Transactions Subject to FPA Section 203, 42579-42587 [E6-12047]

Download as PDF Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations [FR Doc. 06–6509 Filed 7–26–06; 8:45 am] Table of Contents BILLING CODE 4910–13–M DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Parts 2 and 33 [Docket No. RM05–34–002; Order No. 669– B] Transactions Subject to FPA Section 203 Issued July 20, 2006. Federal Energy Regulatory Commission. AGENCY: Final Rule; Order on Rehearing of Order No. 669–A. ACTION: SUMMARY: The Federal Energy Regulatory Commission (Commission) affirms, with certain clarifications, its determinations in Order Nos. 669 and 669–A. Order Nos. 669 and 669–A revised 18 CFR 2.26 and 18 CFR part 33 to implement amended section 203 of the Federal Power Act. This order on rehearing will be effective on August 28, 2006. DATES: jlentini on PROD1PC65 with RULES FOR FURTHER INFORMATION CONTACT: Roshini Thayaparan (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502–6857. Phillip Nicholson (Technical Information), Office of Energy, Markets, and Reliability—West, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502– 8240. Andrew P. Mosier, Jr. (Technical Information), Office of Energy, Markets, and Reliability—West, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502– 6274. 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 Energy, Markets, and Reliability—West, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502–8101. SUPPLEMENTARY INFORMATION: VerDate Aug<31>2005 17:08 Jul 26, 2006 Jkt 208001 I. Introduction ............................ II. Discussion ............................. A. 18 CFR Section 33.1(b)(4)—Definition of ‘‘Electric Utility Company’’ and 18 CFR Section 33.1(c)(1)(i) and (ii)—Blanket Authorizations for Intrastate Commerce and Local Distribution ............... B. 18 CFR Section 33.1(c)(7)—Blanket Authorization for Cash Management Programs .................... C. Section 33.1(c)(2)—Blanket Authorizations for Purchases of Securities ............ D. 18 CFR Section 33.1(c)(8)—Blanket Authorization for a Holding Company Owning Only EWGs, QFs or FUCOs To Acquire Additional EWGs, QFs or FUCOs ................................. E. Section 33.2(j)—General Information Requirements Regarding Cross-Subsidization ...................................... III. Information Collection Statement ................................ IV. Document Availability ........ V. Effective Date ........................ on its proposal to amend its regulations to implement amended section 203.6 On Paragraph December 23, 2005, the Commission No. issued a final rule (Order No. 669) 2 adopting certain modifications to 18 10 CFR 2.26 and 18 CFR part 33 to implement amended section 203.7 Generally, Order No. 669: 11 18 24 30 45 52 55 58 Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, and Suedeen G. Kelly; Order on Rehearing and Clarification 1. In this order we affirm, with certain clarifications, the determinations made in Order Nos. 669 1 and 669–A.2 I. Introduction 2. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) 3 was signed into law. Section 1289 (Merger Review Reform) of Title XII, Subtitle G (Market Transparency, Enforcement, and Consumer Protection),4 of EPAct 2005 amends section 203 of the Federal Power Act (FPA).5 3. On October 3, 2005, the Commission issued a notice of proposed rulemaking (NOPR) requesting comment 1 Transactions Subject to FPA Section 203, Order No. 669, 71 FR 1348 (January 6, 2006), FERC Stats. & Regs. ¶ 31,200 (2005). On January 10, 2006, the Commission issued an errata notice to Order No. 669 revising parts of the regulatory text to conform to the version of the order that was issued in the Federal Register. Transactions Subject to FPA Section 203, Docket No. RM05–34–000 (January 10, 2006) (unpublished errata notice). 2 Transactions Subject to FPA Section 203, Order No. 669–A, Order on Rehearing, 71 FR 28422 (May 16, 2006), FERC Stats. & Regs. ¶ 31,214 (2006). 3 Energy Policy Act of 2005, Public Law No. 109– 58, 119 Stat. 594 (2005). 4 EPAct 2005 at 1281 et seq. 5 16 U.S.C. 824b (2000). PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 42579 (1) Established regulations implementing amended section 203; (2) Granted blanket authorizations, in some instances with conditions, for certain types of transactions, including acquisitions of foreign utilities by holding companies, intraholding company system financing and cash management arrangements, certain internal corporate reorganizations, and certain acquisitions of securities of transmitting utilities and electric utility companies; (3) Defined terms, including ‘‘electric utility company,’’ ‘‘holding company,’’ and ‘‘non-utility associate company;’’ (4) Defined ‘‘existing generation facility;’’ (5) Adopted rules on the determination of ‘‘value’’ as it applies to various section 203 transactions; (6) Set forth a section 203 applicant’s obligation to demonstrate that a proposed transaction will not result in crosssubsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company; and (7) Provided for expeditious consideration of completed applications for the approval of transactions that are not contested, do not involve mergers, and are consistent with Commission precedent. 4. In Order No. 669, the Commission also announced that, at a technical conference on the Public Utility Holding Company Act of 2005 (PUHCA 2005),8 to be held within the next year,9 we would reevaluate certain issues raised in this proceeding. These issues include whether the blanket authorizations granted in Order No. 669 should be revised, and whether additional protection against cross-subsidization and pledges or encumbrances of utility 6 Transactions Subject to FPA Section 203, 70 FR 58636 (October 7, 2005), FERC Stats. & Regs. ¶ 32,589 (2005). 7 A full background to Order Nos. 669 and 669– A is set forth in detail in those orders and will not be repeated in full here. 8 EPAct 2005 at 1261 et seq. Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order No. 667, 70 FR 75592 (Dec. 20, 2005), FERC Stats. & Regs. ¶ 31,197 (2005) (PUHCA 2005 Final Rule), order on reh’g, Order No. 667–A, 71 FR 28446 (May 16, 2006), FERC Stats. & Regs. ¶ 31,213 (2006) (PUHCA 2005 Order on Rehearing), reh’g pending. 9 PUHCA 2005 Final Rule at P 17. The Commission stated that we intend to hold a technical conference no later than one year after PUHCA 2005 became effective to evaluate whether additional exemptions, different reporting requirements, or other regulatory actions need to be considered. The PUHCA 2005 Final Rule took effect on February 8, 2006. E:\FR\FM\27JYR1.SGM 27JYR1 42580 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations assets is needed.10 Order No. 669 became effective on February 8, 2006. 5. On April 24, 2006, the Commission issued an order on rehearing (Order No. 669–A), reaffirming in part and granting rehearing in part of Order No. 669. Order No. 669–A addressed certain inconsistencies between Order No. 669 and the PUHCA 2005 Final Rule, expanded the focus on protection of captive customers, revised certain blanket authorizations, and provided new blanket authorizations. Among its holdings, the Commission: jlentini on PROD1PC65 with RULES (1) affirmed its determination that persons that own only Exempt Wholesale Generators (EWGs), Qualifying Facilities (QFs), or Foreign Utility Companies (FUCOs) are holding companies subject to section 203(a)(2); (2) found that while EWGs, QFs and FUCOs are ‘‘electric utility companies’’ for purposes of PUHCA and for purposes of section 203, persons that are holding companies solely by virtue of owning EWGs, QFs or FUCOs should be granted a new blanket authorization to acquire additional EWGs, QFs and FUCOs without Commission pre-approval under section 203(a)(2); (3) modified the regulatory text to clarify that public utilities have blanket authorization under section 203(a)(1) to acquire securities of other public utilities in the context of intra-system cash management transactions, subject to protections against cross-subsidization and encumbrances of utility assets; (4) modified the regulatory text to provide, similar to the previously granted blanket authorization under section 203(a)(2) for certain holding company transactions involving internal corporate reorganizations, a blanket authorization under section 203(a)(1) for internal corporate reorganizations within the holding company, as long as the restructuring does not result in the reorganization of a traditional public utility that has captive customers or that owns or provides transmission service over Commission-jurisdictional transmission facilities; (5) granted additional blanket authorizations to certain holding companies and their subsidiaries regulated by the Bank Holding Company Act of 1956 11 to acquire securities in the normal course of business, as a fiduciary, for derivatives hedging purposes incidental to the business of banking, as collateral for a loan or other limited purposes, but subject to certain restrictions and reporting requirements; and (6) established a blanket authorization for certain acquisitions of utility securities for purposes of underwriting and hedging transactions, but subject to conditions and reporting requirements. 6. The Commission on rehearing also added several important customer protection changes, including clarifying that ‘‘captive customers’’ include wholesale and retail electric energy customers served under cost-based regulation with respect to exemptions, and providing that certain blanket authorizations do not apply if a public utility owns or provides transmission service over Commission-jurisdictional transmission facilities. Regarding blanket authorization for holding companies to acquire securities of intrastate-only, local distribution-only and/or retail-only utilities, if there is any public utility within the holding company with captive customers or that owns or provides transmission service over jurisdictional facilities, Order No. 669–A also included a new condition that such company report the acquisition to the Commission, including any state actions or conditions related to the transaction, and provide an explanation of why the transaction does not result in crosssubsidization. 7. With respect to all section 203 transactions that do not receive a blanket authorization, the Commission on rehearing added to the regulatory text a specific requirement that an applicant disclose existing pledges and/ or encumbrances of utility assets and provide four specific detailed showings that the proposed transaction will not result in cross-subsidization or pledges or encumbrances of utility assets or, if assurances cannot be provided that cross-subsidization, pledges or encumbrances will not occur, an explanation of how such crosssubsidization, pledge or encumbrance will be consistent with the public interest. 8. The Commission also reiterated that it will hold a technical conference this year to reevaluate numerous issues raised in both this proceeding and the PUHCA 2005 rulemaking proceeding. In Order No. 669–A, the Commission committed to consider additional issues raised in this proceeding, including whether the Commission should codify specific safeguards that must be adopted for money pool transactions, and whether our current merger policy should be revised.12 9. Order No. 669–A became effective on June 15, 2006. The aspects of Order No. 669–A for which requests for rehearing and clarification were filed are described in more detail below.13 II. Discussion 10. The requests for rehearing and/or clarification collectively address five 12 Order No. 669–A at P 91, 162. entities that filed requests for rehearing and/or clarification are listed in an appendix to this order. 13 The 10 Order 11 12 No. 669 at P 4. U.S.C. 1843 (2000). VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 categories of issues discussed in Order No. 669–A. As discussed below, we deny rehearing, and grant in part and deny in part requests for clarification on each of these issues. A. 18 CFR Section 33.1(b)(4)—Definition of ‘‘Electric Utility Company’’ and 18 CFR Section 33.1(c)(1)(i) and (ii)— Blanket Authorizations for Intrastate Commerce and Local Distribution 11. Section 203(a)(2) provides: 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 $10,000,000 of, or, by any means whatsoever, directly or indirectly, merge or consolidate 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 $10,000,000 without first having secured an order of the Commission authorizing it to do so. 12. The definition of the term ‘‘electric utility company’’ is important because it affects whether an entity is a holding company subject to section 203(a)(2). In Order Nos. 669 and 669–A, the Commission concluded that the most reasonable interpretation of the term, as used in amended section 203(a)(2), is the definition in PUHCA 2005—‘‘any company that owns or operates facilities used for the generation, transmission, or distribution of electric energy for sale.’’ 14 The definition thus is broader than the definition of ‘‘public utility’’ under the FPA; it is not limited to entities that engage in wholesale or interstate transactions. 13. However, while Order Nos. 669 and 669–A found that it was not reasonable to interpret section 203(a)(2) as being limited solely to holding company acquisitions and mergers involving utilities making wholesale sales or providing transmission in interstate commerce, the Commission concluded that there would be no benefit from the Commission’s case-bycase evaluation of certain transactions under section 203(a)(2).15 The Commission explained that our core jurisdiction under Part II of the FPA continues to be transmission and sales for resale of electric energy in interstate commerce. Accordingly, we concluded that it is consistent with the public interest to grant blanket authorizations 14 EPAct 2005 at 1262(5). acquisition or merger involving ‘‘any company that owns or operates facilities used for the generation, transmission, or distribution of electric energy for sale’’ is not on its face limited to interstate facilities. Order No. 669 at P 55 n.51; Order No. 669–A at P 56 n.56. 15 An E:\FR\FM\27JYR1.SGM 27JYR1 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations for the following: (1) Section 203(a)(2) purchases or acquisitions by holding companies of companies that own, operate, or control only facilities used solely for transmission or sales of electric energy in intrastate commerce; and (2) section 203(a)(2) purchases or acquisitions by holding companies of only facilities used solely for local distribution and/or sales at retail regulated by a state commission.16 14. In Order No. 669–A, the Commission clarified that it was not asserting jurisdiction over intrastate facilities, local distribution facilities, or retail-only companies under the blanket authorizations. Rather, it was asserting jurisdiction over holding company acquisitions of such companies or facilities for the purpose of ensuring that interstate interests are not adversely affected. The Commission also stated that it would eliminate these blanket authorizations if necessary to protect customers.17 jlentini on PROD1PC65 with RULES 1. Requests for Rehearing and Clarification 15. NARUC reiterates the arguments raised in its initial comments and request for rehearing of Order No. 669, asserting that Congress did not intend for the term ‘‘electric utility company,’’ as used in PUHCA 2005, to be incorporated into the Commission’s regulations implementing FPA section 203. First, NARUC argues that this interpretation violates the fundamental rule of statutory construction, expressio unius est exlusio alterius (express mention of one thing implies the exclusion of another). NARUC argues that the absence of an explicit expansion of the Commission’s jurisdiction over entities in the PUHCA 2005 definition of ‘‘electric utility company’’ ‘‘fatally undermines’’ the Commission’s justification of the result reached on rehearing.18 Second, NARUC argues that adoption of the term ‘‘electric utility company’’ improperly extends the Commission’s authority under amended section 203 to include facilities used for the transmission or sales of electric energy in intrastate commerce, facilities used for local distribution, and facilities used for making retail sales. NARUC states that such facilities fall under the exclusive jurisdiction of state commissions.19 Moreover, NARUC asserts that, based on the Commission’s overreach in jurisdiction over such entities, the 16 Order No. 669 at P 56; Order No. 669–A at P 62–63. 