Standards of Conduct for Transmission Providers, 54463-54482 [E9-25252]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 74, Number 203 (Thursday, October 22, 2009)]
[Rules and Regulations]
[Pages 54463-54482]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-25252]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 358

[Docket No. RM07-1-001; Order No. 717-A]


Standards of Conduct for Transmission Providers

Issued October 15, 2009.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on rehearing and clarification.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) 
generally reaffirms its determinations in Order No. 717, but grants 
rehearing on and clarifies certain provisions. Order No. 717-A aims to 
make the Standards of Conduct clearer and to refocus the rules on the 
areas where there is the greatest potential for abuse. The order 
addresses requests for rehearing and clarification of the following 
issues: Applicability of the Standards of Conduct to transmission 
owners with no marketing affiliate transactions; whether the 
Independent Functioning Rule applies to balancing authority employees; 
which activities of transmission function employees or marketing 
function employees are subject to the Independent Functioning Rule; 
whether local distribution companies making off-system sales on 
nonaffiliated pipelines are subject to the Standards of Conduct; 
whether the Standards of Conduct apply to a pipeline's sale of its own 
production; applicability of the Standards of Conduct to asset 
management agreements; whether incidental purchases to remain in 
balance or sales of unneeded gas supply subject the company to the 
Standards of Conduct; applicability of the No Conduit Rule to certain 
situations; and applicability of the Transparency Rule to certain 
situations.

DATES: Effective Date: This rule will become effective November 23, 
2009.

FOR FURTHER INFORMATION CONTACT: Leonard Tao, Office of the General 
Counsel--Energy Markets, Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426, (202) 502-8214.

SUPPLEMENTARY INFORMATION:

[[Page 54464]]



                            Table of Contents
 
                                                              Paragraph
                                                                 Nos.
 
I. Introduction............................................            1
II. Background.............................................            2
III. Discussion............................................            6
    A. Jurisdiction and Applicability of the Standards:                6
     Applicability to Transmission Providers With No
     Marketing Affiliate Transactions......................
    B. Independent Functioning Rule........................           19
        1. Transmission Function...........................           22
        2. Transmission Function Employees.................           25
        3. Marketing Functions.............................           28
            a. Electric Industry...........................           30
            b. Natural Gas Industry........................           41
                (i) Off-System Sales by LDCs...............           42
                (ii) Sales From Own Production.............           50
                (iii) Asset Management Agreements..........           60
                (iv) Balancing.............................           64
                (v) Other..................................           70
        4. Marketing Function Employees....................           77
        5. Long-Range Planning, Procurement and Other                 84
         Interactions......................................
    C. The No Conduit Rule.................................           93
    D. Transparency Rule...................................           99
    E. Other Definitions--Transmission Function Information          126
    F. Training Requirements...............................          137
    G. Miscellaneous Matters...............................          143
IV. Document Availability..................................          151
V. Effective Date..........................................          154
 

Before Commissioners: Jon Wellinghoff, Chairman; Suedeen G. Kelly, 
Marc Spitzer, and Philip D. Moeller.

I. Introduction

    1. On October 16, 2008, the Commission issued Order No. 717 
amending the Standards of Conduct for Transmission Providers (the 
Standards of Conduct or the Standards) to make them clearer and to 
refocus the rules on the areas where there is the greatest potential 
for abuse.\1\ In this order, the Commission addresses requests for 
rehearing and clarification of Order No. 717.
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    \1\ Standards of Conduct for Transmission Providers, Order No. 
717, 73 FR 63796 (Oct. 27, 2008), FERC Stats. & Regs. ] 31,280 
(2008) (Order No. 717).
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II. Background

