[Federal Register Volume 75, Number 76 (Wednesday, April 21, 2010)]
[Proposed Rules]
[Pages 20796-20799]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9083]
[[Page 20796]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM10-20-000]
Market-Based Rate Affiliate Restrictions
April 15, 2010.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) proposes
to amend its regulations to revise its regulations governing market-
based rates for public utilities pursuant to section 205 of the Federal
Power Act (FPA). The Commission proposes to clarify that employees that
determine the timing of scheduled outages, or that engage in economic
dispatch, fuel procurement, or resource planning may not be shared
under the market-based rate affiliate restrictions codified in Order
No. 697.
DATES: Comments are due June 21, 2010.
ADDRESSES: You may submit comments, identified by docket number by any
of the following methods:
Agency Web site: http://www.ferc.gov. Documents created
electronically using word processing software should be filed in native
applications or print-to-PDF format and not in a scanned format.
Mail/Hand Delivery: Commenters unable to file comments
electronically must mail or hand deliver an original and 14 copies of
their comments to: Federal Energy Regulatory Commission, Secretary of
the Commission, 888 First Street, NE., Washington, DC 20426.
FOR FURTHER INFORMATION CONTACT:
Michelle Barnaby (Technical Information), Office of Energy Market
Regulation, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426, (202) 502-8407.
Paige Bullard (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502-6462.
SUPPLEMENTARY INFORMATION:
Notice of Proposed Rulemaking
April 15, 2010.
I. Introduction
1. In this order, the Federal Energy Regulatory Commission
(Commission) is proposing to revise Sec. 35.39 of its regulations
promulgated in Order No. 697 \1\ in order to reflect the clarification
provided in an order to be issued concurrently with this order in
response to the Compliance Working Group's \2\ concerns regarding
compliance with the market-based rate affiliate restrictions codified
in Order No. 697.\3\ Specifically, the Commission is proposing to
revise the separation of functions and information sharing provisions
of those affiliate restrictions to explicitly state that employees that
determine the timing of scheduled outages or that engage in economic
dispatch, fuel procurement, or resource planning may not be shared
under the Commission's market-based rate affiliate restrictions adopted
in Order No. 697.
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\1\ Market-Based Rates for Wholesale Sales of Electric Energy,
Capacity and Ancillary Services by Public Utilities, Order No. 697,
FERC Stats. & Regs. ] 31,252 (Order No. 697), clarified, 121 FERC ]
61,260 (2007), order on reh'g, Order No. 697-A, FERC Stats. & Regs.
] 31,268, clarified, 124 FERC ] 61,055, order on reh'g, Order No.
697-B, FERC Stats. & Regs. ] 31,285 (2008), order on reh'g, Order
No. 697-C, FERC Stats. & Regs. ] 31,291 (2009), order on reh'g,
Order No. 697-D, FERC Stats. & Regs. ] 31,305 (2010).
\2\ The Compliance Working Group states that it consists of 27
energy companies, which include integrated electric businesses,
merchant generators, marketing and trading businesses, and natural
gas distributors, and explains that the group was formed in mid-2008
``to develop a model [Commission] compliance program guide.''
Compliance Working Group Request for Clarification, Docket No. RM04-
7-007, at 2 (filed Mar. 9, 2009); Compliance Working Group Amended
Request for Clarification, Docket No. RM04-7-007, at 3 (filed Oct.
28, 2009). The members of the Compliance Working Group taking part
in its request for clarification are: Allegheny Energy, Inc.,
American Electric Power Company, Inc., Cleco Corporation, Consumers
Energy Company, Dominion Resources, Inc., Duke Energy Corporation,
Edison International, El Paso Electric Company, Energy East Corp.,
Entergy Corporation, Exelon Corporation, FirstEnergy Corp., FPL
Group, Inc., Pacific Gas and Electric Co., Progress Energy, Inc.,
Public Service Enterprise Group Incorporated, and Westar Energy,
Inc.
\3\ Market-Based Rates for Wholesale Sales of Electric Energy,
Capacity and Ancillary Services By Public Utilities, 131 FERC ]
61,021 (2010) (April 15 Clarification Order).
