Standards of Conduct for Transmission Providers, 3958-3974 [E7-1118]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 72, Number 18 (Monday, January 29, 2007)]
[Proposed Rules]
[Pages 3958-3974]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1118]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 358

[Docket No. RM07-1-000]


Standards of Conduct for Transmission Providers

January 18, 2007.
AGENCY: Federal Energy Regulatory Commission; DOE.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The purpose of this Notice of Proposed Rulemaking is to 
propose permanent regulations regarding the standards of conduct 
consistent with the decision of the United States Court of Appeals of 
the District of Columbia in National Fuel Gas Supply Corporation v. 
FERC, 468 F.3d 831 (2006), regarding natural gas pipelines. On January 
9, 2007, the Commission issued an interim rule regarding the standards 
of conduct in response to the court's decision. The Commission is 
soliciting comments regarding whether or not the interim rule should be 
made permanent for natural gas transmission providers. The Commission 
is also soliciting comments regarding comparable changes for electric 
utility transmission providers: specifically, whether or not the 
standards of conduct should govern the relationship between electric 
utility transmission providers and their energy affiliates. Also, the 
Commission is proposing to: revise the definition of marketing, sales 
or brokering; make permanent the changes adopted in the interim rule 
for risk management employees and discretionary waivers; remove the 
regulations that permit the transmission provider to share information 
necessary to maintain the operations of its transmission system with 
its energy affiliates; add and revise various regulations to facilitate 
integrated resource planning and competitive solicitations; revise the 
regulations to require each transmission provider to post the name of 
its chief compliance officer, to delete outdated references, and to 
require that transmission provider employees certify that they have 
completed standards of conduct training; and, revise the definition of 
affiliate regarding exempt wholesale generators.

DATES: Comments must be filed on or before March 15, 2007. Reply 
comments must be filed on or before April 4, 2007.

ADDRESSES: You may submit comments identified by Docket No. RM07-1-000, 
by one of the following methods:
     Agency Web Site: https://ferc.gov. Follow the instructions 
for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to the Federal Energy Regulatory Commission, Office of the Secretary, 
888 First Street, NE., Washington, DC 20426. Please refer to the 
Comment Procedures Section of the preamble for additional information 
on how to file paper comments.

FOR FURTHER INFORMATION CONTACT: 

[[Page 3959]]

Eric Ciccoretti, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, Telephone: 
(202) 502-8493, E-mail: eric.ciccoretti@ferc.gov.
Deme Anas, Office of Enforcement, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, Telephone: (202) 502-8178, 
E-mail: demetra.anas@ferc.gov.
Stuart Fischer, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, Telephone: 
(202) 502-8517, E-mail: stuart.fischer@ferc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission) is 
proposing to adopt standards of conduct regulations that govern the 
relationship between natural gas transmission providers and their 
marketing affiliates in light of the decision of the United States 
Court of Appeals for the District of Columbia Circuit concerning the 
standards of conduct for transmission providers under Order No. 
2004.\1\ In National Fuel Gas Supply Corporation v. FERC (National 
Fuel),\2\ the court determined that the Commission did not support the 
standards of conduct's definition of energy affiliate and vacated Order 
Nos. 2004, 2004-A, 2004-B, 2004-C and 2004-D (collectively referred to 
as Order No. 2004) as applied to natural gas pipelines and remanded the 
orders to the Commission.\3\ Specifically, the court rejected the 
Commission's attempt to extend the standards of conduct beyond 
pipelines' relationships with their marketing affiliates to also govern 
pipelines' relationships with numerous non-marketing affiliates, such 
as producers, gatherers, and local distribution companies (energy 
affiliates). In light of this, the court found moot the other issues 
raised on appeal.\4\
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    \1\ On November 25, 2003, the Commission added Part 358 to the 
regulations adopting standards of conduct that apply uniformly to 
natural gas and electric utility transmission providers. 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, order on reh'g, Order No. 2004-D, 110 
FERC ] 61,320 (2005), remanded as it applies to natural gas 
pipelines, National Fuel Gas Supply Corporation v. FERC, 468 F.3d 
831, (D.C. Cir. Nov. 17, 2006).
    \2\ National Fuel, slip op. at 4.
    \3\ Id.
    \4\ Id.
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    2. On January 9, 2007, the Commission issued an interim rule that 
promulgated temporary regulations consistent with the court's decision, 
but designed to prevent a regulatory gap with respect to standards of 
conduct for natural gas transmission providers and their marketing 
affiliates.\5\ The purpose of this Notice of Proposed Rulemaking (NOPR) 
is to propose permanent regulations consistent with the court's 
decision regarding natural gas pipelines. The Commission is also 
soliciting comments regarding whether or not to make comparable changes 
for electric utility transmission providers. With respect to both 
industries, the Commission seeks evidence regarding the scope of the 
rules, including application of the rules to energy affiliates. This 
issuance will provide a forum to develop the appropriate record for any 
future action. Moreover, because we are initiating a rulemaking 
proceeding, the Commission also takes this opportunity to propose 
additional changes to the standards of conduct, including, among other 
things, proposing provisions to facilitate integrated resource planning 
and competitive solicitations for electric utility transmission 
providers.
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    \5\ Standards of Conduct for Transmission Providers, Order No. 
690, 72 FR 2427 (Jan. 19, 2007); FERC Stats. & Regs. ] 31,327 (Jan. 
9, 2007).
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    3. In this NOPR, the Commission proposes to make permanent the 
interim regulations that made the standards of conduct inapplicable to 
the relationship between natural gas pipeline transmission providers 
and their energy affiliates. The Commission also proposes to: (1) To 
revise the definition of marketing, sales or brokering at Sec.  
358.3(e) of the Commission's regulations; (2) make permanent the 
changes adopted in the interim rule for Sec.  358.4(a)(6) of the 
Commission's regulations regarding risk management employees and 
Sec. Sec.  358.5(c)(4)(i) and (ii) of the Commission's regulations 
regarding discretionary waivers; (3) remove Sec.  358.5(b)(8) of the 
Commission's regulations, which permits the transmission provider to 
share information necessary to maintain the operations of its 
transmission system with its energy affiliates; (4) add and revise 
various sections to facilitate integrated resource planning and 
competitive solicitations; (5) revise Sec.  358.4(e) of the 
Commission's regulations to require each transmission provider to post 
the name of its chief compliance officer, to delete outdated 
references, and to require that transmission provider employees certify 
that they have completed standards of conduct training; and (6) revise 
the definition of affiliate regarding exempt wholesale generators at 
Sec.  358.3(b)(2) of the Commission's regulations.

