27 October 2008
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[Federal Register: October 27, 2008 (Volume 73, Number 208)]
[Rules and Regulations]
[Page 63795-63832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc08-19]
[[Page 63795]]
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Part III
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Part 358
Standards of Conduct for Transmission Providers; Final Rule
[[Page 63796]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 358
[Docket No. RM07-1-000; Order No. 717]
Standards of Conduct for Transmission Providers
Issued October 16, 2008.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission is amending its
regulations adopted on an interim basis in Order No. 690, in order to
make them clearer and to refocus the rules on the areas where there is
the greatest potential for abuse. The Final Rule is designed to foster
compliance, facilitate Commission enforcement, and conform the
Standards of Conduct to the decision of the U.S. Court of Appeals for
the DC Circuit in National Fuel Gas Supply Corporation v. FERC, 468 F.
3d 831 (DC Cir. 2006). Specifically, the Final Rule eliminates the
concept of energy affiliates and eliminates the corporate separation
approach in favor of the employee functional approach used in Order
Nos. 497 and 889.
DATES: Effective Date: This rule will become effective November 26,
2008.
FOR FURTHER INFORMATION CONTACT:
Kathryn Kuhlen, Office of Enforcement, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426,
Kathryn.Kuhlen@FERC.gov, (202) 502-6855.
Jamie A. Jordan, Office of Enforcement, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426,
Jamie.Jordan@FERC.gov (202) 502-6628.
Table of Contents
Paragraph
Number
I. Introduction............................................. 1
II. Background.............................................. 3
III. Discussion............................................. 9
A. Overall Approach..................................... 9
1. Commission Proposal.............................. 9
2. Comments......................................... 10
3. Commission Determination......................... 12
B. Jurisdiction and Applicability of the Standards...... 13
1. Applicability to Pipelines Operating Under Part 13
157................................................
2. Applicability to Pipelines with No Marketing 16
Affiliate Transactions.............................
3. Commencement Date................................ 24
4. Waivers from Coverage of the Standards........... 27
C. Independent Functioning Rule......................... 34
1. Transmission Functions........................... 37
2. Transmission Function Employee................... 41
3. Marketing Functions.............................. 50
4. Marketing Function Employee...................... 97
5. Supervisors, Managers and Corporate Executives... 106
6. Elimination of Shared Employees Concept.......... 122
7. Long-Range Planning and Procurement.............. 134
8. Exclusion for Permitted Information Exchanges.... 152
D. The No Conduit Rule.................................. 187
1. Commission Proposal.............................. 188
2. Comments......................................... 189
3. Commission Determination......................... 197
E. Transparency Rule.................................... 204
1. Waivers and Exercises of Discretion.............. 205
2. Other Posting Requirements....................... 218
F. Other Definitions.................................... 249
1. Affiliate........................................ 250
2. Transmission..................................... 259
3. Transmission Customer............................ 265
4. Transmission Function Information................ 267
5. Transmission Provider............................ 277
G. Per Se Violation..................................... 283
1. Commission Proposal.............................. 284
2. Comments......................................... 285
3. Commission Determination......................... 291
H. Training Requirements................................ 295
1. Commission Proposal.............................. 295
2. Comments......................................... 296
3. Commission Determination......................... 305
I. Compliance Date...................................... 310
J. Miscellaneous Matters................................ 313
1. Comments......................................... 313
2. Commission Determination......................... 314
IV. Information Collection Statement........................ 318
V. Environmental Analysis................................... 324
VI. Regulatory Flexibility Act.............................. 325
VII. Document Availability.................................. 326
VIII. Effective Date and Congressional Notification......... 329
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Regulatory Text
Appendix A
Before Commissioners: Joseph T. Kelliher, Chairman; Svedeen G.
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.
I. Introduction
1. This Final Rule amends the Standards of Conduct for Transmission
Providers (the Standards of Conduct or the Standards) to make them
clearer and to refocus the rules on the areas where there is the
greatest potential for abuse. The Standards have substantially evolved
over the twenty years since they were first adopted for the gas
industry in 1988. During that time, the Commission added numerous
exceptions and additions to the original regulations (and to the
regulations adopted for the electric industry in 1996), including
revisions made in Order No. 2004,\1\ in which the Commission combined
the separate Standards for the gas and electric industry, expanded the
scope of the Standards to include the new concept of energy affiliates,
and adopted a corporate separation approach to the relationship of
transmission providers and their marketing arms. The cumulative effect
of many of these changes rendered the Standards as a whole difficult
for regulated entities to apply and for the Commission to enforce.
Furthermore, on appeal of Order No. 2004, the U.S. Court of Appeals for
the DC Circuit disapproved of the expansion of the Standards to include
energy affiliates, and vacated Order No. 2004 as it applied to the gas
industry.\2\
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\1\ Standards of Conduct for Transmission Providers, Order No.
2004, FERC Stats. & Regs., Regulations Preambles 2001-2005 ] 31,155
(2003), order on reh'g, Order No. 2004-A, FERC Stats. & Regs.,
Regulations Preambles 2001-2005 ] 31,161 (2004), order on reh'g,
Order No. 2004-B, FERC Stats. & Regs., Regulations Preambles 2001-
2005 ] 31,166 (2004), order on reh'g, Order No. 2004-C, FERC Stats.
& Regs., Regulations Preambles 2001-2005 ] 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. Nat'l Fuel
Gas Supply Corporation v. FERC, 468 F.3d 831 (DC Cir. 2006)
(National Fuel).
\2\ National Fuel, 468 F. 3d at 845.
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2. The reforms adopted in this Final Rule are designed to eliminate
the elements that have rendered the Standards difficult to enforce and
apply. They combine the best elements of Order No. 2004 (especially the
integration of gas and electric Standards, an element not contested in
National Fuel), with those of the Standards originally adopted for the
gas industry in Order No. 497 \3\ and for the electric industry in
Order No. 889.\4\ Specifically, the Final Rule (i) eliminates the
concept of energy affiliates and (ii) eliminates the corporate
separation approach in favor of the employee functional approach used
in Order Nos. 497 and 889. In addition, the reforms adopted here
conform the Standards to the National Fuel opinion. At bottom, these
reforms, by making the Standards clearer and by refocusing them on the
areas where there is the greatest potential for affiliate abuse, will
make compliance less elusive and subjective for regulated entities, and
will facilitate enforcement of the Standards by the Commission.
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\3\ Inquiry Into Alleged Anticompetitive Practices Related to
Marketing Affiliates of Interstate Pipelines, Order No. 497, 53 FR
22139 (1988), FERC Stats. & Regs., Regulations Preambles 1986-1990 ]
30,820 (1988); Order No. 497-A, order on reh'g, 54 FR 52781 (1989),
FERC Stats & Regs., Regulations Preambles 1986-1990 ] 30,868 (1989);
Order No. 497-B, order extending sunset date, 55 FR 53291 (1990),
FERC Stats. & Regs., Regulations Preambles 1986-1990 ] 30,908
(1990); Order No. 497-C, order extending sunset date, 57 FR 9
(1992), FERC Stats. & Regs., Regulations Preambles 1991-1996 ]
30,934 (1991), reh'g denied, 57 FR 5815 (1992), 58 FERC ] 61,139
(1992); aff'd in part and remanded in part sub nom. Tenneco Gas v.
FERC, 969 F.2d 1187 (DC Cir. 1992) (collectively, Order No. 497)
(Tenneco).
\4\ Open Access Same-Time Information System (Formerly Real-Time
Information Network) and Standards of Conduct, Order No. 889, 61 FR
21737 (May 10, 1996), FERC Stats. & Regs., Regulations Preambles
January 1991-June 1996 ] 31,035 (1996); Order No. 889-A, order on
reh'g, 62 FR 12484 (Mar. 14, 1997), FERC Stats. & Regs., Regulations
Preambles July 1996--December 2000 ] 31,049 (1997); Order No. 889-B,
reh'g denied, 62 FR 64715 (Dec. 9, 1997), 81 FERC ] 61,253 (1997)
(collectively, Order No. 889).
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II. Background
3. The Commission first adopted Standards of Conduct in 1988, in
Order No. 497. These initial Standards prohibited interstate natural
gas pipelines from giving their marketing affiliates or wholesale
merchant functions undue preferences over non-affiliated customers.
Citing demonstrated record abuses, the U.S. Court of Appeals for the DC
Circuit upheld these Standards in 1992.\5\ The Commission adopted
similar Standards for the electric industry in 1996, in Order No. 889,
prohibiting public utilities from giving undue preferences to their
marketing affiliates or wholesale merchant functions. Both the electric
and gas Standards sought to deter undue preferences by: (i) Separating
a transmission provider's employees engaged in transmission services
from those engaged in its marketing services, and (ii) requiring that
all transmission customers, affiliated and non-affiliated, be treated
on a non-discriminatory basis.
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\5\ Tenneco, 969 F. 2d at 1214.
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4. Changes in both the electric and gas industries, in particular
the unbundling of sales from transportation in the gas industry and the
increase in the number of power marketers in the electric industry, led
the Commission in 2003 to issue Order No. 2004, which broadened the
Standards to include a new category of affiliate, the energy
affiliate.\6\ The new Standards were made applicable to both the
electric and gas industries, and provided that the transmission
employees of a transmission provider \7\ must function independently
not only from the company's marketing affiliates but from its energy
affiliates as well, and that transmission providers may not treat
either their energy affiliates or their marketing affiliates on a
preferential basis. Order No. 2004 also imposed requirements to
publicly post information concerning a transmission provider's energy
affiliates.
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\6\ The new Standards defined an Energy Affiliate as an
affiliate of a transmission provider that (1) engages in or is
involved in transmission transactions in U.S. energy or transmission
markets; (2) manages or controls transmission capacity of a
transmission provider in U.S. energy or transmission markets; (3)
buys, sells, trades or administers natural gas or electric energy in
U.S. energy or transmission markets; or (4) engages in financial
transactions relating to the sale or transmission of natural gas or
electric energy in U.S. energy or transmission markets. 18 CFR
358.3(d). Certain categories of entities were excluded from this
definition in following subsections of the regulations.
\7\ A transmission provider was defined as (1) any public
utility that owns, operates or controls facilities used for
transmission of electric energy in interstate commerce; or (2) any
interstate natural gas pipeline that transports gas for others
pursuant to subpart A or part 157 or subparts B or G of part 284 of
the same chapter of the regulations. 18 CFR 358.3(a).
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5. On appeal by members of the natural gas industry, the U.S. Court
of Appeals for the DC Circuit overturned the Standards as applicable to
gas transmission providers, on the grounds that the evidence of energy
affiliate
[[Page 63798]]
abuse cited by the Commission was not in the record.\8\ The court noted
that the dissenting Commissioners in Order No. 2004 had expressed
concern that the Order would diminish industry efficiencies without
advancing the FERC policy of preventing unduly discriminatory
behavior.\9\
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\8\ National Fuel, 468 F. 3d at 841.
\9\ Id. at 838.
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6. The Commission issued an Interim Rule on January 9, 2007,\10\
which repromulgated the portions of the Standards not challenged in
National Fuel. The Commission then set about determining how to respond
to the DC Circuit's order on a permanent basis. On January 18, 2007,
the Commission issued its initial NOPR,\11\ requesting comment on
whether the concept of energy affiliates should be retained for the
electric industry, proposing the creation of two new categories of
employees denominated as Competitive Solicitation Employees and
Planning Employees, carrying over the Interim Rule's new definition of
marketing to cover asset managers, and making numerous other proposals.
The Commission received thousands of pages of both initial and reply
comments from some 95 individuals, companies, and organizations.
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\10\ Standards of Conduct for Transmission Providers, Order No.
690, 72 FR 2427 (Jan. 19, 2007); FERC Stats. & Regs. ] 31,237 (2007)
(Interim Rule); clarified by, Standards of Conduct for transmission
providers, Order No. 690-A, 72 FR 14235 (Mar. 27, 2007); FERC Stats.
& Regs. ] 31,243 (2007) (Order on Clarification and Rehearing).
\11\ Standards of Conduct for Transmission Providers, 72 FR 3958
(Jan. 29, 2007), FERC Stats. & Regs. ] 32,611 (2007) (initial NOPR).
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7. Consideration of these comments, coupled with the Commission's
own experience in administering the Standards, persuaded the Commission
to modify the approach advanced in the initial NOPR. For that reason,
the Commission issued a new NOPR on March 27, 2008,\12\ and invited
comment both on its general approach and on its specific provisions. In
the NOPR, the Commission proposed to return to the approach of
separating by function transmission personnel from marketing personnel,
an approach that had been adopted in Order Nos. 497 and 889. The
Commission also proposed to clarify and streamline the Standards in
order to enhance compliance and enforcement, and to increase
transparency in the area of transmission/affiliate interactions that
would aid in the detection of any undue discrimination. Comments were
received from 62 companies and organizations, which are listed in
Appendix A.\13\ The vast majority of the comments were laudatory both
of the Commission's efforts to simplify and clarify the Standards, and
of the general approaches taken by the Commission to achieve that goal.
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\12\ Standards of Conduct for Transmission Providers, 73 Fed.
Reg. 16,228 (March 27, 2008), FERC Stats. & Regs. ] 32,630 (2008)
(NOPR).
\13\ The acronyms used throughout are defined in Appendix A.
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8. Notwithstanding general agreement with the Commission's overall
approach, many commenters submitted requests for clarification and
modifications. In most instances, the modifications proposed were
advanced with the stated goal either to make the Standards even
clearer, or to address matters which some entities believed had fallen
between the cracks in the transition from the existing Standards to a
more streamlined approach. The Commission has carefully considered
these comments and agrees that in several areas, modifications to the
regulatory text are needed. This Final Rule adopts the overall approach
set forth in the NOPR, but modifies the regulatory text to better
achieve the goals of clarity and enforceability. It also provides
clarifications in several areas in order to aid regulated entities in
applying the Standards.
III. Discussion
A. Overall Approach
1. Commission Proposal
9. The NOPR proposed to simplify and clarify the Standards, and in
particular to: (i) Eliminate the concept of energy affiliates, and (ii)
eliminate the corporate separation approach to separating a
transmission provider's transmission function employees from its
marketing function employees, instead returning to the employee
functional approach utilized in Order Nos. 497 and 889. The NOPR
pointed out that the corporate separation approach had proven difficult
to implement, as evidenced by the scores of waiver requests submitted
to the Commission, and impeded legitimate integrated resource planning
and competitive solicitations, as reflected in the concerns raised by
the electric industry in particular and also by state commissions. The
Commission also found that the existing Standards are too complex to
facilitate compliance or support enforcement efforts, and have had the
unintended effect of making it more difficult for transmission
providers to reasonably manage their businesses.
2. Comments
10. The vast majority of commenters agreed with the Commission's
goals of simplifying the Standards in order to achieve greater clarity,
efficiencies of operation, and ease of compliance. They also applauded
the proposed return to the employee functional approach, stating that
it would better promote regulatory certainty than had the corporate
separation approach.\14\
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\14\ Most commenters expressly support the change in approach to
the independent functioning rule from ``corporate separation'' to
``employee functional,'' including ALCOA; Ameren; AGA; APPA; ATC;
Arizona PSC; Bonneville; CenterPoint; Chandeleur; California PUC
(particularly supporting the Commission's efforts to remove
impediments to integrated resource planning); Destin; Dominion
Resources; Duke; E.ON; EEI; El Paso; EPSA; Idaho Power; FirstEnergy;
INGAA; Iroquois; Kinder Morgan; LPPC; MidAmerican; NARUC; National
Grid; NGSA; New York PSC; Nisource; NCPA; PG&E; PSEG; Puget Sound;
SMUD; Salt River; SCE; Southern Co. Services; Spectra; TAPS; TANC;
TDU Systems; Vectren; WA UTC; Western Utilities Compliance Group;
Wisconsin Electric; and Xcel.
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11. No commenters proposed that the corporate separation approach
be continued, and no commenters requested continuation of the energy
affiliate concept. The FTC, however, contended that behavioral rules,
including the employee functional approach, cannot fully achieve
independent functioning because such an approach remains vulnerable to
subtle events of discrimination and preference that may be difficult to
detect and document.\15\ The FTC and ITC recommend instead that the
Commission require vertically integrated firms to structurally unbundle
transmission and place operation of the transmission function in the
hands of the relevant Regional Transmission Organization (RTO) or
Independent System Operator (ISO).\16\
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\15\ FTC at 6-7.
\16\ FTC at 9-10; ITC Reply at 4-5.
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3. Commission Determination
12. The overwhelming support from commenters on the NOPR's overall
approach confirms the Commission's conviction that simplifying and
clarifying the Standards in the manner proposed will best achieve the
twin goals of compliance and enforcement. The Commission therefore
adopts the employee functional approach, as set forth in the regulatory
text, and eliminates the concept of energy affiliates. Specifics and
definitions regarding the employee functional approach, as well as
other matters, are discussed below. With respect to the comments of the
FTC and ITC, there has been no demonstration that the proposed rules
are inadequate to address the potential for undue preferences. Nor do
we believe this proceeding is the proper forum to
[[Page 63799]]
address issues as complex and far-reaching as those raised by the FTC
and ITC.
B. Jurisdiction and Applicability of the Standards
1. Applicability to Pipelines Operating Under Part 157
a. Commission Proposal
13. In the NOPR, the Commission carried forward from the existing
Standards the essence of the language in section 358.1 governing the
applicability of the Standards to interstate natural gas pipelines. The
proposed text reads in pertinent part: ``This part applies to any
interstate natural gas pipeline that transports gas for others pursuant
to subpart A of part 157 or subparts B or G of part 284 of this chapter
and conducts transmission transactions with an affiliate that engages
in marketing functions.'' Likewise, the definition of transmission
provider in proposed section 358.3(k), insofar as it pertains to the
gas industry, reads as follows: ``Any interstate natural gas pipeline
that transports gas for others pursuant to subpart A of part 157 or
subparts B or G of part 284 of this chapter.''
b. Comments
14. Hampshire Gas and Northwest Natural object that the texts of
proposed sections 358.1(a) and 358.3(k) bring within the ambit of the
Standards certain gas pipelines that did not fall within the Standards
as issued under Order No. 497.\17\ They contend that the NOPR's use of
the word ``or'' instead of ``and'' in proposed section 358.1(a) expands
the ambit of the regulations to any pipeline that transports gas either
under subpart A of part 157 or under subpart B or G of part 284. Both
commenters note that a pipeline operating only under part 157 does not
have the authority to provide open access transportation, as it may
only transport for specific authorized shippers, and thus it is not
possible for a part 157 pipeline to engage in discrimination in favor
of an affiliate. Hampshire and Northwest Natural urge the Commission to
change the Standards' applicability to cover only those pipelines that
operate under both parts 157 and 284.\18\
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\17\ Hampshire Gas at 6-9; Northwest Natural at 3-7.
\18\ Id.
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c. Commission Determination
15. The current Standards, as well as the proposed Standards,
contain the word ``or'' instead of ``and'' in sections 358.1(a) and
358.3(k)(2). The fact that the Commission is returning to the employee
functional approach used in Order No. 497 does not automatically mean,
however, that it must resurrect all other aspects of Order No. 497.
Each provision must be considered on a case-by-case basis. The
Commission has evaluated the comments contending that part 157
pipelines should not be included in the ambit of section 358.1(a), and
determines that their position is well-taken. Pipelines operating only
under part 157 cannot discriminate in favor of an affiliate, because
such pipelines can only transport for specific shippers authorized by
their certificates. Put another way, in this Final Rule, we are
concerned about the relationship between pipelines and their shippers
where the pipelines are providing transportation service pursuant to
part 284 blanket certificate authorization and open access rules, which
give the pipelines the flexibility to discriminate in favor of their
affiliates because they may commence and terminate service without ex
ante review by market participants or the Commission. By contrast, the
very few pipelines that are not part 284 open-access transporters must
receive shipper-specific certificate authorization from the Commission,
which must find the service is required by the public convenience and
necessity under Section 7 of the Natural Gas Act. Accordingly, part 157
transporters do not have the flexibility that could lead to
discriminating unduly in favor of their affiliates. The Commission will
therefore eliminate the reference to part 157, leaving only interstate
pipelines that transport gas for others pursuant to subparts B or G of
part 284 subject to the Standards and within the scope of the
definition of transmission provider. Accordingly, the Standards now
apply to those pipelines subject to the Commission's open access rules
under part 284.
2. Applicability to Pipelines With No Marketing Affiliate Transactions
a. Commission Proposal
16. The NOPR requested comment as to whether the statement of the
Standards' applicability to interstate pipelines in section 358.1(a)
should parallel the statement of the Standards' applicability to the
electric industry set forth in section 358.1(b).\19\ The language in
question reads: ``and conducts transmission transactions with an
affiliate that engages in marketing functions.''
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\19\ NOPR at P 58.
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b. Comments
17. INGAA asserts that the cited language is essential, because it
exempts those pipelines with affiliates that have marketing function
employees, but with which the pipeline conducts only non-transmission
transactions. INGAA argues that these non-transmission transactions do
not pose the potential for the types of abuse the rules seek to
prevent. According to INGAA, the cited language also ensures that the
proposed Standards operate within the boundaries set forth in National
Fuel, by not extending coverage to relationships and transactions for
which the Commission has no record evidence of undue discrimination or
preference.\20\
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\20\ INGAA at 9-12.
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18. NGSA argues that the limitation in the current language implies
an exemption from the Standards for sales of gas in which the gas is
not shipped using capacity held or controlled by the seller's
affiliated transmission provider. NGSA urges the Commission to either:
(i) Clarify that the No Conduit Rule (and the Standards generally)
would nonetheless apply to such gas sellers when they share the same
facilities or trading floor with marketing function employees who are
not exempt from the Standards, or (ii) require entities that house
exempt marketing function employees in the same facility as non-exempt
marketing function employees to provide some physical separation
between the two groups, to prevent uncontrolled flow of restricted
information.\21\
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\21\ NGSA Reply Comments at 12-14.
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19. While agreeing with INGAA, other commenters would apply the
conditional language in section 358.1(a) to public utilities as well as
pipelines, thereby limiting the Standards' application to both public
utilities and interstate natural gas pipelines that conduct
transportation transactions with marketing affiliates.\22\
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\22\ Nisource at 25-28; DCP Midstream at 2; Southwest Gas at 18-
20.
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c. Commission Determination
20. The Commission agrees with INGAA that there is no evidence in
the record to suggest that pipelines that do not conduct transmission
transactions with an affiliate engaged in marketing functions are in a
position to engage in the type of affiliate abuse to which the
Standards are directed. Therefore, the Commission will retain the
language in section 358.1(a) that sets forth this limitation.
21. The Commission disagrees with NGSA's contention that certain
sales of gas have, by implication, been made
[[Page 63800]]
exempt. The Commission is not exempting any sales of gas; the Standards
apply to conduct, not to products. Section 358.1 addresses which
pipelines and which electric utilities fall within the ambit of the
Standards. A pipeline may have some marketing affiliates with which it
conducts transmission transactions, and some with which it does not. A
pipeline that conducts transmission transactions with a marketing
affiliate must comply with the Standards, including the No Conduit
Rule.
22. If a pipeline has affiliates of both types (some with which it
conducts transmission transactions and some with which it does not),
the pipeline must ensure that there is no prohibited communication with
marketing function employees, in accordance with the requirements of
the No Conduit Rule. The pipeline can determine how best to ensure
compliance with the regulation, and we decline to order physical
separation of employees on a generic basis. We might consider it on a
case-specific basis, however, in the event the Commission found a
violation.\23\
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\23\ C.f., e.g., Southern Co. Serv. Inc., 117 FERC ] 61,021
(2006).
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23. The Commission agrees with those commenters that suggest
parallelism between the electric and gas industries could be achieved
by also applying to public utilities the limitation applicable to
pipelines. Because the core abuse to which the Standards are directed
is that of undue preference in favor of an affiliate (defined to
include divisions of the transmission provider as well as separate
corporate entities), a public utility that does not engage in any
transmission transactions with a marketing affiliate should be excluded
from the Standards' coverage, just as should a pipeline. Therefore, the
Commission modifies the language of section 358.1(b) accordingly.
3. Commencement Date
a. Commission Proposal
24. The Commission proposed in section 358.8(a) that a transmission
provider must comply with the Standards as of the earlier of the date
it has a rate on file with the Commission or the date it commences
transmission transactions.
b. Comments
25. INGAA and APGA disagree with the commencement date proposed in
section 358.8(a). INGAA asserts that the Standards should not apply to
a pipeline unless and until the pipeline engages in transportation
transactions with a marketing or brokering affiliate. INGAA believes
that proposed section 358.8(a) is inconsistent with the Standards'
purpose of preventing preferential treatment and with proposed section
358.1(a), which applies the Standards only to pipelines conducting
transmission transactions with an affiliate engaging in marketing
functions.\24\ Conversely, APGA would have the Standards apply to a
newly-certificated pipeline as soon as the pipeline begins soliciting
customers or negotiating contracts, rather than deferring compliance
until such time as the pipeline commences transportation.\25\
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\24\ INGAA at 58-61.
\25\ APGA at 8-10.
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c. Commission Determination
26. The Commission believes that INGAA's comments on this point are
well-taken. Under section 358.1, a pipeline that does not conduct
transmission transactions with an affiliate that engages in marketing
functions need not comply with the Standards. In this Final Rule, we
expand that same provision to apply to public utilities as well, as
discussed above. Therefore, we will modify the effective date upon
which a transmission provider must be in full compliance with the
Standards to provide that a transmission provider must comply with the
Standards on the date it commences transmission transactions with an
affiliate that engages in marketing functions. See section 358.8(a).
4. Waivers From Coverage of the Standards
a. Commission Proposal
27. In the NOPR, the Commission did not address the issue of
whether existing waivers from the Standards should apply to the new
Standards.
b. Comments
28. Numerous commenters request that the Commission clarify that
existing waivers from the application of the current Standards remain
in effect upon finalization of this rulemaking, to the extent they
remain relevant.\26\ Questar further requests that exemptions and
waivers granted under Order No. 2004 be functionally adapted to the
rules as proposed in the NOPR.\27\
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\26\ AGA at 26; INGAA at 61-62; New York PSC at 5-6; National
Grid at 28-29; Northwest Natural at 6-7; Questar at 2; TDU Systems
at 18; Unitil at 4-5. New York PSC adds that without such
confirmation, existing sales activities authorized under the
standing waivers may be disrupted at the expense of the public
interest. New York PSC at 5. New York PSC offers the example of
National Fuel Gas Distribution Corporation (NFGD), which it states
received a waiver to make off-system sales from contract storage
located on an affiliated pipeline system to marketers who resell
that gas to NFGD's retail customer under a New York PSC-approved
retail choice program. New York PSC states that uncertainty
regarding status of the waiver may compel NFGD to terminate those
sales. Id. at 5-6.
\27\ Questar at 2.
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29. Northwest Natural requests that the Commission broaden existing
waivers from ``partial'' to ``full'' for pipelines that provide
transportation for a single affiliated shipper.\28\ Similarly, USG
believes that pipelines transporting gas only for affiliated shippers
should be exempted from the rules. It recommends that the Commission
either amend proposed section 358.1(a) to exclude pipelines that do not
serve unaffiliated customers, amend the exceptions to the proposed
definition of ``marketing functions,'' or grant USG and B-R Pipeline a
waiver.\29\
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\28\ Northwest Natural at 7.
