Policy Statement on Market Monitoring Units, 35247-35249 [05-11935]
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Federal Register / Vol. 70, No. 116 / Friday, June 17, 2005 / Notices
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
[Docket No. RM98–1–000]
Records Governing Off-the Record
Communications; Public Notice
June 10, 2005.
This constitutes notice, in accordance
with 18 CFR 385.2201(b), of the receipt
of prohibited and exempt off-the-record
communications.
Order No. 607 (64 FR 51222,
September 22, 1999) requires
Commission decisional employees, who
make or receive a prohibited or exempt
off-the-record communication relevant
to the merits of a contested proceeding,
to deliver to the Secretary, a copy of the
communication, if written, or a
summary of the substance of any oral
communication.
Prohibited communications are
included in a public, non-decisional file
associated with, but not a part of, the
decisional record of the proceeding.
Unless the Commission determines that
the prohibited communication and any
responses thereto should become a part
of the decisional record, the prohibited
off-the-record communication will not
be considered by the Commission in
reaching its decision. Parties to a
proceeding may seek the opportunity to
respond to any facts or contentions
made in a prohibited off-the-record
communication, and may request that
the Commission place the prohibited
communication and responses thereto
in the decisional record. The
Commission will grant such a request
only when it determines that fairness so
requires. Any person identified below as
having made a prohibited off-the-record
communication shall serve the
document on all parties listed on the
official service list for the applicable
proceeding in accordance with Rule
2010, 18 CFR 385.2010.
Docket No.
5–23–05
........................
........................
........................
6–3–05
6–3–05
5–19–05
6–3–05
5–17–05
5–19–05
6–9–05
Exempt off-the-record
communications are included in the
decisional record of the proceeding,
unless the communication was with a
cooperating agency as described by 40
CFR 1501.6, made under 18 CFR
385.2201(e)(1)(v).
The following is a list of off-therecord communications recently
received in the Office of the Secretary.
The communications listed are grouped
by docket numbers in ascending order.
These filings are available for review at
the Commission in the Public Reference
Room or may be viewed on the
Commission’s Web site at https://
www.ferc.gov using the eLibrary
(FERRIS) link. Enter the docket number,
excluding the last three digits, in the
docket number field to access the
document. For assistance, please contact
FERC, Online Support at
FERCOnlineSupport@ferc.gov or toll
free at (866) 208–3676, or for TTY,
contact (202) 502–8659.
Exempt:
Date filed
1. CP04–36–000 .............................................................................................
CP04–41–000 .............................................................................................
CP04–42–000 .............................................................................................
CP04–43–000 .............................................................................................
2. CP05–49–000 .............................................................................................
3. CP05–130–000 ...........................................................................................
4. PF05–2–000 ...............................................................................................
5. Project No. 620–009 ...................................................................................
6. Project No. 2100–000 .................................................................................
7. Project No. 2150–033 .................................................................................
8. Project Nos. 12536–000, 12537–000, 12539–000 and 12550–000 ..........
1 Summary
Presenter or requester
Hon. Edward M. Kennedy.
Hon. John F. Kerry.
Hon. Barney Frank.
Hon. James P. McGovern.
Magdalene Manco.
Michael Oritt (2 documents) et al.
Frank M. Fly.
Susan Lavin.
Sue Larsen.
Steve Hocking, Linda Lehman, Mike Henry1.
Dianne Rodman.
of telephone conversation.
Magalie R. Salas,
Secretary.
[FR Doc. E5–3109 Filed 6–16–05; 8:45 am]
Independent System Operators (ISOs)
and Regional Transmission
Organizations (RTOs).
BILLING CODE 6717–01–P
DATES:
May 27, 2005.
Ted
Gerarden (Technical Information),
Office of Market Oversight and
Investigations, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426.
(202) 502–6187. Ted.Gerarden@ferc.gov.
Lodie White (Legal Information), Office
of General Counsel—Markets, Tariffs &
Rates, Federal Energy Regulatory
Commission, 888 First Street, NE.,
Washington, DC 20426. (202) 502–6193.
Lodie.White@ferc.gov.
FOR FURTHER INFORMATION CONTACT:
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
[Docket No. PL05–1–000]
Policy Statement on Market Monitoring
Units
Issued May 27, 2005.
Federal Energy Regulatory
Commission.
ACTION: Policy statement.
