New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities, 4532-4541 [E6-940]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 71, Number 18 (Friday, January 27, 2006)]
[Proposed Rules]
[Pages 4532-4541]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-940]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

[Docket No. RM06-10-000]


New PURPA Section 210(m) Regulations Applicable to Small Power 
Production and Cogeneration Facilities

Issued January 19, 2006.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
proposing to amend its regulations governing small power production and 
cogeneration in response to section 1253 of the Energy Policy Act of 
2005 (EPAct 2005), which added section 210(m) to the Public Utility 
Regulatory Policies Act of 1978 (PURPA). The Commission seeks public 
comment on the amended regulations proposed herein.

DATES: Comments are due February 27, 2006. Reply Comments are due March 
28, 2006.

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:
Deborah Wyrick (Technical Information), Office of Energy Markets and 
Reliability, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-6113.

Marka Shaw (Technical Information), Office of Energy Markets and 
Reliability, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8641.

Samuel Higginbottom (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8561.

Giuseppe Fina (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8696.

SUPPLEMENTARY INFORMATION:
Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, 
and Suedeen G. Kelly.

I. Introduction

    1. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) 
\1\ was signed into law. Section 1253(a) of EPAct 2005 adds a new 
section 210(m) to the Public Utility Regulatory Policies Act of 1978 
(PURPA) \2\ which provides for termination of an electric utility's 
obligation to purchase energy and capacity from qualifying cogeneration 
facilities and qualifying small power production facilities (QFs), if 
the Federal Energy Regulatory Commission (Commission) finds that 
certain conditions are met. Section 210(m) \3\: (1) Provides a 
procedure for an electric utility to file an application for relief 
from the mandatory purchase obligation on a service territory-wide 
basis; (2) provides a procedure for any affected entity or person to 
apply to the Commission for an order reinstating the electric utility's 
obligation to purchase energy; (3) provides for termination of an 
electric utility's obligation to sell to QFs energy and capacity if the 
Commission finds that certain conditions are met; (4) protects existing 
rights and remedies under any contract or obligation in effect or 
pending approval involving the purchase of energy or capacity or sale 
of energy or capacity to a QF; and (5) allows the Commission to issue 
and enforce

[[Page 4533]]

regulations to ensure that an electric utility recovers all prudently 
incurred costs associated with the purchase of energy from a QF.
---------------------------------------------------------------------------

    \1\ Public Law 109-58, Sec.  1253, 119 Stat. 594 (2005).
    \2\ 16 U.S.C. 824a-3 (2000).
    \3\ We note that the Commission has issued a notice of proposed 
rulemaking regarding added section 210(n) in Docket No. RM05-36-000. 
That section makes clear that no new qualifying cogeneration 
facility can enter into a contract with an electric utility unless 
the cogeneration facility satisfies criteria for new qualifying 
cogeneration facilities that will be established by the Commission. 
Revised Regulations Governing Small Power Production and 
Cogeneration Facilities, Notice of Proposed Rulemaking, 70 FR 60,456 
(Oct. 18, 2005), FERC Stats. & Regs. ] 32,590 (2005).
---------------------------------------------------------------------------

    2. The Commission proposes to amend its regulations, specifically 
18 CFR 292.303, to implement the requirements in section 210(m).\4\ The 
Commission seeks public comment on the regulations proposed herein.
---------------------------------------------------------------------------

    \4\ We will generally refer to EPAct 2005's added section 210(m) 
of PURPA as ``amended section 210.'' All other references to PURPA 
section 210 are as it currently exists.
---------------------------------------------------------------------------

II. Background

    3. When Congress enacted section 210 of PURPA, it required the 
Commission to prescribe rules as the Commission determined necessary to 
encourage cogeneration and small power production, including rules 
requiring electric utilities to offer to purchase electric power from 
and sell electric power to QFs. Additionally, section 210 of PURPA 
authorized the Commission to exempt QFs from certain federal and state 
laws and regulations.
    4. Under section 201 of PURPA, cogeneration facilities and small 
power production facilities which meet certain standards and which are 
not owned by persons primarily engaged in the generation or sale of 
electric power \5\ can become QFs, and thus become eligible for the 
rates and exemptions pursuant to section 210 of PURPA and found in our 
regulations.\6\
---------------------------------------------------------------------------

    \5\ The ownership requirement was codified in sections 3(17)(A) 
and 3(18)(A) of the FPA. Section 1253(b) of EPAct 2005 removed the 
ownership requirement from sections 3(17)(A) and 3(18)(A) of the 
FPA, and the Commission has proposed to remove the ownership 
requirement from its regulations in Docket No. RM05-36-000. Revised 
Regulations Governing Small Power Production and Cogeneration 
Facilities, Notice of Proposed Rulemaking, 70 FR 60456 (Oct.18, 
2005), FERC Stats. & Regs. ] 32,590 (2005).
    \6\ 18 CFR Part 292 (2005).
---------------------------------------------------------------------------

    5. A cogeneration facility is defined in the Federal Power Act 
(FPA) \7\ as a facility which produces electric energy and steam or 
forms of useful energy (such as heat) which are used for industrial, 
commercial, heating, or cooling purposes.\8\ Thus, cogeneration 
facilities simultaneously produce two forms of useful energy, namely 
electric power and heat. Cogeneration facilities can use significantly 
less fuel to produce electricity and steam (or other forms of energy) 
than would be needed to produce the two separately.
---------------------------------------------------------------------------

    \7\ 16 U.S.C. 824 et seq. (2000).
    \8\ 16 U.S.C. 796(18) (2000).
---------------------------------------------------------------------------

    6. Small power production facilities as defined in the FPA use 
biomass, waste, or renewable resources, including wind, solar energy 
and water, to produce electric power and have a power production 
capacity which, together with any other facilities located at the same 
site, are not greater than 80 megawatts.\9\ Reliance on these sources 
of energy can reduce the need to consume fossil fuels to generate 
electric power.
---------------------------------------------------------------------------

    \9\ 16 U.S.C. 796(17)(A)(i)-(ii) (2000).
---------------------------------------------------------------------------

