Transactions Subject to FPA Section 203, 42579-42587 [E6-12047]
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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:
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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:
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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).
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(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.
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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:
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(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).
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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
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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
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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.
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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.
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20 Id.
21 See
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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
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to-subsidiary loans are authorized as
part of cash management programs even
if such loans are not under formal
money pool arrangements.32
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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
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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.
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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
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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
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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.
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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
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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)).
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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).
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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).
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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.
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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.
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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
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65 Id.
CFR 33.2(j)(1)(i) and (ii).
at 33.2(j)(2).
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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.
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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.
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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 (https://
www.ferc.gov) and in the Commission’s
Public Reference Room during normal
business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First Street, NE.,
Room 2A, Washington, DC 20426.
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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
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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.
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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.
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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\
---------------------------------------------------------------------------
\43\ Order No. 669 at P 70.
\44\ Id. (citing EPAct 2005 at 1262(8)).
\45\ EPAct 2005 at 1262(14).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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\
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\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.
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\66\ APPA/NRECA Rehearing Request at 2 (emphasis in the
original).
\67\ Id. at 4.
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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\
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\68\ Id. at 6-7.
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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\
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\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\
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\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.''
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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.
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\71\ 5 CFR 1320.12 (2005).
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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