AGENCY:
SUMMARY: The Federal Energy
Regulatory Commission (Commission) is
issuing this policy statement is to
provide guidance on the coordinated
roles and responsibilities of the
Commission and market monitoring
units (MMUs) associated with
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35247
17:59 Jun 16, 2005
Jkt 205001
SUPPLEMENTARY INFORMATION
Before Commissioners: Pat Wood, III,
Chairman; Nora Mead Brownell, Joseph T.
Kelliher, and Suedeen G. Kelly.
PO 00000
Frm 00027
Fmt 4703
Sfmt 4703
Market Monitoring Units in Regional
Transmission Organizations and
Independent System Operators; Policy
Statement on Market Monitoring Units
1. The purpose of this policy
statement is to provide guidance on the
role of market monitoring units (MMUs)
associated with Independent System
Operators (ISOs) and Regional
Transmission Organizations (RTOs).
MMUs perform an important role in
assisting the Commission in enhancing
the competitiveness of ISO/RTO
markets. Competitive markets benefit
customers by assuring that prices
properly reflect supply and demand
conditions. MMUs monitor organized
wholesale markets to identify ineffective
market rules and tariff provisions,
identify potential anticompetitive
behavior by market participants, and
provide the comprehensive market
analysis critical for informed policy
decision making. This policy statement
provides guidance on the coordinated
E:\FR\FM\17JNN1.SGM
17JNN1
35248
Federal Register / Vol. 70, No. 116 / Friday, June 17, 2005 / Notices
roles and responsibilities of the
Commission and the MMUs.
2. In order to achieve the stated
purpose of enhancing the competitive
structure of the ISO/RTO markets,
MMUs perform several valuable tasks:
• To identify ineffective market rules
and tariff provisions and recommend
proposed rule and tariff changes to the
ISO/RTO that promote wholesale
competition and efficient market
behavior.
• To review and report on the
performance of wholesale markets in
achieving customer benefits.
• To provide support to the ISO/RTO
in the administration of Commissionapproved tariff provisions related to
markets administered by the ISO/RTO
(e.g., day-ahead and real-time markets).
• To identify instances in which a
market participant’s behavior may
require investigation and evaluation to
determine whether a tariff violation has
occurred, or may be a potential Market
Behavior Rule 1 violation, and
immediately notify appropriate
Commission staff for possible
investigation.
3. Good market rules are essential to
efficient wholesale markets in which
competing suppliers have incentives to
meet the customers’ needs for reliable
service at the least cost. ISO/RTO
markets are operationally complex.
MMUs should have access to data and
other resources to evaluate participant
behavior and responses in these
markets. As such, MMUs should
evaluate the market-specific responses
of individual market participants to
existing or proposed market rules and
tariff provisions. It is therefore critical
that the MMU consistently and
impartially evaluate the existing ISO/
RTO rules and tariff provisions,
including mitigation and their effects on
the economic signals sent to market
participants. However, it is the
responsibility of the ISO/RTO to make
section 205 filings, rather than the
MMU.
4. Wholesale market design flaws can
present perverse incentives that may
result in unintended inefficient or
unreliable operations, but which may
not be manifested for many months or
years. It is critical that the MMU
provide the ISO/RTO and the
Commission with its perspective and
expertise in the development of market
rules and tariff provisions. It is also
essential that the MMU work
proactively in identifying market design
1 Investigation of Terms and Conditions of Public
Utility Market-Based Rate Authorizations, 105
FERC ¶ 61,218 (2003), order on reh’g,107 FERC
¶ 61,175 (2004).
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17:59 Jun 16, 2005
Jkt 205001
flaws, and provide assistance to the
ISO/RTO in developing appropriate rule
changes that will promote reliable and
efficient operation of the wholesale
markets. While the Commission is
responsible for ensuring just and
reasonable rates, the Commission does
benefit from the expertise of the ISO/
RTO to provide the tariff filings to the
Commission that help ensure that the
market rules in place work effectively
and to ensure that customers receive the
full benefits of competitive wholesale
markets. In response, the Commission
makes every effort to act in a timely
manner on such filings, and has recently
announced procedures to assure
expeditious Commission action when
necessary to ensure smooth functioning
of wholesale markets.2
5. Organized markets work best to
benefit customers when the market rules
and tariff provisions governing ISO/
RTO-administered markets and
contained in the ISO/RTO tariff are
clearly understood by and followed by
market participants. MMUs should
therefore vigilantly monitor participant
behavior. For this reason, the
Commission has determined that ISOs/
RTOs may administer compliance with
tariff provisions only if they are
expressly set forth in the tariff; involve
objectively identifiable behavior; and do
not subject the seller to sanctions or
consequences other than those expressly
approved by the Commission and set
forth in the tariff, with the right of
appeal to the Commission.3 Such
penalties, however, must be designed to
be a clear deterrent to unwanted
behavior, without being so high as to be
unnecessarily punitive.4
6. Beyond the objectively identifiable,
Commission-approved tariff provisions
that are administered by the ISO/RTO,
there may be situations in which actions
of a market participant require
investigation and evaluation to
determine whether a violation occurred,
or in which the provisions of the tariff
2 See Guidance Order on Expedited Tariff
Revisions for Regional Transmission Organizations
and Independent System Operators, 111 FERC
¶ 61,009 (2005).