    2. The Commission first adopted the Standards of Conduct in 1988, 
in Order No. 497.\2\ The Commission adopted similar Standards for the 
electric industry in 1996, in Order No. 889,\3\ prohibiting public 
utilities from giving undue preferences to their marketing affiliates 
or wholesale merchant functions. Both the electric and gas Standards 
sought to deter undue preferences by (i) separating a transmission 
provider's employees engaged in transmission services from those 
engaged in its marketing services, and (ii) requiring that all 
transmission customers, affiliated and non-affiliated, be treated on a 
non-discriminatory basis.
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    \2\ Inquiry Into Alleged Anticompetitive Practices Related to 
Marketing Affiliates of Interstate Pipelines, Order No. 497, 53 FR 
22139 (Jun. 14, 1988), FERC Stats. & Regs., Regulations Preambles 
1986-1990 ] 30,820 (1988); Order No. 497-A, order on rehearing, 54 
FR 52781 (Dec. 22, 1989), FERC Stats. & Regs., Regulations Preambles 
1986-1990 ] 30,868 (1989); Order No. 497-B, order extending sunset 
date, 55 FR 53291 (Dec. 28, 1990), FERC Stats. & Regs., Regulations 
Preambles 1986-1990 ] 30,908 (1990); Order No. 497-C, order 
extending sunset date, 57 FR 9 (Jan. 2, 1992), FERC Stats. & Regs., 
Regulations Preambles January 1991-June 1996 ] 30,934 (1991), 
rehearing denied, 57 FR 5815 (Feb. 18, 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) (Tenneco) (collectively, Order 
No. 497).
    \3\ Open Access Same-Time Information System (Formerly Real-Time 
Information Network) and Standards of Conduct, Order No. 889, 61 FR 
21737 (May 10, 1996), FERC Stats. & Regs., Regulations Preambles 
January 1991-June 1996 ] 31,035 (1996); Order No. 889-A, order on 
reh'g, 62 FR 12484 (Mar. 14, 1997), FERC Stats. & Regs., Regulations 
Preambles July 1996-December 2000 ] 31,049 (1997); Order No. 889-B, 
reh'g denied, 62 FR 64715 (Dec. 9, 1997), 81 FERC ] 61,253 (1997) 
(collectively, Order No. 889).
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    3. In 2003, the Commission issued Order No. 2004,\4\ which 
broadened the Standards to include a new category of affiliate, the 
energy affiliate.\5\ The new Standards were made applicable to both the 
electric and gas industries, and provided that the transmission 
employees of a transmission provider \6\ must function independently 
not only from the company's marketing affiliates but from its energy 
affiliates as well, and that transmission providers may not treat 
either their energy affiliates or their marketing affiliates on a 
preferential basis. Order No. 2004 also imposed requirements to 
publicly post information concerning a transmission provider's energy 
affiliates. On appeal, the U.S. Court of Appeals for the D.C.

[[Page 54465]]

Circuit overturned the Standards as applied to gas transmission 
providers, on the grounds that the evidence of energy affiliate abuse 
cited by the Commission was not in the record.\7\
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    \4\ Standards of Conduct for Transmission Providers, Order No. 
2004, FERC Stats. & Regs. ] 31,155 (2003), order on rehearing, Order 
No. 2004-A, FERC Stats. & Regs. ] 31,161, order on rehearing, Order 
No. 2004-B, FERC Stats. & Regs. ] 31,166, order on rehearing, Order 
No. 2004-C, FERC Stats. & Regs. ] 31,172 (2004), order on rehearing, 
Order No. 2004-D, 110 FERC ] 61,320 (2005), vacated and remanded as 
it applies to natural gas pipelines sub nom. National Fuel Gas 
Supply Corp. v. FERC, 468 F.3d 831 (D.C. Cir. 2006) (National Fuel); 
see Standards of Conduct for Transmission Providers, Order No. 690, 
FERC Stats. & Regs. ] 31,237, order on rehearing, Order No. 690-A, 
FERC Stats. & Regs. ] 31,243 (2007); see also Standards of Conduct 
for Transmission Providers, Notice of Proposed Rulemaking, FERC 
Stats. & Regs. ] 32,611 (2007); Notice of Proposed Rulemaking, FERC 
Stats. & Regs. ] 32,630 (2008).