    7. Prior to the enactment of PURPA, a cogenerator or small power 
producer seeking to establish interconnected operation with a utility 
faced three major obstacles. First, utilities were not generally 
willing to purchase this electric output or were not willing to pay an 
appropriate rate for that output. Second, utilities generally charged 
discriminatorily high rates for back-up service to cogenerators and 
small power producers. Third, a cogenerator or small power producer 
which provided electricity to a utility's grid ran the risk of being 
considered a public utility and thus being subjected to extensive state 
and federal regulation.
    8. Section 210 of PURPA was designed to remove these obstacles. 
Each electric utility is required under section 210 to offer to 
purchase available electric energy from cogeneration and small power 
production facilities which obtain qualifying status. The rates for 
such purchases from QFs must be just and reasonable to the ratepayers 
of the utility, in the public interest, and must not discriminate 
against cogenerators or small power producers. Rates also must not 
exceed the incremental cost to the electric utility of alternative 
electric energy (also known as the electric utility's ``avoided 
costs''). Section 210 also requires electric utilities to provide 
electric service to QFs at rates which are just and reasonable, in the 
public interest, and which do not discriminate against cogenerators and 
small power producers.
    9. Since Congress enacted PURPA, electric utilities have complained 
that their obligation to purchase from and sell to QFs, as implemented 
by the Commission in 18 CFR 292.303(a)-(b), was not economically 
beneficial and that they were purchasing energy they did not need and 
selling energy they did not want to sell. In 1995, the Commission 
clarified that in determining the avoided cost rate, the electric 
utility must take into account all alternative sources including third-
party suppliers and does not have to buy power it does not need.\10\ In 
the past decade, with the development of exempt wholesale generators 
(EWGs) introduced by the Energy Policy Act of 1992,\11\ and increasing 
competition in wholesale electric markets as well as some retail 
electric markets, Congress has debated whether to repeal PURPA 
altogether, or to revise it. The result is new section 210(m), which is 
the subject of this rulemaking, and new section 210(n), which is being 
addressed in Docket No. RM05-36-000. New section 210(m) requires the 
Commission to lift the mandatory purchase obligation if it finds, in 
effect, that there is a sufficiently competitive market for the QF to 
sell its power. While the provision permits electric utilities to file 
applications for relief from the mandatory purchase obligation, and 
requires the Commission to act on such applications within 90 days, the 
Commission has determined that it can more appropriately address this 
issue through rulemaking.
---------------------------------------------------------------------------

    \10\ Southern California Edison Company and San Diego Gas & 
Electric Company, 70 FERC ] 61,215 at 61,677-78, reconsideration 
denied, 71 FERC ] 61,269 at 62,078 (1995) (finding that the 
determination of avoided cost must take into account ``all 
sources'').
    \11\ Energy Policy Act of 1992, Public Law No. 102-486, 106 
Stat. 2776, (1993) (EPAct 1992). EPAct 1992 added a new section 32 
to the Public Utility Holding Company Act of 1935 (PUHCA) to permit 
a category of sellers called EWGs to be exempt from PUHCA.
---------------------------------------------------------------------------

III. Proposed Revisions to Regulations

A. Obligation To Purchase

    10. Section 292.303(a) of the Commission's regulations, 18 CFR 
292.303(a), states that:

    Obligation to purchase from qualifying facilities. Each electric 
utility shall purchase, in accordance with Sec.  292.304, any energy 
and capacity which is made available from a qualifying facility:
    (1) Directly to the electric utility; or
    (2) Indirectly to the electric utility in accordance with 
paragraph (d) of this section.

    11. The new PURPA section 210(m)(1) amends the obligation to 
purchase and states that:

    * * * no electric utility shall be required to enter into a new 
contract or obligation to purchase electric energy from a qualifying 
cogeneration facility or a qualifying small power production 
facility under this section if the Commission finds that the 
qualifying cogeneration facility or qualifying small power 
production facility has nondiscriminatory access to--
    (A)(i) Independently administered, auction-based day ahead and 
real time wholesale markets for the sale of electric energy; and 
(ii) wholesale markets for long-term sales of capacity and electric 
energy; or
    (B)(i) Transmission and interconnection services that are 
provided by a Commission-approved regional transmission entity and 
administered pursuant to an open access transmission tariff that 
affords nondiscriminatory treatment to all customers; and (ii) 
competitive wholesale markets that provide a meaningful

[[Page 4534]]

opportunity to sell capacity, including long-term and short-term 
sales, and electric energy, including long-term, short-term and 
real-time sales, to buyers other than the utility to which the 
qualifying facility is interconnected. In determining whether a 
meaningful opportunity to sell exists, the Commission shall 
consider, among other factors, evidence of transactions within the 
relevant market; or
    (C) Wholesale markets for the sale of capacity and electric 
energy that are, at a minimum, of comparable competitive quality as 
markets described in subparagraphs (A) and (B).