17 Order No. 669–A at P 63. 18 NARUC Rehearing Request at 4–5. 19 Id. at 5–6. VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 Commission erred in granting a blanket authorization for holding company acquisitions of facilities used solely in intrastate commerce or used solely for local distribution and/or sales at retail regulated by a state commission. NARUC argues that the Commission’s justifications for these blanket exemptions are valid, but the Commission’s stated rationale provides further evidence that the Commission lacks jurisdiction over such entities.20 2. Commission Determination 16. NARUC’s request for rehearing is denied. NARUC’s request for rehearing reiterates arguments made in its rehearing request of Order No. 669. The Commission addressed those arguments fully in Order No. 669–A.21 17. NARUC also argues that the Commission erred in Order No. 669–A in granting blanket authorizations of holding company acquisitions of facilities that NARUC asserts are outside the Commission’s statutory authority. NARUC notes that the Commission gave three reasons for granting these blanket authorizations and argues that these reasons actually highlight why the Commission does not have jurisdiction over these matters. As the basis for this error, NARUC repeats the same argument made on rehearing of Order No. 669. The Commission responded fully to that argument as well in Order No. 669–A.22 B. 18 CFR Section 33.1(c)(7)—Blanket Authorization for Cash Management Programs 18. In Order No. 669, the Commission stated that cash management programs, money pools, and other intra-holding company financing arrangements 23 are a routine and important tool used by many large companies to lower the cost of capital for their regulated subsidiaries and to improve the rate of return the holding company and its subsidiaries can receive on their money.24 The Commission found that it was consistent with the public interest to grant blanket authorization under section 203(a)(2) for holding companies and their subsidiaries to take part in intra-system cash management programs.25 at 6–7. Order No. 669–A at P 41–54. 22 See id. P 62–63. 23 Order No. 669 at P 142; see also Order No. 669– A at P 84 (citing Regulation of Cash Management Practices, Order No. 634, 68 FR 40500 (July 8, 2003), FERC Stats. & Regs. ¶ 31,145 (2003) (Cash Management Rule), Order No. 634–A, 68 FR 61993 (October 31, 2003), FERC Stats. & Regs. ¶ 31,152 (2003) (Cash Management Rule II)). 24 Order No. 669 at P 142. 25 Id. PO 00000 20 Id. 21 See Frm 00015 Fmt 4700 Sfmt 4700 42581 19. In Order No. 669–A, the Commission granted clarifications regarding this blanket authorization. The Commission clarified that the blanket authorization granted for money pool transactions is intended to authorize ‘‘horizontal’’ transactions between public utility company subsidiaries as well as ‘‘downward’’ loans from the holding company to its public utility company subsidiaries. However, the blanket authorization does not cover acquisitions of securities issued by entities outside the established intra-system cash management program 26 or money pool.27 1. Requests for Rehearing and Clarification 20. In the time between the issuance of Order No. 669 and the issuance of Order No. 669–A, several entities sought explicit Commission approvals for certain of their subsidiary-to-subsidiary transactions, transactions in their money pools and other such cash management programs. EEI notes that, in several of these cases, the Commission granted such approval, subject to limits and reporting requirements imposed under the authorizations previously issued by the Securities and Exchange Commission (SEC).28 The limits and reporting requirements put in place by the SEC differ from those in Order No. 669–A. EEI seeks clarification that the companies with Intervening Orders do not have to comply with the restrictions of their former SEC financing orders, as of the effective date of Order No. 669– A.29 21. Second, EEI notes that the preamble to Order No. 669–A describes the blanket authorization as covering transactions only within a ‘‘money pool,’’ 30 while the regulatory text uses the broader term, ‘‘intra-system cash management program.’’ 31 EEI argues that the Commission should not distinguish between formal money pools and other, less formal intra-system lending arrangements. It asks the Commission to clarify that subsidiary26 18 CFR 33.1(c)(7). No. 669–A at P 89. 28 EEI Rehearing Request at 5–6 (citing Exelon Corporation, 114 FERC ¶ 61,116 (2006) (Exelon)). EEI identifies only one of the orders in a group that it calls the ‘‘Intervening Orders’’—Exelon. Two similar orders, issued the same day, are Entergy Services, Inc., 114 FERC ¶ 61,120 (2006) (Entergy) and National Grid plc and National Grid USA, 114 FERC ¶ 61,115 (2006) (National Grid). The group of three will be referred to as the ‘‘Intervening Orders.’’ 29 EEI Rehearing Request at 4–8. 30 Id. at 6 (citing Order No. 669–A at P 89). 31 Id. (citing 18 CFR 33.1(c)(7)). 27 Order E:\FR\FM\27JYR1.SGM 27JYR1 42582 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations to-subsidiary loans are authorized as part of cash management programs even if such loans are not under formal money pool arrangements.32 jlentini on PROD1PC65 with RULES 2. Commission Determination 22. We will grant in part EEI’s request for clarification on the first issue. To the extent companies with Intervening Orders engage in activities within Order No. 669–A’s blanket authorizations, those activities are not subject to the SEC limits and reporting requirements incorporated by the Intervening Orders. However, activities exceeding Order No. 669–A’s blanket authorizations remain subject to the SEC limits and reporting requirements incorporated by the Intervening Orders.33 Activities authorized by the Intervening Orders were conditioned on compliance with the prior SEC limits and reporting requirements. Thus, we will waive those conditions only for activities subsequently authorized generally in Order No. 669–A. Those activities will be subject to the restrictions and requirements of Order No. 669–A, instead of the Intervening Orders. 23. EEI’s second request for clarification, regarding whether subsidiary-to-subsidiary loans are authorized as part of cash management programs even if such loans are not under formal money pool arrangements, is granted. Order No. 669–A’s preamble inadvertently suggested a narrower authorization than its regulatory text. However, the blanket authorization granted under Order No. 669–A for a public utility subsidiary within a holding company system to acquire the security of another public utility within the system (horizontal transactions) specifically depends on the transaction occurring within the system’s cash management program, subject to safeguards to prevent crosssubsidization or pledges or encumbrances of utility assets.34 Further, we note that the Commission’s Cash Management Rule prescribes certain documentation requirements for entities participating in cash management programs. For example, Cash Management Rule II requires that cash management agreements be filed with the Commission on a public basis.35 Neither rule prohibits participation by a holding company in a cash management program in which the holding company’s Commissionregulated public utility subsidiary also at 8–9. Exelon, 114 FERC ¶ 61,116 at P 9; Entergy, 114 FERC ¶ 61,120 at P 10; National Grid, 114 FERC ¶ 61,115 at P 10. 34 18 CFR 33.1(c)(7). 35 Cash Management Rule II at P 43. participates, nor do they dictate the content of or terms for participating in a cash management program.36 Both rules, however, were issued under a broad array of statutory authority reaching many Commission-regulated entities, including public utilities under sections 203 and 204 of the FPA, in order to provide greater transparency of cash management activities.37 With this background, we clarify that the blanket authorization in Order No. 669–A applies to activities that are part of cash management programs, even if they are not part of a formal money pool. Finally, we will reevaluate whether any changes need to be made to our Cash Management Rule in the technical conference to be held later this year. C. Section 33.1(c)(2)—Blanket Authorizations for Purchases of Securities 24. In Order Nos. 669 and 669–A, the Commission provided a blanket authorization under section 203(a)(2) for holding companies to purchase, acquire, or take: (i) Any non-voting security (that does not convey sufficient veto rights over management actions so as to convey control) in 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; (ii) any voting security in 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 if, after the acquisition, the holding company will own less than 10 percent of the outstanding voting securities; or (iii) any security of a subsidiary company within the holding company system.38 25. On rehearing, the Commission declined to extend to public utilities under section 203(a)(1) the blanket authorizations for dispositions of utility securities of less than 10 percent that we granted to public utility holding companies under section 203(a)(2). The Commission decided that it would continue to review dispositions of jurisdictional facilities by public utilities under FPA section 203(a)(1) on a case-by-case basis, finding that ‘‘[c]oncerns with control, markets and protection of captive customers or customers receiving transmission service over jurisdictional transmission facilities are closely linked with assets 32 Id. 33 See VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 36 Cash Management Rule at P 45; Cash Management Rule II at P 31, 36. 37 Cash Management Rule II at P 19. 38 18 CFR 33.1(c)(2). See also Order No. 669 at P 144–45; Order No. 669–A at P 97, 101–03. PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 directly controlled by the public utilities.’’ 39 1. Requests for Rehearing and Clarification 26. EEI reiterates arguments, previously denied on rehearing, that the Commission should grant a blanket authorization under section 203(a)(1) for a public utility to dispose of up to 9.99 percent of its voting securities. Such authority, it argues, would parallel the blanket authorization granted in Order No. 669–A for holding companies to acquire up to 9.99 percent of voting securities of a transmitting utility or electric utility company and therefore, would be appropriate. EEI does not formally seek rehearing on this issue and, indeed, a second rehearing on the issue does not lie. However, in light of EEI’s concerns that lack of a section 203(a)(1) parallel blanket authorization could thwart investment, we will include this issue in the technical conference to be held within one year of the effective date of amended section 203 and PUHCA 2005. EEI also seeks clarification on transactions that involve securities with a value below $10 million. EEI does not believe such transactions require authorization under section 203(a)(1) even if 10 percent or more voting securities are involved. It asks the Commission to confirm that the $10 million threshold is a minimum jurisdictional amount, regardless of the percentage of voting stocks involved. 27. EEI also asks that the Commission clarify that dispositions of less than 10 percent or more of voting securities, and of any amount of non-voting securities, do not require section 203(a)(1) review.40 2. Commission Determination 28. The Commission clarifies that, if a section 203(a)(1)(C) transaction involves securities with a value below $10 million, the transaction does not require authorization under section 203(a)(1)(C) even if 10 percent or more of voting securities are involved. Section 203(a)(1) addresses four types of transactions in separate parts. Under parts (A), (C) and (D), a value in excess of $10 million is indeed the threshold below which section 203(a)(1) does not apply, unless a public utility is disposing of the whole of its facilities under section 203(a)(1)(A).41 39 Order No. 669–A at P 103. EEI Rehearing Request at 10–12. 41 Section 203(a)(1)(A) provides that no public utility shall, without having secured an order authorizing it to do so: ‘‘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 $10,000,000.’’ Because of the 40 40 E:\FR\FM\27JYR1.SGM 27JYR1 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations 29. On the question of the 10 percent limitation, EEI relies on Goldman Sachs 42 as support for its suggestion that the Commission adopt a jurisdictional threshold of 10 percent of voting securities before a public utility must seek authorization for transactions under section 203(a)(1). As noted, rehearing was already denied on this issue. EEI asks for blanket authorization under section 203(a)(1) for public utilities to engage in transactions involving non-voting securities in any amount. EEI cites to paragraph 15 of Goldman Sachs, but that paragraph does not support EEI’s contention. The Commission provided there an example of how a group of non-utility companies under common control might each purchase just under 10 percent of a public utility, but stop at that point in order to avoid becoming holding companies under section 1262(8) of EPAct 2005 and, therefore, potentially subject to section 203(a)(2). The Commission explained that authorization for such transactions may nevertheless require approval under other provisions of section 203, and specifically mentioned sections 203(a)(1)(A) and (B). This was not a suggestion that acquisitions of voting securities in an amount less than 10 percent or that acquisitions of nonvoting securities in any amount cannot trigger the requirement for prior authorization by the Commission. Accordingly, EEI’s request for clarification on this issue is denied. * * * ’’ 44 PUHCA 2005 defines ‘‘publicutility company’’ to include an ‘‘electric utility company.’’ 45 31. The Commission found that while Congress expressly excluded from the definition of holding company certain banks and other institutions, it did not similarly exclude from the definition of holding company entities that only own QFs, EWGs or FUCOs. Rather, section 1266(a) of PUHCA 2005 specifically directs the Commission to exempt QF/ EWG/FUCO holding companies from the federal access to books and records provision; thus, the very language of the provision recognizes that such entities are holding companies. It directs the Commission to issue a final rule to exempt ‘‘any person that is a holding company, solely with respect to one or more [QFs, EWGs, or FUCOs].’’ Therefore, consistent with the concurrent determination in the PUHCA 2005 rehearing order, the Commission concluded that companies that acquire 10 percent or more of an EWG, FUCO or QF are holding companies as that term is used in PUHCA 2005 as well as FPA section 203(a)(2).46 32. However, to ensure that investment in the electric industry is not hampered and that encouragement of QFs is not undermined, the Commission granted a blanket authorization under FPA section 203(a)(2) for holding companies that own or control only EWGs, QFs or FUCOs to acquire the securities of additional EWGs, FUCOs or QFs.47 D. 18 CFR Section 33.1(c)(8)—Blanket Authorization for a Holding Company Owning Only EWGs, QFs or FUCOs To Acquire Additional EWGs, QFs or FUCOs 1. Requests for Rehearing and Clarification 33. TAPSG states that the Commission erred in creating a new blanket authorization under section 203(a)(2) for holding companies that own or control only EWGs, QFs, or FUCOs to acquire the securities of additional EWGs, QFs, or FUCOs.48 TAPSG asserts that the blanket authorization overlooks Congressional concern about the competitive effects of transfers of generation facilities and creates confusion that would discourage, rather than encourage, new investment. It contends that a holding company’s acquisition of additional EWGs and QFs in the same geographic market could raise competitive concerns, particularly if the holding company owns other EWGs or QFs in the same geographic market that is a load pocket. TAPSG also argues that the confusion created by jlentini on PROD1PC65 with RULES 30. In Order No. 669, the Commission rejected requests that we determine that only companies that own traditional utilities, not those that own solely FUCOs, EWGs and/or QFs, are ‘‘holding companies’’ under amended section 203.43 The Commission noted that ‘‘holding company’’ in PUHCA 2005 means ‘‘any company that directly or indirectly owns, controls, or holds, with the power to vote, 10 percent or more of the outstanding voting securities of a public utility company or of a holding company of any public utility company; placement of the comma in this sentence, we do not interpret the $10,000,000 threshold as applying to dispositions of the whole of a utility’s jurisdictional facilities. 42 EEI Rehearing Request at 10 (citing The Goldman Sachs Group, Inc., 114 FERC ¶ 61,118, at P 15 (Goldman Sachs), order on reh’g, 115 FERC ¶ 61,303 (2006)). 43 Order No. 669 at P 70. VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 PO 00000 44 Id. (citing EPAct 2005 at 1262(8)). 2005 at 1262(14). 46 Order No. 669–A at P 49–51. 47 Id. at P 52; 18 CFR 33.1(c)(8). 48 TAPSG Rehearing Request at 2–5. 45 EPAct Frm 00017 Fmt 4700 Sfmt 4700 42583 the blanket authorization under section 203(a)(2), in conjunction with section 203(a)(1) review of certain EWG and QF transactions, will create uncertainty that could chill, rather than encourage investment. TAPSG further argues that, if the Commission does not rescind the blanket authorization in 18 CFR section 33.1(c)(8), it should clarify which transactions remain subject to section 203(a)(1) review. 34. In this regard, TAPSG and APPA/ NRECA ask the Commission to affirm the conclusion in Order No. 669 that a holding company’s acquisition of securities of an EWG that is a public utility, by which the holding company acquires control of the EWG, is a disposition of jurisdictional assets by the EWG and requires a filing with Commission under FPA section 203(a)(1) by the EWG.49 APPA/NRECA argue that this clarification is important because a single holding company could gain market power by acquiring a number of EWGs in a relevant geographic market. 35. TAPSG and APPA/NRECA request clarification that the blanket authorization does not override the Commission’s conclusion regarding the scope of section 203(a)(1)(D), concerning the acquisition of an existing generation facility with a value of $10 million that is used for interstate wholesale sales and over which the Commission has jurisdiction, and that if a public utility acquires an existing generation facility used for Commissionjurisdictional sales, whether a QF or any other type of generation facility, the transaction is subject to section 203 review. TAPSG argues that the plain language of section 203(a)(1)(D) requires the review of acquisitions of generators, such as EWGs.50 36. Moreover, TAPSG requests that the Commission clarify that a transaction will trigger section 203(a)(1)(D) review when a holding company that controls an EWG that is a public utility acquires another EWG or QF. They maintain that this is required by Enova Corporation and Pacific Enterprises (Enova).51 In addition, TAPSG argues that under Enova, section 203(a)(1)(D) review is required: (1) For the acquisition of another EWG or QF where the holding company itself is not 49 Id. at 5–6 (citing Order No. 669 at P 60 n.55); APPA/NRECA Rehearing Request at 9–12 (same). 50 TAPSG Rehearing Request at 6–7 (citing Order No. 669 at P 87); APPA/NRECA Rehearing Request at 11–12. 51 TAPSG Rehearing Request at 7–8 (citing Enova, 79 FERC ¶ 61,107, at 61,494 (1997)); APPA/NRECA Rehearing Request at 11 (citing Enova, 79 FERC ¶ 61,107 at 61,491–94 and Central Vermont Public Service Corporation, 39 FERC ¶ 61,295, at 61,960 (1987)). E:\FR\FM\27JYR1.SGM 27JYR1 42584 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations jlentini on PROD1PC65 with RULES a public utility but owns or controls a public utility (such as an EWG), and (2) for the acquisition by a holding company that is not a public utility of a holding company that is not itself a public utility but that owns a public utility.52 37. In summary, TAPSG asks the Commission to clarify that the section 203(a)(2) blanket authorization applies only to: (1) ‘‘a holding company owning/controlling only EWGs, QFs, or FUCOs that (a) is not a public utility, (b) does not yet own or control a public utility (such as an EWG), and (c) is acquiring its first EWG or QF’’; or (2) ‘‘a holding company owning/controlling only EWGs, QFs, or FUCOs that acquires a FUCO.’’ 53 38. In comparison, Occidental requests that the Commission clarify (or, in the alternative, grant rehearing) that the section 203(a)(2) blanket authorization in section 33.1(c)(8) applies to an acquisition of securities of holding companies that are holding companies solely with respect to holding EWGs, QFs, or FUCOs.54 Occidental argues that it would be inconsistent with the intent of Order No. 669–A for the acquisition of securities of such holding companies not to also be covered by this blanket authorization.55 In addition, Occidental argues that it would be arbitrary and capricious to provide blanket authorization for holding companies that own or control only EWGs, QFs, or FUCOs only when they acquire directly the securities of additional EWGs, QFs or FUCOs and not where the acquisition is structured as acquisition of securities of a holding company that holds only EWGs, QFs, or FUCOs. Occidental argues that what it requests would not undermine any Commission policy or efforts to prevent cross-subsidization. Occidental argues that not granting blanket authority for the acquisition of securities of such holding companies will create unnecessary burdens on transactions and discourage investment in the electric industry. 2. Commission Determination 39. We reject TAPSG’s request to rescind the blanket authorization in section 33.1(c)(8), granted under section 203(a)(2) for holding companies that own or control only EWGs, QFs, or FUCOs to acquire the securities of additional EWGs, FUCOs, or QFs. The concerns raised in TAPSG’s rehearing petition are focused on the competitive 52 TAPSG Rehearing Request at 8. 53 Id. 54 Occidental 55 Id. Rehearing Request at 3–5. (citing Order No. 669–A at P 52). VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 effects of generation transfers involving EWGs and QFs if this section 203(a)(2) blanket authorization is retained. As an initial matter (and as discussed further below), we note that this blanket authorization in no way affects any section 203(a)(1) authorizations required by EWGs themselves. The vast majority of EWGs located in the United States are public utilities and, to the extent such EWGs seek to sell or transfer control of their jurisdictional facilities to a holding company, such EWGs will be subject to a competitive review of the transaction under section 203(a)(1)(A), irrespective of the holding company’s blanket exemption.56 Thus, TAPSG’s concerns that EWG acquisitions will escape competitive review are misplaced. 40. With respect to QFs, many QFs (cogeneration QFs, non-geothermal small power production QFs with capacity of 30 MWs or less, and geothermal small power production) are exempt from section 203 of the FPA and thus are not treated as public utilities subject to section 203(a)(1)(A); thus, unlike the situation with EWGs, if such QFs were to sell or transfer control of their jurisdictional facilities to a holding company, there would be no competitive review by the Commission under section 203(a)(1).57 However, what TAPSG ignores is that there was no Federal review of such transactions by this Commission or by the SEC prior to EPAct 2005. QFs were largely exempted from PUHCA 1935 regulation by virtue of the Commission’s exemption authority under the Public Utility Regulatory Policies Act of 1978 (PURPA), and companies that owned QFs (or EWGs, for that matter) were not considered holding companies by virtue of owning an EWG or QF under PUHCA 1935. Accordingly, our blanket exemption here does nothing more than maintain the status quo with respect to any regulatory review required of 56 Further, although most holding companies are not public utilities, to the extent a holding company is also a public utility, a transaction in which it acquired an EWG’s or QF’s generation facilities (if such facilities are used for jurisdictional wholesale sales) may trigger the requirements of section 203(a)(1)(D). 57 However, if a transaction involved a public utility and a QF, section 203 review, including a competitive review, may be required. If a public utility acquires all or part of a QF’s jurisdictional facilities, the transaction may be subject to FPA section 203(a)(1)(A). Similarly, if a public utility proposes to merge or consolidate its facilities with those of a QF, the transaction would be subject to section 203(a)(1)(B), which applies when a public utility merges or consolidates its facilities with those of ‘‘any other person.’’ ‘‘Person’’ would include a QF. Further, a transaction in which a public utility seeks to acquire a QF’s existing generation facility (if the QF facility is used for jurisdictional wholesale sales) may trigger section 203(a)(1)(D). PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 holding company acquisitions of QF facilities.58 While we recognize the possibility that market power issues associated with QF ownership could become a concern in the future, even where the ownership is by a holding company that owns only QFs, EWG and FUCOs and there are no captive customers in the entire holding company system, TAPSG has not convinced us that there is a problem to remedy at this time or that our decision in any way undermines Congressional intent. Further, if in the future problems become apparent with respect to holding company acquisitions of QFs, the Commission may revisit the exemption from section 203 provided to QFs under PURPA and/or revisit the section 203(a)(2) blanket authorization at issue here.59 We also disagree with TAPSG that the blanket authority creates any confusion that would discourage investment, and no other commenter argues that this is the case. At this time, we see no added benefit from the Commission’s case-by-case evaluation of these transactions under section 203(a)(2).60 41. Moreover, TAPSG does not explain why we should limit the applicability of the blanket authority in 18 CFR 33.1(c)(8) to situations where: (1) The holding company is not and does not own a public utility, and is acquiring its first EWG or QF; or (2) the holding company is acquiring a FUCO. As noted, it is likely that section 203(a)(1) would be triggered in any event for EWGs and, in many instances, QFs. Therefore, TAPSG’s request that this restriction be placed on the applicability of the blanket authority is denied. 42. We grant APPA/NRECA’s request to clarify that a holding company’s acquisition of the securities of an EWG public utility, by which the holding company acquires control of the public utility EWG, may be a jurisdictional disposition of assets by the EWG, which 58 We also have weighed the fact that to require new case-by-case review of holding company acquisitions of QFs could impose a substantial burden on QFs. 59 We note that in the Commission’s recent rulemaking implementing revised section 210(n) of PURPA, the Commission proposed to eliminate certain QF exemptions from FPA sections 205 and 206 and sought comment on whether it should eliminate other exemptions. In the final rule, however, the Commission retained the FPA section 203 exemption. Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order No. 671, 71 FR 7,852 at P 102 (February 15, 2006), FERC Stats. & Regs. P 31,203 (2006), order on reh’g, Order No. 671–A, 71 FR 30,585 (May 30, 2006), FERC Stats. & Regs. P 31,219 (2006). 60 See Order No. 669 at P 55; Order No. 669–A at P 56, 62. E:\FR\FM\27JYR1.SGM 27JYR1 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations jlentini on PROD1PC65 with RULES requires approval under section 203(a)(1) even if the holding company has blanket authority under section 203(a)(2). The blanket authority under section 203(a)(2) in no way affects whether separate authorization for a particular transaction is required under section 203(a)(1). We reaffirm the statements made in Order No. 669 regarding section 203(a)(1) review regarding EWGs 61 and QFs.62 Granting blanket authority in section 33.1(c)(8) under section 203(a)(2) does not affect authorizations required under section 203(a)(1). Thus, TAPSG and APPA/ NRECA’s requests for clarification to this effect are granted. 43. We will continue to review dispositions of jurisdictional facilities by public utilities under section 203(a)(1) on a case-by-case basis and we will also review public utility acquisitions of generating facilities under the new section 203(a)(1)(D) on a case-by-case basis.63 TAPSG requests other clarifications interpreting section 203(a)(1) in light of the blanket authority granted in section 33.1(c)(8). In effect, it asks us to modify the section 203(a)(2) blanket authority and we decline to do so. TAPSG’s requests for clarification to this effect are denied. 44. Finally, we agree with Occidental that Order No. 669–A should be interpreted to provide blanket authorization for holding companies that own or control only EWGs, QFs, or FUCOs to acquire securities of a holding 61 Order No. 669 at P 60 n.55 stating: [A] holding company acquisition of securities of an EWG would in some circumstances trigger section 203 review in any event by virtue of section 203(a)(1). This is because the EWG could well be a public utility and, to the extent the holding company acquired ‘‘control’’ of the EWG, we would construe the EWG to be ‘‘disposing’’ of its jurisdictional facilities and thus required to file for approval under section 203(a). A similar situation involving acquisition of securities of a QF would not trigger section 203 review, since QFs currently are exempted from FPA section 203 filing requirements by the Commission’s PURPA regulations. 62 Id. P 87 stating: [I]f a public utility acquires an existing generation facility used for Commission-jurisdictional sales, whether a QF or any other type of generation facility, the transaction is subject to section 203. Although certain QFs themselves are exempted from any filing requirements under section 203 by virtue of our PURPA regulations, this does not mean that public utilities that acquire QFs are exempt. Additionally, there is no limitation in amended section 203(a)(1)(D) on the type of generation facilities that trigger section 203 review, if they are used for interstate wholesale sales and the Commission has jurisdiction over them for ratemaking purposes. Further, even if the Commission had the discretion to exempt QF acquisitions from section 203 review, we do not think it would be necessarily consistent with the public interest to do so in light of EPAct 2005’s elimination of QF ownership restrictions. 