\29\ USG at 10-12.
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30. With regards to the Commission's continued willingness to
consider requests for waivers, Unitil seeks clarification that the
Commission will continue to consider requests for waivers by entities
that would have qualified for waivers under the requirements of Order
Nos. 889, 497, or 2004.\30\ TDU Systems supports the Commission's
proposal to allow transmission owners who are members of RTOs and ISOs,
do not operate or control their transmission facilities, and have no
access to transmission function information, to request waivers from
the Standards.\31\
---------------------------------------------------------------------------
\30\ Unitil at 4-5.
\31\ TDU Systems at 17.
---------------------------------------------------------------------------
c. Commission Determination
31. The Commission agrees that it would be both burdensome and
unfair to require entities that have already received waivers from the
Standards on a case-by-case basis to file their requests again.
Therefore, existing waivers relating to the Standards shall continue in
full force and effect.
32. The determination as to whether a waiver is appropriate for an
entity that serves only a single, affiliated customer is best made on
an individual basis. Any entity that believes it is entitled to a
waiver may apply for one, and any entity that has already received a
full or partial waiver may continue to rely upon it. This Final Rule is
not the appropriate vehicle to grant or modify individual waivers for
specific entities, as requested by Questar and USG. We note, however,
that many of the waivers previously granted transmission providers may
be rendered moot by the revisions made here to the Standards.
[[Page 63801]]
33. The Commission clarifies that nothing in this Final Rule
precludes an entity from seeking a waiver. Indeed, section 358.1(d)
specifically so provides. If an entity believes it is entitled to a
waiver but has not yet applied for one, it is thus free to do so. The
appropriateness of granting such a waiver will be based on the facts
and circumstances of the individual case, examined in light of the
specific provisions and stated principles of the Standards adopted in
this Final Rule.
C. Independent Functioning Rule
34. In the NOPR, the Commission proposed to continue the policy,
established in Order Nos. 497 and 889 and referred to as the
Independent Functioning Rule, of requiring the transmission function
employees of a transmission provider to function independently of the
marketing employees of the transmission provider. However, the NOPR
proposed eliminating the corporate separation approach to the
Independent Functioning Rule, which was adopted in Order No. 2004, and
replacing it with the employee functional approach previously utilized
in Order Nos. 497 and 889. Under the NOPR proposal, the relevant
consideration for purposes of applying the Independent Functioning Rule
is the function performed by the employee himself (or herself). Thus,
while under the current Standards any employee of a marketing or energy
affiliate is prohibited from interacting with transmission function
employees, the proposed Standards restricted the category of employees
who must function independently from transmission function employees to
those who actively and personally engage in marketing functions.
35. To implement this approach, the NOPR proposed definitions of
certain key terms, the principal two being ``transmission functions''
and ``marketing functions.'' The definitions of ``transmission function
employee,'' ``marketing function employee,'' ``transmission function
information'' and ``marketing function information'' all keyed off
these two core definitions.
36. Commenters generally approved of the NOPR approach, but raised
certain concerns about the manner of its implementation and about the
proposed definitions of terms. They also requested clarification on
various matters. These topics are addressed below.
1. Transmission Functions
a. Commission Proposal
37. The NOPR proposed to define ``transmission functions'' as
``transmission system operations and the planning, directing,
organizing or carrying out of transmission operations, including the
granting and denying of transmission service requests.'' See proposed
section 358.3(h).
b. Comments
38. ALCOA requests clarification that the word ``planning'' in the
definition of transmission function applies only to planning associated
with transmission operations. ALCOA proposes that the Commission refine
the term ``planning,'' as used in this definition, so that it is
limited to current, near-term and real-time operations, and requests
that the Commission exclude long-range system planning.\32\
---------------------------------------------------------------------------
\32\ ALCOA at 4.
---------------------------------------------------------------------------
39. In asserting that the proposed definition of transmission
functions is ambiguous, National Grid urges the Commission to adopt a
more precise definition of ``transmission function'' that encompasses
those activities that directly affect open access, i.e., real-time
control of the transmission system; planning of electric transmission
facilities or expansions; and the receipt, processing and granting of
transmission service requests.\33\ For other functions that could
reasonably be interpreted to relate to transmission, National Grid
posits, the No-Conduit Rule will prevent abuses.\34\ Furthermore,
National Grid requests clarification of the scope of the phrases
``operations,'' ``transmission system operations,'' and ``transmission
operations.'' \35\
---------------------------------------------------------------------------
\33\ National Grid would exclude the planning of gas
transmission from the scope of the definition because pipeline open
seasons allow all interested parties to seek capacity in gas
expansion projects; it states that such conversations therefore do
not create concerns about preferential sharing of information.
Alternatively, it suggests that the definition of transmission
function could expressly exempt natural gas transmission planning
discussions that involve projects subject to an open season.
National Grid at 9-10.
\34\ National Grid at 7-11.
\35\ Id. at 9.
---------------------------------------------------------------------------
c. Commission Determination
40. The proposed NOPR definition of ``transmission functions''
carries over the principal concepts contained in the existing
definition of ``transmission function employee'' (there is no
definition of the term ``transmission functions'' in the existing
Standards). We agree, however, that additional language may be needed
to clarify that the Commission intends the definition to apply to day-
to-day operations, not long-range planning. Therefore, we will modify
the definition in section 383.3(h) to read: ``the planning, directing,
organizing or carrying out of day-to-day transmission operations,
including the granting and denying of transmission service requests.''
This modification focuses the definition on those areas most
susceptible to affiliate abuse. Furthermore, information about long-
range activities, such as planned transmission lines, are likely
already to be in the public sphere.\36\ The definition we adopt in this
Final Rule is directed at short-term real time operations, including
those decisions made in advance of real time but directed at real time
operations. To the extent the Commission's prior cases and No Action
Letters are in accord with this principle, they may be consulted for
guidance as to individual activities in question.
---------------------------------------------------------------------------
\36\ Issues relating to long-range planning are governed by
other Commission actions, such as in Order No. 890 for electric
utilities and in the long-standing policies regarding open seasons
subject to certificate policies for gas pipelines. See, e.g., Gulf
Crossing Pipeline Co., LLC, 123 FERC ] 61,100 at P 105 (2008).
---------------------------------------------------------------------------
2. Transmission Function Employee
a. Commission Proposal
41. In the NOPR, the Commission proposed to define transmission
function employee as: ``an employee, contractor, consultant or agent of
a transmission provider who actively and personally engages in
transmission functions.'' See proposed section 358.3(i).
b. Comments
42. Many commenters disagreed with the proposed classification of
field, maintenance, and construction employees as ``transmission
function employees'' \37\ for a variety of reasons, including the fact
that field employees do not actively and personally engage in system
operations \38\ and do not have access to transmission information.\39\
Similarly, MidAmerican requests that the definition of transmission
function employee expressly exclude the following categories: Engineers
who plan, design and oversee construction of transmission facilities;
construction workers who build transmission facilities; engineers who
make engineering decisions regarding the operation and maintenance of
transmission facilities; engineers who determine whether transmission
[[Page 63802]]
requests can be accommodated by the existing transmission system;
utility line workers who operate, repair and maintain transmission
facilities according to orders; and clerical staff and mapping
personnel who draw plans for and process communications about
transmission facilities.\40\
---------------------------------------------------------------------------
\37\ ATC at 18; Dominion Resources at 14; EEI at 54; Puget Sound
at 7-8; INGAA; Nisource; Southern Co. Services at 24-25.
\38\ Southern Co. Services at 25.
\39\ Puget Sound at 8.
\40\ MidAmerican at 11-12.
---------------------------------------------------------------------------
43. To mirror the language in the preamble of the NOPR, Bonneville
suggests that a transmission or marketing function employee be one who
actively and personally engages in ``more than a de minimis amount of''
transmission or marketing functions.\41\ In addition, E.ON seeks more
clarity on the scope of the de minimis exception proposed in the
preamble, so as to avoid contrasting interpretations by transmission
providers.\42\
---------------------------------------------------------------------------
\41\ Bonneville at 4-5. See also AGA at 18.
\42\ E.ON at 12-13.
---------------------------------------------------------------------------
44. Wisconsin Electric is unclear as to whether the standards
applicable to transmission function employees also apply to employees
engaged in certain reliability functions. More specifically, Wisconsin
Electric requests clarification that balancing authority employees are
not transmission function employees or agents under the proposed
rules.\43\
---------------------------------------------------------------------------
\43\ Wisconsin Electric at 6.
---------------------------------------------------------------------------
45. Commenters also raised concerns regarding the use of the phrase
``actively and personally engages.'' EEI requests that the Commission
clarify that an employee is not ``actively and personally engaged'' in
transmission or marketing functions so long as the employee is not
engaged in such activities on a day-to-day basis. Furthermore, EEI
believes that precedent under Order No. 889 regarding the ``day to day
activities'' standard should continue to apply, except for certain
precedent that undermined the ``day-to-day'' standard as it applied to
officers.\44\ Idaho Power requests that the Commission explain any
difference between the term ``actively and personally engages in'' and
the ``directing, organizing, or executing'' classification standard of
Order No. 889.\45\
---------------------------------------------------------------------------
\44\ EEI at 5-6, 11-12; Entergy at 2-3.
\45\ Idaho Power at 6-7.
---------------------------------------------------------------------------
c. Commission Determination
46. The Commission agrees that field, maintenance and construction
workers, as well as engineers and clerical workers, are not normally
involved in the day-to-day operations of the transmission system.
Therefore, they would not fall within the scope of the definition of
transmission function employee, unless in addition to functioning in
their stated capacity they also engaged in the day-to-day operation of
the transmission system.
47. The Commission declines to add a further exclusion in the
regulatory text for de minimis involvement. As discussed in the section
on officers, directors and supervisors, the Commission has determined
to add the phrase ``day-to-day'' to further clarify the scope of
activity covered by the definition. This addition should capture the
concerns of the commenters who requested inclusion of the phrase de
minimis. However, as noted in the preamble of the NOPR, if a non-
transmission function employee were pressed into service on an isolated
occasion to perform a transmission function, perhaps under emergency
conditions, such de minimis involvement would not convert him into a
transmission function employee. The remote possibility that such a
scenario would occur does not warrant adding exclusion language to the
text, which would unduly elevate the exclusion and raise more questions
than it answers.
48. Similarly, the question of whether balancing authority
personnel are included in the definition of transmission function
employees depends on the circumstances. If the transmission provider
also serves as a balancing authority, and an employee's duties
encompass both transmission provider and balancing authority
activities, such an employee would be a transmission function employee
(provided his or her duties are encompassed by the definition of
transmission function employee). If, however, the two functions are
separate, and the employee performs no duties outside of those specific
to a balancing authority employee, he or she would not be considered a
transmission function employee.
49. The phrase ``actively and personally'' applies to marketing
function employees as well as transmission function employees, and its
application arises most notably with respect to supervisory personnel.
The comments relating to that phrase, and the Commission's
determination with respect to it, are set forth below in the section
entitled Supervisors, Managers and Corporate Executives.
3. Marketing Functions
a. Commission Proposal
50. The NOPR proposed defining marketing functions as ``the sale
for resale in interstate commerce, or the submission of offers or bids
to buy or sell natural gas or electric energy or capacity, demand
response, virtual electric or gas supply or demand, or financial
transmission rights in interstate commerce,'' subject to the following
``exemptions'':
(1) Bundled retail sales, including sales of electric energy made
by providers of last resort (POLRs),
(2) Incidental purchases or sales of natural gas to operate
interstate natural gas pipeline transmission facilities,
(3) Sales of natural gas solely from the transmission provider's
own production,
(4) Sales of natural gas solely from the transmission provider's
own gathering or processing facilities, and
(5) Sales by an intrastate natural gas pipeline or local
distribution company making an on-system sale.
b. Comments
51. Several commenters recommend that the Commission consider the
differences between the electric and gas industries and adopt separate
definitions of the term marketing functions for each of the
industries.\46\
---------------------------------------------------------------------------
\46\ INGAA at 14; NGSA at 10-11; Nisource at 10; AGA at 11-13;
Williston at 3.
---------------------------------------------------------------------------
i. Electric Industry
52. Commenters from the electric industry raised concerns about the
inclusion of ``bids to buy'' in the definition of marketing functions,
and the effects of such inclusion on planning activities. Commenters
also sought clarification and modification as to various individual
components of the definition, and identified a number of issues
regarding the bundled retail sales exemption and the inclusion of POLRs
in that exemption.
(a) Bids to Buy and Other Terms Listed in the Definition
53. Dominion Resources believes that the definition, as it applies
to the electric industry, should be limited to sales for resale or
purchases for resale of electricity in interstate commerce,\47\ while
NiSource proposes limiting the definition to wholesale sales of
electricity.\48\ On the other hand, TAPS believes that the definition
of marketing functions is too narrow, in that it only covers purchases
that involve the ``submission of offers or bids to buy or sell.'' It
argues that the definition of marketing functions should include
purchases, as well as sales, for resale of energy, in order to ensure
that all transmission provider activities in wholesale markets,
including the purchase of electric energy, capacity,
[[Page 63803]]
and physical and financial transmission rights and other energy related
products for bundled retail load, are covered by the Standards. TAPS
requests that the proposed definition be modified to include purchases,
regardless of whether they are accomplished through the submission of a
bid or offer.\49\
---------------------------------------------------------------------------
\47\ Dominion Resources at 11-13.
\48\ NiSource at 10.
\49\ TAPS at 11-14.
---------------------------------------------------------------------------
54. Some commenters requested clarification of various terms used
in the definition of marketing functions. First, commenters ask the
Commission to clarify that the scope of the term ``demand response'' is
limited to the bidding or supply of demand response in a FERC
jurisdictional context, and does not cover the development of a retail
customer demand response program or a balancing authority's dispatch of
demand response for reliability.\50\ Dominion Resources requests that
the definition exclude regulated utilities demand/load response
programs in their regulated service territories, as being part of their
integrated resource planning.\51\
---------------------------------------------------------------------------
\50\ Arizona PSC at 6; EEI at 48; SCE at 8-9; Western Utilities
at 10.
\51\ Dominion Resources at 12-13.
---------------------------------------------------------------------------
55. Second, commenters request clarification of the term
``capacity'' as used in the marketing functions definition. Dominion
Resources and EEI request that the term refer to generation and not
transmission capacity.\52\ Some commenters seek further clarifications
on other terms used in the definition of marketing functions. Dominion
Resources and MidAmerican request that the Commission confirm that
certain terms carry the same meaning in the Standards as they do in
Commission-administered organized markets, or, alternatively, that the
terms should be interpreted in a manner that limits the definition to
activities that occur in interstate commerce. These terms include: (i)
``Virtual electric or gas supply or demand;'' (ii) ``financial
transmission rights;'' (iii) ``offer'' or ``bid;'' (iv) ``demand
response;'' and (v) ``bundled retail sales.'' \53\ Similarly, NiSource
requests that the definition of marketing functions, as it applies to
the natural gas industry, should exclude the terms demand response,
virtual bids, and allocations of financial transmission rights.\54\
---------------------------------------------------------------------------
\52\ Id. at 12; EEI at 49.
\53\ Dominion Resources at 12; MidAmerican at 9-10.
\54\ NiSource at 10-11.
---------------------------------------------------------------------------
56. APPA and TAPS are concerned that the definition of marketing
functions, although it includes financial transmission rights, excludes
resale of a public utility transmission provider's physical electric
system transmission rights. These commenters believe that the omission
allows transmission provider employees engaging in such transmission
activities to communicate with other personnel on a preferential basis
regarding the availability of new firm transmission rights.\55\ TAPS
further asserts that the definition should include transmission
reservations and scheduling of transmission.\56\
---------------------------------------------------------------------------
\55\ APPA at 6-9; TAPS at 28-31.
\56\ TAPS at 30.
---------------------------------------------------------------------------
(b) Exclusions
57. Commenters express varying opinions on the proposed exclusion
in section 358.3(c)(1) for ``bundled retail sales, including sales of
electric energy made by providers of last resort (POLRs).'' National
Grid and EEI generally supported the exemption.\57\ National Grid
recommends, however, that the proposed exemption be revised to read
``bundled retail sales or retail sales of electric energy made by
providers of last resort,'' rather than treating POLR sales as a subset
of bundled retail sales.\58\ Ameren believes that the POLR exclusion
should apply to all procurement or sale of energy by a POLR in support
of its POLR function, and urges the Commission to clarify that
incidental sales or purchases of energy by a POLR that benefit POLR
customers who are required to meet reliability or RTO requirements are
not activities within the scope of marketing functions, even if made on
an unbundled basis.\59\
---------------------------------------------------------------------------
\57\ National Grid at 12-13; EEI at 34.
\58\ National Grid at 12-13.
\59\ Ameren at 22-24.
---------------------------------------------------------------------------
58. On the other hand, EPSA and TAPS both oppose a blanket
exemption for POLRs.\60\ TAPS asserts that the Commission has denied
waivers to some affiliated POLRs in the past, and the waivers it has
granted have been fact-specific.\61\ TAPS likewise opposes a blanket
exclusion for all bundled retail sales,\62\ suggesting it be limited to
cases in which the retail marketing function has been separated from
the wholesale marketing function,\63\ and EPSA would eliminate an
exclusion both for POLRs and for all bundled retail sales insofar as
the exclusion would apply to utilities engaged in both bundled retail
sales and wholesale sales.\64\ TAPS requests that the Commission
clarify that the bundled retail sales exemption does not extend to
activities of the transmission provider's merchant function.\65\
---------------------------------------------------------------------------
\60\ EPSA at 6-8; TAPS at 26-28.
\61\ TAPS at 26-27.
\62\ Id. at 15-25.
\63\ Id.
\64\ EPSA at 7-8.
\65\ TAPS at 25-26.
---------------------------------------------------------------------------
59. Many commenters request clarifications on the scope of the
bundled retail sales exclusion. EEI requests that the Commission
confirm that the exclusion covers purchases in support of retail sales
only as long as the resale of excess purchased power is made by
separate employees.\66\ WA UTC urges the Commission to include in the
exclusion the incidental wholesale power purchases and sales a utility
serving bundled retail load must make to balance its variable output
resources with variations in its actual bundled retail loads.\67\
---------------------------------------------------------------------------
\66\ EEI at 34.
\67\ WA UTC at 8-10.
---------------------------------------------------------------------------
60. Several commenters sought additional exclusions from the
marketing functions definition as it applies to the electric industry.
California PUC recommends that the Commission exclude from the
marketing functions definition utility employees engaged in state-
regulated activities, such as engaging in purchases necessary to serve
bundled retail load or to meet the requirements of state-mandated
programs, because these activities are overseen by state
regulators.\68\ MidAmerican asks the Commission to clarify that all
planning personnel, whether or not engaged in state-mandated integrated
resource planning, be excluded from the definition of marketing
functions.\69\
---------------------------------------------------------------------------
\68\ California PUC at 10. California PUC also asks the
Commission not to exempt any interactions between a utility's
transmission function employees and the employees of a utility's
unregulated affiliates, on the grounds that state regulators do not
oversee the activities of a utility's unregulated affiliates. Id.
\69\ MidAmerican at 8-9.
---------------------------------------------------------------------------
61. LPPC requests that the definition of marketing functions
expressly exclude electricity exchanges, arguing they are often
necessary to accomplish a transmission transaction, such as when access
to renewable sources of power requires crossing multiple systems.\70\
---------------------------------------------------------------------------
\70\ LPPC at 15-16.
---------------------------------------------------------------------------
ii. Natural Gas Industry
62. Commenters from the natural gas industry raised concerns about
the inclusion of ``bids to buy'' in the definition of marketing
functions, as had commenters from the electric industry. They also seek
modifications of existing exclusions and the addition of new
exclusions, and request clarification as to whether various activities
that arise in the gas industry are encompassed by the definition.
[[Page 63804]]
(a) Bids To Buy and Other Terms Listed in the Definition
63. Many commenters believe that purchases should be excluded from
the definition of marketing functions as it applies to the natural gas
industry, arguing that their inclusion would extend the Standards
beyond the limits set by National Fuel.\71\ Southwest Gas requests that
the Commission clarify that the definition of marketing functions
covers only the sale of gas in interstate commerce,\72\ and AGA and
Dominion Resources request that marketing functions be defined in terms
of natural gas sales for resale in interstate commerce.\73\ AGA and
Southwest Gas believe this approach appropriately excludes natural gas
hedging activities.\74\ NGSA, rather than deleting purchases from the
definition itself, requests that purchase be included in the exclusions
to the definition in proposed sections 358.3(c)(3-5).\75\
---------------------------------------------------------------------------
\71\ Salt River at 7-9; INGAA at 14; Nisource at 10.
\72\ Southwest Gas at 5-9.
\73\ AGA at 12-13; Dominion Resources at 7-8.
\74\ AGA at 12-13; Southwest Gas at 14-15. Southwest Gas further
requests confirmation that the proposed definition reflect its view
that financial transactions designed to hedge price risk associated
with on-system retail sales are an important tool for an LDC's
provision of economical retail sales service, citing to Order No.
2004-C. Id.
\75\ NGSA at 13.
---------------------------------------------------------------------------
64. Several commenters believe that the phrase ``natural gas or
electric energy or capacity'' is ambiguous as to whether it encompasses
natural gas capacity, which they argue should not be included in the
definition.\76\ NGSA believes that an extension of the concept to
natural gas is not supported and is unnecessary due to the extensive
regulations governing pipeline capacity marketing.\77\ Southwest Gas
requests that, if the Commission intends to include pipeline capacity
in the definition, it amend proposed section 358.3(c)(5) to expressly
exempt a purchase or release of interstate pipeline capacity by a local
distribution company (LDC).\78\
---------------------------------------------------------------------------
\76\ National Grid at 11-12; NGSA at 9-11; Williston at 13-14;
Southwest Gas at 16-17.
\77\ NGSA at 11-13.
\78\ Southwest Gas at 16-17.
---------------------------------------------------------------------------
(b) Exclusions
65. With respect to the exclusion for bundled retail sales, New
York PSC requests that the Commission add to the exclusion the
purchasing of natural gas to make such sales.\79\
---------------------------------------------------------------------------
\79\ New York PSC at 3.
---------------------------------------------------------------------------
66. With respect to the exclusions for sales of gas from one's own
production or from one's own gathering or processing facilities, some
commenters assert that these exclusions have been narrowed from the
prior Standards without explanation. First, commenters observe that
proposed sections 358.3(c)(3) and (c)(4) exclude sales of natural gas
from a transmission provider's own production, gathering or processing
facilities, whereas the prior Standards extended the exclusion to also
include sales of natural gas from gathering and processing facilities
that are owned by the transmission provider's affiliate.\80\ INGAA
finds no reason to distinguish between a transmission provider's
directly and indirectly owned gathering and processing facilities.
INGAA and others request that these proposed exclusions be modified to
encompass sales and purchases of gas from the production, gathering or
processing facilities owned by either a transmission provider or its
affiliate.\81\
---------------------------------------------------------------------------
\80\ INGAA at 15; NGSA at 14-15; Williston at 14-15.
\81\ Id.
---------------------------------------------------------------------------
67. Calypso urges the Commission either to clarify that the term
``transmission provider's own production'' encompasses a transmission
provider's foreign-sourced natural gas, or that the Commission extend
the exclusion to cover such gas.\82\
---------------------------------------------------------------------------
\82\ Calypso at 2-4.
---------------------------------------------------------------------------
68. With respect to the exclusion for sales by an intrastate
natural gas pipeline or LDC making an on-system sale, some commenters
would expand the exclusion to cover sales by LDCs that are off-system
but entered into with non-affiliated pipelines,\83\ to exclude
intrastate and Hinshaw pipelines that must buy enough gas to meet
predicted peak loads and sometimes must make off-system sales when
circumstances create surpluses,\84\ and to exclude 7(f) companies,
arguing the Commission recognized in Order No. 2004 that there is no
reason to treat 7(f) companies differently than LDCs with respect to
this exclusion.\85\ Alternatively, to the extent the Commission
believes exclusion of additional sales would create a potential area of
abuse, INGAA recommends that the transactions be evaluated on a case-
by-case basis.\86\ On the other hand, AGA disapproves of the proposed
exclusion, because it believes it creates potential for abuse and is
inconsistent with the NGA's prohibition against undue
discrimination.\87\ Southwest Gas believes that Hinshaw pipelines
should be excluded from the Standards altogether, arguing that doing so
would be consistent with Order No. 497 and the Commission's treatment
of Hinshaw pipelines as LDCs under the NGPA.\88\
---------------------------------------------------------------------------
\83\ INGAA at 18-19; SCANA at 3-4; AGA at 14-15; National Grid
at 13-14; New York PSC at 3-4; Northwest Natural at 7-8; Dominion
Resources at 8; Duke at 8-9; Southwest Gas at 12-13.
\84\ INGAA at 18-19; SCANA at 3-4.
\85\ Southwest Gas at 18.
\86\ INGAA at 20.
\87\ AGA at 5-8.
\88\ Southwest Gas at 17-18.
---------------------------------------------------------------------------
69. INGAA and Unitil also object that certain sales by LDCs,
intrastate pipelines and other shippers necessary to maintain balances
are captured in the proposed definition of marketing functions, and
argue that Order No. 2004 excluded these sales as operational through
the concept of energy affiliates. INGAA believes the Commission should
restore this exclusion.\89\ Unitil argues further that Order No. 2004-A
excluded from the Standards de minimis off-system sales related to an
LDC's balancing requirements.\90\
---------------------------------------------------------------------------
\89\ INGAA at 16-17.
\90\ Until at 6-7.
---------------------------------------------------------------------------
70. Questar requests that exchanges of gas for the purpose of
reducing transmission costs be excluded from the definition of
marketing functions.\91\
---------------------------------------------------------------------------
\91\ Questar at 4-5.
---------------------------------------------------------------------------
71. Commenters contend that, as proposed, the Standards may be read
to cover a natural gas pipeline's relationship with its electric
marketing affiliates or employees, or with its other employees who are
not making sales of natural gas.\92\ As remedies, MidAmerican proposes
to exclude the activities of an LDC, including those affiliated with an
electric transmission provider,\93\ and TDU Systems proposes to remove
from the definition of marketing functions the purchase or sale of
natural gas by an electric transmission provider.\94\
---------------------------------------------------------------------------
\92\ INGAA at 14; MidAmerican at 16-18; TDU Systems at 14-15.
\93\ MidAmerican at 16-18.
\94\ TDU Systems at 14-15.
---------------------------------------------------------------------------
(c) Clarifications
72. Several commenters raise concerns that, as proposed, the NOPR
would apply the Standards to a pipeline's relationship with affiliates
that do not hold capacity on the affiliate pipeline.\95\ These
commenters request that the Commission clarify that the Standards apply
only to the relationship between the pipeline and affiliates that hold
or control capacity on the affiliate pipeline.
---------------------------------------------------------------------------
\95\ INGAA at 17-18; USG at 7-10; Spectra at 5-7; PSEG at 10-11;
AGA at 14-16.
---------------------------------------------------------------------------
73. Spectra asks the Commission to clarify that the definition of
marketing functions excludes affiliated foreign pipelines that either
do not participate
[[Page 63805]]
in the U.S. energy markets or that are interconnected with U.S.
pipelines, but are subject to a foreign country's regulation, stating
that the current Standards exclude them from the definition of energy
affiliate.\96\
---------------------------------------------------------------------------
\96\ Spectra at 7-8.
