Exhibit D-1
*1 Commission Opinions, Orders and Notices
Southern Company Services, Inc.
Docket Nos. ER00-1655-000 and ER00-1655-001
Order Accepting for Filing Proposed Market-Based Rates and Amended Intercompany
Interchange Contract as Modified
(Issued June 15, 2000)
Before Commissioners: James J. Hoecker, Chairman; William L. Massey, Linda
Breathitt, and Curt H (acute)ebert, Jr.
In this order, we accept for filing, without hearing or suspension, the
revised Market- Based Rate Power Sales Tariff (Market Rate Tariff) and the
amended and restated Intercompany Interchange Contract (IIC) filed by Southern
Company Services, Inc. (SCSI).
Background
On February 18, 2000, as amended on May 8, 2000, SCSI, as agent for Alabama
Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power
Company, and Savannah Electric and Power Company (Operating Companies), filed an
amended and restated IIC. In its filing, SCSI requests authority to include
under the amended and restated IIC a new operating company that SCSI is forming,
New Operating Company (NewCo). [FN1] SCSI states that NewCo is being created to
consolidate wholesale activities that are currently being conducted on a
piecemeal basis by the existing Operating Companies.
SCSI also proposes to revise the IIC to incorporate all previous Commission-
approved amendments into a single "restated" contract and to simplify and
modernize the contract. SCSI's proposed substantive changes to the IIC include:
(1) creating a new definition for Assignable Energy to differentiate purchases
made for the benefit of all the Operating Companies from those made to meet a
specific need involving less than all of the Operating Companies; (2)
incorporating a method to adjust the costs to individual Operating Companies in
instances where a purchase benefits the system as a whole but adversely impacts
an individual Operating Company; (3) allowing all Operating Companies to satisfy
their opportunity sale obligations for system sales at the same average system
rate; and (4) eliminating a provision specifying that operating and maintenance
expenses otherwise classified as variable would be treated as fixed whenever a
generating unit was projected to run at less than a 10 percent annual capacity
factor (Ten Percent Rule).
In addition, SCSI proposes to revise its Market Rate Tariff to include NewCo
among the companies authorized to sell under its terms. [FN2] Furthermore, SCSI
has submitted amendments to its Code of Conduct to reflect the addition of
NewCo. SCSI requests an effective date of April 18, 2000 for the amended IIC and
the Market Rate Tariff with the exception of the elimination of the Ten Percent
Rule, for which the effective date requested is the date that a Commission order
is issued accepting the filing without any refund obligation.
Notice and Interventions
Notice of SCSI's initial filing was published in the Federal Register, 65 Fed.
Reg. 11,296 (2000), with comments, protests and motions to intervene due on or
before March 10, 2000.
*2 On March 10, 2000, Oglethorpe Power Corporation (Oglethorpe) and the Board
of Water, Light and Sinking Fund Commissioners of the City of Dalton, Georgia
(Dalton Utilities) filed timely motions to intervene. Dalton Utilities states
that it is not clear what role NewCo will play in the future supply of electric
power under existing wholesale agreements between SCSI and customers. Dalton
Utilities argues that no action on this filing by the Commission should
pre-determine the rights of customers under existing wholesale agreements
without the consent of such customers. On March 13, 2000, the Municipal Electric
Authority of Georgia (MEAG) filed an untimely motion to intervene, raising
nosubstantive issues. On March 27, 2000, SCSI filed a letter stating that the
rights of the parties are defined under the existing wholesale agreements and
that these rights would not be affected (one way or the other) by this filing.
On April 14, 2000, a deficiency letter was issued by the Director, Division of
Tariffs and Rates-East, concerning SCSI's filing. On May 8, 2000, SCSI filed a
supplement to its original filing. Notice of SCSI's supplemental filing was
published in the Federal Register, 65 Fed. Reg. 31,306, with comments, protests
and motions to intervene due on or before May 22, 2000. No additional comments
or interventions were filed.
Discussion
Procedural Matters
Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 18
C.F.R. s 385.214 (1999), the timely, unopposed motions to intervene of
Ogelthorpe and Dalton Utilities serve to make them parties to this proceeding.
We will grant the untimely, unopposed motion to intervene of MEAG given its
interest in this proceeding and the absence of any undue prejudice or delay.
