New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities, 35872-35892 [E7-12553]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 72, Number 125 (Friday, June 29, 2007)]
[Rules and Regulations]
[Pages 35872-35892]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-12553]



[[Page 35871]]

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Part VI





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Part 292



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

Federal Register / Vol. 72, No. 125 / Friday, June 29, 2007 / Rules 
and Regulations

[[Page 35872]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

[Docket No. RM06-10-001; Order No. 688-A]


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

Issued June 22, 2007.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on rehearing.

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SUMMARY: In this order on rehearing, the Federal Energy Regulatory 
Commission (Commission) denies rehearing on most major issues decided 
in Order No. 688, which amended its regulations governing small power 
production and cogeneration in response to section 1253 of the Energy 
Policy Act of 2005 (EPAct 2005), which added section 210(m) to the 
Public Utility Regulatory Policies Act of 1978 (PURPA). The Commission 
also clarifies certain aspects of the rule and adopts some additional 
filing requirements.

DATES: Effective Date: The revisions to our regulations in this order 
on rehearing will become effective July 30, 2007.

FOR FURTHER INFORMATION CONTACT: Susan G. Pollonais (Technical 
Information), Office of Energy Markets and Reliability, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6011.
    Marka Shaw (Technical Information), Office of Energy Markets and 
Reliability, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8641.
    Samuel Higginbottom (Legal Information), Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8561.
    Mason Emnett (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6540.
    Eric Winterbauer (Legal Information), Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8329.

SUPPLEMENTARY INFORMATION: Before Commissioners: Joseph T. Kelliher, 
Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon 
Wellinghoff.

Order on Rehearing and Clarification

I. Introduction

    1. On October 20, 2006, the Federal Energy Regulatory Commission 
(Commission) issued Order No. 688,\1\ in which the Commission revised 
its regulations governing the purchase requirement for electric energy 
produced by qualifying cogeneration and small power production 
facilities (QFs). This rulemaking proceeding was initiated to implement 
section 210(m) of the Public Utility Regulatory Policies Act of 1978 
(PURPA),\2\ which mandates termination of the requirement that an 
electric utility enter into a new contract or obligation to purchase 
electric energy from QFs \3\ if the Commission finds that the QF has 
nondiscriminatory access to one of three categories of markets defined 
in section 210(m)(1)(A), (B), or (C) of PURPA, as amended.
    2. As relevant here, section 210(m) provides for the following:
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    \1\ New PURPA Section 210(m) Regulations Applicable to Small 
Power Production and Cogeneration Facilities, Order No. 688, 71 FR 
64342 (Nov. 1, 2006), FERC Stats. & Regs. ] 31,233 (2006) (Final 
Rule).
    \2\ Section 210(m) was added to PURPA by section 1253 of the 
Energy Policy Act of 2005 (EPAct 2005). See Pub. L. 109-58, 1253, 
119 Stat. 594, 967 (2005).
    \3\ The requirement that an electric utility enter into a new 
contract or obligation to purchase electric energy from QFs is 
referred to herein as either the mandatory purchase obligation or, 
more simply, the purchase requirement.

    (i) Termination of the requirement that an electric utility 
enter into a new contract or obligation to purchase electric energy 
from a QF after certain specified findings are made by the 
Commission;
    (ii) Reinstatement of the purchase requirement upon a showing 
that the conditions for terminating the requirement are no longer 
met;
    (iii) Termination of the requirement that an electric utility 
enter into new contracts to sell electric energy to QFs after 
certain specified findings are made by the Commission;
    (iv) Reinstatement of the sale requirement upon a showing that 
the conditions for terminating the requirement are no longer met; 
and,
    (v) Preservation of existing contracts and obligations to 
purchase electric energy or capacity from, or to sell electric 
energy or capacity to, a QF.

    The Final Rule amended Part 292 of the Commission's regulations, 
pertaining to electric utilities' obligation to purchase electric 
energy from or sell electric energy to a QF, to address these 
provisions of section 210(m) and also to provide a process for applying 
for the reinstatement of the requirements to purchase electric energy 
from or to sell electric energy to QFs upon a showing that the 
conditions for the removal of those requirements are no longer met.
    3. New Sec.  292.309 of the Commission's regulations describes the 
findings that the Commission must make to justify relieving an electric 
utility's obligation to enter into new QF purchase contracts. If the 
Commission finds that the QF has nondiscriminatory access to one of 
three types of wholesale markets described in subparagraphs (A), (B), 
and (C) of section 210(m)(1), the requirement that the electric utility 
enter into new contracts or obligations is terminated. In the Final 
Rule, the Commission concluded that the four existing ``Day 2'' markets 
\4\ satisfy the requirements of subparagraph (A). The Commission found 
that the ``Day 1'' markets \5\ satisfy some, but not all, of the 
requirements of subparagraph (B). Finally, the Commission found that 
the markets operated by the Electric Reliability Council of Texas 
(ERCOT) satisfy the requirements of subparagraph (C). All of these 
markets are administered by regional transmission organizations (RTOs) 
or independent system operators (ISOs).
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    \4\ The four existing ``Day 2'' markets are those auction based 
day-ahead and real-time markets operated by the Midwest Independent 
Transmission System Operator Corp. (MISO), PJM Interconnection, LLC 
(PJM), New York Independent System Operator, Inc. (NYISO), and ISO 
New England, Inc. (ISO-NE).
    \5\ The existing ``Day 1'' markets are those real-time markets 
operated by the California Independent System Operator Corporation 
(CAISO) and the Southwest Power Pool (SPP).
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    4. With regard to analyzing whether a QF has nondiscriminatory 
access to one of these markets, the Commission adopted three rebuttable 
presumptions. First, the Final Rule concluded that the existence of an 
open access transmission tariff (OATT), or a reciprocity tariff filed 
by a non-public utility pursuant to the Commission's open access 
regulations,\6\ justified a rebuttable presumption that QFs have 
nondiscriminatory access to the markets in the transmission provider's 
service territory. Second, the Commission adopted a rebuttable 
presumption that QFs located within one of the four existing ``Day 2'' 
markets also have nondiscriminatory access to those markets. Third, the 
Commission concluded that QFs with a net capacity no greater than 20 MW 
may not have nondiscriminatory access to any market, notwithstanding 
the availability of service under an OATT or their location within a 
``Day 2'' market. The Commission therefore adopted a rebuttable 
presumption that such small

[[Page 35873]]

