Exempt Wholesale Generators (EWG)

Under PUHCA 1935, an “affiliate” for these purposes means any company in which the person claiming EWG status owns a five percent or greater voting interest. PUHCA 2005 retains the relevant portions of the definition of an affiliate found in PUHCA 1935. It is important to note that under this definition, affiliation exists solely within a single ownership chain. In other words, sister companies are not affiliates under this definition.

The definition of an EWG set forth above has been incorporated, with slight modification, into the Commission’s regulations at 18 CFR § 366.1. That section defines an EWG as “any person engaged directly, or indirectly through one or more affiliates as defined in this subchapter, and exclusively in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling electric energy at wholesale.”

The definition of an EWG found in section 366.1 of the Commission’s regulations also specifies that “[f]or purposes of establishing or determining whether an entity qualifies for exempt wholesale generator status, sections 32(a)(2) through (4), and sections 32(b) through (d) of [PUHCA 1935] . . . shall apply.” Knowledge of these provisions is important because they control a significant portion of the representations that must be included in an EWG self-certification and to some extent what should not be included. Click on the link below for information on these provisions of PUHCA 1935.

Section 366.3(a) of the Commission’s regulations, 18 CFR § 366.3(a), provides that any person that is a holding company solely with respect to one or more EWGs, Foreign Utility Companies, or Qualifying Facilities under the Public Utility Regulatory Policies Act of 1978 will be exempt from the regulations on Commission access to holding company books and records found at section 366.2 and the accounting and record keeping requirements found at section 366.21, 18 CFR §§ 366.2, 366.21. In addition, any associated service company will be exempt from the requirements of section 366.2, the accounting and record keeping requirement for service companies found at 366.22, and the annual filing requirements found at 366.23, 18 CFR §§ 366.2, 366.22, 366.23. The holding company is also exempt from the notice of holding company filing requirements found at section 366.4, 18 CFR § 366.4.

The EWG status of generating subsidiaries can also have significance for holding companies that qualify as a single-state holding company system and thus qualify for the waiver of PUHCA 2005 requirements applicable to such holding companies. See 18 C.F.R. § 366.3(c). Section 366.3(c)(1) of the Commission’s regulations, 18 CFR § 366.3(c)(1), defines a single-state holding company system as “one that derives no more than 13 percent of its public-utility company revenues from outside a single-state.” The waiver available to single-state holding company systems essentially preserves the status quo for holding companies that qualified for a single-state holding company exemption under PUHCA 1935 by in effect finding that revenues from EWGs and certain other exempt entities do not qualify as public-utility company revenues. Under PUHCA 1935, these revenues were not public-utility company revenues because these companies were not public-utility companies for purposes of the statute. They are, however, public-utility companies under PUHCA 2005. The Commission’s current regulations specify that revenues derived from EWGs are not considered to be public-utility company revenues. 18 CFR § 366.3(c)(1). As a result, single-state holding company system status is not affected if the holding company acquires out-of-state EWGs. The Commission’s regulations permit a single-state holding company to seek waivers of the accounting, record retention and reporting requirements of sections 366.21, 366.22 and 366.23 of the regulations.

In practice, the only instance of particular note where EWG status has important significance outside the context of PUHCA 2005 is section 33.1(c)(8) of the Commission’s regulations, which contains a blanket authorization under FPA section 203(a)(2) that applies to, among other things, acquisitions of securities of EWGs.

In addition, section 214 of the FPA makes a rate or charge received by an EWG unlawful under section 205 of the FPA if the Commission finds that the rate or charge results from any undue preference received by the EWG from an “affiliate” or “associate company,” as defined in PUHCA 2005. 16 U.S.C. § 824m (2012).

The core of a notice of self-certification is a set of representations that demonstrate that the filer meets the definition of an EWG. It is important that each necessary representation be made fully and precisely. To assist filers, a model self-certification filing and a document providing commentary on the essential representations contained in a self-certification are posted on this webpage. To the extent that a potential filer is not able to make a specific required representation but believes that it nevertheless can qualify for EWG status, it should consult with Commission staff about possible alternative representations.