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II. Background
2. In Order No. 697, the Commission adopted affiliate restrictions
that govern the relationship between franchised public utilities with
captive customers and their ``market-regulated'' affiliates, i.e.,
affiliates whose power sales are regulated in whole or in part on a
market-based rate basis. These market-based rate affiliate restrictions
govern the separation of functions, the sharing of market information,
sales of non-power goods or services, and power brokering. The
Commission requires that, as a condition of receiving and retaining
market-based rate authority, sellers comply with these affiliate
restrictions unless explicitly permitted by Commission rule or order.
Failure to satisfy the conditions set forth in these affiliate
restrictions constitutes a violation of the market-based rate
tariff.\4\
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\4\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 549-550.
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3. On March 9, 2009, the Compliance Working Group submitted a
request for clarification in the Commission's market-based rate
rulemaking proceeding regarding which employees can be shared for
purposes of compliance with the Commission's market-based rate
affiliate restrictions. On October 28, 2009, the Compliance Working
Group submitted an amended request for clarification. In response to
the Compliance Working Group's request, the Commission is providing
clarification regarding which employees may not be shared under these
affiliate restrictions.\5\ In this Notice of Proposed Rulemaking
(NOPR), we propose to revise the text of the separation of functions
and information sharing provisions of the affiliate restrictions
contained in Sec. 35.39 of the Commission's regulations in order to
reflect the clarification provided in response to the Compliance
Working Group's request.
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\5\ April 15 Clarification Order, 131 FERC ] 61,021.
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III. Discussion
4. Under the separation of functions requirement in the market-
based rate affiliate restrictions, employees of market-regulated power
sales affiliates must operate separately, to the maximum extent
practical, from employees of affiliated franchised utilities with
captive customers.\6\ Order No. 697 exempts certain categories of
employees from this separation of functions requirement. Employees in
these categories are permitted to be shared, and Order No. 697 gives
examples of permissibly ``shared employees'' that are drawn from Order
No. 2004, which established the Standards of Conduct rules that were in
effect at the time that Order No. 697 was issued.\7\ In particular, the
market-based rate affiliate restrictions provide that
[[Page 20797]]
``Franchised public utilities with captive customers are permitted to
share support employees, and field and maintenance employees with their
market-regulated power sales affiliates. Franchised public utilities
with captive customers are also permitted to share senior officers and
boards of directors with their market-regulated power sales affiliates;
provided, however, that the shared officers and boards of directors
must not participate in directing, organizing or executing generation
or market functions.'' \8\ Moreover, under the information sharing
restriction, ``[a] franchised public utility with captive customers may
not share market information with a market-regulated power sales
affiliate if the sharing could be used to the detriment of captive
customers, unless simultaneously disclosed to the public.'' However,
``[p]ermissibly shared support employees, field and maintenance
employees and senior officers and board of directors under Sec.
35.39(c)(2)(ii) may have access to information covered by the
prohibition of Sec. 35.39(d)(1), subject to the no-conduit provision
in Sec. 35.39(g).'' \9\
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\6\ 18 CFR 35.39(c)(2)(i).
\7\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 561-566
(citing Standards of Conduct for Transmission Providers, Order No.
2004, FERC Stats. & Regs. ] 31,155, at P 96, 99-101, 145-146 (2003),
order on reh'g, Order No. 2004-A, FERC Stats. & Regs. ] 31,161, at P
134, order on reh'g, Order No. 2004-B, FERC Stats. & Regs. ] 31,166,
order on reh'g, Order No. 2004-C, FERC Stats. & Regs. ] 31,172
(2004), order on reh'g, Order No. 2004-D, 110 FERC ] 61,320 (2005),
vacated and remanded as it applies to natural gas pipelines sub nom.
National Fuel Gas Supply Corp. v. FERC, 468 F.3d 831 (D.C. Cir.
2006); see id. P 562 (citing 18 CFR 358.4(a)(5) (Order 2004-era
Standards of Conduct)).
\8\ 18 CFR 35.39(c)(2)(ii); see also Order No. 697, FERC Stats.
