizontal market power 
concerns. The Merger Policy Statement also uses an analytical screen 
(Appendix A analysis) that is intended to allow early identification of 
transactions that clearly do not raise competitive concerns. As

[[Page 58637]]

part of the screen analysis, applicants must define the relevant 
products sold by the merging entities, identify the customers and 
potential suppliers in the geographic markets that are likely to be 
affected by the proposed transaction, and measure the concentration in 
those markets.\8\ Using the delivered price test to identify 
alternative competing suppliers, the concentration of potential 
suppliers included in the defined market is then measured by the 
Herfindahl-Hirschman Index (HHI) and used as a screen to determine 
which transactions may raise market power concerns.
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    \7\ U.S. Department of Justice and Federal Trade Commission, 
Horizontal Merger Guidelines, 57 FR 41,552 (1992), revised, 4 Trade 
Reg. Rep. (CCH) ] 13,104 (Apr. 8, 1997).
    \8\ Merger Policy Statement at ] 30,119-20.
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    7. The Commission stated in the Merger Policy Statement that it 
will examine the second factor, the effect on rates, by focusing on 
customer protections designed to insulate consumers from any harm 
resulting from the transaction. We directed applicants to attempt to 
negotiate such measures with their customers before filing their 
applications.\9\
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    \9\ See id. at ] 30,121-24.
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    8. The Merger Policy Statement set forth a third factor for 
examination, the effect on regulation. This includes both state 
regulation and the Commission's regulation, including any potential 
shift in regulation from the Commission to the Securities and Exchange 
Commission (SEC) due to a transaction creating a registered public 
utility holding company under the Public Utility Holding Company Act of 
1935 (PUHCA 1935).\10\ The Merger Policy Statement explained that, 
unless applicants commit themselves to abide by this Commission's 
policies with regard to affiliate transactions involving non-power 
goods and services, we will set the issue of the effect on regulation 
for hearing.\11\ With respect to a transaction's effect on state 
regulation, where the state commissions have authority to act on the 
transaction, the Commission stated that it intends to rely on them to 
exercise their authority to protect state interests.
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    \10\ 15 U.S.C. 79a et seq. (2000).
    \11\ Merger Policy Statement at ] 30,125; see also Atlantic City 
Electric Company and Delmarva Power & Light Company, 80 FERC ] 
61,126 at 61,412, order denying reh'g, 81 FERC ] 61,173 (1997).
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3. The Filing Requirements Rule and Revised Filing Requirements Under 
18 CFR Part 33 of the Commission's Regulations
    9. The Commission later issued the Filing Requirements Rule,\12\ a 
final rule updating the filing requirements under 18 CFR Part 33 of the 
Commission's regulations for section 203 applications. The Filing 
Requirements Rule implements the Merger Policy Statement and provides 
detailed guidance to applicants for preparing applications. The revised 
filing requirements were also designed to assist the Commission in 
determining whether section 203 transactions are consistent with the 
public interest, to provide more certainty, and to expedite the 
Commission's handling of such applications.
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    \12\ Revised Filing Requirements Under Part 33 of the 
Commission's Regulations, Order No. 642, 65 FR 70,983 (Nov. 28, 
2000), FERC Stats. & Regs., Regulations Preambles July 1996-Dec. 
2000 ] 31,111 (2000), order on reh'g, Order No. 642-A, 66 FR 16,121 
(Mar. 23, 2001), 94 FERC ] 61,289 (2001) (codified at 18 CFR Part 33 
(2005) (Filing Requirements Rule)).
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    10. The Filing Requirements Rule codifies the Commission's 
screening approach, provides specific filing requirements consistent 
with Appendix A of the Commission's Merger Policy Statement, 
establishes guidelines for vertical competitive analysis, and sets 
forth filing requirements for mergers that may raise vertical market 
power concerns. It also streamlined the rules, eliminated unnecessary 
Part 33 filing requirements, and reduced the information burden for 
transactions that raise no competitive concerns.
    11. In the Filing Requirements Rule, the Commission explained that 
for certain transactions, abbreviated filing requirements are 
appropriate because it is relatively easy to determine that they will 
not harm competition and, thus, a full-fledged screen or vertical 
competitive analysis is not required. The Commission does not require 
the full Appendix A analysis screen if: (1) The applicant demonstrates 
that the merging entities do not operate in the same geographic 
markets, or if they do, that the extent of such overlapping operation 
is de minimis; and (2) no intervenor has alleged that one of the 
merging entities is a perceived potential competitor in the same 
geographic market as the other.\13\ Furthermore, the Commission stated 
that it will not require section 203 applicants to provide an Appendix 
A analysis if: (1) The application is a regional transmission 
organization (RTO) filing that directly responds to the Commission's 
RTO rule; \14\ (2) the transaction is simply an internal corporate 
reorganization; or (3) the transaction only involves a disposition of 
transmission facilities.\15\
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    \13\ Filing Requirements Rule at ] 31,902 and ] 31,907. It also 
provides that an applicant will not be required to file additional 
information regarding the vertical aspects of a proposed merger if 
it shows that the merger does not impair competition in 
``downstream'' electricity markets and involves an input supplier 
(the ``upstream'' merging firm) that sells: (1) An input that is 
used to produce a de minimis amount of the relevant product; or (2) 
no product into the downstream electricity geographic market. Id. At 
] 31,903.
    \14\ Regional Transmission Organizations, Order No. 2000, 65 FR 
809 (Jan. 6, 2000), FERC Stats. & Regs. ] 31,089 at 31,108 (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. Public Utility 
District No. 1 of Snohomish County, Washington v. FERC, 272 F.3d 607 
(D.C. Cir. 2001).
    \15\ Filing Requirements Rule at ] 31,902. The Commission 
clarified that, if it later determined that a filing raised 
competitive issues, the Commission would evaluate those issues and 
direct the applicant to submit any data needed to satisfy the 
Commission's concerns. Id. at n.79.
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    12. The Commission also stated in the Filing Requirements Rule 
that, as announced in the Merger Policy Statement, it intended to 
continue processing section 203 applications expeditiously, with a goal 
of issuing an initial order for most mergers within 150 days of a 
completed application.\16\ Further, the Commission stated that it 
intended to continue processing uncontested non-merger applications 
within 60 days of filing and protested non-merger applications within 
90 days of filing.\17\
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    \16\ Id. at ] 31,873.
    \17\ Id. at ] 31,876.
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B. Section 203 as Amended by EPAct 2005