Aside from making the basic representations necessary to demonstrate EWG status, the most common issue raised in EWG filings is that of incidental activities. Incidental activities are activities that go beyond engaging directly, or indirectly through one or more affiliates, and exclusively in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling electric energy at wholesale. The Commission has developed precedent on incidental activities that are considered to be consistent with the requirements of EWG status and are therefore allowable. These activities are dealt with in greater detail elsewhere on this webpage.

The fundamental question to be addressed when considering an incidental activity connection is whether the activity is a necessary or appropriate part of wholesale generation operations or whether it represents a new line of business that is distinct from wholesale generation operations. If the activity can be reasonably viewed as a new line of business, it cannot qualify as an allowable incidental activity. Commission precedent on incidental activities elaborates on this point in specific contexts.

It is not necessary to seek approval of EWG status through a Commission declaratory order where an incidental activity not mentioned in existing precedent is at issue. Those activities can be described in a self-certification filing. Companies are encouraged to discuss any novel proposed incidental activities with Commission staff. Once a filing is made, Commission staff may also seek further information about the nature of the activities in question.

Although the Commission’s regulations specify that a notice of self-certification should include a form of notice of the filing suitable for publication in the Federal Register, 18 C.F.R. § 366.7(a), it is no longer necessary to submit this form of notice. See Notice Formats.

Finally, a company filing a notice of self-certification must represent that it has filed a copy of the notice of self-certification with the state regulatory authority of the state where the eligible facility is located.

The Commission’s regulations contemplate notices of self-recertification only in the case of a material change in facts, and the Commission has dismissed notices of self-recertification in situations that do not involve material changes in fact. More information on notices of self-recertification is provided on this webpage under the heading “Other EWG Filings.”

Companies may also file a petition for a formal Commission determination of EWG status. Such filings must be accompanied by a filing fee. The fee is set forth at 18 C.F.R. § 381.302(a), as updated from time-to-time.

The Commission’s regulations specify that if the Commission takes no action on a notice of self-certification within 60 days of filing, the notice of self-certification will be deemed to be granted. See 18 CFR § 366.7(a).

It is Commission practice to allow filings found to be consistent with the statute and regulations to become effective by operation of this provision of the regulations. In other words, in most cases no formal order is issued confirming that the filer is an EWG. Rather, each month the Commission issues a Secretary’s notice listing all EWG dockets for which the 60-day period expired during the previous month. Where a notice of self-certification raises novel issues, however, the Commission may on its own motion issue a formal order addressing them.

The Commission recognized early on that a literal reading of the exclusivity requirement was inconsistent with the reality of this business, and it has approved a long list of incidental activities that are deemed to be consistent with the exclusivity requirement. This consistency arises from the fact that the activities do not constitute a separate line of business but rather are simply incidental to the business of wholesale generation and sales.

Companies that propose to engage in activities not specifically mentioned in the definition of an EWG should research the Commission’s cases to determine whether the Commission has previously approved the activities in question. To the extent that there are no cases on point, the company should develop its own theories as to why the activity should nevertheless be considered to be an allowable incidental activity and present them in the EWG certification. Companies in this situation are encouraged to consult with Commission staff.

The following is a list of Commission cases approving various incidental activities. These cases deal with some of the more common incidental activities, and the list is thus not comprehensive. In addition, approved incidental activities are frequently subject to certain conditions or restrictions. It is thus important to consult the Commission’s cases to determine whether a proposed incidental activity is fully consistent with Commission requirements.