63 Order No. 669–A at P 103. VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 company that holds only EWGs, QFs, or FUCOs. We do so, however, consistent with our prior holding in Order No. 669 that such acquisitions will trigger review under section 203(a)(1) if the transaction results in a change of control of an EWG that is a public utility owned by the holding company whose securities are being acquired. E. Section 33.2(j)—General Information Requirements Regarding CrossSubsidization 45. As modified by Order No. 669–A, section 33.2(j)(1) requires that a section 203 applicant must explain, with appropriate evidentiary support (Exhibit M to the application), how it is assuring that the proposed transaction will not result in cross-subsidization of a nonutility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company. This explanation must disclose all existing pledges or encumbrances of utility assets and include a detailed showing that the transaction will not result in: (A) Transfers of facilities between a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, and an associate company; (B) new issuances of securities by traditional public utility associate companies that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; (C) new pledges or encumbrances of assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; or (D) new affiliate contracts between nonutility associate companies and traditional public utility associate companies that have captive customers or that own or provide transmission service over jurisdictional transmission facilities, other than non-power goods and services agreements subject to review under sections 205 and 206 of the FPA.64 Section 33.2(j)(2) states that if no such assurance can be provided, the applicant must explain how such cross-subsidization, pledge, or encumbrance will be consistent with the public interest.65 1. Requests for Rehearing and Clarification 46. APPA/NRECA argue that the Commission should amend 18 CFR PO 00000 64 18 65 Id. CFR 33.2(j)(1)(i) and (ii). at 33.2(j)(2). Frm 00019 Fmt 4700 Sfmt 4700 42585 33.2(j)(1) to require that the explanation in Exhibit M address ‘‘how applicants are providing assurance that it is not reasonably foreseeable that the proposed transaction will result in, at the time of the transaction or in the future, cross-subsidization of a nonutility associate company or pledge or encumbrance of utility assets for the benefit of an associate company.’’ 66 APPA/NRECA argue that the omission of the phrase ‘‘at the time of the transaction or in the future’’ from section 33.2(j)(1), a phrase found in the parallel regulation at section 33.1(c)(5) (the blanket authorization for holding companies that include a transmitting utility or an electric utility to acquire a FUCO), creates conflicting requirements and will ‘‘create confusion and invite abuse.’’ 67 APPA/NRECA assert that section 33.2(j)(1) is inconsistent with Congressional intent that the Commission have broad authority to ensure that section 203 transactions do not result in cross-subsidization or asset pledges or encumbrances, even after the transaction is consummated, unless the Commission has found that they are consistent with the public interest. 47. APPA/NRECA also ask that the Commission clarify or amend section 33.2(j) to state that Exhibit M must be verified by a duly authorized corporate official of the holding company under 18 CFR 385.2005 (Subscription and verification). APPA/NRECA argue this requirement is consistent with section 33.1(c)(5) and the Commission’s existing regulations for section 203 applications.68 48. Moreover, APPA/NRECA request the Commission clarify that if the Commission later finds that an approved transaction has resulted in, at the time of the transaction or in the future, cross-subsidization of a nonutility associate company or pledge or encumbrance of utility assets for the benefit of an associate company, the Commission may find that such crosssubsidization, pledge, or encumbrance violates the Commission order and the relevant entities can be penalized. APPA/NRECA maintain that this will help to ensure that the holding company and its senior corporate officials are held responsible for the statements made in a section 203 application and to provide them notice of the consequences of a violation.69 66 APPA/NRECA Rehearing Request at 2 (emphasis in the original). 67 Id. at 4. 68 Id. at 6–7. 69 Id. at 7–8. E:\FR\FM\27JYR1.SGM 27JYR1 42586 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations 2. Commission Determination 49. We will grant APPA/NRECA’s request in part. The Commission does not accept APPA/NRECA’s assertion that section 33.2(j)(1), as revised in Order No. 669–A, creates confusion and invites abuse simply because it contains different requirements than the regulation against which APPA/NRECA chose to compare it or that it is inconsistent with Congressional intent. We agree, however, that adding to the regulations a verification requirement regarding the contents of the application and a requirement for the exercise of reasonable foresight in providing the explanation required under Exhibit M will help make the regulation more effective. With respect to reasonable foresight, we will modify the regulatory text of 18 CFR 33.2(j)(1) as follows: Of how applicants are providing assurance, based on facts and circumstances known to them or that are reasonably foreseeable, that the proposed transaction will not result in, at the time of the transaction or in the future, cross-subsidization of a non-utility associate company or pledge or encumbrance of utility assets for the benefit of an associate company.* * * 50. These changes will not create an undue burden on the applicants. Our rules already require that the information in the application be verified by one having knowledge of the matters contained in the application and exhibits.70 51. In response to APPA/NRECA’s request, the Commission clarifies that, if the Commission later finds that an approved transaction has resulted in cross-subsidization or a pledge or encumbrance, the Commission may find that it constitutes a violation of a Commission order and is subject to consequent penalties. Whether particular facts violate a Commission order is a matter for determination in an individual proceeding. If a violation is found, the appropriate remedy or penalty is also a matter properly addressed in that proceeding. Accordingly, a blanket statement in the regulations is not necessary. jlentini on PROD1PC65 with RULES III. Information Collection Statement 52. The regulations of the Office of Management and Budget (OMB) 71 require that OMB approve certain information requirements imposed by 70 A specific verification requirement applicable to Exhibit M, as requested by APPA/NRECA, is unnecessary since, under section 33.7, the original application, of which Exhibit M is a part, must be ‘‘signed by a person or persons having authority with respect thereto and having knowledge of the matters therein set forth, and must be verified under oath.’’ 71 5 CFR 1320.12 (2005). VerDate Aug<31>2005 16:25 Jul 26, 2006 Jkt 208001 an agency. OMB has approved the information requirements contained in Order Nos. 669 and 669–A. Specifically, OMB approved the following information collection and assigned the corresponding OMB control numbers: ‘‘Application under Federal Power Act Section 203’’ (FERC–519) (1902–0082). This order denies rehearing requests and only clarifies the provisions of Order Nos. 669 and 669–A. This order does not make substantive modifications to the Commission’s information collection requirements and, accordingly, OMB approval for this order is not necessary. However, the Commission will send a copy of this order to OMB for informational purposes. 53. Interested persons may obtain information on the information requirements by contacting the following: The Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426 [Attention: Michael Miller, Office of the Executive Director, ED–34], Phone: (202) 502–8415, Fax: (202) 273–0873, email: michael.miller@ferc.gov. 54. To submit comments concerning the collection(s) of information and provide estimates on the associated burden of these requirements, 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. Comments should be emailed to oira_submission@omb.eop.gov and reference the OMB Control number listed above. IV. Document Availability 55. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through Commission’s Home Page (http:// 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. 56. 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 ‘‘RM05–34’’ in the docket number field. PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 57. 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 202–502–6652 (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). V. Effective Date 58. The revisions in this order on rehearing will become effective on August 28, 2006. List of Subjects 18 CFR Part 2 Administrative practice and procedure, Electric power, Natural gas, Pipelines, Reporting and recordkeeping requirements. 18 CFR Part 33 Electric utilities, Reporting and recordkeeping requirements, Securities. The Commission Orders Requests for rehearing are hereby denied and requests for clarification are hereby granted in part and denied in part, as discussed in the body of this order. By the Commission. Magalie R. Salas, Secretary. In consideration of the foregoing, under the authority of EPAct 2005, the Commission is amending part 33 of Chapter I, Title 18, Code of Federal Regulations, as set forth: I PART 33—APPLICATIONS UNDER FEDERAL POWER ACT SECTION 203 1. Section 33.2 amended by revising (j)(1) introductory text to read as follows: I § 33.2 Contents of application—general information requirements. * * * * * (j) An explanation, with appropriate evidentiary support for such explanation (to be identified as Exhibit M to this application): (1) Of how applicants are providing assurance, based on facts and circumstances known to them or that are reasonably foreseeable, that the proposed transaction will not result in, at the time of the transactions or in the future, cross-subsidization of a nonutility associate company or pledge or encumbrance of utility assets for the benefit of an associate company, including: * * * * * E:\FR\FM\27JYR1.SGM 27JYR1 Federal Register / Vol. 71, No. 144 / Thursday, July 27, 2006 / Rules and Regulations 42587 Appendix A Note: The following Appendix will not be published in the Code of Federal Regulations. LIST OF PETITIONERS REQUESTING REHEARING AND/OR CLARIFICATION [Petitioner acronyms] Acronym Name APPA/NRECA ..................................................... EEI ...................................................................... NARUC ............................................................... Occidental ........................................................... TAPSG ................................................................ [FR Doc. E6–12047 Filed 7–26–06; 8:45 am] BILLING CODE 6717–01–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 35 [Docket No. RM02–12–002; Order No. 2006– B] Standardization of Small Generator Interconnection Agreements and Procedures Issued July 20, 2006. Federal Energy Regulatory Commission, DOE. ACTION: Order on clarification. jlentini on PROD1PC65 with RULES AGENCY: SUMMARY: The Federal Energy Regulatory Commission clarifies one issue regarding Order No. 2006–A. Order Nos. 2006–A and 2006 require all public utilities that own, control, or operate facilities for transmitting electric energy in interstate commerce to file revised open access transmission tariffs containing standard small generator interconnection procedures and a standard small generator interconnection agreement, and to provide interconnection service under them to small generating facilities of no more than 20 megawatts. DATES: Effective Date: August 28, 2006. FOR FURTHER INFORMATION CONTACT: Michael G. Henry (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502–8532. Kirk F. Randall, Office of Energy Markets and Reliability, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502–8092. SUPPLEMENTARY INFORMATION: VerDate Aug<31>2005 17:08 Jul 26, 2006 Jkt 208001 American Public Power Association and the National Rural Electric Cooperative Association. Edison Electric Institute. National Association of Regulatory Utility Commissioners. Occidental Chemical Corporation. Transmission Access Policy Study Group. Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, and Suedeen G. Kelly; Order on Clarification I. Introduction 1. This order grants a request for clarification of Order No. 2006–A submitted by Southern California Edison (SoCal Edison).1 Order Nos. 2006 and 2006–A require that all public utilities that own, control, or operate facilities used for transmitting electric energy in interstate commerce 2 have on file with the Commission standard generator interconnection procedures (pro forma SGIP) and a standard small generator interconnection agreement (pro forma SGIA) for interconnecting with the Transmission Provider’s Transmission System any Small Generating Facility capable of producing no more than 20 megawatts of power.3 Order No. 2006 requires that all public utilities subject to it modify 1 Standardization of Small Generator Interconnection Agreements and Procedures, Order No. 2006, 70 FR 34189 (June 13, 2005), FERC Stats. & Regs. ¶ 31,180 (2005) (Order No. 2006), order on reh’g, Order No. 2006A, 70 FR 71760 (November 30, 2005), FERC Stats. & Regs. ¶ 31,196 (2005). 2 A public utility is a utility that owns, controls, or operates facilities used for transmitting electric energy in interstate commerce, as defined in section 201(e) of the Federal Power Act (FPA). 16 U.S.C. 824(e) (2000). A non-public utility that seeks voluntary compliance with the reciprocity condition of an open access transmission tariff may satisfy that condition by adopting these procedures and agreement, or by filing interconnection rules that substantially conform with, or are superior to, the pro forma SGIP and pro forma SGIA. 3 Capitalized terms used in this order have the meanings specified in the Glossaries of Terms or the text of the pro forma SGIP or the pro forma SGIA. Small Generating Facility means the device for which the Interconnection Customer (the owner or operator of the Small Generating Facility) has requested interconnection. The utility with which the Small Generating Facility is interconnecting is the Transmission Provider. A Small Generating Facility is a device used for the production of electricity having a capacity of no more than 20 megawatts. The interconnection process begins when the Interconnection Customer submits an application for interconnection (Interconnection Request) to the Transmission Provider. PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 their open access transmission tariffs (OATTs) to include the pro forma SGIP and pro forma SGIA. On November 22, 2005, the Commission issued Order No. 2006–A, which modified portions of Order No. 2006.4 II. Background 2. Under Order No. 2006, if the proposed interconnection of the Interconnection Customer’s Small Generating Facility with the Transmission Provider’s Transmission System does not qualify for review under the accelerated Fast Track Process or the 10 kW Inverter Process, it is evaluated using industry-standard interconnection studies. These studies— the Feasibility Study, the System Impact Study, and the Facilities Study—are performed by the Transmission Provider under the pro forma study agreements in the pro forma SGIP. These study agreements, to be signed by the Transmission Provider and Interconnection Customer, are similar to, but less complex than, similar agreements for Large Generators contained in Order No. 2003. The Commission developed the pro forma SGIP and SGIA to offer a simple process for interconnecting Small Generating Facilities with the nation’s electric grid.5 To this end, the three pro forma SGIP study agreements did not include boilerplate contract provisions 4 Comparable documents for generators larger than 20 megawatts in size are set forth in Order No. 2003 and are referred to as the LGIP and LGIA. See Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, 68 FR 49845 (August 19, 2003), FERC Stats. & Regs. ¶ 31,146 (2003) (Order No. 2003), order on reh’g, Order No. 2003–A, 69 FR 15932 (March 26, 2004), FERC Stats. & Regs. ¶ 31,160 (2004) (Order No. 2003–A), order on reh’g, Order No. 2003–B, 70 FR 265 (January 4, 2005), FERC Stats. & Regs. ¶ 31,171 (2005) (Order No. 2003–B), order on reh’g, Order No. 2003–C, 70 FR 37661 (June 30, 2005), FERC Stats. & Regs. ¶ 31,190 (2005) (Order No. 2003–C); see also Notice Clarifying Compliance Procedures, 106 FERC ¶ 61,009 (2004). 5 See Order No. 2006 at P 1, 509. E:\FR\FM\27JYR1.SGM 27JYR1

