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2.5. ERMUSR 09-11-2012 Elk River Y Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager John Dietz—Chair Daryl Thompson—Vice Chair Al Nadeau—Trustee MEETING DATE: AGENDA ITEM NUMBER: September 11, 2012 2.5 SUBJECT: Federal Energy Regulatory Commission Waiver of Standards of Conduct and Open Access Same-Time Information System Requirements BACKGROUND: In September 2008, Connexus Energy terminated the 10-year rolling "all requirements"power contract with Elk River Municipal Utilities (ERMU). In April 2010, the Utilities Commission authorizes the exploration of wholesale power supply options through participation in a resource planning coalition. In addition to this coalition, staff has been researching other wholesale power supply options. Elk River Municipal Utilities currently contracts the energy and capacity of our Landfill Gas-to- Electric Generation Plant and the capacity of our Diesel Generation Plant to Great River Energy (GRE). As a result of the work of Central Minnesota Municipal Power Agency (CMMPA), ERMU receives revenue through the Midwest Independent Transmission System Operator(MISO) Tariff Attachment 0 for our"high side"transmission facilities within our substations. Also through CMMPA, ERMU has invested in the CAPX2020 Brookings-Twin Cities Transmission Project. DISCUSSION: Although not currently subject to the Federal Energy Regulatory Commission(FERC) Standards of Conduct(SOC) and Open Access Same-Time Information System (OASIS) Requirements, it is possible that ERMU may become subject to those requirements. The ownership in generation and transmission with a change in wholesale power supply that includes selling the output of our generation facilities on the MISO market might create a situation where ERMU would be required to comply with these FERC rules. The SOC and OASIS Requirements would create an unnecessary burden on ERMU. Because ERMU is a small utility by FERC definition, there was precedent for waiver of the SOC and OASIS that potentially could be imposed under the R.3 Page 1 of 2 NATURE ® ► `� AfiURE Reliable Public Power Provider P o w r e r o T o 5 rxvr reciprocity requirements of FERC Order Nos. 888, 889, 890, 2003, 2004, and 717 as applied to municipal electric systems. In July 2011 in an effort to leave all options open for future wholesale power supply and potential marketing of the output from our generation facilities, ERMU submitted a petition for waivers of the SOC and OASIS reciprocity conditions. On August 30, 2012, FERC granted ERMU's request. ACTION REQUESTED: Staff recommends the Commission receive the FERC Order on Request for Waiver of the OASIS and Standards of Conduct Requirements. ATTACHMENTS: • Petition of Elk River Municipal Utilities for Waiver of Standards of Conduct and OASIS Reciprocity Conditions—dated July 12, 2012 • Federal Energy Regulatory Commission—Order on Requests for Waiver of the Commission's OASIS and Standards of Conduct Requirements—dated August 30, 2012 PRIIREI Rt Page 2 of 2 NATURE Reliable Public Power Provider P OW,4E0 Fo SERVE UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Elk River Municipal Utilities I Docket No. OA11-=000 PETITION OF ELK RIVER MUNICIPAL UTILITIES FOR WAIVER OF STANDARDS OF CONDUCT AND OASIS RECIPROCITY CONDITIONS Pursuant to 18 C.F.R. §§ 35.28(e)(2) and 358.1(d) and Rules 101(e) and 207 of the Commission's Rules of Practice and Procedure,' Elk River Municipal Utilities ("Elk River")respectfully requests that the Commission waive reciprocity-based standards of conduct and Open Access Same-Time Information System ("OASIS") requirements that might otherwise apply to it under Order Nos. 888, 889, 890, 2003, 2004, and 717, as they apply to municipal electric systems through the reciprocity obligation.2 Elk River is not a ' 18 C.F.R. §§ 385.101(e)and 385.207. 2 Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities;Recovery of Stranded Costs by Public Utilities and Transmitting Utilities,Order No. 888, 61 Fed.Reg.21,539(May 10, 1996),FERC Stats.&Regs.¶31,036(1996), clarified, 76 FERC¶61,009 (1996),modified,Order No. 888-A,62 Fed. Reg. 12,274(Mar. 14, 1997), FERC Stats. &Regs.¶31,048 (1997),order on reh'g,Order No. 888-B,62 Fed.Reg. 64,688(Dec.9, 1997), 81 FERC¶61,248(1997), order on reh'g,Order No. 888-C, 82 FERC it 61,046(1998),af'd in part and remanded in part sub nom. Transmission Access Policy Study Group v. FERC,225 F.3d 667(D.C. Cir.2000),affd sub nom. New York v. FERC, 535 U.S. 1 (2002); Open Access Same-Time Information System(formerly Real-Time Information Networks)and Standards of Conduct, Order No. 889,61 Fed. Reg.21,737(May 10, 1996), FERC Stats.&Regs.¶31,035 (1996),clarified, 76 FERC¶61,009(1996),modified,Order No. 889-A,62 Fed. Reg. 12,484(Mar. 14, 1997),FERC Stats. &Regs.¶31,049(1997),reh'g denied,Order No.889-B, 62 Fed.Reg. 64,715 (Dec. 9, 1997), 81 FERC¶61,253 (1997),af'd in part and remanded in part sub nom. Transmission Access Policy Study Group v. FERC,225 F.3d 667(D.C.Cir. 2000),affd sub nom. New York v. FERC, 535 U.S. 1 (2002).See also Preventing Undue Discrimination and Preference in Transmission Service,Order No. 890, 72 Fed. Reg. 12,266(Mar. 15,2007),FERC Stats.&Regs.¶31,241 (2007), order on reh'g and clarification,Order No. 890-A,73 Fed. Reg.2984(Jan. 16,2008),FERC Stats. &Regs.¶31,261 (2007),order on reh'g, Order No. 890-B,73 Fed.Reg.39,092(July 8,2008), 123 FERC ¶61,299(2008),order on reh'g and clarification,Order No.890-C,74 Fed.Reg. 12,540(Mar.25,2009), 126 FERC¶61,228(2009),order on clarification, Order No. 890-D,74 Fed.Reg. 61,511 (Nov.25,2009), 129 FERC¶61,126(2009); Standardization of Generator Interconnection Agreements and Procedures, Order No.2003, 68 Fed. Reg.49,846(Aug. 19,2003), FERC Stats. &Regs.