Section 210(m)(1) thus relieves an electric utility of its obligation 
to enter into a new contract or obligation to purchase QF power upon a 
Commission finding that certain market conditions exist.
    12. As discussed below, the Commission will: (1) Discuss its 
interpretation of the criteria for electric utility relief from the 
purchase obligation; (2) make a preliminary finding that QFs 
interconnected with utilities that are members of Midwest Independent 
Transmission System Operator, Inc. (Midwest ISO), PJM Interconnection, 
L.L.C. (PJM), ISO New England, Inc. (ISO-NE), and New York Independent 
System Operator (NYISO) have nondiscriminatory access to those markets 
and that those markets satisfy the section 210(m)(1)(A) criteria for 
removing the obligation of those electric utilities to enter into new 
contracts or obligations with QFs; and (3) provide guidance on the 
definition of ``nondiscriminatory access,'' and ``new contract or 
obligation.''
1. Meaning of Section 210(m)(1)
    13. Section 210(m)(1) states that no utility shall be obligated to 
enter into a new contract or obligation if the Commission finds that 
QFs have nondiscriminatory access to one of the three market 
circumstances described in section 210(m)(1)(A), (B), and (C). In 
effect, Congress has required the Commission to remove the mandatory 
purchase obligation if it finds that there is access to a sufficiently 
competitive market for QFs to sell their power. Based on this statutory 
language, in this section, we discuss our interpretation of what type 
of markets are required by section 210(m)(1) of PURPA to relieve a 
utility of the mandatory purchase obligation.
    14. Subparagraph (A) waives the purchase obligation if QFs have 
nondiscriminatory access to (i) independently administered, auction-
based day-ahead and real-time wholesale markets for the sale of 
electric energy; and (ii) wholesale markets for long-term sales of 
capacity and electric energy. We conclude that the most reasonable 
interpretation of subsection (A) is that it was crafted to apply in 
regions in which Independent System Operators (ISO) and Regional 
Transmission Organizations (RTO) administer day-ahead and real-time 
markets, and bilateral long-term contracts for the sale of capacity and 
electric energy are available to participants/QFs in these markets.
    15. We note that the second prong of subparagraph (A) does not 
require auction-based long-term capacity or energy markets and such an 
interpretation would not be consistent with the statutory text. First, 
subparagraph (A)(ii) does not use the terms ``organized,'' 
``independently administered,'' or ``competitive'' when describing the 
long term markets. As evidenced by subparagraph (B)(ii), discussed 
below, Congress could have imposed such requirements for the long-term 
wholesale markets, but did not. Therefore, we conclude that no such 
requirement was intended for the long-term markets of section 
210(m)(1)(A)(ii). Second, unlike subparagraph (B)(ii), subparagraph 
(A)(ii) does not require the Commission to consider ``evidence of 
transactions within the relevant market'' when determining whether QFs 
have meaningful opportunities to sell into wholesale markets outside 
the host utility. This suggests that Congress presumed there was a 
meaningful opportunity to sell for QFs that have ``nondiscriminatory 
access to'' ISO and RTO regions with day-ahead and real-time markets.
    16. A reasonable interpretation of subparagraph (B) is that it is 
intended to apply in non-auction-based markets because it waives the 
mandatory purchase requirement so long as there is (i) a Commission-
approved regional transmission entity providing nondiscriminatory 
transmission and interconnection services; and (ii) ``competitive 
wholesale markets'' for short- and long-term energy and capacity sales 
and real-time energy sales. To meet subparagraph (B)(i), QFs must have 
nondiscriminatory access to transmission and interconnection service 
that is nondiscriminatory, which we interpret to mean access pursuant 
to a Commission-approved open access transmission tariff (OATT) and 
interconnection rules and provided by an entity that is regional in 
scope. Amended section 210 does not contain any express definition, 
and, therefore, the Commission has discretion in this context to deem 
an entity to be ``regional'' based on factors such as sufficient 
regional scope or configuration or the multiple discrete transmission 
systems it controls.
    17. As to the second prong, subparagraph (B)(ii) requires that QFs 
have access to ``competitive wholesale markets that provide a 
meaningful opportunity'' to sell capacity and energy on both a short- 
and long-term basis and energy on a real-time basis (emphasis added). 
``Meaningful opportunity'' is to be determined by the Commission after 
considering, among other factors, ``evidence of transactions within the 
relevant market.'' Taken together, the terms ``competitive,'' 
``meaningful opportunity'' and ``evidence of transactions'' suggest 
that Congress intended that waiver occur in a non-auction-based market 
only if it could be established that QFs had opportunities to sell 
their output into competitive wholesale markets.
    18. Subparagraph (C) removes the purchase obligation in wholesale 
markets for the sale of capacity and electric energy that are, ``at a 
minimum,'' of comparable competitive quality as markets described in 
subparagraphs (A) and (B). Although this provision is not clear on its 
face, its reference to subparagraphs (A) and (B) requires the 
Commission to be mindful, in interpreting the provision, of the two 
types of requirements that are embodied in those sections, i.e., (1) 
nondiscriminatory access to transmission and interconnection services, 
and (2) competitive short-term and long-term markets. These provisions 
appear to require a case-by-case approach, but we seek comments on 
whether the Commission can make generic findings on these provisions.
    19. The Commission's existing OATT, adopted in Order No. 888,\12\ 
and interconnection rules, adopted in Order Nos. 2003 \13\ and 
2006,\14\ are designed to

[[Page 4535]]

eliminate undue discrimination in the provision of transmission and 
interconnection services. Although the Commission recently issued a 
Notice Of Inquiry regarding changes to the OATT, the OATT has been 
considered sufficient to provide non-discriminatory access to 
transmission until such time as modified. Accordingly, we conclude that 
QFs have non-discriminatory access to transmission and interconnection 
if they have access to utilities providing service under an Order No. 
888 OATT (or to utilities providing service under a Commission-accepted 
reciprocity tariff) and interconnection services pursuant to the 
Commission's interconnection rules. However, we seek comment on whether 
there are any circumstances in which an OATT should be considered 
insufficient for purposes of section 210(m). We also seek comment on 
whether a Commission-accepted reciprocity tariff filed by a 
nonjurisdictional electric utility has the same effect as an OATT for 
purposes of meeting section 210(m)(1)(C). We also seek comment on 
whether nonjurisdictional utilities provide nondiscriminatory 
interconnection services for purposes of section 210(m)(1)(C) of PURPA.
---------------------------------------------------------------------------

    \12\ Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities and 
Recovery of Stranded Costs by Public Utilities and Transmitting 
Utilities, Order No. 888, FERC Stats. & Regs. Regulations Preambles 
January 1991-June 1996 ] 31,036 (1996), Order No. 888-A, FERC Stats. 
& Regs., Regulations Preambles July 1996-December 2000 ] 31,048 
(1997), order on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997), 
order on reh'g, Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in 
relevant part sub nom. Transmission Access Policy Study Group v. 
FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v. 
FERC, 535 U.S. 1 (2002).
    \13\ Standardization of Generator Interconnection Agreements and 
Procedures, Order No. 2003, 68 FR 49,845 (Aug. 19, 2003), FERC 
Stats. & Regs. ] 31,146 (2003), order on reh'g, Order No. 2003-A, 69 
FR 15,932 (Mar. 26, 2004), FERC Stats. & Regs. ] 31,160 (2004), 
order on reh'g, Order No. 2003-B, 70 FR 265 (Jan. 4, 2005), FERC 
Stats. & Regs. ] 31,171 (2004), order on reh'g, Order No. 2003-C, 70 
FR 37,661 (June 30, 2005), FERC Stats. & Regs. ] 31,190 (2005).
    \14\ Standardization of Small Generator Interconnection 
Agreements and Procedures, Order No. 2006, 70 FR 34,100 (Jun. 13, 
2005), FERC Stats. & Regs. ] 31,180 at 31,406-31,551 (2005), order 
on reh'g, Order No. 2006-A, 70 FR 71,760 (Nov. 30, 2005), FERC 
Stats. & Regs. ] 31,196 (2005).
---------------------------------------------------------------------------