    \5\ The Order 2004 standards of conduct defined an energy 
affiliate as an affiliate of a transmission provider that (1) 
engages in or is involved in transmission transactions in U.S. 
energy or transmission markets; (2) manages or controls transmission 
capacity of a transmission provider in U.S. energy or transmission 
markets; (3) buys, sells, trades or administers natural gas or 
electric energy in U.S. energy or transmission markets; or (4) 
engages in financial transactions relating to the sale or 
transmission of natural gas or electric energy in U.S. energy or 
transmission markets. Order No. 2004, FERC Stats. & Regs. ] 31,155 
at P 40; see also 18 CFR 358.3(d). Certain categories of entities 
were excluded from this definition in subsequent subsections of the 
regulations.
    \6\ A transmission provider was defined as (1) any public 
utility that owns, operates or controls facilities used for 
transmission of electric energy in interstate commerce; or (2) any 
interstate natural gas pipeline that transports gas for others 
pursuant to subpart A of part 157 or subparts B or G of part 284 of 
the same chapter of the regulations. Order No. 2004, FERC Stats. & 
Regs. ] 31,155 at P 33-34; see also 18 CFR 358.3(a).
    \7\ National Fuel, 468 F.3d at 841.
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    4. The Commission issued an Interim Rule on January 9, 2007,\8\ 
which repromulgated the portions of the Standards not challenged in 
National Fuel as applied to natural gas transmission providers. On 
January 18, 2007, the Commission issued its initial notice of proposed 
rulemaking (NOPR),\9\ requesting comment on a variety of issues, 
including whether the concept of energy affiliates should be retained 
for the electric industry. Following consideration of the comments 
filed and the Commission's own experience in administering the 
Standards, the Commission modified the approach advanced in the initial 
NOPR. The Commission issued a second NOPR on March 21, 2008,\10\ and 
invited comment both on its general approach and on its specific 
provisions. In the second NOPR, the Commission proposed to return to 
the approach of separating by function transmission personnel from 
marketing personnel, an approach that had been adopted in Order Nos. 
497 and 889. The Commission also proposed to clarify and streamline the 
Standards in order to enhance compliance and enforcement, and to 
increase transparency in the area of transmission/affiliate 
interactions to aid in the detection of any undue discrimination.
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    \8\ Standards of Conduct for Transmission Providers, Order No. 
690, 72 FR 2427 (Jan. 19, 2007); FERC Stats. & Regs. ] 31,237 (2007) 
(Interim Rule); clarified by, Standards of Conduct for Transmission 
Providers, Order No. 690-A, 72 FR 14235 (Mar. 27, 2007); FERC Stats. 
& Regs. ] 31,243 (2007) .
    \9\ Standards of Conduct for Transmission Providers, 72 FR 3958 
(Jan. 29, 2007), FERC Stats. & Regs. ] 32,611 (2007).
    \10\ Standards of Conduct for Transmission Providers, 73 FR 
16228 (Mar. 27, 2008), FERC Stats. & Regs. ] 32,630 (2008).
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    5. The reforms adopted in Order No. 717 were intended to eliminate 
the elements that have rendered the Standards difficult to enforce and 
apply. They combined the best elements of Order No. 2004 (especially 
the integration of gas and electric Standards, an element not contested 
in National Fuel) with those of the Standards originally adopted for 
the gas industry in Order No. 497 and for the electric industry in 
Order No. 889. Specifically, Order No. 717 (i) eliminated the concept 
of energy affiliates and (ii) eliminated the corporate separation 
approach in favor of the employee functional approach used in Order 
Nos. 497 and 889. In addition, the reforms adopted in Order No. 717 
conformed the Standards with the National Fuel opinion.