---------------------------------------------------------------------------
74. SCANA requests clarification that if an LDC sells gas to an
asset manager in connection with establishing an asset management
arrangement for its off-system sales, the LDC is not engaging in a
marketing function or compromising its supposed status as an entity
exempt from the Standards.\97\
---------------------------------------------------------------------------
\97\ SCANA at 3-6.
---------------------------------------------------------------------------
c. Commission Determination
75. The definition of ``marketing functions'' was designed to
encompass both the electric and gas industries, as do the Standards as
a whole. The list of activities in proposed section 358.3(c) therefore
listed concepts that are not only applicable to both industries, but
also concepts applicable to one or the other. For instance, virtual
bidding is currently limited to the electric industry, as are financial
transmission rights. The many requests for clarification by commenters,
however, suggest this combined definition is confusing, exacerbated by
the fact that some concepts have different meanings in the two
industries, such as the word ``capacity.'' Therefore, in order to avoid
any further confusion regarding such matters, the Commission agrees
with those commenters who request separate definitions for the electric
and gas industries, and modifies the regulatory text at section
358.3(c) to so provide. We also clarify several of the terms used in
the definitions, as requested by commenters, and discuss separately
below other issues pertaining to the electric or gas industries.
i. Electric Industry
76. Besides modifying section 358.3(c) to provide a separate
definition of marketing functions for public utilities and their
affiliates, the Commission revises the definition to read as follows:
``the sale for resale in interstate commerce, or the submission of
offers to sell in interstate commerce, of electric energy or capacity,
demand response, virtual transactions, or financial or physical
transmission rights, all as subject to an exclusion for bundled retail
sales, including sales of electric energy made by providers of last
resort (POLRs) acting in their POLR capacity.'' See section
358.3(c)(1).
(a) Bids To Buy and Other Terms Listed in the Definition
77. Importantly, in addition to separating electric from gas, this
definition removes ``bids to buy'' from the category of marketing
functions. Many commenters requested this exclusion, for reasons that
include the jurisdictional reach of the Commission and National Fuel
concerns. The Commission agrees that restricting the definition of
marketing functions to include only sales, rather than purchases, more
closely matches the statutory prohibitions against undue
preferences.\98\ Furthermore, the removal of purchases from the
definition of marketing functions frees companies to conduct the
informational exchanges necessary to engage in integrated resource
planning,\99\ and eliminates the difficulties which might otherwise be
experienced by executive personnel who have overall procurement
responsibilities that include both transmission and marketing. At the
same time, it preserves protection against affiliate abuse, as it is
those employees who are making wholesale sales of electricity, not
purchases, who can improperly benefit from transmission function
information obtained from the affiliated transmission provider. (The
issue of long-range planning is discussed more fully below in the
section entitled Long-Range Planning and Procurement.) It also
addresses the concern of California PUC that purchases of power to
serve bundled retail load or to meet the requirements of state-mandated
programs should not be considered marketing functions.
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\98\ Statutory coverage encompasses any transmission or sale of
electric energy subject to the Commission's jurisdiction, and any
transportation or sale of natural gas subject to the Commission's
jurisdiction; sales subject to the Commission's jurisdiction being
sales for resale in interstate commerce. Sections 205 and 206 of the
Federal Power Act (FPA), 16 U.S.C. 824d-824e (2000), Sections 4 and
5 of the Natural Gas Act (NGA), 15 U.S.C. 717c-717d (2000).
\99\ Many commenters requested that long-range planning be
excluded from the scope of the Standards. Comments on this topic are
set forth below in the section entitled Long-Range Planning and
Procurement.
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78. The Commission also clarifies what is meant by certain of the
categories listed within the definition of marketing functions, or that
are subsumed in the categories listed. The Commission clarifies that
inclusion of the term ``demand response'' in this definition is not
intended to interfere with demand response programs that a load-serving
entity (LSE) has established for its customers.\100\ Confusion over the
terms ``capacity,'' ``virtual'' and ``financial transmission rights''
are eliminated by restricting their application to the electric
industry. The Commission also agrees with APPA and TAPS that inasmuch
as physical as well as financial transmission rights may be sold by
marketing function employees, physical transmission rights should be
added to the definition of marketing functions, and so modifies the
regulatory text. Ancillary services, when referring to sales for resale
as opposed to an integrated public utility's actions in calling on its
own generation or demand response resources for ancillary services
purposes, are included within the definition of marketing functions as
sales for resale either of generation or demand response. For example,
a number of RTOs and ISOs have established or are in the process of
establishing ancillary services markets, and sales into these markets
would fall within the definition of marketing functions.\101\
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\100\ If concerns remain despite this clarification, interested
persons may present them to the Commission on a case-by-case basis.
\101\ See, e.g., Midwest Independent Transmission System
Operator, Inc., 122 FERC ] 61,172 (2008), reh'g granted in part and
denied in part and clarification granted, 123 FERC ] 61,297 (2008);
New England Power Pool, 115 FERC ] 61,175 (2006), reh'g denied, 117
FERC ] 61,106 (2006); Atlantic City Electric Company, 86 FERC ]
61,248 (1999), clarification granted, 86 FERC ] 61,310 (1999).
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79. We decline to grant APPA's and TAPS's further request that we
add to the definition of marketing functions both the making of
transmission reservations and the scheduling of transmission. These
activities are beyond the scope of electric energy sales. However, we
note that marketing function employees making sales of energy will need
to schedule transmission for such sales (at least outside of organized
electric energy markets), and thus those individuals will most likely
already fall within the definition of marketing function employees and
within the scope of the Independent Functioning Rule.
(b) Exclusions
80. Some commenters objected to the proposed inclusion of POLRs in
the exclusion for bundled retail sales, while others suggested the
exclusion should be broader and encompass all procurement or sales by a
POLR in support of its POLR function. As the Commission explained in
the NOPR, actual instances of abuse in this regard have not been
presented, even though entities have been granted waivers to exempt
their POLR activities from the
[[Page 63806]]
Standards.\102\ Inasmuch as entities acting as POLRs are providing
bundled retail service, it is appropriate to include POLR sales in the
definition of bundled retail sales. However, we decline to extend the
exclusion to cover all procurement or sale of energy by a POLR in
support of its POLR function, as requested by Ameren. POLRs should not
have special exclusions not shared by other providers of bundled retail
service. (However, we note that insofar as Ameren is concerned about
procurement of energy for POLR purposes, that concern is mooted by our
removal of purchases from the definition of marketing functions.) We
also decline Ameren's request to exclude incidental sales of energy by
a POLR. Public utilities serving retail load often make off-system
wholesale sales, which are not covered by the exclusions for bundled
retail sales and which are susceptible to affiliate abuse. Likewise,
off-system wholesale sales made by POLRs should not be excluded.
Furthermore, activities made by a POLR that is not acting within its
POLR capacity are not covered by the exclusion.
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\102\ See High Island Offshore System, L.L.C., 116 FERC ] 61,047
(2006); Cinergy Services Inc., 111 FERC ] 61,512 (2005); Exelon
Corp., 123 FERC ] 61,167 (2008).
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81. We also decline to extend the exclusion for bundled retail
sales to include incidental off-system sales by a utility serving
bundled retail load, as requested by WA UTC. Once the utility is making
wholesale sales off-system, it is no longer serving retail load but
engaging in marketing transactions, and should be treated no
differently than other marketers making wholesale sales. Otherwise, a
utility could purchase quantities of power excess to its needs and then
sell the power off-system, free of the restrictions pertaining to
marketing function employees that are imposed by the Standards.
82. The Commission also declines to grant LPPC's request that
exchanges of electricity designed to work around scarce transmission
should be excluded from the definition of marketing functions. It is
not always obvious whether such exchanges should be classified as
transmission or as the purchase and sale of generation. The
determination of that question often turns on the specifics of the
transactions in question,\103\ making a blanket exclusion
inappropriate. An entity seeking guidance for its individual situation
may file for a waiver or pursue other means of resolution, such as a No
Action Letter or a General Counsel opinion letter.\104\ Further, as
noted with respect to Ameren's request regarding POLR purchases and
sales, to the extent such exchanges involve purchases, those purchases
are not included in the definition of marketing functions which we
adopt in this Final Rule.
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\103\ See, e.g., Utah Assoc. Mun. Power Sys., 83 FERC ] 61,337
(1998); El Paso Elec. Co., 115 FERC ] 61,312 (2006).
\104\ A comprehensive discussion of the various sources of
guidance available from the Commission and its staff is set forth in
our recent Interpretative Order Modifying No-Action Letter Process
and Reviewing Other Mechanisms for Obtaining Guidance. See Obtaining
Guidance on Regulatory Requirements, 123 FERC ] 61,157 (2008).
---------------------------------------------------------------------------
ii. Natural Gas Industry
83. In accordance with our determination to provide separate
definitions for the electric and gas industries, the Commission adopts
the following definition of marketing functions for pipelines and their
affiliates: ``the sale for resale in interstate commerce, or the
submission of offers to sell in interstate commerce, of natural gas,
subject to the following exclusions: (i) Bundled retail sales, (ii)
Incidental purchases or sales of natural gas to operate interstate
natural gas pipeline transmission facilities, (iii) Sales of natural
gas solely from a seller's own production, (iv) Sales of natural gas
solely from a seller's own gathering or processing facilities, and (v)
Sales by an intrastate natural gas pipeline, by a Hinshaw pipeline
exempt from the Natural Gas Act, or by a local distribution company
making an on-system sale.'' This revised definition reflects our
response to the various requests made by the commenters pertaining to
the natural gas aspects of the definition of marketing functions, as
discussed below.
(a) Bids to Buy and Other Terms Listed in the Definition
84. The major alteration in the definition from that proposed in
the NOPR is the elimination of ``bids to buy.'' As with the case of the
electric industry, this elimination will address jurisdictional and
National Fuel concerns.
85. The Commission agrees with the commenters who contend that
``capacity'' is a term that should be confined to the electric industry
insofar as the definition of marketing functions is concerned; that in
fact had been the intent of the NOPR. Accordingly, the term is removed
from the gas specific definition.
(b) Exclusions
86. New York PSC's requested clarification, regarding whether the
exclusion for bundled retail sales should include the purchase of
natural gas to make such sales, has been rendered unnecessary by the
Commission's determination to exclude purchases from the definition of
marketing functions.
87. The Commission agrees with INGAA's observation that in the
reworking of the regulatory text, the NOPR inadvertently limited two of
the existing exclusions applicable to sales from a transmission
provider's production or gathering or processing facilities, thus not
also encompassing sales from an affiliate's production or gathering or
processing facilities. Exclusions (iii) and (iv) should not focus on
the transmission provider but on the seller. Therefore, we modify
exclusion (iii) to read ``sales of natural gas solely from a seller's
own production,'' and exclusion (iv) to read ``sales of natural gas
solely from a seller's own gathering or processing facilities.''
88. The Commission also agrees with Calypso's request for
clarification that foreign-sourced gas be included in the exclusion for
sales of natural gas from an entity's own production. Whether the gas
is foreign or domestic, the operative consideration is whether it is
from the entity's own production.
89. The Commission likewise grants Spectra's request for
confirmation that sales by foreign LDCs are covered by the exclusion
for sales by an intrastate natural gas pipeline or local distribution
company making an on-system sale.
90. In regard to Southwest Gas' request for a similar clarification
regarding Hinshaw pipelines, the Commission determines that exclusion
(v) for intrastate pipelines should also apply to Hinshaw
pipelines,\105\ which are exempted from coverage under section 1(c) of
the NGA,\106\ and modifies the wording of the exclusion accordingly.
---------------------------------------------------------------------------
\105\ Hinshaw pipelines are interstate pipelines in which all
the gas is consumed within one state and the pipeline is subject to
regulation by a state commission.
\106\ 15 U.S.C. 1(c) (2006).
---------------------------------------------------------------------------
91. Several commenters request that the Commission add a new
exclusion to the definition of marketing functions, to encompass off-
system sales by LDCs on non-affiliated pipelines. The Commission
declines to do so. If the LDC in question makes sales of gas off-system
for resale, that sale qualifies as a marketing function. As discussed
above, however, if a pipeline does not conduct transmission
transactions with an affiliate that engages in marketing functions, it
is not subject to the Standards under section 358.1(a).
[[Page 63807]]
Therefore, if the LDC in question does not conduct transmission
transactions with an affiliated interstate pipeline, its off-system
sales on an unaffiliated pipeline are irrelevant insofar as the
Standards are concerned. In support of its request for this new
exclusion, AGA cites Order No. 497-A and a waiver granted to National
Fuel Gas Supply Corporation in 1993.\107\ In Order No. 497-A, however,
the Commission affirmatively stated that when a pipeline or LDC sells
gas off-system, it is a marketer of that gas within the scope of the
rule.\108\ The referenced waiver addressed the issue of applicability,
not the definition of marketing, pointing out that a pipeline that does
not conduct transportation transactions with its affiliated marketer is
not subject to the Standards.\109\ It is thus inapposite to AGA's point
(and in accord with our observation above on applicability).
---------------------------------------------------------------------------
\107\ AGA at 14-15, citing Order No. 497-A at p. 31,592 and
Nat'l Fuel Gas Supply Corp., 64 FERC ] 61,192 (1993).
\108\ Order No. 497-A at p. 31,592.
\109\ Id. p. 31,590-91.
---------------------------------------------------------------------------
92. Similarly, several commenters express concern that the
definition of marketing functions may sweep within its scope LDCs that
do not sell gas from capacity held or controlled by them on their
affiliated pipeline. As discussed above, the Standards do not apply to
pipelines that do not conduct transmission transactions with an
affiliate that engages in marketing functions, and such pipelines
therefore need not concern themselves with the definition.
93. Questar's request that exchanges of gas for the purpose of
reducing transportation costs be excluded from the definition of
marketing functions \110\ is the analog on the gas side of LPPC's
request concerning exchanges on the electric side, and the same
reasoning and result apply. However, we note that the procurement of
gas during the exchange would not be covered by the definition of
marketing functions, inasmuch as purchases are no longer included. This
also applies to the situation in which the receipt of a ``field
exchange'' serves to supply on-system bundled retail customers.\111\
---------------------------------------------------------------------------
\110\ Questar at 4-5.
\111\ A field exchange is the exchange of natural gas in the
field from company-owned production for equivalent quantities of gas
that is closer to the entity's distribution system, made to lower
the delivered costs of gas for on-system retail sales. Alcoa Power
Generating Inc., 108 FERC ] 61,243 (2004) at P 179.
---------------------------------------------------------------------------
(c) Clarifications
94. Spectra contends that a foreign entity that does not
participate in United States energy markets had been excluded from the
definition of energy affiliate, and requests that such exclusion
continue to apply. The revised Standards have discarded the concept of
energy affiliate, so there is no need to address Spectra's request. As
to whether such an entity would be subject to the Standards, section
358.1 controls the question of applicability, as discussed above.
95. INGAA and SCANA request that not only should on-system sales by
LDCs be excluded from the definition of marketing functions, but off-
system sales should be as well, on the grounds such sales are entered
into by non-marketing affiliates. However, the categorization of the
affiliate is immaterial. If employees of an LDC make an off-system sale
for resale in interstate commerce, they qualify as marketing function
employees (assuming they are employed by a marketing affiliate of a
transmission provider with which the affiliate conducts transmission
transactions).
96. INGAA's and other commenters' contention that a pipeline should
only be concerned with interactions with its gas marketing function
employees, not with affiliated electric marketing function employees,
is misplaced (or has been subsumed in the exclusion of energy affiliate
from coverage of the Standards). Gas marketing function employees would
not be making a sale for resale to electric marketing function
employees, who would be purchasing the gas for consumption and thus in
a retail capacity. Therefore, the definition of marketing function
would not be triggered.
97. SCANA inquires whether pipelines and LDCs may remove themselves
from coverage of the Standards by contracting with asset managers to
make their off-system sales, and Southwest Gas requests clarification
regarding the definition of ``marketing function employees'' in
relation to asset management agreements. The Commission clarifies that
under the Independent Functioning Rule and the No Conduit Rule, it
would be the employees of the asset manager, acting as agents or
contractors for the pipeline or LDC, rather than employees of the
pipeline or LDC, who would qualify as marketing function employees
after the asset arrangement was consummated, inasmuch as they would be
the persons making all the subsequent sales for resale. The inclusion
of agents and contractors in the definition of transmission function
employee or marketing function employee is discussed in more detail
below in the section entitled Elimination of Shared Employees Concept.
4. Marketing Function Employee
a. Commission Proposal
98. The NOPR proposed defining a marketing function employee as
``an employee, contractor, consultant or agent of a transmission
provider or of an affiliate of a transmission provider who actively and
personally engages in marketing functions.'' See proposed section
358.3(d).
b. Comments
99. Xcel seeks clarification as to whether the employees who
purchase natural gas and interstate pipeline capacity to deliver fuel
to the utility's electric generation fleet are marketing function
employees under the revised definition.\112\
---------------------------------------------------------------------------
\112\ Xcel at 20-21.
---------------------------------------------------------------------------
100. Several commenters request amendments to the definition of
marketing function employees that would limit its application. AGA,
Destin, and EPSA recommend that the Commission limit the definition of
a marketing function employee to employees who actively and personally
engage in marketing functions ``involving an affiliated transmission
provider'' to ensure that the Standards are narrowly directed at the
activities that give rise to concerns of undue preference.\113\ EPSA
would also include employees who engage in marketing functions on
behalf of a transmission provider located within its affiliated
transmission provider's electric control area.\114\
---------------------------------------------------------------------------
\113\ AGA at 16; Destin at 8; EPSA at 6.
\114\ EPSA at 6.
---------------------------------------------------------------------------
101. Other commenters request clarifications regarding which
employees are included in the definition of marketing function
employees. Arizona PSC suggests that the employees who perform
competitive solicitations should not be categorized as marketing
function employees, because their inclusion may unnecessarily limit
their ability to obtain the non-public transmission function
information necessary to make competitive solicitations as efficient
and cost effective as possible.\115\ MidAmerican seeks clarification
that generator operating personnel are not a subcategory of marketing
function employees.\116\ Finally, EEI seeks clarification on which
types of ``analysts,'' such as forecasters and employees who coordinate
strategic planning and regulatory services, would
[[Page 63808]]
be considered marketing function employees under the proposed
rule.\117\
---------------------------------------------------------------------------
\115\ Arizona PSC at 5.
\116\ MidAmerican at 7.
\117\ EEI at 49.
---------------------------------------------------------------------------
c. Commission Determination
102. The Commission adopts the proposed definition of marketing
function employee in section 358.3(d), with the addition of the
adverbial phrase ``on a day-to-day basis.'' A discussion of the
comments which prompted this addition is set forth in the section on
Supervisors, Managers and Corporate Executives. In this section, we
address the other concerns of commenters with respect to the
definition.
103. Xcel's requested clarification as to whether employees who
purchase natural gas for their electric fleet are marketing function
employees is rendered moot inasmuch as we have deleted purchases from
the definition of marketing functions, and such employees would thus
not be marketing function employees. (Furthermore, such a purchase
would be one made at retail, rather than wholesale, and thus not
subject to the definition of marketing function for that reason as
well.)
104. We decline to limit the definition of marketing function
employee by adding a requirement that the employee be engaged in
marketing functions ``involving an affiliated transmission provider.''
An employee making off-system sales could potentially use non-public
transmission function information to its advantage. However, as
described in more detail above, if a transmission provider does not
conduct any transmission transactions with an affiliate that engages in
marketing functions, it does not fall within the scope of the Standards
under section 358.1.
105. EPSA's concerns regarding the definition of marketing function
employee in relation to transactions with affiliates that do not
conduct transmission transactions with their affiliated transmission
provider within the latter's electric control area mixes two unrelated
concepts. Whether a transmission provider conducts transmission
transactions with a marketing affiliate governs the question of the
applicability of the Standards under section 358.1, not the definition
of marketing function employee. If a transmission provider does not
fall within the scope of the Standards under that provision, it need
not concern itself with the definitions relating to the Standards'
proscribed activities.
106. Arizona PSC's concerns regarding competitive solicitations are
resolved by the removal of purchases from the definition of marketing
functions. We also clarify, in response to Arizona PSC's request, that
generating operator personnel are not marketing function employees,
unless they also engage in marketing functions. The question of whether
analysts (such as forecasters and employees who coordinate strategic
planning and regulatory services) are marketing function employees can
be answered by reference to the definition itself. If such analysts are
not actively and personally involved on a day-to-day basis in the sale
for resale of electric energy (or the other items mentioned in the
definition), they are not marketing function employees.
5. Supervisors, Managers and Corporate Executives
a. Commission Proposal
107. The second sentence of the proposed NOPR definitions of
transmission function employee and marketing function employee stated
that an officer, director or other supervisory employee is not
considered to be a transmission function or marketing function employee
if he or she does not actively and personally engage in transmission or
marketing functions. See proposed sections 358.3(d) and (i).
b. Comments
108. Concerns surrounding whether officers, directors or
supervisors could be classified as marketing or transmission function
employees generated many comments, more than on almost any other issue.
Many commenters agree with the NOPR formulation that officers,
directors and other supervisory employees that do not ``actively and
personally engage'' in marketing or transmission functions should be
exempted from the definition of a marketing function employee or
transmission function employee.\118\ Idaho Power, on the other hand,
asserts that the explicit carve-out of officers, directors and other
supervisors who do not ``actively and personally engage'' in the
functions is redundant and therefore superfluous.\119\
---------------------------------------------------------------------------
\118\ See AGA at 18, Ameren at 20-22, Duke at 4-5; SCE at 9-10;
Vectren at 3-4; INGAA at 21.
\119\ Idaho Power at 7-8.
---------------------------------------------------------------------------
109. Some commenters raise concerns about the application of the
``actively and personally engaged'' standard to different types of
corporations. Salt River, for example, requests clarification that
high-level officials of vertically integrated utilities will not be
deemed either transmission or marketing function employees for
approving department budgets or signing large value contracts.\120\ In
addition, INGAA requests guidance on how to apply the definitions of
transmission and marketing function employees to organizations of
varying sizes and structure, considering the different levels of
involvement that supervisory employees must have depending on the size
of the organization.\121\
---------------------------------------------------------------------------
\120\ Salt River at 10-14.
\121\ INGAA at 33.
---------------------------------------------------------------------------
110. Several commenters recommended alternative approaches to
determine whether officers, directors or other supervisory employees
should be classified as marketing or transmission function employees.
For example, many commenters requested that the Commission re-introduce
the concept of ``day-to-day'' involvement, used in Order No. 2004, to
make the distinction between an ``employee'' and a supervisor or
executive.\122\
---------------------------------------------------------------------------
\122\ NGSA at 25-28; Southern Co. Services at 15-20; LPPC at 13.
Southern Co. Services further requests the Commission to eliminate
what it regards as the confusing precedent regarding the treatment
of shared officers set forth in Ameren Serv. Co., 87 FERC ] 61,145
(1999). Southern Co. Services at 15-20.
---------------------------------------------------------------------------
111. National Grid, however, suggests using a corporate governance
approach to make the distinction, as follows: Managers and employees
negotiating deals and undertaking certain activities would fall within
the definition of transmission or marketing function employee; senior
executives and members of risk management committees who oversee the
managers and employees would not.\123\ Vectren believes that any
confusion might be eliminated by deleting ``supervisory'' from the
proposed definition.\124\
---------------------------------------------------------------------------
\123\ INGAA also comments on the status of risk management
personnel in the context of the concept of ``shared employees.''
INGAA at 36-40.
\124\ TDU Systems at 10.
---------------------------------------------------------------------------
112. Numerous commenters seek additional guidance on the de minimis
language used in the preamble of the NOPR.\125\ Commenters object that
the NOPR guidance regarding de minimis involvement does not indicate
what amount and kind of activity exceeds the threshold. They request a
more precise discussion with specific activities that would require
classifying the employee as either marketing or transmission.\126\ Both
Idaho Power and Bonneville request that the Commission include the de
minimis language directly in the
[[Page 63809]]
regulatory text and provide guidance as to its meaning.\127\
---------------------------------------------------------------------------
\125\ EPSA at 6; Idaho Power at 7; MidAmerican at 12; National
Grid at 17, PG&E at 16-18; Puget Sound at 4-6.
\126\ Idaho Power at 7; NGSA at 5, National Grid at 17, PG&E at
16-18; Puget Sound at 4-6. INGAA requests a list of factors the
Commission will consider in evaluating whether a particular employee
qualifies as a marketing or transmission function employee. INGAA at
25-28.
\127\ Idaho Power at 7; Bonneville at 4-5.
---------------------------------------------------------------------------
113. Commenters also requested further guidance from the Commission
as to which type of conduct would classify a supervisory employee as
actively and personally engaged in one of these functions.\128\ Many of
these commenters seek assurance from the Commission that officers,
directors and other supervisory employees will not be classified as
marketing or transmission function employees by fulfilling their
fiduciary duties and informing themselves of business operations.\129\
Southern Co. Services is concerned that some may construe the
``actively and personally engaged'' standard to be the same as the
standard used to determine professional conflicts of interest, which
would inhibit effective corporate governance.\130\
---------------------------------------------------------------------------
\128\ E.ON at 10, AGA at 20, El Paso at 1; Idaho Power at 7; TDU
Systems at 8-9; Western Utilities at 4-5; Williston at 12-13. INGAA
presents hypothetical examples of varying levels of supervisory
involvement in a number of different transactions, seeking guidance
as to what level of involvement distinguishes supervisory personnel
from those that fall within the definition of marketing function
employee. INGAA at 30-32.
\129\ INGAA at 112; LPPC at 11-12; Western Utilities at 4-5;
Idaho Power at 7, National Grid at 17, PG&E at 16-18; Puget Sound at
4-6; E.ON at 10. AGA would add fulfilling obligations associated
with corporate delegation policy or strategic or long-term planning.
AGA at 20. Nisource asserts that the Commission has permitted
transmission providers to allow senior managers, officers or
directors to have ultimate responsibility for transmission
operations and wholesale merchant functions, as long as they do not
participate in directing, organizing or executing transmission
system operations or reliability functions or wholesale merchant
functions. Nisource at 13.
\130\ Southern Co. Services at 21-22.
---------------------------------------------------------------------------
114. Commenters request that the Commission confirm that if an
officer, director, or other supervisory employee engages in the
following activities, they will not be classified as marketing or
transmission function employees. These activities include (i) passive
involvement in contracting, so long as employees do not take an active
role in the decision-making process and do not disclose non-public
transmission information; \131\ (ii) occasional participation in
routine customer meetings; \132\ (iii) executing and/or approving large
wholesale sales or purchase agreements consistent with the officer's
delegated approval authority and fiduciary obligations on behalf of the
company; \133\ and (iv) participating in the formulation of an overall
wholesale strategy for a utility, and establishing general parameters
for negotiation of wholesale contracts.\134\ Similarly, MidAmerican
requests that the definition clarify that it excludes officers and
personnel who do not have first line reporting relationships with
transmission or marketing function personnel.\135\
---------------------------------------------------------------------------
\131\ TDU Systems at 9-11; SCANA at 7-8. TDU Systems also asks
that the Commission clarify and expand its explanation of the
activities that would cause a supervisor or director to be regarded
as actively and personally engaged in transmission functions. TDU
Systems at 9.