Agencies

[Federal Register Volume 71, Number 144 (Thursday, July 27, 2006)]
[Rules and Regulations]
[Pages 42579-42587]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12047]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 2 and 33

[Docket No. RM05-34-002; Order No. 669-B]


Transactions Subject to FPA Section 203

Issued July 20, 2006.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final Rule; Order on Rehearing of Order No. 669-A.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) affirms, 
with certain clarifications, its determinations in Order Nos. 669 and 
669-A. Order Nos. 669 and 669-A revised 18 CFR 2.26 and 18 CFR part 33 
to implement amended section 203 of the Federal Power Act.

DATES: This order on rehearing will be effective on August 28, 2006.

FOR FURTHER INFORMATION CONTACT: 

Roshini Thayaparan (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426. (202) 502-6857.
Phillip Nicholson (Technical Information), Office of Energy, Markets, 
and Reliability--West, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426. (202) 502-8240.
Andrew P. Mosier, Jr. (Technical Information), Office of Energy, 
Markets, and Reliability--West, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426. (202) 502-6274.
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 Energy, Markets, and 
Reliability--West, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426. (202) 502-8101.

SUPPLEMENTARY INFORMATION:

Table of Contents

 
                                                               Paragraph
                                                                  No.
 
I. Introduction.............................................           2
II. Discussion..............................................          10
  A. 18 CFR Section 33.1(b)(4)--Definition of ``Electric              11
   Utility Company'' and 18 CFR Section 33.1(c)(1)(i) and
   (ii)--Blanket Authorizations for Intrastate Commerce and
   Local Distribution.......................................
  B. 18 CFR Section 33.1(c)(7)--Blanket Authorization for             18
   Cash Management Programs.................................
  C. Section 33.1(c)(2)--Blanket Authorizations for                   24
   Purchases of Securities..................................
  D. 18 CFR Section 33.1(c)(8)--Blanket Authorization for a           30
   Holding Company Owning Only EWGs, QFs or FUCOs To Acquire
   Additional EWGs, QFs or FUCOs............................
  E. Section 33.2(j)--General Information Requirements                45
   Regarding Cross-Subsidization............................
III. Information Collection Statement.......................          52
IV. Document Availability...................................          55
V. Effective Date...........................................          58
 

Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, 
and Suedeen G. Kelly; Order on Rehearing and Clarification

    1. In this order we affirm, with certain clarifications, the 
determinations made in Order Nos. 669 \1\ and 669-A.\2\
---------------------------------------------------------------------------

    \1\ Transactions Subject to FPA Section 203, Order No. 669, 71 
FR 1348 (January 6, 2006), FERC Stats. & Regs. ] 31,200 (2005). On 
January 10, 2006, the Commission issued an errata notice to Order 
No. 669 revising parts of the regulatory text to conform to the 
version of the order that was issued in the Federal Register. 
Transactions Subject to FPA Section 203, Docket No. RM05-34-000 
(January 10, 2006) (unpublished errata notice).
    \2\ Transactions Subject to FPA Section 203, Order No. 669-A, 
Order on Rehearing, 71 FR 28422 (May 16, 2006), FERC Stats. & Regs. 
] 31,214 (2006).
---------------------------------------------------------------------------

I. Introduction

    2. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) 
\3\ was signed into law. Section 1289 (Merger Review Reform) of Title 
XII, Subtitle G (Market Transparency, Enforcement, and Consumer 
Protection),\4\ of EPAct 2005 amends section 203 of the Federal Power 
Act (FPA).\5\
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    \3\ Energy Policy Act of 2005, Public Law No. 109-58, 119 Stat. 
594 (2005).
    \4\ EPAct 2005 at 1281 et seq.
    \5\ 16 U.S.C. 824b (2000).
---------------------------------------------------------------------------

    3. On October 3, 2005, the Commission issued a notice of proposed 
rulemaking (NOPR) requesting comment on its proposal to amend its 
regulations to implement amended section 203.\6\ On December 23, 2005, 
the Commission issued a final rule (Order No. 669) adopting certain 
modifications to 18 CFR 2.26 and 18 CFR part 33 to implement amended 
section 203.\7\ Generally, Order No. 669:
---------------------------------------------------------------------------

    \6\ Transactions Subject to FPA Section 203, 70 FR 58636 
(October 7, 2005), FERC Stats. & Regs. ] 32,589 (2005).
    \7\ A full background to Order Nos. 669 and 669-A is set forth 
in detail in those orders and will not be repeated in full here.

    (1) Established regulations implementing amended section 203;
    (2) Granted blanket authorizations, in some instances with 
conditions, for certain types of transactions, including 
acquisitions of foreign utilities by holding companies, intra-
holding company system financing and cash management arrangements, 
certain internal corporate reorganizations, and certain acquisitions 
of securities of transmitting utilities and electric utility 
companies;
    (3) Defined terms, including ``electric utility company,'' 
``holding company,'' and ``non-utility associate company;''
    (4) Defined ``existing generation facility;''
    (5) Adopted rules on the determination of ``value'' as it 
applies to various section 203 transactions;
    (6) Set forth a section 203 applicant's obligation to 
demonstrate that a proposed transaction will not result in cross-
subsidization of a non-utility associate company or the pledge or 
encumbrance of utility assets for the benefit of an associate 
company; and
    (7) Provided for expeditious consideration of completed 
applications for the approval of transactions that are not 
contested, do not involve mergers, and are consistent with 
Commission precedent.

    4. In Order No. 669, the Commission also announced that, at a 
technical conference on the Public Utility Holding Company Act of 2005 
(PUHCA 2005),\8\ to be held within the next year,\9\ we would 
reevaluate certain issues raised in this proceeding. These issues 
include whether the blanket authorizations granted in Order No. 669 
should be revised, and whether additional protection against cross-
subsidization and pledges or encumbrances of utility

[[Page 42580]]

assets is needed.\10\ Order No. 669 became effective on February 8, 
2006.
---------------------------------------------------------------------------

    \8\ EPAct 2005 at 1261 et seq. Repeal of the Public Utility 
Holding Company Act of 1935 and Enactment of the Public Utility 
Holding Company Act of 2005, Order No. 667, 70 FR 75592 (Dec. 20, 
2005), FERC Stats. & Regs. ] 31,197 (2005) (PUHCA 2005 Final Rule), 
order on reh'g, Order No. 667-A, 71 FR 28446 (May 16, 2006), FERC 
Stats. & Regs. ] 31,213 (2006) (PUHCA 2005 Order on Rehearing), 
reh'g pending.
    \9\ PUHCA 2005 Final Rule at P 17. The Commission stated that we 
intend to hold a technical conference no later than one year after 
PUHCA 2005 became effective to evaluate whether additional 
exemptions, different reporting requirements, or other regulatory 
actions need to be considered. The PUHCA 2005 Final Rule took effect 
on February 8, 2006.
    \10\ Order No. 669 at P 4.
---------------------------------------------------------------------------

    5. On April 24, 2006, the Commission issued an order on rehearing 
(Order No. 669-A), reaffirming in part and granting rehearing in part 
of Order No. 669. Order No. 669-A addressed certain inconsistencies 
between Order No. 669 and the PUHCA 2005 Final Rule, expanded the focus 
on protection of captive customers, revised certain blanket 
authorizations, and provided new blanket authorizations. Among its 
holdings, the Commission:

    (1) affirmed its determination that persons that own only Exempt 
Wholesale Generators (EWGs), Qualifying Facilities (QFs), or Foreign 
Utility Companies (FUCOs) are holding companies subject to section 
203(a)(2);
    (2) found that while EWGs, QFs and FUCOs are ``electric utility 
companies'' for purposes of PUHCA and for purposes of section 203, 
persons that are holding companies solely by virtue of owning EWGs, 
QFs or FUCOs should be granted a new blanket authorization to 
acquire additional EWGs, QFs and FUCOs without Commission pre-
approval under section 203(a)(2);
    (3) modified the regulatory text to clarify that public 
utilities have blanket authorization under section 203(a)(1) to 
acquire securities of other public utilities in the context of 
intra-system cash management transactions, subject to protections 
against cross-subsidization and encumbrances of utility assets;
    (4) modified the regulatory text to provide, similar to the 
previously granted blanket authorization under section 203(a)(2) for 
certain holding company transactions involving internal corporate 
reorganizations, a blanket authorization under section 203(a)(1) for 
internal corporate reorganizations within the holding company, as 
long as the restructuring does not result in the reorganization of a 
traditional public utility that has captive customers or that owns 
or provides transmission service over Commission-jurisdictional 
transmission facilities;
    (5) granted additional blanket authorizations to certain holding 
companies and their subsidiaries regulated by the Bank Holding 
Company Act of 1956 \11\ to acquire securities in the normal course 
of business, as a fiduciary, for derivatives hedging purposes 
incidental to the business of banking, as collateral for a loan or 
other limited purposes, but subject to certain restrictions and 
reporting requirements; and
---------------------------------------------------------------------------

    \11\ 12 U.S.C. 1843 (2000).
---------------------------------------------------------------------------

    (6) established a blanket authorization for certain acquisitions 
of utility securities for purposes of underwriting and hedging 
transactions, but subject to conditions and reporting requirements.

    6. The Commission on rehearing also added several important 
customer protection changes, including clarifying that ``captive 
customers'' include wholesale and retail electric energy customers 
served under cost-based regulation with respect to exemptions, and 
providing that certain blanket authorizations do not apply if a public 
utility owns or provides transmission service over Commission-
jurisdictional transmission facilities. Regarding blanket authorization 
for holding companies to acquire securities of intrastate-only, local 
distribution-only and/or retail-only utilities, if there is any public 
utility within the holding company with captive customers or that owns 
or provides transmission service over jurisdictional facilities, Order 
No. 669-A also included a new condition that such company report the 
acquisition to the Commission, including any state actions or 
conditions related to the transaction, and provide an explanation of 
why the transaction does not result in cross-subsidization.
    7. With respect to all section 203 transactions that do not receive 
a blanket authorization, the Commission on rehearing added to the 
regulatory text a specific requirement that an applicant disclose 
existing pledges and/or encumbrances of utility assets and provide four 
specific detailed showings that the proposed transaction will not 
result in cross-subsidization or pledges or encumbrances of utility 
assets or, if assurances cannot be provided that cross-subsidization, 
pledges or encumbrances will not occur, an explanation of how such 
cross-subsidization, pledge or encumbrance will be consistent with the 
public interest.
    8. The Commission also reiterated that it will hold a technical 
conference this year to reevaluate numerous issues raised in both this 
proceeding and the PUHCA 2005 rulemaking proceeding. In Order No. 669-
A, the Commission committed to consider additional issues raised in 
this proceeding, including whether the Commission should codify 
specific safeguards that must be adopted for money pool transactions, 
and whether our current merger policy should be revised.\12\
---------------------------------------------------------------------------

    \12\ Order No. 669-A at P 91, 162.
---------------------------------------------------------------------------

    9. Order No. 669-A became effective on June 15, 2006. The aspects 
of Order No. 669-A for which requests for rehearing and clarification 
were filed are described in more detail below.\13\
---------------------------------------------------------------------------

    \13\ The entities that filed requests for rehearing and/or 
clarification are listed in an appendix to this order.
---------------------------------------------------------------------------

II. Discussion

    10. The requests for rehearing and/or clarification collectively 
address five categories of issues discussed in Order No. 669-A. As 
discussed below, we deny rehearing, and grant in part and deny in part 
requests for clarification on each of these issues.

A. 18 CFR Section 33.1(b)(4)--Definition of ``Electric Utility 
Company'' and 18 CFR Section 33.1(c)(1)(i) and (ii)--Blanket 
Authorizations for Intrastate Commerce and Local Distribution

    11. Section 203(a)(2) provides:

    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 $10,000,000 of, or, 
by any means whatsoever, directly or indirectly, merge or 
consolidate 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 $10,000,000 without first having secured 
an order of the Commission authorizing it to do so.