III. Discussion

A. Jurisdiction and Applicability of the Standards: Applicability to 
Transmission Providers With No Marketing Affiliate Transactions

    6. In Order No. 717, we addressed the question of whether the 
Standards' applicability to interstate pipelines in Sec.  358.1(a) 
should parallel the Standards' applicability to the electric industry 
in Sec.  358.1(b). Section 358.1(a) generally states that part 358 
applies to any interstate pipeline that transports gas for others and 
conducts transmission transactions with an affiliate that engages in 
marketing functions.\11\ In contrast, the NOPR proposed that Sec.  
358.1(b) should state only that this part applies to any public utility 
that owns, operates, or controls facilities used for the transmission 
of electric energy in interstate commerce. The specific question 
addressed in Order No. 717 concerned the phrase ``and conducts 
transmission transactions with an affiliate that engages in marketing 
functions'' and whether this language should be retained in Sec.  
358.1(a).\12\
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    \11\ 18 CFR 358.1(a) (2009).
    \12\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 16.
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    7. We determined that the language in Sec.  358.1(a) should 
parallel the language in Sec.  358.1(b) since there was no evidence in 
the record that pipelines that do not conduct transmission transactions 
with an affiliate engaged in marketing functions are in a position to 
engage in the type of affiliate abuse to which the Standards are 
directed.\13\ We concluded that rather than remove the phrase in 
question from Sec.  358.1(a), this provision should be added to Sec.  
358.1(b) so that the limitation would apply to public utilities as well 
as pipelines.\14\ We found that a public utility or a pipeline that 
does not engage in any transmission transactions with a marketing 
affiliate should be excluded from the Standards coverage.
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    \13\ Id. P 20.
    \14\ Id. P 23.
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Requests for Rehearing and Clarification
    8. Several parties raise the issue of the applicability of the 
Standards to marketing function employees of affiliates that do not 
conduct transmission transactions with affiliated transmission 
providers. For example, the Electric Power Supply Association (EPSA) 
interprets these provisions as applying the Standards only to 
transmission companies that conduct transactions with their marketing 
affiliates. According to EPSA, some pipeline/transmission providers 
have multiple marketing affiliates and these providers do not engage in 
transactions with all of their affiliates.\15\ EPSA states that it is 
unclear whether that pipeline or transmission provider is subject to 
the Standards with all of its marketing affiliates, or just those with 
which it conducts transactions.\16\ EPSA argues that the Independent 
Functioning Rule in Sec.  358.5 should only apply to the relationship 
between the transmission function employees and the marketing function 
employees of those marketing affiliates with which the provider 
conducts transactions.\17\
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    \15\ EPSA Nov. 17, 2008 Request for Clarification at 2.
    \16\ Id. at 3.
    \17\ Id. at 4.
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    9. The Interstate Natural Gas Association of America (INGAA), 
MidAmerican Energy Holdings Company (MidAmerican), and the Edison 
Electric Institute (EEI) also interpret the Standards as not extending 
to employees of affiliates that do not conduct transmission 
transactions with the pipeline or public utility transmission 
provider.\18\ INGAA states that it is unclear how the regulations apply 
where a pipeline has at least one affiliate engaged in marketing 
functions that conducts transmission transactions on the pipeline, but 
has other affiliates that do not. INGAA argues that the Standards 
cannot lawfully be applied to marketing function employees of 
affiliates that do not conduct transmission transactions with the 
affiliated pipeline.\19\ INGAA contends that if the Standards are 
intended to apply to the relationship between a pipeline and the 
marketing function employees of affiliates that do not conduct 
transmission transactions on that affiliated pipeline, the Commission 
has exceeded its authority.\20\
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    \18\ INGAA Nov. 17, 2008 Request for Clarification and Rehearing 
at 4; MidAmerican Nov. 17, 2008 Request for Rehearing or 
Clarification at 5; EEI Nov. 17, 2008 Request for Clarification at 
12-13.
    \19\ INGAA at 7-9.
    \20\ Id.
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    10. MidAmerican argues that when an affiliate does not engage in 
transmission transactions on an affiliated transmission provider's 
system, there is little or no potential for affiliate abuse, and to the 
extent that there could be inappropriate interaction with affiliates, 
such conduct is already proscribed by the No Conduit Rule in Sec.  
358.6 and the Transparency Rule in Sec.  358.7.\21\
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    \21\ MidAmerican at 5.