\132\ SCANA at 7-8.
\133\ Duke at 5-6.
\134\ Id.
\135\ MidAmerican at 12.
---------------------------------------------------------------------------
115. Instead of specifically addressing each type of conduct, INGAA
recommends that the Commission adopts a rule of reason approach to
determining, on a case-by-case basis, whether or not an executive's or
supervisor's conduct was a good faith attempt to fulfill his corporate
responsibilities.\136\
---------------------------------------------------------------------------
\136\ INGAA at 112.
---------------------------------------------------------------------------
c. Commission Determination
116. In an effort to provide clarity in this area, which has long
been the subject of much discussion and concern, the Commission in the
NOPR included a second sentence in the definition of both transmission
and marketing function employees that specifically addressed corporate
executives and supervisory personnel. The proposed sentence provided
that such employees were not considered to be transmission or marketing
function employees if they were not actively and personally engaged in
such functions, and was included to provide reassurance to officers,
directors and supervisors that a mere oversight role did not render
them transmission or marketing function employees. As Idaho Power
points out, however, the sentence is redundant, as no employee,
contractor or agent not so engaged is considered to be a transmission
or marketing function employee. Therefore, we delete the sentence from
the definitions of transmission and marketing function employees.
117. The Commission's intention in introducing the phrase
``actively and personally engaged,'' which is retained in the first
sentence of each definition, was similar to that implicit in use of the
phrase ``day-to-day.'' \137\ The concept underlying both is simply
this: If an employee regularly carries out or supervises the details of
the activities in question, he or she is actively and personally
engaged in them; if he or she merely signs off on the activities
without having directed or organized the activities, he or she is not
personally engaged in them. Thus, for example, supervisors who are not
involved in the negotiation of a gas or electric energy sale, and who
do not oversee or provide input into the details of the negotiations
being carried out by another employee (e.g., by editing and revising
material elements of a contract), but rather simply approve the
contract governing the sale, are not marketing function employees.
Furthermore, as we noted in the preamble of the NOPR, de minimis
involvement in transmission and marketing functions will not render a
person a transmission or marketing function employee. Therefore, a
supervisor who on rare occasions has tangential involvement in a
negotiation, such as being called in to meet the negotiating parties
from the other side, is not thereby rendered a marketing function
employee.
---------------------------------------------------------------------------
\137\ The phrase ``day-to-day'' appears in the definition of
transmission function employee in the existing Standards. 15 CFR
358.3(j).
---------------------------------------------------------------------------
118. That said, the Commission will add the phrase ``day-to-day''
to the definition of transmission and marketing function employees, in
order to provide even greater certainty. Our addition of the phrase
``day-to-day'' also obviates the need to add the phrase de minimis in
the regulatory text.
119. As noted, INGAA posits a number of hypotheticals involving
varying percentages of time that a supervisor spends reviewing trades,
and seeks guidance as to when such involvement would rise to the level
of rendering him a marketing function employee. It is unnecessary to
address each of these hypotheticals, because the key to the question
lies in the fact that if a supervisor is simply signing off on a deal
negotiated or proposed by someone else, and is not involved in
overseeing and providing input into the negotiations, he is not himself
engaged in the marketing function activity. Likewise, upper level
management personnel who review contracts over a certain dollar amount
are not converted into deal-makers themselves, simply by virtue of that
review. This is also true for other personnel, such as attorneys,
accountants and other advisors who may examine a contract for its
conformity to legal, accounting or other requirements. Such review does
not render them marketing function employees.
120. It may be objected that a lower level supervisor on the
trading floor could hardly ignore proscribed transmission function
information with which he is familiar in reviewing a deal. However, the
closer the supervisory employee is to the trading activity, the more
likely it is that he will be overseeing and providing input into the
trades, and not simply signing off on a deal, and thus would be
considered a marketing function employee.
[[Page 63810]]
121. A principal goal of the reforms made in this Final Rule is to
provide greater certainty to regulated entities and their employees
regarding the scope of the Independent Functioning Rule and the No
Conduit Rule. The carefully circumscribed nature of the definitions of
transmission functions and of transmission and marketing function
employees should provide greater clarity than is contained in the
existing Standards with regard to the permissible activities of
supervisors, managers, and corporate executives. We suggest that if a
situation truly does appear to be a close call, that in itself should
be a red flag that suggests conservatism in applying the rule. In this
area, it is best to err on the side of caution.\138\
---------------------------------------------------------------------------
\138\ As observed above, entities also have several avenues by
which to receive guidance on such issues from the Commission or
Commission staff. See Obtaining Guidance on Regulatory Requirements,
123 FERC ] 61,157 (2008).
---------------------------------------------------------------------------
122. For further clarification as to what is included in the day-
to-day operation of the transmission system (and thus which employees
would be considered transmission function employees), we mention the
following examples, in addition to the granting and denying of service
requests already specified in the definition: Coordinating the actual
physical flows of power or gas, balancing load with energy or capacity,
isolating portions of the system to prevent cascades, imposing
transmission loading relief, and the like. Supervisors who are not
actively and personally engaged in activities of these or a similar
nature would not be considered to be transmission function employees.
In regard to AGA's and Duke's requests for clarification regarding the
roles of managers and officers who are involved in corporate
governance, strategic and long-range planning, and development of
general negotiating parameters for wholesale contracts, we clarify that
these types of activities go beyond the day-to-day activities that
characterize transmission function employees and marketing function
employees, and participation in them would not make an employee a
transmission function employee or a marketing function employee.
6. Elimination of Shared Employees Concept
a. Commission Proposal
123. In the NOPR, the Commission noted that the corporate
separation approach instituted in Order No. 2004 made it difficult for
companies to transact needed business because all the employees of a
marketing affiliate would be walled off from the transmission
provider's transmission function employees. The corporate separation
approach required the creation of whole categories of employees who
could be shared between the transmission provider and the marketing
affiliate, such as officers and members of the board, field and
maintenance employees, and risk management employees.\139\ Issues have
also arisen under the existing Standards as to whether such employees
as lawyers, accountants, and rate design personnel should be exempted.
The NOPR's substitution of the employee functional approach in place of
the corporate separation approach eliminates the need for shared
employees, since it is now only marketing function employees who must
function independently from transmission function employees. Therefore,
the regulatory text omitted any mention of shared employees.
---------------------------------------------------------------------------
\139\ NOPR at P 24.
---------------------------------------------------------------------------
b. Comments
124. The elimination of the concept of shared employees seemed to
have confused some commenters. Idaho Power requests that the Commission
clarify what it means when it states in the NOPR that there is no
longer a need for the concept of shared employees, considering that
those employees' roles have not changed.\140\ EPSA requests that the
Commission either amend all other orders that reference shared
employees or address the ambiguity in the Final Rule by stating the
concept no longer exists in Commission regulations.\141\ However,
NiSource requests that the Commission confirm that the categories of
employees identified by Order No. 2004 as ``shared'' continue to exist
with the same status under the proposed Standards.\142\
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\140\ Idaho Power at 9.
\141\ EPSA at 5.
\142\ NiSource at 11-12.
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125. Wisconsin Electric and INGAA request additional guidance on
how some formerly ``shared employees'' would be classified. These
employees include attorneys, accountants, risk management personnel,
and regulatory personnel who must approve the transactions made by
marketing function employees.\143\ Wisconsin Electric and INGAA request
that these employees should not be classified as marketing or
transmission function employees and INGAA proposes that the Commission
modify the definitions of transmission and marketing function employees
to expressly exclude risk management employees.\144\
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\143\ INGAA at 36-40; Wisconsin Electric at 4-5; LPPC at 18-19.
\144\ INGAA at 36-40.
---------------------------------------------------------------------------
126. Similarly, PSEG requests clarification as to the comment in
paragraph 41 of the NOPR that rate design employees fall within the
current Standards' concept of ``shared employees.'' PSEG asks whether
this comment indicates that the Commission is abandoning what PSEG
states was its position in Order No. 2004-C as to considering certain
rate design functions to be transmission functions.\145\ PSEG also
requests that the Commission clarify that employees who are shared
between affiliated transmission and marketing functions and whose
primary purpose is to develop and implement policy for the companies,
advocate policies in various forums, or engage in strategic planning or
financial decision making do not fall within the definitions of
``transmission function employee'' or ``marketing function employee.''
\146\
---------------------------------------------------------------------------
\145\ PSEG at 7.
\146\ PSEG at 5.
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127. EPSA asks the Commission to clarify whether the Independent
Functioning Rule extends to consultant companies that offer both
transmission and marketing services for corporate companies.\147\ In
addition, National Grid asks whether contractor firms who are retained
to provide services may be considered transmission and marketing
function employees.\148\ Although National Grid does not believe
contracting firms should be tied to a function, EPSA and National Grid
would subject employees of these respective companies to the No Conduit
Rule as appropriate.\149\
---------------------------------------------------------------------------
\147\ EPSA at 6.
\148\ National Grid at 20.
\149\ EPSA at 6; National Grid at 20.
---------------------------------------------------------------------------
128. Idaho Power seeks clarification that despite the elimination
of the shared employee concept, those employees who were formerly
considered shared employees will still be subject to the No Conduit
Rule.\150\
---------------------------------------------------------------------------
\150\ Idaho Power at 9.
---------------------------------------------------------------------------
c. Commission Determination
129. As discussed in the NOPR, the substitution of the employee
functional approach for the corporate separation approach renders
continuation of the concept of ``shared employees'' unnecessary. Since
only those individuals who engage in transmission or marketing
functions now fall within the scope of the Independent Functioning
Rule, support personnel of the type formerly included in the concept of
shared employees, and who
[[Page 63811]]
do not meet those definitions, do not. Therefore, there is no need to
further exempt them under the outmoded rubric of shared employees.
130. We decline to amend prior orders that mention shared
employees; guidance from prior orders will be applicable or not
depending on whether those orders address concepts that survive the
revisions made in this Final Rule. We also decline to grant NiSource's
request that employees formerly classified as ``shared'' continue in
that classification. This would entail resurrecting the concept, and is
unnecessary.
131. Commenters raise questions as to whether various types of
employees formerly classified as shared employees are beyond the scope
of the Independent Functioning Rule, citing such employees as
attorneys, accountants, risk management personnel, regulatory
personnel, rate design personnel, and strategic planning personnel.
Again, the determination depends on the answer to a more fundamental
question: Do such employees function in their stated roles, or do they
also actively and personally perform day-to-day transmission functions
or marketing functions? If they do not perform transmission functions
or marketing functions, they are not subject to the Independent
Functioning Rule. Therefore, if an attorney is rendering legal advice,
he may consult with both transmission function employees and marketing
function employees. Likewise, a risk management employee may develop
risk guidelines for both transmission function employees and marketing
function employees. And regulatory personnel may present before
regulatory bodies filings that cover both transmission and marketing
issues. Of course, all such employees would remain subject to the No
Conduit Rule, and are prohibited from transmitting transmission
function information to marketing function employees.
132. We disagree with PSEG's contention that the Commission is
abandoning its position in Order No. 2004-C, which PSEG characterizes
as determining that certain rate design functions qualified as
transmission functions. Order No. 2004-C specifically stated that we
would consider ``the actual duties and responsibilities of employees in
determining whether they are transmission function employees.'' \151\
Here, as well, if a rate design employee were also assigned the
responsibility for performing transmission functions, he or she would
be a transmission function employee. However, if the rate design
employee is merely calculating rates to propose to the appropriate
regulatory body, the employee would not be a transmission function
employee; as discussed above, we are restricting the definition of
transmission functions to the day-to-day operation of the transmission
system.
---------------------------------------------------------------------------
\151\ Order No. 2004-C at P 30.
---------------------------------------------------------------------------
133. We grant EPSA's and National Grid's requests for clarification
as to whether consultants and contractors are subject to the
Independent Functioning Rule, and whether their firms are as well.
Agents and outside consultants and contractors who serve as
transmission function employees must function independently of
marketing function employees, and vice versa. However, the fact that
given individuals employed by a consulting firm may function in one of
the two categories does not bar other individuals employed by the same
firm from functioning in the other category. Of course, consultants and
contractors functioning as transmission function employees may not
interact with consultants and contractors functioning as marketing
function employees, and all such consultants and contractors must abide
by the No Conduit Rule.
134. We also grant Idaho Power's request for clarification that
employees formerly classified as shared employees are still subject to
the No Conduit Rule. Not only are these employees subject to the No
Conduit Rule, but so are all employees, regardless of their status or
classification.
7. Long-Range Planning and Procurement
a. Commission Proposal
135. The corporate separation approach of the former Standards
created difficulties for public utilities engaged in long-range
planning, and this difficulty was one of the impetuses that led to the
reforms instituted in this Final Rule. Because such planning activities
frequently encompass both transmission and generation issues, and
because under the existing Standards none of the employees of a
marketing or energy affiliate (except for shared employees) could
interact with the transmission function employees of a transmission
provider, it was difficult for planning personnel to gather needed
information and to consult with appropriate personnel in order to make
decisions on such basic matters as whether to build generation or to
buy power. It was never the intent of the Commission to interfere with
legitimate planning activities, something that is vital for the
continued efficient operation of both the electric and natural gas
industries.
136. The NOPR proposed substituting the employee functional
approach for the corporate separation approach to the Independent
Functioning Rule, thus permitting most company employees to interact
with one another, and eliminating the wholesale walling off of all
marketing and energy affiliate employees from the transmission function
employees of the transmission provider.
b. Comments
137. Many commenters seek additional clarification from the
Commission regarding the effect of the proposed Standards on long-range
planning, and urge the Commission to clarify that employees do not
become marketing or transmission function personnel by engaging in
activities such as integrated resource planning (IRP), competitive
solicitations, or non-competitive solicitations that are conducted
under state supervision.\152\
---------------------------------------------------------------------------
\152\ EEI at 33; California PUC at 4, 7-8; Entergy at 2; TANC at
4-5; SCE at 7-8; Vectren at 6-8, 10.
---------------------------------------------------------------------------
138. Some commenters ask the Commission to clarify whether
``transmission functions'' includes long-range operations of the
transmission system. SMUD and Idaho Power request that the proposed
Standards exclude long-term transmission system planning, and the
specific activities involved in that planning, from the definitions
transmission function.\153\ TDU Systems, on the other hand, requests
that the Standards do apply to transmission function employees who
engage in long-term transmission planning. However, TDU Systems also
believes that transmission function employees should be permitted to
provide limited information to marketing function employees regarding
the feasibility of generation proposals.\154\
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\153\ SMUD at 2; Idaho Power at 12-13.
\154\ TDU Systems at 5, 11-12.
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139. SCANA requests that neither generation-related employees that
are physically located onsite at the generating facilities nor
employees that are responsible for short and long-term resource
planning be classified into one of the functions.\155\
---------------------------------------------------------------------------
\155\ SCANA at 10-15. Similarly, PG&E requests that the
Commission confirm that the transmission function employees who have
the responsibility to serve retail load may work cooperatively to
plan transmission and generation on an integrated basis as required
to meet state mandates. PG&E at 8.
---------------------------------------------------------------------------
140. Many commenters also object to the Commission's inclusion of
``submission of offers or bids to buy or sell'' in the proposed
definition of
[[Page 63812]]
marketing functions. These commenters identify numerous barriers that
the inclusion of this phrase would place on long-range planning.\156\
These stated barriers include (i) preventing employees engaged in
resource procurement from having access to transmission planning
information to meet their state obligations; \157\ (ii) limiting a
company's ability to design and implement effective demand response
programs for retail load; \158\ (iii) restricting employees from
accessing transmission information needed to engage in competitive
solicitations for service to retail native load; \159\ (iv) restricting
integrated resource planning and competitive procurement employees from
accessing transmission information needed to engage in power purchases
and requests for proposals to serve native load; \160\ and (v)
interfering with the ability of planning employees to obtain non-public
transmission function information necessary to make solicitations as
efficient and cost effective as possible.\161\
---------------------------------------------------------------------------
\156\ Puget Sound at 5-6.
\157\ Id.; NARUC at 7.
\158\ LPPC at 13-14.
\159\ Salt River at 8-10; NARUC at 7; SCE at 7-8; Xcel at 13-14;
PG&E at 12-14; EEI at 31-34.
\160\ Salt River at 8-10; EEI at 31-36; LPPC at 8; Southern Co.
Services at 12-13. Southern Co. Services contends that including
these activities in the definition would conflict with state law
requiring IRP and requests for proposal (RFP). Southern Co. Services
at 11. Southern Co. Services requests that the Commission modify the
definition of marketing functions to exclude RFP. Id. at 14.
\161\ Western Utilities at 7-8; SCE at 8.
---------------------------------------------------------------------------
141. Many commenters also seek clarifications regarding whether
certain activities are considered long-range planning or marketing
functions. Idaho Power requests clarification that employees performing
non-transmission function planning may consult with transmission
function employees, without compromising their non-transmission-
function-employee status.\162\ Xcel asks the Commission to clarify (i)
how the marketing function definition applies to both short-term and
long-term transactions and to IRP related gas activities; \163\ (ii)
that marketing function excludes offers to buy or sell natural gas
transportation or storage capacity that is the product of long-range
planning to serve the native retail load of the gas LDC or to deliver
natural gas fuel to electric generating plants owned or controlled by
the utility; \164\ and (iii) that the proposed standards allow
utilities the flexibility to pursue self-build or build/transfer
options without running afoul of the Independent Functioning Rule.\165\
---------------------------------------------------------------------------
\162\ Idaho Power at 12-13.
\163\ Xcel at 14-16; SCANA at 10-15. Xcel believes that short-
term wholesale purchase transactions should be treated comparably
with long-term capacity and energy acquisitions to serve native
load, since the function is the same: serving native load. Xcel at
14-16.
\164\ Xcel at 15-16.
\165\ Xcel at 16-18. Xcel also questions whether the marketing
function definition should apply to the Xcel Energy Transmission
Access Group, which it states acts as the transmission service
customer in arranging the long-term transmission service
requirements for retail and wholesale native load customers of all
four Xcel Energy Operating Companies. Xcel notes that this group
does not offer, bid, buy, or sell electric energy or natural gas nor
does it take positions on financial transmission rights in organized
markets. Xcel at 19-20.
---------------------------------------------------------------------------
142. Many commenters also propose amendments to the proposed
standards to remedy their concerns. Multiple commenters propose to
remove ``buy'' from section 358.3(c), asserting that the Commission
does not have direct authority over purchases.\166\ PG&E's proposed
resolution is to amend the definition by introducing language limiting
the scope of the definition to wholesale purchases and sales.\167\ Salt
River suggests defining ``marketing functions'' simply as sales for
resale.\168\ To ensure that demand response is construed as a planning,
rather than marketing, function, LPPC requests an additional exception
for development, administration or implementation of demand response
programs, including the issuance of requests for proposals or the
awarding of contracts for demand response.\169\ Commenters stress that
these modifications are sufficient because such employees would remain
subject to the No Conduit Rule to protect improper disclosure of
protected information.\170\
---------------------------------------------------------------------------
\166\ Western Utilities at 8-9; Salt River at 8-9; SCE at 8.
\167\ PG&E at 12-14.
\168\ Salt River at 8-10.
\169\ LPPC at 13-14.
\170\ Salt River at 8-10.
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143. Commenters request that the Commission clarify that the
Standards do not prevent transmission providers from sharing
transmission planning information with unaffiliated network service
transmission customers. TAPS requests that the Commission clarify that
the proposed Standards do not preclude transmission providers from
providing unaffiliated network customers' planning personnel with the
same types of information as is made available to the planning
personnel of the transmission provider and its affiliates.\171\ TAPS,
TDU Systems and APPA request assurances that unaffiliated planning
representatives involved in the regional joint planning process
contemplated by Order 890 have the same access to transmission
information as does the transmission provider's own generation planners
and affiliates.\172\
---------------------------------------------------------------------------
\171\ TAPS at 38.
\172\ TAPS at 38; TDU Systems at 4; APPA at 6.
---------------------------------------------------------------------------
c. Commission Determination
144. As stated in the NOPR, one of the principal concerns the
Commission had with the current Standards was the barriers they appear
to have erected to coordinated resource planning, the critical
importance of which the Commission stressed in Order Nos. 890 and 890-
A.\173\ Public utilities complained they were finding it difficult to
gather together the necessary personnel and data to efficiently analyze
their long-range needs for both transmission and generation, due to the
strictures imposed by the corporate separation approach to the
Independent Functioning Rule. For that reason, as well as others, the
Commission revised the scope of the Independent Functioning Rule to
encompass only transmission function employees and marketing function
employees, thereby concentrating the rule on the area that presented
the greatest potential for undue preferences.
---------------------------------------------------------------------------
\173\ NOPR at P 32. See Preventing Undue Discrimination and
Preference in Transmission Service, Order No. 890, FERC Stats. &
Regs. ] 31,241, at P 425 (2007), order on reh'g and clarifications,
Order No. 890-A, FERC Stats. & Regs. ] 31,261, at P 171 (2007),
order on reh'g, Order No. 890-B, 123 FERC ] 61,299 (2008).
---------------------------------------------------------------------------
145. Commenters expressed approval of the Commission's efforts to
remove unnecessary barriers to resource planning, but many raised
concerns that some barriers still remain. Others sought clarification
as to the implications of the proposed Standards on the transparency of
the resource planning process. These concerns fall in two main areas:
whether ``transmission functions'' include long-range operation of the
transmission system, thereby implicating employees involved in long-
range transmission planning; and whether the definition of ``marketing
functions'' should include the phrase ``submission of offers or bids to
buy or sell,'' rather than simply ``offers to sell.'' A few commenters
also raised concerns about access by third parties to transmission
function information in the context of open planning programs.
146. As stated earlier in connection with the discussion of the
definition of ``transmission functions,'' the Commission in this Final
Rule clarifies that the term refers to the day-to-day operation of the
transmission system, and has modified the definition accordingly. Long-
range planning regarding the transmission system would not be included,
and employees
[[Page 63813]]
engaged in such long-range planning, provided they were not also
actively and personally involved in the day-to-day operation of the
transmission system, would not be considered transmission function
employees. Therefore, the Independent Functioning Rule would not apply
to them.
147. Idaho Power Company requests clarification that long-range
planning functions such as integrated resource planning and preparation
of system impact studies not be considered transmission functions. We
reiterate that so long as these activities do not implicate the day-to-
day operation of the transmission system, they are not transmission
functions. SMUD likewise questions whether long-range transmission
planning is included in the definition; our amendment in this Final
Rule clarifies that it is not. And SCANA requests that employees who
perform generation-related resource planning not be considered
transmission function employees (or marketing function employees).
These employees do not perform day-to-day transmission operations, and
thus are not transmission function employees. Furthermore, they are not
engaged in sales of energy for resale, and thus are not marketing
function employees under our revised definition of the term.
148. As discussed above, the Commission has determined to remove
``bids to buy'' from the definition of marketing functions, in large
part because the Commission's jurisdiction centers on sales for resale
in interstate commerce, not on purchases. It is also unnecessary to
include purchases in the scope of the rule in order to categorize
marketers making off-system sales as marketing function employees;
personnel making purchases destined to serve off-system sales would be
so categorized by virtue of their involvement in the sale portion of
the transaction. The removal of purchases from the definition of
marketing functions addresses the concerns of the many commenters who
feared that barriers to long range resource planning might still remain
under the proposed Standards.
149. LPPC is concerned that inclusion of demand response in the
definition of marketing functions could interfere with the development
of demand response programs as a part of long-range planning. As
discussed above, the Commission does not intend to interfere with
demand response programs that an LSE has established for its customers,
and inclusion of the term demand response in the definition would thus
not impede planning for demand response programs. PG&E's request to
exclude from the definition of marketing functions those purchases made
to serve bundled native load or pursuant to state obligations is mooted
by our limitation of the definition to sales and not purchases.
150. Our revised definition of transmission functions, limiting it
to the day-to-day operation of the transmission system, should enable
the free flow of the type of transmission information needed for
planning purposes. And the removal of purchases from the definition of
marketing functions should expand the category of personnel who are
permitted access to the type of information necessary to engage in
long-range system planning and competitive solicitations, whether
conducted pursuant to state mandate or not.
151. Idaho Power Company seeks guidance as to whether long-range
planning personnel will be able to discuss information with
transmission function employees. If the planning personnel do not
otherwise qualify as marketing function personnel, they may hold such
discussions. However, if the transmission employees in question have
access to transmission function information and share it with the
planning personnel, under the No Conduit Rule the planning personnel
may not pass such information on to marketing function personnel.
152. In Order No. 890, the Commission deferred consideration of the
impediments to the planning process which some commenters therein
stated were created by the Standards.\174\ Our modifications to the
proposed definition of transmission functions (limiting such functions
to the day-to-day operation of the transmission system) and to the
proposed definition of marketing functions (removing purchases from the
definition) address those concerns. TAPS and TDU Systems, however,
raise a separate concern, asserting that the ability of public
utilities to enjoy the relatively free flow of information permitted
under the revised Standards may encourage them to refrain from sharing
such information with non-affiliated entities in the planning process.
We reiterate our commitment, set forth in Order No. 890, as to the
desirability of a coordinated and open planning process.\175\ This
proceeding is not the proper forum to address the appropriate extent of
participation by interested entities in the planning processes of
public utilities. However, as we stated in Order No. 890, the
transmission provider must make available to any interested party the
same data, information, and models it uses in the transmission planning
process.\176\
---------------------------------------------------------------------------
\174\ Order No. 890 at n.269.
\175\ Id. at P 425.
\176\ Id. at P 471.
---------------------------------------------------------------------------
8. Exclusion for Permitted Information Exchanges
a. Commission Proposal
153. In the NOPR, the Commission proposed an exclusion to both the
Independent Functioning Rule and the No Conduit Rule for information
that we believed required communication between transmission function
employees and marketing function employees. Two categories of
information were implicated: information regarding generation necessary
to perform generation dispatch, and information necessary to maintain
or restore operation of the transmission system. The Commission
proposed that in situations requiring the exchange of such information,
contemporaneous records be made of the communication, except in cases
of emergency, when recordation was to be made as soon after the fact as
practicable. The NOPR also proposed that the records of the
communications be retained for a period of five years. See proposed
sections 358.5(b), 358.6(b), 358.7(h).
b. Comments
154. Commenters raised the general concern that the provisions
designating the proposed permitted interactions are drafted too
narrowly to fully cover the types of communications they purport to
exclude.\177\ With respect to generation dispatch, MidAmerican believes
that the exclusion should cover all communications necessary to perform
generation dispatch, and suggests eliminating the words ``regarding
generation.'' \178\ ALCOA suggests the exclusion should cover the
situation where transmission function employees perform generation
dispatch.\179\ NiSource asks the Commission to delineate which
generation-related information is exempted.\180\ Bonneville contends
that communications necessary to provide generation inputs for
ancillary and control area services should be permissible, and not
subject to the contemporaneous record requirement.\181\
---------------------------------------------------------------------------
\177\ See, e.g., Nisource at 21-22; MidAmerican at 15-16.
\178\ MidAmerican at 15.
\179\ ALCOA at 6.
\180\ Nisource at 23.
\181\ Bonneville at 6.