A. Order No. 2004

    4. Prior to Order No. 2004, the Commission had two separate sets of 
regulations governing standards of conduct for transmission providers. 
The regulations applicable to natural gas pipelines were issued in 
Order No. 497 in 1988,\6\ under sections 4 and 5 of the Natural Gas 
Act.\7\ In 1996, the Commission issued Order No. 889,\8\ which created 
standards of conduct regulations applicable to electric utilities under 
sections 205 and 206 of the Federal Power Act.\9\ Both rules had the 
same goal--to prevent transmission providers from wielding their market 
power over transmission to give undue preference or unduly 
discriminatory treatment in favor of their marketing affiliates over 
non-affiliates. Both rules employed the same general approach, e.g., 
requiring employees engaged in transmission services to function 
independently from employees of its marketing affiliates and imposing 
prohibitions restricting transmission providers from sharing certain 
information with their marketing affiliates. The rules were designed to 
ensure that affiliated and non-affiliated transmission customers were 
treated on an equal basis. However, the standards of conduct under 
Order Nos. 497 and 889 contained some differences, particularly with 
respect to the

[[Page 3960]]

information sharing prohibitions and posting requirements.
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    \6\ 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 (D.C. Cir. 1992).
    \7\ 15 U.S.C. 717c and 717d; see also former 18 CFR part 161 
(2003).
    \8\ 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 
Jan. 1991-June 1996 ] 31,035 (Apr. 24, 1996); Order No. 889-A, order 
on reh'g, 62 FR 12484 (Mar. 14, 1997), FERC Stats. & Regs., 
Regulations Preambles 1996-2000 ] 31,049 (Mar. 4, 1997); Order No. 
889-B, reh'g denied, 62 FR 64715 (Dec. 9, 1997), 81 FERC ] 61,253 
(Nov. 25, 1997).
    \9\ 16 U.S.C. 824d and 824e; see also former 18 CFR 37.4 (2003).
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    5. In Order No. 2004, the Commission revised the standards of 
conduct so that one set of regulations applied uniformly to both 
natural gas and electric utility transmission providers and their 
affiliates.\10\ In doing so, the Commission noted several reasons for 
issuing new standards of conduct.\11\ In Order No. 2004, the Commission 
also expanded the coverage of the standards of conduct to govern the 
relationships between transmission providers and energy affiliates.\12\ 
Previously, the standards of conduct governed the relationships between 
transmission providers and their marketing affiliates.\13\
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    \10\ 18 CFR 358.3(a)(1) and (2) (definition of transmission 
provider).
    \11\ Order No. 2004 at P 6-15.
    \12\ Section 358.3(d) defined energy affiliate as any affiliate 
which is engaged or involved in transmission transactions; manages 
or controls pipeline capacity; buys, sells, trades or administers 
natural gas or electric energy in domestic energy or transmission 
markets; and engages in financial transactions relating to the sale 
or transmission of natural gas or electric energy in such markets. 
18 CFR 358.3(d).
    \13\ Under Order No. 497, marketing included affiliates and 
business divisions engaged in making sales for resale of natural gas 
in interstate commerce (former 18 CFR 161.2(c)); and under Order No. 
889, marketing covered affiliates and business divisions engaged in 
making sales for resale of electric energy in interstate commerce 
(former 18 CFR 37.3(e)).
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B. Matters Appealed

    6. Five issues were appealed from Order No. 2004: (1) The extension 
of the standards of conduct to cover the relationship between natural 
gas transmission providers and their energy affiliates under Sec.  
358.3(d); (2) the scope of the restrictions on sharing risk management 
employees between natural gas pipeline transmission providers and their 
marketing/energy affiliates under Sec.  358.4(a)(6); (3) the scope of 
the restrictions on sharing lawyers between natural gas pipeline 
transmission providers and their marketing/energy affiliates; (4) the 
scope of the requirement for natural gas pipeline transmission 
providers to post all discretionary acts under Sec.  358.5(c)(4); and 
(5) the timing as to when newly certificated pipelines become subject 
to the standards of conduct.

C. The Court's Decision

    7. In National Fuel, the court vacated Order No. 2004 as applicable 
to natural gas pipelines because of the expansion of the standards of 
conduct to include energy affiliates. The court explained that the 
Commission relied on both theoretical grounds and on record evidence to 
justify this expansion. The court concluded that the Commission's 
record evidence did not withstand scrutiny and, thus, concluded the 
expansion was arbitrary and capricious in violation of the 
Administrative Procedure Act.\14\ The court vacated Order No. 2004 as 
applicable to natural gas pipelines. In light of this disposition, the 
court did not address the other four issues raised on appeal regarding 
Order No. 2004.
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    \14\ National Fuel, slip op. at 4.
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II. Discussion

    8. The NOPR proposes to make changes to Part 358 (discussed in 
greater detail below) consistent with National Fuel, seeks comment on 
other issues, and clarifies that waivers or exemptions that the 
Commission issued under Order No. 2004 remain valid and are not 
negatively impacted by the National Fuel decision.

A. Partially Repromulgating Part 358

    9. Order No. 2004 codified many case-by-case exceptions that had 
evolved during the implementation of Order Nos. 497 and 889. These 
provisions included: codifying exceptions to the independent 
functioning requirement;\15\ revising information sharing prohibitions 
to reflect practical considerations \16\ and emergency 
circumstances;\17\ codifying a training requirement;\18\ revising and 
imposing new posting requirements to improve transparency;\19\ and 
requiring transmission providers to designate a chief compliance 
officer.\20\ The NOPR proposes to re-adopt those sections of Part 358 
that were not appealed and not found infirm in National Fuel.
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    \15\ 18 CFR 358.4.
    \16\ 18 CFR 358.5(b)(6) and (8).
    \17\ 18 CFR 358.4(a)(2).
    \18\ 18 CFR 358.4(e)(5).
    \19\ 18 CFR 358.5(a) and (b).
    \20\ 18 CFR 358.4(e)(6).
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B. The Definition of Energy Affiliates