3 In California Indep. Sys. Operator Corp., 106
FERC ¶ 61,179 (2004), the Commission stated that
as long as there are appeal rights to the
Commission, MMUs may administer certain
objective behavior-related tariff provisions and to
charge specified, Commission-approved penalties
for such tariff violations. However, where policy
issues are implicated or the question of whether a
tariff violation has occurred cannot be determined
objectively pursuant to Commission-approved tariff
provisions, it is the Commission’s statutory
responsibility to address the question.
4 See California Indep. Sys. Operator Corp., 106
FERC ¶ 61,179 (2004), order on reh’g, 107 FERC
¶ 61,118 (2004); see also California Indep. Sys.
Operator Corp., 109 FERC ¶ 61,087 (2004), order
denying reh’g, 109 FERC ¶ 61,089 (2004).
PO 00000
Frm 00028
Fmt 4703
Sfmt 4703
do not specifically address undesirable
market behavior. If, in the course of
monitoring participant behavior, the
MMU finds that an action by a market
participant may require investigation
and evaluation, or may be a potential
violation of a market rule contained in
an ISO/RTO-filed tariff, or may be a
violation of the Market Behavior Rules,
the MMU should notify the Commission
staff.5 In this way the Commission will
act in cases where market participants’
behavior falls outside of the limited area
of objectively identifiable, specific
penalty rule violations the ISO/RTO
may administer.6
7. The MMU should monitor and
regularly report on performance and
structure of the electricity market within
the ISO/RTO region. Since these
markets ultimately exist for the benefit
of customers, the MMU should focus on
how efficiently the markets are
responding to customers’ needs for
reliable electricity supply at the lowest
long run cost to customers. An in-depth
review should include an evaluation of
market prices of ISO/RTO-administered
products (e.g., real-time and day ahead
energy markets, locational marginal
prices, and ancillary services) and
specifically determine the extent to
which the prices reflect competitive
outcomes, not market power abuses.
The MMU should also be responsible
for providing an analysis of the
structural competitiveness of the
wholesale markets and a determination
of effectiveness of bid mitigation rules
to remedy potential exercise of market
power. In addition, the MMU should
evaluate the effectiveness of the markets
in signaling needed investment in
generation, transmission, and demand
response infrastructure. Market signals
for additional investment are only
valuable to customers to the extent that
the signals can reasonably result in the
needed market investment response.
Thus, it is imperative that the MMU also
identify any potential barriers that may
impede the market’s ability to provide
needed investments. In all instances, the
MMU should be proactive in
recommending changes to the ISO/RTO.
5 See Appendix A for protocols MMUs should
follow in bringing referrals to the Commission.
6 Where the Commission undertakes the
enforcement of matters referred to it by the MMU,
the Commission will exercise its discretion to
determine the appropriate remedy for violations,
applying the policies and principles set forth in
Investigation of Terms and Conditions of Public
Utility Market-Based Rate Authorizations, 105
FERC ¶ 61,218 (2003) (Market Behavior Rules
Order), order on reh’g, 107 FERC ¶ 61,175 (2004).
E:\FR\FM\17JNN1.SGM
17JNN1
Federal Register / Vol. 70, No. 116 / Friday, June 17, 2005 / Notices
By the Commission.
Linda Mitry,
Deputy Secretary.