    13. EPAct 2005 revises section 203(a) of the FPA as follows:
    14. Amended section 203(a)(1) states that no public utility shall, 
without first having secured an order of the Commission authorizing it 
to do so: (A) Sell, lease, or otherwise dispose of the whole of its 
facilities subject to the jurisdiction of the Commission, or any part 
thereof of a value in excess of $10 million; (B) merge or consolidate, 
directly or indirectly, such facilities or any part thereof with those 
of any other person, by any means whatsoever; (C) purchase, acquire, or 
take any security with a value in excess of $10 million of any other 
public utility; or (D) purchase, lease, or otherwise acquire an 
existing generation facility: (i) that has a value in excess of $10 
million; and (ii) that is used for interstate wholesale sales and over 
which the Commission has jurisdiction for ratemaking purposes.
    15. Section 203(a)(2) adds the entirely new requirement that no 
holding company in a holding company system that includes a 
transmitting utility or an electric utility shall purchase, acquire, or 
take any security with a value in excess of $10 million of, or, by any 
means whatsoever, directly or indirectly, merge or consolidate with, a 
transmitting utility, an electric utility

[[Page 58638]]

company, or a holding company in a holding company system that includes 
a transmitting utility, or an electric utility company, with a value in 
excess of $10 million without Commission authorization.
    16. Like the existing section 203(a), amended section 203(a)(3) 
provides that upon receipt of an application for such approval, the 
Commission shall give reasonable notice in writing to the Governor and 
state commission of each of the states in which the physical property 
affected is situated, and to such other persons as it may deem 
advisable.
    17. Amended section 203(a)(4) states that after notice and 
opportunity for hearing the Commission shall approve the proposed 
disposition, consolidation, acquisition, or change in control if it 
finds that the transaction will be consistent with the public interest, 
but also adds the entirely new requirement that the Commission must 
find that the transaction will not result in cross-subsidization of a 
non-utility associate company or pledge or encumbrance of utility 
assets for the benefit of an associate company, unless that cross-
subsidization, pledge, or encumbrance will be consistent with the 
public interest.
    18. Section 203(a)(5) adds the entirely new requirement that the 
Commission shall:

    By rule, adopt procedures for the expeditious consideration of 
applications for the approval of dispositions, consolidations, or 
acquisitions, under this section. Such rules shall identify classes 
of transactions, or specify criteria for transactions, that normally 
meet the standards established in paragraph (4). The Commission 
shall provide expedited review for such transactions. The Commission 
shall grant or deny any other application for approval of a 
transaction not later than 180 days after the application is filed. 
If the Commission does not act within 180 days, such application 
shall be deemed granted unless the Commission finds, based on good 
cause, that further consideration is required to determine whether 
the proposed transaction meets the standards of paragraph (4) and 
issues an order tolling the time for acting on the application for 
not more than 180 days, at the end of which additional period the 
Commission shall grant or deny the application.

    19. Section 203(a)(6), which is also new, provides that for 
purposes of this subsection, the terms ``associate company,'' ``holding 
company,'' and ``holding company system'' have the meaning given those 
terms in the Public Utility Holding Company Act of 2005 (PUHCA 
2005).\18\
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    \18\ EPAct 2005 Sec.  1261 et seq.
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    20. Section 1289(b) provides that the amendments made by this 
section shall take effect six months after the date of enactment of 
EPAct 2005.
    21. Section 1289(c) provides that the amendments made by subsection 
(a) shall not apply to any section 203 application that was filed on or 
before the date of enactment of EPAct 2005.
    22. Section 203(b) of the FPA remains unchanged.\19\
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    \19\ Section 203(b) states:
    The Commission may grant any application for an order under this 
section in whole or in part and upon such terms and conditions as it 
finds necessary or appropriate to secure the maintenance of adequate 
service and the coordination in the public interest of facilities 
subject to the jurisdiction of the Commission. The Commission may 
from time to time for good cause shown make such orders supplemental 
to any order made under this section as it may find necessary or 
appropriate.
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III. Discussion

    23. The Commission proposes to revise 18 CFR Part 33 (Application 
for Acquisition, Sale, Lease, or Other Disposition, Merger or 
Consolidation of Facilities, or for Purchase or Acquisition of 
Securities of a Public Utility) and 18 CFR 2.26 (Policies concerning 
review of applications under section 203) to implement amended section 
203 of the FPA.