    12. The definition of the term ``electric utility company'' is 
important because it affects whether an entity is a holding company 
subject to section 203(a)(2). In Order Nos. 669 and 669-A, the 
Commission concluded that the most reasonable interpretation of the 
term, as used in amended section 203(a)(2), is the definition in PUHCA 
2005--``any company that owns or operates facilities used for the 
generation, transmission, or distribution of electric energy for 
sale.'' \14\ The definition thus is broader than the definition of 
``public utility'' under the FPA; it is not limited to entities that 
engage in wholesale or interstate transactions.
---------------------------------------------------------------------------

    \14\ EPAct 2005 at 1262(5).
---------------------------------------------------------------------------

    13. However, while Order Nos. 669 and 669-A found that it was not 
reasonable to interpret section 203(a)(2) as being limited solely to 
holding company acquisitions and mergers involving utilities making 
wholesale sales or providing transmission in interstate commerce, the 
Commission concluded that there would be no benefit from the 
Commission's case-by-case evaluation of certain transactions under 
section 203(a)(2).\15\ The Commission explained that our core 
jurisdiction under Part II of the FPA continues to be transmission and 
sales for resale of electric energy in interstate commerce. 
Accordingly, we concluded that it is consistent with the public 
interest to grant blanket authorizations

[[Page 42581]]

for the following: (1) Section 203(a)(2) purchases or acquisitions by 
holding companies of companies that own, operate, or control only 
facilities used solely for transmission or sales of electric energy in 
intrastate commerce; and (2) section 203(a)(2) purchases or 
acquisitions by holding companies of only facilities used solely for 
local distribution and/or sales at retail regulated by a state 
commission.\16\
---------------------------------------------------------------------------

    \15\ An acquisition or merger involving ``any company that owns 
or operates facilities used for the generation, transmission, or 
distribution of electric energy for sale'' is not on its face 
limited to interstate facilities. Order No. 669 at P 55 n.51; Order 
No. 669-A at P 56 n.56.
    \16\ Order No. 669 at P 56; Order No. 669-A at P 62-63.
---------------------------------------------------------------------------

    14. In Order No. 669-A, the Commission clarified that it was not 
asserting jurisdiction over intrastate facilities, local distribution 
facilities, or retail-only companies under the blanket authorizations. 
Rather, it was asserting jurisdiction over holding company acquisitions 
of such companies or facilities for the purpose of ensuring that 
interstate interests are not adversely affected. The Commission also 
stated that it would eliminate these blanket authorizations if 
necessary to protect customers.\17\
---------------------------------------------------------------------------

    \17\ Order No. 669-A at P 63.
---------------------------------------------------------------------------

1. Requests for Rehearing and Clarification
    15. NARUC reiterates the arguments raised in its initial comments 
and request for rehearing of Order No. 669, asserting that Congress did 
not intend for the term ``electric utility company,'' as used in PUHCA 
2005, to be incorporated into the Commission's regulations implementing 
FPA section 203. First, NARUC argues that this interpretation violates 
the fundamental rule of statutory construction, expressio unius est 
exlusio alterius (express mention of one thing implies the exclusion of 
another). NARUC argues that the absence of an explicit expansion of the 
Commission's jurisdiction over entities in the PUHCA 2005 definition of 
``electric utility company'' ``fatally undermines'' the Commission's 
justification of the result reached on rehearing.\18\ Second, NARUC 
argues that adoption of the term ``electric utility company'' 
improperly extends the Commission's authority under amended section 203 
to include facilities used for the transmission or sales of electric 
energy in intrastate commerce, facilities used for local distribution, 
and facilities used for making retail sales. NARUC states that such 
facilities fall under the exclusive jurisdiction of state 
commissions.\19\ Moreover, NARUC asserts that, based on the 
Commission's overreach in jurisdiction over such entities, the 
Commission erred in granting a blanket authorization for holding 
company acquisitions of facilities used solely in intrastate commerce 
or used solely for local distribution and/or sales at retail regulated 
by a state commission. NARUC argues that the Commission's 
justifications for these blanket exemptions are valid, but the 
Commission's stated rationale provides further evidence that the 
Commission lacks jurisdiction over such entities.\20\
---------------------------------------------------------------------------

    \18\ NARUC Rehearing Request at 4-5.
    \19\ Id. at 5-6.
    \20\ Id. at 6-7.
---------------------------------------------------------------------------

2. Commission Determination
    16. NARUC's request for rehearing is denied. NARUC's request for 
rehearing reiterates arguments made in its rehearing request of Order 
No. 669. The Commission addressed those arguments fully in Order No. 
669-A.\21\
---------------------------------------------------------------------------

    \21\ See Order No. 669-A at P 41-54.
---------------------------------------------------------------------------

    17. NARUC also argues that the Commission erred in Order No. 669-A 
in granting blanket authorizations of holding company acquisitions of 
facilities that NARUC asserts are outside the Commission's statutory 
authority. NARUC notes that the Commission gave three reasons for 
granting these blanket authorizations and argues that these reasons 
actually highlight why the Commission does not have jurisdiction over 
these matters. As the basis for this error, NARUC repeats the same 
argument made on rehearing of Order No. 669. The Commission responded 
fully to that argument as well in Order No. 669-A.\22\
---------------------------------------------------------------------------

    \22\ See id. P 62-63.
---------------------------------------------------------------------------

B. 18 CFR Section 33.1(c)(7)--Blanket Authorization for Cash Management 
Programs

    18. In Order No. 669, the Commission stated that cash management 
programs, money pools, and other intra-holding company financing 
arrangements \23\ are a routine and important tool used by many large 
companies to lower the cost of capital for their regulated subsidiaries 
and to improve the rate of return the holding company and its 
subsidiaries can receive on their money.\24\ The Commission found that 
it was consistent with the public interest to grant blanket 
authorization under section 203(a)(2) for holding companies and their 
subsidiaries to take part in intra-system cash management programs.\25\
---------------------------------------------------------------------------

    \23\ Order No. 669 at P 142; see also Order No. 669-A at P 84 
(citing Regulation of Cash Management Practices, Order No. 634, 68 
FR 40500 (July 8, 2003), FERC Stats. & Regs. ] 31,145 (2003) (Cash 
Management Rule), Order No. 634-A, 68 FR 61993 (October 31, 2003), 
FERC Stats. & Regs. ] 31,152 (2003) (Cash Management Rule II)).
    \24\ Order No. 669 at P 142.
    \25\ Id.
---------------------------------------------------------------------------

    19. In Order No. 669-A, the Commission granted clarifications 
regarding this blanket authorization. The Commission clarified that the 
blanket authorization granted for money pool transactions is intended 
to authorize ``horizontal'' transactions between public utility company 
subsidiaries as well as ``downward'' loans from the holding company to 
its public utility company subsidiaries. However, the blanket 
authorization does not cover acquisitions of securities issued by 
entities outside the established intra-system cash management program 
\26\ or money pool.\27\
---------------------------------------------------------------------------

    \26\ 18 CFR 33.1(c)(7).
    \27\ Order No. 669-A at P 89.
---------------------------------------------------------------------------

1. Requests for Rehearing and Clarification
    20. In the time between the issuance of Order No. 669 and the 
issuance of Order No. 669-A, several entities sought explicit 
Commission approvals for certain of their subsidiary-to-subsidiary 
transactions, transactions in their money pools and other such cash 
management programs. EEI notes that, in several of these cases, the 
Commission granted such approval, subject to limits and reporting 
requirements imposed under the authorizations previously issued by the 
Securities and Exchange Commission (SEC).\28\ The limits and reporting 
requirements put in place by the SEC differ from those in Order No. 
669-A. EEI seeks clarification that the companies with Intervening 
Orders do not have to comply with the restrictions of their former SEC 
financing orders, as of the effective date of Order No. 669-A.\29\
---------------------------------------------------------------------------

    \28\ EEI Rehearing Request at 5-6 (citing Exelon Corporation, 
114 FERC ] 61,116 (2006) (Exelon)). EEI identifies only one of the 
orders in a group that it calls the ``Intervening Orders''--Exelon. 
Two similar orders, issued the same day, are Entergy Services, Inc., 
114 FERC ] 61,120 (2006) (Entergy) and National Grid plc and 
National Grid USA, 114 FERC ] 61,115 (2006) (National Grid). The 
group of three will be referred to as the ``Intervening Orders.''
    \29\ EEI Rehearing Request at 4-8.
---------------------------------------------------------------------------

    21. Second, EEI notes that the preamble to Order No. 669-A 
describes the blanket authorization as covering transactions only 
within a ``money pool,'' \30\ while the regulatory text uses the 
broader term, ``intra-system cash management program.'' \31\ EEI argues 
that the Commission should not distinguish between formal money pools 
and other, less formal intra-system lending arrangements. It asks the 
Commission to clarify that subsidiary-

[[Page 42582]]

to-subsidiary loans are authorized as part of cash management programs 
even if such loans are not under formal money pool arrangements.\32\
---------------------------------------------------------------------------

    \30\ Id. at 6 (citing Order No. 669-A at P 89).
    \31\ Id. (citing 18 CFR 33.1(c)(7)).
    \32\ Id. at 8-9.
---------------------------------------------------------------------------

2. Commission Determination
    22. We will grant in part EEI's request for clarification on the 
first issue. To the extent companies with Intervening Orders engage in 
activities within Order No. 669-A's blanket authorizations, those 
activities are not subject to the SEC limits and reporting requirements 
incorporated by the Intervening Orders. However, activities exceeding 
Order No. 669-A's blanket authorizations remain subject to the SEC 
limits and reporting requirements incorporated by the Intervening 
Orders.\33\ Activities authorized by the Intervening Orders were 
conditioned on compliance with the prior SEC limits and reporting 
requirements. Thus, we will waive those conditions only for activities 
subsequently authorized generally in Order No. 669-A. Those activities 
will be subject to the restrictions and requirements of Order No. 669-
A, instead of the Intervening Orders.
---------------------------------------------------------------------------

    \33\ See Exelon, 114 FERC ] 61,116 at P 9; Entergy, 114 FERC ] 
61,120 at P 10; National Grid, 114 FERC ] 61,115 at P 10.
---------------------------------------------------------------------------

    23. EEI's second request for clarification, regarding whether 
subsidiary-to-subsidiary loans are authorized as part of cash 
management programs even if such loans are not under formal money pool 
arrangements, is granted. Order No. 669-A's preamble inadvertently 
suggested a narrower authorization than its regulatory text. However, 
the blanket authorization granted under Order No. 669-A for a public 
utility subsidiary within a holding company system to acquire the 
security of another public utility within the system (horizontal 
transactions) specifically depends on the transaction occurring within 
the system's cash management program, subject to safeguards to prevent 
cross-subsidization or pledges or encumbrances of utility assets.\34\ 
Further, we note that the Commission's Cash Management Rule prescribes 
certain documentation requirements for entities participating in cash 
management programs. For example, Cash Management Rule II requires that 
cash management agreements be filed with the Commission on a public 
basis.\35\ Neither rule prohibits participation by a holding company in 
a cash management program in which the holding company's Commission-
regulated public utility subsidiary also participates, nor do they 
dictate the content of or terms for participating in a cash management 
program.\36\ Both rules, however, were issued under a broad array of 
statutory authority reaching many Commission-regulated entities, 
including public utilities under sections 203 and 204 of the FPA, in 
order to provide greater transparency of cash management 
activities.\37\ With this background, we clarify that the blanket 
authorization in Order No. 669-A applies to activities that are part of 
cash management programs, even if they are not part of a formal money 
pool. Finally, we will reevaluate whether any changes need to be made 
to our Cash Management Rule in the technical conference to be held 
later this year.
---------------------------------------------------------------------------

    \34\ 18 CFR 33.1(c)(7).
    \35\ Cash Management Rule II at P 43.
    \36\ Cash Management Rule at P 45; Cash Management Rule II at P 
31, 36.
    \37\ Cash Management Rule II at P 19.
---------------------------------------------------------------------------

C. Section 33.1(c)(2)--Blanket Authorizations for Purchases of 
Securities

    24. In Order Nos. 669 and 669-A, the Commission provided a blanket 
authorization under section 203(a)(2) for holding companies to 
purchase, acquire, or take: (i) Any non-voting security (that does not 
convey sufficient veto rights over management actions so as to convey 
control) in 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; (ii) any voting 
security in 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 if, after the 
acquisition, the holding company will own less than 10 percent of the 
outstanding voting securities; or (iii) any security of a subsidiary 
company within the holding company system.\38\
---------------------------------------------------------------------------

    \38\ 18 CFR 33.1(c)(2). See also Order No. 669 at P 144-45; 
Order No. 669-A at P 97, 101-03.
---------------------------------------------------------------------------

    25. On rehearing, the Commission declined to extend to public 
utilities under section 203(a)(1) the blanket authorizations for 
dispositions of utility securities of less than 10 percent that we 
granted to public utility holding companies under section 203(a)(2). 
The Commission decided that it would continue to review dispositions of 
jurisdictional facilities by public utilities under FPA section 
203(a)(1) on a case-by-case basis, finding that ``[c]oncerns with 
control, markets and protection of captive customers or customers 
receiving transmission service over jurisdictional transmission 
facilities are closely linked with assets directly controlled by the 
public utilities.'' \39\
---------------------------------------------------------------------------

    \39\ Order No. 669-A at P 103.
---------------------------------------------------------------------------

1. Requests for Rehearing and Clarification
    26. EEI reiterates arguments, previously denied on rehearing, that 
the Commission should grant a blanket authorization under section 
203(a)(1) for a public utility to dispose of up to 9.99 percent of its 
voting securities. Such authority, it argues, would parallel the 
blanket authorization granted in Order No. 669-A for holding companies 
to acquire up to 9.99 percent of voting securities of a transmitting 
utility or electric utility company and therefore, would be 
appropriate. EEI does not formally seek rehearing on this issue and, 
indeed, a second rehearing on the issue does not lie. However, in light 
of EEI's concerns that lack of a section 203(a)(1) parallel blanket 
authorization could thwart investment, we will include this issue in 
the technical conference to be held within one year of the effective 
date of amended section 203 and PUHCA 2005. EEI also seeks 
clarification on transactions that involve securities with a value 
below $10 million. EEI does not believe such transactions require 
authorization under section 203(a)(1) even if 10 percent or more voting 
securities are involved. It asks the Commission to confirm that the $10 
million threshold is a minimum jurisdictional amount, regardless of the 
percentage of voting stocks involved.
    27. EEI also asks that the Commission clarify that dispositions of 
less than 10 percent or more of voting securities, and of any amount of 
non-voting securities, do not require section 203(a)(1) review.\40\
---------------------------------------------------------------------------

    \40\ 40 EEI Rehearing Request at 10-12.
---------------------------------------------------------------------------

2. Commission Determination
    28. The Commission clarifies that, if a section 203(a)(1)(C) 
transaction involves securities with a value below $10 million, the 
transaction does not require authorization under section 203(a)(1)(C) 
even if 10 percent or more of voting securities are involved. Section 
203(a)(1) addresses four types of transactions in separate parts. Under 
parts (A), (C) and (D), a value in excess of $10 million is indeed the 
threshold below which section 203(a)(1) does not apply, unless a public 
utility is disposing of the whole of its facilities under section 
203(a)(1)(A).\41\
---------------------------------------------------------------------------

    \41\ Section 203(a)(1)(A) provides that no public utility shall, 
without having secured an order authorizing it to do so: ``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 $10,000,000.'' Because of the placement of the 
comma in this sentence, we do not interpret the $10,000,000 
threshold as applying to dispositions of the whole of a utility's 
jurisdictional facilities.