Appendix A—Protocols on MMU;
Referrals to the Commission for
Enforcement
1. In the Market Behavior Rules Order, the
Commission concluded that it is appropriate
for ISOs/RTOs to administer certain matters
that concern market behavior (with appeal
rights to the Commission) if the behavior is
objectively identifiable and set forth in the
ISO/RTO tariff and for which the violations
have clear Commission-approved sanctions
that are set forth in the tariff.7 All other
aspects of tariff related enforcement, as well
as enforcement of the Market Behavior
Rules,8 are the responsibility of the
Commission.9 The Commission also stated
that it is the obligation of the MMU to inform
the Commission of potential Market Behavior
Rule violations and any violations of the ISO/
RTO tariff that the Commission has not
allowed the ISO/RTO to resolve in the first
instance.10 In that regard, the Commission
further noted that the Commission Staff
would develop ‘‘appropriate triggers for
referring compliance issues to the
Commission.’’ 11
2. In addition to providing that the
Commission will enforce the Market
Behavior Rules, the Market Behavior Rules
Order placed a 90-day time limit on
responding to allegations of violations of the
Market Behavior Rules.12 The Commission
must act, by initiating an investigation,
within 90 days ‘‘from the date it knew of an
alleged violation of its Market Behavior Rules
or knew of the potentially manipulative
character of an action or transaction.’’ 13
Knowledge on the part of the Commission is
defined as including a call to the
Commission’s Hotline alleging inappropriate
behavior or communication with the
Commission’s Enforcement Staff.
3. The following protocols are for the
purpose of implementing and effectuating
referrals by the MMUs to the Commission of:
(1) Alleged tariff violations that the
Commission has not allowed the ISOs/RTOs
to administer and resolve in the first
instance; and (2) alleged violations of Market
Behavior Rules.14 It is important to
understand that the referral protocols set
7 Market
Behavior Rules Order at P 182.
id. at Appendix A. The six Market Behavior
Rules adopted in the Market Behavior Rules Order
address: (1) Unit operations; (2) market
manipulation; (3) communications; (4) reporting; (5)
record retention; and (6) tariff-related matters.
9 Id. at P 185. If, however, the Market Behavior
Rules overlap with clearly stated tariff provisions
for behavior which is objectively identifiable and
for which the violations have Commissionapproved sanctions, then the Commission will defer
to the MMU in the first instance, subject to possible
review.
10 Id. at P 184.
11 Id. See also California Indep. Sys. Operator
Corp., 106 FERC ¶ 61,179 at PP 44, 101 (2004).
12 Id. at P 148.
13 Id.
14 We will, hereinafter, refer to both these alleged
tariff violations and alleged Market Behavior Rules
violations as ‘‘Market Violations.’’
8 See
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17:59 Jun 16, 2005
Jkt 205001
forth below are not intended to affect, and
should not affect in any manner, the regular
and ongoing communications and dialogue
that the MMUs have with Commission Staff
about a variety of market-related matters and
issues, including the status of the markets
and activities of the market participants.15 In
addition, ongoing communications between
the ISO/RTO staff and Commission Staff who
are on-site at the various ISOs/RTOs, as in
the case for California ISO, Midwest ISO and
Southwest Power Pool, should not be
affected. These protocols are solely addressed
to referrals to the Commission of Market
Violations. As is the case with any matter
that may be the subject of an investigation,
the Commission will determine whether and
to what extent to conduct an investigation.
Protocols:
4. Protocol No. 1. An MMU should make
a referral to the Commission in all instances
where the MMU has reason to believe that a
Market Violation may have occurred. While
the MMU need not be able to prove that a
Market Violation has occurred, the MMU
should provide sufficient credible
information to warrant further investigation
by the Commission. Once the MMU has
obtained sufficient credible information to
warrant referral to the Commission, the MMU
should immediately refer the matter to the
Commission and desist from independent
action related to the alleged Market
Violation[s].16
5. Protocol No. 2. All referrals to the
Commission of alleged Market Violations
should be in writing, whether transmitted
electronically, by fax, mail, or courier. The
MMU may alert the Commission orally in
advance of the written referral, but the
Commission will not act without a written
referral.
6. Protocol No. 3. The referral should be
addressed to the Commission’s Director of
the Enforcement Division of the Office of
Market Oversight and Investigation, with a
copy also directed to both the Director of the
Office of Market, Tariffs and Rates and the
Commission’s General Counsel.
7. Protocol No. 4. The referral should
include, but is not limited to, the following
information:
(a) The name[s] of and, if possible, the
contact information for, the market
participants that allegedly took the action[s]
that constituted the alleged Market
Violation[s];
(b) The date[s] or time period during which
the alleged Market Violation[s] occurred and
whether the alleged wrongful conduct is
ongoing;
at P 184.
is noteworthy that the Commission’s 90-day
time period in which to open an investigation
regarding a Market Behavior Rule violation may
begin with a communication other than a referral
from the MMU since, as noted earlier, a call to the
Hotline or any communication with the
Commission’s Enforcement Staff alleging a Market
Behavior Rule violation will start the 90-day time
period. (See Market Behavior Rules Order at P 148).