¶31,146(2003),modified, 68 Fed. Reg. 69,599(Dec. 15,2003), clarified,69 Fed. Reg.2135 (Jan. 14,2004), 106 FERC if 61,009(2004), -2 - FERC-jurisdictional "public utility" and consequently is not directly subject to the Commission's standards of conduct. Although as a non jurisdictional utility it may not be necessary for it to do so, as a matter of caution Elk River seeks this waiver. Elk River currently has an arrangement to receive its power supply by long-term contract with Connexus Energy. This arrangement is due to expire in 2018. As a result, Elk River may engage with new power suppliers in the future, and therefore seeks this waiver. Elk River qualifies for a waiver because it is a non-public utility that owns only limited and discrete transmission facilities that do not form an integrated grid. Furthermore, the imposition of a separation of functions barrier on Elk River would be an undue burden given its very small size and limited staff I. COMMUNICATIONS Communications regarding these proceedings should be directed to the following: order on reh'g,Order No.2003-A,69 Fed. Reg. 15,932(Mar.26,2004),FERC Stats.&Regs.¶31,160 (2004),order on reh'g,Order No.2003-B,70 Fed.Reg.265(Jan.4,2005), FERC Stats.&Regs.¶31,171 (2004), order on reh'g,Order No.2003-C,70 Fed.Reg. 37,661 (June 30,2005),FERC Stats.&Regs.¶ 31,190(2005),affd sub nom. NARUC v. FERC,475 F.3d 1277(D.C.Cir.2007),cert. denied, 128 S.Ct. 1468(2008);Standards of Conduct for Transmission Providers,Order No.2004,68 Fed.Reg. 69,134(Dec. 11,2003),FERC Stats. &Regs.¶31,155 (2003),order on reh'g,Order No.2004-A,69 Fed.Reg.23,562 (Apr.29,2004),FERC Stats.&Regs.¶31,161 (2004),order on reh'g,Order No.2004-B,69 Fed.Reg. 48,371 (Aug. 10,2004), FERC Stats.&Regs.if 31,166(2004),order on reh'g,Order No.2004-C,70 Fed. Reg.284(Jan.4,2005),FERC Stats.&Regs.If 31,172(2004),order on reh'g,Order No.2004-D, 110 FERC¶61,320(2005),vacated in part sub nom. Nat'l Fuel Gas Supply Corp. v. FERC,468 F.3d 831 (D.C. Cir. 2006); Standards of Conduct for Transmission Providers,Order No.717,73 Fed.Reg.63,796(Oct.27, 2008),FERC Stats.&Regs.¶31,280(2008), on reh'g,Order No. 717-A, 74 Fed.Reg. 54,463 (Oct.22, 2009), FERC Stats.&Regs.¶31,297(2009), clarified,Order No. 717-B,74 Fed.Reg. 60,153 (Nov.20, 2009), 129 FERC if 61,123 (2009),on reh'g,Order No.717-C,75 Fed.Reg.20,909(Apr.22,2010), 131 FERC¶61,045(2010),corrected,Docket No. RM07-1-002(Apr. 21,2010),eLibrary No.20100421-3039, on reh'g and clarification, 76 Fed. Reg.20,838(Apr. 14,2011), 135 FERC¶61,071 (2011). - 3 - Troy J. Adams, Utilities Director Robert A. Jablon ELK RIVER MUNICIPAL UTILITIES Melissa E. Birchard 13069 Orono Parkway SPIEGEL&MCDIARMID LLP P.O. Box 430 1333 New Hampshire Avenue, NW Elk River, MN 55330-0430 Washington, DC 20036 Phone: 763-441-2020 Phone: 202-879-4000 Fax: 763-441-8099 Fax: 202-393-2866 Email: tadams @elkriverutilities.com Email: robert.jablon @spiegelmcd.com melissa.birchard @spiegelmcd.com II. FACTUAL STATEMENT Elk River is a transmission-dependant municipal corporation located in the City of Elk River, Minnesota. The City of Elk River is in eastern Minnesota, about 35 miles northwest of Minneapolis. It has a population of approximately 23,000. Elk River is primarily an electric distribution system. Elk River's distribution system serves the City of Elk River as well as nearby areas, including parts of Dayton, Big Lake, and Otsego. Elk River currently meets its customers' electric needs through a single all-requirements contract with Connexus Energy, a cooperative electric utility which together with 27 other electric cooperatives maintains partial ownership in Great River Energy, an electric generation and transmission cooperative. Because of this, Elk River does not currently purchase any energy in the markets. Elk River is a small utility. The Elk River electric system peak was 57 MW in 2008, 50 MW in 2009, and 54 MW in 2010. Elk River's retail sales totaled only 224,226 MWh, 232,773 MWh, and 250,712 MWh in 2008, 2009, and 2010, respectively. Apart from very limited sales of generation that Elk River makes to Great River Energy in connection with a landfill gas and a diesel plant, described in detail below, Elk River at - 4 - present makes no wholesale sales. Any wholesale sales in the future similarly would be very limited. Elk River thus easily meets the Commission's definition of a small electric utility, disposing of well under 4 million MWh of energy annually.3 Elk River's generation assets are limited. Elk River operates a landfill gas-to- electric generating plant that began operations in October, 2002 and generates approximately 3.2 MW of power and 26,000 MWh of energy annually. The capacity and energy from this plant are contracted to Great River Energy. Elk River also owns a backup diesel power plant with four engines4 that can generate 10.6 MW of power. The capacity of this backup plant is currently contracted to Great River Energy. As a backup plant, this facility produces only a few hundred MWh of energy annually. None of the generation from either plant is sold by Elk River in the markets for energy, although it is possible Elk River may begin to sell energy or capacity from these two plants in the market when the current contractual arrangements for one or both of these facilities eventually expires or is terminated.5 Elk River is transmission-dependant. However, it owns limited and discrete transmission equipment located in substations that interconnect Elk River facilities with GRE-owned transmission. Elk River's transmission assets, which are necessary for Elk River to receive the power that it distributes to its retail customers, consist of limited and 3 See Wolverine Power Supply Coop., Inc., 127 FERC¶61,159,P 15(2009)(reaffirming that only utilities disposing of under 4 million MWh of energy annually meet the Commission's definition of"small utility"). See also Black Hills Power, Inc., 135 FERC¶61,058,PP 4-8(2011). 