A. Proposal To Amend 18 CFR Part 33

1. Part 33--Title
    24. Currently, 18 CFR Part 33 is titled ``Application for 
Acquisition, Sale, Lease, or Other Disposition, Merger or Consolidation 
of Facilities, or for Purchase or Acquisition of Securities of a Public 
Utility.'' The Commission proposes to revise the title of 18 CFR part 
33 to read as follows: ``Applications Under Federal Power Act Section 
203.''
2. Applicability and Definitions--18 CFR 33.1
    25. Proposed section 33.1(a) is intended to clarify what 
transactions are subject to amended section 203 of the FPA and Part 33 
as a result of amended sections 203(a)(1)(A)-(D) and (a)(2) of the 
FPA.\20\ Proposed new subsection 33.1(b) would define certain new terms 
in amended section 203 that are not defined in EPAct 2005.
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    \20\ Because proposed section 33.1(a) is almost identical to 
amended sections 203(a)(1)(A)-(D) and (a)(2), which are summarized 
in section II.B. above and set forth in the proposed regulatory 
text, we will not recite that text here.
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a. ``Value''

    26. Proposed subsection 33.1(b) would define ``value.'' Currently, 
subsection 33.1(b) defines ``[v]alue in excess of $50,000'' as ``the 
original cost undepreciated as defined in the Commission's Uniform 
System of Accounts prescribed for public utilities and licensees in 
part 101 of this chapter.''
    27. Before EPAct 2005, the question of what ``value'' means was not 
particularly significant for determining section 203 applicability, 
since most transactions involving the transfer of jurisdictional 
facilities clearly met the relatively low $50,000 threshold regardless 
of how ``value'' was defined. Most transactions involving the transfer 
of physical jurisdictional facilities (usually transmission) were 
clearly subject to section 203 simply because the ``original cost 
undepreciated'' of almost any transmission facility exceeded the 
relatively low $50,000 threshold set forth in FPA section 203(a). 
However, with the higher $10 million threshold, the question of how to 
define ``value'' may become significant for determining whether section 
203 applies to certain transactions involving jurisdictional facilities 
(either physical or paper),\21\ generation facilities, securities, 
individual companies or holding companies.
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    \21\ We note that the $10 million value threshold that is to be 
applied to the transfer of jurisdictional facilities under amended 
section 203(a)(1)(A), similar to the prior $50,000 threshold under 
section 203(a), is important for determining whether the transfer of 
part of a public utility's jurisdictional facilities is subject to 
section 203. The transfer of all of a public utility's 
jurisdictional facilities, regardless of value, is subject to 
amended section 203, as it was with section 203.
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    28. As relevant here, we believe that ``value'' can be viewed in 
two broad ways: Original/accounting cost value and market value. 
Original cost undepreciated is the amount actually paid for installing 
an original plant and equipment and additions thereto. A market value 
approach, on the other hand, bases value on the probable or expected 
future earnings or profits over the life of the asset. Different 
potential buyers of the asset will, of course, place different 
valuations on an asset, depending on their estimates of future expected 
profitability and their cost of capital.
    29. As discussed below, the Commission proposes to generally rely 
on a ``market value'' approach for determining whether asset transfers 
are jurisdictional under section 203, with the exception of transfers 
of wholesale contracts. We invite comment on whether the ``market 
value'' concept or other alternative concepts are appropriate. We also 
invite comment and suggestions on measures of market value or other 
measures of value.
    30. With respect to transactions involving the transfer of physical 
facilities, such as an existing generation facility or a transmission 
facility, which

[[Page 58639]]