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[[Page 54466]]

    11. MidAmerican is concerned that paragraph 104 of Order No. 717 
suggests that all marketing function employees within a corporate 
holding company structure are to be considered marketing function 
employees of all affiliated transmission providers.\22\ MidAmerican 
contends that employees of an affiliate who engage in marketing 
functions are not likely to be privy to non-public transmission 
function information of an affiliated transmission provider unless the 
affiliate engages in transmission transactions with that transmission 
provider.\23\ MidAmerican further argues that to the extent that an 
employee of an affiliate engaged in marketing functions became privy to 
non-public transmission function information about another affiliated 
transmission provider's system, he or she is still proscribed from 
being a conduit for that information under the Standards and the 
transmission provider would also have the obligation to post the 
disclosed information pursuant to the Transparency Rule.\24\
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    \22\ Id. at 7.
    \23\ Id. at 7-11.
    \24\ Id. at 8.
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    12. EEI requests clarification that, regardless of whether a 
corporate family owns electric transmission providers, gas transmission 
providers, or both, that the Standards of Conduct apply only (a) 
between transmission function employees of a gas transmission provider 
and employees within the corporate family engaged in gas marketing 
functions, and (b) between transmission function employees of an 
electric transmission provider and employees within the corporate 
family engaged in electric marketing functions.\25\ EEI contends that 
it would be unfair to subject companies with both gas and electric 
transmission providers to restrictions on relationships that do not 
apply to the same relationships in companies that have only gas or only 
electric transmission providers.\26\
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    \25\ EEI at 12.
    \26\ Id.
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    13. EEI states that paragraphs 16-23 of Order No. 717 indicate that 
the rules only apply between transmission function employees and those 
marketing function employees who are employed by a company that 
conducts transmission transactions with the transmission provider. EEI 
requests clarification as to whether this interpretation is 
accurate.\27\
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    \27\ Id. at 13.
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    14. Under EEI's interpretation of these provisions, an employee 
that makes sales of electric energy is performing a marketing function 
only if that employee works for a public utility transmission provider 
or a company that is affiliated with such a provider.\28\ EEI requests 
confirmation of this interpretation.
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    \28\ Id. at 11-12.
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    15. The Transmission Access Policy Study Group (TAPS) argues that 
the Commission should either eliminate the exemption for electric 
transmission providers that do not conduct transmission transactions 
with marketing affiliates, or clarify that transmission owners in 
regional transmission organizations (RTOs) remain subject to the 
Standards absent a waiver.\29\ TAPS contends that if this exemption is 
not eliminated for the electric transmission providers, transmission 
owners in RTO regions may interpret Sec.  358.1(b) as exempting them 
from the Standards regardless of whether they have sought and obtained 
a waiver.\30\ Specifically, TAPS argues that the Commission should 
expand upon ``conduct transmission transactions with an affiliate that 
engages in marketing functions.'' \31\ According to TAPS, transmission 
owners within an RTO may argue that only the RTO conducts transmission 
transactions with market participants and thus these transmission 
owners would be exempt from the Standards.\32\ Alternatively, TAPS asks 
that the Commission clarify that the new language in Sec.  358.1(b) 
does not exempt transmission owners in RTO regions who conduct 
marketing activities (or who have affiliates that are engaged in 
marketing activities) in the RTO market.\33\
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    \29\ TAPS Nov. 17, 2008 Petition for Rehearing or Clarification 
at 29.
    \30\ Id. at 30.
    \31\ Id. at 31.
    \32\ Id.
    \33\ Id. at 33.
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Commission Determination
    16. Consistent with our findings in Order No. 717 that a public 
utility or interstate natural gas pipeline that does not engage in any 
transmission transactions with a marketing affiliate should be excluded 
from the Standards' coverage,\34\ we clarify that the term ``marketing 
function employee'' of a transmission provider, as defined in Sec.  
358.3(d), does not include an employee of an affiliate that does not 
engage in transmission transactions on the affiliated transmission 
provider's transmission system. Furthermore, we note that Sec.  
358.1(a) and (b) generally limit the applicability of the Standards of 
Conduct to transmission providers that conduct transmission 
transactions with an affiliate that engages in marketing functions.
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    \34\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 20 and P 
23.
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    17. In response to EEI, we confirm that an employee who makes sales 
of electric energy is performing a marketing function only if the 
employee works for a public utility transmission provider or a company 
affiliated with such a provider.
    18. We deny TAPS' request that we eliminate the exemption for 
electric transmission providers that do not conduct transmission 
transactions with marketing affiliates. As described above, the 
Commission determined in Order No. 717 that ``a public utility that 
does not engage in any transmission transactions with a marketing 
affiliate should be excluded from the Standards' coverage'' \35\ 
because there is no evidence that this type of relationship triggers 
concerns that the public utility will engage in undue preference in 
favor of an affiliate. However, we clarify that a public utility 
transmission owner that is in a Commission-approved RTO or that is part 
of a Commission-approved independent system operator (ISO) and has 
access to non-public transmission function information remains subject 
to the Standards of Conduct unless it has obtained a waiver.
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    \35\ Id. P 23.
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B. Independent Functioning Rule

