[Code of Federal Regulations]
[Title 18, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 18CFR2.25]

[Page 28-29]
 
           TITLE 18--CONSERVATION OF POWER AND WATER RESOURCES
 
  CHAPTER I--FEDERAL ENERGY REGULATORY COMMISSION, DEPARTMENT OF ENERGY
 
PART 2_GENERAL POLICY AND INTERPRETATIONS--Table of Contents
 
Sec. 2.25  Ratemaking treatment of the cost of emissions allowances 
in coordination transactions.

    (a) General Policy. This Statement of Policy is adopted in 
furtherance of the goals of Title IV of the Clean Air Act Amendments of 
1990, Pub. L. 101-549, Title IV, 104 Stat. 2399, 2584 (1990).
    (b) Costing Emissions Allowances in Coordination Sales. If a public 
utility's coordination rate on file with the Commission provides for 
recovery of variable costs on an incremental basis, the Commission will 
allow recovery of the incremental costs of emissions allowances 
associated with a coordination sale. If a coordination rate does not 
reflect incremental costs, the public utility should propose alternative 
allowance costing methods or demonstrate that the coordination rate does 
not produce unreasonable results. The Commission finds that the cost to 
replace an allowance is an appropriate basis to establish the 
incremental cost.
    (c) Use of Indices. The Commission will allow public utilities to 
determine emissions allowance costs on the basis of an index or 
combination of indices of the current price of emissions allowances, 
provided that the public utility affords purchasing utilities the option 
of providing emissions allowances. Public utilities should explain and 
justify any use of different incremental cost indices for pricing 
coordination sales and making dispatch decisions.
    (d) Calculation of Amount of Emissions Allowances Associated With 
Coordination Transactions. Public utilities should explain the methods 
used to compute the amount of emissions allowances included in 
coordination transactions.
    (e) Timing. (1) Public utilities should provide information to 
purchasing utilities regarding the timing of opportunities for 
purchasers to stipulate whether they will purchase or return emissions 
allowances. A public utility may require a purchasing utility to 
declare, no later than the beginning of the coordination transaction:
    (i) Whether it will purchase or return emissions allowances; and
    (ii) If it will return emissions allowances, the date on which those 
allowances will be returned.
    (2) Public utilities may include in agreements with purchasing 
utilities non-discriminatory provisions for indemnification if the 
purchasing utility fails to provide emissions allowances by the date on 
which it declares that the allowances will be returned.

[[Page 29]]

    (f) Other Costing Methods Not Precluded. The ratemaking treatment of 
emissions allowance costs endorsed in this Policy Statement does not 
preclude other approaches proposed by individual utilities on a case-by-
case basis.

[59 FR 65938, Dec. 22, 1994, as amended by Order 579, 60 FR 22261, May 
5, 1995]