QFs do not have nondiscriminatory access to any market.
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    \6\ 18 CFR 35.28(e). An OATT provides interconnection as well as 
transmission services on a nondiscriminatory basis.
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    5. Requests for rehearing and/or clarification of these rulings, 
and the procedure implementing them, were received from the American 
Forest and Paper Association (American Forest & Paper) and California 
Cogeneration Council (CCC), Central Vermont Public Service Corporation 
(Central Vermont), Cogeneration Association of California and the 
Energy Producers and Users Coalition (Cogeneration Association of 
California), the Council of Industrial Boiler Owners (CIBO), Deere & 
Company (Deere), Edison Electric Institute (EEI), Oklahoma Gas and 
Electric Company (OG&E), jointly from the Electricity Consumers 
Resource Council (ELCON), the American Iron and Steel Institute, the 
American Chemistry Council, and the Council of Industrial Boiler Owners 
(Industrial Parties), National Rural Electric Cooperative Association, 
(NRECA), Occidental Chemical Corporation (Occidental), PacifiCorp, and 
Public Interest Organizations (PIOs). Southern California Edison (SCE) 
and PJM Interconnection, Inc. (PJM) filed answers to the requests for 
rehearing. ELCON and Cogeneration Association of California filed 
answers those answers.\7\
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    \7\ Rule 713(d) of the Commission's Rules of Practice and 
Procedure, 18 CFR 383.713(d), provides that the Commission will not 
permit answers to requests for rehearing. We will, accordingly, 
reject SCE and PJM's answers to the requests for rehearing. Rule 
213(a)(2) of the Commission's Rules of Practice and Procedure, 18 
CFR 385.213(a)(2), prohibits an answer to an answer unless otherwise 
ordered by the decisional authority. We are not persuaded to accept 
the answers of ELCON and Cogeneration Association of California and 
will, therefore, reject them. The alternative motions to reject of 
ELCON and Cogeneration Association of California are rejected as 
moot.
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    6. As discussed below, the Commission generally denies the requests 
for rehearing of the Final Rule. The Commission continues to believe 
that the Final Rule appropriately implements section 210(m) by 
identifying what type of markets satisfy the requirements of sections 
210(m)(1)(A), (B), and (C) and the criteria that will be used to 
determine whether a QF has nondiscriminatory access to one of those 
markets. We therefore do not disturb the basic implementation structure 
established in that order. We do, however, grant clarification 
regarding certain specific matters. The Commission addresses each of 
these issues in turn.

II. Discussion

A. Three Types of Markets

    7. Section 210(m)(1) identifies three types of markets, 
nondiscriminatory access to which will satisfy the findings the 
Commission must make to terminate an electric utility's purchase 
requirement. As the Commission explained in the Final Rule, the 
statutory language of sections 210(m)(1)(A), (B), and (C) requires us 
to differentiate among distinct types of markets when analyzing whether 
an electric utility will be relieved of its purchase obligation. The 
Commission must terminate the mandatory purchase obligation if we find 
that a QF has nondiscriminatory access to:

    (A) ``independently administered, auction-based day ahead and 
real time wholesale markets for the sale of electric energy'' and 
``wholesale markets for long-term sales of capacity and electric 
energy'';
    (B) ``transmission and interconnection services that are 
provided by a Commission-approved regional transmission entity and 
administered pursuant to an open access transmission tariff that 
affords nondiscriminatory treatment to all customers'' and 
``competitive wholesale markets that provide a meaningful 
opportunity to sell capacity, including long-term and short-term 
sales, and electric energy, including long-term, short-term and 
real-time sales, to buyers other than the utility to which the [QF] 
is interconnected''; \8\ or,
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    \8\ In determining whether a meaningful opportunity to sell 
exists, section 210(m)(1)(B) directs the Commission to consider, 
among other factors, evidence of transactions within the relevant 
market.
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    (C) ``wholesale markets for the sale of capacity and electric 
energy that are, at a minimum, of comparable competitive quality as 
markets described in subparagraphs (A) and (B).''

    8. In the Final Rule, the Commission considered the specific 
criteria set forth in these statutory provisions and concluded that 
certain markets in the United States satisfied some or all of the 
requirements of each. The Commission rejected proposals to adopt a 
single standard for relief, which in effect would interpret sections 
210(m)(1)(A), (B), and (C) as collectively defining a single type of 
market, access to which would require termination of the purchase 
requirement. The Commission found that the most reasonable 
interpretation of section 210(m)(1) is that Congress, in separately 
describing three different types of markets, was requiring the 
Commission to differentiate among each type of market when determining 
whether to terminate the purchase requirement.
1. Section 210(m)(1)(A)
    9. Section 210(m)(1)(A) of PURPA requires the Commission to 
terminate an electric utility's obligation to purchase from a QF if the 
QF has nondiscriminatory access to (i) independently administered, 
auction-based, day ahead and real time wholesale markets for the sale 
of electric energy; and (ii) wholesale markets for long-term sales of 
capacity and electric energy. In the Final Rule, the Commission found 
that the four existing ``Day 2'' markets, MISO, PJM, ISO-NE and NYISO, 
satisfy the first prong of section 210(m)(1)(A) because the markets 
administered by these RTO/ISOs are, as required by the statute, 
independently administered, auction-based day ahead and real time 
wholesale markets for electricity.\9\ The Commission further found that 
the existence of bilateral long-term contracts for long-term sales of 
capacity and energy in these markets satisfies the second prong of 
section 210(m)(1)(A). Since both of these requirements are satisfied, 
the Commission concluded that a showing of nondiscriminatory access to 
any of these ``Day 2'' markets would terminate the purchase 
requirement.
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    \9\ The Commission stated that any future determinations of 
whether a new ``Day 2'' market satisfies the requirements of section 
210(m)(1)(A) would be considered on a case-by-case basis, either in 
response to an application for termination of the mandatory purchase 
obligation or a petition for declaratory order.
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Requests for Rehearing
    10. No petitioner challenges the Commission's determination that 
the existing ``Day 2'' RTO/ISO markets satisfy the requirements of the 
first prong of section 210(m)(1)(A), i.e., that they are independently 
administered, auction-based day ahead and real time wholesale 
electricity markets. Requests for rehearing instead focus on the second 
prong, regarding whether a wholesale market for long-term sales of 
capacity and electric energy also exists in these regions. PIOs argue 
that the mere existence of some bilateral long-term contracts does not 
demonstrate the existence of a competitive wholesale market for long-
term sales or actual ``meaningful opportunities'' for QFs to sell 
energy or capacity long-term to multiple buyers. PIOs therefore contend 
that the Commission erred in finding that the ``Day 2'' markets satisfy 
the requirements of section 210(m)(1)(A). Cogeneration Association of 
California agrees that the existence of a ``Day 2''