& Regs. ] 31,252 at P 562.
\9\ 18 CFR 35.39(d).
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5. In its request for clarification, the Compliance Working Group
asked the Commission to clarify which employees are permissibly
``shared employees'' for purposes of the Commission's market-based rate
affiliate restrictions. Specifically, it suggests that the Commission
should interpret these affiliate restrictions to permit sharing of
employees who are neither ``transmission function employees'' nor
``marketing function employees'' under the Standards of Conduct.\10\
The Compliance Working Group stated that the issue arose because shared
employees under the market-based rate affiliate restrictions are
defined by reference to shared employees under the Order No. 2004-era
Standards of Conduct, but as of the effective date of the Standards of
Conduct Final Rule, November 26, 2008, the Standards of Conduct no
longer use the concept of shared employees. The Compliance Working
Group therefore claimed that this inconsistency poses a compliance
conundrum that needs to be addressed in order to enable companies and
their employees to understand, and comply with, the market-based rate
affiliate restrictions.
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\10\ Standards of Conduct for Transmission Providers, Order No.
717, FERC Stats. & Regs. ] 31,280 (2008) (Standards of Conduct Final
Rule), order on reh'g, Order No. 717-A, FERC Stats. & Regs. ]
31,297, order on reh'g, Order No. 717-B, 129 FERC ] 61,123 (2009).
As discussed below, ``transmission function employees'' and
``marketing function employees'' are defined terms under the
Standards of Conduct. See 18 CFR 358.3(d); 358.3(i).
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6. As explained in the April 15 Clarification Order, we are denying
the Compliance Working Group's request that the Commission interpret
the market-based rate affiliate restrictions to permit the sharing of
employees who are neither transmission function employees nor marketing
function employees under the Standards of Conduct. However, in order to
address the Compliance Working Group's concerns regarding compliance
with the market-based rate affiliate restrictions, the April 15
Clarification Order provides guidance regarding which employees may not
be shared under the affiliate restrictions.\11\
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\11\ April 15 Clarification Order, 131 FERC ] 61,021 at P 39-42.
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7. Specifically, in the April 15 Clarification Order the Commission
denies the Compliance Working Group's request that it interpret the
market-based rate affiliate restrictions to permit the sharing of
employees who are neither transmission function employees nor marketing
function employees under the Standards of Conduct because the Standards
of Conduct definition of ``marketing function employee'' does not
include certain employees who may not be shared under the market-based
rate affiliate restrictions (for instance, employees that make economic
dispatch decisions or that determine the timing of scheduled outages).
Thus, the Commission explains that granting the Compliance Working
Group's requested interpretation would permit market-based rate sellers
to share employees that may not currently be shared under the affiliate
restrictions.
8. The April 15 Clarification Order explains that ``marketing
function employee'' is not a defined term in the market-based rate
regulations adopted in Order No. 697, and explains that the
restrictions on which employees may be shared under the market-based
rate affiliate restrictions are not limited to those employees who are
engaged in sales. It states that as clarified in Order No. 697-A, under
the market-based rate affiliate restrictions, ``shared employees may
not be involved in decisions regarding the marketing or sale of
electricity from the facilities, may not make economic dispatch
decisions, and may not determine the timing of scheduled outages for
facilities.'' \12\ In this regard, the April 15 Clarification Order
explains that responsibility for economic dispatch or the timing of
scheduled outages, for example, is not a ``marketing function'' under
the Standards of Conduct and, therefore, engaging in these activities
would not cause an employee to be a marketing function employee subject
to the Independent Functioning Rule under the Standards of Conduct (and
therefore, those employees could be shared). Thus, consistent with the
Commission's determinations in Order No. 697-A, the April 15
Clarification Order clarifies that, for purposes of compliance with the
market-based rate affiliate restrictions, a franchised public utility
with captive customers and its market-regulated power sales affiliates
may not share employees that make economic dispatch decisions or that
determine the timing of scheduled outages.\13\
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\12\ April 15 Clarification Order 131 FERC ] 61,021 at P 37
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 253).
\13\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 253.