    10. Because the court's decision focused on the Commission's lack 
of evidence to support expanding the standards of conduct to govern the 
relationship between natural gas transmission providers and their non-
marketing affiliates, the interim rule added a new provision stating 
that the standards of conduct do not govern the relationship between 
natural gas transmission providers and their energy affiliates.\21\ In 
this NOPR, consistent with the court's decision, the Commission 
proposes to retain this provision on a permanent basis for natural gas 
transmission providers. We seek comment on whether this is sufficient 
to protect customers.
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    \21\ Interim 18 CFR 358.1(e) states: ``The Standards of Conduct 
in this part do not govern the relationship between a natural gas 
Transmission Provider and its energy affiliates.''
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    11. The Commission also is seeking comment on the current 
restrictions relating to energy affiliates of electric utility 
transmission providers. The court in National Fuel did not address this 
issue because electric utility transmission providers did not appeal 
Order No. 2004. However, the Commission believes it is important to 
address the issue here.
    12. The Commission has reviewed the existing regulations, the 
rationale for promulgating them, and other modifications being 
discussed herein concerning whether or not to eliminate the 
restrictions on energy affiliates of electric utility transmission 
providers. If we were to eliminate these restrictions, the non-
marketing energy affiliates of electric transmission providers would no 
longer be subject to the standards of conduct. However, since we have 
not yet received comments on the issue or engaged in outreach, this 
NOPR does not suggest regulatory text on this issue. We intend to 
carefully examine any comments received on this issue and weigh them 
heavily in our deliberations on a Final Rule.
    13. When the Commission adopted the definition of energy affiliate 
in Order No. 2004, the Commission focused most closely on examples of 
the potential for undue discrimination in favor of energy affiliates of 
natural gas pipelines, rather than of electric utility transmission 
providers.\22\ Although the Commission noted certain violations of 
Order No. 889 by electric utility transmission providers,\23\ these 
instances involved undue preferences given to an electric transmission 
provider's merchant function. As we discuss further below, the 
definition of marketing affiliate expressly includes an electric 
transmission provider's merchant function and the Commission sees no 
reason to delete that important protection.\24\ Furthermore, in an area 
where the Commission made findings of undue discrimination that was not 
covered by Order No. 889--undue preferences given to asset managers--we 
are proposing, as discussed below, to broaden the definition of 
marketing affiliate so that the standards of conduct explicitly 
prohibit such undue preferences.
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    \22\ Order No. 2004 at P 10-11.
    \23\ Order No. 2004 at P 14.
    \24\ 18 CFR 358.3(c)(2).
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    14. Over the past three years, the Commission has engaged in 
extensive outreach and consultation with the industry regarding the 
standards of

[[Page 3961]]

conduct. This outreach has included three public technical conferences 
(held in Houston, Chicago, and Scottsdale, Arizona) and numerous 
meetings between industry participants and our staff. Over the course 
of this outreach, we have received information and comments on many 
important issues arising under the standards of conduct. However, this 
outreach did not cover the issue addressed here--energy affiliate 
restrictions for electric utility transmission providers. Accordingly, 
the Commission seeks comment on whether applying the standards of 
conduct to the relationship between electric utility transmission 
providers and their marketing affiliates, but not to their energy 
affiliates would be sufficient to protect customers. Commenters who 
believe that it is appropriate to retain the standards of conduct for 
the relationship between electric utility transmission providers and 
their energy affiliates should submit evidence to support continued 
application of the definition of energy affiliates to electric utility 
transmission providers. Commenters who believe that we should not apply 
the standards of conduct to the relationship between electric utility 
transmission providers and their energy affiliates should provide 
support for their position that customers will be sufficiently 
protected from undue discrimination.
    15. Commenters should include a focus on the type of energy 
affiliate that they are discussing. Making the standards of conduct 
inapplicable to electric utility transmission providers and their 
energy affiliates would affect the relationship between a transmission 
provider and the following types of non-marketing energy affiliates 
(except as otherwise noted):
    a. Affiliated asset managers; \25\
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    \25\ See 18 CFR 358.3(d)(1) (``involved in transmission 
transactions''). Below, the Commission proposes to separately make 
the relationship between transmission providers and asset managers 
subject to the standards of conduct by expanding the definition of 
marketing affiliate.
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    b. Affiliated transmission customers that do not make sales for 
resale; \26\
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    \26\ See 18 CFR 358.3(d)(1) (``engages in * * * transmission 
transactions''); Order No. 2004-A at P 44.
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    c. Affiliated gas entities, e.g., affiliated producers, affiliated 
gatherers, affiliated gas Local Distribution Companies (LDCs), and 
affiliated intrastate pipelines;
    d. Affiliated financial institutions that do not engage in physical 
transactions, but only financial transactions; \27\
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    \27\ See 18 CFR 358.3(d)(4).
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    e. Affiliated entities that aggregate and re-sell transmission 
capacity without making sales for resales of energy; \28\
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    \28\ See 18 CFR 358.3(d)(1).
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    f. Affiliated electric LDCs; \29\
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    \29\ See 18 CFR 358.3(d)(5); Order No. 2004-C at P 24-25.
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    g. Affiliated electronic trading platforms; \30\ and,
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    \30\ See 18 CFR 358.3(d)(1); Order No. 2004-A at P 4.
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    h. Affiliated entities that buy, trade or administer electric 
energy.\31\
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    \31\ See 18 CFR 358.3(d)(3) (``buys, sells, trades or 
administers electric energy''). The Commission believes that the 
relationship with affiliates that make wholesale sales of electric 
energy in interstate commerce is governed by the definition of 
marketing. See 18 CFR 358.3(k).
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    The Commission seeks comments on whether the standards of conduct 
should continue to apply to these relationships.
    16. In addition, the Commission seeks comment, particularly from 
companies subject to both sets of standards, on whether it is desirable 
to maintain consistency between the standards of conduct applicable to 
natural gas transmission providers and electric utility transmission 
providers. We note that retaining the energy affiliate restriction for 
electric transmission providers, but not for natural gas transmission 
providers, would create, for some companies, inconsistent rules for 
different subsidiaries within a holding company. For example, an energy 
affiliate of an electric utility transmission provider would be 
restricted in communicating with that transmission provider, but if a 
natural gas transmission provider owned that same energy affiliate 
there would be no such restriction. Similarly, if a holding company 
owned both electric utility and natural gas transmission providers, two 
differing sets of rules would apply within the same holding company 
system. The electric transmission provider would be precluded from 
dealing with all energy affiliates in that system, whereas the natural 
gas pipeline company would not. Uniformity could lessen the compliance 
burden on the industry and ease oversight of compliance by the 
Commission staff, but the Commission recognizes that uniformity does 
not override the Commission's mandate for customer protection.
    17. Under the Natural Gas Act and the Federal Power Act, the 
Commission has the statutory mandate to prevent and remedy undue 
discrimination.\32\ Even absent the standards of conduct regulations 
promulgated under that authority, the Commission has the authority to 
prevent and remedy a transmission provider's undue preference or 
advantage granted in favor of its affiliates. If a transmission 
provider provides an undue preference or advantage in favor of an 
affiliate that is not covered by the standards of conduct, that undue 
preference may still be prohibited by the Natural Gas Act or Federal 
Power Act.
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    \32\ Sections 4 and 5 of the Natural Gas Act, 15 U.S.C. 717c and 
717e, state that no natural gas company shall make or grant an undue 
preference or advantage with respect to any transportation or sale 
of natural gas subject to the Commission's jurisdiction. Similarly, 
under sections 205 and 206 of the Federal Power Act, 16 U.S.C. 824d 
and 824e, no public utility shall make or grant an undue preference 
with respect to any transmission or sale subject to the Commission's 
jurisdiction.
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    18. We are not disturbing the fundamental protections to consumers 
and competitors of electric transmission providers that were adopted in 
Order No. 889 and retained in Order No. 2004. It will continue to be 
unlawful for electric utility transmission providers to provide any 
undue preference to their merchant function or any affiliate that owns 
generation or sells electricity. These are the core protections that 
customers and competitors have long supported and that we retain here. 
It also will continue to be unlawful for electric transmission 
providers to provide any undue preference to an affiliate selling or 
trading natural gas. Each of these protections is covered explicitly by 
the definition of marketing affiliate and is left undisturbed.