[[Page 35874]]

market does not equate to a long-term market, arguing that access to a 
long-term market is essential to provide the assurance of long-term 
revenue necessary to provide incentives for construction of new 
resources.
    11. American Forest & Paper and CCC argue that there has never been 
a time in the history of the power industry when some bilateral 
contracts did not exist. They contend that there is no evidentiary 
basis that shows such contracts are available to QFs on a 
nondiscriminatory basis or that there is a market for such contracts. 
They argue that the word ``market'' presumes more than an occasional, 
isolated transaction. American Forest & Paper and CCC argue that in the 
Final Rule the Commission not only fails to explain why the existence 
of bilateral contracts constitutes a meaningful competitive market, but 
also fails to establish any standard for what constitutes a ``long term 
sale,'' examine any of the bilateral contracts it believes exist to 
determine if they meet any such standard, or consider whether bilateral 
contracts are in fact available to QFs in any meaningful sense.
    12. Cogeneration Association of California adds that the 
insufficiency of the bilateral markets is also demonstrated by the lack 
of meaningful participation in utility requests for offers. 
Cogeneration Association of California argues that the current practice 
of bilateral contracting is not indicative of a competitive market, nor 
is it proof that QFs have a meaningful opportunity to participate in 
whatever markets are there. It argues that there is significant 
discrimination against QFs when they attempt to enter into bilateral 
contracts.
    13. American Forest & Paper and CCC also argue that the Final Rule 
errs as a matter of law by determining generically that ``Day 2'' 
markets satisfy section 210(m)(1)(A) rather than requiring utilities to 
demonstrate, on a case-by-case basis, the factual basis upon which 
relief is requested, which they argue is required by section 210(m)(3). 
American Forest & Paper and CCC contend that the Commission simply 
presumed adequate wholesale markets existed in the ``Day 2'' markets, 
rendering the language of section 210(m)(1)(A)(ii) of the statute a 
nullity by not requiring applicants to set forth the factual basis on 
which relief is requested. American Forest & Paper and CCC complain 
that QFs have been denied the opportunity to challenge the specific 
findings after sufficient notice of the factual claims being made.
    14. American Forest & Paper and CCC cite Alliant Energy Corporate 
Services Inc.\10\ as support for its belief that section 210(m)(3) 
requires notice to each affected QF prior to the Commission making a 
determination under section 210(m)(1). American Forest & Paper and CCC 
compare the Commission's generic treatment of ``Day 2'' markets with 
its case-by-case procedures for the reinstatement of the obligation, 
despite the almost identical statutory language in sections 210(m)(3) 
and 210(m)(4). American Forest & Paper argues that ``regulations cannot 
alter the statutory scheme,'' \11\ stating that the procedural 
requirements have been inappropriately interpreted away in the Final 
Rule.
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    \10\ 113 FERC ] 61,024 (2005).
    \11\ American Forest & Paper Request for Rehearing at 13 (citing 
P. Gioso & Sons, Inc. v. Occupational Safety and Health Review 
Commission, 115 F.3d 100, 105 (1st Cir. 1997)).
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    15. In American Forest & Paper and CCC's view, Congressional intent 
to encourage QF development supports interpreting section 
210(m)(1)(A)(ii) as requiring the Commission to find, based on specific 
evidence, that there is a meaningfully competitive market prior to 
terminating the mandatory purchase obligation. American Forest & Paper 
and CCC note, for example, that EPAct 2005 did not repeal PURPA and 
provided for termination of the purchase requirement only if a very 
particular demonstration is made.
    16. Industrial Parties similarly argue that the Commission erred in 
categorically finding that ``Day 2'' markets provide QFs with access to 
long-term wholesale markets. Industrial Parties contend that the 
Commission has ignored evidence that establishes that these markets are 
in their infancy. While acknowledging that suppliers will offer QFs a 
bilateral contract in the organized markets, Industrial Parties argue 
that the rates and terms and conditions of such contracts typically are 
not truly long-term and are discriminatory. Industrial Parties state 
that the long-term markets that exist are predominantly for resale--
generators selling to load serving entities that in many cases have 
divested generation--and that these contracts are typically for a 
period of 6 to 18 months.
    17. Industrial Parties also argue that the Commission incorrectly 
assumed that access to short-term ``Day 2'' markets is equivalent to a 
finding of access to long-term markets under section 210(m)(1)(A)(ii). 
Industrial Parties contend that the Commission must address the 
definition of ``long-term,'' arguing that the Commission appears to 
view a market in excess of one year as long-term. Industrial Parties 
contend that a long-term market is a market of several years' duration 
or at least the timeframe for planning a new generator, which they 
state is three to five years for a gas-fired combined cycle unit. 
Industrial Parties ask that the Commission require utility applicants 
to present information on the short- and long-term capacity obligations 
of load-serving entities in the relevant markets, their practices for 
meeting such obligations, and any barriers to entry into such markets.
    18. Finally, American Forest & Paper and CCC argue that the 
Commission's interpretation of section 210(m)(1)(A)(ii) violates rules 
of statutory construction. Because subparagraph (C) specifically refers 
to markets for the sale of capacity under both subparagraphs (A) and 
(B), defining a third type of market that is ``similar'' to 
subparagraphs (A) and (B), American Forest & Paper and CCC argue it is 
nonsensical to conclude that the markets for capacity referenced in 
subparagraphs (A)(ii) and (B)(ii) are not similar as between 
themselves. American Forest & Paper and CCC therefore argue that the 
Commission erred by not interpreting subparagraph (A)(ii) as imposing 
qualitative requirements comparable to those imposed under subparagraph 
(B)(ii). In American Forest & Paper and CCC's view, otherwise the 
inclusion of a requirement that the Commission review specific 
``evidence of transactions'' in subparagraph (B)(ii) would require the 
Commission to ignore evidence of transactions when applying 
subparagraph (A)(ii), which the Commission did not do in the Final 
Rule.
Commission Determination
    19. The Commission denies rehearing of the determination that the 
four existing ``Day 2'' markets (MISO, PJM, NYISO, and ISO-NE) satisfy 
the requirements of the second prong of section 210(m)(1)(A). 
Petitioners on rehearing essentially argue that the Commission should 
have imposed a standard higher than what the statutory language 
literally requires, i.e., nondiscriminatory access to ``wholesale 
markets for long-term sales of capacity and electric energy.'' The 
Commission declined to do so in the Final Rule and we affirm that 
determination here.
    20. The Commission did not simply assume the existence of long-term 
markets in the ``Day 2'' markets, as some petitioners argue. Rather, 
the Commission found that the existence of bilateral long-term 
contracts for long-term sales of capacity and energy is a sufficient 
indication of a market. The Commission continued that it is reasonable 
to conclude that the

