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Energy Policy Act of 1992
<br />The Energy Policy Act of 1992 (the “Energy Policy Act of 1992”) made fundamental changes in the federal
<br />regulation of the electric utility industry, particularly in the area of transmission access under Sections 211,
<br />212, and 213 of the Federal Power Act. The purpose of these changes, in part, was to bring about increased
<br />competition. While the Utility could contest before the Federal Energy Regulatory Commission (“FERC”)
<br />or in federal court any application under Sections 211, 212 and 213 of the Federal Power Act on
<br />jurisdictional, procedural or substantive grounds, those Sections of the Federal Power Act provided the
<br />FERC with the authority, upon application by an electric utility, federal power marketing agency, or any
<br />person generating electricity for sale or resale, to require a transmitting utility such as the Utility to provide
<br />transmission services to the applicant at rates, charges, terms and conditions set by FERC based on
<br />standards and provisions in the Federal Power Act. However, the Energy Policy Act of 1992 specifically
<br />denied the FERC the authority to mandate “retail wheeling,” under which a retail customer of one utility
<br />could obtain power from another utility or non-utility power generator.
<br />On April 24, 1996, the FERC issued two final rules. The final rules effected significant changes in the
<br />regulation of transmission services provided by public utilities (as defined in the Federal Power Act) that
<br />own, operate or control interstate transmission facilities and which are subject to the FERC jurisdiction
<br />over wholesale contracts, rates and services (“jurisdictional utilities”). The Utility is not a public utility, as
<br />defined by the Federal Power Act, and is not a jurisdictional utility under the Federal Power Act for its sales
<br />or generation of power.
<br />One of the final rules, Order No. 888, (i) requires the provision of open access transmission services on a
<br />nondiscriminatory basis by all jurisdictional utilities by requiring all such utilities to file tariffs that offer
<br />other entities seeking to effect wholesale power transactions the same transmission services they provide
<br />themselves, under comparable terms and conditions, and (ii)may require a non-jurisdictional utility, such
<br />as the Utility, that purchases transmission services from a jurisdictional utility under an open access tariff
<br />and that owns or controls transmission facilities to, in turn, provide open access service to the jurisdictional
<br />utility under terms that are comparable to the service that the non-jurisdictional utility provides itself. This
<br />is referred to as the reciprocity requirement. Order No.888 also includes provisions which, in effect, would
<br />permit jurisdictional utilities to recover under certain conditions so-called “stranded costs” for generating
<br />and other facilities from wholesale customers of a utility which use open access transmission service to
<br />purchase from other power suppliers.
<br />The other final rule, Order No. 889, (i) implements standards of conduct for jurisdictional utilities that offer
<br />open access transmission services to ensure that transmission owners and their affiliates do not have an
<br />unfair competitive advantage in using transmission to sell power, and (ii)requires those jurisdictional
<br />utilities to establish or use an electronic “Open Access Same-time Information System” (“OASIS”) to share
<br />transmission-related information (including information about available capacity) on the Internet, and to
<br />require that those jurisdictional utilities also obtain information about their transmission systems for their
<br />own wholesale power transactions, such as available capacity, in the same way that their competitors do
<br />through the OASIS.
<br />In 2007, the FERC issued Order No. 890 which, as modified and clarified on rehearing, updated Order Nos.
<br />888 and 889. Order 890 did not substantially change the requirements or jurisdictional reach of those orders
<br />with respect to the Utility.
<br />The Utility, as a non-jurisdictional utility, is not directly subject to Order No. 888, 889,and 890. Therefore
<br />at this time, the Utility is unable to predict what effect, if any these rules will have on the Utility.
<br />Energy Policy Act of 2005
<br />The EnergyPolicy Act of 2005 (the “2005 Act”) made additional changes to the federal regulation of the
<br />electric utility industry, some of which affect the Utility.
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