C. Revising the Definition of Marketing, Sales or Brokering

    19. The interim rule adopted a temporary regulation for natural gas 
pipeline transmission providers at Sec.  358.3(l) that mirrored the 
exceptions to the definition of marketing that were found in Order No. 
497.\33\ Accordingly, marketing means a sale of natural gas to any 
person or entity by a seller that is not an interstate pipeline, except 
when: (1) The seller is selling gas solely from its own production; (2) 
the seller is selling gas solely from its own gathering or processing 
facilities; or (3) the seller is an intrastate natural gas pipeline or 
a local distribution company making an on-system sale. The NOPR 
proposes to remove the interim regulation codified at Sec.  358.3(l) 
and incorporate those

[[Page 3962]]

exceptions in the definition of ``Marketing, sales or brokering'' for 
natural gas transmission providers currently located at Sec.  358.3(e).
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    \33\ Interim 18 CFR 358.3(l) states:
    Marketing or brokering means a sale of natural gas to any person 
or entity by a seller that is not an interstate pipeline, except 
when:
    (1) the seller is selling gas solely from its own production;
    (2) The seller is selling gas solely from its own gathering or 
processing facilities; or
    (3) The seller is an intrastate natural gas pipeline or a local 
distribution company making an on-system sale.
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    20. The electric utility and natural gas industries differ in 
certain respects that are relevant to the energy affiliate issue. The 
Commission is proposing, consistent with the National Fuel decision, to 
revise the definition of marketing affiliate to include certain 
exceptions that were adopted in Order No. 497, but deleted in Order No. 
2004. These exceptions would remove standards of conduct restrictions 
for a natural gas pipeline with respect to an affiliate's sales of gas 
from its own production, gathering or processing facilities. However, 
sales of electricity from a transmission provider's own ``production'' 
facilities--i.e., the generating plants operated by its merchant 
function--were already covered in Order No. 889 and, hence, Order No. 
2004 did not represent a change in this regard. Thus, we do not propose 
to disturb this longstanding customer protection, and will therefore 
retain the Order No. 2004 definition of marketing affiliate that 
explicitly covers an electric utility transmission provider's merchant 
function. We also note that the gathering and processing exceptions are 
also inapplicable to electric utility transmission providers and, 
hence, require no comparable change. We seek comment on these revised 
definitions of marketing affiliate for natural gas and electric 
transmission providers.
    21. The Commission also is proposing to expand the definition of 
marketing, sales or brokering to include entities that manage or 
control transmission capacity, such as asset managers or agents.\34\ 
Frequently, asset managers and agents are involved extensively in 
transmission transactions, they stand in the shoes of the transmission 
customer and act as nominating/balancing agent, and have access to all 
the transmission customer's transmission information.\35\ The 
Commission is proposing to include asset managers/agents within the 
definition of marketing based on information gathered during 
investigations by the Commission's Enforcement staff. In each of these 
matters, staff investigated, among other issues, asset managers/agents 
that were also marketing affiliates and whether the asset managers 
received an undue preference from their affiliated transmission 
providers. All of these matters concluded with settlements approved by 
the Commission, including the payment by American Electric Power 
Company, Inc. (AEP) of $21 million, the largest civil penalty in 
Commission history,\36\ and the payment by Cleco Corporation of the 
largest civil penalty under section 214 of the Federal Power Act.\37\ 
The third settlement, involving South Carolina Electric and Gas Company 
(SCEG), resulted in SCEG agreeing to a compliance plan.\38\ Because 
these investigations were resolved by settlements, the Commission never 
made any specific findings that asset managers/agents and their 
affiliates engaged in undue discrimination. Still, the activities 
identified by staff provide a sufficient basis for the Commission to 
propose to include asset managers/agents in the definition of marketing 
affiliates. That is the case even though the settled investigations 
involved asset managers who were also marketing affiliates. However, a 
review of the voluntary consent postings \39\ on several transmission 
providers' OASIS and Internet Web sites shows that sometimes asset 
managers are marketing affiliates, but that sometimes they are not.\40\
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    \34\ Generally, asset managers manage or control gas or electric 
assets, often including a transmission customer's capacity. Agents 
frequently are authorized to act in the place of transmission 
customers with respect to specified transmission-related activities 
such as nominations, scheduling or billing.
    \35\ In the investigation of Cleco Corporation, Commission staff 
observed that corporation's asset manager performed the following 
services for Cleco Corporation: (1) Transmission scheduling 
services; (2) resource coordination and delivery of power trading 
and ancillary services; (3) fuel purchases for generation use; (4) 
marketing and customer relations services; (5) commodity trading; 
(6) monitoring, energy management, scheduling, dispatch and 
accounting and billing services; (7) interaffiliate billing; (8) 
retail and wholesale marketing; and (9) energy trading. Cleco 
Corporation, 104 FERC ] 61,025 (2003) (Cleco).
    \36\ American Electric Power Company, Inc., 110 FERC ] 61,061 
(2005).
    \37\ See Cleco, supra note 35.
    \38\ South Carolina Electric & Gas Company, 111 FERC ] 61,217 
(2005).
    \39\ Currently, 18 CFR 358.5(b)(4) requires a transmission 
provider to post notice if a non-affiliated transmission customer 
voluntarily consents, in writing, to allow the transmission provider 
to share the non-affiliated transmission customer's information with 
a marketing or energy affiliate. 18 CFR 358.5(b)(4).
    \40\ For example, El Paso Natural Gas Company's voluntary 
consent postings on its Internet Web site identify that non-
affiliated customers have voluntarily consented to allow El Paso to 
disclose their respective information to El Paso's marketing and 
energy affiliates, e.g., El Paso Field Services, L.P. (an energy 
affiliate) and El Paso Marketing L.P. (a marketing affiliate.) 
https://tebb.epenergy.com/ebbepg/notices/
noticeView.asp?sPipelineCode=EPNG&sSubC (Dec. 8, 2006). Similar 
notices of asset management agreements or agency agreements can be 
found at the voluntary consent links of the OASIS or Internet Web 
sites for National Fuel Gas Supply Corp., Texas Eastern 
Transmission, LP, Tennessee Gas Pipeline Company, Potomac Electric 
Power Company, and Dominion Transmission Inc.
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    22. The Commission believes that the standards of conduct should 
govern the relationship between transmission providers and their 
affiliated asset managers. It would likely be unduly discriminatory to 
permit a transmission provider to inform its affiliated asset manager 
about an upcoming curtailment or outage, unless all other non-
affiliated asset managers or transmission customers have comparable 
access to that information. Including affiliated asset managers/agents 
in the definition of marketing would ensure that all asset managers are 
treated in a comparable fashion. The Commission is soliciting comments 
on whether to include this provision in the definition of marketing and 
encourages commenters to identify potential harm of including or not 
including asset managers/agents in the definition of marketing. For 
that purpose, proposed Sec.  358.3(e) reads as follows:

