Chairman Jon Wellinghoff Statement July 19, 2012 Docket Nos. AD12-9-000 and AD11-11-000 Item No. E-4

Policy Reforms on Capacity Allocation for Merchant Transmission Projects

"Thank you Becky and all the Team for your work on the proposed policy statement.

In addition to the proposed wide notice and detailed reporting safeguards that you mentioned, could you explain the key difference between an open season under our current policy and an open solicitation as proposed here?

The past several years have seen significant changes in the business models of developers of transmission projects with the evolution of merchant project developers and non-incumbent developers of cost-based participant funded projects. These new entrants hope to offer potential customers cost-effective service that is alternative to that offered by the incumbent transmission owner or new service not offered by incumbents. I believe the policy we propose today to be another step in furthering the Commission’s policy of providing fair and open access to transmission service for customers and competitive generators who seek opportunities to participate in wholesale electricity markets.

I note that these projects will coordinate at several possible points with the regional transmission planning processes established by Order Nos. 890 and 1000. For example, the need for a particular project may be identified initially in the regional planning process. Although developers of merchant or cost-based participant-funded projects wish to recover their costs from individual potential customers through bilateral negotiated agreements rather than seek regional cost allocation, they would nevertheless coordinate and share information with the regional planning process. When developed, such projects would be reflected in the topography and operation of the transmission system for future regional planning, even though they did not seek regional or interregional cost allocation.

I think this proposal finds the appropriate balance between the flexibility to negotiate rates, terms and amount of capacity potential customers want, which many developers told us they need to secure financing, with new safeguards to ensure that these rates are not unduly discriminatory or preferential and are just and reasonable. I look forward to comments on the proposal.”