is addressed by amended subsections 203(a)(1)(A) and (D), the use of 
``original cost undepreciated'' could lead to a different 
jurisdictional determination for facilities of equal size. For example, 
two generation units of the same size and type, but of substantially 
different ages, would likely have different values based on ``original 
cost undepreciated.'' The transfer of the newer generation unit could 
be deemed jurisdictional because its original construction cost 
exceeded $10 million, while the transfer of the older unit might not be 
jurisdictional because its original construction cost was less than $10 
million. Thus, although the effects on markets of the transfer of both 
generation units could be the same, under the existing regulations the 
Commission would be prevented from evaluating the public interest 
implications of the transfer of the older unit.\22\ Therefore, the 
Commission proposes that ``value,'' as applied to transmission 
facilities and existing generation facilities, be defined as the market 
value of such facilities. We recognize, however, that the determination 
of the market value for transmission facilities can be difficult in 
some instances and thus propose that, in the absence of a readily 
ascertainable market value, original cost undepreciated would be used. 
We seek comment on whether this measure of ``value'' of transmission 
and generation facilities, or some other measure, should be used, for 
transactions between non-affiliates and between affiliates. For 
transactions involving transfers of facilities between non-affiliates, 
the Commission believes that market value will, in most circumstances, 
be reflected in the transaction price. However, for a transaction 
between affiliates, it cannot be readily assumed that the market value 
will be reflected in the transaction price, since the buyer and seller 
do not bargain at arms' length. A possible alternative measure is 
original cost undepreciated. Therefore, the Commission seeks comments 
on these or other possible alternatives for defining value for 
transactions between affiliates.
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    \22\ Admittedly, this example addresses transfers of relatively 
small generation or transmission facilities. Even at a historical 
cost of $101 per kilowatt, the original cost of a 100 megawatt plant 
would exceed $10 million and thus the transfer would be 
jurisdictional.
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    31. With respect to paper jurisdictional facilities (usually 
wholesale contracts), Commission precedent does not address how the 
value of a wholesale contract should be determined for purposes of 
determining whether section 203 applies.\23\ Rather, it appears to have 
been assumed, by applicants and the Commission alike, that the value of 
a wholesale contract, however measured, would exceed $50,000. However, 
with the increase in the value threshold to $10 million in amended 
section 203, the ``value'' of a wholesale contract may become 
significant.
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    \23\ In Enron Power Marketing, Inc., 65 FERC ] 61,305 at 62,405 
(1993), the Commission merely noted, without discussion, that the 
value of the wholesale contract must exceed $50,000 for the transfer 
to be subject to section 203 of the FPA. See also Ocean State Power, 
38 FERC ] 61,140 (1987).
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    32. For example, a wholesale contract may have a total revenue 
stream that exceeds $10 million, but with profits of much less than $10 
million. A market value approach would involve basing ``value'' on the 
price or consideration paid for the contract, which, as with any other 
asset, would depend on the valuation of expected profits over the 
remaining life of the contract. Alternatively, the significance of a 
wholesale contract in terms of its effect on the market may be better 
reflected by defining ``value'' as total expected contract revenues 
over the remaining life of the contract. Total revenues are directly 
related to the quantity of power and energy delivered under the 
contract, which contributes to total market supply.\24\ It may also be 
appropriate to factor into this determination the value of options that 
might affect the price and any rights to extend the contract or change 
the quantities sold. At this juncture, however, we propose that for 
purposes of determining the applicability of amended section 203 and 
Part 33 to a given transaction, the value of any wholesale contract 
included in the transaction would be based on total expected contract 
revenues over the remaining life of the contract. We seek comment on 
whether this measure of ``value'' of wholesale power sales contracts, a 
market value measure, or some other measure, should be used.
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    \24\ We note that for purposes of determining destination 
markets to be used in the Appendix A analysis, Part 33 requires 
applicants to identify individual wholesale customers based on 
sales. 18 CFR 33.3(c)(2).
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    33. In addition, existing section 203 requires prior Commission 
approval for a public utility to acquire any security of another public 
utility, regardless of the value of the security. Thus, up to this 
point there was no need to define ``value'' for security acquisitions 
in Part 33. Amended sections 203(a)(1)(C) and (a)(2), however, state 
that the securities must have a value in excess of $10 million. The 
Commission proposes to define ``value'' of a security as the market 
price at the time the security is acquired. For transactions between 
non-affiliated companies, we will rebuttably presume that the market 
value is the agreed-upon transaction price. We seek comment on whether 
this measure of ``value'' of securities, or some other measure, should 
be used. We also seek comment on how to determine value for security 
transactions involving affiliates if the securities are not widely 
traded. For example, should the Commission consider using the Edgar 
standard \25\ of review when determining value in affiliate 
transactions? While this valuation method would not require a direct 
solicitation, the Commission seeks comments as to whether we should 
give particular weight to evidence of non-affiliate transactions 
involving either non-affiliated buyers or sellers of securities of 
similarly situated utilities or assets.
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    \25\ Boston Edison Company Re: Edgar Electric Energy Company, 55 
FERC ] 61,382 (1991) (Edgar). The Edgar standard of review is 
designed to prevent affiliate abuse and to ensure prices that are 
consistent with competitive outcomes. The Edgar decision outlined 
three methods by which a buyer could demonstrate that the 
transaction was free from potential affiliate abuse. First, the 
buyer can present evidence of direct head-to-head competition either 
through a formal solicitation or an informal negotiation process. 
Second, the buyer can present evidence of the prices that non-
affiliated buyers were willing to pay for similar services to the 
proposed affiliate sale. Third, the buyer can present benchmark 
evidence showing the terms, prices and conditions of sales of 
similar services made by non-affiliated sellers in the relevant 
market. Id. at 62,168-69.
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    34. The Commission proposes to define ``value'' with respect to a 
merger or consolidation with a transmitting utility, an electric 
utility company, or a holding company in a holding company system that 
includes a transmitting utility, or an electric utility company, with a 
value in excess of $10 million, as used in amended section 203(a)(2), 
as ``market value.'' As noted above, we would expect that in most 
circumstances ``market value'' will be reflected in the transaction 
price for transactions between non-affiliates. We seek comment on 
whether this measure of ``value'' or some other measure should be used 
in these circumstances.
    35. Further, given the increased significance of valuation of a 
transaction under amended section 203, we solicit comment on whether 
the Commission's existing record keeping and reporting requirements, 
outside the section 203 context, provide an adequate basis for 
monitoring jurisdictional entities' determinations of when a section 
203 application is required.\26\ For example,

[[Page 58640]]

do FERC Form 1s or Order No. 652 \27\ market-based rate change in 
status reports provide sufficient information to monitor compliance 
with section 203?
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    \26\ However, we note that EPAct 2005 Sec. Sec.  1284(d) and (e) 
expand the Commission's criminal and civil penalty authority, which 
will discourage noncompliance with the requirements of FPA section 
203.
    \27\ Reporting Requirement for Changes in Status for Public 
Utilities with Market-Based Rate Authority, Order No. 652, 70 FR 
8,253 (Feb. 18, 2005), FERC Stats. & Regs. ] 31,175, order on reh'g, 
111 FERC ] 61,413 (2005).
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b. ``Existing Generation Facility''

    36. Proposed subsection 33.1(b) also defines the term ``existing 
generation facility.'' Amended section 203(a)(1)(D) provides that the 
acquisition of ``an existing generation facility'' with a value in 
excess of $10 million ``that is used for interstate wholesale sales and 
over which the Commission has jurisdiction for ratemaking purposes'' is 
now subject to section 203 of the FPA.
    37. The Commission proposes to define ``existing generation 
facility'' for section 203 purposes as a generation facility that is 
operational at the time the transaction is consummated. If such a 
generation facility is intended to be used in whole or in part for 
wholesale sales in interstate commerce by a public utility, it is 
subject to our jurisdiction for ratemaking purposes and thus covered 
under amended section 203(a)(1)(D). Although the statutory provision 
refers to a facility that ``is'' used for wholesale sales (and over 
which the Commission has jurisdiction for ratemaking purposes), we 
believe a reasonable interpretation is that the provision would apply 
to newly constructed facilities that have already been energized at the 
time the transaction is consummated and are intended to be used in 
whole or in part for wholesale sales in interstate commerce by public 
utilities. We also note that if it can be demonstrated that a facility 
is used exclusively for retail sales, then amended section 203(a)(1)(D) 
is not triggered. We seek comment on the definition of the term 
``existing generation facility.'' We seek comment on whether ``at the 
time the section 203 transaction is consummated'' is the correct point 
in time for determining whether a facility is an ``existing'' facility.