If, however, the triggering communication was from
the MMU, the MMU should make a referral, to the
extent it determines one is warranted, as soon as
practicable so that Enforcement has the benefit of
the referral prior to the time it must take action—
i.e., within the 90 days of the initial
communication.
PO 00000
15 Id.
16 It
Frm 00029
Fmt 4703
Sfmt 4703
35249
(c) The specific Market Behavior Rule[s]
and/or tariff provision[s] that were allegedly
violated;
(d) The specific act[s] or conduct that
allegedly violated the Market Behavior Rule
or tariff;
(e) The consequences in the market
resulting from the act[s] or conduct,
including, if known, an estimate of economic
impact on the market;
(f) If the MMU believes that the act[s] or
conduct constituted manipulative behavior
in violation of Market Behavior Rule 2, a
description of the alleged manipulative effect
on market prices, market conditions, or
market rules;
(g) Any other information that the MMU
believes is relevant and may be helpful to the
Commission.
8. Protocol No. 5. Following a referral to
the Commission, the MMU should continue
to notify and inform the Commission of any
information that the MMU learns of that may
be related to the referral, but the MMU
should not undertake any investigative steps
regarding the referral except at the express
direction of the Commission Staff. However,
this does not mean the MMU cannot
continue its monitoring functions and make
recommendations to the ISO/RTO,
stakeholders, and the Commission on tariff
changes that may be necessary.
[FR Doc. 05–11935 Filed 6–16–05; 8:45 am]
BILLING CODE 6717–01–P
ENVIRONMENTAL PROTECTION
AGENCY
[ER–FRL–6664–5]
Environmental Impact Statements and
Regulations; Availability of EPA
Comments
Availability of EPA comments
prepared pursuant to the Environmental
Review Process (ERP), under section
309 of the Clean Air Act and Section
102(2)(c) of the National Environmental
Policy Act, as amended. Requests for
copies of EPA comments can be directed
to the Office of Federal Activities at
202–564–7167. An explanation of the
ratings assigned to draft environmental
impact statements (EISs) was published
in the Federal Register dated April 1,
2005 (70 FR 16815).
Draft EISs
EIS No. 20050142, ERP No. D–NOA–
K39092–CA, Programmatic—Montrose
Settlements Restoration Program
(MSRP) Draft Restoration Plan, To
Restore Injured Natural Resources,
Channel Islands, Southern California
Bight including Baja California Pacific
Islands, Orange County, CA
Summary: EPA expressed concerns
about direct and indirect impacts, the
feasibility of the artificial reef projects,
and their inclusion in the alternatives,
E:\FR\FM\17JNN1.SGM
17JNN1
]]>Agencies
[Federal Register Volume 70, Number 116 (Friday, June 17, 2005)]
[Notices]
[Pages 35247-35249]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-11935]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. PL05-1-000]
Policy Statement on Market Monitoring Units
Issued May 27, 2005.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Policy statement.
-----------------------------------------------------------------------
SUMMARY: The Federal Energy Regulatory Commission (Commission) is
issuing this policy statement is to provide guidance on the coordinated
roles and responsibilities of the Commission and market monitoring
units (MMUs) associated with Independent System Operators (ISOs) and
Regional Transmission Organizations (RTOs).
DATES: May 27, 2005.
FOR FURTHER INFORMATION CONTACT: Ted Gerarden (Technical Information),
Office of Market Oversight and Investigations, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426.
(202) 502-6187. Ted.Gerarden@ferc.gov. Lodie White (Legal Information),
Office of General Counsel--Markets, Tariffs & Rates, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426.
(202) 502-6193. Lodie.White@ferc.gov.
SUPPLEMENTARY INFORMATION
Before Commissioners: Pat Wood, III, Chairman; Nora Mead Brownell,
Joseph T. Kelliher, and Suedeen G. Kelly.
Market Monitoring Units in Regional Transmission Organizations and
Independent System Operators; Policy Statement on Market Monitoring
Units
1. The purpose of this policy statement is to provide guidance on
the role of market monitoring units (MMUs) associated with Independent
System Operators (ISOs) and Regional Transmission Organizations (RTOs).