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155. Commenters also seek clarification on the type of generation
[[Page 63814]]
information transmission function employees may share with generation
employees. E.ON and PSEG seek confirmation that employees engaged in
generation-related activities may receive transmission function
information from transmission function employees.\182\ Likewise, EEI
requests that the Commission clarify that the exclusion for information
necessary to maintain or restore operation of the transmission system
includes information necessary for the scheduling of transmission-
related generation outages.\183\ PSEG further requests that the
Commission address the circumstance where employees performing
generation-related activities are the same employees performing trading
activities.\184\
---------------------------------------------------------------------------
\182\ PSEG at 8; E.ON at 21.
\183\ EEI at 53; ATC at 10; Wisconsin Electric at 6-7.
\184\ PSEG at 9.
---------------------------------------------------------------------------
156. Numerous commenters requested clarification on the scope of
the reliability exemption.\185\ National Grid requests clarification
that the reliability exclusion is not limited to those communications
related only to transmission system reliability,\186\ and other
commenters believe the exclusion should cover all types of reliability
communications.\187\ PSEG requests, instead, specific examples of
permitted reliability communications.\188\ E.ON suggests that these
excluded communications for reliability purposes can only be made to
the same extent that a transmission provider would communicate with a
similarly situated non-affiliated entity engaged in wholesale merchant
operations.\189\
---------------------------------------------------------------------------
\185\ See, e.g., National Grid at 10-11; PSEG at 17-18; Nisource
at 22-23; ATC at 4; EEI at 51-52; Destin at 13; E.ON at 19-20;
MidAmerican at 14. Reliability Standards refer to the standards
promulgated by the North American Electric Reliability Corporation
(NERC) and approved by the Commission.
\186\ National Grid at 10-11.
\187\ See, e.g., National Grid at 10-11; MidAmerican at 14;
Ameren at 25; Wisconsin Electric at 6-7.
\188\ PSEG at 6.
\189\ E.ON at 19-20; see also TAPS at 45.
---------------------------------------------------------------------------
157. Destin contends that the proposed rule discriminates against
natural gas transmission providers, averring that the two types of
permitted information apply only to electric transmission
providers.\190\
---------------------------------------------------------------------------
\190\ Destin at 12.
---------------------------------------------------------------------------
158. Ameren notes that elsewhere in the proposed regulations, the
Commission uses the terms ``permitted information'' or ``permitted
information exchanges.'' Ameren requests that the Commission be
consistent throughout the Final Rule.\191\
---------------------------------------------------------------------------
\191\ Ameren at 27.
---------------------------------------------------------------------------
159. Some commenters propose alternative methods of defining
permitted exchanges. Western Utilities urges the Commission to
recategorize the descriptions proposed in sections 358.5(b), 358.6(b)
and 358.7(h) as a permissible subset of non-public transmission
function information.\192\ SCE prefers a modification to section
358.6(b) that describes a particular set of safe harbor exchanges.\193\
---------------------------------------------------------------------------
\192\ Western Utilities at 10-11.
\193\ SCE at 6.
---------------------------------------------------------------------------
160. EEI contends that the Commission's exclusions for permitted
information exchanges should be phrased as ``exemptions'' rather than
``permitted communications'' to clarify that other forms of
communication, such as social conversations, are not implicitly barred
because they are not identified as ``permitted'' communications.\194\
---------------------------------------------------------------------------
\194\ EEI at 50.
---------------------------------------------------------------------------
161. SCANA would like confirmation that if generation dispatch
employees are part of the company's transmission function, not its
marketing function, then communications between such employees and non-
dispatch-oriented transmission function employees necessary to perform
generation dispatch and to maintain or restore operation of the
transmission system are permissible.\195\
---------------------------------------------------------------------------
\195\ SCANA at 8-10.
---------------------------------------------------------------------------
162. SCE requests that the Commission include the phrase ``non-
public transmission'' to the exclusion for permitted information
exchanges to avoid the unintended implication that all exchanges
between marketing function employees and transmission function
employees are banned except the specific exchanges described.\196\
---------------------------------------------------------------------------
\196\ SCE at 6-7.
---------------------------------------------------------------------------
163. PSEG seeks clarification that marketing function employees may
communicate with employees of a gas LDC that is not affiliated with a
gas transmission provider. PSEG asserts that communications in such a
circumstance are essential for generation dispatch purposes and pose no
threat of prohibited communications.\197\
---------------------------------------------------------------------------
\197\ PSEG at 6, 10-11.
---------------------------------------------------------------------------
164. Ameren requests that the Commission clarify that proposed
section 358.6(b) does not preclude support personnel from sharing
information related to a marketing affiliate's specific transmission
service request.\198\ Ameren also asks the Commission to clearly state
in the Final Rule that the permitted information exclusion includes the
operating information exemption it states is permitted under Order No.
2004.\199\
---------------------------------------------------------------------------
\198\ Ameren at 27.
\199\ Id.
---------------------------------------------------------------------------
165. Many commenters express confusion with respect to the record
requirement arising from proposed sections 358.2(d) and 358.7(h).
Commenters request clarification that the record retention requirement
is limited to the two narrow categories of permitted communications
identified in section 358.7(h).\200\ Likewise, National Grid requests
the Commission confirm that the contemporaneous record requirement
applies only to the types of communications addressed in sections
358.5(b), 358.6(b) and 358.7(h).\201\
---------------------------------------------------------------------------
\200\ See, e.g., Idaho Power at 9-10; National Grid at 22-24;
MidAmerican at 13; Xcel at 22.
\201\ National Grid at 22-23.
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166. Some commenters expressed the concern that the contemporaneous
record requirement presents too great an administrative burden.\202\
NiSource would eliminate the contemporaneous requirement, stating the
Commission neither explains why the records are necessary, nor
justifies the burden placed on transmission providers.\203\
---------------------------------------------------------------------------
\202\ See, e.g. , NiSource at 19; Destin at 13; ATC at 16.
\203\ NiSource at 19.
---------------------------------------------------------------------------
167. Other commenters seek clarifications on the mechanics of the
record requirement. Idaho Power and Puget Sound ask whether a recorded
phone line satisfies the recordation requirement.\204\ Puget Sound
requests that the Commission not require indexing of these recorded
communications.\205\ ATC requests that the Commission expressly clarify
that permitted communications need not also be contemporaneously posted
on the OASIS.\206\
---------------------------------------------------------------------------
\204\ Idaho Power at 9-10; Puget Sound at 11.
\205\ Puget Sound at 12-13.
\206\ ATC at 8.
---------------------------------------------------------------------------
168. Commenters disagree on how much detail should be required for
cross-functional meeting records. Puget Sound prefers to record only
who attended, the agenda, verification that no discussion of nonpublic
transmission function information took place, and any items circulated
for the meeting, instead of keeping detailed records.\207\ Similarly,
E.ON would like assurance that these meeting records need not contain a
``word-for-word'' transcription, so long as the key points are
addressed.\208\ EPSA, however, believes that there should be an actual
transcript or recording of any interaction between restricted
employees.\209\
---------------------------------------------------------------------------
\207\ Puget Sound at 13.
\208\ E.ON at 23.
\209\ EPSA at 10-11.
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[[Page 63815]]
169. INGAA contends that this recordation requirement implies,
through the use of the word ``exchange,'' that it extends to
information received from the marketing function employee.\210\ INGAA
asks the Commission to clarify that the recordation requirement applies
only to non-public transmission information provided to a marketing
function employee, and not to information received from a marketing
function employee.\211\
---------------------------------------------------------------------------
\210\ INGAA at 55-58.
\211\ INGAA at 57-58.
---------------------------------------------------------------------------
170. Wisconsin Electric urges the Commission to consider adopting a
six-month time period, after which disclosure of non-public
transmission function information to a marketing employee is no longer
a violation.\212\ And Williston requests that the five-year retention
requirement for the contemporaneous records of its communications be
reduced to three years.\213\
---------------------------------------------------------------------------
\212\ Wisconsin Electric at 7-8.
\213\ Williston at 11.
---------------------------------------------------------------------------
171. Williston believes that the new Standards should allow
whatever steps are necessary to be taken during an emergency, without
regard to the record requirement.\214\ Likewise, ATC and EEI state that
any contemporaneous records created after an emergency should simply be
assembled only to the extent possible and to the best knowledge of that
company at that time, and that no extraordinary duties should be
imposed to meet the Standards' requirements.\215\
---------------------------------------------------------------------------
\214\ Williston at 9-10.
\215\ ATC at 16; EEI at 4.
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172. Williston asserts that requiring records for non-emergency
communications places more onerous controls on the sharing of
information, without justification.\216\ Williston also requests
assurances that in situations where such communications are provided to
the Commission, that they will remain non-public.\217\
---------------------------------------------------------------------------
\216\ Williston at 10.
\217\ Id. at 11.
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173. National Grid proposes that the Commission eliminate the
proposed requirement that each company's Chief Compliance Officer
direct and manage contemporaneous recordings, and allow each company to
individually determine how best to comply with the contemporaneous
record requirement.
c. Commission Determination
174. As discussed above, the Commission is eliminating the
corporate separation approach to the Independent Functioning Rule, and
transmission function employees are no longer barred from interacting
with all the employees of a marketing or energy affiliate (only
marketing function employees). Therefore, the occasions where
transmission function employees will legitimately need to interact in a
professional capacity with employees barred from doing so under the
Independent Functioning Rule is greatly reduced from the current
Standards. This is especially true in the critical areas of reliability
and generation dispatch, as it is rarely marketing function personnel
who engage in these activities. However, to cover any isolated
circumstances that may remain, such as in the case of smaller utilities
whose employees may perform multiple job duties, the Commission
proposed in the NOPR an exclusion to the Independent Functioning Rule
and the No Conduit Rule to ensure that where certain critical functions
were concerned, employees would not hesitate to interact with one
another for fear of violating the Standards.
175. The bulk of the confusion which seems to have arisen over the
exclusion, as expressed in the comments, centers on generation
dispatch. Because dispatch is not inherently a marketing function, and
because persons engaged in marketing are very unlikely to also be
engaged in generation dispatch, commenters have assumed the Commission
meant the exclusion to cover some broader situation. That is not the
case. It was intended only for those rare instances, such as with
smaller utilities, where some overlap of duties might exist.
176. To avoid any further confusion, the Commission eliminates from
section 358.7(h) the exclusion pertaining to generation dispatch, and
instead broadens the exclusion for reliability to include generation
concerns. The Commission further broadens the exclusion for reliability
to include compliance with reliability standards generally. The
proposed first exclusion is thus eliminated and the proposed second
exclusion is split into two parts, to read as follows: ``information
pertaining to compliance with Reliability Standards approved by the
Commission,'' and ``information necessary to maintain or restore
operation of the transmission system or generating units, or that may
affect the dispatch of generating units.'' Furthermore, to avoid
duplication, the Commission deletes the redundant statements of the
exclusion in sections 358.5(b) and 358.6(b). The Commission also
deletes the statement of the exclusion from section 358.2, as it
contains a level of detail inappropriate for a statement of general
principles. The statements of both the exclusion and the retention
requirement pertaining to it are now contained in section 358.7(h),
under the Transparency Rule.
177. The Commission agrees with SCE that the phrase ``non-public
information'' should be added to the statement of the exclusion, to
avoid the implication that exchanges of public information must also be
recorded, and modifies the text accordingly. Likewise, the Commission
clarifies, in response to a request from INGAA, that it is transmission
function information that is not to be disclosed, and as to which the
exclusion applies, and modifies the language of the exclusion
accordingly. However, we remind INGAA that with respect to the
Independent Functioning Rule, it is the interaction of transmission
function employees and marketing function employees that is at issue.
Such interactions ought not to occur, except for non-business related
activities or in connection with the exclusion under discussion.
178. Some commenters are concerned that acceptable interactions
among employees not covered by the exclusion might be inadvertently
swept into the recordation requirement by use of the term
``permitted.'' To avoid any confusion over the scope of the term, the
heading will read: ``Exclusion for and recordation of certain
information exchanges.'' We point out, however, that while transmission
function employees and marketing function employees may talk about
personal matters, which certainly need not be recorded, they are
required to function independently from one another with respect to
their work activities. Therefore, their interactions should be limited
to social activities or to the necessary discussion of information that
falls within the exclusion discussed. And, as indicated, in the latter
case appropriate recordation is to be made.
179. SCANA states that the employees of its affiliated utility who
perform generation dispatch are included in the utility's transmission
function, and requests guidance as to their status as it pertains to
the exclusion. The Commission confirms that if such employees are not
performing marketing functions, they may freely interact with other
transmission function employees, and need not be concerned with the
exclusion in question.
180. PSEG seeks clarification that marketing function employees may
communicate with employees of a gas LDC that is not affiliated with a
gas transmission provider. Such communications would not involve
transmission function employees or the dissemination of transmission
function
[[Page 63816]]
information to an affiliated marketing function employee, and thus
would be permissible.
181. The Commission confirms that the exclusion does not implicate
the processing of transmission service requests from an affiliate,
which is permissible. Ameren requests the Commission to carry over into
the revised Standards the following provision: ``A transmission
provider is permitted to share information necessary to maintain the
operations of the transmission system with its Energy Affiliates.''
This provision is no longer needed, due to the elimination of the
concept of energy affiliates and the restrictions pertaining to such
affiliates.
182. Some commenters suggest the recordation requirements of the
exclusion create an added burden on their operations. To the contrary,
the Standards greatly reduce the burdens on operations. Under the
existing Standards, transmission function employees must function
independently from all the employees of a marketing affiliate, not just
the marketing function employees. It can readily be seen that limiting
the restriction on interactions to marketing function employees
virtually eliminates the need for the exclusion itself. And in those
rare cases noted in the exclusion where interaction between
transmission function employees and marketing function employees may be
required, the transmission provider is not prohibited from allowing the
interaction, it simply must keep a record to enable the Commission to
ascertain whether the communications fell within the scope of the
exclusion or not.
183. The Commission clarifies that the recording of any meetings
and exchanges of information under the exclusion need not take any
particular form; thus, a recorded phone line is sufficient. The
Commission declines to require a transcript, as one commenter suggests,
as this would be impracticable. The important element of the
requirement is to make a record of what generally was discussed, and
the date and persons involved. Puget Sound requests that entities not
be required to index the communications. No particular extraction
method for the data is required; however, communications subject to the
exclusion must be retrievable in some fashion, in order for Commission
staff to review them if necessary.
184. The Commission agrees that an entity may designate someone
other than its chief compliance officer as the person responsible for
managing the recordings under the exclusion, and eliminates that
restriction from the regulatory text. The five-year holding period
matches that set forth in proposed section 358.4, and will be retained.
This period, rather than the requested three-year period that governs
the retention of certain shipper data under 18 CFR 284.12 (2008), will
better enable Commission staff to access the information in the course
of periodic audits or other interactions with the entity in question,
which may occur on an infrequent basis.\218\
---------------------------------------------------------------------------
\218\ It is also consistent with the time period adopted by the
Commission in Order No. 677, amending the retention period for price
data under 18 CFR 284.288(b) and 284.403(b) (natural gas) and 18 CFR
35.37(d) (electricity), Revisions to Record Retention Requirements
for Unbundled Sales Service, Persons Holding Blanket Marketing
Certificates, and Public Utility Market-Based Rate Authorization
Holders,FERC Stats. & Regs. ] 31,218 (2006); Order No. 670
prohibiting market manipulation under 18 CFR part 1c, Prohibition of
Energy Market Manipulation, FERC Stats. & Regs. ] 31,202 (2006); and
the generally applicable five-year statute of limitations where a
penalty provision does not impose its own statute of limitations.
See FERC Stats. & Regs. ] 31,218 at n.6.
---------------------------------------------------------------------------
185. With respect to emergency circumstances during which
contemporaneous recordation cannot be made, the Commission clarifies
that after-the-fact recordation need be assembled only to the extent
possible; we recognize that the thoroughness of such notes or other
recordation will vary greatly depending on the nature and extent of the
emergency.
186. The Commission declines to adopt a time period for the
possible transition of non-public information to public information.
The continued usefulness of such information to an affiliated marketing
function employee will depend on the circumstances, and thus does not
lend itself to a generic rule. The Commission also notes that its
regulations govern whether information it receives is treated as non-
public or otherwise; as a general matter, information received in
connection with investigations is so treated.\219\
---------------------------------------------------------------------------
\219\ See 18 CFR part 1b (2008). See also 18 CFR 388.112 and
388.113 (2008).
---------------------------------------------------------------------------
187. Lastly, Destin suggests the proposed exclusion by its terms
discriminates against the gas industry. That is not correct. The
definition of transmission in section 358.3(f) includes gas
transportation as well as electric transmission. Therefore, information
necessary to maintain or restore operation of the transmission system
refers to pipelines as well as to electric transmission.
D. The No Conduit Rule
188. In the NOPR, the Commission proposed carrying forward the no
conduit prohibition of the existing Standards, but modified it to
encompass only marketing function employees, not all employees of a
marketing or (for the electric industry) an energy affiliate, as the
persons who could not receive transmission function information. As in
the case of the analogous reform to the Independent Functioning Rule,
this change restricts the category of individuals who should be walled
off from transmission function information to those who can capitalize
on it in the form of an undue preference.
1. Commission Proposal
189. The Commission proposed prohibiting employees of a
transmission provider from disclosing non-public transmission function
information to the transmission provider's marketing function employees
(defined to include employees of an affiliate). The Commission also
proposed prohibiting the receipt of transmission function information
by a transmission provider's marketing function employees. See proposed
section 358.6.(a).
2. Comments
190. EPSA agrees with all the NOPR proposals designed to strengthen
the No Conduit Rule and approves broadening the scope of the term
``non-public'' as much as feasible.\220\
---------------------------------------------------------------------------
\220\ EPSA at 8.
---------------------------------------------------------------------------
191. SCE states that the prohibition set forth in proposed section
358.6(a)(1), prohibiting transmission function employees from
disclosing non-public transmission function information to marketing
function employees, is redundant, since all employees are so prohibited
under proposed section 358.6(a)(4). SCE recommends that the provision
be amended by substituting the words ``non-marketing function employees
and affiliate employees'' for ``transmission function employees'' and
deleting the proposed section 358.6(a)(4).\221\
---------------------------------------------------------------------------
\221\ SCE at 6.
---------------------------------------------------------------------------
192. Many commenters object that the prohibition against receiving
non-public transmission function information ``from any source'' is, in
one or more ways, unworkable and unenforceable.\222\ SCE claims the
proposed section is also unfair because of what it sees as the
Commission's intent to approach violations to the proposed Standards as
per se violations.\223\ Commenters argue
[[Page 63817]]
that transmission providers cannot control whether affiliated marketing
function employees receive non-public transmission function information
from third parties, and many commenters further contend that the
receiving marketing function employee may not have a way to know
whether the information is non-public.\224\ SCE states that because the
proposed prohibition operates against marketing function employees who
work for transmission providers and not against those who do not, the
Commission is providing the latter a competitive advantage in that they
can receive information the former cannot.\225\ Western Utilities also
complains that no posting ``cure'' provision has been provided for
improper disclosures by a third party to a marketing function
employee.\226\
---------------------------------------------------------------------------
\222\ See, e.g., AGA at 23-25, ALCOA at 6-8, Ameren at 29-30,
Arizona PSC at 3-5, Bonneville at 9-10, E.ON. at 14-15, EEI at 42-
44, Entergy at 3, Idaho Power at 10, INGAA at 43-45, INGAA Response
at 3, NiSource at 19-20, PG&E at 22, PSEG at 15-16, Puget Sound at
10-11, SCE at 2-5, Southern Co. Services at 25-26, Western Utilities
at 5-7, and Wisconsin Electric at 9.
\223\ SCE at 3.
\224\ Western Utilities observes that the rule could potentially
require a marketing function employee to maintain detailed records
of all transmission function information he or she hears, and spend
significant amounts of time investigating each item to ascertain
whether it is non-public. SCE and Western Utilities state the
prohibition could also be interpreted as preventing a marketing
function employee from attending any meeting involving an ISO, NERC
or Regional Entity because of the potential for disclosure of non-
public information. SCE at 4; Western Utilities at 6.
\225\ SCE at 5.
\226\ Western Utilities at 7.
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193. Many commenters recommend either amending this prohibition or
eliminating it. Some commenters believe that the other sections of the
No Conduit Rule adequately ensure that improper transfers of non-public
information will not occur, and request that the Commission eliminate
the proposed prohibition.\227\ SCE prefers amending the provision to
prohibit disclosure or access to, rather than receipt of, non-public
transmission function information.\228\ INGAA suggests, and others
agree, that the prohibition ``from any source'' be eliminated and
substituted with language limiting the provision to information
received from a transmission function employee of the transmission
provider.\229\
---------------------------------------------------------------------------
\227\ NiSource at 19-20; Vectren at 6; Williston at 11-12.
\228\ SCE at 5.
\229\ INGAA at 45; PSEG at 15; E.ON at 3; Southern Co. Services
at 26; E.ON at 3. Western Utilities contends that while the
transmission provider cannot impose or enforce a compliance program
on unaffiliated third parties, it may be liable under the proposed
rule for prohibited disclosures by third parties. Western Utilities
at 5.
---------------------------------------------------------------------------
194. NGSA believes that the language of the No Conduit Rule
prohibits distribution of non-public transmission information only to a
pipeline's in-house marketing function, but does not reach marketing
function employees of an affiliate. NGSA proposes amendments that it
believes ensure that the prohibition reaches both.\230\ On the other
hand, AGA does not believe that the No Conduit Rule should apply to
non-jurisdictional marketing affiliates.\231\
---------------------------------------------------------------------------
\230\ NGSA Reply Comments at 10-11.
\231\ AGA at 3.
---------------------------------------------------------------------------
195. Destin is concerned that the No Conduit Rule requires a
transmission provider to ensure compliance by the marketing function
employees, a task it contends is impracticable in the context of a
large and diverse corporate family. Destin believes the proposed
Standards effectively adopt a strict liability standard for
transmission providers with respect to any violations that may be
committed by a marketing affiliate, and that could subject a company to
a double penalty for a violation.\232\ Dominion Resources agrees with
Destin and queries whether the Commission has the authority to enforce
violations of the Standards by employees of a transmission provider's
affiliates.\233\
---------------------------------------------------------------------------
\232\ Destin at 4-6.
\233\ Dominion Resources at 15.
---------------------------------------------------------------------------
196. TDU Systems requests that the Final Rule clarify that
generation planners are subject to the No Conduit Rule.\234\
---------------------------------------------------------------------------
\234\ TDU Systems at 5-6.
---------------------------------------------------------------------------
197. Finally, Vectren asks the Commission to modify section
358.2(c) to change it from passive voice to active voice, in order to
make it consistent with other subsections of section 358.2 and to
clarify who must comply with the provision.\235\
---------------------------------------------------------------------------
\235\ Vectren at 11.
---------------------------------------------------------------------------
3. Commission Determination
198. The Commission believes that the No Conduit Rule is at least
equally as critical to the regulatory scheme of the Standards as is the
Independent Functioning Rule, and adopts it in this Final Rule.
However, we find that certain of the commenters' objections to the
proposed regulatory text are well-taken, and modify it to (i) eliminate
redundancies and (ii) address the concerns of those who interpret the
rule as reaching the unwitting receipt of transmission function
information by marketing function employees.
199. We agree with SCE that the first subsection of the rule,
proposed section 358.6(a)(1), which prohibits transmission function
employees from disclosing non-public transmission function information
to their transmission provider's marketing function employees, is
redundant. This prohibition is necessarily included in the broader
prohibition of the fourth subsection, proposed section 358.6(a)(4),
which prohibits any employee of the transmission provider or of its
marketing affiliates from making such disclosures. Therefore, we revise
the regulatory text to eliminate the proposed first prohibition, and
rearrange the remaining list of prohibitions.
200. Many commenters object to the prohibition in proposed section
358.6(a)(2), which prohibits marketing function employees from
receiving non-public transmission function information from any source.
They argue that such receipt could be unwitting, or forced upon the
employees unwillingly. In light of the difficulties in determining
whether a marketing function employee may have willingly and knowingly
received such information, or rather whether he inadvertently received
it, the Commission will eliminate this prohibition in section 358.6.
The statement of the No Conduit Rule in the general principles section,
section 358.2, is likewise revised to reflect this modification.
201. We further clarify that contractors, consultants or agents, as
well as employees, are covered by the prohibition in section 358.6(b),
and modify the regulatory text accordingly. We also modify the
corresponding regulatory text in the statement of general principles,
section 358.2(c).
202. NGSA contends that marketing function employees of an
affiliate would not be reached under the No Conduit Rule. That is not
the case. Marketing function employees are defined in section 358.3(d)
to include employees, contractors, consultants or agents not only of
the transmission provider, but also of an affiliate of the transmission
provider.
203. Destin claims that the proposed rule makes transmission
providers responsible for the actions of their affiliates with respect
to the disclosure of transmission function information. That is also
not the case. Only one of the prohibitions is solely directed against
transmission providers, and it prohibits them from using anyone as a
conduit for improper disclosures, something that is clearly within
their power. Of course, to the extent transmission providers have
corporate control over an affiliate, they are expected to require the
affiliate to abide by the Standards.
204. TDU Systems requests clarification that generation planners
are subject to the No Conduit Rule. The Commission confirms that not
only are generation planners subject to the No Conduit Rule, but so are
all other employees of a transmission provider or its marketing
affiliate. In response to
[[Page 63818]]
Vectrin's request that the active voice be used in section 358.2(c)
(the statement of general principles relating to the No Conduit Rule),
the Commission believes no change is appropriate. The preceding two
general principles refer to affirmative obligations, whereas the
principle in question refers to an obligation to refrain from taking
certain actions, which lends itself to the passive voice.
E. Transparency Rule
205. In addition to the Independent Functioning Rule and the No
Conduit Rule, the NOPR proposed a Transparency Rule, the provisions of
which are designed to alert interested persons and the Commission to
potential acts of undue preference. Most of the various posting
requirements of the existing Standards were placed in this section, and
in some cases modified to streamline them and conform them to the new
approaches proposed in the NOPR. The various posting requirements are
discussed below.
1. Waivers and Exercises of Discretion
a. Commission Proposal
206. The Commission proposed carrying forward most of the existing
provisions regarding the non-discrimination requirements of section
358.4, including the provisions regarding the posting of waivers and
exercises of discretion. These provisions were proposed to remain under
section 358.4.
b. Comments
207. Many commenters contend that the requirement that pipelines
log and post all ``exercises of discretion'' is vague, unnecessarily
broad, and overly burdensome.\236\ Both Williston and INGAA argue that
the NOPR expands this requirement without justification.\237\ INGAA and
NiSource request that the Commission eliminate the requirement
altogether.\238\
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\236\ See, e.g., INGAA at 50; Nisource at 17; NGSA Reply
Comments at 5-7; Kinder Morgan at 5-6; Spectra at 9-10; Williston at
15-17.
\237\ Williston at 15-17; INGAA at 50.
\238\ INGAA at 50; Nisource at 17.
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208. As an alternative to eliminating the requirement, several
commenters request that the Commission further clarify its scope.\239\
INGAA requests that the Commission clarify that a pipeline need not
post all acts of discretion inherent in its day-to-day operations.