[[Page 35875]]

subparagraph (A)(ii) requirement for long-term markets is met because 
bilateral long-term contracts are available to participants in the 
footprints of the MISO, PJM, ISO-NE, and NYISO. The Commission noted 
that long-term contracts were to be expected in these markets because 
of the nature of these markets. In this regard, the transmission access 
offered by RTOs allows suppliers (including QFs) the opportunity to 
enter into long-term bilateral contracts. RTOs have no incentive to 
favor one set of suppliers over others in providing transmission 
access. By eliminating pancaked rates, eliminating problems with 
internal loop flows, and improving the reliability of transmission 
operations over a broad multi-utility region, an RTO offers regional 
transmission service which facilitates longer-term contracting 
practices. This is because an RTO's footprint encompasses many 
different wholesale buyers, providing significant opportunity for a 
seller to reach many potential wholesale buyers.
    21. In addition, organized markets operated by an RTO facilitate 
long-term bilateral contracts between sellers (including QFs) and 
wholesale buyers by reducing the costs to sellers of making long-term 
bilateral supply commitments. In the event a seller is unable to 
produce the energy required under a bilateral contract (for example, 
because of an outage), the seller can easily acquire replacement energy 
from the organized market at a transparent and competitive price. Even 
when the seller is physically capable of producing its contractually-
required energy, the seller can acquire the energy from the RTO's 
market whenever it is cheaper to do so. Both of these factors reduce 
the cost to a seller of entering into a long-term bilateral 
contract.\12\
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    \12\ Final Rule at P 120.
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    22. With respect to bilateral long-term markets in these RTO/ISOs, 
the Commission noted that no commenters argued that long-term contracts 
do not exist in these markets or that QFs are precluded from entering 
into them with willing buyers.\13\ The Commission also pointed out that 
electronic quarterly report (EQR) filings indicate that there are in 
fact contracts for long-term sales of capacity and energy in each of 
the ``Day 2'' markets. The Commission concluded that the existence of 
these long-term contracts is a sufficient indication that long-term 
wholesale markets exist in those regions. It is telling that no 
petitioner on rehearing challenges (indeed, several petitioners 
concede) that long-term contracts exist in the ``Day 2'' markets. 
Instead, petitioners argue that existence of such contracts does not 
necessarily indicate that an adequate market for long-term energy and 
capacity exists. Yet the very fact that buyers and sellers of long-term 
energy and capacity have found each other, evidenced by the contracts 
they have entered into, demonstrates that a market for such products 
does in fact exist, which is all that the statute requires.
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    \13\ Final Rule at P 117-20.
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    23. The thrust of many of the arguments on rehearing is that the 
Commission should have considered whether these long-term markets were 
competitive or as robust as QFs would like. That is not the standard 
set forth by Congress in section 210(m)(1)(A)(ii), which requires only 
that a long-term market is present, not that it be competitive or that 
it meet the subjective preferences of all QFs. As the Commission noted 
in the Final Rule, Congress knew how to impose a more specific level of 
review regarding the quality of the relevant long-term market since, in 
contrast to the language it used in section 210(m)(1)(A)(ii), it 
expressly used prescriptive language in section 210(m)(1)(B)(ii).
    24. Section 210(m)(1)(A)(ii) requires only that we find access to 
``wholesale markets for long-term sales of capacity and electric 
energy.'' The term ``market'' is not defined with respect to any 
particular number of purchasers or sellers or the quality of the 
contracts available. One definition is ``the action or business of 
buying and selling; an instance of this, a commercial transaction; a 
(good or bad) bargain.'' \14\ Another definition is ``a meeting 
together of people for the purpose of trade by private purchase and 
sales and usually not by auction.'' \15\ These standard definitions 
support the Commission's finding that the ability of QF sellers to 
reach purchasers and the existence of long-term contracts for capacity 
and energy are sufficient to determine that ``markets'' exist for 
purposes of section 210(m)(1)(A)(ii). In contrast to section 
210(m)(1)(A)(ii), section 210(m)(1)(B)(ii) requires us to find access 
to ``competitive wholesale markets that provide a meaningful 
opportunity to sell capacity, including long-term and short-term sales, 
and electric energy, including long-term, short term and real-time 
sales.'' Under this statutory directive, the Commission must not only 
find that markets exist, but it must assess the quality of the markets 
and find that they are ``competitive.'' Congress chose not to require a 
finding of ``competitive'' long-term markets as a condition of invoking 
section 210(m)(1)(A)(ii) and we have given reasonable meaning to this 
difference in language.\16\
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    \14\ The New Oxford English Dictionary Vol. 1 A-M (1993 ed.).
    \15\ Webster's New Collegiate Dictionary (1979 ed.).
    \16\ Some petitioners argue that the Commission's reliance on 
EQR reports to find the existence of a long-term market in ``Day 2'' 
regions is contradicted by Congress' reference to ``evidence of 
transactions'' in section 210(m)(1)(B), but not in section 
210(m)(1)(A). The requirement in subparagraph (B) for evidence of 
transactions does not bar the use of such evidence in subparagraph 
(A), but merely indicates that such evidence is not required under 
subparagraph (A).
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    25. Congress's decision to establish different standards in 
subparagraphs (A) and (B) makes sense in light of the ultimate question 
of whether a QF has nondiscriminatory access to potential purchasers 
other than the host utility, sufficient to justify terminating the 
purchase requirement, which is the overarching theme of section 
210(m)(1). In the ``Day 2'' markets, which were in existence when EPAct 
2005 was enacted and of which Congress was aware when it was 
considering PURPA reform, energy sold under bilateral long-term 
contracts as well as in the competitive day-ahead and real-time energy 
markets is simply scheduled as a delivery to the RTO and ISO grid. 
These market conditions make it possible for parties to enter into 
long-term contracts with confidence that electric energy sold pursuant 
to these contracts will be delivered. It is reasonable to conclude, 
therefore, that Congress considered the criteria specified for long-
term contracts in section 210(m)(1)(B) unnecessary for section 
210(m)(1)(A). This explains the distinctions embedded in the standards 
set forth in sections 210(m)(1)(A) and 210(m)(1)(B).
    26. It is true, as petitioners point out, that in some ``Day 2'' 
markets there is no formalized market for long-term sales of energy and 
capacity. It may also be true that such long-term markets are nascent 
and that the sales that do occur are predominantly to load serving 
entities for resale. All that is required by section 210(m)(1)(A)(ii), 
however, is that there be a market, not that it has particular market 
attributes desired by petitioners. Petitioners have offered no 
reasonable alternative to our interpretation of section 210(m)(1).
    27. Petitioners are correct to point out that the Commission did 
not expressly define what length of contract it considered ``long-
term'' within the meaning of section 210(m)(1)(A)(ii). The Commission 
explained, however, that it was relying on EQR data to find that long-
term contracts existed in the ``Day 2'' markets. Long-term contracts 
are defined for EQR purposes as having a

