FERC Implements Significant Revisions to Change in Status Reporting Requirements

In granting market-based rate authority, FERC evaluates vertical market power by, in part, examining whether an entity controls "inputs to electric power generation" such that the entity may create barriers to other market entrants. FERC has defined "inputs to electric power production" to include "sites for generation capacity in development" and, in December 2008, FERC rejected proposals to limit the latter term to mean only permitted sites at which construction is underway. Instead, in Order No. 697-B, FERC explained that "sites for new generation capacity development" should be interpreted to include ownership of all land that could potentially be used for generation. FERC’s interpretation only excluded sites that cannot be used for generation capacity development, e.g., land where zoning laws prohibit generation development.

Under Order No. 697-C, all entities with market-based rate authority are now required to make quarterly reports of the entity’s acquisition of a site or sites for generation capacity development for which site control has been demonstrated in the interconnection process and for which the potential number of megawatts that are reasonably commercially feasible is equal to 100 MW or more. In other words, an entity with market-based rate authority has a quarterly reporting requirement that is triggered if the entity has acquired site control of land reasonably suited for 100 MW or more of generation capacity development. Generally speaking, "site control" includes ownership, leasehold, development rights, and certain options and exclusivity relationships; however, the term can vary by the interconnection procedures applicable to a particular site. Entities submitting a deposit in lieu of showing "site control" in the interconnection process will also trigger the reporting requirement. Each quarterly report must include the following information:

(a)   The number of sites acquired;

(b)   The relevant geographic market in which the sites are located, i.e., the entity’s balancing authority area or RTO/ISO region; and

(c)   The maximum potential number of megawatts that can be reasonably developed on the sites reported. To calm fears that change in status reports will disclose commercially sensitive information, FERC will allow reporting entities to aggregate the potential megawatts for each relevant geographic market in which sites are located. In addition, a report must justify the estimated megawatts at each site based on the maximum potential number of megawatts that could be produced with the technology for which the site was acquired. FERC expects that entities will be forthright in their estimations.

In addition, entities with market-based rate authority must make yearly reports to FERC about any land for which:

(a)   The entity has acquired, taken a leasehold interest in, obtained an option to purchase or lease, or entered into an exclusivity or other relationship to acquire land for the purpose of developing generation capacity, but for which site control has not yet been demonstrated during the prior three years; and

(b)   The potential megawatts reasonably developed on the site is 100 MW or more.

Yearly change in status reports must include the same information as that included in quarterly reports (described above), and may aggregate sites consistent with the aggregation rules applied to quarterly reports. Further, yearly change in status reports must be submitted to FERC by January 1. Thus, for example, if an entity acquires land in August 2009 for 100 MW of generation capacity development but has not demonstrated site control by August 2012, then the entity must file a change in status report with FERC on January 1, 2013 to report the land acquisition.

Lastly, FERC implemented a clean-up procedure that requires all entities with market-based rate authority to file a change in status report by January 1, 2010 describing acquired, leased, or optioned sites lacking site control that have already been held for three years or more prior to the effective date of Order 697-C. Sellers need not report sites that have already been reported to FERC.

Order No. 697-C implements significant ongoing change in status reporting requirements that affect all entities with market-based rate authority. If you have questions regarding Order 697-C or would like assistance with the new reporting requirements, please contact the following individuals.

Marcus Wood at (503) 294-9434 or mwood@stoel.com
Jennifer H. Martin at (503) 294-9852 or jhmartin@stoel.com
Jason A. Johns at (503) 294-9618 or jajohns@stoel.com