    Marketing, sales or brokering means a sale for resale of natural 
gas or electric energy in interstate commerce in U.S. energy or 
transmission markets. Marketing also includes managing or 
controlling transmission capacity of a third-party as an asset 
manager or agent.
    (1) A sales and marketing employee or unit includes:
    (i) An interstate natural gas pipeline's sales operating unit, 
to the extent provided in Sec.  284.286 of this chapter, and
    (ii) An electric public utility Transmission Provider's energy 
sales unit, unless such unit engages solely in bundled retail sales.
    (2) Marketing or sales does not include incidental purchases or 
sales of natural gas to operate interstate natural gas pipeline 
transmission facilities.
    (3) Marketing means a sale of natural gas to any person or 
entity by a seller that is not an interstate pipeline, except where:
    (i) The seller is selling gas solely from its own production;
    (ii) The seller is selling gas solely from its own gathering or 
processing facilities; or
    (iii) The seller is an intrastate natural gas pipeline or a 
local distribution company making an on-system sale.

D. Exceptions to the Independent Functioning Requirement--Risk 
Management Employees and Lawyers

    23. Section 358.4 requires, except in emergency circumstances, the 
transmission function employees \41\ of the transmission provider to 
function independently of the marketing affiliates' employees. 
Notwithstanding

[[Page 3963]]

this requirement, since 1988, the Commission has developed a body of 
case law, permitting certain types of employees to be shared between a 
transmission provider and its marketing affiliate. At the request of 
industry participants, Order No. 2004 reiterated these holdings by 
codifying exceptions to the independent functioning requirement that 
permit the sharing of officers and members of the board of directors 
(directors),\42\ support employees,\43\ field and maintenance 
employees,\44\ and risk management employees.\45\ Although industry 
participants urged the Commission to codify a general exception 
regarding the sharing of lawyers, the Commission did not do so stating 
that, if a lawyer participated in transmission policy decisions on 
behalf of a transmission provider, he or she would be considered a 
transmission function employee (and hence, not permissibly shared).\46\
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    \41\ Section 358.3(j) of the Commission's regulations currently 
defines transmission function employee as an employee, contractor, 
consultant or agent of a transmission provider who conducts 
transmission system operations or reliability functions, including, 
but not limited to, those who are engaged in day-to-day duties and 
responsibilities for planning, directing, organizing or carrying out 
transmission-related operations.
    \42\ 18 CFR 358.4(a)(5).
    \43\ 18 CFR 358.4(a)(4).
    \44\ 18 CFR 358.4(a)(4).
    \45\ 18 CFR 358.4(a)(6).
    \46\ Order No. 2004-A at P 157.
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    24. In describing these exceptions, the Commission stated that the 
sharing of these non-transmission functions allowed the transmission 
provider to realize the benefits of cost saving through integration 
where the shared employees do not have duties or responsibilities 
relating to transmission, and generally would not be in a position to 
give a marketing affiliate an undue preference.\47\ The Commission also 
stated that the exception allowing the sharing of officers and 
directors facilitated corporate governance activities, but that, to the 
extent a senior officer or director conducts transmission functions or 
is involved in planning, directing or organizing transmission 
functions, the officer's or director's status does not automatically 
exempt him/her from also being a transmission function employee.\48\ In 
Order No. 2004-A, the Commission stated that, although it permitted the 
sharing of these categories of employees, it would evaluate, in 
compliance audits and investigations, employees' actual duties to 
determine whether the transmission provider is appropriately applying 
the exception.\49\ In other words, regardless of an individual's title 
or how his or her responsibilities are labeled, if that individual is 
engaged in day-to-day duties and responsibilities for planning, 
directing, organizing or carrying out transmission-related operations, 
that individual is a transmission function employee (and may not be 
permissibly shared).
---------------------------------------------------------------------------