[[Page 35876]]

term of one year or more and, thus, the Commission's findings regarding 
long-term contracts in the Final Rule incorporated that definition. 
While some petitioners argue that a longer-term should have been used, 
we continue to believe that contracts of a year or more are 
sufficiently long-term to meet the statutory requirement that there be 
``wholesale markets for long-term sales of capacity and energy'' within 
the meaning of section 210(m)(1)(A)(ii).\17\
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    \17\ Although the statute contrasts real-time, day-ahead, and 
long-term wholesale sales, it provides no definition of those 
categories of transactions. Nevertheless, the terms real-time and 
day-ahead markets were well known with respect to ISOs and RTOs at 
the time EPAct 2005 was enacted and definitions of these markets 
were well understood, i.e., Congress knew the meaning the terms as 
used with respect to ISOs and RTOs existing at the time of enactment 
of EPAct 2005. Additionally, the Commission at the time of enactment 
of EPAct 2005 had for years defined long-term contracts under the 
OATT as one year or longer. Similarly, the Commission has treated 
power sales with a contract term of greater than one year to be 
``long-term'' for reporting purposes. See, e.g., Revised Public 
Utility Filing Requirements, Order No. 2001, 67 FR 31043, FERC 
Stats. & Regs. ] 31,127 (2002), Order No. 2001-A, 100 FERC ] 61,074, 
reconsideration and clarification denied, Order No. 2001-B, 100 FERC 
] 61,342 (2002). We thus believe it is reasonable to use the 
convention of treating contracts of a year or more as ``long-term'' 
consistent with our longstanding practice.
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    28. We note that the Commission has initiated a proceeding to 
explore ways to improve the operation of wholesale organized electric 
markets administered by RTOs and ISOs, including actions the Commission 
might take to further improve opportunities for long-term contracting 
in RTO and ISO regions.\18\ While we disagree with petitioners who 
argue that QFs above 20 MW do not have access to long-term contracting 
opportunities in organized markets, or that section 210(m)(1)(A) 
requires us to find ``competitive'' or ``robust'' contracting 
opportunities, we are taking steps to facilitate additional 
opportunities for long-term contracting.
---------------------------------------------------------------------------

    \18\ Wholesale Competition in Regions with Organized Electric 
Markets, 119 FERC ] 61,306.
---------------------------------------------------------------------------

    29. The Commission also rejects arguments that it may not make 
generic findings in this rulemaking as to the ``Day 2'' markets 
satisfying the requirements of section 210(m)(1)(A). The Commission has 
broad discretion to adopt generic policy or make generic findings 
through the rulemaking process rather than case-by-case 
adjudications.\19\ Establishing generic findings in this rulemaking 
provides all parties, including electric utilities and QFs alike, a 
reasonable chance to be heard on common issues that arise in various 
market structures and involving classes of QFs. Indeed, no party has 
sought rehearing of the Commission's conclusion that the ``Day 2'' 
markets satisfy the first prong of section 210(m)(1)(A). It is just as 
appropriate for the Commission to find generically, in this rulemaking, 
that long-term markets exist in the ``Day 2'' RTO/ISOs as it is to find 
that those RTO/ISOs operate independently administered, auction-based 
day ahead and real time wholesale markets within the meaning of section 
210(m)(1)(A)(i).
---------------------------------------------------------------------------

    \19\ Securities and Exchange Comm'n v. Chenery, 332 U.S. 194, 
202-03, reh'g denied, 332 U.S. 747 (1947).
---------------------------------------------------------------------------

    30. These generic findings do not violate the requirements of 
section 210(m)(3), as some petitioners argue. Under section 210(m)(1), 
the Commission must terminate the purchase requirement if it makes 
certain findings regarding nondiscriminatory access to specified 
markets. That provision of the statute does not specify the particular 
procedural mechanism the Commission must use in making those findings 
and, thus, the Commission has discretion to act through a rulemaking, 
case-by-case determinations, or some combination thereof. Section 
210(m)(3) does not, as the petitioners appear to assume, require the 
Commission to await an application from an electric utility in order to 
make any of the particular findings specified in section 210(m)(1). 
While the Commission made certain generic findings in the Final Rule, 
it also required electric utilities (including those in the ``Day 2'' 
markets) that seek relief from the obligation to enter into new 
contracts or obligations with QFs to file an application pursuant to 
regulations implementing section 210(m)(3).\20\ Thus, the Commission 
has incorporated the application process into its implementing 
regulations, combining the application procedures with generic findings 
and rebuttable presumptions to streamline the Commission's review. The 
resulting structure is fully consistent with the requirements of both 
sections 210(m)(1) and 210(m)(3).\21\
---------------------------------------------------------------------------

    \20\ Final Rule at P 102.
    \21\ The comparative structures of sections 210(m)(3) and 
210(m)(4) do not support a different outcome. Section 210(m)(4) 
specifies the procedural requirements for reinstating the purchase 
requirement after the Commission has entered an order terminating 
that requirement and, thus, does not govern the Commission's initial 
procedures for acting to terminate the requirement.
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2. Section 210(m)(1)(B)
    31. Section 210(m)(1)(B) requires termination of the purchase 
obligation if a QF has nondiscriminatory access to (i) transmission and 
interconnection services provided by a Commission-approved regional 
transmission entity pursuant to an open access tariff and (ii) 
competitive wholesale markets providing a meaningful opportunity to 
sell long-term and short-term capacity and electricity to buyers other 
than the interconnecting electric utility. The Commission concluded in 
the Final Rule that the CAISO and SPP are regional transmission 
entities within the meaning of the first prong of section 210(m)(1)(B), 
but made no findings as to the second prong for any market, including 
those operated by CAISO and SPP. The Commission also stated that any 
future determinations of what transmission providers qualify as a 
regional transmission entity within the meaning of the first prong will 
be made on a case-by-case basis. The Commission provided examples of 
factors it may consider in making that determination, such as 
sufficient regional scope or configuration of the multiple discrete 
transmission systems the regional transmission entity controls.
Requests for Rehearing
    32. Occidental argues that the Commission erred in reserving the 
discretion to deem an entity a ``Commission-approved regional 
transmission entity'' in the context of a section 210(m) proceeding. 
Because section 210(m)(1)(B)(i) refers to a ``Commission-approved'' 
entity, Occidental argues that a transmission provider must have been 
deemed by the Commission to be a ``regional transmission entity'' prior 
to the filing of an application for relief from the purchase 
requirement.
    33. PacifiCorp argues that evidence of robust bilateral markets or 
actual sales by a QF to wholesale non-PURPA purchasers should be 
considered when the Commission determines whether QFs have the 
requisite ``meaningful opportunity'' to sell capacity and energy to 
other buyers within the meaning of section 210(m)(1)(B)(ii). PacifiCorp 
offers factual examples of QF plans to participate in wholesale 
markets, depending on market prices, although it acknowledges that the 
examples it used are extreme and did not materialize. PacifiCorp asks 
the Commission to establish a rebuttable presumption that evidence of a 
robust bilateral market featuring liquid trading points, or actual 
sales by QFs, should be adopted for purposes of implementing section 
210(m)(1)(B)(ii). Alternatively, PacifiCorp asks the Commission to 
provide further guidance as to how the standards of that section will 
be applied.