INGAA and Kinder Morgan request clarification that the provision does
not cover information that must be posted under other regulatory or
tariff requirements, arguing that would create duplicative posting
requirements.\240\ Many commenters request clarification that the
provision does not apply to acts of discretion regarding tariff
provisions that, by their own terms, allow for discretion in their
application.\241\ INGAA and Dominion Resources assert that subsequent
acts of discretion within the tariff's parameters should be presumed
non-discriminatory, unless and until someone raises a concern.\242\
---------------------------------------------------------------------------
\239\ See, e.g., INGAA at 50; NGSA Reply Comments at 5-7; Kinder
Morgan at 5-6; Spectra at 9-10; Williston at 15-17.
\240\ INGAA at 52-53; Kinder Morgan at 6.
\241\ See, e.g., INGAA at 53-54; NGSA Reply Comments at 5-7;
Spectra at 9-10; Dominion Resources at 19; NiSource at 18.
\242\ INGAA at 53-54; Dominion Resources at 19.
---------------------------------------------------------------------------
209. Other commenters propose to limit the scope of this posting
requirement in varying ways. NGSA proposes that the Commission adopt
the following rule of thumb: That the pipeline need not post each
individual use of a waiver that is generic in application, posted,
available to all shippers and cannot be denied when requested; but that
the pipeline should post non-generic waivers that are not applied on
every request or that are shipper-specific.\243\ Alternatively,
Williston believes that only a discretionary waiver of a tariff
provision that specifically provides for discretionary waiver need be
posted.\244\ Similarly, Dominion Resources contends that only waivers
should be posted, and not ``acts of discretion,'' noting that myriad
acts of discretion are continually being made.\245\ Chandeleur believes
that the retention of documents requirement should refer only to the
log of the acts of waiver and exercises of discretion, contending that
retention requirements and reproduction specifications for Internet Web
site information is addressed in the Commission's regulations at
section 284.12(b)(3)(v).\246\
---------------------------------------------------------------------------
\243\ NGSA Reply Comments at 7.
\244\ Williston at 16.
\245\ Dominion Resources at 17-20.
\246\ Chandeleur at 5.
---------------------------------------------------------------------------
210. Commenters also suggest other modifications to this
requirement. NGSA urges that the Commission clarify that the non-
discrimination posting requirements set forth in proposed section 358.4
apply uniformly to all gas industry transmission providers, regardless
of whether the transmission provider has marketing affiliates or
whether those marketing affiliates transact business on the
pipeline.\247\ In addition, NGSA requests that the Commission establish
a standardized format for the posting of offers of a discount and
discretionary waivers, to ensure that the disclosures are more
accessible and include all relevant information.\248\ And Williston
requests that the Commission reduce the retention period to three
years, instead of five.\249\
---------------------------------------------------------------------------
\247\ NGSA Reply Comments at 3-5. NGSA alternatively requests,
in the event the Commission believes the scope of this request falls
outside of this proceeding, that the Commission initiate an
expedited ``companion proceeding'' that seeks to apply the posting
requirements generally to all pipelines and not only to a particular
subset of pipelines.
\248\ NGSA Reply Comments at 16-17.
\249\ Williston at 15-17.
---------------------------------------------------------------------------
211. Commenters also request modifications to the proposed
requirement regarding posting of discounts, set forth in section
358.4(b). Chandeleur believes that proposed section 358.4(b) contains
unnecessary overlap with the existing regulatory text in section
250.16(d) of the Commission's regulations, and requests that the
Commission adopt the approach of having only one subparagraph within
the regulation setting out the elements required to meet the reporting
burden for Form 592.\250\
---------------------------------------------------------------------------
\250\ Chandeleur at 6.
---------------------------------------------------------------------------
212. ATC believes that the discount requirement should not apply to
transmission providers that participate in an RTO or ISO, if the
discount is granted by the RTO or ISO without the consent or approval
of the transmission provider.\251\
---------------------------------------------------------------------------
\251\ ATC at 14.
---------------------------------------------------------------------------
c. Commission Determination
213. Proposed section 358.4, which generally deals with non-
discrimination requirements, also contains the posting requirements for
notices of waivers, notices of exercises of discretion, and discounts.
Inasmuch as these posting aspects of the proposed section relate to the
Transparency Rule, we move them to section 358.7, which includes the
other posting requirements under the Standards. Further, in response to
NGSA's request, we clarify that section 358.4 as a whole, as well as
the posting requirements moved to section 358.7, apply to all
transmission providers, in accordance with the limitations set forth in
section 358.1.
214. Commenters had no objections to the general requirements of
section 358.4, other than regarding waivers, exercises of discretion
and discounts. The Commission is persuaded by the arguments of many
commenters that a blanket requirement to post all waivers and exercises
of discretion goes beyond what is needed to alert customers and others
to possible acts of undue discrimination or preferences in favor of an
affiliate. Furthermore, such posting is
[[Page 63819]]
in some cases redundant to the posting requirements set forth elsewhere
in our regulations. Therefore, although the Commission confirms the
substantive non-discrimination requirements of section 358.4, we modify
the posting requirements in a number of ways.
215. As a preliminary matter, the Commission clarifies that for
these purposes, a waiver is considered to be a determination to do or
not do something that is specifically required to be done or not done
by the transmission provider's tariff. An act of discretion, on the
other hand, is an action that is within the scope of the tariff
provision in question, and which typically involves an exercise of
judgment on the part of the transmission provider. The Commission has
in some cases approved tariffs for interstate pipelines that grant the
pipeline the right to waive compliance with provisions of its tariff,
typically for a given entity for a limited term.\252\ We will continue
to require transmission providers to record in a log such waivers, if
granted in favor of an affiliate, and to post the log on the
transmission provider's Internet Web site (however, if a specific
waiver is approved by Commission order, such waiver need not be posted
as it will already be public). We also add a definition of waiver to
the regulatory text, to read: ``Waiver means the determination by a
transmission provider, if authorized by its tariff, to waive any
provisions of its tariff for a given entity.'' See section 358.3(m).
Limiting the recording of waivers to those in favor of an affiliate
will reduce the administrative burden on the pipeline, while capturing
any instances of potential undue discrimination.
---------------------------------------------------------------------------
\252\ See, e.g., CenterPoint Energy Gas Transmission Company
FERC Gas Tariff, Sixth Revised Volume No. 1, Sec. 15.1.
---------------------------------------------------------------------------
216. The Commission further determines that transmission providers
need not post exercises of discretion that are within the scope of a
tariff provision, unless in any given instance such posting is required
under any other of our regulations. Such acts are already permitted by
the tariff, and therefore fall within the scope of matters which the
Commission has approved. Furthermore, a transmission provider, in
particular a pipeline, makes many of these judgment calls every day on
an ongoing basis; recording all these matters would place a substantial
administrative burden on it.
217. The Commission declines to modify the proposed five-year
retention requirement for recordation of the acts of waiver, as the
five-year period will better enable Commission staff to monitor
compliance.\253\ Records may be examined only periodically, as when an
audit is performed, and therefore earlier deletion could impede the
necessary review. However, we observe that the volume of material to be
retained should be substantially reduced, in light of the Final Rule's
more circumscribed reporting requirements.
---------------------------------------------------------------------------
\253\ See also our discussion above concerning the five-year
retention period for certain information exchanges under section
358.7(h).
---------------------------------------------------------------------------
218. The Commission further clarifies that where the information
called for under the posting requirements of the Standards is
duplicative of information required to be posted by transmission
providers under other provisions of our regulations or orders, such as
the posting requirements of 18 CFR part 284 and 18 CFR part 37, only a
single posting is required, and the transmission provider is to follow
the posting requirements, inclusive of substance, venue, and timing, of
the other regulations or orders. We believe the posting requirements
contained in such regulations or orders are sufficient to fulfill the
transparency goals of the Standards of Conduct. Inasmuch as discount
information is required to be posted both for the gas and electric
industries under other provisions of our regulations, we delete
proposed section 358.4(b), which had set forth proposed requirements
for the posting of discount information. Also, if a transmission owner
is a member of an RTO or ISO and has not participated in the granting
of a discount by the RTO or ISO, it would not be subject to the
obligation to post such discounts.
2. Other Posting Requirements
a. Commission Proposal
219. In addition to the posting requirements relating to the non-
discrimination provisions of section 358.4, the NOPR proposed
streamlining and updating other posting requirements imposed on
transmission providers by the Standards, and modifying them to take
into account elimination of the concept of energy affiliates.
b. Comments
i. Contemporaneous Disclosure
220. INGAA requests the Commission to modify section 358.7(a),
which requires the contemporaneous posting of improper disclosures of
non-public transmission function information, to also provide for
posting of a notice of a marketing function employee's receipt of non-
public transmission function information (unless the Commission deletes
proposed section 358.6(a)(2) of the No Conduit Rule prohibiting such
receipt).\254\ NGSA disagrees with INGAA that posting be made of a
notice only, and not the disclosure itself, when the information
received by a marketing function employee comes from a third party and
not from the affiliated transmission provider.\255\ It further requests
that the Commission require that the marketing function employee
immediately alert its affiliated transmission provider when it becomes
aware it has received non-public transmission information, so that the
transmission provider may post the disclosure.\256\
---------------------------------------------------------------------------
\254\ INGAA at 45; INGAA Response at 3.
\255\ NGSA Reply Comments at 8.
\256\ Id.
---------------------------------------------------------------------------
221. EEI supports the proposed provision requiring a transmission
provider that discloses non-public transmission customer information to
only post notice that such non-public transmission customer information
was disclosed, and not the contents of the information. EEI proposes
that a similar distinction be applied to Critical Energy Infrastructure
Information (CEII) that has been inadvertently disclosed.\257\
Likewise, National Grid proposes posting only a notice when disclosure
of the information itself may breach some other public policy
goal.\258\
---------------------------------------------------------------------------
\257\ EEI at 54.
\258\ National Grid at 26-27.
---------------------------------------------------------------------------
222. ATC requests that the regulatory language be revised to
indicate the transmission provider must post immediately ``upon
discovery of disclosure,'' rather than upon the actual disclosure.\259\
---------------------------------------------------------------------------
\259\ ATC at 2, 12.
---------------------------------------------------------------------------
ii. Specific Transaction Information
223. Many commenters request that the Commission clarify the
exclusion to contemporaneous disclosure of non-public transmission
function information that proposed section 358.7(b) provides for a
marketing function employee's specific request for transmission
service.\260\ MidAmerican proposes that the definition of
``transmission customer'' be modified to add that they could be either
affiliated or unaffiliated.\261\ Although Ameren supports proposed
section 358.7(b), it seeks clarification that the transaction-specific
exclusion includes information that relates to its ability to take
service on an ongoing basis, including outages or other system
conditions.\262\ Dominion Resources requests that the Commission modify
the exclusion so that
[[Page 63820]]
transmission function employees may discuss with marketing function
employees any information that relates solely to service provided by
the transmission provider to the employer of the marketing function
employee, or requests for such service.\263\
---------------------------------------------------------------------------
\260\ NOPR at P 58.
\261\ MidAmerican at 18-19.
\262\ Ameren at 33.
\263\ Dominion Resources at 21.
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iii. Voluntary Consent Provision
224. SCE requests that section 358.7(c), providing for a
transmission customer's voluntary consent to disclosure of its customer
information, be moved to section 358.5(c), which deals with the
separation of functions under the Independent Functioning Rule, to
suggest a limitation for non-affiliated customers.\264\
---------------------------------------------------------------------------
\264\ SCE at 7.
---------------------------------------------------------------------------
225. MidAmerican asks the Commission to clarify that the proposed
voluntary consent provision is unnecessary for generation output where
the host utility has a legal obligation to purchase the output of the
generator. It also requests the Commission to modify the provision to
clarify that the rule refers specifically to the transmission
``function'' and disclosure of ``non-public transmission''
information.\265\
---------------------------------------------------------------------------
\265\ MidAmerican at 19.
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iv. Identification of Affiliate Information
226. APGA and EPSA urge the Commission to retain the requirement to
post organizational charts under section 358.7(e),\266\ which deals
with identification of affiliate information, and APGA requests the
charts be color-coded as well.\267\ APGA submits that the elimination
of the energy affiliates concept does not eliminate the need for such a
color-coded organizational chart.\268\
---------------------------------------------------------------------------
\266\ APGA at 3-4; EPSA at 11.
\267\ APGA at 3-4.
\268\ APGA at 3-4.
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227. With respect to the requirement that a pipeline post the names
and addresses of all its affiliates that employ or retain marketing
function employees,\269\ INGAA requests that the Commission confirm
that the posting requirements are limited to information related only
to those marketing affiliates that hold or control capacity on their
affiliated pipeline, and that this posting requirement does not apply
to a marketing function that does not hold capacity on its affiliated
pipeline. INGAA requests that if the Commission so confirms, it should
amend the provision to make the distinction clear.\270\
---------------------------------------------------------------------------
\269\ NOPR at P 59.
\270\ INGAA at 54-55.
---------------------------------------------------------------------------
228. MidAmerican requests that proposed section 358.7(e)(2), which
requires a listing of employee-staffed facilities shared by the
transmission provider and marketing function employees, be limited only
to those buildings where the transmission provider and its marketing
function employees conduct customary duties, so as to exclude
facilities where marketing function employees visit only on
occasion.\271\ Similarly, ATC requests that the Commission clarify the
definition of ``employee-staffed facilities'' to limit its
applicability to places at which both transmission function and
marketing function employees have offices or are regularly
located.\272\
---------------------------------------------------------------------------
\271\ MidAmerican at 19-20.
\272\ ATC at 15.
---------------------------------------------------------------------------
v. Identification of Employee Information
229. MidAmerican requests that the provision in proposed section
358.7(f) that requires a transmission provider to post on its OASIS or
Internet Web site the job titles and job descriptions of its
transmission function employees, with the exception of clerical,
maintenance, and field positions,\273\ be clarified to indicate which
positions are excluded as ``clerical, maintenance and field
positions.'' \274\
---------------------------------------------------------------------------
\273\ NOPR at P 59-60.
\274\ MidAmerican at 11-12.
---------------------------------------------------------------------------
230. EEI believes that this posting requirement should conform to
the employee functional approach. EEI asserts that the proposed
requirement, if left in place, would grandfather much of the
inefficiency and confusion of the corporate separation approach.\275\
---------------------------------------------------------------------------
\275\ EEI at 55-56.
---------------------------------------------------------------------------
vi. Timing and General Requirements of Postings
231. SCE recommends that the Commission eliminate the distinction
in proposed section 358.7(g) between Internet Web sites and OASIS, and
allow electric utilities as well as pipelines to post information on
their Internet Web sites.\276\ SCE states that, as a member of an ISO,
it does not maintain its own OASIS.\277\ ALCOA requests that the
Commission recognize that marketing function employees are not granted
access to OASIS, and provide an avenue for them to cure the prohibited
disclosure of non-public information.\278\
---------------------------------------------------------------------------
\276\ The definition of Internet Web site in proposed section
358.3(b) indicated that pipelines post the information required
under sections 284.12 and 284.13 on their Internet Web site, and the
definition of OASIS in proposed section 358.3(e) indicated that
public utilities post the information required under part 37 on
their OASIS. Various subsections of proposed section 358.7 continued
this distinction between pipelines and public utilities for the
posting requirements under the Standards. See, e.g., proposed
sections 368.7(a)(1), (a)(2), (c), (d), (e)(1), (e)(2), (f)(1),
(f)(2) and (g)(1).
\277\ SCE at 10.
\278\ ALCOA at 7-8.
---------------------------------------------------------------------------
232. With respect to the suspension of posting requirements during
an emergency, SCE recommends that ``earthquake'' be added to the list
of emergencies that qualify as allowing a transmission provider to
suspend posting requirements.\279\
---------------------------------------------------------------------------
\279\ SCE at 11.
---------------------------------------------------------------------------
233. While supporting the Commission's decision to suspend posting
requirements in the event of an emergency, Chandeleur requests
clarification on the method of implementation for this
requirement.\280\ And E.ON states that the Commission should retain the
existing exclusion from posting for emergency circumstances.\281\
---------------------------------------------------------------------------
\280\ Chandeleur at 7.
\281\ E.ON at 22-23.
---------------------------------------------------------------------------
vii. Other
234. Commenters raised concerns about potential conflicts between
the proposed posting requirements in the NOPR and the posting
requirements in the NAESB standards. The Arizona PSC urges the
Commission to clarify, pending revision of the NAESB standards, that
the existing NAESB standards do not impose a posting requirement that
is different from the modified posting requirements under the new
rules.\282\ In addition, Chandeleur suggests that the Commission
provide a waiver of those NAESB standards that relate to the format and
content of postings which it contends will be outdated after the
effective date of the new Standards.\283\
---------------------------------------------------------------------------
\282\ Arizona PSC at 7; see also EEI at 53.
\283\ Chandeleur at 8.
---------------------------------------------------------------------------
c. Commission Determination
i. Contemporaneous Disclosure
235. Section 358.7(a)(1) requires that if non-public transmission
function information is disclosed to a marketing function employee, the
transmission provider must post the information on its Web site. Some
commenters object to the posting requirement where non-public
information is disclosed by the transmission provider, arguing that
such posting will provide an advantage to a competitor. We disagree.
Such posting, by making the information public, will place the
competitor and the transmission provider's affiliated marketer on an
even footing. Therefore, this provision will be retained.
[[Page 63821]]
236. Western Utilities and INGAA raise concerns over the posting
provision in instances where a marketing affiliate receives non-public
transmission function information from a third party. Since we are
eliminating that particular prohibition of the No Conduit Rule, no
change to the posting provision is necessary. However, we note that if
a transmission provider uses anyone as a conduit for improper
disclosures, such an event would be considered an improper disclosure
and should be posted.
237. The Commission proposed in section 358.7(a)(2) that only a
notice be posted in the event non-public transmission customer
information is improperly disclosed, rather than requiring posting of
the disclosure itself, to prevent a further breach of confidentiality.
We extend this distinction between posting of a notice and posting the
disclosure itself to include CEII,\284\ as well as any other
information that the Commission by law has determined is to be subject
to limited dissemination. However, we decline to extend it to cover
information where disclosure may be deemed to breach some other public
policy goal, as requested by National Grid. This standard is too
imprecise to have practical application. If a transmission provider is
concerned about disclosure in any given instance, it may seek guidance
from the Commission.
---------------------------------------------------------------------------
\284\ This limitation does not affect our determinations made
elsewhere regarding the need to disclose information that may
contain CEII, or the appropriate methods for entities to access such
CEII, nor our adoption of mandatory reliability standards for CEII.
See, e.g., Order 890 at P 403-404; Mandatory Reliability Standards
for Critical Infrastructure Protection, Order No. 706, 73 Fed. Reg.
7368 (Feb. 7, 2008), 122 FERC ] 61,040, reh'g denied and
clarification granted, Order No. 706-A, 123 FERC ] 61,174 (2008).
---------------------------------------------------------------------------
238. We decline to adopt ATC's proposal that with respect to non-
public transmission information that was improperly disclosed, the
transmission provider must post it immediately ``upon discovery of
disclosure,'' rather than upon the actual disclosure. The provision by
its terms imposes the posting requirement on a transmission provider
that wrongfully discloses such information, and it would be anomalous
to assume the transmission provider was not aware of its own actions. A
corporation can only act through its agents and employees, and those
actions are taken on behalf of the corporation. Therefore, knowledge of
the disclosure is imputed to the transmission provider, which is
responsible both for the disclosure and for the posting.
ii. Specific Transaction Information
239. Section 358.7(b) provides an exemption to the disclosure
requirement for requests for transmission service made by a marketing
function employee. The Commission agrees that the language should be
modified to clarify that transmission function employees may discuss
with marketing function employees the latter's specific request for
transmission service (but not non-public matters beyond the specific
request, such as outages or other system conditions). We therefore add
the following sentence: ``A transmission provider's transmission
function employee may discuss with its marketing function employee a
specific request for transmission service submitted by the marketing
function employee.''
iii. Voluntary Consent Provision
240. The Commission declines to move the provision regarding the
posting of voluntary employee consents in section 358.7(c) to the
Independent Functioning Rule, as requested by SCE. The provision in
question relates to posting, and is therefore appropriately included in
the Transparency Rule. We also decline to include a specific exclusion
to the customer consent provision for contracts involving generator
output, as requested by MidAmerican. The posting requirements are
general in application, and ought not to be so detailed as to cover
every special circumstance that may apply to only one or a limited
number of transmission providers. To do so would make the regulations
unwieldy and subject to constant change. Therefore, we decline to
include an exclusion covering a customer's consent for contracts
involving generator output.
241. Furthermore, we decline to distinguish between affiliated and
non-affiliated customers in connection with the voluntary consent
provision. The intent of the provision is to permit any customer to
disclose customer information to marketing function employees of the
transmission provider, should it desire to do so. Of course, an
affiliated customer will already be aware of information pertaining to
its own marketing affiliate, but there conceivably could be other
marketing affiliates of the same transmission provider as to which the
customer may wish to give its consent for disclosure.
242. The Commission agrees that the voluntary consent provision
refers to non-public customer information (including a customer's
transmission request and accompanying information), and adds this
phrase to section 358.7(c).
iv. Identification of Affiliate Information
243. Section 358.7(e)(1) provides that a transmission provider post
the names and addresses of all its affiliates that employ or retain
marketing function employees. The Commission declines to revert to a
requirement to post an organizational chart of all affiliates of a
transmission provider, and further declines to extend this to a color-
coded chart. With the elimination from the Standards of the concept of
energy affiliates, it is only necessary to be concerned with the
marketing affiliates of a transmission provider. Therefore, an entire
organizational chart is unnecessary, and an undue burden on
transmission providers.
244. With respect to INGAA's request that information need not be
posted about affiliates that do not, for instance, hold or control
capacity on its affiliated pipeline, the Commission notes that the
proposed provision applies to affiliates ``that employ or retain
marketing function employees.'' If an activity falls within one of the
exclusions to the definition of marketing functions set forth in
proposed section 358.3(c), its employees will not by definition be
marketing function employees, and the posting rule would not apply. If,
however, the activities do not fall within any of the exclusions to the
definition, and the affiliate employs or retains marketing function
employees, the posting provision would apply.
245. We agree with MidAmerican and ATC that the posting
requirements in section 358.7(e)(2) regarding shared facilities need
not include facilities where transmission function employees and
marketing function employees do not both transact their job-related
activities, and modify the regulatory text accordingly. We further
clarify that the phrase ``employee-staffed facilities'' is meant to
exclude facilities where individuals do not typically transact
business, such as substations.
v. Identification of Employee Information
246. The Commission agrees with EEI that the proposed provision in
section 358.7(f)(1) covering the posting of job titles and names of
transmission function employees should conform more closely to the
employee functional approach. Furthermore, in accordance with the
clarification made in this Final Rule, such jobs as maintenance and
field positions are not considered transmission functions, unless the
employees also engage in the day-to-day operation of the transmission
system.
[[Page 63822]]
Therefore, we will modify the wording of this provision to refer only
to ``transmission function employees,'' and delete the reference to
clerical, maintenance and field positions.
vi. Timing and General Requirements of Postings
247. Section 358.7(g)(1) requires updated posting on a transmission
provider's OASIS or Internet Web site. The Commission agrees with SCE
that transmission owners who are members of RTOs or ISOs might not have
their own OASIS. Furthermore, some interested entities or individuals
might not have access to a transmission provider's OASIS. We therefore
modify the venue for posting to require that the posting of information
required under the Standards for both public utilities and interstate
pipelines is to be made on the transmission provider's Web site, where
it will be accessible to all interested entities. The various sections
within the Transparency Rule are amended to conform to this change.
248. Section 358.7(g)(2) provides suspension of postings in the
case of emergencies. The Commission does not deem it necessary to list
every conceivable natural disaster in this provision, but will add
``earthquakes'' to the list, as requested by SCE. Chandeleur requests
clarification as to the method of implementation of this provision. In
the event the transmission provider needs suspension of postings beyond
one month, it should publicly file with the Commission for a further
period of suspension, in accordance with the provisions of part 385 of
the Commission's regulations.
vii. Other
249. Chandeleur suggests the Commission provide an anticipatory
waiver of any changes to NAESB standards which may be made relating to
the format and content of posting requirements, should they be
inconsistent with the Standards here adopted. The NAESB standards
currently adopted by the Commission are set forth in 18 CFR sections
38.2 and 284.12 (2008), and relate to matters other than the Standards
of Conduct. The provisions applicable to electric utilities in section
38.2 include the Business Practices for Open Access Same-Time
Information Systems (OASIS), which relate to requests for transmission
service. The provisions applicable to pipelines in section 284.12
include information which is to be posted on the pipeline's Internet
Web site, covering such matters as the name of shippers taking service,
the rate charged, the duration of the contract, receipt and delivery
points, quantity, whether the shipper is an affiliate of the pipeline,
and the like. These postings generally differ from the postings
required under the Standards of Conduct. As discussed above, to the
extent any of the information required under the Standards of Conduct
is also required under other regulations or orders, duplicative
postings are not required. Therefore, no anticipatory waiver of the
type requested by Chandeleur is needed or appropriate.
F. Other Definitions
250. In addition to the definitions discussed above, the NOPR
either carried over or modified a number of definitions contained in
the current Standards, including ``affiliate,'' ``transmission,''
``transmission customer,'' ``transmission function information,'' and
``transmission provider.''
1. Affiliate
a. Commission Proposal
251. The Commission proposed to modify its definition of
``affiliate'' to conform to the new definition of affiliate set forth
in 18 CFR 35.43(a)(1).\285\ The only addition in the NOPR to that
definition was the inclusion of ``a division that operates as a
functional unit of the specified company.'' See proposed section
358.3(a).
---------------------------------------------------------------------------
\285\ This definition was promulgated in Cross-Subsidization
Restrictions on Affiliate Transactions, Order No. 707, 73 FR 11,013
(Feb. 29, 2008), FERC Stats. & Regs. ] 31,264 (2008), order on
reh'g, 73 FR 43,072 (July 24, 2008), FERC Stats. & Regs. ] 31,272
(2008).
---------------------------------------------------------------------------
b. Comments
252. INGAA contends that the NOPR changed the definition of
affiliate to be consistent with an order that addresses only electric
transmission providers, and therefore is not a definition fairly
applicable to the natural gas industry.\286\ INGAA and Iroquois request
that the rules return to the longstanding definition of affiliate in
the Standards and also retain the prior, integrally related definition
of ``control.'' \287\ Iroquois adds that the proposed definition does
not reflect the established scheme's rebuttable presumption of control,
thereby expanding the reach of the Standards. To the extent the
Commission declines to revert to the prior definitions of affiliate and
control, Iroquois requests that the Commission modify the proposed
definition to reinstate the concept that the definition of control
establishes a rebuttable presumption, and also continue any exemptions
from the definition of affiliate that were granted under the prior
Standards.\288\
---------------------------------------------------------------------------
\286\ INGAA at 12-13; see also Williston at 12.
\287\ INGAA at 12-13; Iroquois at 14.
\288\ Iroquois at 7-13.
---------------------------------------------------------------------------
253. Both INGAA and Iroquois request that the Commission provide
clarification as to how the definition would apply to interstate
pipelines jointly owned by two or more otherwise non-affiliated
companies.\289\ INGAA would like confirmation that, in the event an
affiliate of one joint owner of a pipeline holds capacity on that
pipeline, such relationship does not create an affiliation between the
affiliates of the entities who are the joint owners.\290\
---------------------------------------------------------------------------
\289\ Id. 13-14; INGAA at 13.