    \47\ Order No. 2004 at P 97.
    \48\ Order No. 2004-B at P 57.
    \49\ Order No. 2004-A at P 134.
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    25. Petitioners appealed the codification of the exception for 
permissibly shared risk management employees and the preamble 
discussion in Order No. 2004 regarding permissibly shared lawyers. As 
mentioned above, in National Fuel, the court did not address these 
matters, and, accordingly, sub silencio, invalidated these aspects of 
Order No. 2004. Accordingly, the Commission is seeking comment on 
whether to make permanent changes adopted by the interim rule by 
retaining Sec.  358.4(a)(6).\50\ The Commission also seeks comments on 
whether to make this change applicable to electric public utility 
transmission providers. The Commission is also seeking comments on 
whether additional guidance with respect to permissibly shared 
employees, such as shared risk management employees, lawyers and 
officers and directors, would be helpful given the different structure, 
sizes and operations of the various transmission providers.
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    \50\ Interim 18 CFR 358.4(a)(6) reads: ``Transmission Providers 
are permitted to share risk management employees that are not 
engaged in Transmission Functions or sales or commodity functions 
with their Marketing and Energy Affiliates. This provision does not 
apply to natural gas transmission providers.''
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E. Discretionary Tariff Provision

    26. In Order No. 2004, the Commission required each transmission 
provider to maintain a log detailing the circumstances and manner in 
which it exercised discretion under any terms of its tariff and post 
that information on its OASIS or Internet Web site.\51\ The regulatory 
language in Order No. 2004 was substantively identical to the 
requirement under Order No. 889, but it was different than the 
requirement under Order No. 497. Former Sec.  161.3(k) promulgated in 
Order No. 497 required a pipeline to maintain a written log of waivers 
that the pipeline grants with respect to tariff provisions that provide 
for such discretionary waivers and provide the log to any person 
requesting it within 24 hours of the request. On appeal, one of the 
petitioners claimed that Sec.  358.5(c)(4) was broader than former 
Sec.  161.3(k), arguing that there was a significant difference between 
granting waivers of tariff provisions that provide for such 
discretionary waivers (former Sec.  161.3(k)) and exercising discretion 
under any terms of its tariff (Sec.  358.5(c)(4)).
---------------------------------------------------------------------------

    \51\ 18 CFR 358.5(c)(4).
---------------------------------------------------------------------------

    27. To comply with the court's mandate in National Fuel, the 
interim rule modified Sec.  358.5(c)(4)(i) \52\ so that it only applies 
to electric transmission providers and added a separate provision for 
natural gas transmission providers at Sec.  358.5(c)(4)(i) that 
provides that natural gas transmission providers must maintain a 
written log of waivers that the natural gas transmission provider 
grants with respect to tariff provisions that provide for such 
discretionary waivers and provide the log to any person requesting it 
within 24 hours of the request. The purpose of the discretionary waiver 
posting requirement is to enable transmission customers to determine 
whether they are similarly situated and potentially entitled to 
comparable treatment by the transmission provider.
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    \52\ Section 358.5(c)(4)(i) provides that Electric Transmission 
Providers must maintain a written log, available for Commission 
audit, detailing the circumstances and manner in which they 
exercised their discretion under any terms of the tariff. The 
information contained in this log is to be posted on the OASIS or 
Internet Web site within 24 hours of when a Transmission Provider 
exercises its discretion under any terms of the tariff. 18 CFR 
358.5(c)(4)(i).
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    28. As mentioned above, in National Fuel, the court did not address 
this matter, and, accordingly, sub silencio, invalidated this aspect of 
Order No. 2004. The Commission is faced with making permanent this 
requirement for electric transmission providers, while having different 
requirements for natural gas transmission providers. Accordingly, the 
Commission is seeking comment on whether to make permanent changes 
adopted in the interim rule by retaining Sec. Sec.  358.5(c)(4)(i) and 
(ii) and seeking suggestions on what type of requirement is appropriate 
to give similarly situated customers sufficient information to 
determine whether they are being treated in a non-discriminatory 
fashion with respect to a transmission provider's discretionary 
activities. The Commission also encourages commenters to include 
suggestions on how we can craft the scope of the discretionary waiver 
requirement to minimize the burden on transmission providers while 
balancing the need for transparency in the market.

F. Timing of When a New Natural Gas Transmission Provider Becomes 
Subject to the Standards of Conduct

    29. Under Order No 497, a natural gas transmission provider became 
subject to the standards of conduct when the transmission provider 
commenced transportation transactions with its marketing or brokering 
affiliate.\53\ In the preamble of Order No. 2004, the Commission stated 
that newly

[[Page 3964]]

certificated transmission providers would become subject to the 
standards of conduct when the transmission providers begin soliciting 
business or negotiating contracts as those are activities which the 
Commission considers transmission function activities. In Order No. 
2004-B, the Commission stated that a new interstate pipeline should 
observe the standards of conduct when the pipeline is granted and 
accepts a certificate of public convenience and necessity and becomes 
subject to the Commission's jurisdiction under the Natural Gas Act.\54\ 
The Commission stated that its goal was to ensure that newly formed 
pipelines provide non-discriminatory treatment and limit their ability 
to unduly favor their marketing and energy affiliates.\55\ The timing 
of applicability of the standards of conduct was one of the items 
appealed, but not addressed in the National Fuel decision and vacated 
sub silencio. In the interim rule, the Commission did not require 
natural gas transmission providers to observe the standards of conduct 
until they commence transportation transactions with their marketing 
affiliates.
---------------------------------------------------------------------------

    \53\ Former 18 CFR 161.1 (2003).
    \54\ Order No. 2004-B at P 136.
    \55\ Order No. 2004-C at P 46.
---------------------------------------------------------------------------

    30. The issue on appeal was whether the Commission could apply the 
standards of conduct to a holder of a certificate that has not yet 
commenced transportation of natural gas. The Commission does not have 
any evidence that affiliate abuse has occurred in the time period 
before transportation commences, but believes there is clearly an 
incentive for the transmission provider to give an undue preference to 
its affiliates. A transmission provider must observe the non-
discrimination provisions of sections 4 and 5 of the Natural Gas Act 
(and sections 205 and 206 of the Federal Power Act). The Commission 
seeks comment on when a transmission provider should be required to 
comply with the standards of conduct and is proposing the following 
modification to Sec.  358.4(e)(2).