    19. In Order No. 717, we continued the policy of requiring 
transmission function employees of a transmission provider to function 
independently of the marketing function employees of the transmission 
provider. This policy is referred to as the Independent Functioning 
Rule. The relevant consideration for purposes of applying the 
Independent Functioning Rule is the function performed by the employee 
himself. To implement this approach, we defined several key terms, 
including ``transmission functions'' (Sec.  358.3(h)), ``marketing 
functions'' (Sec.  358.3(c)), and ``transmission function employees'' 
(Sec.  358.3(i)).
    20. We defined ``transmission functions'' as ``the planning, 
directing, organizing or carrying out of day-to-day transmission 
operations, including the granting and denying of transmission service 
requests.'' \36\ Through this definition, we intended to focus on 
``those areas most susceptible to affiliate abuse,'' which we 
identified as ``short-term real time operations, including those 
decisions made in advance of real

[[Page 54467]]

time but directed at real time operations.'' \37\
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    \36\ Id. P 40.
    \37\ Id.
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    21. With regard to the definition of transmission function 
employee, we agreed that field, maintenance and construction workers, 
as well as engineers and clerical workers, are not normally involved in 
the day-to-day operations of the transmission system. Thus, in general 
they would not fall within the scope of the definition of transmission 
function employee.\38\ However, we declined to add a further exclusion 
in the definition for de minimis involvement.\39\ We also found that 
the question of whether balancing authority personnel are included in 
the definition of transmission function employee depends on the 
circumstances. If the transmission provider also serves as a balancing 
authority and an employee's duties encompass both transmission provider 
and balancing authority activities, the employee is a transmission 
function employee.\40\ We also provided several examples of what 
activities constitute the day-to-day operation of the transmission 
system. Included in these examples was balancing load with energy or 
capacity.\41\
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    \38\ Id. P 46.
    \39\ Id. P 47.
    \40\ Id. P 48.
    \41\ Id. P 122.
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1. Transmission Function
    22. Both Wisconsin Electric Power Company (Wisconsin Electric) and 
EEI request further clarification of whether personnel that balance 
load with energy or capacity are considered ``transmission function 
employees'' under the Standards.\42\ EEI contends that economic 
decisions regarding the source of energy or capacity to be used to 
balance load may be made by marketing function employees and requests 
that the Commission affirmatively find that such activities are not 
transmission functions.\43\ Wisconsin Electric argues that the 
Commission's statement in paragraph 122 of Order No. 717 that balancing 
load with energy or capacity is among the day-to-day operations of the 
transmission system is inconsistent with the Commission's statement in 
paragraph 48 of Order No. 717 that excluded a balancing authority from 
the definition of a ``transmission function employee'' where the 
balancing authority and transmission functions are separate, and the 
employee performs no duties outside of those specific to a balancing 
authority employee.\44\
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    \42\ Wisconsin Electric Nov. 17, 2008 Request for Clarification 
at 3; EEI at 7.
    \43\ EEI at 7.
    \44\ Wisconsin Electric at 4.
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    23. Wisconsin Electric requests that the Commission clarify that a 
balancing area employee who balances load with generation (including 
scheduled interchange) and performs no other transmission functions is 
not a ``transmission function employee'' for purposes of the 
Standards.\45\ If the Commission intends that balancing load with 
energy or capacity is a transmission function, then Wisconsin Electric 
requests that the Commission clarify and identify which of the other 
balancing authority requirements under the NERC Reliability Standards 
are also transmission functions and which are not.\46\
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    \45\ Id.
    \46\ Id. at 5.
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Commission Determination
    24. We clarify that paragraph 122 of Order No. 717 incorrectly 
included ``balancing load with energy or capacity'' as an example of 
what is included in the day-to-day operation of the transmission 
system. As we stated in Order No. 717, ``[i]f the transmission provider 
also serves as a balancing authority, and an employee's duties 
encompass both transmission provider and balancing authority 
activities, such an employee would be a transmission function employee 
(provided his or her duties are encompassed by the definition of 
transmission function employee). If, however, the two functions are 
separate, and the employee performs no duties outside of those specific 
to a balancing authority employee, he or she would not be considered a 
transmission function employee.'' \47\ Thus, personnel who balance load 
with energy or generating capacity are not considered ``transmission 
function employee[s]'' under the Standards where the balancing 
authority and transmission functions are separate, and the employee 
does not perform duties or tasks of a transmission function 
employee.\48\
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    \47\ Order No. 717 at P 48.
    \48\ We reiterate that the No Conduit Rule still applies and 
would prohibit the transmission provider from using personnel who 
balance load with energy or generating capacity as conduits for the 
disclosure of non-public transmission information to marketing 
function employees.
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2. Transmission Function Employees
    25. TAPS is concerned that the transmission function definition 
places too much emphasis on short-term or real-time operations in an 
effort to exclude long-term planning employees from the transmission 
function and that this emphasis might be misconstrued.\49\ 
Specifically, TAPS is concerned that the short-term focus might be 
misinterpreted as limiting the Commission's determination that 
employees engaged in the ``granting and denying of transmission service 
requests'' are transmission function employees.\50\ TAPS asks the 
Commission to clarify that personnel engaged in ``granting or denying 
transmission service requests'' are transmission function employees 
regardless of the duration of service requested.\51\
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    \49\ TAPS at 41.
    \50\ Id.
    \51\ Id.
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    26. TAPS also asks the Commission to clarify that the transmission 
function includes not just the employees who post on the OASIS that a 
particular request has been granted or denied but, also, the employees 
who are responsible for performing the underlying system impact studies 
or otherwise determining whether the transmission system can support 
the requested services.\52\ TAPS asserts that engineers who make 
engineering decisions regarding the operation and maintenance of 
transmission facilities and engineers who determine whether 
transmission requests can be accommodated by the existing transmission 
system are clearly performing activities that are integral to a 
transmission provider's administration of its tariff and are central to 
the ``planning, directing, organizing or carrying out of day-to-day 
transmission operations, including the granting and denying of 
transmission service requests.'' \53\
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    \52\ Id. at 42-43.
    \53\ Id. at 42-43 (citing 18 CFR 358.3(h)).
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Commission Determination
    27. The Commission clarifies that personnel engaged in ``granting 
or denying transmission service requests'' are transmission function 
employees regardless of the duration of service requested. We find that 
granting or denying of transmission service requests is an integral 
part of ``planning, directing, organizing or carrying out of day-to-day 
transmission operations.'' \54\ The Commission also clarifies that 
``transmission function employee'' includes an employee responsible for 
performing system impact studies or determining whether the 
transmission system can support the requested services as this type of 
employee is planning, directing, organizing or