    20. We also recognize that small QFs may be in a unique situation 
with respect to nondiscriminatory access because they interconnect with 
the host utility at a distribution level. For instance, Granite State 
has recently filed a petition in Docket No. EL06-26-000 asking the 
Commission to initiate a rulemaking implementing section 210(m) of 
PURPA and as part of that rulemaking, issue rules retaining the 
mandatory purchase obligation for small QFs (those with a nameplate 
capacity of 5 MW or less) and creating a rebuttable presumption in 
favor of retaining the mandatory purchase obligation for small power 
production facilities with a capacity over 5 MW and up to 20 MW. 
Granite State suggests that small hydro QFs do not have 
nondiscriminatory access to RTO/ISO markets. Therefore, we seek comment 
on whether the purchase obligation should be retained for small 
renewable projects and, if so, how to define ``small,'' e.g., 5 MWs or 
below, 20 MWs or below as proposed by Granite State. In addition, we 
seek comment on whether there may be other categories of QFs that lack 
nondiscriminatory access to RTO/ISO short-term or long-term wholesale 
markets for which we should retain the obligation to purchase.
    21. With respect to whether the second prong of section 
210(m)(B)(ii) is met in non-ISO/non-RTO markets, i.e., whether QFs in 
non-ISO/non-RTO markets have access to wholesale markets for long-term 
sales of capacity and electric energy, would that prong be satisfied if 
there is a demonstration that an organized power procurement process 
exists in which QFs can participate (albeit not an auction-based 
process)? We seek comments on ways the prong may be satisfied.
2. Implementation of Section 210(m)(1)
(a) Subparagraph A
    22. As we discussed above, the Commission interprets section 
210(m)(1)(A) to apply in regions in which ISOs and RTOs administer day-
ahead and real-time markets, and bilateral long-term contracts for the 
sale of capacity and electric energy are available to participants/QFs 
in these markets. The Commission proposes to find that the Midwest ISO, 
PJM, ISO-NE, and NYISO satisfy the requirements of section 
210(m)(1)(A).\15\ These entities are Commission approved ISO or RTOs 
that provide non-discriminatory open access transmission services and 
independently administer auction-based wholesale markets for day-ahead 
and real-time energy sales. Additionally, with respect to (A)(ii), the 
existence of bilateral long-term contracts for long-term sales of 
capacity and energy is an indication of a market. It is reasonable to 
conclude that the second prong of subparagraph (A) is met because 
bilateral long-term contracts are available to participants in the 
footprints of the Midwest ISO, PJM, ISO-NE, and NYISO. Therefore, we 
propose to find that electric utilities that are members of the Midwest 
ISO, PJM, ISO-NE, and NYISO would meet the requirements for relief from 
the mandatory purchase obligation. We describe these markets in more 
detail below.
---------------------------------------------------------------------------

    \15\ While Southwest Power Pool, Inc. (SPP) and the California 
Independent System Operator Corporation (Cal ISO), respectively are 
a Commission-approved RTO and ISO, they do not satisfy the 
requirements of section 210(m)(1)(A) because neither has day-ahead 
markets. However, any utility within SPP and Cal ISO may file an 
application with the Commission to seek relief from the mandatory 
purchase obligation under sections 210(m)(1)(B) or (C), on a case-
by-case basis.
---------------------------------------------------------------------------

(1) Midwest ISO
    23. On December 20, 2001, the Commission found that the Midwest ISO 
satisfied the requirements, including independence from market 
participants, of Order No. 2000, and thus granted the Midwest ISO RTO 
status.\16\ Thus, we believe that the Midwest ISO ``independently 
administers'' auction-based real-time markets. With respect to 
subparagraph (1)(A)(i), the Commission approved the Midwest ISO's 
proposed Transmission and Energy Markets Tariff (TEMT), which allowed 
the Midwest ISO to initiate Day 2 operations in its 15-state 
region.\17\ The Midwest ISO's Day 2 operations include, among other 
things, day-ahead and real-time energy markets and a Financial 
Transmission Rights (FTR) market for transmission capacity. The Midwest 
ISO began Day 2 operations on April 1, 2005. Since market participants 
have access to the Midwest ISO's day-ahead and real-time energy markets 
to sell their electric energy, a QF that has ``non-discriminatory 
access'' would have the same opportunity. Also, bilateral contracts 
exist in the Midwest ISO for the long-term sales of capacity and 
energy. Accordingly, we would expect that such long-term sales would be 
available to all participants in the Midwest ISO's footprint. Based on 
the foregoing, we propose to find that the Midwest ISO meets the 
conditions of subparagraph (A).
---------------------------------------------------------------------------

    \16\ See Midwest Independent Transmission System Operator, Inc., 
97 FERC ] 61,326 (2001) order on reh'g, 103 FERC ] 61,169 (2003).
    \17\ See Midwest Independent Transmission System Operator, Inc., 
108 FERC ] 61,163 (Midwest ISO, FERC Electric Tariff, Third Revised 
Volume No. 1, Module C), order on reh'g, 109 FERC ] 61,157 (2004), 
order on reh'g, 111 FERC ] 61,043 (2005).
---------------------------------------------------------------------------

(2) PJM
    24. PJM received Commission approval as an independent regional 
transmission organization on July 12, 2001.\18\ Since independence from 
market participants is one of four characteristics that PJM had shown 
for Commission approval to operate as an RTO, PJM satisfies the 
``independently administered'' condition. Second, since 1997, PJM has 
operated auction-based, day-ahead and real-time wholesale energy 
markets pursuant to its OATT and Operating Agreement.\19\ Because PJM's 
market participants have access to auction-based day ahead and real 
time wholesale energy markets, a QF would have the same opportunity as 
other generators to sell energy in that market. Also, there are 
bilateral contracts in PJM for the long-term sales of capacity and

[[Page 4536]]

energy. Accordingly, we would expect that such long-term sales would be 
available to all participants in PJM's footprint. Therefore, we propose 
to find that PJM meets the conditions of subparagraph (A).
---------------------------------------------------------------------------

    \18\ PJM Interconnection, L.L.C., 96 FERC ] 61,061 (2001). On 
December 20, 2002, in PJM Interconnection, L.L.C., 101 FERC ] 61,345 
(2002), PJM was granted full, rather than provisional, RTO status. 
Independence was one of the matters considered in the 2002 Order.
    \19\ PJM Interconnection, L.L.C., FERC Electric Tariff, Sixth 
Revised Volume No. 1.
---------------------------------------------------------------------------

(3) ISO-NE
    25. ISO-NE received Commission approval as an independent regional 
transmission operator on March 24, 2004, by having satisfied the 
Commission's criterion of independence from market participants.\20\ 
Due to ISO-NE's status as an RTO, we believe that the ISO-NE satisfies 
the ``independently administered'' condition of subparagraph (A)(i). 
With respect to the second condition of subparagraph (A)(i), ISO-NE, 
pursuant to Market Rule 1 of its OATT, commenced operation of its 
auction-based energy markets on March 1, 2003. Since ISO-NE's market 
participants have access to auction-based day ahead and real time 
wholesale energy markets, a QF would have the same opportunity. Also, 
there are bilateral contracts in ISO-NE for the long-term sales of 
capacity and energy. Accordingly, we would expect that such long-term 
sales would be available to all participants in ISO-NE's footprint. 
Therefore we propose to find that ISO-NE meets the conditions of 
subparagraph (A).
---------------------------------------------------------------------------

    \20\ ISO New England, Inc., 106 FERC 61,280 (2004).
---------------------------------------------------------------------------