c. ``Associate Company,'' ``Holding Company,'' ``Holding Company 
System,'' ``Transmitting Utility,'' and ``Electric Utility Company''

    38. The term ``transmitting utility'' is already defined in amended 
section 3 of the FPA \28\ as ``an entity (including an entity described 
in section 201(f)) that owns, operates, or controls facilities used for 
the transmission of electric energy--(A) in interstate commerce; (B) 
for the sale of electric energy at wholesale.'' \29\
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    \28\ 16 U.S.C. 796 (2000).
    \29\ EPAct 2005 Sec.  1291.
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    39. Amended section 203(a)(6) states that the terms ``associate 
company,'' ``holding company,'' and ``holding company system'' shall 
have the meaning given those terms in PUHCA 2005.\30\
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    \30\ Id. at Sec.  1262.
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    40. We note that amended section 203(a)(2) refers to the term 
``electric utility company,'' but provides no definition of that term. 
However, ``electric utility company'' is a PUHCA term and we believe 
that the most reasonable interpretation, especially in light of amended 
section 203(a)(6), is that it has the same meaning as used in PUHCA 
2005, which is any company that owns or operates facilities used for 
the generation, transmission, or distribution of electric energy for 
sale.\31\ We seek comments on this proposed definition.
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    \31\ Id. at Sec.  1262(5).
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d. ``Non-Utility Associate Company''

    41. Amended section 203(a)(4) adds the new requirement that before 
we can approve a proposed section 203 transaction, the Commission must 
find that the transaction will not result in cross-subsidization of a 
non-utility associate company or a pledge or encumbrance of utility 
assets for the benefit of an associate company, unless that cross-
subsidization, pledge, or encumbrance will be consistent with the 
public interest. However, because EPAct 2005 provides no definition of 
the term ``non-utility associate company,'' proposed subsection 33.1(b) 
would define this term.
    42. PUHCA 2005, Subtitle F of EPAct 2005, defines an ``associate 
company'' of a company as any company in the same holding company 
system with such company, but does not define ``non-utility associate 
company.'' \32\ A reasonable interpretation, as explained below, is 
that Congress was concerned about the potential that customers of 
``regulated'' public utilities (persons that own or operate facilities 
used for wholesale sales or transmission in interstate commerce) would 
inappropriately subsidize ``unregulated'' associate companies \33\ in 
the same holding company system, whether the associate companies were 
in energy or non-energy businesses. Such cross-subsidization can harm 
not only customers of the regulated public utility but it can also harm 
competition by giving ``unregulated'' sellers a competitive advantage. 
Similarly, Congress was concerned that regulated public utility assets 
not be inappropriately pledged or used to support non-regulated 
associate companies, to the harm of customers of the regulated public 
utility.
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    \32\ Id. at Sec.  1262.
    \33\ ``Unregulated'' companies, as the term is used herein, 
would include those that have no rate regulation oversight (e.g., 
real estate businesses) as well as those that are regulated on a 
market rate basis (e.g., wholesale sellers granted market-based rate 
authority by the Commission).
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    43. Historically, the Commission has used the term ``non-utility'' 
in more than one context and with more than one meaning. In the context 
of considering cross-subsidization concerns arising from the formation 
of holding companies, ``non-utility operations'' has been used to refer 
to the operation of businesses completely uninvolved in any aspect of 
the generation, transmission, distribution, or sale of electricity.\34\ 
An example would be an associate company that engages in real estate 
development or residential construction. In the context of considering 
cross-subsidization or affiliate abuse concerns associated with power 
transactions between public utility affiliates, the Commission has 
differentiated between utility activities and non-utility activities 
according to whether they were being conducted by a public utility with 
captive wholesale or retail customers served under cost-based rates 
(sometimes described as a ``traditional public utility''). In this 
context, the Commission has sometimes referred to a power marketer (a 
public utility authorized to charge market-based rates but without 
captive customers) affiliate of a traditional public utility as a non-
utility affiliate.\35\
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    \34\ See Central Illinois Public Service Company, 42 FERC ] 
61,073 at 61,328 (1988); Boston Edison Company and BEC Energy, 80 
FERC ] 61,274 at 61,994 (1997).
    \35\ See Sierra Pacific Power Company, 95 FERC ] 61,193 at 
61,678-79 (2001) (Sierra Pacific).
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    44. To provide the broadest cross-subsidization protection, the 
Commission proposes to interpret the term ``non-utility associate 
company'' to mean any associate company in a holding company system 
other than a public utility or electric utility company that has 
wholesale or retail customers served under cost-based regulation. 
Therefore, a non-utility associate company would include, for example, 
a power marketer, a generator that does not have captive customers, a 
gas marketer, a fuel supply company or a company that provides inputs 
to power production, or a company that is involved in business 
activities not related to the generation, transmission,