4 There is space available at the plant for a fifth diesel engine to be added in the future if needed,but even operated at maximum capacity this would not substantially increase output for standards of conduct waiver purposes. The current contractual agreement with Great River Energy concerning the diesel plant is an"evergreen" arrangement that renews each year but which potentially could be terminated each year. The current contractual agreement with Great River Energy governing the landfill gas power plant expires in 2022. - 5 - discrete 69 kV substation equipment interconnected with a looped GRE transmission line in the Elk River vicinity. For approximately one year, Elk River's transmission facilities have been subject to the functional operation and control of the Midwest Independent Transmission System Operator("Midwest ISO"), to which any potential request for transmission would be directed. Elk River lacks the power to grant or deny transmission service. Elk River has only one staff member, Mr. Troy Adams, Utilities Director, who regularly handles transmission function information. Mr. Adams, or any future successor in the role of general manager, would also handle business decisions regarding purchases and sales of energy, although a joint action agency may be contracted to carry out any such market transactions on Elk River's behalf because Elk River lacks the staffing capacity to do so itself. Elk River's discrete 69 kV transmission equipment serves the main function of enabling Elk River to deliver electric power to its retail customers. Revenues from Elk River's transmission facilities amount to approximately $60,000 annually, as provided to Elk River by MISO through Elk River's Attachment O. III. ELK RIVER HAS ONLY LIMITED AND DISCRETE TRANSMISSION FACILITIES, SATISFYING THE COMMISSION'S REQUIREMENTS FOR WAIVER OF THE STANDARDS OF CONDUCT AND OASIS RECIPROCITY CONDITIONS As noted, Elk River is not a public utility and, consequently, is not directly subject to the open access requirements and related obligations that the Commission imposed on public utilities in Order Nos. 888 and 889. However, it is possible that Elk - 6 - River could become subject to the standards of conduct under standards of reciprocity.6 Having recently entered into agreements turning over functional operational control of its transmission equipment to the Midwest ISO, as a practical matter,transmission requests to use Elk River's facilities would come to the Midwest ISO and not to Elk River. Elk River thus has no power to grant or deny transmission use and cannot profit in trading transmission information. As the Commission has recognized, the costs of complying with certain reciprocity-based obligations—specifically, the requirements to create or participate in an OASIS and to separate transmission-function employees from marketing-function employees—can be unduly onerous for small utilities.? Such a burden on small utilities could harm competition rather than enhance it. Elk River is a"small utility"under the definition adopted by the Commission,8 although Elk River recognizes that as a participant in the Midwest ISO, the small utility standard for waiver may not apply.9 The Commission has furthermore recognized that the burden of imposing standards of conduct requirements on utilities that own only limited and discrete 6 Commission policy,which Elk River supports,requires an open access transmission customer to stand ready to provide reciprocal transmission service, if requested,to any public utility from which it takes open access transmission service. Consequently,Elk River would be obliged to provide and would provide, if requested,reciprocity-based transmission service to another public utility from which Elk River takes open access transmission service. The Commission has stated that"absent a waiver,the obligation to provide reciprocal,non-discriminatory services necessarily commits the customer of open access service,even if not a public utility,to abide by the OASIS and standards of conduct requirements."Order No. 889-A,62 Fed Reg. 12,484,at 12,488,FERC Stets.&Regs.If 31,049,at 30,553. To date,the transmission uses of Elk River's 69 kV substation transmission equipment have been to enable Great River Energy to deliver power to Elk River and for Elk River to deliver power on behalf of a wind plant located in the City. Elk River has never denied or had controversy over its providing transmission service. Of course,any transmission request would automatically be granted within Midwest ISO Order No. 888 tariff requirements through MISO. See, e.g.,N. States Power Co., 76 FERC¶61,250,at 62,297(1996)(fording that separating merchant and transmission functions pursuant to Order No. 889 can impose undue financial burden on small utilities). 