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

[[Page 42583]]

    29. On the question of the 10 percent limitation, EEI relies on 
Goldman Sachs \42\ as support for its suggestion that the Commission 
adopt a jurisdictional threshold of 10 percent of voting securities 
before a public utility must seek authorization for transactions under 
section 203(a)(1). As noted, rehearing was already denied on this 
issue. EEI asks for blanket authorization under section 203(a)(1) for 
public utilities to engage in transactions involving non-voting 
securities in any amount. EEI cites to paragraph 15 of Goldman Sachs, 
but that paragraph does not support EEI's contention. The Commission 
provided there an example of how a group of non-utility companies under 
common control might each purchase just under 10 percent of a public 
utility, but stop at that point in order to avoid becoming holding 
companies under section 1262(8) of EPAct 2005 and, therefore, 
potentially subject to section 203(a)(2). The Commission explained that 
authorization for such transactions may nevertheless require approval 
under other provisions of section 203, and specifically mentioned 
sections 203(a)(1)(A) and (B). This was not a suggestion that 
acquisitions of voting securities in an amount less than 10 percent or 
that acquisitions of non-voting securities in any amount cannot trigger 
the requirement for prior authorization by the Commission. Accordingly, 
EEI's request for clarification on this issue is denied.
---------------------------------------------------------------------------

    \42\ EEI Rehearing Request at 10 (citing The Goldman Sachs 
Group, Inc., 114 FERC ] 61,118, at P 15 (Goldman Sachs), order on 
reh'g, 115 FERC ] 61,303 (2006)).
---------------------------------------------------------------------------

D. 18 CFR Section 33.1(c)(8)--Blanket Authorization for a Holding 
Company Owning Only EWGs, QFs or FUCOs To Acquire Additional EWGs, QFs 
or FUCOs

    30. In Order No. 669, the Commission rejected requests that we 
determine that only companies that own traditional utilities, not those 
that own solely FUCOs, EWGs and/or QFs, are ``holding companies'' under 
amended section 203.\43\ The Commission noted that ``holding company'' 
in PUHCA 2005 means ``any company that directly or indirectly owns, 
controls, or holds, with the power to vote, 10 percent or more of the 
outstanding voting securities of a public utility company or of a 
holding company of any public utility company; * * * '' \44\ PUHCA 2005 
defines ``public-utility company'' to include an ``electric utility 
company.'' \45\
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    \43\ Order No. 669 at P 70.
    \44\ Id. (citing EPAct 2005 at 1262(8)).
    \45\ EPAct 2005 at 1262(14).
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    31. The Commission found that while Congress expressly excluded 
from the definition of holding company certain banks and other 
institutions, it did not similarly exclude from the definition of 
holding company entities that only own QFs, EWGs or FUCOs. Rather, 
section 1266(a) of PUHCA 2005 specifically directs the Commission to 
exempt QF/EWG/FUCO holding companies from the federal access to books 
and records provision; thus, the very language of the provision 
recognizes that such entities are holding companies. It directs the 
Commission to issue a final rule to exempt ``any person that is a 
holding company, solely with respect to one or more [QFs, EWGs, or 
FUCOs].'' Therefore, consistent with the concurrent determination in 
the PUHCA 2005 rehearing order, the Commission concluded that companies 
that acquire 10 percent or more of an EWG, FUCO or QF are holding 
companies as that term is used in PUHCA 2005 as well as FPA section 
203(a)(2).\46\
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    \46\ Order No. 669-A at P 49-51.
---------------------------------------------------------------------------

    32. However, to ensure that investment in the electric industry is 
not hampered and that encouragement of QFs is not undermined, the 
Commission granted a blanket authorization under FPA section 203(a)(2) 
for holding companies that own or control only EWGs, QFs or FUCOs to 
acquire the securities of additional EWGs, FUCOs or QFs.\47\
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    \47\ Id. at P 52; 18 CFR 33.1(c)(8).
---------------------------------------------------------------------------

1. Requests for Rehearing and Clarification
    33. TAPSG states that the Commission erred in creating a new 
blanket authorization under section 203(a)(2) for holding companies 
that own or control only EWGs, QFs, or FUCOs to acquire the securities 
of additional EWGs, QFs, or FUCOs.\48\ TAPSG asserts that the blanket 
authorization overlooks Congressional concern about the competitive 
effects of transfers of generation facilities and creates confusion 
that would discourage, rather than encourage, new investment. It 
contends that a holding company's acquisition of additional EWGs and 
QFs in the same geographic market could raise competitive concerns, 
particularly if the holding company owns other EWGs or QFs in the same 
geographic market that is a load pocket. TAPSG also argues that the 
confusion created by the blanket authorization under section 203(a)(2), 
in conjunction with section 203(a)(1) review of certain EWG and QF 
transactions, will create uncertainty that could chill, rather than 
encourage investment. TAPSG further argues that, if the Commission does 
not rescind the blanket authorization in 18 CFR section 33.1(c)(8), it 
should clarify which transactions remain subject to section 203(a)(1) 
review.
---------------------------------------------------------------------------

    \48\ TAPSG Rehearing Request at 2-5.
---------------------------------------------------------------------------

    34. In this regard, TAPSG and APPA/NRECA ask the Commission to 
affirm the conclusion in Order No. 669 that a holding company's 
acquisition of securities of an EWG that is a public utility, by which 
the holding company acquires control of the EWG, is a disposition of 
jurisdictional assets by the EWG and requires a filing with Commission 
under FPA section 203(a)(1) by the EWG.\49\ APPA/NRECA argue that this 
clarification is important because a single holding company could gain 
market power by acquiring a number of EWGs in a relevant geographic 
market.
---------------------------------------------------------------------------

    \49\ Id. at 5-6 (citing Order No. 669 at P 60 n.55); APPA/NRECA 
Rehearing Request at 9-12 (same).
---------------------------------------------------------------------------

    35. TAPSG and APPA/NRECA request clarification that the blanket 
authorization does not override the Commission's conclusion regarding 
the scope of section 203(a)(1)(D), concerning the acquisition of an 
existing generation facility with a value of $10 million that is used 
for interstate wholesale sales and over which the Commission has 
jurisdiction, and that if a public utility acquires an existing 
generation facility used for Commission-jurisdictional sales, whether a 
QF or any other type of generation facility, the transaction is subject 
to section 203 review. TAPSG argues that the plain language of section 
203(a)(1)(D) requires the review of acquisitions of generators, such as 
EWGs.\50\
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    \50\ TAPSG Rehearing Request at 6-7 (citing Order No. 669 at P 
87); APPA/NRECA Rehearing Request at 11-12.
---------------------------------------------------------------------------

    36. Moreover, TAPSG requests that the Commission clarify that a 
transaction will trigger section 203(a)(1)(D) review when a holding 
company that controls an EWG that is a public utility acquires another 
EWG or QF. They maintain that this is required by Enova Corporation and 
Pacific Enterprises (Enova).\51\ In addition, TAPSG argues that under 
Enova, section 203(a)(1)(D) review is required: (1) For the acquisition 
of another EWG or QF where the holding company itself is not

[[Page 42584]]

a public utility but owns or controls a public utility (such as an 
EWG), and (2) for the acquisition by a holding company that is not a 
public utility of a holding company that is not itself a public utility 
but that owns a public utility.\52\
---------------------------------------------------------------------------

    \51\ TAPSG Rehearing Request at 7-8 (citing Enova, 79 FERC ] 
61,107, at 61,494 (1997)); APPA/NRECA Rehearing Request at 11 
(citing Enova, 79 FERC ] 61,107 at 61,491-94 and Central Vermont 
Public Service Corporation, 39 FERC ] 61,295, at 61,960 (1987)).
    \52\ TAPSG Rehearing Request at 8.
---------------------------------------------------------------------------

    37. In summary, TAPSG asks the Commission to clarify that the 
section 203(a)(2) blanket authorization applies only to: (1) ``a 
holding company owning/controlling only EWGs, QFs, or FUCOs that (a) is 
not a public utility, (b) does not yet own or control a public utility 
(such as an EWG), and (c) is acquiring its first EWG or QF''; or (2) 
``a holding company owning/controlling only EWGs, QFs, or FUCOs that 
acquires a FUCO.'' \53\
---------------------------------------------------------------------------

    \53\ Id.
---------------------------------------------------------------------------

    38. In comparison, Occidental requests that the Commission clarify 
(or, in the alternative, grant rehearing) that the section 203(a)(2) 
blanket authorization in section 33.1(c)(8) applies to an acquisition 
of securities of holding companies that are holding companies solely 
with respect to holding EWGs, QFs, or FUCOs.\54\ Occidental argues that 
it would be inconsistent with the intent of Order No. 669-A for the 
acquisition of securities of such holding companies not to also be 
covered by this blanket authorization.\55\ In addition, Occidental 
argues that it would be arbitrary and capricious to provide blanket 
authorization for holding companies that own or control only EWGs, QFs, 
or FUCOs only when they acquire directly the securities of additional 
EWGs, QFs or FUCOs and not where the acquisition is structured as 
acquisition of securities of a holding company that holds only EWGs, 
QFs, or FUCOs. Occidental argues that what it requests would not 
undermine any Commission policy or efforts to prevent cross-
subsidization. Occidental argues that not granting blanket authority 
for the acquisition of securities of such holding companies will create 
unnecessary burdens on transactions and discourage investment in the 
electric industry.
---------------------------------------------------------------------------

    \54\ Occidental Rehearing Request at 3-5.
    \55\ Id. (citing Order No. 669-A at P 52).
---------------------------------------------------------------------------

2. Commission Determination
    39. We reject TAPSG's request to rescind the blanket authorization 
in section 33.1(c)(8), granted under section 203(a)(2) for holding 
companies that own or control only EWGs, QFs, or FUCOs to acquire the 
securities of additional EWGs, FUCOs, or QFs. The concerns raised in 
TAPSG's rehearing petition are focused on the competitive effects of 
generation transfers involving EWGs and QFs if this section 203(a)(2) 
blanket authorization is retained. As an initial matter (and as 
discussed further below), we note that this blanket authorization in no 
way affects any section 203(a)(1) authorizations required by EWGs 
themselves. The vast majority of EWGs located in the United States are 
public utilities and, to the extent such EWGs seek to sell or transfer 
control of their jurisdictional facilities to a holding company, such 
EWGs will be subject to a competitive review of the transaction under 
section 203(a)(1)(A), irrespective of the holding company's blanket 
exemption.\56\ Thus, TAPSG's concerns that EWG acquisitions will escape 
competitive review are misplaced.
---------------------------------------------------------------------------

    \56\ Further, although most holding companies are not public 
utilities, to the extent a holding company is also a public utility, 
a transaction in which it acquired an EWG's or QF's generation 
facilities (if such facilities are used for jurisdictional wholesale 
sales) may trigger the requirements of section 203(a)(1)(D).
---------------------------------------------------------------------------

    40. With respect to QFs, many QFs (cogeneration QFs, non-geothermal 
small power production QFs with capacity of 30 MWs or less, and 
geothermal small power production) are exempt from section 203 of the 
FPA and thus are not treated as public utilities subject to section 
203(a)(1)(A); thus, unlike the situation with EWGs, if such QFs were to 
sell or transfer control of their jurisdictional facilities to a 
holding company, there would be no competitive review by the Commission 
under section 203(a)(1).\57\ However, what TAPSG ignores is that there 
was no Federal review of such transactions by this Commission or by the 
SEC prior to EPAct 2005. QFs were largely exempted from PUHCA 1935 
regulation by virtue of the Commission's exemption authority under the 
Public Utility Regulatory Policies Act of 1978 (PURPA), and companies 
that owned QFs (or EWGs, for that matter) were not considered holding 
companies by virtue of owning an EWG or QF under PUHCA 1935. 
Accordingly, our blanket exemption here does nothing more than maintain 
the status quo with respect to any regulatory review required of 
holding company acquisitions of QF facilities.\58\ While we recognize 
the possibility that market power issues associated with QF ownership 
could become a concern in the future, even where the ownership is by a 
holding company that owns only QFs, EWG and FUCOs and there are no 
captive customers in the entire holding company system, TAPSG has not 
convinced us that there is a problem to remedy at this time or that our 
decision in any way undermines Congressional intent. Further, if in the 
future problems become apparent with respect to holding company 
acquisitions of QFs, the Commission may revisit the exemption from 
section 203 provided to QFs under PURPA and/or revisit the section 
203(a)(2) blanket authorization at issue here.\59\ We also disagree 
with TAPSG that the blanket authority creates any confusion that would 
discourage investment, and no other commenter argues that this is the 
case. At this time, we see no added benefit from the Commission's case-
by-case evaluation of these transactions under section 203(a)(2).\60\
---------------------------------------------------------------------------