Intercompany Interchange Contract
SCSI states that NewCo will aggregate into one business unit the wholesale
activities currently performed on a piecemeal basis by each of the Operating
Companies. SCSI emphasizes that the addition of NewCo will simplify the resource
planning and decisionmaking process, while maintaining the benefits and burdens
of participation in the wholesale markets, as if the existing Operating
Companies had done so directly. SCSI describes the addition of NewCo as one of
several ministerial changes that have no substantive effect on rates, practices
or procedures under the IIC.
SCSI's statements make clear that NewCo will stand in the shoes of the
existing Operating Companies, i.e., it will simplify the existing wholesale
activities without any change in how costs and revenues from wholesale
transactions are shared by the existing Operating Companies. Accordingly, we
will accept SCSI's addition of NewCo, as well as the other changes to the IIC.
Because these statements are not in the IIC, we will direct SCSI to amend the
IIC within 30 days of the date of this order to make clear that the existing
Operating Companies will continue to share the costs and revenues from NewCo's
wholesale transactions just as if the sales were made by the existing Operating
Companies themselves. [FN3] Accordingly, we will accept the amended IIC for
filing, to become effective as of April 18, 2000, except for the provision
eliminating the Ten Percent Rule, which will become effective upon issuance of
this order.
*3 Market-Based Rates
The Commission allows power sales at market-based rates if the seller and its
affiliates do not have, or have adequately mitigated market power in generation
and transmission and cannot erect other barriers to entry. In order for the
affiliate of a transmission-owning public utility to demonstrate the absence or
mitigation of market power, the public utility must have on file with the
Commission an open access transmission tariff for the provision of comparable
services. The Commission also considers whether there is evidence of affiliate
abuse or reciprocal dealing. [FN4]
As we explain below, we find that SCSI's proposal to include NewCo among those
authorized to sell under the Market Rate Tariff meets these standards.
Accordingly, we will accept the revision to the Market Rate Tariff for filing
without suspension or hearing, to become effective on the date of commencement
of service by NewCo.
1. Generation Market Power
The Commission has recently evaluated the generation dominance of the
applicant and its affiliates in Docket No. ER99-2670-000. [FN5] Our analysis
indicated that the market shares of installed and uncommitted capacity of SCSI
do not exceed levels the Commission has found to be acceptable, [FN6] and there
are no material changes in circumstances that would warrant a different
conclusion here.
Accordingly, we find that NewCo meets the Commission's generation market power
standard for approval of market-based rates.
2. Transmission Market Power
When an affiliate of a transmission-owning public utility seeks authorization
to charge market-based rates, the Commission has required the public utility to
have an open access transmission tariff on file before granting such
authorization. [FN7] The Southern Company's Operating Companies have filed an
open access pro forma compliance transmission tariff in Docket No. OA96-27- 000.
[FN8]
Accordingly, we find that NewCo meets the Commission's transmission market
power standard for approval of market-based rates.
3. Other Barriers to Entry/Reciprocal Dealing
We are satisfied with SCSI's explanation that there are no other barriers to
entry or reciprocal dealing considerations of concern here.
4. Affiliate Abuse
SCSI states that NewCo will not sell power to, or purchase power from, any
affiliated entity with a franchised service territory unless the Commission
first approves such a transaction in a separate order under Section 205 of the
Federal Power Act (FPA), 16 U.S.C. s 824d (1994).
In addition, SCSI states that it has amended its Code of Conduct, which has
been previously accepted by the Commission, [FN9] to reflect the addition of
NewCo as a system company. The amended Code of Conduct satisfies the
Commission's affiliate abuse requirements for the separation of personnel, the
pricing of non- power goods and services and the requirement concerning the
sharing of all market information.
*4 With these safeguards, we are satisfied with SCSI's explanation that there
are no affiliate abuse considerations of concern here.
Waivers, Authorizations and Reporting Requirements
We will grant NewCo the following waivers, consistent with those granted to
other entities with market-based rate authorization: (1) waiver of the
accounting and related reporting requirements of Parts 41, 101 and 141 of the
Commission's regulations, with the exception of 18 C.F.R. ss 141.14, .15 (1999);
(2) permission to make abbreviated filings under Part 45; (3) waiver of the
requirements of Subpart B and C of Part 35, except Sections 35.12(a), 35.13(b),
35.15 and 35.16; and (4) blanket approval for issuances of securities or
assumptions of liabilities pursuant to Part 34 of the Commission's regulations.