    Each Transmission Provider must be in full compliance with the 
standards of conduct within 30 days of becoming subject to the 
Commission's jurisdiction.

G. Revising Sec.  358.5(b)(8)

    31. Currently, Sec.  358.5(b)(8) states that a transmission 
provider is permitted to share information necessary to maintain the 
operations of the transmission system with its energy affiliates. In 
the Order No. 2004 proceeding, natural gas commenters asked the 
Commission to adopt a provision allowing communication of operational 
information with energy affiliates, such a producers, gatherers or 
LDCs. They argued that prohibiting the sharing of operational 
information might endanger the reliability of the gas transmission 
systems.\56\ Accordingly, Order No. 2004 codified current Sec.  
358.5(b)(8). In Order No. 2004, the Commission provided additional 
clarification explaining that this provision permits a transmission 
provider to share day-to-day, operational-type information with 
interconnected energy affiliates necessary to maintain the pipelines' 
operations, such information includes confirmations, nominations and 
schedulers with upstream producers and gathering facilities, 
operational data relating to interconnection points and communications 
related to the maintenance of interconnected facilities. The Commission 
added that it expected that these types of communications would take 
place between the operators of the pipeline or gas control 
facilities.\57\ As the Commission is proposing that the standards of 
conduct will no longer govern the relationship between natural gas 
transmission providers and their energy affiliates, it appears that 
this provision is no longer necessary because communications between a 
natural gas transmission provider and its affiliated/interconnected 
gatherer(s), \58\producer(s) and LDCs are not restricted by the 
standards of conduct. Therefore, the Commission proposes to delete 
Sec.  358.5(b)(8) from the regulations and seeks comments on this 
proposal.
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    \56\ For electric transmission providers, a provision allowing 
communications relating to generation dispatch exists at 18 CFR 
358.5(b)(6) of the Commission's regulations.
    \57\ Order No. 2004-A at P 203.
    \58\ Under section 201(e) of the Federal Power Act, a public 
utility is ``any person who owns or operates facilities subject to 
the jurisdiction of the Commission.'' 16 U.S.C. 824(e). The 
standards of conduct apply to a public utility that is a 
transmission provider, which is defined as ``any public utility that 
owns, operates or controls facilities used for the transmission of 
electric energy in interstate commerce'' in addition to certain 
interstate natural gas pipelines. 18 CFR 358.3(a).
---------------------------------------------------------------------------

H. Changes To Facilitate Integrated Resource Planning and Competitive 
Solicitations

    32. Since Order No. 2004 was issued, industry participants have 
sought staff guidance on standards of conduct requirements to assist 
with their compliance efforts. To provide further guidance, the 
Commission held three standards of conduct technical conferences, the 
most recent being held on April 7, 2006, and staff posted a 
``Frequently Asked Questions'' (FAQs) page on the Commission's Internet 
Web site. Following the April 7, 2006 technical conference, staff began 
a series of outreach meetings with various industry participants, 
including public utilities, industry trade associations and state 
commissions, to discuss ways for the Commission to address the 
applicability of the standards of conduct in the context of business 
activity that the Commission did not address in Order No. 2004, such as 
integrated resource planning and competitive solicitations.
    33. To address integrated resource planning and competitive 
solicitations, the Commission proposes to make changes to the standards 
of conduct intended to make public utilities \58\ integrated resource 
planning and procurement more accurate and efficient, particularly in 
their consideration of electric transmission. The standards of conduct 
apply to ``any public utility that owns, operates or controls 
facilities used for the transmission of electric energy in interstate 
commerce,'' but do not apply to independent system operators (ISOs) or 
regional transmission organizations (RTOs).\59\ In conducting 
integrated resource planning, a public utility evaluates its current 
and future mix of generation, transmission, demand-side management and 
other resources to meet future demand while minimizing costs, ensuring 
reliability, and complying with a state's environmental requirements. 
As an example, integrated resource planning may help a public utility 
or state commission choose to meet load growth through the addition of 
a new generation resource, a new demand resource, or through new 
transmission resources. There is a wide variety of methods for 
conducting integrated resource planning. Some states require public 
utilities to periodically submit an integrated resource plan. Such 
submissions are typically subject to some review and comment by the 
public and review and approval by the applicable state commission.
---------------------------------------------------------------------------

    \58\ Under section 201(e) of the Federal Power Act, a public 
utility is ``any person who owns or operates facilities subject to 
the jurisdiction of the Commission.'' 16 U.S.C. 824(e). The 
standards of conduct apply to a public utility that is a 
transmission provider, which is defined as ``any public utility that 
owns, operates or controls facilities used for the transmission of 
electric energy in interstate commerce'' in addition to certain 
interstate natural gas pipelines. 18 CFR 358.3(a).
    \59\ 18 CFR 358.1(b).
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    34. The Commission believes that improved coordination between 
transmission planning, generation planning and demand response 
programs, which are the main elements of integrated resource planning, 
is

[[Page 3965]]

necessary to improve the economics and reliability of the transmission 
grid. In the next several years, reliability concerns are expected to 
grow as transmission investment has lagged behind load growth.\60\ As 
recently stated by North American Electric Reliability Council (NERC), 
``[b]ulk power system reliability and adequacy depends on close 
coordination of generation and transmission planning and demand 
response programs.'' \61\ The Commission also understands that some 
states are requiring greater consideration of transmission in public 
utilities' integrated resource planning. In consideration of these 
developments, the Commission seeks to ensure that the evaluation of 
transmission in public utilities' planning and procurement is as 
accurate and efficient as possible. The Commission proposes to create a 
category of employees under the standards of conduct, ``planning 
employees,'' who are permitted to engage in all aspects of ``integrated 
resource planning'' for bundled retail load, to receive non-public 
transmission information, and to interact with transmission function 
employees, provided that the integrated resource planning is conducted 
pursuant to state mandate.
---------------------------------------------------------------------------