(4) NYISO
    26. The NYISO received Commission authorization to operate as an 
independent transmission operator on June 30, 1998 after showing that 
it is independent of market participants.\21\ On November 18, 1999, the 
NYISO commenced operation of its auction-based energy markets. Under 
the ISO Market Administration and Control Area Services Tariff, NYISO's 
market participants have access to auction-based day ahead and real 
time wholesale energy markets,\22\ and a QF would have the same 
opportunity as other generators within NYISO to sell energy into 
NYISO's auction-based day ahead and real time wholesale energy markets. 
Also, there are bilateral contracts in NYISO for the long-term sales of 
capacity and energy. Accordingly, we would expect that such long-term 
sales would be available to all participants in NYISO's footprint. 
Therefore we propose to find that NYISO meets the conditions of 
subparagraph (A).
---------------------------------------------------------------------------

    \21\ Central Hudson Gas & Electric Co., 83 FERC ] 61,352 (1998), 
order on reh'g, 87 FERC ] 61,135 (1999).
    \22\ New York Independent System Operator, Inc., FERC Electric 
Tariff Original Volume No. 2.
---------------------------------------------------------------------------

(5) Conclusion
    27. The Commission thus proposes to find in this rulemaking 
proceeding that QFs interconnected with electric utilities that are 
members of Midwest ISO, PJM, ISO-NE, and NYISO have nondiscriminatory 
access to those markets and those markets meet the section 210(m)(1)(A) 
criteria for removing the obligation of those electric utilities to 
enter into new contracts or obligations with the QFs. We seek comments, 
including specific evidence, which either support or refute this 
preliminary finding Finally, as noted previously, we seek comment on 
whether the obligation to purchase should be retained in these markets 
for ``small'' QFs.
    28. Under our proposed regulations, to claim relief from the 
purchase obligation, electric utilities that are members of Midwest 
ISO, PJM, ISO-NE, and NYISO will need to make compliance filings 
pursuant to section 210(m)(3). This compliance filing is discussed in 
more detail in our discussion of section 210(m)(3).
(b) Subparagraphs B and C
    29. The Commission proposes to determine on a case-by-case basis 
\23\ whether a utility has met the requirements of sections 
210(m)(1)(B) and 210(m)(1)(C) for relief from its purchase obligation. 
An electric utility filing an application claiming to meet the 
requirements of section 210(m)(1)(B) or section 210(m)(1)(C) of PURPA 
must demonstrate the ``factual basis upon which relief is requested.'' 
Applicants should provide, among other evidence, actual sales data for 
(1) long-term and short-term capacity and (2) long-term, short-term, 
and real-time electric energy as well as evidence that the utility 
operates in a competitive wholesale market. Accordingly, to be relieved 
of their mandatory purchase obligations, electric utilities that are 
not members of Midwest ISO, PJM, ISO-NE, and NYISO would be required to 
file such applications with the Commission pursuant to section 
210(m)(3) of PURPA.
---------------------------------------------------------------------------

    \23\ We will allow joint applications to be filed by a number of 
utilities in a region if the applications for relief from the 
purchase obligation present common issues of law and fact. We would 
expect common issues of law and fact to exist where one or more 
utilities operate within the same market.
---------------------------------------------------------------------------

    30. We propose that other markets, i.e., both non-auction-based 
markets and non-RTO markets, as well as new auction-based markets, and 
utility-specific markets would be addressed on a case-by-case basis, 
pursuant to section 210(m)(3) discussed below. In addition, subsequent 
changes to market conditions in all markets would be handled on a case-
by-case basis, pursuant to section 210(m)(4) discussed below.
3. Other Issues
    31. Section 210(m)(1) states that no electric utility shall be 
obligated to purchase from a QF if the Commission finds that the QF has 
nondiscriminatory access to the market conditions identified in each 
subparagraph. We propose that there be a rebuttable presumption that a 
utility provides nondiscriminatory access if it has an open access 
transmission tariff in compliance with our pro forma OATT (or a 
Commission-approved reciprocity tariff).\24\ We also propose that QFs 
or any other affected party should be allowed to rebut that 
presumption, for example, by providing specific and credible evidence 
that the QF does not have non-discriminatory access to wholesale 
markets. However, the presumption cannot be rebutted by an argument 
that the utility has not properly implemented or administered its OATT. 
Improper implementation of an OATT is more properly the subject of a 
complaint and the Commission will take appropriate steps in response to 
a complaint to ensure that the OATT is properly implemented.
---------------------------------------------------------------------------

    \24\ In Docket No. RM05-25-000, the Commission is currently 
reviewing the adequacy and sufficiency of the pro forma OATT to 
ensure that it prevents undue discrimination in the provision of 
transmission service.
---------------------------------------------------------------------------

    32. Section 210(m)(1) also states that no electric utility ``shall 
be required to enter into a new contract or obligation'' to purchase 
electric energy from a QF if the Commission makes the required finding. 
The Commission proposes to find that when a contract terminates by its 
own accord, an electric utility is not compelled to enter into a new, 
successor contract with the QF if the Commission has found that the QF 
has nondiscriminatory access to markets that satisfy the criteria of 
section 210(m)(1). Some have alleged that the grant of QF status means 
that electric utilities have an ``obligation'' to purchase from that QF 
in perpetuity. We disagree. That a facility has QF status does not mean 
that an electric utility has an ``obligation'' to purchase from the QF 
in perpetuity, or, conversely, that the QF has the right to demand that 
the utility purchase at avoided-cost rates in perpetuity. The 
Commission proposes to find that if a contract is entered into after 
August 8, 2005, the date of enactment, but before the

[[Page 4537]]

Commission has determined that an electric utility is entitled to 
relief from the obligation to purchase from a QF, the contract already 
entered into will be treated as though it was in effect on August 8, 
2005 for purposes of section 210(m)(1).

B. Purchase and Sale Obligations for New Cogeneration Facilities

    33. Section 210(m)(2)(A) of PURPA reads:

    REVISED PURCHASE AND SALE OBLIGATIONS FOR NEW FACILITIES--(A) 
After the date of enactment of this subsection, no electric utility 
shall be required pursuant to this section to enter into a new 
contract or obligation to purchase from or sell electric energy to a 
facility that is not an existing qualifying cogeneration facility 
unless the facility meets the criteria for qualifying cogeneration 
facilities established by the Commission pursuant to the rulemaking 
required by subsection (n).

    34. This provision reinforces the requirement that new qualifying 
cogeneration facilities must satisfy the section 210(n) criteria for 
new qualifying cogeneration facilities, which the Commission is 
implementing in pending Docket No. RM05-36-000. The Commission proposes 
to make this clarification in section 292.309(d) of its regulations.
    35. Section 210(m)(2)(B) defines the term ``existing qualifying 
cogeneration facility'' to mean a facility that: (i) Was a qualifying 
cogeneration facility on the date of enactment of subsection (m), or 
(ii) had filed with the Commission a notice of self-certification, 
self-recertification or an application for Commission certification 
under 18 CFR 292.207 prior to the date on which the Commission issues 
the final rule required by subsection 210(n). The Commission proposes 
to adopt this definition in new section 292.309(b)(1) of its 
regulations.