Consistent with procedures we have adopted in other cases, NewCo may file
umbrella service agreements for short-term power sales (one year or less) within
30 days of the date of commencement of short-term service, to be followed by
quarterly transaction summaries of specific sales. [FN10] For long- term
transactions (longer than one year), NewCo must submit the actual individual
service agreement for each transaction within 30 days of the date of
commencement of service.
To ensure the clear identification of filings,and in order to facilitate the
orderly maintenance of the Commission's files and public access to documents,
long-term transaction service agreements should not be filed with the short-
term transaction summaries.
Additionally, we will direct NewCo to inform the Commission promptly of any
change in status that would reflect a departure from the characteristics the
Commission has relied upon in approving market-based pricing. These include, but
are not limited to: (1) ownership of generation or transmission facilities or
inputs to electric power production other than fuel supplies; or (2) affiliation
with any entity not disclosed in the filing that owns generation or transmission
facilities or inputs to electric power production, or affiliation with any
entity that has a franchised service area. [FN11] Alternatively, NewCo may elect
to report such changes with the updated market analysis it will be required to
file every three years. [FN12]
The Commission orders:
(A) SCSI's revised Market Rate Tariff is hereby accepted for filing, without
suspension or hearing, to become effective on the date of commencement of
service of NewCo.
(B) SCSI is hereby directed to revise the IIC as discussed in the body of this
order within 30 days of the date of this order.
(C) SCSI's amended and restated IIC is hereby accepted for filing, without
suspension or hearing, to become effective on April 18, 2000 except for the
provision eliminating the Ten Percent Rule, which will become effective upon
issuance of this order.
(D) NewCo is hereby directed to inform the Commission of the date of
commencement of service within 10 days of that date.
*5 (E) NewCo's request for waiver of Parts 41, 101, and 141 of the
Commission's regulations is hereby granted, as discussed in the body of this
order.
(F) Within 30 days of the date of this order, any person desiring to be heard
or to protest the Commission's blanket approval of issuances of securities or
assumptions of liabilities by NewCo should file a motion to intervene or protest
with the Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, D.C. 20426, in accordance with Rules 211 and 214 of the Commission's
Rules of Practice and Procedure, 18 C.F.R. ss 385.211 and 385.214 (1999).
(G) Absent a request to be heard within the period set forth in Ordering
Paragraph (F) above, NewCo is hereby authorized to issue securities and assume
obligations or liabilities as guarantor, indorser, surety, or otherwise in
respect of any security of another person; provided that such issue or
assumption is for some lawful object within the corporate purpose of NewCo,
compatible with the public interest, and reasonably necessary or appropriate for
such purposes.
(H) Until further order of this Commission, the full requirements of Part 45
of the Commission's regulations, except as noted below, are hereby waived with
respect to any person now holding or who may hold an otherwise proscribed
interlocking directorate involving NewCo. Any such person instead shall file a
sworn application providing the following information:
(1) the full name and business address; and
(2) all jurisdictional interlocks, identifyingthe affected companies and the
positions held by that person.
(I) The Commission reserves the right to modify this order to require a
further showing that neither public nor private interests will be adversely
affected by continued Commission approval of NewCo's issuances of securities or
assumptions of liabilities, or by the continued holding of any affected
interlocks.
(J) NewCo's request for waiver of the provisions of Subparts B and C of Part
35 of the Commission's regulations, with the exception of Sections 35.12(a),
35.13(b), 35.15 and 35.16, is hereby granted.
(K) NewCo is hereby directed to conform to the filing and reporting
requirements specified in this order. The first quarterly report of transactions
undertaken by NewCo under its market-based power sales tariff will be due within
30 days of the calender quarter in which service commences.
(L) NewCo is hereby directed to file an updated market analysis within three
years of the date of this order, and every three years thereafter.