8 See supra note 4 at 4. - 7 - transmission facilities that do not act as an integrated grid would be inapposite. Thus, Elk River asks the Commission to waive any standards of conduct requirements otherwise applicable to Elk River as a function of the reciprocity obligation. Commission regulations provide that non-public utilities may file for waiver of all or part of the reciprocity conditions contained in a public utility open access tariff at any time. 18 C.F.R. § 35.28(e)(2). In Order Nos. 888, 889 and cases decided shortly thereafter, the Commission set forth the standards it would apply in determining whether to waive the standards of conduct and OASIS requirements applicable to a public utility or to a non-public utility through reciprocity.1° Under the Order No. 889-era test established in Black Creek Hydro," the Commission stated that it would waive standards of conduct and OASIS requirements "(1) if the applicant owns, operates, or controls only limited and discrete transmission facilities (rather than an integrated transmission grid); or (2) if the applicant is a small public utility" and is not part of a tight power pool. See Order No. 889-A, 62 Fed. Reg. 12,484, at 12,489, FERC Stats. &Regs. 31,049, at 30,555 (citing Black Creek Hydro, Inc., 77 FERC 1161,232 (1996)). The Commission recently amended the second standard, and has added a new standard for waivers applicable to utilities that have relinquished control of their facilities to an RTO/ISO. See Black Hills Power, 135 FERC 1161,058, PP 2-8. However, the 9 See Black Hills Power, 135 FERC¶61,058,P 2. 1°See Easton Utils. Comm'n, 83 FERC¶61,334,at 62,343 (1998);Dakota Elec. Ass'n,78 FERC¶61,117, at 61,452(1997)("We consider requests for waiver of Order No. 889 made by non-public utilities using the same standards we apply to requests for waiver made by public utilities."). "See, e.g.,Goshen Phase II, LLC, 133 FERC¶61,090, P 13 (2010)("In prior orders,the Commission has enunciated the standards for waiver of,or exemption from,some or all of the requirements of Order Nos. 888 and 889. The Commission has stated that the criteria for waiver of the requirements of Order No. 890 and Order No.2004 are unchanged from those used to evaluate requests for waiver under Order - 8 - "limited and discrete" standard for waivers established in Black Creek Hydro has not been modified(id. PP 3, 6) and, in the context of this case, Elk River submits, its very small size is also relevant. In Black Creek Hydro,the Commission ruled on rehearing that it would waive the reciprocity obligation for a utility capable of demonstrating that it owns, operates, or controls only"limited and discrete transmission facilities (facilities that do not form an integrated transmission grid)."Black Creek Hydro, Inc., 77 FERC IT 61,232, at 61,941 (1996) (citing N. States Power Co., 76 FERC ¶61,250, at 62,297 (1996)). This was consistent with the order below, where the Commission found that a waiver is appropriate where "any transmission facilities that the applicant owns or controls are limited and discrete transmission facilities that do not form an integrated transmission grid(e.g., a single transmission line)."N. States Power Co., 76 FERC¶61,250, at 62,297. Elk River qualifies for a waiver under the "limited and discrete" standard established in Black Creek Hydro and reaffirmed in Black Hills Power on April 21, 2011. In Black Creek Hydro, the Commission found that where an applicant's facilities were, for example, limited to an individual transmission line, they would be deemed limited and discrete. Id. Elk River's facilities qualify because they are limited to discrete pieces of 69 kV equipment, such as breakers, switches, and transformers, located in individual substations in the Elk River area.12 Elk River's facilities are surrounded by the system of Nos. 888 and 889.Order No.717 did not change those criteria.")(citations omitted). 12 See Attachment A,One-Line Diagrams of Station 14 Substation,Otsego Substation,Waco Substation, North Substation,and West Substation. We note that,as indicated on the West Substation one-line diagram,there is a single 69 kV switch owned by Elk River but operated by Great River Energy that is connected directly to Great River Energy's transmission grid. It is located just outside the fence of the West Substation. - 9 - Great River Energy and are included in the larger Midwest ISO grid. Elk River does not own, operate, or control an integrated transmission network and its facilities consist of limited, discrete pieces of equipment having a transmission-level voltage, such as breakers and transformers. See, e.g., Black Hills Power, 135 FERC 1[61,058, PP 32, 49 (granting a waiver to the City of Roseville where Roseville"does not own, operate, or control an integrated transmission network and [] its facilities consist of limited, discrete pieces of equipment having a transmission-level voltage (i.e., breakers and transformers)"). Elk River's participation in the MISO grid does not impact its qualification for waiver, as Elk River's facilities do not,themselves, form an integrated transmission grid. See Wabash Valley Power Ass'n, 123 FERC¶ 61,193, P 10 (2008) (granting waiver where utility"owns only limited and discrete transmission facilities that, while part of the Midwest ISO operated transmission grid, do not themselves form an integrated transmission grid"). See also Black Hills Power, 135 FERC¶ 61,058, P 10 (granting waiver to Muscatine Power& Water despite integration with MISO grid). A waiver is also warranted because Elk River's facilities are not of themselves interstate in nature. This contrasts with Cross-Sound Cable, which was denied a waiver under the limited and discrete standard, and whose facilities physically connect the markets of multiple states. Id. P 43 ("Cross-Sound Cable, an intertie that connects the New England and New York markets, cannot qualify as a limited and discrete facility that does not form an integrated transmission grid"). Elk River's facilities are located in a handful of substations sited in eastern Minnesota in the Elk River vicinity. In addition, again, any requests for transmission over Elk River facilities would be directed to MISO, not to Elk River. Although Elk River's facilities are regularly used by GRE, whose - 10 - transmission interconnects with the substation, transmission requests from new sources are not anticipated. Given Elk River is a small utility that relies on a single staff member for both transmission and market expertise, the additional costs involved in imposing a separation of functions would increase Elk River's costs significantly, but, in view of Elk River's limited and discrete transmission facilities,would not create public benefits. Consistent with Commission precedent, Elk River commits to notify the Commission within 30 days of any material change in facts affecting the basis for the waiver that Elk River seeks.l3 IV. CONCLUSIONS For the foregoing reasons, Elk River respectfully requests that the Commission grant this request for waiver of OASIS and standards of conduct requirements that otherwise might be imposed under the reciprocity requirements of Order Nos. 888, 889 and later orders. 