C. Application for Relief

    36. Section 210(m)(3) of PURPA states:

    COMMISSION REVIEW--Any electric utility may file an application 
with the Commission for relief from the mandatory purchase 
obligation pursuant to this subsection on a service territory-wide 
basis. Such application shall set forth the factual basis upon which 
relief is requested and describe why the conditions set forth in 
subparagraphs (A), (B) or (C) of paragraph (1) of this subsection 
have been met. After notice, including sufficient notice to 
potentially affected qualifying cogeneration facilities and 
qualifying small power production facilities, and an opportunity for 
comment, the Commission shall make a final determination within 90 
days of such application regarding whether the conditions set forth 
in subparagraphs (A), (B) or (C) of paragraph (1) have been met.
    37. The Commission proposes to include in new section 292.310 the 
language of section 210(m)(3) of PURPA. Since the enactment of EPAct 
2005, two applications for relief from the mandatory purchase 
obligation have been filed with the Commission.\25\ In Alliant, the 
Commission explained that, in order to meet the express statutory 
requirement of ``notice,'' including ``sufficient notice to potentially 
affected qualifying cogeneration facilities and qualifying small power 
production facilities,'' contained in section 210(m)(3) of PURPA, it 
would require that an applicant identify all potentially affected QFs 
in any application for relief filed pursuant to section 210(m)(3).\26\ 
The Commission then described which facilities constitute ``all 
potentially affected QFs.'' \27\
---------------------------------------------------------------------------

    \25\ See Alliant Energy Corporate Services, Inc., 113 FERC ] 
61,024 (2005) (Alliant); Montana-Dakota Utilities Co., 113 FERC ] 
61,045 (2005) (Montana-Dakota). In both instances, the Commission 
dismissed petitions for declaratory orders pursuant to section 
210(m)(3) of PURPA requesting relief from the mandatory purchase 
obligation on the grounds of insufficient notice.
    \26\ Alliant, 113 FERC ] 61,024 at P 18.
    \27\ Id. at P 19-20.
---------------------------------------------------------------------------

    38. Consistent with Alliant and Montana-Dakota, before the 
Commission will consider an application filed pursuant to section 
210(m)(3) of PURPA, an applicant must first identify in the application 
all potentially affected QFs (with their names and current addresses)--
including: (1) Those QFs that have existing power purchase contracts 
with the applicant; (2) other QFs that sell their output to the 
applicant or that have pending requests for the applicant to purchase 
their output; (3) any developer of generating facilities with whom the 
applicant has agreed to enter into power purchase contracts or is 
discussing power purchase contacts; (4) the developers of facilities 
that have pending state avoided cost proceedings; and (5) any other QFs 
that the applicant reasonably believes to be affected by its petition. 
This will ensure that the statutory obligation is met to provide notice 
and an opportunity to comment to all potentially affected QFs. The 
Commission proposes to incorporate this interpretation of ``sufficient 
notice'' and ``all potentially affected QFs'' in new section 292.310(b) 
and (c).
    39. We point out that under section 210(m)(3) the Commission must 
make a finding regarding an application for relief of the purchase 
obligation and that the finding must be made within 90 days of the date 
of such application. The Commission, accordingly, will expect an 
application for relief to be fully supported by documentation upon 
which the required finding can be made, i.e., a case in chief. For 
those not in one of the Commission-certified markets, such 
documentation should include, but is not limited to: (1) Prepared 
testimony; (2) affidavits; (3) exhibits; and (4) any other evidence. 
Given the statutory 90-day time limit for finding, we stress that the 
burden will be on the applicant to provide a fully-supported 
application in the first instance.
    40. With regard to applications filed by electric utilities that 
are members of Midwest ISO, PJM, NYISO, or ISO-NE, an electric utility 
need only submit a compliance filing showing that: (1) It is a member 
of one of these RTOs/ISOs; (2) the Commission has made a final finding 
that the RTO/ISO that it is a member of provides QFs with 
nondiscriminatory access;\28\ (3) a list of all potentially affected 
QFs; and (4) the QFs have the right to request service under an OATT or 
OATTs (or reciprocity tariffs) on file. Once a final rule issues and 
the Commission has acted on rehearing of the final rule, the Commission 
will not reevaluate its decision on specific markets made in the 
instant proceeding, absent changed circumstances. The Commission seeks 
comments on whether there are any QFs within the service territories of 
members of the Midwest ISO, PJM, ISO-NE, and NYISO that, although they 
have access to an OATT or OATTs (or reciprocal tariffs), nonetheless do 
not have nondiscriminatory access to those markets.
---------------------------------------------------------------------------

    \28\ The final rule in this proceeding must have become 
effective before an electric utility may rely upon it. As a result, 
any electric utilities that file early and seek to rely on the 
preliminary findings with respect to Midwest ISO, PJM, NYISO or ISO-
NE in this NOPR will not be permitted to do so.
---------------------------------------------------------------------------

    41. We anticipate that the compliance filings of the electric 
utilities that are members of the Midwest ISO, PJM, NYISO, or ISO-NE 
and seeking relief from the purchase obligation will be essentially 
ministerial; we do not expect the findings made in this rulemaking to 
be re-litigated in the compliance filing proceeding. In this regard, we 
conclude that the existence of a filed OATT ( or reciprocity tariff) 
will be construed to provide nondiscriminatory access. If a QF believes 
that the administration or implementation of the OATT denies it access 
to markets, it is not an issue for the compliance filing proceeding; 
instead the QF may file a complaint challenging the implementation or 
administration of an OATT.

[[Page 4538]]

D. Reinstatement of Obligation To Purchase

    42. Section 210(m)(4) provides:

    REINSTATEMENT OF OBLIGATION TO PURCHASE. At any time after the 
Commission makes a finding under paragraph (3) relieving an electric 
utility of its obligation to purchase electric energy, a qualifying 
cogeneration facility, a qualifying small power production facility, 
a State agency, or any other affected person may apply to the 
Commission for an order reinstating the electric utility's 
obligation to purchase electric energy under this section. Such 
application shall set forth the factual basis upon which the 
application is based and describe why the conditions set forth in 
subparagraphs (A), (B) or (C) of paragraph (1) of this subsection 
are no longer met. After notice, including sufficient notice to 
potentially affected utilities, and opportunity for comment, the 
Commission shall issue an order within 90 days of such application 
reinstating the electric utility's obligation to purchase electric 
energy under this section if the Commission finds that the 
conditions set forth in subparagraphs (A), (B) or (C) of paragraph 
(1) which relieved the obligation to purchase, are no longer met.