(M) NewCo is hereby directed to inform the Commission promptly of any change
in status that would reflect a departure from the characteristics the Commission
has relied upon in approving market-based pricing. Alternatively, as discussed
in the body of this order, NewCo may elect to report any such changes every
three years with the updated market analysis filed pursuant to Ordering
Paragraph (L) above. NewCo shall notify the Commission of which option it elects
in the first quarterly report filed pursuant to Ordering Paragraph (K) above.
*6 (N) SCSI is hereby informed of the following rate schedule designations:
Southern Company Services, Inc.
Docket No. ER00-1655-000
Rate Schedule Designations
Effective Date: Date of Commencement of Service of NewCo
Designation-Description
(1) FERC Electric Tariff, First Revised Volume No. 4 Original Sheet Nos. 1-7
(Supersedes Original Volume No. 4)-Market- Based Rate Tariff and Code of
Conduct
Effective Date: April 18, 2000
(2) Rate Schedule FERC No. 138 (Supersedes Rate Schedule FERC No. 65, as
supplemented)-Amended and Restated Intercompany Interchange Contract and
Allocation Methodology and Rate Manual
FN1 SCSI notes that NewCo is subject to regulatory approval from the
Securities and Exchange Commission (SEC). However, this approval has not yet
been obtained. Upon receipt of SEC approval, SCSI states that a submittal to
this Commission will be made to reflect the formal name of NewCo.
FN2 SCSI also proposes to revise its Market Rate Tariff (Sections 6.1 and
6.2) to adopt the prime rate published in the Wall Street Journal as the
applicable interest rate. Further, SCSI has filed to update Section 1.4 of its
Market Rate Tariff to reflect the change from separate Point-to-Point and
Network Transmission Tariffs to the single Open Access Transmission Tariff
required by Order No. 888. See Promoting Wholesale Competition Through Wholesale
Open Access Non-Discriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and Transmitting Utilities,
FERCStatutes and Regulations, Regulations Preambles January 1991- June 1996 P
31,036 (1996) (Order No. 888), order on reh'g, FERC Statutes and Regulations P
31,048 (1997) (Order No. 888-A), order on reh'g, 81 FERC P 61,248 (1997) (Order
No. 888-B), order on reh'g, 82 FERC P 61,046 (1998) (Order No. 888-C).
FN3 See SCSI transmittal letter at 3-4; SCSI supplemental response at 6-
7.
FN4 E.g., Progress Power Marketing, Inc., 76 FERC P 61,155, at p. 61,919
(1996), letter order approvingsettlement, 79 FERC P 61,149 (1997); Northwest
Power Marketing Company, L.L.C., 75 FERC P 61,281, at p. 61,889 (1996); accord
Heartland Energy Services, Inc. et al., 68 FERC P 61,223, at pp. 62,060-63
(1994) (Heartland).
FN5 Southern Operating Companies, letter order issued May 28, 1999.
FN6 See, e.g., Louisiana Energy and Power Authority v. FERC, 141 F.3d 364
(D.C. Cir. 1998).
FN7 See Order No. 888, FERC Statutes and Regulations at pp. 31,656-57;
accord Southern Company Services, Inc., 71 FERC P 61,392, at p. 62,536 (1995);
Heartland, 68 FERC at pp. 62,059-60.
FN8 Allegheny Power Systems, Inc., et al., 77 FERC P 61,266 (1996),
clarified, 80 FERC P 61,143 (1997).
FN9 SEI Wisconsin, L.L.C., Docket No ER99-669-001, letter order, issued
February 26, 1999.
FN10 See Cataula Generating Company, L.P., 79 FERC P 61,261, at p. 62,134
(1997); Kincaid Generation, L.L.C., 78 FERC P 61,082, at pp. 61,300-01 (1997);
see also Southern Company Services, Inc., 75 FERC P 61,130, at pp. 61,444-45,
clarified, 75 FERC P 61,353 (1996).
FN11 See, e.g., Morgan Stanley Capital Group, 69 FERC P 61,175, at p.
61,695 (1994), order on reh'g, 72 FERC P 61,082 (1995); InterCoast Power
Marketing Company, 68 FERC P 61,248, at p. 62,134, clarified, 68 FERC P 61,324
(1994).
FN12 We reserve the right to require such an analysis at any time.
Federal Energy Regulatory Commission
91 FERC P 61,259, 2000 WL 773047 (F.E.R.C.)
END OF DOCUMENT