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9. In addition, as explained in the April 15 Clarification Order,
franchised public utilities with captive customers should be prohibited
from sharing employees that engage in resource planning or fuel
procurement with their market-regulated power sales affiliates. If the
franchised public utility and its market-regulated power sales
affiliate are permitted to share employees that make strategic
decisions about future generation supply, such as deciding when and/or
where to build or acquire generating capacity, such strategic decision
making by a shared employee could result in generation being built or
acquired for the benefit of the market-regulated power sales affiliate,
and at the expense of the captive customers of the franchised public
utility. In this regard, the Commission notes that the corporate entity
has an inherent incentive to decrease its market-regulated power sales
affiliate's costs in order to maximize profits for shareholders.
10. Similarly, a shared employee that procures fuel for both the
franchised public utility and the market-regulated power sales
affiliate may have the incentive to allocate purchases of lower priced
fuel supplies to the market regulated power sales affiliate while
allocating purchases of higher priced fuel supplies to the franchised
public utility. By contrast, if the two entities are required to
independently procure fuel, they would compete for the market's best
priced fuel.
11. Therefore, given that the definition of marketing function
employee under the Standards of Conduct does not specifically address
[[Page 20798]]
employees that determine the timing of scheduled outages or that engage
in economic dispatch, fuel procurement, or resource planning, the April
15 Clarification Order clarifies that employees engaging in these
activities \14\ are prohibited from being shared under the market-based
rate affiliate restrictions, absent an explicit waiver from the
Commission.
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\14\ The prohibition on sharing employees that engage in
resource planning applies only to the sharing of employees between a
franchised public utility and its market-regulated power sales
affiliate, and is not intended to alter resource planning activities
by transmission providers that are permitted under the Standards of
Conduct Final Rule.
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12. In order to reflect this clarification, we propose to revise
Sec. 35.39 of our regulations in order to clarify that employees that
determine the timing of scheduled outages or that engage in economic
dispatch, fuel procurement, or resource planning may not be shared
under the market-based rate affiliate restrictions. Accordingly, we
propose to revise the separation of functions provision contained in
Sec. 35.39(c)(2)(ii) of the regulations to include the provision that
franchised public utilities with captive customers are prohibited from
sharing employees that determine the timing of scheduled outages or
that engage in economic dispatch, fuel procurement, or resource
planning with their market-regulated power sales affiliates.
13. We also propose to revise the information sharing provision
contained in Sec. 35.39(d)(2) of the regulations to include the
provision that employees that determine the timing of scheduled outages
or that engage in economic dispatch, fuel procurement, or resource
planning may not have access to information covered by the prohibition
of Sec. 35.39(d)(1).
IV. Information Collection Statement
14. The Office of Management and Budget's (OMB) regulations require
that OMB approve certain information collection and data retention
requirements imposed by an agency.\15\ Order No. 697's revisions to the
information collection requirements for market-based rate sellers were
approved under FERC-919 ``Market-Based Rates for Wholesale Sales of
Electric Energy, Capacity and Ancillary Services by Public Utilities''
OMB Control Nos. 1902-0234. While this order proposes to revise the
regulations for the market-based rate program in order to provide
clarification, it does not add to the existing information collection
requirements. Accordingly, a copy of this order will be sent to OMB for
informational purposes only.
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\15\ 5 CFR 1320.11.
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V. Environmental Analysis
15. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\16\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment.\17\ The actions proposed here fall within the categorical
exclusions in the Commission's regulations for rules that are
clarifying, corrective, or procedural, or do not substantially change
the effect of legislation or regulations being amended.\18\ In
addition, the proposed rule is categorically excluded as an electric
rate filing submitted by a public utility under sections 205 and 206 of
the FPA.\19\ As explained above, this proposed rule revises the
regulations for the market-based rate program in order to provide
clarification. Accordingly, no environmental assessment is necessary
and none has been prepared in this NOPR.
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\16\ Regulations Implementing the National Environmental Policy
Act of 1969, Order No. 486, FERC Stats. & Regs., Regulations
Preambles July 1996-December 2000 ] 30,783 (1987).