13 See Material Changes in Facts Underlying Waiver of Order No. 889 and Part 358 of the Commission's Regulations, 127 FERC¶61,141,P 5 and Ordering Paragraph(A)(2009);see also Wolverine Power Supply Coop., Inc., 127 FERC¶61,159,P 14 n.21 (2009). Absent a change in the underlying facts establishing eligibility,"[a] waiver of the Standards of Conduct remains in effect unless and until the Commission takes action on a complaint by an entity alleging that Applicants used access to transmission information to unfairly benefit one of their own sales,or an affiliate's sales."See, e.g., Goshen Phase IL LLC, 133 FERC¶61,090,P 17. "A waiver of the requirement to establish and maintain an information system(Le.,an OASIS)remains effective until the Commission takes action in response to any complaint by an entity alleging that, in evaluating its transmission needs,the entity could not obtain from Goshen 11 information necessary to complete its evaluation."Id. P 16 n.23. - 11 - Respectfully submitted, Robert A. Jablon Melissa E. Birchard Attorneys for Elk River Municipal Utilities Law Offices of: Spiegel & McDiarmid LLP 1333 New Hampshire Avenue, NW Washington, DC 20036 (202) 879-4000 July 12, 2011 CERTIFICATE OF SERVICE I hereby certify that I have this day caused the foregoing document to be served upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated on this 12th day of July, 2011. Melissa E. Birchard Law Offices of: Spiegel & McDiarmid LLP 1333 New Hampshire Avenue,NW Washington, DC 20036 (202) 879-4000 140 FERC ¶ 61,163 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller, John R. Norris, Cheryl A. LaFleur, and Tony T. Clark. City Utility Commission of Owensboro, Kentucky Docket No. TS11-2-000 Connecticut Transmission Municipal Electric Energy Docket No. TS11-4-000 Cooperative Elk River Municipal Utilities Docket No. TS11-7-000 Northern States Power Company, Minnesota Docket No. TSO4-281-001 Northern States Power Company, Wisconsin ORDER ON REQUESTS FOR WAIVER OF THE COMMISSION'S OASIS AND STANDARDS OF CONDUCT REQUIREMENTS (Issued August 30, 2012) 1. In this order, the Commission grants three separate requests for certain waivers of the Commission's Standards of Conduct requirements and denies a fourth request as moot.1 Three of these waiver requests involve obligations to comply with the 1 Standards of Conduct for Transmission Providers, Order No. 2004, FERC Stats. & Regs. ¶ 31,155 (2003), order on reh'g, Order No. 2004-A, FERC Stats. & Regs. ¶ 31,161, order on reh'g, Order No. 2004-B, FERC Stats. & Regs. If 31,166, order on reh'g, Order No. 2004-C, FERC Stats. & Regs. if 31,172 (2004), order on reh'g, Order No. 2004-D, 110 FERC ¶ 61,320 (2005), vacated and remanded as it applies to natural gas pipelines sub nom. National Fuel Gas Supply Corp. v. FERC, 468 F.3d 831, (D.C. Cir. 2006); see Standards of Conduct for Transmission Providers, Order No. 690, FERC Stats. & Regs. ¶ 31,237, order on reh'g, Order No. 690-A, FERC Stats. & Regs. 1131,243 (2007); see also Standards of Conduct for Transmission Providers, Order No. 717, FERC Stats. & Regs. ¶ 31,280 (2008), order on reh'g, Order No. 717-A, FERC Stats. & Regs. ¶ 31,297, order on reh'g, Order No. 717-B, 129 FERC ¶ 61,123 (2009), order on reh'g, Order No. 717-C, 131 FERC 41161,045 (2010), order on reh'g, Order No. 717-D, 135 FERC ¶ 61,017 (2011). (continued...) Docket No. TS11-2-000, et al. - 2 - Commission's Standards of Conduct requirements as they apply through the Commission's pro forma open access transmission tariff(OATT) reciprocity requirements.2 Two applicants also request waiver of the Commission's requirements to establish and maintain an Open Access Same-Time Information System (OASIS), and we also grant these OASIS waiver requests in this order.3 2. The remaining waiver request involves a request to continue an existing waiver of the Commission's Standards of Conduct requirements, notwithstanding changed circumstances. We will dismiss this request as moot, as the applicant no longer needs a waiver (as it is no longer subject to the regulations). I. Requests for New Waivers A. Waiver Standards for Small Electric Utilities under Reciprocity Obligations 3. As we explained in Kansas City Board of Public Utilities, 140 FERC 1161,113, at P 8 (2012) (Kansas City Board), when the Commission is deciding on waiver requests, it applies the same criteria to both waiver requests from public utilities and waiver requests from non-public utilities.° We also stated in Black Hills that the rationale used by the Commission to determine which small public utilities qualify for waivers of the Commission's OASIS, Standards of Conduct, and pro forma OATT requirements applies 2 See Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890, FERC Stats. & Regs. ¶ 31,241, order on reh'g, Order No. 890-A, FERC Stats. & Regs. ¶ 31,261 (2007), order on reh'g, Order No. 890-B, 123 FERC¶ 61,299 (2008), order on reh'g, Order No. 890-C, 126 FERC 1161,228 (2009), order on clarification, Order No. 890-D, 129 FERC ¶ 61,126 (2009). 