MMUs perform an important role in assisting the Commission in enhancing
the competitiveness of ISO/RTO markets. Competitive markets benefit
customers by assuring that prices properly reflect supply and demand
conditions. MMUs monitor organized wholesale markets to identify
ineffective market rules and tariff provisions, identify potential
anticompetitive behavior by market participants, and provide the
comprehensive market analysis critical for informed policy decision
making. This policy statement provides guidance on the coordinated
[[Page 35248]]
roles and responsibilities of the Commission and the MMUs.
2. In order to achieve the stated purpose of enhancing the
competitive structure of the ISO/RTO markets, MMUs perform several
valuable tasks:
To identify ineffective market rules and tariff provisions
and recommend proposed rule and tariff changes to the ISO/RTO that
promote wholesale competition and efficient market behavior.
To review and report on the performance of wholesale
markets in achieving customer benefits.
To provide support to the ISO/RTO in the administration of
Commission-approved tariff provisions related to markets administered
by the ISO/RTO (e.g., day-ahead and real-time markets).
To identify instances in which a market participant's
behavior may require investigation and evaluation to determine whether
a tariff violation has occurred, or may be a potential Market Behavior
Rule \1\ violation, and immediately notify appropriate Commission staff
for possible investigation.
---------------------------------------------------------------------------
\1\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, 105 FERC ] 61,218 (2003), order on
reh'g,107 FERC ] 61,175 (2004).
---------------------------------------------------------------------------
3. Good market rules are essential to efficient wholesale markets
in which competing suppliers have incentives to meet the customers'
needs for reliable service at the least cost. ISO/RTO markets are
operationally complex. MMUs should have access to data and other
resources to evaluate participant behavior and responses in these
markets. As such, MMUs should evaluate the market-specific responses of
individual market participants to existing or proposed market rules and
tariff provisions. It is therefore critical that the MMU consistently
and impartially evaluate the existing ISO/RTO rules and tariff
provisions, including mitigation and their effects on the economic
signals sent to market participants. However, it is the responsibility
of the ISO/RTO to make section 205 filings, rather than the MMU.
4. Wholesale market design flaws can present perverse incentives
that may result in unintended inefficient or unreliable operations, but
which may not be manifested for many months or years. It is critical
that the MMU provide the ISO/RTO and the Commission with its
perspective and expertise in the development of market rules and tariff
provisions. It is also essential that the MMU work proactively in
identifying market design flaws, and provide assistance to the ISO/RTO
in developing appropriate rule changes that will promote reliable and
efficient operation of the wholesale markets. While the Commission is
responsible for ensuring just and reasonable rates, the Commission does
benefit from the expertise of the ISO/RTO to provide the tariff filings
to the Commission that help ensure that the market rules in place work
effectively and to ensure that customers receive the full benefits of
competitive wholesale markets. In response, the Commission makes every
effort to act in a timely manner on such filings, and has recently
announced procedures to assure expeditious Commission action when
necessary to ensure smooth functioning of wholesale markets.\2\
---------------------------------------------------------------------------
\2\ See Guidance Order on Expedited Tariff Revisions for
Regional Transmission Organizations and Independent System
Operators, 111 FERC ] 61,009 (2005).
---------------------------------------------------------------------------
5. Organized markets work best to benefit customers when the market
rules and tariff provisions governing ISO/RTO-administered markets and
contained in the ISO/RTO tariff are clearly understood by and followed
by market participants. MMUs should therefore vigilantly monitor
participant behavior. For this reason, the Commission has determined
that ISOs/RTOs may administer compliance with tariff provisions only if
they are expressly set forth in the tariff; involve objectively
identifiable behavior; and do not subject the seller to sanctions or
consequences other than those expressly approved by the Commission and
set forth in the tariff, with the right of appeal to the Commission.\3\
Such penalties, however, must be designed to be a clear deterrent to
unwanted behavior, without being so high as to be unnecessarily
punitive.\4\
---------------------------------------------------------------------------
\3\ In California Indep. Sys. Operator Corp., 106 FERC ] 61,179
(2004), the Commission stated that as long as there are appeal
rights to the Commission, MMUs may administer certain objective
behavior-related tariff provisions and to charge specified,
Commission-approved penalties for such tariff violations. However,
where policy issues are implicated or the question of whether a
tariff violation has occurred cannot be determined objectively
pursuant to Commission-approved tariff provisions, it is the
Commission's statutory responsibility to address the question.
\4\ See California Indep. Sys. Operator Corp., 106 FERC ] 61,179
(2004), order on reh'g, 107 FERC ] 61,118 (2004); see also
California Indep. Sys. Operator Corp., 109 FERC ] 61,087 (2004),
order denying reh'g, 109 FERC ] 61,089 (2004).