• Selkirk Cogen Partners, L.P., 69 FERC ¶ 61,037 (1994) (sales of excess fuel supplies)
• UGI Dev. Co., 89 FERC ¶ 61,192 (1999) (trading emissions allowances)
• Southern Elec. Wholesale Generators, Inc., 66 FERC ¶ 61,264 (1994) (facility development activities)
• NRG Northeast Generating LLC, 88 FERC ¶ 61,190 (1999) (ownership and operation of landfill for disposal of coal combustion by-products from present and future EWG operations)
• Application of Keyspan-Ravenswood, Inc. for Determination of Exempt Wholesale Generator Status, Docket No. EG99-166-000 (June 9, 1999) (granted by KeySpan-Ravenswood, Inc., 88 FERC ¶ 62,073 (1999)) (ownership of oil storage and transportation facilities that will be used by an affiliate to provide oil to the EWG and to third parties)
• Entergy Power Marketing Corp., 73 FERC ¶ 61,063 (1995) (wholesale power marketing)
• Sithe Framingham LLC, 83 FERC ¶ 61,106 (1998) (sale of ancillary services)
• Richmond Power Enter., L. P., 62 FERC ¶ 61,157 (1993) (sale of generation byproducts such as steam and fly ash)
• Killingholme Generation Ltd., 90 FERC ¶ 61,194 (2000) (certain leases of property)
• Duquesne Power, LP, 106 FERC ¶ 61,104 (2004) (purchase and sell congestion revenue rights)
• CNG Power Services Corp., 71 FERC ¶ 61,026 (1995) (reassign excess transmission capacity)

Specifically, an EWG must file a notice of any material change in facts that may affect its EWG status within 30 days of that change. The company is required to:

1. Submit either a new notice of self-certification or a petition for a Commission certification order,
2. Explain why the material change in facts does not affect its status as an EWG, or
3. Notify the Commission that it no longer seeks to maintain EWG.

The Commission’s regulations do not further define what constitutes a material change in facts. However, given that EWG certification depends on making certain representations discussed on this webpage in connection with the EWG certification procedures, the analysis of what constitutes a material change should focus on those representations. The question thus becomes: does the change call into question the company’s ability to make one or more of the representations?

In practice, material changes in fact are commonly changes involving incidental activities that may call into question whether the company is “exclusively” engaged in wholesale generation and sales operations. To the extent that the activity falls within Commission precedent on allowable incidental activities, the change normally would not be viewed as affecting the company’s EWG status. In any event, to the extent there is uncertainty about whether a change would be considered material, Commission staff is available to provide guidance.

This is the only reference in the Commission’s regulations to recertification of EWG status, and the Commission has dismissed such filings that do not involve material changes in fact that may affect the filer’s EWG status. See, e.g., BG Dighton Power, LLC, 132 FERC ¶ 61,029 (2010). As a result, a company that files a notice of self-recertification should explain why the change in facts in question is a material change that may affect its EWG status. See id. P 6. A company that wishes to provide additional information regarding itself, but is not able to explain how this information represents a material change in fact that may affect its EWG status, should provide the information in a notice of non-material change in fact. Commission staff is available to provide guidance on this issue.

• Section 32 of the Public Utility Holding Company Act of 1935.
• Filing Requirements and Ministerial Procedures for Persons Seeking Exempt Wholesale Generator Status, Order No. 550, February 10, 1993, Docket No. RM93-1-000, 18 CFR Parts 365 and 381, 58 F.R. 8897.
• Filing Requirements and Ministerial Procedures for Persons Seeking Exempt Wholesale Generator Status; Order Addressing Motions for Rehearing, Reconsideration and Clarification; Amending Regulations; and Interpreting PUCHA Section 32(a)(1), Order No. 550-A, April 14, 1993, Docket No.
• RM05-32-000; Order No. 667 Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005.
• Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order No. 667-A, April 24, 2006, Docket No. RM05-32-001, 18 CFR 365, 18 CFR 366, 71 FR 28446.
• Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order No. 667-B, July 28, 2006, Docket No. RM05-32-002, 18 CFR 366, 71 FR 42750.
• Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order No. 667-C, Feb. 20, 2007, Docket No. RM05-32-003, 18 CFR 366.

Is there a requirement to become an EWG?

No. EWG status is not mandatory. However, if a wholesale generator is not an EWG, the absence of EWG status may affect the obligations of a holding company that owns an interest in the generator.

What is an EWG exempt from?