\290\ INGAA at 13. For example, INGAA posits, if non-affiliated
Companies A and B form a joint venture that holds Pipeline C, INGAA
contends that transmission relationships between a marketing
affiliate of Company A and Pipeline C do not create an affiliation
between that marketing affiliate and other affiliates of Company B,
because there is no common ownership and control between the
marketing entity and Company B's affiliates. Id.
---------------------------------------------------------------------------
254. TDU Systems asserts that the definition of affiliate should
not include members of generation and transmission cooperatives.\291\
---------------------------------------------------------------------------
\291\ TDU Systems at 13-14.
---------------------------------------------------------------------------
255. Arizona PSC proposes a modification to the proposed definition
to cure what it finds to be an inconsistency between the NOPR's
definition and the definition of ``affiliate'' in Order No. 707. It
would eliminate the words ``division that operates as a functional
unit'' from proposed section 358.3(a)(1). Both Arizona PSC and EEI
contend that this deletion is consistent with the NOPR's employee
functional approach.\292\
---------------------------------------------------------------------------
\292\ Arizona PSC at 6-7; EEI at 47.
---------------------------------------------------------------------------
c. Commission Determination
256. Much of the concern over the definition of affiliate appears
to stem from a misapprehension that affiliates themselves are still
subject to the Independent Functioning Rule. As discussed throughout
this Final Rule, it is only marketing function employees who are
required to operate independently of a transmission provider's
transmission function employees. Nonetheless, the concept of affiliate
does retain importance, since marketing function employees by
definition must be employed by the transmission provider or by its
affiliates (unless the marketing function employees are
contractors).\293\
---------------------------------------------------------------------------
\293\ Inclusion of contractors in the definition of marketing
function employee is discussed in the section entitled Elimination
of Shared Employees Concept.
---------------------------------------------------------------------------
257. Because the Standards follow a different regulatory scheme
than Order
[[Page 63823]]
No. 707, the definition of affiliate here does not necessarily need to
be identical to the more detailed definition set forth in Order No.
707. As regulated entities have become familiar with the existing
definition, the Commission sees no necessity to alter it. Therefore,
the Commission will reinstate the major features of the definition of
``affiliate'' found in the existing Standards, including the ability to
rebut a presumption of control. See section 358.3(a)(1). The requests
for the Commission to comment on the specifics of hypothetical
corporate arrangements are accordingly answered by reference to that
provision.
258. The existing definition of exempt wholesale generators refers
both to regulations and the FPA as the source of the definition, and
does not provide for updating. We modify the definition so as to refer
to the currently applicable section of the regulations defining exempt
wholesale generators, section 366.1, and provide that such definition
or any successor definition shall govern. See section 358.3(a)(2).
259. Arizona PSC and EEI would eliminate the inclusion of a
division (as opposed to a separate corporate entity) from the
definition of affiliate. This inclusion, which is contained in the
existing Standards, covers those marketing function employees who may
be employed by the transmission provider itself, rather than by an
affiliate of the transmission provider. Therefore, the provision will
be retained.
2. Transmission
a. Commission Proposal
260. The Commission proposed to streamline the current definition
of transmission by defining it as ``electric transmission, network or
point-to-point service, ancillary services or other methods of electric
transmission, or the interconnection with jurisdictional transmission
facilities, under part 35 of this chapter; and natural gas
transportation, storage, exchange, backhaul, or displacement service
provided pursuant to subpart A of part 157 or subparts B or G or part
284 of this chapter.'' See proposed section 358.3(f).
b. Comments
261. Many commenters raise concerns related to the Commission's
inclusion of ancillary services in the definition of transmission. TAPS
suggests that the Commission distinguish between a transmission
provider's offering ancillary services to its customers pursuant to its
Open Access Transmission Tariff, which it states is a transmission
function, and offering ancillary services competitively, which it views
as a marketing function.\294\ NCPA requests that in those markets where
ancillary services are procured pursuant to a bidding process, the
rules treat ancillary services as part of the marketing function and
not as part of the transmission function.\295\ EEI requests
clarification that the definition covers only those ``ancillary
services'' and ``interconnection'' that are offered in connection with
jurisdictional transmission service.\296\ Wisconsin Electric requests
that the Commission deem the provision of ancillary services as a
function outside of the operation of the Standards.\297\
---------------------------------------------------------------------------
\294\ TAPS at 31-33.
\295\ NCPA at 3-4.
\296\ EEI at 44-46.
\297\ Wisconsin Electric at 3-4.
---------------------------------------------------------------------------
262. NiSource requests clarification as to whether generation is
considered a subtype of transmission. It asserts that generation
information is not a subtype of transmission or marketing function
information and therefore should not be subject to the rules or
included in its exclusions.\298\
---------------------------------------------------------------------------
\298\ Nisource at 14-16.
---------------------------------------------------------------------------
c. Commission Determination
263. The Commission agrees that inclusion of ancillary services in
the definition of transmission, which is carried forward from the
existing Standards, needs clarification. Ancillary services can either
be transmission or covered under the definition of marketing functions,
as discussed above. Therefore, we clarify that ancillary services, as
used in the definition of transmission, refers to the use of an
integrated public utility's own generation or demand response resources
to provide ancillary services, and does not refer to the sale for
resale of generation or demand response resources for ancillary
services purposes.
264. NiSource raises a concern as to whether the proposed exclusion
for communications regarding generation dispatch in proposed section
358.7(h) suggests we regard generation as a form of transmission.
NiSource's concern is addressed by the modifications made in this Final
Rule to that exclusion; however, we further clarify that generation is
typically not a transmission function. Of course, operation of the
transmission system may impact generation, and therefore some
transmission function information may well implicate generation
concerns. It was for that reason the above-cited exclusion was added to
the Standards. See section 358.7(h).
265. The Commission removes the reference to subpart A of part 157,
in accordance with its elimination of this reference from section
358.1(a), but otherwise adopts the NOPR definition of transmission. See
section 358.3(f).
3. Transmission Customer
a. Commission Proposal
266. The Commission proposed to carry forward the existing
definition of ``transmission customer'' to mean ``any eligible
customer, shipper or designated agent that can or does execute a
transmission service agreement or can or does receive transmission
service, including all persons who have pending requests for
transmission service or for information regarding transmission.'' See
proposed section 358.3(g).
b. Comments
267. MidAmerican requests that the Commission modify this
definition so that it expressly includes affiliated and non-affiliated
customers, shippers or designated agents.\299\
---------------------------------------------------------------------------
\299\ MidAmerican at 10-11.
---------------------------------------------------------------------------
c. Commission Determination
268. The Commission adopts proposed section 358.3(g). MidAmerican's
requested addition is unnecessary, as on its face the definition of
transmission customer does not distinguish between affiliated and non-
affiliated customers. To the extent clarification on this point is
desired, we clarify that all customers that fit the definition are
included.
4. Transmission Function Information
a. Commission Proposal
269. The Commission proposed to define ``transmission function
information'' to mean ``information relating to transmission
functions,'' thus keying off the new definition of ``transmission
function'' set forth in the proposed Standards. See proposed section
358.3(j).
b. Comments
270. Several commenters request that the Commission include in its
definition specific examples or categories of information that it deems
to be transmission information.\300\ EEI and Southern Co. Services
suggest that the Commission use the guidance found in section
358.5(b)(1) of the current Standards as a basis for amending the
definition,\301\ and SCE provides a
[[Page 63824]]
proposed amendment that includes its recommended examples.\302\
---------------------------------------------------------------------------
\300\ ATC at 11-12; EEI at 46; Southern Co. Services at 26-27;
SCE at 10-11.
\301\ EEI at 46; Southern Co. Services at 26-27.
\302\ SCE at 10-11.
---------------------------------------------------------------------------
271. National Grid and PSEG inquire whether the scope of the
definition is the same as, more broad or more narrow than the scope of
the definition of ``transmission'' information in the current
Standards.\303\
---------------------------------------------------------------------------
\303\ National Grid at 20-22; PSEG at 16-17.
---------------------------------------------------------------------------
272. Southern Co. Services asserts that proposed sections
358.6(a)(1) and 358.7(a) create ambiguity as to whether all ``customer
information'' is ``transmission information,'' and requests
clarification of the definition of ``transmission information.'' \304\
Bonneville requests clarification as to whether the definition is
limited to non-public transmission information.\305\ And TDU Systems
requests clarification that accounting records necessary for rate
design do not constitute transmission function information.\306\
---------------------------------------------------------------------------
\304\ Southern Co. Services at 27.
\305\ Bonneville at 5-6.
\306\ TDU Systems at 16.
---------------------------------------------------------------------------
273. Spectra requests the Commission to amend the definition to
indicate it does not include information relating to a marketing
function employee's specific request for transmission service or
interconnection.\307\
---------------------------------------------------------------------------
\307\ Spectra at 11-12.
---------------------------------------------------------------------------
c. Commission Determination
274. The Commission adopts the NOPR definition of transmission
function information as information relating to ``transmission
functions,'' which is the core definition where the crux of the
requirements of the Independent Functioning Rule and the No Conduit
Rule is found, and where any issues regarding interpretation should be
focused. Indeed, as there is no debate on the meaning of
``information,'' the Commission could have eliminated section 358.3(j)
entirely. The Commission is retaining this section, however, to
reinforce the prohibition on the improper disclosure of non-public
transmission function information.
275. Nevertheless, to provide clarity, the Commission will give
examples of transmission function information, drawn from the current
Standards. These include, for example, available transmission
capability, price, curtailments, storage, and balancing. In response to
the request for clarification by National Grid and PSEG, we observe
that not all elements found in the existing Standards are relevant, due
to the restriction in this Final Rule of the term ``transmission
functions'' to day-to-day operations.
276. We clarify that transmission customer information is a subset
of transmission function information, as it is submitted in connection
with a request for transmission service. We also clarify that rate
design, in and of itself, is not a transmission function under the
Standards.
277. The term transmission function information is not limited to
non-public information; however, it is only non-public transmission
function information which the No Conduit Rule prohibits being passed
to marketing function employees.
278. Spectra requests the definition be amended to exclude
information relating to a marketing function employee's specific
request for service. We decline to do so. Such information is indeed
transmission function information, as discussed above. Spectra's
concerns, however, are addressed by section 358.7(b), which permits
discussions regarding such requests between transmission function and
marketing function employees.
5. Transmission Provider
a. Commission Proposal
279. The Commission proposed to define ``transmission provider''
as:
(1) Any public utility that owns, operates or controls facilities
used for the transmission of electric energy in interstate commerce; or
(2) Any interstate natural gas pipeline that transports gas for
others pursuant to subpart A of part 157 or subparts B or G of part 284
of this chapter.
(3) A transmission provider does not include a natural gas storage
provider authorized to charge market-based rates that is not
interconnected with the jurisdictional facilities of any affiliated
interstate natural gas pipeline, has no exclusive franchise area, no
captive ratepayers and no market power.
See proposed section 358.3(k).
b. Comments
280. Hampshire requests that subsection (3) of the definition be
modified to apply to ``storage companies that already have been
authorized by FERC to charge market-based rates based on a showing that
they lacked market power,'' arguing the definition should not include
the additional criteria listed. The criterion that the storage facility
not have captive customers and not have market power is duplicative,
according to Hampshire, because if the facility has captive customers
then it has market power by definition. Hampshire further contends that
the limitation against exclusive franchises is extraneous because the
Natural Gas Act does not permit exclusive franchises.\308\
---------------------------------------------------------------------------
\308\ Hampshire Gas at 9-12.
---------------------------------------------------------------------------
281. The US DOI argues that the proposed language does not
recognize that certain federal agencies may own transmission facilities
without having functional responsibility for them. It requests that the
Commission clarify that it is the operator of the transmission
facility, and not the federal agency that owns the transmission
facility, that is the transmission provider subject to the
Standards.\309\
---------------------------------------------------------------------------
\309\ US DOI at 1-2.
---------------------------------------------------------------------------
c. Commission Determination
282. As a preliminary matter, the Commission will delete the
reference to Part 157 from the definitions of transmission and
transmission provider. See sections 358.3(f) and (k). This corresponds
to our deletion of the same reference in section 358.1, the
applicability provisions of the Standards, as discussed above.
283. We will also accept Hampshire's proposed modification with
respect to exclusive franchises and the Commission's jurisdiction over
storage facilities under the NGA. While the Commission does not
necessarily agree with Hampshire's description regarding market-based
rates,\310\ the Commission does agree that the exclusion of natural gas
storage providers authorized to charge market-based rates, which is an
exclusion carried over from Order Nos. 497 and 2004 and not opposed in
the comments, needs no further qualification. We modify proposed
section 358.3(k)(3) accordingly.
---------------------------------------------------------------------------
\310\ See Rate Regulation of Certain Natural Gas Storage
Facilities, Order No. 678, 71 Fed. Reg. 36612 (June 27, 2006), FERC
Stats. & Regs. ] 31,220 (2006).
---------------------------------------------------------------------------
284. Lastly, we clarify that if a transmission provider is merely
an owner of facilities but performs none of the functions of a
transmission provider, it is in the same position as a public utility
transmission owner that participates in a Commission-approved RTO or
ISO. Section 358.1(c) provides that such a participating transmission
owner may seek a waiver from the Standards. Similarly, if any other
transmission owner meets the definition of transmission provider but
does not operate or control its transmission system and has no access
to transmission function information, it may request a waiver from the
Standards, in whole or in part.
G. Per Se Violation
285. In the course of the NOPR's discussion on the need for reform
of the Standards, the Commission observed
[[Page 63825]]
that while the Standards establish per se rules, the Commission still
possesses statutory authority to rectify and sanction, where necessary,
instances of undue discrimination and preference even if they are not
specifically addressed in the per se regulations of the Standards. This
authority is derived from sections 205 and 206 of the FPA and sections
4 and 5 of the NGA.
1. Commission Proposal
286. No proposal was made in the NOPR regarding per se rules; the
Commission merely pointed out the fact that the proposed Standards,
just as do the current Standards, contain per se rules.
2. Comments
287. Several commenters request that the Commission clarify how the
proposed per se rules will be enforced. Idaho Power and Puget Sound
requests confirmation that transmission providers will continue to have
the opportunity to defend themselves against allegations of violations
of the Standards, and that it is not the case that the Commission
intends there will be violations of the per se rules ``for which no
further investigation would be needed.'' \311\
---------------------------------------------------------------------------
\311\ Idaho Power at 4-5, quoting NOPR at P 55; Puget Sound at
9-10.
---------------------------------------------------------------------------
288. INGAA and LPPC likewise note confusion about the NOPR's use of
``per se'' because, they contend, in other contexts the term refers to
the establishment of a set of facts that automatically creates a
violation of law without reference to other or additional facts. INGAA
urges that the Commission reject a per se approach and adopt a ``rule
of reason'' approach to ascertaining violations of the Standards, in
which the regulated entity may show legitimate purpose for or lack of
harm caused by the subject behavior.\312\
---------------------------------------------------------------------------
\312\ INGAA at 3-4.
---------------------------------------------------------------------------
289. Commenters also raise concerns about the interplay between the
Standards and the statutory prohibitions on undue discrimination and
preference. Specifically, many commenters argue that the per se concept
means a transmission provider may be accused of undue discrimination
and preference even where its activity was permissible under the
Standards.\313\ Southern Co. Services would like the Commission to
clarify that the Standards occupy the field for the potential types of
undue discrimination and preference addressed in the Standards, so that
compliance with the Standards would create a safe harbor with respect
to activities that fall within the scope of the Standards.\314\
---------------------------------------------------------------------------
\313\ Southern Co. Services at 23-24; Ameren at 6,8; E.ON at 7;
EEI at 41-42.
\314\ Southern Co. Services at 23-24; see also EEI at 41-42;
E.ON at 7.
---------------------------------------------------------------------------
290. Ameren cautions the Commission against arbitrarily expanding
the scope of the behavior that is deemed to violate the Standards on a
case-by-case basis, noting that this could raise notice and due process
issues.\315\ E.ON asserts that an undue preference analysis for
subjects already covered by the Standards would greatly complicate
training efforts.\316\
---------------------------------------------------------------------------
\315\ Ameren at 6, 18.
\316\ E.ON at 8.
---------------------------------------------------------------------------
291. Both INGAA and LPPC note that many of the rules within the
Standards are not amenable to a per se approach to enforcement because
they are non-specific and broad.\317\
---------------------------------------------------------------------------
\317\ INGAA at 8; LPPC at 17-18.
---------------------------------------------------------------------------
292. Puget Sound raises additional questions about the enforcement
of the Standards, e.g., how a per se violation may be distinguishable
from noncompliance with other rules; whether disclosure by a
transmission provider of non-public information to its marketing
function is a per se violation and, if so, does the posting requirement
cure the per se violation; whether a marketing function employee who
receives transmission information from an unaffiliated third party is
guilty of a per se violation; and whether inadvertent disclosure of
non-public information to a marketing function employee is
sanctionable.\318\
---------------------------------------------------------------------------
\318\ Puget Sound at 10.
---------------------------------------------------------------------------
3. Commission Determination
293. In response to commenters' confusion regarding the NOPR's
reference to the term per se, the Commission clarifies that we did not
mean to establish a new standard of review or impose different
evidentiary burdens specific to these rules. Under these regulations,
the Commission would still have to prove that a violation occurred, and
an accused maintains the right to demonstrate that such a violation did
not occur. Further, if it is established that a violation has occurred,
such matters as whether the violations were inadvertent or, under the
facts of the case, harmless, will be taken into account by the
Commission in determining whether any remedy or sanction is
appropriate.
294. Some commenters request the Commission to declare that the
Standards occupy the field with respect to the area of undue
preferences, and that matters not specifically covered by the Standards
may not be found to be violations of the undue preferences prohibition
in the FPA or the NGA. This we decline to do. There are potentially an
infinite number of ways undue preferences might arise, and the
Standards are not intended to be exhaustive. It is possible that an
entity might embark on a course of conduct not contemplated by the
Standards, which could be found upon investigation to constitute a
violation of the statutory undue preference prohibitions. In such case,
the entity's compliance with the Standards in other aspects would not
serve as a defense.
295. Puget Sound asks whether posting would cure a transmission
provider's disclosure of non-public transmission function information
to a marketing function employee. Posting the information does not
change the fact that a violation occurred, but it would be a vital
consideration that the Commission would certainly take into account in
deciding whether any remedy or sanction would be appropriate. We
observe also, by way of further clarification, that if the transmission
provider failed to post the disclosed information, this would
constitute a second and separate violation, in this case of section
358.7(a)(1).
H. Training Requirements
1. Commission Proposal
296. The NOPR proposed modifications to the training requirements
for the Standards, requiring annual training for transmission function
employees, marketing function employees, officers, directors,
supervisory employees, and any other employees likely to become privy
to transmission function information; and requiring training on the
Standards to new employees within the first 30 days of their
employment. See proposed section 358.8(c)(1).
2. Comments
297. Commenters raised various concerns about the scope of the
proposed training requirements. Destin believes that the requirements
are overly broad and unduly burdensome; arguing that a transmission
provider cannot engage in affiliate abuse with employees that do not
use its transmission services.\319\ Ameren states that the Commission's
training requirement should apply only to employees who engage in
transmission or marketing functions, as well as officers, directors and
support or other employees who can be expected to have access to non-
public transmission information.
[[Page 63826]]
Ameren also states that a transmission provider should provide focused
levels of training to certain specific classes of employees.\320\
---------------------------------------------------------------------------
\319\ Destin at 8.
\320\ Ameren at 31-32.
---------------------------------------------------------------------------
298. Commenters seek clarification as to which employees must be
trained, and some suggest modifications to the proposed regulatory
text. MidAmerican and National Grid seek confirmation that the rule
excludes supervisors of departments that have nothing to do with
transmission.\321\ To clarify the regulatory text, National Grid
proposes setting out that the training requirement applies to (i)
transmission function employees; (ii) marketing functioning employees;
and (iii) officers, directors, supervisory employees, and any other
employees likely to become privy to transmission function
information.\322\
---------------------------------------------------------------------------
\321\ MidAmerican at 20-21; NationalGrid at 22.
\322\ NationalGrid at 22.
---------------------------------------------------------------------------
299. Some commenters request clarification as to which types of
employees are captured by the ``likely to become privy to transmission
function information'' language in sections 358.8(b)(2) and
358.8(c)(1).\323\ Xcel urges the Commission to modify proposed section
358.8(b)(2) by requiring a transmission provider to distribute
materials only to those employees likely to become privy to non-public
transmission information, instead of to any and all transmission
function information.\324\
---------------------------------------------------------------------------
\323\ MidAmerican at 20-21; Williston at 17-18.
\324\ Xcel at 22.
---------------------------------------------------------------------------
300. Commenters urge the Commission to modify the proposed
regulation so as to eliminate the requirement to train marketing
function employees. INGAA requests that marketing function employees
should be excluded, arguing such training is infeasible and unnecessary
in certain corporate structures.\325\ In addition, Williston questions
the need to conduct annual training for employees who do not have
access to non-public or privileged information and/or marketing
function employees. If a transmission provider is required to train
marketing function employees of its affiliates, Williston asserts this
is an expansion of the current rules. If not, Williston questions
whether a transmission provider would have employees that fit under the
definition of marketing function employees that would need to be
restricted from having access to company information.\326\
---------------------------------------------------------------------------
\325\ INGAA at 49-50.
\326\ Williston at 17-18.
---------------------------------------------------------------------------
301. Commenters raise concerns over whether field and maintenance
employees fall into the training requirements and request that the
Commission exclude these employees. INGAA notes that field and
maintenance employees may pick up transmission information in the
nature of irrelevant raw data from time to time, and could therefore
fall within the training requirement as set forth in the proposed
provision.\327\ INGAA argues that these employees do not have access to
information of a commercial value and including them within the
training requirement would be an unwarranted burden. INGAA requests
that the proposed provision be amended to exclude these employees.\328\
---------------------------------------------------------------------------
\327\ INGAA at 47.
\328\ Id. at 47; see also Vectren at 9-10.
---------------------------------------------------------------------------
302. Commenters also request clarification on the application of
these training requirements to agents, contractors, and
consultants.\329\ TDU Systems recommends that agents, contractors, and
consultants be trained only once per year, even if engaged by more than
one transmission provider during that time, provided that they receive
a copy of the current written compliance procedures for each of the
relevant transmission providers.\330\ INGAA requests that the
Commission clarify that contractor training may be limited to those
specific contractors who may be considered transmission function
employees if they worked directly for the pipeline.\331\
---------------------------------------------------------------------------
\329\ INGAA at 48; TDU Systems at 16-17.
\330\ TDU Systems at 16-17.
\331\ INGAA at 48.
---------------------------------------------------------------------------
303. Commenters request additional guidance on the timing of the
required training. National Grid requests confirmation that companies
may satisfy the annual training requirement by providing training once
a year for all employees, rather than providing training on a rolling
basis, to ensure that each relevant employee attends training at least
once within each 365-day cycle.\332\ Ameren requests that the
Commission clarify that employees trained within 12 months of the Final
Rule's issuance do not need to be trained again until a year passes
from the date of their most recent training.\333\
---------------------------------------------------------------------------
\332\ National Grid at 25-26.
\333\ Ameren at 35.
---------------------------------------------------------------------------
304. E.ON urges the Commission to clarify that annual Standards
training should be mandatory only for transmission and marketing
function employees, and that employees who do not engage in
transmission and marketing functions should be allowed to be trained on
a less frequent basis.\334\ NiSource requests that the requirement in
section 358.8(c) that new employees be trained within 30 days of hire
be modified to require training within 60 days of hire, arguing that
the 30 day limitation is overly burdensome.\335\
---------------------------------------------------------------------------
\334\ E.ON at 25.
\335\ NiSource at 28.
---------------------------------------------------------------------------
305. The PUC of Ohio proposes that the Standards include a
requirement that transmission providers post on their Internet Web
sites a general overview of their unique training programs and
schedules and the name of the designated chief compliance officer.\336\
---------------------------------------------------------------------------
\336\ PUC of Ohio at 3.
---------------------------------------------------------------------------
3. Commission Determination
306. The Commission endeavored in the NOPR to limit training to
those employees who would be most likely to be exposed to transmission
function information, or those to whom the disclosure of such
information is strictly prohibited. Obviously, transmission function
employees and marketing function employees are the two core categories
of employees that should be most cognizant of the rules. Although we
have deleted the prohibition against marketing function employees
receiving transmission function information, due to the possibility
such receipt could be inadvertent, it is expected that if someone
attempted to pass such information to a marketing function employee,
the marketing function employee would not only refuse it but would
report the individual to the company's chief compliance officer or
other appropriate individual.
307. Officers, directors, and supervisory employees also have a
clear need for an understanding of the Standards, as it is likely they
will either be in a position to interact with both transmission
function employees and marketing function employees, or be responsible
for responding to any questions or concerns about the Standards from
the employees who report to them. Other employees likely to become
privy to transmission function information will vary from company to
company; likely categories would include rate and regulatory personnel,
lawyers, accountants, risk management personnel, and the like. This
list is by no means exhaustive, but rather is included for illustrative
purposes.
308. Either a transmission provider or its affiliate should provide
training to marketing function personnel employed by the affiliate;
failure to do so would leave a major class of employees without the
requisite training. As to whether field and maintenance workers should
receive training, that would depend on the circumstances of the
[[Page 63827]]
particular transmission provider. As noted above, field and maintenance
personnel are not considered transmission function employees if they
are functioning in their stated capacity and do not engage in the day-
to-day operation of the transmission system. However, if it is likely
they may become privy to transmission function information, then
training on the Standards would be appropriate and called for under
section 358.8(c)(1).
309. Commenters seek clarification regarding the training of
agents, contractors and consultants. If such individuals are acting
within one of the categories specified for the provision of training to
employees, then such individuals should receive the training as if they
were permanent hires. If the consultants are hired on a short-term
basis and provide proof that they have received the appropriate
training from another transmission provider within the requisite
period, then further training would not be necessary until the
following year, although they should receive the specific written
compliance materials applicable to each transmission provider.
Furthermore, it is not necessary for the transmission provider to track
annual dates for each employee; if the transmission provider prefers,
it may train all its employees, or all its employees in a given
category, at a certain time each year. New employees, after their
initial training, can be fit within this schedule. However, the
employee should not go longer than a year without participating in
training.
310. We decline to lengthen the period for initial training from 30
days to 60 days, as requested by one commenter. It is especially
important for new hires to receive the training, as they may not have
been exposed to it before, as would be the case with existing
employees. We also note that it is unnecessary to add a requirement to
post training programs on the transmission provider's Internet Web
site. Training is for the benefit of the transmission provider's
employees, not the public at large. And as proposed section 358.8(c)(2)
already requires posting the name of the transmission provider's chief
compliance officer, it is unnecessary to add a further requirement in
this regard.
I. Compliance Date
1. Commission Proposal
311. The NOPR did not set forth a date by which existing
transmission providers must be in full compliance with the new
Standards (as noted above, a new transmission provider must be in
compliance on the date it commences transmission transactions with an
affiliate that engages in marketing functions).
2. Comments
312. Commenters propose that the Commission allow 60 to 90 days
after issuance of the Final Rule for its implementation by existing
transmission providers.\337\
---------------------------------------------------------------------------
\337\ TDU Systems at 17; Wisconsin Electric at 9-10; Ameren at
35.