---------------------------------------------------------------------------
6. Beyond the objectively identifiable, Commission-approved tariff
provisions that are administered by the ISO/RTO, there may be
situations in which actions of a market participant require
investigation and evaluation to determine whether a violation occurred,
or in which the provisions of the tariff do not specifically address
undesirable market behavior. If, in the course of monitoring
participant behavior, the MMU finds that an action by a market
participant may require investigation and evaluation, or may be a
potential violation of a market rule contained in an ISO/RTO-filed
tariff, or may be a violation of the Market Behavior Rules, the MMU
should notify the Commission staff.\5\ In this way the Commission will
act in cases where market participants' behavior falls outside of the
limited area of objectively identifiable, specific penalty rule
violations the ISO/RTO may administer.\6\
---------------------------------------------------------------------------
\5\ See Appendix A for protocols MMUs should follow in bringing
referrals to the Commission.
\6\ Where the Commission undertakes the enforcement of matters
referred to it by the MMU, the Commission will exercise its
discretion to determine the appropriate remedy for violations,
applying the policies and principles set forth in Investigation of
Terms and Conditions of Public Utility Market-Based Rate
Authorizations, 105 FERC ] 61,218 (2003) (Market Behavior Rules
Order), order on reh'g, 107 FERC ] 61,175 (2004).
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7. The MMU should monitor and regularly report on performance and
structure of the electricity market within the ISO/RTO region. Since
these markets ultimately exist for the benefit of customers, the MMU
should focus on how efficiently the markets are responding to
customers' needs for reliable electricity supply at the lowest long run
cost to customers. An in-depth review should include an evaluation of
market prices of ISO/RTO-administered products (e.g., real-time and day
ahead energy markets, locational marginal prices, and ancillary
services) and specifically determine the extent to which the prices
reflect competitive outcomes, not market power abuses. The MMU should
also be responsible for providing an analysis of the structural
competitiveness of the wholesale markets and a determination of
effectiveness of bid mitigation rules to remedy potential exercise of
market power. In addition, the MMU should evaluate the effectiveness of
the markets in signaling needed investment in generation, transmission,
and demand response infrastructure. Market signals for additional
investment are only valuable to customers to the extent that the
signals can reasonably result in the needed market investment response.
Thus, it is imperative that the MMU also identify any potential
barriers that may impede the market's ability to provide needed
investments. In all instances, the MMU should be proactive in
recommending changes to the ISO/RTO.
[[Page 35249]]
By the Commission.
Linda Mitry,
Deputy Secretary.
Appendix A--Protocols on MMU; Referrals to the Commission for
Enforcement
1. In the Market Behavior Rules Order, the Commission concluded
that it is appropriate for ISOs/RTOs to administer certain matters
that concern market behavior (with appeal rights to the Commission)
if the behavior is objectively identifiable and set forth in the
ISO/RTO tariff and for which the violations have clear Commission-
approved sanctions that are set forth in the tariff.\7\ All other
aspects of tariff related enforcement, as well as enforcement of the
Market Behavior Rules,\8\ are the responsibility of the
Commission.\9\ The Commission also stated that it is the obligation
of the MMU to inform the Commission of potential Market Behavior
Rule violations and any violations of the ISO/RTO tariff that the
Commission has not allowed the ISO/RTO to resolve in the first
instance.\10\ In that regard, the Commission further noted that the
Commission Staff would develop ``appropriate triggers for referring
compliance issues to the Commission.'' \11\
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\7\ Market Behavior Rules Order at P 182.
\8\ See id. at Appendix A. The six Market Behavior Rules adopted
in the Market Behavior Rules Order address: (1) Unit operations; (2)
market manipulation; (3) communications; (4) reporting; (5) record
retention; and (6) tariff-related matters.
\9\ Id. at P 185. If, however, the Market Behavior Rules overlap
with clearly stated tariff provisions for behavior which is
objectively identifiable and for which the violations have
Commission-approved sanctions, then the Commission will defer to the
MMU in the first instance, subject to possible review.
\10\ Id. at P 184.
\11\ Id. See also California Indep. Sys. Operator Corp., 106
FERC ] 61,179 at PP 44, 101 (2004).
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2. In addition to providing that the Commission will enforce the
Market Behavior Rules, the Market Behavior Rules Order placed a 90-
day time limit on responding to allegations of violations of the
Market Behavior Rules.\12\ The Commission must act, by initiating an
investigation, within 90 days ``from the date it knew of an alleged
violation of its Market Behavior Rules or knew of the potentially
manipulative character of an action or transaction.'' \13\ Knowledge
on the part of the Commission is defined as including a call to the
Commission's Hotline alleging inappropriate behavior or
communication with the Commission's Enforcement Staff.