3 Open Access Same-Time Information System and Standards of Conduct, Order No. 889, FERC Stats. & Regs. ¶ 31,035 (1996), order on reh'g, Order No. 889-A, FERC Stats. & Regs. 1131,049, reh'g denied, Order No. 889-B, 81 FERC ¶ 61,253 (1997). ° Citing Central Minnesota Municipal Power Agency, et aL, 79 FERC ¶ 61,260, at 62,127 & n.15 (1997); Promoting Wholesale Competition Through Open Access Non- Discriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. 1131,036, at 31,763 (1996); and Dakota Electric Association, et aL, 78 FERC 1161,117, at 61,452 (1997). Docket No. TS11-2-000, et al. - 3 - equally to small non-jurisdictional electric utilities that follow these requirements under their reciprocity obligations.5 4. In Black Hills, we also clarified that when an electric utility transmission owner or operator participates in a Commission-approved Independent System Operator (ISO) or Regional Transmission Organization (RTO), membership in a tight power pool is not relevant to whether the Commission will grant or deny a waiver of the Standards of Conduct or OASIS requirements.6 Rather, the utility is eligible for a waiver if it (1) has turned over operation or control of its transmission system to the ISO/RTO, (2) has no access to information concerning the operation of the transmission facilities it has turned over to the ISO/RTO, and (3) obtains information about such matters only by viewing the ISO/RTO's pertinent OASIS postings. 5. For small electric utilities that have not relinquished control over the operation of their transmission systems to an ISO/RTO, the Commission may also grant a waiver of the Commission's Standards of Conduct or OASIS requirements where the applicant demonstrates that (1) it is a small electric utility with energy sales below four million MWh, and (2) no other circumstances are present to indicate that a waiver is not justified.' Additionally, the Commission may also grant a waiver where an entity can demonstrate that its transmission facilities are limited, discrete, and do not form an integrated transmission grid.8 B. Docket No. TS11-2-000 Background 6. On March 18, 2011, the City Utility Commission of the City of Owensboro, Kentucky (Owensboro) filed a request for a waiver of the requirements to maintain and establish an OASIS and to comply with the Commission's Standards of Conduct for 5 Kansas City Board, 140 FERC ¶ 61,113 at P 11. 6 Black Hills Power, Inc., 135 FERC ¶ 61,058, at PP 2, 8 & n.12 (2011) (Black Hills). 'Kansas City Board, 140 FERC if 61,113 at P 10; Black Hills, 135 FERC 1161,058 at P 8. 8 Black Hills, 135 FERC ¶ 61,058 at P 7. Docket No. TS11-2-000, et al. - 4 - Transmission Providers as they apply to municipal electric systems through the reciprocity requirement of the Commission's pro forma OATT.9 7. Owensboro claims that because it is a municipal corporation, it is a non-public utility10 and, thus, is not directly subject to the Commission's open access and related obligations;11 however, Owensboro states that its transition to open access transmission service could give rise to such obligations as a matter of reciprocity. Accordingly, Owensboro contends that it qualifies for a waiver under the Commission's criteria for small public utilities that dispose of no more than four million MWh of electricity annually.12 To support its request, Owensboro avers that it disposed of roughly 2.5 million MWh of electricity in each of the past two years.13 Additionally, Owensboro commits to inform the Commission within 30 days of any material changes in fact that could affect its continued eligibility for the waiver.14 8. Notice of Owensboro's filing was published in the Federal Register, 76 Fed. Reg. 19,355 (2011), with comments due on or before April 18, 2011. Louisville Gas and Electric Company (Louisville Gas) filed a timely motion to intervene and protest. Owensboro filed a motion for leave to file an answer and an answer to Louisville Gas' protest and, in turn, Louisville Gas filed a motion for leave to file an answer and an answer in response. Discussion 9. As a preliminary matter, Rule 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R. § 385.214(a)(2) (2012), prohibits an answer to an answer unless otherwise ordered by the decisional authority. We will accept the answers filed by Owensboro and Louisville Gas, because they aided us in our decision-making process. 9 Owensboro Request at 1-2. 10 Section 201(f) of the Federal Power Act (FPA), provides, in part, that no provision of Part II of the FPA applies to a state, [or] political subdivision of a state .... that sells less than 4,000,000 megawatt hours of electricity per year. 16 U.S.C. § 824f (2006). 11 Owensboro Request at 5-6. 12 Id. at 7. 13 Id. 14 Id. Docket No. TS11-2-000, et al. - 5 - 10. Turning to the merits of Owensboro's waiver request, Louisville Gas claims that other circumstances are present that warrant denying Owensboro's request for waiver of the Standards of Conduct requirements.15 Louisville Gas believes that without the discipline required by the Standards of Conduct, Owensboro could use non-public information about generator or transmission outages to maximize sales opportunities and improperly influence the market. In its answer, Owensboro argues that (a) certain communications restrictions on its power marketer and transmission provider and (b) certain reliability agreements restrain its ability to share information, and should mitigate Louisville Gas's concerns.16 Louisville Gas responds that such restraints do not provide adequate assurance that Owensboro will not use such information to benefit itself or its affiliates if the waiver request is granted.' 