    \57\ However, if a transaction involved a public utility and a 
QF, section 203 review, including a competitive review, may be 
required. If a public utility acquires all or part of a QF's 
jurisdictional facilities, the transaction may be subject to FPA 
section 203(a)(1)(A). Similarly, if a public utility proposes to 
merge or consolidate its facilities with those of a QF, the 
transaction would be subject to section 203(a)(1)(B), which applies 
when a public utility merges or consolidates its facilities with 
those of ``any other person.'' ``Person'' would include a QF. 
Further, a transaction in which a public utility seeks to acquire a 
QF's existing generation facility (if the QF facility is used for 
jurisdictional wholesale sales) may trigger section 203(a)(1)(D).
    \58\ We also have weighed the fact that to require new case-by-
case review of holding company acquisitions of QFs could impose a 
substantial burden on QFs.
    \59\ We note that in the Commission's recent rulemaking 
implementing revised section 210(n) of PURPA, the Commission 
proposed to eliminate certain QF exemptions from FPA sections 205 
and 206 and sought comment on whether it should eliminate other 
exemptions. In the final rule, however, the Commission retained the 
FPA section 203 exemption. Revised Regulations Governing Small Power 
Production and Cogeneration Facilities, Order No. 671, 71 FR 7,852 
at P 102 (February 15, 2006), FERC Stats. & Regs. P 31,203 (2006), 
order on reh'g, Order No. 671-A, 71 FR 30,585 (May 30, 2006), FERC 
Stats. & Regs. P 31,219 (2006).
    \60\ See Order No. 669 at P 55; Order No. 669-A at P 56, 62.
---------------------------------------------------------------------------

    41. Moreover, TAPSG does not explain why we should limit the 
applicability of the blanket authority in 18 CFR 33.1(c)(8) to 
situations where: (1) The holding company is not and does not own a 
public utility, and is acquiring its first EWG or QF; or (2) the 
holding company is acquiring a FUCO. As noted, it is likely that 
section 203(a)(1) would be triggered in any event for EWGs and, in many 
instances, QFs. Therefore, TAPSG's request that this restriction be 
placed on the applicability of the blanket authority is denied.
    42. We grant APPA/NRECA's request to clarify that a holding 
company's acquisition of the securities of an EWG public utility, by 
which the holding company acquires control of the public utility EWG, 
may be a jurisdictional disposition of assets by the EWG, which

[[Page 42585]]

requires approval under section 203(a)(1) even if the holding company 
has blanket authority under section 203(a)(2). The blanket authority 
under section 203(a)(2) in no way affects whether separate 
authorization for a particular transaction is required under section 
203(a)(1). We reaffirm the statements made in Order No. 669 regarding 
section 203(a)(1) review regarding EWGs \61\ and QFs.\62\ Granting 
blanket authority in section 33.1(c)(8) under section 203(a)(2) does 
not affect authorizations required under section 203(a)(1). Thus, TAPSG 
and APPA/NRECA's requests for clarification to this effect are granted.
---------------------------------------------------------------------------

    \61\ Order No. 669 at P 60 n.55 stating:
    [A] holding company acquisition of securities of an EWG would in 
some circumstances trigger section 203 review in any event by virtue 
of section 203(a)(1). This is because the EWG could well be a public 
utility and, to the extent the holding company acquired ``control'' 
of the EWG, we would construe the EWG to be ``disposing'' of its 
jurisdictional facilities and thus required to file for approval 
under section 203(a). A similar situation involving acquisition of 
securities of a QF would not trigger section 203 review, since QFs 
currently are exempted from FPA section 203 filing requirements by 
the Commission's PURPA regulations.
    \62\ Id. P 87 stating:
    [I]f a public utility acquires an existing generation facility 
used for Commission-jurisdictional sales, whether a QF or any other 
type of generation facility, the transaction is subject to section 
203. Although certain QFs themselves are exempted from any filing 
requirements under section 203 by virtue of our PURPA regulations, 
this does not mean that public utilities that acquire QFs are 
exempt. Additionally, there is no limitation in amended section 
203(a)(1)(D) on the type of generation facilities that trigger 
section 203 review, if they are used for interstate wholesale sales 
and the Commission has jurisdiction over them for ratemaking 
purposes. Further, even if the Commission had the discretion to 
exempt QF acquisitions from section 203 review, we do not think it 
would be necessarily consistent with the public interest to do so in 
light of EPAct 2005's elimination of QF ownership restrictions.
---------------------------------------------------------------------------

    43. We will continue to review dispositions of jurisdictional 
facilities by public utilities under section 203(a)(1) on a case-by-
case basis and we will also review public utility acquisitions of 
generating facilities under the new section 203(a)(1)(D) on a case-by-
case basis.\63\ TAPSG requests other clarifications interpreting 
section 203(a)(1) in light of the blanket authority granted in section 
33.1(c)(8). In effect, it asks us to modify the section 203(a)(2) 
blanket authority and we decline to do so. TAPSG's requests for 
clarification to this effect are denied.
---------------------------------------------------------------------------

    \63\ Order No. 669-A at P 103.
---------------------------------------------------------------------------

    44. Finally, we agree with Occidental that Order No. 669-A should 
be interpreted to provide blanket authorization for holding companies 
that own or control only EWGs, QFs, or FUCOs to acquire securities of a 
holding company that holds only EWGs, QFs, or FUCOs. We do so, however, 
consistent with our prior holding in Order No. 669 that such 
acquisitions will trigger review under section 203(a)(1) if the 
transaction results in a change of control of an EWG that is a public 
utility owned by the holding company whose securities are being 
acquired.

E. Section 33.2(j)--General Information Requirements Regarding Cross-
Subsidization

    45. As modified by Order No. 669-A, section 33.2(j)(1) requires 
that a section 203 applicant must explain, with appropriate evidentiary 
support (Exhibit M to the application), how it is assuring that the 
proposed transaction will not result in cross-subsidization of a non-
utility associate company or the pledge or encumbrance of utility 
assets for the benefit of an associate company. This explanation must 
disclose all existing pledges or encumbrances of utility assets and 
include a detailed showing that the transaction will not result in: (A) 
Transfers of facilities between a traditional public utility associate 
company that has captive customers or that owns or provides 
transmission service over jurisdictional transmission facilities, and 
an associate company; (B) new issuances of securities by traditional 
public utility associate companies that has captive customers or that 
owns or provides transmission service over jurisdictional transmission 
facilities, for the benefit of an associate company; (C) new pledges or 
encumbrances of assets of a traditional public utility associate 
company that has captive customers or that owns or provides 
transmission service over jurisdictional transmission facilities, for 
the benefit of an associate company; or (D) new affiliate contracts 
between non-utility associate companies and traditional public utility 
associate companies that have captive customers or that own or provide 
transmission service over jurisdictional transmission facilities, other 
than non-power goods and services agreements subject to review under 
sections 205 and 206 of the FPA.\64\ Section 33.2(j)(2) states that if 
no such assurance can be provided, the applicant must explain how such 
cross-subsidization, pledge, or encumbrance will be consistent with the 
public interest.\65\
---------------------------------------------------------------------------

    \64\ 18 CFR 33.2(j)(1)(i) and (ii).
    \65\ Id. at 33.2(j)(2).
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1. Requests for Rehearing and Clarification
    46. APPA/NRECA argue that the Commission should amend 18 CFR 
33.2(j)(1) to require that the explanation in Exhibit M address ``how 
applicants are providing assurance that it is not reasonably 
foreseeable that the proposed transaction will result in, at the time 
of the transaction or in the future, cross-subsidization of a non-
utility associate company or pledge or encumbrance of utility assets 
for the benefit of an associate company.'' \66\ APPA/NRECA argue that 
the omission of the phrase ``at the time of the transaction or in the 
future'' from section 33.2(j)(1), a phrase found in the parallel 
regulation at section 33.1(c)(5) (the blanket authorization for holding 
companies that include a transmitting utility or an electric utility to 
acquire a FUCO), creates conflicting requirements and will ``create 
confusion and invite abuse.'' \67\ APPA/NRECA assert that section 
33.2(j)(1) is inconsistent with Congressional intent that the 
Commission have broad authority to ensure that section 203 transactions 
do not result in cross-subsidization or asset pledges or encumbrances, 
even after the transaction is consummated, unless the Commission has 
found that they are consistent with the public interest.
---------------------------------------------------------------------------

    \66\ APPA/NRECA Rehearing Request at 2 (emphasis in the 
original).
    \67\ Id. at 4.
---------------------------------------------------------------------------

    47. APPA/NRECA also ask that the Commission clarify or amend 
section 33.2(j) to state that Exhibit M must be verified by a duly 
authorized corporate official of the holding company under 18 CFR 
385.2005 (Subscription and verification). APPA/NRECA argue this 
requirement is consistent with section 33.1(c)(5) and the Commission's 
existing regulations for section 203 applications.\68\
---------------------------------------------------------------------------

    \68\ Id. at 6-7.
---------------------------------------------------------------------------

    48. Moreover, APPA/NRECA request the Commission clarify that if the 
Commission later finds that an approved transaction has resulted in, at 
the time of the transaction or in the future, cross-subsidization of a 
non-utility associate company or pledge or encumbrance of utility 
assets for the benefit of an associate company, the Commission may find 
that such cross-subsidization, pledge, or encumbrance violates the 
Commission order and the relevant entities can be penalized. APPA/NRECA 
maintain that this will help to ensure that the holding company and its 
senior corporate officials are held responsible for the statements made 
in a section 203 application and to provide them notice of the 
consequences of a violation.\69\
---------------------------------------------------------------------------

    \69\ Id. at 7-8.

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[[Page 42586]]

2. Commission Determination
    49. We will grant APPA/NRECA's request in part. The Commission does 
not accept APPA/NRECA's assertion that section 33.2(j)(1), as revised 
in Order No. 669-A, creates confusion and invites abuse simply because 
it contains different requirements than the regulation against which 
APPA/NRECA chose to compare it or that it is inconsistent with 
Congressional intent. We agree, however, that adding to the regulations 
a verification requirement regarding the contents of the application 
and a requirement for the exercise of reasonable foresight in providing 
the explanation required under Exhibit M will help make the regulation 
more effective. With respect to reasonable foresight, we will modify 
the regulatory text of 18 CFR 33.2(j)(1) as follows:

    Of how applicants are providing assurance, based on facts and 
circumstances known to them or that are reasonably foreseeable, that 
the proposed transaction will not result in, at the time of the 
transaction or in the future, cross-subsidization of a non-utility 
associate company or pledge or encumbrance of utility assets for the 
benefit of an associate company.* * *

    50. These changes will not create an undue burden on the 
applicants. Our rules already require that the information in the 
application be verified by one having knowledge of the matters 
contained in the application and exhibits.\70\
---------------------------------------------------------------------------

    \70\ A specific verification requirement applicable to Exhibit 
M, as requested by APPA/NRECA, is unnecessary since, under section 
33.7, the original application, of which Exhibit M is a part, must 
be ``signed by a person or persons having authority with respect 
thereto and having knowledge of the matters therein set forth, and 
must be verified under oath.''
---------------------------------------------------------------------------

    51. In response to APPA/NRECA's request, the Commission clarifies 
that, if the Commission later finds that an approved transaction has 
resulted in cross-subsidization or a pledge or encumbrance, the 
Commission may find that it constitutes a violation of a Commission 
order and is subject to consequent penalties. Whether particular facts 
violate a Commission order is a matter for determination in an 
individual proceeding. If a violation is found, the appropriate remedy 
or penalty is also a matter properly addressed in that proceeding. 
Accordingly, a blanket statement in the regulations is not necessary.

III. Information Collection Statement

    52. The regulations of the Office of Management and Budget (OMB) 
\71\ require that OMB approve certain information requirements imposed 
by an agency. OMB has approved the information requirements contained 
in Order Nos. 669 and 669-A. Specifically, OMB approved the following 
information collection and assigned the corresponding OMB control 
numbers: ``Application under Federal Power Act Section 203'' (FERC-519) 
(1902-0082). This order denies rehearing requests and only clarifies 
the provisions of Order Nos. 669 and 669-A. This order does not make 
substantive modifications to the Commission's information collection 
requirements and, accordingly, OMB approval for this order is not 
necessary. However, the Commission will send a copy of this order to 
OMB for informational purposes.
---------------------------------------------------------------------------

    \71\ 5 CFR 1320.12 (2005).
---------------------------------------------------------------------------

    53. Interested persons may obtain information on the information 
requirements by contacting the following: The Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426 [Attention: 
Michael Miller, Office of the Executive Director, ED-34], Phone: (202) 
502-8415, Fax: (202) 273-0873, e-mail: michael.miller@ferc.gov.
    54. To submit comments concerning the collection(s) of information 
and provide estimates on the associated burden of these requirements, 
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 fo