[[Page 58641]]

distribution, or sale of electricity.\36\ We seek comment on whether 
this definition is appropriate or whether the Commission should use a 
narrower definition, e.g., one which defines a ``non-utility associate 
company'' as a company that is in a business not related to generation, 
transmission, distribution, or sale of electricity.
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    \36\ These are examples only. This list is not intended to be 
exhaustive.
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3. Contents of Application--General Information Requirements Regarding 
Cross-Subsidization--18 CFR 33.2(j)
    45. Proposed new subsection 33.2(j) would implement section 
203(a)(4) by requiring applicants to include in their section 203 
applications an explanation of how applicants are providing assurance 
that the proposed transaction will not result in cross-subsidization of 
a non-utility associate company or pledge or encumbrance of utility 
assets for the benefit of an associate company, with appropriate 
evidentiary support for such explanation; or, if no such assurance can 
be provided, an explanation of how such cross-subsidization, pledge, or 
encumbrance will be consistent with the public interest. This 
explanation will be Exhibit M to the applicant's application. The 
Commission seeks comment on what evidence parties should be required to 
submit to support any explanation offered under this subsection.
    46. EPAct 2005 provides no guidance on how the Commission, when 
reviewing section 203 applications, should determine whether or not a 
proposed transaction will result in cross-subsidization or a pledge or 
encumbrance of utility assets for the benefit of an associate company. 
The Commission has sought to guard against potential cross-
subsidization and affiliate abuse when it reviews applications for 
cost-based or market-based rate authority under section 205 of the FPA 
\37\ or dispositions of jurisdictional facilities under section 203 
involving public utilities with captive customers or their 
affiliates.\38\ The Commission also has in place cash management rules 
to monitor proprietary capital ratios and money lending or other 
financial arrangements that can harm regulated companies.\39\ In light 
of the Congress' clear directive in EPAct 2005 that the Commission make 
findings regarding cross-subsidization and the pledge or encumbrance of 
utility assets in the context of a section 203 application, we seek 
comment, as discussed below, on what additional safeguards or 
conditions may need to be placed on section 203 transactions.
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    \37\ 16 U.S.C. 824d (2000).
    \38\ See e.g., Sierra Pacific, 95 FERC ] 61,193; Boston Edison 
Company, 80 FERC ] 61,274 (1997).
    \39\ Regulation of Cash Management Practices, Order No. 634, 68 
FR 40,500 (Jul. 8, 2003), III FERC Stats. & Regs. ] 31,145 (June 26, 
2003), Order No. 634-A, 68 FR 61,993 (Oct. 31, 2003), III FERC 
Stats. & Regs. ] 31,152 (2003) (Cash Management Rule).
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    47. The Commission's primary focus has been to prevent a transfer 
of benefits from a traditional public utility's captive customers to 
shareholders of the public utility's holding company due to an intra-
system transaction that involves power or energy, generation 
facilities, or non-power goods and services. Concerns arise both in the 
circumstance in which an ``unregulated'' affiliate (e.g., a power 
marketer or non-utility affiliate) provides power or goods and services 
to a public utility with captive customers, as well as the circumstance 
in which the public utility with captive customers provides power or 
goods and services to the ``unregulated'' affiliate. For instance, a 
traditional public utility with captive customers served at cost-based 
rates may purchase power from its marketing affiliate at a price above 
market or sell power to its marketing affiliate at below-market prices, 
thus transferring benefits from customers to shareholders of the 
holding company. Customers served at cost-based rates by a traditional 
public utility may also be harmed if the traditional public utility 
buys a generation facility from an affiliate at a price greater than 
market or sells a generation plant to an affiliate at less than cost or 
market value, whichever is higher. Further, customers may be harmed if 
the traditional public utility purchases non-power goods and services 
from an affiliate at above market prices or sells non-power goods and 
services to an affiliate at less than the higher of cost or market 
value.\40\
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    \40\ We note, however, that in our recently issued notice of 
proposed rulemaking to implement PUHCA 2005, we have sought comment 
on whether the Commission should apply the lower of cost or market 
standard for the provision of non-power goods and services or if we 
should instead adopt the SEC ``at cost'' standard. Repeal of the 
Public Utility Holding Company Act of 1935 and Enactment of the 
Public Utility Holding Company Act of 2005, 112 FERC ] 61,300 at P 
15 (2005) (PUHCA NOPR).
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    48. The Commission's regulatory tool for protecting against 
inappropriate cross-subsidization, on an on-going basis, has primarily 
been its FPA sections 205 and 206 \41\ rate authority. This includes: 
review of just and reasonable rates and prudently incurred costs (e.g., 
costs of purchasing power or non-power goods and services from an 
affiliate) for public utilities that sell at cost-based rates; imposing 
conditions and codes of conduct on market-based rate authorizations for 
sellers that have, or are affiliated with companies that have, captive 
customers; and auditing the accounts, books, and records of public 
utilities to ensure that inappropriate cross-subsidization does not 
occur.
---------------------------------------------------------------------------

    \41\ 16 U.S.C. 824e (2000).
---------------------------------------------------------------------------