11. Having considered the representations in Owensboro's filing, the opposition thereto, and the subsequent answers, the Commission grants Owensboro's requests for waivers from both the requirement to maintain and establish an OASIS and the requirement to comply with the Standards of Conduct. As both parties note, the Commission generally grants waivers of its Standards of Conduct requirements to small electric utilities that have not relinquished control over the operation of their transmission systems to an ISO/RTO, which remain in effect unless and until the Commission takes is Louisville Gas Protest at 1-2. 16 Owensboro Answer at 1-3. Owensboro adds that Big Rivers Electric Corporation (Big Rivers) has little incentive to share information with Owensboro because, even though Owensboro has hired Big Rivers to perform certain transmission- operation functions, Big Rivers is Owensboro's competitor. Owensboro Answer at 8-9. Owensboro also disputes that Big Rivers would use Owensboro as a conduit for sharing information with ACES Power Marketing (ACES). In this regard, Owensboro explains that Big Rivers is a member of ACES and, thus, it would have no need to use Owensboro as a conduit for such communications. Moreover, Big Rivers has adopted Standards of Conduct (filed with the Commission) that prohibit Big Rivers from providing non-public transmission information to ACES directly or from using anyone as a conduit to do so. Id. Owensboro also notes that Big Rivers represented to the Commission that it had already implemented measures with respect to its Transmission Function to guarantee that it is physically and functionally independent from activities associated with ACES and those measures are codified in its Standards of Conduct. Id. at 9-10. " Louisville Gas Answer at 1-2. Docket No. TSI 1-2-000, et al. - 6 - action on a complaint claiming that the small public utility used its access to information to benefit itself or its affiliates.18 12. While Louisville Gas hypothesizes that such abuses are possible, it has not specifically alleged that Owensboro has in fact used its access to information to benefit itself or its affiliates. Absent such evidence, and consistent with our general policy, we shall grant Owensboro's waiver request because it meets the established criteria for a waiver.19 If Louisville Gas believes that Owensboro misused non-public transmission or customer information, it may file a complaint with the Commission under 18 C.F.R. § 385.206, seeking appropriate relief. 13. Owensboro's Standards of Conduct and OASIS waivers will remain in effect unless the Commission subsequently rescinds them, for example, after hearing on a complaint that Owensboro has used its access to information to unfairly benefit itself or its affiliate 20 C. Docket No. TS11-4-000 Background 14. On June 8, 2011, the Connecticut Transmission Municipal Electric Energy Cooperative (Connecticut Cooperative) filed a request for a waiver of the requirements to comply with the Commission's Standards of Conduct as applicable to non-public utilities through the reciprocity requirements of the Commission's pro forma OATT.21 Connecticut Cooperative is a non-profit municipal joint action transmission agency formed by the Connecticut municipally-owned electric utilities. As a political 18 E.g., Black Hills, 135 FERC ¶ 61,058 at P 40; Material Changes in Facts Underlying Waiver of Order No. 889 and Part 358 of the Commission's Regulations, 127 FERC If 61,141, at P 5 (2009) (Material Changes Order). 19 Louisville Gas Answer at 5-6 (noting that the means for revoking a waiver can only provide "after-the-fact relief'). 20 Owensboro must notify the Commission if there is a material change in facts that affect the waiver, within 30 days of the date of such change. Material Changes Order, 127 FERC 1161,141 at P 5. 21 Connecticut Cooperative Request at 1. Notice of Connecticut Cooperative's filing was published in the Federal Register, 76 Fed. Reg. 37,809 (2011), with interventions and protests due on June 22, 2011. None was filed. Docket No. TS11-2-000, et al. - 7 - subdivision of Connecticut, Connecticut Cooperative argues that it falls within the jurisdictional exemption of FPA section 201(1). Connecticut Cooperative's transmission facilities consist of approximately 12 miles of 345 kV and 115 kV electric transmission facilities. 15. Connecticut Cooperative also argues that it has satisfied the three criteria for a waiver of the Standards of Conduct for electric utilities participating in a Commission approved RTO or ISO by (1) turning over operation and control of its transmission system to ISO New England, (2) relinquishing access to information concerning the operation of its facility to Connecticut Light and Power, and (3) committing to obtain information about the operational status of its facility solely through OASIS.22 Discussion 16. Based on the representations in Connecticut Cooperative's filing, we grant Connecticut Cooperative's request for a waiver of the Commission's Standards of Conduct requirements because Connecticut Cooperative meets the three eligibility criteria for electric utilities operators participating in a Commission-approved ISO or RTO. Connecticut Cooperative's Standards of Conduct waiver will remain in effect unless and until the Commission takes action on a complaint by an entity that Connecticut Cooperative has used its access to information to unfairly benefit itself or its affiliate.23 D. Docket No. TS11-7-000 Background 17. On July 15, 2011, Elk River Municipal Utilities (Elk River) filed a request for a waiver of the requirements to maintain and establish an OASIS and to comply with the Commission's Standards of Conduct for Transmission Providers as applicable to municipal electric systems through the reciprocity requirements of the Commission's pro forma OATT.24 Elk River is a municipality that is primarily an electric distribution system and, under FPA section 201(0, not subject to Part II of the FPA. Elk River 22 Id. at 6-7. 