[[Page 54468]]

carrying out the day-to-day transmission operations.
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    \54\ 18 CFR 258.3(h).
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3. Marketing Functions
    28. In Order No. 717, we made the Standards applicable to ``any 
public utility that owns, operates, or controls facilities used for the 
transmission of electric energy in interstate commerce and conducts 
transmission transactions with an affiliate that engages in marketing 
functions'' \55\ and also any interstate natural gas pipeline that 
transports gas for others and ``conducts transmission transactions with 
an affiliate that engages in marketing functions.'' \56\
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    \55\ 18 CFR 358.1(b).
    \56\ 18 CFR 358.1(a).
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    29. As noted above, we defined several terms in the order. 
Marketing functions include ``in the case of public utilities and their 
affiliates, the sale for resale in interstate commerce, or the 
submission of offers to sell in interstate commerce, of * * * financial 
or physical transmission rights.'' \57\ We adopted the following 
definition of marketing functions for pipelines and their affiliates: 
``The sale for resale in interstate commerce, or the submission of 
offers to sell in interstate commerce, natural gas, subject to the 
following exclusions: (i) Bundled retail sales, (ii) Incidental 
purchases or sales of natural gas to operate interstate natural gas 
pipeline transmission facilities, (iii) Sales of natural gas solely 
from a seller's own production, (iv) Sales of natural gas solely from a 
seller's own gathering or processing facilities, and (v) Sales by an 
intrastate natural gas pipeline, by a Hinshaw pipeline exempt from the 
Natural Gas Act (NGA), or by a local distribution company making an on-
system sale.'' \58\ We also defined a marketing function employee as 
``an employee, contractor, consultant or agent of a transmission 
provider or of an affiliate of a transmission provider who actively and 
personally engages on a day-to-day basis in marketing functions.''
---------------------------------------------------------------------------

    \57\ 18 CFR 358.3(c)(1).
    \58\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 83.
---------------------------------------------------------------------------

a. Electric Industry
    30. EEI seeks clarification as to which sales of transmission 
rights are marketing functions, and which sales are transmission 
functions.\59\ EEI suggests that as a general rule, any sale of 
transmission service under an open access transmission service or a 
pre-Order No. 888 grandfathered agreement be considered a transmission 
function, while any resale or reassignment of such service should be 
considered a marketing function.\60\ EEI also suggests that the rule 
must allow the limited sorts of ``resale'' that occur from a facility 
that has been leased, or when transmission is being provided on a back-
to-back basis, to be treated as transmission functions, not marketing 
functions.\61\
---------------------------------------------------------------------------

    \59\ EEI at 14-15.
    \60\ Id.
    \61\ Id.
---------------------------------------------------------------------------

    31. TAPS requests that the Commission restore (1) the Order 889-era 
separation of transmission function employees from employees engaged in 
purchases for wholesale sales; \62\ and (2) Order 2004's required 
separation of transmission function personnel from employees making 
purchases for retail load.\63\ TAPS also contends that the Commission 
should require the separation of transmission function personnel from 
employees making bundled retail sales.\64\ TAPS argues that the 
marketing definition should be revised to include bids to buy products 
traded in organized markets, particularly financial transmission 
rights.\65\ Finally, TAPS requests reconsideration of the Commission's 
decision to exempt from the marketing definition retail sales by a 
provider of last resort (POLR).\66\
---------------------------------------------------------------------------

    \62\ TAPS at 13-22.
    \63\ Id. at 22-26.
    \64\ Id. at 26-29.
    \65\ Id. at 33-36.
    \66\ Id. at 37-40.
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    32. Transmission Dependent Utility Systems (TDUS) asks that the 
Commission exclude from the definition of marketing functions sales by 
generation and transmission cooperatives to their members.\67\ 
According to TDUS, Order No. 717 eliminated purchasing-related 
activities from coverage under the Standards.\68\ TDUS states that 
under the new Standards, employees of generation and transmission 
cooperatives will not be subject to the Standards due to their 
purchasing activities alone.\69\ However, TDUS believes that there is a 
question left as to whether such employees' involvement in sales of 
power to members will subject them to the Standards and asserts that it 
should not.\70\ TDUS asserts that because the generation and 
transmission cooperative's role with respect to its member load is 
nearly identical to that of a vertically integrated investor-owned 
utility's role with respect to its retail load, employees of generation 
and transmission cooperatives should have the same access to generation 
and transmission function information as the employees of investor-
owned utilities.\71\
---------------------------------------------------------------------------

    \67\ TDUS Nov. 17, 2008 Request for Clarification or Rehearing 
at 2-3.
    \68\ Id. at 2.
    \69\ Id.
    \70\ Id.
    \71\ Id. at 3.
---------------------------------------------------------------------------

Commission Determination
    33. We grant EEI's request for clarification that any sale of 
transmission service under an open access transmission service or a 
pre-Order No. 888 grandfathered agreement be considered a transmission 
function, while any resale or reassignment of such service be 
considered a marketing function. Under Order No. 890, a transmission 
customer may sell all or a portion of its transmission rights to an 
eligible customer (i.e., an assignee). When this type of transaction 
occurs, the transmission customer becomes a reseller and the assignee 
must sign a service agreement with the transmission provider. The 
transmission provider is obligated to credit or charge the reseller for 
any difference in price between the assignee's agreement and the 
reseller's original agreement.\72\ Thus, the transmission provider 
continues in the role of providing transmission service and makes the 
payments to both the reseller and its customer. However, the resale or 
reassignment between the reseller and the assignee is a marketing 
function.
---------------------------------------------------------------------------