[[Page 35877]]

    34. With regard to the SPP market, OG&E argues that the Commission 
erred in declining to find that utilities operating in SPP also satisfy 
the second prong of section 210(m)(1)(B) or to provide guidance with 
respect to the information required for utilities to make such a 
showing. OG&E argues that its comments on the NOPR adequately 
demonstrated that QFs have nondiscriminatory access to competitive 
markets within SPP. If the evidence it submitted was insufficient, OG&E 
claims the Commission erred by failing to provide guidance as to what 
type of information would satisfy the Commission's requirements. OG&E 
contends that such guidance would reduce the costs and burdens 
associated with preparing an application under section 210(m).
    35. With regard to the CAISO market, Cogeneration Association of 
California argues that the lack of new construction in California, 
despite a clear supply shortage, is evidence that competitive long-term 
markets do not exist in that region. Cogeneration Association of 
California also argues that competitive markets must have price 
transparency, including both pricing terms and non-price terms, 
contending that there is virtually no disclosure to any market 
participant of prices secured or approved for capacity or energy 
purchased by utilities. Industrial Parties point to other 
characteristics of the California market that, in their view, would 
preclude a finding of access to sufficiently competitive markets, such 
as exit fees, the lack of direct access, and the dominance of utility 
generation in an otherwise thinly traded market.
Commission Determination
    36. We disagree with Occidental's assertion that a transmission 
entity must have been deemed by the Commission to be a ``regional 
transmission entity'' prior to the filing of an application for relief 
from the purchase requirement. As we explained in the Final Rule, 
section 210 does not define regional transmission entity and, 
therefore, the Commission has discretion in interpreting that term. At 
the time of enactment of section 210(m), Congress was aware of the 
existence of Commission-approved RTOs and ISOs with varying degrees of 
regional scope (some spanning many states and some covering only large 
individual states), as well as the continuing voluntary development of 
various types of transmission organizations.\22\ It is reasonable to 
conclude that Congress, by using the generic term ``regional 
transmission entity'' in section 210(m)(1)(B)(i), intended to leave it 
to the Commission's discretion to determine on a case-be-case basis 
whether or not an entity is regional within the meaning of the 
statute.\23\
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    \22\ Indeed Congress, in EPAct 2005 incorporated into the 
Federal Power Act (FPA) definitions of RTO and ISO, with the RTO 
definition specifically recognizing that such an entity must be of 
sufficient ``regional'' scope, whereas the ISO definition does not 
contain a sufficient regional scope element. Pub. L. 109-58, 1291, 
119 Stat. 594, 984 (2005) (codified at 16 U.S.C. 796(27), (28)). Cf. 
Pub. L. 109-58, 1286, 119 Stat. 594, 981 (2005) (adding section 
206(a)(2) to the FPA, allowing Commission to order refunds for 
certain sales in ``organized'' markets).
    \23\ Congress in section 210(m) did not use the term ``regional 
transmission organization'' and thus presumably did not intend to 
limit a ``regional transmission entity'' to the regional scope 
requirements of Order No. 2000. Regional Transmission Organizations, 
Order No. 2000, 65 FR 809 (Jan. 6, 2000), FERC Stats. & Regs. ] 
31,089 (1999), order on reh'g, Order No. 2000-A, 65 FR 12088 (Mar. 
8, 2000), FERC Stats. & Regs. ] 31,092 (2000), dismissed sub nom. 
Pub. Util. Dist. No. 1 of Snohomish County, Washington v. FERC, 272 
F.3d 607 (D.C. Cir. 2001).
---------------------------------------------------------------------------

    37. We also deny rehearing of the decision not to find in the 
context of this rulemaking that the SPP market satisfies the second 
prong of section 210(m)(1)(B). While OG&E claims to have provided in 
its initial comments evidence demonstrating the quality of the SPP 
market,\24\ what OG&E provided was little more than cursory comments 
and a description of bidding procedures that are being adopted in 
Oklahoma. Section 210(m)(1)(B)(ii) requires a showing of ``competitive 
wholesale markets that provide a meaningful opportunity to sell 
capacity, including long-term and short-term sales, and electric 
energy, including long-term, short-term and real-time sales, to buyers 
other than the utility to which the qualifying facility is 
interconnected.'' This provision also provides that ``[i]n determining 
whether a meaningful opportunity to sell exists the Commission shall 
consider, among other factors, evidence of transactions within the 
relevant market.'' We do not find OG&E's cursory submission sufficient 
to meet the statutory requirements. Moreover OG&E did not include any 
evidence of transactions in the SPP market. There was, and continues to 
be, an insufficient record in this proceeding to find that the SPP 
market satisfies the second prong of section 210(m)(1)(B).
---------------------------------------------------------------------------

    \24\ OG&E Comments at 4-6.
---------------------------------------------------------------------------

    38. With regard to OG&E's and PacifiCorp's requests for further 
guidance, we believe that the statutory language requiring that a QF 
have a meaningful opportunity to sell capacity and energy to buyers 
other than the interconnected utility means an actual, and not just 
theoretical, opportunity. Concrete evidence of transactions would 
further that finding, as the statutory language implies. To the extent 
such evidence is not available, we would expect at a minimum a 
petitioning electric utility to explain any lack of evidence of 
transactions and to provide a reasoned explanation of how the 
Commission could find that a meaningful opportunity to sell to buyers 
other than the interconnected utility exists in the absence of a 
history of transactions.\25\ PacifiCorp's evidence of QF proposals that 
never reached fruition does not provide an adequate basis for the 
Commission to make any presumptions regarding whether particular 
markets satisfy the requirements of section 210(m)(1)(B)(ii). We 
continue to believe that it is best to address on a case-by-case basis 
whether non-RTO/ISOs and RTO/ISOs that do not have both auction-based 
real-time and day-ahead markets satisfy those statutory 
requirements.\26\
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    \25\ The Commission is aware that certain types of evidence of 
transactions may contain information that an electric utility 
considers to be confidential. If information is considered 
confidential by the electric utility, procedures exist to maintain 
its confidentiality.
    \26\ Final Rule at P 145.
---------------------------------------------------------------------------