    43. The Commission views this section as an opportunity for a QF, a 
state agency, or any affected person to seek to reinstate the purchase 
obligation should there be a material change in the circumstances under 
which the Commission granted relief. We note that the applicant bears 
the burden to ``set forth the factual basis'' upon which the 
application is based. The requirement for a ``factual basis'' indicates 
that allegations of a change in the conditions upon which relief was 
granted must be supported with evidence. The Commission proposes to 
consider these applications on a case-by-case basis.
    44. Consistent with our interpretation of ``notice'' under section 
210(m)(3), the Commission will require an applicant to identify all 
potentially affected utilities in the application so that the 
Commission will be able to meet its statutory requirement to provide 
sufficient notice and an opportunity for comment.

E. Obligation To Sell

    45. Section 292.303(b) of the Commission's regulations, 18 CFR 
292.303(b), states that: ``Each electric utility shall sell to any 
qualifying facility, in accordance with Sec.  292.305, any energy and 
capacity requested by the qualifying facility.'' Under new section 
210(m)(5), this mandatory obligation to sell can be terminated if the 
Commission finds that: ``Competing retail electric suppliers are 
willing and able to sell and deliver electric energy to the qualifying 
cogeneration facility or qualifying small power production facility; 
and the electric utility is not required by State law to sell electric 
energy in its service territory.''
    46. The Commission proposes to incorporate the language of section 
210(m)(5) of PURPA in new section 292.312 of the Commission's 
regulations. The Commission proposes to interpret the phrase ``new 
contract or obligation'' contained in section 210(m)(3) consistently 
with its interpretation of the same words contained in section 
210(m)(1) of PURPA.\29\
---------------------------------------------------------------------------

    \29\ See P 29 supra.
---------------------------------------------------------------------------

    47. The Commission is also proposing to include a provision, 
section 292.313, allowing a QF, State agency, or any other affected 
person to apply to the Commission for an order reinstating the electric 
utility's obligation to sell electric energy if the factual predicate 
for the determination that the obligation to purchase should be 
terminated no longer exists.

F. Section 210(m)(6)

    48. Section 210(m)(6) of PURPA requires that:

    Nothing in this subsection affects the rights or remedies of any 
party under any contract or obligation, in effect or pending 
approval before the appropriate State regulatory authority or non-
regulated electric utility on the date of enactment of this 
subsection, to purchase electric energy or capacity from or to sell 
electric energy or capacity to a qualifying cogeneration facility or 
qualifying small power production facility under this Act (including 
the right to recover costs of purchasing electric energy or 
capacity).

    49. We propose to implement section 210(m)(6) of PURPA by adopting 
the language of the statute in section 292.314. In addition, the 
Commission will clarify that the stage of the construction of a 
facility has no bearing on whether the protections of section 210(m)(6) 
are triggered. The Commission interprets section 210(m)(6) to protect 
the rights and remedies under a contract or obligation in effect or 
pending approval before the state regulatory authority, regardless of 
the construction stage of the facility that may be the subject of the 
contract or obligation. We solicit comments on whether further or 
different language and/or clarifications other than those proposed here 
should be incorporated into our regulations.

G. Section 210(m)(7)

    50. Section 210(m)(7) of PURPA requires that:

    (A) The Commission shall issue and enforce such regulations as 
are necessary to ensure that an electric utility that purchases 
electric energy or capacity from a qualifying cogeneration facility 
or qualifying small power production facility in accordance with any 
legally enforceable obligation entered into or imposed under this 
section recovers all prudently incurred costs associated with the 
purchase. (B) A regulation under subparagraph (A) shall be 
enforceable in accordance with the provisions of law applicable to 
enforcement of regulations under the Federal Power Act (16 U.S.C. 
791a et seq.).

    51. The Commission does not believe that regulations are necessary 
at this time; this is a matter that the Commission can address on a 
case-by-case basis. However, the Commission will consider a regulation 
under this section in the future if a need becomes apparent.
    52. We solicit comments on whether there is a need for the 
Commission to consider a regulation, and if so what that regulation 
should state, to ensure that an electric utility that purchases 
electric energy or capacity from a cogeneration QF or qualifying small 
power production facility in accordance with any legally enforceable 
obligation entered into or imposed under section 210(m)(7) recovers all 
prudently incurred costs associated with the purchase.

IV. Information Collection Statement

    53. The Commission is submitting the following collection of 
information contained in this proposed rulemaking to the Office of 
Management and Budget (OMB) for review under section 3507(d) of the 
Paperwork Reduction Act of 1995.\30\ The Commission identifies the 
information provided for under part 292 as FERC-556. These collections 
of information are specifically mandated by statute.
---------------------------------------------------------------------------

    \30\ 44 U.S.C. 3507(d) (2000).
---------------------------------------------------------------------------

    54. The Commission solicits comments on the Commission's need for 
this information, whether the information will have practical utility, 
the accuracy of the provided burden estimates, ways to enhance the 
quality and clarity of the information that the Commission will 
collect, and any suggested methods for minimizing the respondent's 
burden, including the use of information techniques. The burden 
estimates for complying with this proposed rule are as follows:

[[Page 4539]]



----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Hour per      Total annual
            Data collection FERC-556                respondents      responses       response          hours
----------------------------------------------------------------------------------------------------------------
Sec.   292.310..................................             230               1               2             460
Sec.   292.312..................................             230               1               2             460
Sec.   292.413..................................             630               1               3           1,890
                                                 -----------------
    Totals......................................             860               1  ..............           2,810
----------------------------------------------------------------------------------------------------------------

    Total Annual Hours for the Collection: (reporting + recordkeeping 
if appropriate)
    Information Collection Costs: Because of the regional differences 
and the various staffing levels that will be involved in preparing the 
documentation (legal, technical and support) the Commission is using an 
hourly rate of $150 to estimate the costs for filing and other 
administrative processes (reviewing instructions, searching data 
sources, completing and transmitting the collection of information). 
The estimated cost is anticipated to be $421,500.
    Title: FERC-556 Small Power Production and Cogeneration Facilities.
    Action: Proposed Data Collections.
    OMB Control Nos.: 1902-0075.
    Upon approval of a collection of information, OMB will assign an 
OMB control number and an expiration date. Respondents subject to the 
filing requirements of this rule will not be penalized for failing to 
respond to these collections of information unless the collections of 
information display a valid OMB control number or the Commission has 
provided justification as to why the control number should not be 
displayed.
    Respondents: Businesses or other for profit, state, local or tribal 
government.
    Necessity of the Information: The Commission proposes amending its 
regulations to implement section 210(m) of PURPA which was enacted in 
section 1253 of the EPAct 2005; specifically, its regulations governing 
purchases of electric energy from and sales of electric energy to 
qualifying small power production and cogeneration facilities
    These requirements conform to the Commission's plan for efficient 
information collection, communication, and management within the energy 
industry. The Commission has assured itself, by means of internal 
review, that there is specific, objective support for the burden 
estimates associated with the information requirements.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426 [Attention: 
Michael Miller, Office of the Executive Director, Phone: (202) 502-
8415, fax: (202) 273-0873, e-mail: michael.miller@ferc.gov].
    55. For submitting comments concerning the collection(s) of 
information and the associated burden estimate(s), please send your 
comments to the contact listed above and to the Office of Management 
and Budget, Office of Information and Regulatory Affairs, Washington, 
DC 20503, [Attention: Desk Officer for the Federal Energy Regulatory 
Commission, phone: (202) 395-4650, fax: (202) 395-7285, e-mail: oira_
submission@omb.eop.gov.