\17\ 18 CFR 380.4.
\18\ See 18 CFR 380.4(a)(2)(ii).
\19\ 18 CFR 380.4(a)(15).
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VI. Regulatory Flexibility Act Analysis
16. The Regulatory Flexibility Act of 1980 (RFA) \20\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a proposed rule and that minimize
any significant economic impact on a substantial number of small
entities. Most filing companies regulated by the Commission do not fall
within the RFA's definition of small entity.\21\ Moreover, as noted
above, this proposed rule revises the regulations for the market-based
rate program in order to provide clarification of an existing
requirement that affected entities, including small entities, are
currently required to comply with. Because the proposed revisions
clarify an existing requirement, and do not add to the existing
information collection or filing requirements, the Commission concludes
that the proposed rule will not have a significant economic impact on a
substantial number of small entities. As a result, no regulatory
flexibility analysis is required.
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\20\ 5 U.S.C. 601-12.
\21\ 5 U.S.C. 601(3), citing to section 3 of the Small Business
Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a
``small-business concern'' as a business which is independently
owned and operated and which is not dominant in its field of
operation.
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VII. Comment Procedures
17. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due June 21, 2010. Comments must refer to
Docket No. RM10-20-000, and must include the commenters' name, the
organization they represent, if applicable, and their address in their
comments.
18. The Commission encourages comments to be filed electronically
via the eFiling link on the Commission's Web site at http://www.ferc.gov. The Commission accepts most standard word processing
formats. Documents created electronically using word processing
software should be filed in native applications or print-to-PDF format
and not in a scanned format. Commenters filing electronically do not
need to make a paper filing.
19. Commenters that are not able to file comments electronically
must send an original and 14 copies of their comments to: Federal
Energy Regulatory Commission, Secretary of the Commission; 888 First
Street, NE., Washington, DC 20426.
20. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters on this proposal are
not required to serve copies of their comments on other commenters.
VIII. Document Availability
21. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
22. From the Commission's Home Page on the Internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary,
[[Page 20799]]
type the docket number excluding the last three digits of this document
in the docket number field.
23. User assistance is available for eLibrary and the Commission's
Web site during normal business hours from FERC Online Support at (202)
502-6652 (toll free at 1-866-208-3676) or e-mail at
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at
[email protected].
List of subjects in 18 CFR Part 35
Electric power rates, Electric utilities, Reporting and
recordkeeping requirements.
By direction of the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
In consideration of the foregoing, the Commission proposes to amend
part 35, Chapter I, Title 18, Code of Federal Regulations, as follows:
PART 35--FILING OF RATE SCHEDULES AND TARIFFS
1. The authority citation for part 35 continues to read as follows:
Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
2. In Sec. 35.39, paragraphs (c)(2)(ii) and (d)(2) are revised to
read as follows:
Sec. 35.39 Affiliate restrictions.
* * * * *
(c) * * *
(2) * * *
(ii) Franchised public utilities with captive customers are
permitted to share support employees, and field and maintenance
employees with their market-regulated power sales affiliates.
Franchised public utilities with captive customers are also permitted
to share senior officers and boards of directors with their market-
regulated power sales affiliates; provided, however, that the shared
officers and boards of directors must not participate in directing,
organizing or executing generation or market functions. Franchised
public utilities with captive customers are prohibited from sharing
employees that determine the timing of scheduled outages or that engage
in economic dispatch, fuel procurement, or resource planning with their
market-regulated power sales affiliates.
* * * * *
(d) * * *
(2) Permissibly shared support employees, field and maintenance
employees and senior officers and board of directors under Sec.
35.39(c)(2)(ii) may have access to information covered by the
prohibition of Sec. 35.39(d)(1), subject to the no-conduit provision
in Sec. 35.39(g). Employees that determine the timing of scheduled
outages or that engage in economic dispatch, fuel procurement, or
resource planning may not have access to information covered by the
prohibition of Sec. 35.39(d)(1).
* * * * *
[FR Doc. 2010-9083 Filed 4-20-10; 8:45 am]
BILLING CODE 6717-01-P