EWGs are exempt from all requirements of Part 366 of the Commission’s regulations (which pertain to PUHCA 2005), other than 18 C.F.R. § 366.7. EWG status only affects obligations under PUHCA 2005, and EWGs thus remain subject to all applicable obligations under the Federal Power Act.  In addition, Part 366 establishes exemptions from certain requirements of PUHCA 2005 for holding companies that only own EWGs and certain other exempt entities.  See 18 C.F.R. § 366.3(a).

How does a company become an EWG?

A company wishing to establish its status as an EWG may either submit a notice of self-certification of EWG status or it may file a petition for a Commission declaratory order finding the company to be an EWG.

What should be included in a notice of self-certification of EWG status?

• A brief description of the company. Detailed descriptions of company upstream ownership structures are not required.
• Contact information for the filing entity (including a current phone number).
• A brief description of the filing entity’s generation facility, including its location.
• Representations establishing that the filing entity satisfies the definition of an EWG set forth at 18 C.F.R. § 366.1. An example of these representations can be found in the sample notice of self-certification.
• If the filing entity will engage in incidental activities that the Commission has not previously found to be consistent with EWG status, the filing entity should provide an explanation of why these activities should be found to be consistent with EWG status.
• A representation that a copy of the notice of self-certification has been filed with the utility commission of the state where the filing entity’s generation facility is located.

See more information on notices of self-certification and their contents.

What continuing requirements does an EWG have after it has been certified as an EWG?

After being certified as an EWG, the company must continue to operate consistently with the representations it made in its notice of self-certification. If there are any material changes in fact that may affect the company’s status as an EWG, the company is require to submit to the Commission a notice of material change in facts within 30 days of the change. See 18 C.F.R. § 366.7(c). 

Can a company file for EWG status if it is currently developing or has not yet acquired a generation facility?

Yes; however, because the company will be deemed to have temporary EWG status from the time that the notice of EWG status is filed, the company must restrict its activities to those that are consistent with EWG status. The Commission has found activities necessary or appropriate for purposes of eligible facility development or acquisition are consistent with EWG status.

Can EWG status be revoked?

The Commission may, on its own motion or on the complaint of any person, revoke the status of a facility or a company if it fails to conform to any of the criteria under Part 366 of the Commission’s regulations for such status.

What should a company do if it no longer wishes to be an EWG?

A company that chooses to relinquish its EWG status should submit to the Commission a notice of material change in fact explaining that it will no longer be an EWG.
 

Section 32(a)(2) of PUHCA 1935 defines an eligible facility as a facility “used for the generation of electric energy exclusively for sale at wholesale” or that is “used for the generation of electric energy and leased to one or more public utility companies.” Section 32(a)(2) of PUHCA 1935 also specifies that an eligible facility can consist of a portion of a generation facility and can include necessary appurtenant interconnection facilities.

Section 32(b) of PUHCA 1935 provides that retail sales of electric energy produced by a facility located in a foreign country do not prevent the facility from being an eligible facility, or prevent a person owning and/or operating the facility, from being an EWG if none of the electric energy generated by the facility is sold to consumers in the United States.

Section 32(c) of PUHCA 1935 provides that any facility that was in a retail rate base on October 24, 1992 cannot be considered to be an eligible facility unless every state commission with jurisdiction over the retail rates in question makes a determination that allowing the facility to be an eligible facility will benefit consumers, be in the public interest, and not violate state law.

Section 32(d) of PUHCA 1935 provides that no EWG may own or operate a portion of any facility if any other portion of that facility is owned or operated by an electric utility company that is an affiliate or associate company of such EWG. However, the Commission has determined that this prohibition does not apply if the affiliate or associate company electric utility company is itself an EWG. See Buffalo Gap Wind Farm 2, LLC, 118 FERC ¶ 61,069 (2007). If the affiliate or associate company is not an EWG, a co-ownership arrangement will nevertheless be permissible if certain conditions are met. Specifically, every state commission that has jurisdiction over the retail rates that the affiliate or associate company charges for electric energy from the facility must determine that allowing the facility to be an eligible facility will benefit consumers, be in the public interest, and not violate state law.