    39. The claims of Cogeneration Association of California and the 
Industrial Parties regarding the lack of a sufficiently competitive 
market in California can be addressed in any individual cases 
concerning California. We note that the CAISO has been found only to 
satisfy section 210(m)(1)(B)(i) and that a separate finding of 
``competitive wholesale markets'' is required under section 
210(m)(1)(B)(ii). Thus, if a California utility makes a filing pursuant 
to section 210(m)(3) and Sec.  292.310 of the Commission's regulations, 
and claims that it satisfies the section 210(m)(1)(B) criteria for 
relief from the purchase obligation, the issue of whether ``competitive 
wholesale markets'' exist will be an issue in that proceeding and the 
burden will be on the applicant to make the required demonstration.\27\
---------------------------------------------------------------------------

    \27\ The Commission also left open the option of California 
utilities seeking a determination that the California market 
satisfies section 210(m)(1)(A) by filing requests for declaratory 
orders, after there is a functioning ``Day 2'' RTO/ISO in 
California. Final Rule at P 157.
---------------------------------------------------------------------------

3. A Single Standard of Relief
    40. As explained above, the Commission concluded in the Final Rule 
that the most reasonable interpretation of section 210(m)(1) is that 
Congress, in setting forth three discrete tests for three different 
types of markets, was directing the Commission to differentiate among 
three different

[[Page 35878]]

markets, access to which would require termination of the purchase 
requirement provided such access is available on a nondiscriminatory 
basis. A number of petitioners had advocated a different interpretation 
of section 210(m)(1), arguing that subparagraphs (A), (B), and (C), 
when read together, establish a single standard for relief from the 
purchase requirement. In their view, these separate provisions together 
require electric utilities to demonstrate that a QF would remain 
economically viable or would otherwise have access to the technical 
equivalent of the purchase requirement in order to terminate the 
purchase requirement. The Commission rejected that view by interpreting 
section 210(m)(1) as establishing different standards for each of the 
three types of markets identified in subparagraphs (A), (B), and (C).
Requests for Rehearing
    41. American Forest & Paper and CCC again challenge the 
Commission's determination that the three standards of relief described 
in section 210(m)(1) were intended to be different in terms of the 
organization and competitiveness of the relevant market or the 
evidentiary showings required for each. They argue that EPAct 2005 did 
not repeal PURPA or the Commission's obligation to encourage QF 
development and, therefore, the Commission's interpretation of section 
210(m)(1) is unreasonable. American Forest & Paper and CCC suggest that 
section 210(m)(1)(C) clearly requires markets under subparagraphs (A), 
(B) and (C) to be of similar competitive quality since markets that 
satisfy subparagraph (C) must be ``similar'' to those described in 
subparagraphs (A) and (B). American Forest & Paper and CCC conclude 
that the Commission has adopted an unreasonable statutory construction 
by interpreting section 210(m)(1) as referring to three distinct types 
of markets.
Commission Determination
    42. The Commission denies requests for rehearing of the 
determination not to adopt a single test to evaluate whether the 
requirements of section 210(m)(1) are met. We continue to believe, as 
we found in the Final Rule, that the most reasonable interpretation of 
section 210(m)(1) is that Congress, in setting forth discrete tests for 
three different types of markets, was requiring the Commission to 
differentiate among these markets and the differing circumstances they 
present in determining whether a utility is relieved of the purchase 
requirement. As discussed above, this interpretation is supported by 
the different language Congress used in subparagraphs (A) and (B) and 
the consequent need to make meaningful distinctions in the explicit 
statutory language Congress used. Otherwise, subparagraphs (A) and (B) 
presumably would have been collapsed by Congress into one test.
    43. We agree the reference in section 210(m)(1)(C) to markets that 
are of ``comparable competitive quality as markets described in 
subparagraphs (A) and (B)'' indicates Congress' belief that those two 
types of markets share a certain set of competitive qualities. It does 
not follow, however, that the Commission should disregard the specific 
statutory tests in each of those subparagraphs when applying section 
210(m)(1). The structure of section 210(m)(1), which separately 
describes different types of markets, makes clear that Congress was 
establishing a particular set of tests for the Commission to apply. In 
the Final Rule, the Commission adopted the most reasonable 
interpretation of subparagraph (C)--that Congress believed the two 
types of markets identified in subparagraphs (A) and (B), while 
distinct between themselves, contain certain competitive qualities that 
justify termination of the purchase requirement for any QF with 
nondiscriminatory access to those markets. Subparagraph (C) directs the 
Commission to consider these competitive qualities when analyzing 
whether there are other markets that, while not meeting the specific 
requirements of subparagraphs (A) and (B), are sufficiently competitive 
to justify termination of the purchase requirement.
    44. The fact that the markets identified in subparagraphs (A) and 
(B) contain certain competitive qualities does not mean that they are 
the same type of market, or that a single test must be adopted for 
determining whether a particular market satisfies the requirements of a 
particular subparagraph. Such an interpretation would undermine 
Congress's decision to separately identify the two types of markets 
that it believes are sufficiently competitive to justify termination of 
the purchase requirement. It would also conflict with the particular 
determinations to be made under each of the subparagraphs. Subparagraph 
(A) explicitly refers to both ``day ahead and real time'' (i.e., ``Day 
2'') organized markets. RTO/ISO day-ahead and real time markets are 
operated pursuant to Commission tariffs containing market rules and 
market mitigation aimed at preventing exercises of market power. It is 
reasonable to conclude that Congress assumed these markets to be 
sufficiently competitive, in combination with markets for long-term 
contracts, to justify termination of the mandatory purchase obligation.
    45. As we noted in the Final Rule, ``Day 2'' markets are generally 
recognized as providing greater opportunities for QFs and other 
independent generators to make sales to a large number of buyers than 
other markets because the existence of day-ahead and real-time energy 
markets allows all competing generators to submit bids to participate 
on a nondiscriminatory basis in a market from which many buyers over a 
large area make purchases. While the ``Day 1'' markets also provide 
opportunities for independent generators to compete, the markets are 
more limited. It is therefore not surprising that the factual showing 
required under section 210(m)(1)(B) is more difficult relative to 
section 210(m)(1)(A), which enjoys the benefit of the ``Day 2'' market 
structures. These different standards support, rather than undermine, 
the Commission's interpretation that subparagraphs (A) and (B) 
separately identify the particular markets that Congress has deemed 
sufficiently competitive to justify termination of the purchase 
requirement.
    46. The Commission's task under section 210(m)(1)(C) is, therefore, 
to determine the set of competitive qualities that are shared by 
markets satisfying the requirements of subparagraphs (A) and (B). 
Recognizing this task, the Commission declined in the Final Rule to 
adopt any bright line tests when applying subparagraph (C). Simply put, 
the common objective of subparagraphs (A) and (B), and therefore 
subparagraph (C), is the identification of a wholesale marketplace 
where QFs have alternatives to their local utility to sell their 
electric energy. We believe the three-tiered structure of section 
210(m)(1) indicates a finding by Congress that two particular market 
designs provide those alternatives, while directing the Commission to 
consider whether other market designs might as well.
    47. Congress could have stated a broad, general finding to be made 
by the Commission such as ``workably competitive markets.'' Instead, 
Congress tailored subparagraphs (A) and (B) to establish criteria 
specific to each market design that, in its view, provide sufficient 
sales alternatives for QFs. Under these circumstances, we believe it 
appropriate to use the market designs identified in subparagraphs (A) 
and (B) as guides when analyzing whether an alternative market design 
satisfies the