    49. As noted above, the Commission, through its FPA sections 205 
and 206 ratemaking authority, already protects in several ways against 
affiliate abuse in connection with power and energy transactions and 
non-power transactions between traditional public utilities and their 
affiliates. The latter affiliates may be affiliated generators or 
marketers with market-based rates, affiliate companies that provide 
goods such as fuel or supplies, or service company affiliates that 
provide services such as accounting or legal services. When we grant 
market-based rate authority under section 205 of the FPA, the 
Commission requires that a power marketer not sell power to, or 
purchase power from, any utility affiliate without prior Commission 
approval. Another requirement is that sales of non-power goods and 
services from the traditional public utility to a marketing affiliate 
occur at the higher of cost or market value and that the traditional 
public utility's purchases of non-power goods and services from an 
affiliate (e.g., an affiliate fuel company) occur at market value or 
less. Under section 205 of the FPA, the Commission also applies the 
Edgar standard to ensure that a traditional public utility's power 
purchases from an affiliate occur at a just and reasonable rate.\42\
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    \42\ Additionally, issues can arise regarding costs that are 
allocated among holding company affiliates that all have captive 
customers. This does not raise the same concerns discussed above 
regarding the transfer of benefits from captive customers to 
shareholders. Rather, it raises the issue of one set of captive 
customers unfairly subsidizing another set of captive customers. The 
Commission addresses these types of issues in the context of setting 
cost-based rates under FPA sections 205 and 206. Historically, a 
related problem occurred when regulated companies traded an asset at 
inflated prices to the detriment of customers. Modern accounting 
rules generally prevent this problem.
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    50. In the section 203 context, the Commission currently requires 
that to gain section 203 approval without a hearing, if the transaction 
would create a registered holding company under PUHCA 1935, applicants 
must agree to abide by the Commission's policy on intra-system 
transactions for non-power goods and services.\43\ Further, when a

[[Page 58642]]

public utility disposes of its jurisdictional facilities to another 
company, whether domestic or foreign, the Commission protects public 
utility customers against inappropriate cross-subsidization by 
conditioning its authorization on the applicants' acceptance of the 
Commission's authority, under section 301(c) of the FPA,\44\ to review 
the parent company's books and records as they relate to transactions 
with or the business of the public utility.\45\
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    \43\ Public Service Company of Colorado and Southwestern Public 
Service Company, 75 FERC ] 61,325 at 62,046 (1996); Merger Policy 
Statement at ] 30,124-25; 18 CFR 2.26(e). However, as is discussed 
below, with the repeal of the PUHCA 1935 registered holding 
companies will no longer exist and there will be no SEC review of 
non-power goods and services transactions; thus, all intra-system 
affiliate transactions will be subject to this Commission's review 
and conditioning if relevant to jurisdictional rates.
    \44\ 16 U.S.C. 825 (2000).
    \45\ New England Power Company, 87 FERC ] 61,287 (1999).
---------------------------------------------------------------------------

    51. Finally, with respect to potential encumbrances or pledges of 
utility assets, the Commission requires Commission-regulated entities 
that have not been granted waivers of our accounting and reporting 
rules to file copies of all cash management arrangements and changes to 
these arrangements. We also require jurisdictional entities that 
participate in such programs to calculate their proprietary capital 
ratios quarterly and to notify the Commission if they fall below 30 
percent of total capitalization and provide other detailed 
information.\46\
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    \46\ Cash Management Rule at P 9.
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    52. All of these policies seek to safeguard the interests of 
captive customers served at cost-based rates and protect regulated 
public utility assets. However, any merger transaction that creates 
another affiliate opens the door to possible affiliate abuse or cross-
subsidization concerns or pledges or encumbrances of assets. There are 
various ways we could address these concerns. We note that some state 
commissions, when reviewing a merger transaction, impose specific 
conditions designed to protect customers against unfair competitive 
practices, cross-subsidization, and affiliate abuse.\47\ Examples of 
these conditions include, among other things: Reporting and information 
access requirements; restrictions on intra-corporate transactions that 
result in direct charges or cost allocations; a prohibition on the 
local utility bearing any of the merger acquisition premium, 
transaction costs, or merger transition costs; measures to protect the 
utility's financial position; a service quality program, under which 
the local utility would be subject to revenue requirement reductions if 
it did not meet certain performance targets established annually; and 
restrictions on a holding company's access to the local utility's 
power, natural gas assets, and its individual and aggregated customer 
information. Given Congress' amendment of section 203, the Commission 
solicits comments on the adequacy of its present policies preventing 
affiliate abuse and cross-subsidization, and whether conditions such as 
those imposed by state commissions may need to be placed on section 203 
transactions.\48\
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    \47\ See, e.g., In the Matter of the Application of Enron Corp 
for an Order Authorizing the Exercise of Influence Over Portland 
General Electric Company, Public Utility Commission of Oregon, Order 
No. 97-196, UM-814 (June 4, 1997); Joint Petition of Long Island 
Lighting Company and The Brooklyn Union Gas Company for 
Authorization under Section 70 of the Public Service Law to Transfer 
Ownership to an Unregulated Holding Company and Other Related 
Approvals, New York Public Service Commission, Case 97-M-0567 (April 
14, 1998); Joint Application of Pacific Enterprises, Enova 
Corporation, Mineral Energy Company, B Mineral Energy Sub and G 
Mineral Energy Sub for Approval of a Plan of Merger of Pacific 
Enterprises and Enova Corporation With and Into B Mineral Energy Sub 
and G Mineral Energy Sub, the Wholly Owned Subsidiaries of A Newly 
Created Holding Company, Mineral Energy Company, 79 CPUC2d 343, 
D.98-03-073 (March 26, 1998); Standards of Conduct for Distribution 
Companies and Their Competitive Affiliates, 220 Mass. Code Regs. 12 
(2005).
    \48\ In addition to these types of conditions, the Commission 
could, depending upon the specific facts presented, consider as a 
condition of approval of a proposed section 203 transaction that the 
transaction be structured a different way to avoid inappropriate 
cross-subsidization.
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    53. We also seek comment on whether additional conditions should be 
placed on section 203 approvals to ensure that there is no pledge or 
encumbrance that harms utility customers.\49\ Specifically, we seek 
comment on the types of activities that would typically result in a 
pledge or encumbrance and the types of pledges and encumbrances that 
would be consistent with the public interest. We also seek comment on 
whether the Commission should require that all existing pledges and 
encumbrances be disclosed in any section 203 application proposing any 
sort of corporate reorganization.
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    \49\ We note that in our recently issued notice of proposed 
rulemaking to implement PUHCA 2005, we sought comment on whether the 
Commission should amend its rules or policies to provide additional 
protection against inappropriate cross-subsidization or pledges or 
encumbrances of utility assets, particularly pursuant to our FPA 
section 205 and 206 ratemaking authority. PUHCA NOPR at P 26.
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    54. The Commission notes that section 203(a)(4) refers to a pledge 
or encumbrance of utility assets for the benefit of an ``associate'' 
company, as opposed to a ``non-utility associate'' company. Since an 
associate company may either be a utility or non-utility, we interpret 
this provision to require the Commission to determine whether the 
transaction will result in the use of utility assets to finance, or 
serve as collateral for, activities engaged in by an associate company, 
whether it is a non-utility or a utility.
4. Commission Procedures for Consideration of Applications Under 
Section 203 of the FPA--18 CFR 33.11
    55. Amended section 203(a)(5) of the FPA directs the Commission to 
adopt procedures for the expeditious consideration of applications for 
the approval of dispositions, consolidations, or acquisitions under 
section 203 of the FPA. Section 203(a)(5) also requires the Commission 
to ``identify classes of transactions, or specify criteria for 
transactions, that normally meet the standards established in [section 
203(a)(4)].''
    56. Proposed New sections 33.11(a) and (b) would implement amended 
section 203(a)(5). Specifically, proposed subsection 33.11(a) provides 
that the Commission will act on completed applications for approval of 
a transaction (i.e., one that is consistent with the requirements of 
Part 33), not later than 180 days after the completed application is 
filed.\50\ If the Commission does not act within 180 days, such 
application shall be deemed granted unless the Commission finds, based 
on good cause, that further consideration is required and issues an 
order tolling the time for acting on the application for not more than 
180 days, at the end of which additional period the Commission shall 
grant or deny the application, as required by amended section 203 of 
the FPA.
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    \50\ As set forth in the Merger Policy Statement, a complete 
application is one that adequately and accurately describes the 
merger being proposed and that contains all the information 
necessary to explain how the merger is consistent with the public 
interest, including an evaluation of the merger's effect on 
competition, rates, and regulation. Merger Policy Statement at ] 
30,127. The Commission's review process will begin when the 
application is deemed to be complete.
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    57. Proposed subsection 33.11(b) would provide for the expeditious 
consideration of completed section 203 applications that are not 
contested, are not mergers, and are consistent with Commission 
precedent, because they should typically meet the standards established 
in section 203(a)(4).
    58. We note that, generally, the most critical period of the 
Commission's review of a particular section 203 application is the time 
between the end of the notice period and the issuance of a Commission 
decision (i.e., the review period). The length of the review period 
needed depends on the complexity of the application, issues raised by 
any