V. Environmental Analysis

    56. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment. The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. As explained above, this proposed rule is clarifying in 
nature. It interprets several amendments made to PURPA by EPAct 2005, 
and clarifies the applicability of these amendments to electric 
utilities and QFs; it does not substantially change the effect of the 
legislation. Accordingly, no environmental consideration is necessary.

VI. Regulatory Flexibility Act Analysis

    57. The Regulatory Flexibility Act of 1980 (RFA) \31\ generally 
requires a description and analysis of rules that will have significant 
economic impact on a substantial number of small entities and where 
notice and comment rulemaking is required. Certain rules are exempt 
from notice and comment from the RFA requirements; exempt rules include 
interpretative rules, general statements of policy, or rules of agency 
organization procedure or practice.\32\ Interpretative rules 
``generally interpret the intent expressed by Congress, where an agency 
does not insert its own judgments or interpretations in implementing a 
rule and simply regurgitates statutory language.'' \33\ The rule we are 
proposing in this docket is an interpretative rule. Accordingly, no 
regulatory flexibility analysis is required.
---------------------------------------------------------------------------

    \31\ 5 U.S.C. 601-12.
    \32\ 5 U.S.C. 553(b)(A).
    \33\ ``How to Comply with the Regulatory Flexibility Act: A 
Guide for Government Agencies'', Small Business Administration, 
Office of Advocacy, P.5, May 2003.
---------------------------------------------------------------------------

VII. Comment Procedures

    58. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice to be adopted, including 
any related matters or alternative proposals that commenters may wish 
to discuss. Comments are due February 27, 2006. Reply comments are due 
March 28, 2006. Comments and reply comments must refer to Docket No. 
RM06-10-000, and must include the commenters' names, the organizations 
they represent, if applicable, and their address in their comments. 
Comments and reply comments may be filed either in electronic or paper 
format.
    59. Comments and reply comments may be filed electronically via the 
eFiling link on the Commission's Web site at https://www.ferc.gov. The 
Commission accepts most standard word processing formats and commenters 
may attach additional files with supporting information in certain 
other file formats. Commenters filing electronically do not need to 
make paper filings. Commenters that are not able to file comments and 
reply 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.
    60. All comments and reply comments will be placed in the 
Commission's public files and may be viewed, printed, or downloaded 
remotely as described in the Document Availability section below. 
Commenters on this proposal are not required to serve copies of their 
comments and reply comments on other commenters.

VIII. Document Availability

    61. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all

[[Page 4540]]

interested persons an opportunity to view and/or print the contents of 
this document via the Internet through the Commission's Home Page 
(https://www.ferc.gov) and in the Commission's Public Reference Room 
during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 
First Street, NE., Room 2A, Washington, DC 20426.
    62. From the Commission's Home Page on the Internet, this 
information is available in the Commission's document management 
system, eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    63. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours. For assistance, please contact 
FERC Online Support at 1-866-208-3676 (toll free) or (202) 502-8222 (e-
mail at FERCOnlineSupport@FERC.gov), or the Public Reference Room at 
(202) 502-8371, TTY (202) 502-8659 (e-mail at 
public.referenceroom@ferc.gov).

List of Subjects in 18 CFR Part 292

    Electricity, Electric power plants, Electric utilities, Natural 
gas, Reporting and recordkeeping requirements.

    By direction of the Commission.
Magalie R. Salas,
Secretary.

    In consideration of the foregoing, the Commission proposes to amend 
part 292, Chapter I, Title 18, Code of Federal Regulations, as follows:

PART 292--REGULATIONS UNDER SECTIONS 201 AND 210 OF THE PUBLIC 
UTILITY REGULATORY POLICIES ACT OF 1978 WITH REGARD TO SMALL POWER 
PRODUCTION AND COGENERATION

    1. The authority citation for part 292 continues to read as 
follows:

    Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352.

    2. Section 292.303 is amended by revising paragraphs (a) and (b) to 
read as follows:


Sec.  292.303  Electric utility obligations under this subpart.

    (a) Obligation to purchase from qualifying facilities. Each 
electric utility shall purchase, in accordance with Sec.  292.304, 
unless exempted by Sec.  292.309, any energy and capacity which is 
generated from a qualifying facility
    (1) Directly to the electric utility; or
    (2) Indirectly to the electric utility in accordance with paragraph 
(d) of this section.
    (b) Obligation to sell to qualifying facilities. Each electric 
utility shall sell to any qualifying facility, in accordance with Sec.  
292.305, unless exempted by Sec.  292.312 of this chapter, energy and 
capacity requested by the qualifying facility.
* * * * *
    3. Sections 292.309 through 292.314 are added to read as follows:


Sec.  292.309  Termination of obligation to purchase from qualifying 
facilities.

    (a) An electric utility shall no longer be required to enter into a 
new contract or obligation to purchase electric energy from a 
qualifying cogeneration facility or a qualifying small power production 
facility if the Commission finds that the qualifying cogeneration 
facility or qualifying small power production facility has 
nondiscriminatory access to:
    (1)(i) Independently administered, auction-based day ahead and real 
time wholesale markets for the sale of electric energy; and
    (ii) Wholesale markets for long-term sales of capacity and electric 
energy; or
    (2)(i) Transmission and interconnection services that are provided 
by a Commission-approved regional transmission entity and administered 
pursuant to an open access transmission tariff that affords 
nondiscriminatory treatment to all customers; and
    (ii) Competitive wholesale markets that provide a meaningful 
opportunity to sell capacity, including long-term and short-term sales, 
and electric energy, including long-term, short-term and real-time 
sales, to buyers other than the utility to which the qualifying 
facility is interconnected; in determining whether a meaningful 
opportunity to sell exists within the