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\12\ Id. at P 148.
\13\ Id.
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3. The following protocols are for the purpose of implementing
and effectuating referrals by the MMUs to the Commission of: (1)
Alleged tariff violations that the Commission has not allowed the
ISOs/RTOs to administer and resolve in the first instance; and (2)
alleged violations of Market Behavior Rules.\14\ It is important to
understand that the referral protocols set forth below are not
intended to affect, and should not affect in any manner, the regular
and ongoing communications and dialogue that the MMUs have with
Commission Staff about a variety of market-related matters and
issues, including the status of the markets and activities of the
market participants.\15\ In addition, ongoing communications between
the ISO/RTO staff and Commission Staff who are on-site at the
various ISOs/RTOs, as in the case for California ISO, Midwest ISO
and Southwest Power Pool, should not be affected. These protocols
are solely addressed to referrals to the Commission of Market
Violations. As is the case with any matter that may be the subject
of an investigation, the Commission will determine whether and to
what extent to conduct an investigation.
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\14\ We will, hereinafter, refer to both these alleged tariff
violations and alleged Market Behavior Rules violations as ``Market
Violations.''
\15\ Id. at P 184.
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Protocols:
4. Protocol No. 1. An MMU should make a referral to the
Commission in all instances where the MMU has reason to believe that
a Market Violation may have occurred. While the MMU need not be able
to prove that a Market Violation has occurred, the MMU should
provide sufficient credible information to warrant further
investigation by the Commission. Once the MMU has obtained
sufficient credible information to warrant referral to the
Commission, the MMU should immediately refer the matter to the
Commission and desist from independent action related to the alleged
Market Violation[s].\16\
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\16\ It is noteworthy that the Commission's 90-day time period
in which to open an investigation regarding a Market Behavior Rule
violation may begin with a communication other than a referral from
the MMU since, as noted earlier, a call to the Hotline or any
communication with the Commission's Enforcement Staff alleging a
Market Behavior Rule violation will start the 90-day time period.
(See Market Behavior Rules Order at P 148). If, however, the
triggering communication was from the MMU, the MMU should make a
referral, to the extent it determines one is warranted, as soon as
practicable so that Enforcement has the benefit of the referral
prior to the time it must take action--i.e., within the 90 days of
the initial communication.
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5. Protocol No. 2. All referrals to the Commission of alleged
Market Violations should be in writing, whether transmitted
electronically, by fax, mail, or courier. The MMU may alert the
Commission orally in advance of the written referral, but the
Commission will not act without a written referral.
6. Protocol No. 3. The referral should be addressed to the
Commission's Director of the Enforcement Division of the Office of
Market Oversight and Investigation, with a copy also directed to
both the Director of the Office of Market, Tariffs and Rates and the
Commission's General Counsel.
7. Protocol No. 4. The referral should include, but is not
limited to, the following information:
(a) The name[s] of and, if possible, the contact information
for, the market participants that allegedly took the action[s] that
constituted the alleged Market Violation[s];
(b) The date[s] or time period during which the alleged Market
Violation[s] occurred and whether the alleged wrongful conduct is
ongoing;
(c) The specific Market Behavior Rule[s] and/or tariff
provision[s] that were allegedly violated;
(d) The specific act[s] or conduct that allegedly violated the
Market Behavior Rule or tariff;
(e) The consequences in the market resulting from the act[s] or
conduct, including, if known, an estimate of economic impact on the
market;
(f) If the MMU believes that the act[s] or conduct constituted
manipulative behavior in violation of Market Behavior Rule 2, a
description of the alleged manipulative effect on market prices,
market conditions, or market rules;
(g) Any other information that the MMU believes is relevant and
may be helpful to the Commission.
8. Protocol No. 5. Following a referral to the Commission, the
MMU should continue to notify and inform the Commission of any
information that the MMU learns of that may be related to the
referral, but the MMU should not undertake any investigative steps
regarding the referral except at the express direction of the
Commission Staff. However, this does not mean the MMU cannot
continue its monitoring functions and make recommendations to the
ISO/RTO, stakeholders, and the Commission on tariff changes that may
be necessary.
[FR Doc. 05-11935 Filed 6-16-05; 8:45 am]
BILLING CODE 6717-01-P