23 Connecticut Cooperative must notify the Commission if there is a material change in facts that affect the waiver within 30 days of the date of such change. Material Changes Order, 127 FERC ¶ 61,141 at P 5. 24 Elk River Request at 1-2. Docket No. TS11-2-000, et al. - 8 - contends that its facilities qualify for a waiver because they are limited and discrete 69 kV substation equipment, such as breakers, switches, and transformers, located in individual substations in the Elk River area. Elk River adds that its transmission facilities have been subject to the functional operation and control of the Midwest Independent Transmission System Operator, to which all potential requests for transmission are directed. In the alternative, Elk River contends that it qualifies for a waiver because of its small size, as its facilities are minimal and its total sales for each of the past three years ranged from 220,000 to 250,000 MWhs, well below the Commission's criteria of 4,000,000 MWhs for a small utility.25 Elk Hills also argues that imposing a separation of functions barrier would be an undue burden because of its limited staff, e.g., one employee for both transmission and sales duties 26 Discussion 18. Based on the representations in its filing, we find that Elk River's transmission facilities qualify as limited and discrete, rather than as an integrated grid, and Elk River also meets the criteria for a small utility. Accordingly, we will grant Elk River's request for waiver of the requirements to comply with our Standards of Conduct and to maintain and establish an OASIS as they apply to municipal electric systems through the reciprocity requirements of the Commission's pro forma OATT. 19. The waiver of the requirement to establish an OASIS and the waiver of Standards of Conduct requirements will remain in effect absent subsequent action by the Commission as, for example, in response to a complaint that an entity evaluating its transmission needs could not get the information necessary to complete its evaluation 27 25 See Wolverine Power Supply Coop., Inc., 127 FERC 1161,159, at P 15 (2009) (reaffirming that only utilities disposing of under 4,000,000 MWh of energy annually meet the Commissions definition of small utility). See also Black Hills, 135 FERC ¶ 61,058 at PP 4-7. 26 Id. at 2. 27 Elk River must notify the Commission if there is a material change in facts that affect the waiver within 30 days of the date of such change. Material Changes Order, 127 FERC ¶61,141 atP5. Docket No. TS 11-2-000, et al. - 9 - II. Request for Continued Waiver Despite Material Change in Facts A. Docket No. TSO4-281-001 Background 20. On May 1, 2007, the Commission granted a request by Northern States Power Company and Northern States Power Company, Wisconsin (collectively, the NSP Companies) for a partial waiver of the Commission's Standards of Conduct requirements based on, among other matters, three separate findings that the NSP Companies' operations at issue only involved a de minimis amount of sales.2S The order directed the NSP Companies to notify the Commission if a material change in circumstances arose.29 21. On July 13, 2009, Xcel Energy Services Inc. (Xcel) on behalf of its affiliates (i.e., the NSP Companies) filed notice of a material change in facts and a request for a continued waiver.30 Xcel reports that one of the NSP customers who previously received unbundled "provider of last resort" service now receives "bundled" electric retail service from the NSP Companies at rates regulated by the Minnesota Public Utilities Commission. Xcel adds that no other changes have occurred. Accordingly, Xcel asks the Commission to continue the remaining partial waivers that the Commission granted in the 2007 NSP Order. Discussion 22. After the NSP Companies were granted their waivers in 2007, the Commission, in Order No. 717,31 amended the definition of marketing function/affiliate, which was established in Order No. 2004. Specifically, under the new definition, "unbundled sales" by a provider of last resort are excluded from the definition of the marketing function.32 This being the case, the NSP Companies no longer need a Standards of Conduct waiver because, absent changed circumstances, they are not subject to the requirements for which they have in the past obtained a waiver. Thus, we will dismiss the request for a 28 Northern States Power Company and Northern States Power Company (Wisconsin), 119 FERC ¶ 61,103, PP 11, 13 & 16 (2007) (2007 NSP Order). 29 Id. P 16. 30 Xcel Notice at 1-2. 31 See supra n.1. 32 See 18 C.F.R. § 358.3(c)(1) (2012). Docket No. TS 11-2-000, et at - 10 - continued waiver, as moot. We note, however, that the NSP Companies are directed to notify the Commission within 30 days of the date of any material change in circumstance, if any such change occurs 33 The Commission orders: (A) The requests by Owensboro, Connecticut Cooperative, and Elk River for waivers of the requirement to comply with the Commission's Standards of Conduct requirements are hereby granted, as discussed in the body of this order. (B) The requests by Owensboro and Connecticut Cooperative for waivers of the requirement to establish and maintain an OASIS are hereby granted, as discussed in the body of this order. (C) Xcel's motion for continuance of the NSP Companies' previously-granted waivers of the Commission's Standards of Conduct requirements is hereby dismissed as moot, as discussed in the body of this order. By the Commission. ( SEAL ) Kimberly D. Bose, Secretary. 33 Material Changes Order, 127 FERC 1161,141 at P 5.