[[Page 35879]]

requirements of subparagraph (C). For example, the Commission found in 
the Final Rule that the markets in ERCOT satisfy the statutory 
requirements of subparagraph (C) because they are of comparable quality 
to those described in subparagraph (A). We continue to believe that 
finding is appropriate and note that no petitioner challenges it on 
rehearing.
    48. Finally, while it is true that EPAct 2005 did not repeal PURPA 
or the Commission's obligation to encourage QF development, enactment 
of section 210(m) of PURPA clearly changed the rights of QFs under 
PURPA. The Commission has no discretion other than to terminate the 
purchase requirement if it finds that a QF has nondiscriminatory access 
to any of the markets described in section 210(m)(1)(A), (B) or (C). It 
would be inappropriate for the Commission to ignore this mandate by 
implementing section 210(m)(1) in a way that undermines the specific 
standards of relief Congress chose to establish in the statute.

B. Nondiscriminatory Access to a Market

    49. The Commission also must determine that a QF has 
nondiscriminatory access to a PURPA section 210(m)(1) market in order 
to terminate the purchase requirement. In the Final Rule, the 
Commission adopted several presumptions to be used in determining 
whether access to a particular market is available on a 
nondiscriminatory basis in order to streamline processing of 
applications for termination of the purchase requirement.
    50. First, the Final Rule found that a QF's eligibility for service 
under an OATT, or a reciprocity tariff filed by a non-public utility, 
creates a rebuttable presumption that the QF has nondiscriminatory 
access to the relevant market. Second, the Commission adopted a 
rebuttable presumption that QFs interconnected with electric utility 
members of a ``Day 2'' RTO/ISO have nondiscriminatory access to the 
``Day 2'' market. Finally, regardless of available transfer capability 
(ATC) under an OATT or location within a ``Day 2'' market, the Final 
Rule establishes an additional rebuttable presumption that QFs with a 
net capacity no greater than 20 MW do not have nondiscriminatory access 
to wholesale markets.
    51. These rebuttable presumptions were designed to work together to 
facilitate prompt Commission review of requests to terminate the 
purchase requirement within the 90-day time frame mandated in the 
statute. Various petitioners challenge the adoption of these 
presumptions on rehearing, which we address below.
1. The OATT
    52. The Commission first established a rebuttable presumption that 
a QF has nondiscriminatory access to a market if it is eligible for 
service under a Commission-approved OATT, or Commission-filed 
reciprocity tariff, and Commission-approved interconnection rules.\28\ 
If the Commission determines that a particular market meets the 
criteria of section 210(m)(1)(A), (B), or (C), and a QF in that market 
is eligible for service under an OATT or reciprocity tariff, a QF may 
seek to rebut the presumption of access to the market by providing 
specific and credible evidence that the QF does not have 
nondiscriminatory access due to operational characteristics or 
transmission constraints. If the QF is unable to make this 
demonstration, the purchase requirement will be terminated.
---------------------------------------------------------------------------

    \28\ Transmission providers are required to provide 
interconnection as well as transmission services on a 
nondiscriminatory basis under their OATTs.
---------------------------------------------------------------------------

    53. In the Final Rule, the Commission determined that only issues 
other than issues related to the provision of open access transmission 
under the OATT would be considered when analyzing whether the 
presumption of nondiscriminatory access to markets has been rebutted. 
The Commission rejected requests to allow a QF to litigate open access 
implementation issues in the context of these 90-day applications, 
concluding that complaint proceedings are the appropriate forum for 
such disputes. The Commission also rejected arguments that it is 
unreasonable to rely on a presumption that a Commission-approved OATT 
provides nondiscriminatory access to markets in light of the then-
pending NOPR in the OATT reform rulemaking, Docket Nos. RM05-17, et 
al., in which reforms to the pro forma OATT had been proposed.
Requests for Rehearing
    54. Occidental challenges the Commission's reliance on an OATT to 
create a rebuttable presumption that QFs have nondiscriminatory access 
to the relevant wholesale markets. Occidental argues that the 
Commission's actions in the OATT reform rulemaking have demonstrated 
that, notwithstanding the existence of an OATT, there remain continuing 
opportunities for undue discrimination by transmission entities. 
Occidental contends that the Commission's statement in the Final Rule 
that it had not found actual discrimination in the OATT reform 
rulemaking is inconsistent with findings in the OATT reform NOPR that 
deficiencies in the OATT needed to be addressed. In Occidental's view, 
the Commission's determination in the OATT reform NOPR that there are 
remaining opportunities for undue discrimination bear directly on the 
finding that the Commission must make under section 210(m) that a 
utility is administering its OATT in a nondiscriminatory manner.
    55. Occidental argues that the Commission's determination that only 
issues not related to the provision of open access transmission under 
the OATT may be raised to rebut the presumption of nondiscriminatory 
access is inconsistent with the statutory language of section 210(m) 
and is a violation of due process. Industrial Parties assert that the 
Commission must consider evidence of discrimination when analyzing 
whether the presumption has been rebutted. Failure to do so would, in 
their view, violate the Commission's statutory obligation to eradicate 
discrimination.
    56. Occidental further argues that the Commission should clarify 
that QFs under section 210(m)(1)(B) and (C) have the same opportunity 
to rebut the presumption of nondiscriminatory access as QFs under 
section 210(m)(1)(A). Occidental notes that the Commission lists 
several factors in the Final Rule as a possible rebuttal to a finding 
of nondiscriminatory access to the markets set forth in subparagraph 
(A), but that it is not clear if the factors are also relevant to the 
question of whether the purchase obligation should be terminated under 
subparagraphs (B) and (C). If the Commission does not grant 
clarification, Occidental requests rehearing on this issue.
    57. Cogeneration Association of California argues that existence of 
an OATT is insufficient to guarantee nondiscriminatory access since it 
may not provide physical transmission rights. Because QFs generate 
electricity as a necessary by-product of their service to their thermal 
hosts, Cogeneration Association of California contends that a 
cogenerator must have a physical location to deliver the electricity. 
Cogeneration Association of California argues that this requires 
physical transmission rights that recognize the