[[Page 58643]]

protests, Commission staff's analysis, and the need to hold an 
evidentiary hearing. In the Filing Requirements Rule, we stated that we 
typically process uncontested non-merger applications within 60 days of 
the date of filing and protested non-merger applications within 90 days 
of filing. Since the issuance of that rule, the Commission has met 
these goals in almost all instances.
    59. The Commission cannot provide a comprehensive description of 
all the classes or types of transactions that will be encompassed in 
the expedited review category. However, the Commission proposes that 
the transactions that would generally warrant expedited review include: 
(1) A disposition of only transmission facilities, particularly those 
that both before and after the transaction remain under the functional 
control of a Commission-approved RTO or independent system operator; 
(2) transfers involving generation facilities of a size that do not 
require an Appendix A analysis; (3) internal corporate reorganizations 
that do not present cross-subsidization issues; and (4) the acquisition 
of a foreign utility company by a holding company with no captive 
customers in the United States.\51\
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    \51\ We note that PUHCA 1935 exempted from its requirements 
certain acquisitions of foreign utility companies by a holding 
company with operations in the United States. 15 U.S.C. 33 (2000); 
17 CFR 250.57 (2005). However, amended section 203 appears to 
provide no such exemption.
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    60. With respect to the latter category, the acquisition of a 
foreign utility company by a holding company with no captive customers 
in the United States, we recognize that amended section 203's 
requirement for regulatory approval could have the potential to impede 
or have a chilling effect on investment--particularly if the 
transaction were subjected to a lengthy regulatory review. Such a 
transaction would not cause competitive concerns in the United States 
and, further, there would be no concerns about cross-subsidization that 
harms captive customers in the United States. In addition, even with 
respect to the acquisition of a foreign utility company by a holding 
company with captive customers in the United States, there may be 
safeguards or conditions that could be adequate in order to expedite 
approval of such transactions. The Commission does not want to impede 
investment in the U.S. or abroad and we seek comment on procedures the 
Commission might adopt, or safeguards it might require, to pre-approve 
or expedite such transactions while at the same time protecting U.S. 
captive customers.\52\
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    \52\ See Senate Floor Statements by Senators Bingaman (D-NM) and 
Domenici (R-NM), H.R. 6, Energy Policy Act of 2005, Congressional 
Record at S9359 (July 29, 2005) (discussing concerns regarding 
Commission approval of certain foreign transactions outside of the 
United States).
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    61. For the section 203 applications that involve a competitive 
analysis per the guidelines of the revised filing requirements,\53\ or 
that may raise cross-subsidization issues or other issues, the amount 
of time needed for review will depend on the complexity of the issues 
involved. In cases where the Commission decides that a hearing should 
be held, establishing a specific review period could also be 
problematic. However, as provided in amended section 203(a)(5), the 
Commission must grant or deny the application within 360 days of 
filing.
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    \53\ See 18 CFR 33.3 and 33.4.
------