---------------------------------------------------------------------------
3. Commission Determination
313. The Commission determines that the new Standards shall be
effective 30 days from the date of publication in the Federal Register,
and so provides in the section on Effective Date and Congressional
Notification. The Commission further determines that transmission
providers must be in full compliance with the Standards by that date,
with the exception of the posting and training requirements, with which
transmission providers must be in full compliance no later than 60 days
from publication in the Federal Register, as set forth in that same
section. The Commission does not envision that extensive changes would
be needed by transmission providers in order to come into compliance;
many if not most of the procedures they already have in place to comply
with the existing Standards will be transferable with little
modification.
J. Miscellaneous Matters
1. Comments
314. Commenters raise a variety of miscellaneous matters as
follows:
Ameren asks the Commission consider extending the use of
the employee functional approach to the Code of Conduct/affiliate
restrictions promulgated by Order No. 697 and set forth in 18 CFR 35.39
of the Commission's regulations.\338\
---------------------------------------------------------------------------
\338\ Ameren at 36.
---------------------------------------------------------------------------
NGSA asserts that third parties should never be privy to
non-public pipeline information. It contends that in the rare
circumstances in which a pipeline finds it necessary to share non-
public information with a third party (e.g., joint project development
planning), the third party should be subject to a confidentiality
agreement.\339\
---------------------------------------------------------------------------
\339\ NGSA at 16.
---------------------------------------------------------------------------
PUC of Ohio asserts that civil forfeiture should not be
recovered by the operating company in such a way that the expense of
recovery is passed to the customers (as opposed to the shareholders).
It proposes that the Commission require ``ring fencing'' so that an
operating company and its customers are insulated from other operations
involving the corporation, and are only allocated those expenses that
relate directly to an established benefit.\340\
---------------------------------------------------------------------------
\340\ PUC Ohio at 3.
---------------------------------------------------------------------------
NARUC recommends that the Commission monitor
implementation of the Standards by requiring filed compliance plans and
through the conduct of regular audits and reports.\341\
---------------------------------------------------------------------------
\341\ NARUC at 4-5.
---------------------------------------------------------------------------
MidAmerican requests that the Commission clarify that
Order No. 2004 and any Commission guidance and case law issued pursuant
to it should not constitute precedent for the new Standards.
MidAmerican is concerned that unless the Commission clearly rescinds
its prior precedent developed around Order No. 2004, companies will
struggle to determine whether a precedent applies to a provision in the
new Standards.\342\
---------------------------------------------------------------------------
\342\ MidAmerican at 5-7.
---------------------------------------------------------------------------
E.ON requests that the Commission clarify whether
transmission providers can continue to rely on existing guidance
regarding public meetings convened by utility companies. If the
Commission concludes that it is appropriate to start from a ``clean
slate'' on public meetings, then E.ON requests that the Commission
provide additional relevant guidance.\343\
---------------------------------------------------------------------------
\343\ E.ON at 25.
---------------------------------------------------------------------------
2. Commission Determination
315. Ameren's request to extend the employee functional approach,
NGSA's concerns regarding the dissemination of information to non-
affiliated third parties, and the PUC of Ohio's concern regarding the
recovery of civil forfeitures, are all beyond the scope of this Final
Rule, and the Commission declines to adopt their proposals or modify
the Standards accordingly.
316. The Commission also declines to impose the filing of
compliance plans with the Commission, as requested by NARUC. Under
section 358.8(b)(2), transmission providers are required to post on
their Internet Web site written procedures implementing the Standards.
It is thus unnecessary to require additional filings with the
Commission. The Commission, however, is committed to ensuring
compliance with its rules and regulations, and will thus seriously
consider auditing on a regular basis transmission providers' compliance
with the Standards. Also, of course, the Commission will investigate
any credible allegation of violation of the Standards. To that end, the
Commission
[[Page 63828]]
reminds market participants of the Enforcement Hotline,\344\ which was
established twenty years ago to enforce the promulgation of the
original Standards in Order No. 497.
---------------------------------------------------------------------------
\344\ See 18 CFR1b.21 (2008).
---------------------------------------------------------------------------
317. On the issue of guidance, the Commission will not impose a
blanket provision stating that guidance issued by the Commission with
respect to previous Standards has no precedential effect. Many of the
Standards have been carried forward into the new regulations, and
others are similar. The determination of whether previous statements
and rulings made by the Commission may be useful in providing guidance
as to the new Standards must be made on a case-by-case basis, and is
very dependent on which provision of the Standards is in question.
318. E.ON's related concern about public meetings, to the extent it
does not entail matters relating to the Independent Functioning Rule
and the No Conduit Rule, is beyond the scope of this Final Rule. To the
extent E.ON's concern does involve those provisions, it may look for
guidance to the discussions in this Final Rule regarding them, as well
as to the regulatory text.
IV. Information Collection Statement
319. The Office of Management and Budget (OMB) regulations require
approval of certain information collection requirements imposed by
agency rules.\345\
---------------------------------------------------------------------------
\345\ 5 CFR 1320.11.
---------------------------------------------------------------------------
320. Previously, the Commission submitted to OMB the information
collection requirements arising from the Standards of Compliance
adopted in Order No. 2004. OMB approved those requirements.\346\ The
revisions to the Standards proposed in this issuance are modifications
of already approved information collection procedures, and do not
impose any significant additional information collection burden on
industry participants. Many of the changes consist merely of the
rewording of definitions and the reordering of the various information
collection requirements. Some information collection requirements have
been deleted, such as the posting of organizational charts. A
requirement has been added concerning the maintenance of records
regarding certain informational exchanges between transmission function
employees and marketing function employees, as well as a requirement
regarding the posting of contact information regarding the
identification of the Chief Compliance Officer. Neither of these should
impose a significant burden on the transmission providers. In fact, by
proposing that the Standards will no longer govern the relationship
between transmission providers and their Energy Affiliates, the overall
information collection burden will likely decrease.
---------------------------------------------------------------------------
\346\ Letter from OMB to the Commission (Jan. 20, 2004) (OMB
Control Number 1902-0157); ``Notice of Action'' letter from OMB to
the Commission (Jan. 20, 2004) (OMB Control Number 1902-0173).
---------------------------------------------------------------------------
321. The Commission is submitting notification of the information
collection requirements imposed in this Final Rule to OMB for its
review and approval under section 3507(d) of the Paperwork Reduction
Act of 1995.\347\ Comments are solicited on the Commission's need for
this information, whether the information will have practical utility,
the accuracy of provided burden estimates, ways to enhance the quality,
utility, and clarity of the information to be collected, and any
suggested methods of minimizing respondent's burden, including the use
of automated information techniques.
---------------------------------------------------------------------------
\347\ 44 U.S.C. 3507(d) (2000 and Supp. V 2005).
---------------------------------------------------------------------------
322. OMB regulations require OMB to approve certain information
collection requirements imposed by agency rule. The Commission is
submitting notification of this proposed rule to OMB.
Title: FERC-592 and 717.
Action: Proposed Collection.
OMB Control No.: 1902-0157-1902-173.
Respondents: Business or other for profit.
Frequency of Responses: On occasion.
Necessity of the Information: The information is necessary to
ensure that all regulated transmission providers treat all transmission
customers on a non-discriminatory basis.
Internal review: The Commission has reviewed the requirements
pertaining to natural gas pipelines and transmitting electric utilities
and determined the proposed revisions are necessary to clarify the
Standards, enhance compliance, increase efficiencies, and conform with
a recent court decision.
323. These requirements conform to the Commission's plan for
efficient information collection, communication, and management with
the natural gas and electric utility industries. The Commission has
assured itself, by means of internal review, that there is specific,
objective support for the burden estimates associated with the
information requirements.
324. Interested persons may obtain information on the reporting
requirements by contacting: Federal Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426 [Attention: Michael Miller,
Office of the Chief Information Officer], phone: (202) 502-8415, fax:
(202) 208-2425, e-mail: Michael.Miller@FERC.gov. Comments on the
requirements of the Final Rule also may be sent to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
Washington, DC 20503 (Attention Desk Officer for the Federal Energy
Regulatory Commission).
V. Environmental Analysis
325. 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.\348\ The
Commission concludes that neither an Environmental Assessment nor an
Environmental Impact Statement is required for this Final Rule under
Sec. 380.4 of the Commission's regulations for certain actions. The
actions proposed here fall within the categorical exclusions because
this rule is clarifying and corrective, does not substantially change
the effect of the regulations being amended and calls for information
gathering and dissemination.\349\ Therefore, an environmental
assessment is unnecessary and has not been prepared for this
rulemaking.
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\348\ Order No. 486, Regulations Implementing the National
Environmental Policy Act of 1969, FERC Stats. & Regs. ] 30,783
(1987).
\349\ 18 CFR 380.4(a)(2)(ii) and 380.4(a)(5) (2008).
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VI. Regulatory Flexibility Act
326. The Regulatory Flexibility Act of 1980 (RFA) \350\ generally
requires a description and analysis of Final Rules that will have
significant economic impact on a substantial number of small entities.
Because most transmission providers do not fall within the definition
of ``small entity,'' \351\ the Commission certifies that this rule will
not have a significant economic impact on a substantial number of small
entities. Furthermore, small entities may seek a waiver of these
requirements, and those small entities that have already received a
waiver of the Standards would be unaffected by the requirements of this
proposed rulemaking.
---------------------------------------------------------------------------
\350\ 5 U.S.C. 601-612 (2000 and Supp. V 2005).
\351\ See 5 U.S.C. 601(3) and (6) (2000 and Supp. V 2005).
---------------------------------------------------------------------------
VII. Document Availability
327. 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 FERC's Home Page (http://www.ferc.gov)
[[Page 63829]]
and in FERC'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.
328. From FERC'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, type the docket
number excluding the last three digits of this document in the docket
number field.
329. User assistance is available for eLibrary and the FERC'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
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at
public.referenceroom@ferc.gov.
VIII. Effective Date and Congressional Notification
330. These regulations are effective 30 days from the date of
publication in the Federal Register. Transmission providers must be in
full compliance with them by that date, with the exception of the
posting and training requirements, with which transmission providers
must be in full compliance no later than 60 days from the date of
publication in the Federal Register.
331. The Commission has determined, with the concurrence of the
Administrator of the Office of Information and Regulatory Affairs of
OMB, that this rule is not a ``major rule'' as defined in section 351
of the Small Business Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 18 CFR Part 358
Electric power plants, Electric utilities, Natural gas, Reporting
and recordkeeping requirements.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
0
In consideration of the foregoing, the Commission revises part 358,
Chapter I, Title 18, Code of Federal Regulations, to read as follows:
0
1. Part 358 is revised to read as follows:
PART 358--STANDARDS OF CONDUCT
Sec.
358.1 Applicability.
358.2 General principles.
358.3 Definitions.
358.4 Non-discrimination requirements.
358.5 Independent functioning rule.
358.6 No conduit rule.
358.7 Transparency rule.
358.8 Implementation requirements.
Authority: 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791-825r,
2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352.
Sec. 358.1 Applicability.
(a) This part applies to any interstate natural gas pipeline that
transports gas for others pursuant to subparts B or G of part 284 of
this chapter and conducts transmission transactions with an affiliate
that engages in marketing functions.
(b) This part applies to any public utility that owns, operates, or
controls facilities used for the transmission of electric energy in
interstate commerce and conducts transmission transactions with an
affiliate that engages in marketing functions.
(c) This part does not apply to a public utility transmission
provider that is a Commission-approved Independent System Operator
(ISO) or Regional Transmission Organization (RTO). If a public utility
transmission owner participates in a Commission-approved ISO or RTO and
does not operate or control its transmission system and has no access
to transmission function information, it may request a waiver from this
part.
(d) A transmission provider may file a request for a waiver from
all or some of the requirements of this part for good cause.
Sec. 358.2 General principles.
(a) A transmission provider must treat all transmission customers,
affiliated and non-affiliated, on a not unduly discriminatory basis,
and must not make or grant any undue preference or advantage to any
person or subject any person to any undue prejudice or disadvantage
with respect to any transportation of natural gas or transmission of
electric energy in interstate commerce, or with respect to the
wholesale sale of natural gas or of electric energy in interstate
commerce.
(b) A transmission provider's transmission function employees must
function independently from its marketing function employees, except as
permitted in this part or otherwise permitted by Commission order.
(c) A transmission provider and its employees, contractors,
consultants and agents are prohibited from disclosing, or using a
conduit to disclose, non-public transmission function information to
the transmission provider's marketing function employees.
(d) A transmission provider must provide equal access to non-public
transmission function information to all its transmission function
customers, affiliated and non-affiliated, except in the case of
confidential customer information or Critical Energy Infrastructure
Information.
Sec. 358.3 Definitions.
(a) Affiliate of a specified entity means:
(1) Another person that controls, is controlled by or is under
common control with, the specified entity. An affiliate includes a
division of the specified entity that operates as a functional unit.
(2) For any exempt wholesale generator (as defined under Sec.
366.1 of this chapter), affiliate shall have the meaning set forth in
Sec. 366.1 of this chapter, or any successor provision.
(3) ``Control'' as used in this definition means the direct or
indirect authority, whether acting alone or in conjunction with others,
to direct or cause to direct the management policies of an entity. A
voting interest of 10 percent or more creates a rebuttable presumption
of control.
(b) Internet Web site refers to the Internet location where an
interstate natural gas pipeline or a public utility posts the
information, by electronic means, required under this part 358.
(c) Marketing functions means:
(1) in the case of public utilities and their affiliates, the sale
for resale in interstate commerce, or the submission of offers to sell
in interstate commerce, of electric energy or capacity, demand
response, virtual transactions, or financial or physical transmission
rights, all as subject to an exclusion for bundled retail sales,
including sales of electric energy made by providers of last resort
(POLRs) acting in their POLR capacity; and
(2) in the case of interstate pipelines and their affiliates, the
sale for resale in interstate commerce, or the submission of offers to
sell in interstate commerce, natural gas, subject to the following
exclusions:
(i) Bundled retail sales,
(ii) Incidental purchases or sales of natural gas to operate
interstate natural gas pipeline transmission facilities,
(iii) Sales of natural gas solely from a seller's own production,
(iv) Sales of natural gas solely from a seller's own gathering or
processing facilities, and
(v) Sales by an intrastate natural gas pipeline, by a Hinshaw
interstate pipeline exempt from the Natural Gas Act, or by a local
distribution company making an on-system sale.
(d) Marketing function employee means an employee, contractor,
[[Page 63830]]
consultant or agent of a transmission provider or of an affiliate of a
transmission provider who actively and personally engages on a day-to-
day basis in marketing functions.
(e) Open Access Same Time Information System or OASIS refers to the
Internet location where a public utility posts the information required
by part 37 of this chapter, and where it may also post the information
required to be posted on its Internet Web site by this part 358.
(f) Transmission means electric transmission, network or point-to-
point service, ancillary services or other methods of electric
transmission, or the interconnection with jurisdictional transmission
facilities, under part 35 of this chapter; and natural gas
transportation, storage, exchange, backhaul, or displacement service
provided pursuant to subparts B or G of part 284 of this chapter.
(g) Transmission customer means any eligible customer, shipper or
designated agent that can or does execute a transmission service
agreement or can or does receive transmission service, including all
persons who have pending requests for transmission service or for
information regarding transmission.
(h) Transmission functions means the planning, directing,
organizing or carrying out of day-to-day transmission operations,
including the granting and denying of transmission service requests.
(i) Transmission function employee means an employee, contractor,
consultant or agent of a transmission provider who actively and
personally engages on a day-to-day basis in transmission functions.
(j) Transmission function information means information relating to
transmission functions.
(k) Transmission provider means:
(1) Any public utility that owns, operates or controls facilities
used for the transmission of electric energy in interstate commerce; or
(2) Any interstate natural gas pipeline that transports gas for
others pursuant to subparts B or G of part 284 of this chapter.
(3) A transmission provider does not include a natural gas storage
provider authorized to charge market-based rates.
(l) Transmission service means the provision of any transmission as
defined in Sec. 358.3(f).
(m) Waiver means the determination by a transmission provider, if
authorized by its tariff, to waive any provisions of its tariff for a
given entity.
Sec. 358.4 Non-discrimination requirements.
(a) A transmission provider must strictly enforce all tariff
provisions relating to the sale or purchase of open access transmission
service, if the tariff provisions do not permit the use of discretion.
(b) A transmission provider must apply all tariff provisions
relating to the sale or purchase of open access transmission service in
a fair and impartial manner that treats all transmission customers in a
not unduly discriminatory manner, if the tariff provisions permit the
use of discretion.
(c) A transmission provider may not, through its tariffs or
otherwise, give undue preference to any person in matters relating to
the sale or purchase of transmission service (including, but not
limited to, issues of price, curtailments, scheduling, priority,
ancillary services, or balancing).
(d) A transmission provider must process all similar requests for
transmission in the same manner and within the same period of time.
Sec. 358.5 Independent functioning rule.
(a) General rule. Except as permitted in this part or otherwise
permitted by Commission order, a transmission provider's transmission
function employees must function independently of its marketing
function employees.
(b) Separation of functions. (1) A transmission provider is
prohibited from permitting its marketing function employees to:
(i) Conduct transmission functions; or
(ii) Have access to the system control center or similar facilities
used for transmission operations that differs in any way from the
access available to other transmission customers.
(2) A transmission provider is prohibited from permitting its
transmission function employees to conduct marketing functions.
Sec. 358.6 No conduit rule.
(a) A transmission provider is prohibited from using anyone as a
conduit for the disclosure of non-public transmission function
information to its marketing function employees.
(b) An employee, contractor, consultant or agent of a transmission
provider, and an employee, contractor, consultant or agent of an
affiliate of a transmission provider that is engaged in marketing
functions, is prohibited from disclosing non-public transmission
function information to any of the transmission provider's marketing
function employees.
Sec. 358.7 Transparency rule.
(a) Contemporaneous disclosure. (1) If a transmission provider
discloses non-public transmission function information, other than
information identified in paragraph (a)(2) of this section, in a manner
contrary to the requirements of Sec. 358.6, the transmission provider
must immediately post the information that was disclosed on its
Internet Web site.
(2) If a transmission provider discloses, in a manner contrary to
the requirements of Sec. 358.6, non-public transmission customer
information, critical energy infrastructure information (CEII) as
defined in Sec. 388.113(c)(1) of this chapter or any successor
provision, or any other information that the Commission by law has
determined is to be subject to limited dissemination, the transmission
provider must immediately post notice on its Web site that the
information was disclosed.
(b) Exclusion for specific transaction information. A transmission
provider's transmission function employee may discuss with its
marketing function employee a specific request for transmission service
submitted by the marketing function employee. The transmission provider
is not required to contemporaneously disclose information otherwise
covered by Sec. 358.6 if the information relates solely to a marketing
function employee's specific request for transmission service.
(c) Voluntary consent provision. A transmission customer may
voluntarily consent, in writing, to allow the transmission provider to
disclose the transmission customer's non-public information to the
transmission provider's marketing function employees. If the
transmission customer authorizes the transmission provider to disclose
its information to marketing function employees, the transmission
provider must post notice on its Internet Web site of that consent
along with a statement that it did not provide any preferences, either
operational or rate-related, in exchange for that voluntary consent.
(d) Posting written procedures on the public Internet. A
transmission provider must post on its Internet Web site current
written procedures implementing the standards of conduct.
(e) Identification of affiliate information on the public Internet.
(1) A transmission provider must post on its Internet Web site the
names and addresses of all its affiliates that employ or retain
marketing function employees.
(2) A transmission provider must post on its Internet Web site a
complete list of the employee-staffed facilities shared by any of the
transmission provider's transmission function employees and marketing
function employees. The list must include the types of facilities
[[Page 63831]]
shared and the addresses of the facilities.
(3) The transmission provider must post information concerning
potential merger partners as affiliates that may employ or retain
marketing function employees, within seven days after the potential
merger is announced.
(f) Identification of employee information on the public Internet.
(1) A transmission provider must post on its Internet Web site the job
titles and job descriptions of its transmission function employees.
(2) A transmission provider must post a notice on its Internet Web
site of any transfer of a transmission function employee to a position
as a marketing function employee, or any transfer of a marketing
function employee to a position as a transmission function employee.
The information posted under this section must remain on its Internet
Web site for 90 days. No such job transfer may be used as a means to
circumvent any provision of this part. The information to be posted
must include:
(i) The name of the transferring employee,
(ii) The respective titles held while performing each function
(i.e., as a transmission function employee and as a marketing function
employee), and
(iii) The effective date of the transfer.
(g) Timing and general requirements of postings on the public
Internet. (1) A transmission provider must update on its Internet Web
site the information required by this part 358 within seven business
days of any change, and post the date on which the information was
updated. A public utility may also post the information required to be
posted under part 358 on its OASIS, but is not required to do so.
(2) In the event an emergency, such as an earthquake, flood, fire
or hurricane, severely disrupts a transmission provider's normal
business operations, the posting requirements in this part may be
suspended by the transmission provider. If the disruption lasts longer
than one month, the transmission provider must so notify the Commission
and may seek a further exemption from the posting requirements.
(3) All Internet Web site postings required by this part must be
sufficiently prominent as to be readily accessible.
(h) Exclusion for and recordation of certain information exchanges.
(1) Notwithstanding the requirements of Sec. Sec. 358.5(a) and 358.6,
a transmission provider's transmission function employees and marketing
function employees may exchange certain non-public transmission
function information, as delineated in Sec. 358.7(h)(2), in which case
the transmission provider must make and retain a contemporaneous record
of all such exchanges except in emergency circumstances, in which case
a record must be made of the exchange as soon as practicable after the
fact. The transmission provider shall make the record available to the
Commission upon request. The record may consist of hand-written or
typed notes, electronic records such as e-mails and text messages,
recorded telephone exchanges, and the like, and must be retained for a
period of five years.
(2) The non-public information subject to the exclusion in Sec.
358.7(h)(1) is as follows:
(i) Information pertaining to compliance with Reliability Standards
approved by the Commission, and
(ii) Information necessary to maintain or restore operation of the
transmission system or generating units, or that may affect the
dispatch of generating units.
(i) Posting of waivers. A transmission provider must post on its
Internet Web site notice of each waiver of a tariff provision that it
grants in favor of an affiliate, unless such waiver has been approved
by the Commission. The posting must be made within one business day of
the act of a waiver. The transmission provider must also maintain a log
of the acts of waiver, and must make it available to the Commission
upon request. The records must be kept for a period of five years from
the date of each act of waiver.
Sec. 358.8 Implementation requirements.
(a) Effective date. A transmission provider must be in full
compliance with the standards of conduct on the date it commences
transmission transactions with an affiliate that engages in marketing
functions.
(b) Compliance measures and written procedures. (1) A transmission
provider must implement measures to ensure that the requirements of
Sec. Sec. 358.5 and 358.6 are observed by its employees and by the
employees of its affiliates.
(2) A transmission provider must distribute the written procedures
referred to in Sec. 358.7(d) to all its transmission function
employees, marketing function employees, officers, directors,
supervisory employees, and any other employees likely to become privy
to transmission function information.
(c) Training and compliance personnel. (1) A transmission provider
must provide annual training on the standards of conduct to all the
employees listed in paragraph (b)(2) of this section. The transmission
provider must provide training on the standards of conduct to new
employees in the categories listed in paragraph (b)(2) of this section,
within the first 30 days of their employment. The transmission provider
must require each employee who has taken the training to certify
electronically or in writing that s/he has completed the training.
(2) A transmission provider must designate a chief compliance
officer who will be responsible for standards of conduct compliance.
The transmission provider must post the name of the chief compliance
officer and provide his or her contact information on its Internet Web
site.
(d) Books and records. A transmission provider must maintain its
books of account and records (as prescribed under parts 101, 125, 201
and 225 of this chapter) separately from those of its affiliates that
employ or retain marketing function employees, and these must be
available for Commission inspections.
Note: The following appendix will not be published in the Code
of Federal Regulations.
Appendix A
Table of Commenters and Abbreviations for Commenters.
------------------------------------------------------------------------
Commenter Abbreviation
------------------------------------------------------------------------
Alcoa Inc........................... ALCOA.
Ameren Services Company............. Ameren.
American Gas Association............ AGA.
American Public Gas Association..... APGA.
American Public Power Association... APPA.
American Transmission Company LLC... ATC.
Arizona Public Service Company...... Arizona PSC.
Bonneville Power Administration..... Bonneville.
California Public Utilities California PUC.
Commission.
[[Page 63832]]
Calypso U.S. Pipeline, LLC and Calypso.
Calypso LNG, LLC.
CenterPoint Energy Gas Transmission CenterPoint.
Company.
Chandeleur Pipeline Company and Chandeleur.
Sabine Pipeline Lince LLC.
DCP Midstream, LLC.................. DCP Midstream.
Destin Pipeline Company, L.L.C...... Destin.
Dominion Resources, Inc............. Dominion Resources.
Duke Energy Corporation............. Duke.
E.ON U.S. LLC....................... E.ON.
Edison Electric Institute........... EEI.
El Paso Corporation................. El Paso.
Electric Power Supply Association... EPSA.
Entergy Services Inc................ Entergy.
Federal Trade Commission............ FTC.
FirstEnergy Service Company......... FirstEnergy.
Hampshire Gas Company and Washington Hampshire.
Gas Light Company.
Idaho Power Company................. Idaho Power.
International Transmission Company.. ITC.
Interstate Natural Gas Association INGAA.
of America.
Iroquois Gas Transmission System, Iroquois.
L.P.
Kinder Morgan Interstate Pipelines.. Kinder Morgan.
Large Public Power Council.......... LPPC.
MidAmerican Energy Electric MidAmerican.
Utilities.
National Association of Regulatory NARUC.
Utility Commissioners.
National Grid USA................... National Grid.
Natural Gas Supply Association...... NGSA.
New York Public Service Commission.. New York PSC.
NiSource, Inc....................... NiSource.
Northern California Power Agency.... NCPA.
Northwest Natural Gas Company and KB Northwest Natural.
Pipeline Company.
Pacific Gas and Electric Company.... PG&E.
PSEG Companies...................... PSEG.
Public Utilities Commission of Ohio. PUC of Ohio.
Puget Sound Energy, Inc. and Avista Puget Sound.
Corporation.
Questar Gas Company................. Questar.
Sacramento Municipal Utility SMUD.
District.
Salt River Project Agricultural Salt River.
Improvement and Power District.
SCANA Corporation................... SCANA.
Southern California Edison Company.. SCE.
Southern Company Services, Inc...... Southern Co. Services.
Southwest Gas Corporation........... Southwest Gas.
Spectra Energy Transmission, LLC and Spectra.
Spectra Energy Partners, LP.
Transmission Access Policy Study TAPS.
Group.
Transmission Agency of Northern TANC.
California.
Transmission Dependent Utility TDU Systems.
Systems.
U.S. Department of the Interior..... US DOI.
Unitil Corporation.................. Unitil.
USG Pipeline Company, et al......... USG.
Vectren Corporation................. Vectren.
Washington Utilities and WA UTC.
Transportation Commission.
Western Utilities................... Western Utilities.
Williston Basin Interstate Pipeline Williston.
Company.
Wisconsin Electric Power Company.... Wisconsin Electric.
Xcel Energy Services Inc............ Xcel.
------------------------------------------------------------------------
[FR Doc. E8-25105 Filed 10-24-08; 8:45 am]
BILLING CODE 6717-01-P