    \60\ After an extensive assessment, the NERC recently concluded 
that ``[e]xpansion and strengthening of the transmission system 
continues to lag demand growth and expansion of generating resources 
in most areas.'' NERC, 2006 Long-Term Reliability Assessment, at p. 
7 (Oct. 16, 2006). See also Promoting Transmission Investment 
through Pricing Reform, Order No. 679, 71 FR 43293 (July 31, 2006), 
FERC Stats. & Regs. ] 31,222, at P 10 (July 20, 2006) (citations 
omitted) (observing that transmission investment has declined while 
load has doubled), order on reh'g, Order No. 679-A, 117 FERC ] 
61,327 (Dec. 22, 2006).
    \61\ NERC, 2006 Long-Term Reliability Assessment, at p. 8; see 
also id. at p. 13 (``In the long term, reliable transmission will 
depend upon the close coordination of generation and transmission 
planning and construction and the adoption of longer term planning 
horizons * * * '').
---------------------------------------------------------------------------

    35. The Commission also understands that transmission concerns are 
becoming a greater factor in resource procurement. A public utility's 
integrated resource plan often serves as the road map for the public 
utility's resource procurement. For instance, a public utility may 
present an integrated resource plan that specifically calls for long-
term procurement of a certain type of energy resource through a 
competitive solicitation. Such competitive solicitations may also be 
subject to state review and, if they result in the award of long-term 
contract to an affiliate, review by the Commission.\62\ The Commission 
understands the importance of ensuring that the evaluation of 
transmission in procurement is as accurate and efficient as possible. 
The Commission also proposes to create a category of employees under 
the standards of conduct, ``competitive solicitation employees,'' who 
are permitted to conduct competitive solicitations intended to serve 
bundled retail load, and to receive non-public transmission information 
and to interact with transmission function employees in order to 
evaluate proposals submitted in a competitive solicitation.
---------------------------------------------------------------------------

    \62\ See, e.g., Southern California Edison on behalf of 
Mountainview Power Co., LLC, 106 FERC ] 61,183, at P 58 (2004) 
(setting forth criteria for section 205 review of affiliate sales 
for contracts of one year or longer), order on reh'g, 109 FERC ] 
61,086, order on reh'g, 110 FERC ] 61,319 (2005).
---------------------------------------------------------------------------

    36. These Commission proposals to relax the standards of conduct to 
facilitate integrated resource planning and competitive solicitations 
are consistent with the treatment of bundled retail load in the 
standards of conduct as outlined in Order No. 2004. The standards of 
conduct exempt from the definition of marketing affiliate employees, 
those employees involved ``solely in bundled retail sales.'' \63\ As 
such, bundled retail sales employees are not subject to the standards 
of conduct in most respects. In an extension of this policy, the 
Commission's proposals are restricted to integrated resource planning 
for, and competitive solicitations to procure supply to serve, bundled 
retail load.
---------------------------------------------------------------------------

    \63\ 18 CFR 358.3(e)(2).
---------------------------------------------------------------------------

    37. In proposing to facilitate integrated resource planning and 
competitive solicitations through changes to the standards of conduct, 
the Commission is mindful of the goal of the standards of conduct to 
prevent undue preferences, specifically by preventing transmission 
providers from providing unduly preferential treatment to their 
marketing and energy affiliates. Thus, the Commission will place 
restrictions on both planning employees and competitive solicitation 
employees in order to prevent those employees from providing an undue 
preference to the transmission provider's marketing and energy 
affiliates. The Commission seeks to strike a balance between the goal 
of diminishing opportunities for undue preferences with the goal of 
improving the efficiency and accuracy of integrated resource planning 
and competitive solicitations. Along these lines, as discussed below, 
the Commission seeks comment on whether or not the proposal to limit 
the new categories of planning employees and competitive solicitation 
employees to perform their functions only for bundled retail load is 
necessary to prevent undue discrimination.
1. Integrated Resource Planning--Planning Employees
    38. In its outreach regarding integrated resource planning, staff 
heard a common refrain from public utilities, that the standards of 
conduct restrict their ability to conduct integrated resource planning 
because they restrict access to non-public transmission information and 
restrict transmission function employees from interacting with 
employees conducting integrated resource planning. Similarly, in its 
comments on the Open Access Transmission Tariff (OATT) Reform NOPR,\64\ 
the National Association of Regulatory Utility Commissioners called for 
``allow[ing] communications between resource and transmission planners 
for the purpose of developing long-term resource planning documents to 
satisfy State-commission integrated resource planning 
requirements.''\65\
---------------------------------------------------------------------------

    \64\ Preventing Undue Discrimination and Preference in 
Transmission Service, Docket No. RM05-25-000, 71 FR 32635 (June 6, 
2006), 71 FR 39251 (July 12, 2006), FERC Stats. & Regs. ] 32,603 
(May 19, 2006) (OATT Reform NOPR).
    \65\ Comments of National Association of Regulatory Utility 
Commissioners, Preventing Undue Discrimination and Preference in 
Transmission Service, Docket No. RM05-25-000, at p. 12 (filed Aug. 
8, 2006).
---------------------------------------------------------------------------

    39. The information sharing prohibitions of the standards of 
conduct affect the type of transmission information that planners use 
to conduct integrated resource planning. Public utilities relying on 
marketing or energy affiliate employees to perform their integrated 
resource planning are prohibited from obtaining non-public transmission 
information from the transmission provider and, instead, use publicly-
available information. In staff's outreach sessions, some public 
utilities raised concerns, for example, that this prohibition precludes 
long-term planners from obtaining information about generation projects 
in the interconnection queue, or from obtaining information regarding 
planned retirements of generation. With incomplete transmission 
information, public utilities contended, transmission analysis for 
integrated resource planning is incomplete. As a result, they added, 
the IRP process is less efficient and more costly, and the resulting 
integrated resource plan is inferior. Public utilities contended, in 
effect, that the information sharing prohibitions of the standards of 
conduct create a gap between the transmission information needed to 
conduct integrated resource planning and the transmission information 
available to their employees

[[Page 3966]]

who conduct integrated resource planning.
    40. Public utilities also asserted that the independent functioning 
requirement of the standards of conduct hinders integrated resource 
planning because the requirement prohibits planners from working with 
transmission function employees and taking advantage of their 
understanding of the transmission system.
    41. The Commission seeks comment on whether and how the standards 
of conduct preclude those who conduct integrated resource planning from 
obtaining needed transmission information. Commenters should explain 
what types of information, if any, cannot reach such planners under the 
current standards of conduct and how such information assists in 
creating an accurate integrated resource plan. The Commission also 
seeks comment on whether planning employees would also need access to 
non-public customer information in addition to non-public transmission 
information.
    42. The Commission propose