    \72\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, FERC Stats. & Regs. ] 31,241, 
order on rehearing, Order No. 890-A, FERC Stats. & Regs. ] 31,261 
(2007), order on rehearing, Order No. 890-B, 123 FERC ] 61,299 
(2008) order on rehearing, Order No. 890-C, 126 FERC ] 61,228 
(2009).
---------------------------------------------------------------------------

    34. While we grant EEI's requested clarification as discussed 
above, we reject its suggestion that limited sorts of ``resale'' that 
occur from a facility being leased, or transmission that is provided on 
a back-to-back basis, be treated as transmission functions. We deny 
this clarification because EEI has failed to adequately support or 
explain its request. We note, however, that EEI appears to be 
describing a narrow set of circumstances that may be more suitable for 
a waiver request.
    35. We deny TAPS' request for rehearing that the marketing function 
definition be amended to include purchases as well as sales. As we 
noted in Order No. 717, restricting the definition of marketing 
function to include only sales more closely matches the statutory 
prohibitions against undue preference.\73\ Specifically, sections 205 
and 206 of the Federal Power Act prohibit undue preference or advantage

[[Page 54469]]

to any person with respect to ``any transmission or sale subject to the 
jurisdiction of the Commission * * *.'' \74\ Similarly, sections 4 and 
5 of the Natural Gas Act prohibit undue preference with respect to 
``any transportation or sale of natural gas subject to the jurisdiction 
of the Commission * * *.'' \75\ Because the Commission's authority to 
impose the Standards of Conduct to prevent undue preference is rooted 
in these sections, we find that TAPS' request to expand the marketing 
function definition to include purchases to be inconsistent with our 
statutory authority.
---------------------------------------------------------------------------

    \73\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 77.
    \74\ 16 U.S.C. 824d(b) and 16 U.S.C. 824e(a) (emphasis added).
    \75\ 15 U.S.C. 717c(b) and 15 U.S.C. 717d(a) (emphasis added).
---------------------------------------------------------------------------

    36. In response to the TAPS statement that excluding employees 
responsible for purchases from the reach of the Standards of Conduct 
alters the Commission's approach in Order No. 889, we note that in 
Order No. 717 the Commission found that the removal of purchases from 
the definition of marketing function ``frees companies to conduct the 
informational exchanges necessary to engage in integrated resource 
planning, and eliminates the difficulties which might otherwise be 
experienced by executive personnel who have overall procurement 
responsibilities that include both transmission and marketing. At the 
same time, it preserves the protection against affiliate abuse, as it 
is those employees who are making wholesale sales of electricity, not 
purchases, who can improperly benefit from transmission function 
information obtained from the affiliated transmission provider.'' \76\ 
Given these findings and the Commission's consideration of its more 
than decade-long experience implementing the Order No. 889 provisions, 
we reiterate that there is no need to include purchases in the 
marketing function definition as a means of preventing undue 
preference.\77\ For these same reasons, we also deny TAPS' request that 
we require the separation of transmission function employees from those 
employees making purchases for retail load and its request that we 
include bids to buy products within the definition of marketing 
function.
---------------------------------------------------------------------------

    \76\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 77 
(footnote omitted).
    \77\ We note that the courts have held that an agency may alter 
its past interpretation in light of reconsideration of relevant 
facts and its mandate. American Trucking Ass'n v. Atchison, Topeka & 
Santa Fe Ry., 387 U.S. 397, 416 (1967). See also Hatch v. FERC, 654 
F.2d 825, 834 (D.C. Cir. 1981). See also New York v. FERC, 535 U.S. 
1 at 28 (2002) (The Commission's choice not to assert jurisdiction 
represents a statutorily permissible policy choice).
---------------------------------------------------------------------------

    37. Similarly, we reject TAPS' request that employees making 
bundled retail sales \78\ be included in the definition of marketing 
function. In Order No. 888, the Commission stated that it had exclusive 
jurisdiction over the rates, terms and conditions of unbundled retail 
transmission in interstate commerce.\79\ However, the Commission 
declined to assert jurisdiction over bundled retail transmission, 
reasoning that ``when transmission is sold at retail as part and parcel 
of the delivered product called electric energy, the transaction is a 
sale of electric energy at retail.'' \80\ The U.S. Supreme Court 
affirmed the Commission's decision to assert jurisdiction over 
unbundled but not bundled retail transmission, finding that the 
Commission made a statutorily permissible choice.\81\ TAPS essentially 
is asking us to end this long-standing jurisdictional divide, at least 
with regard to the Standards. We decline to do so.
---------------------------------------------------------------------------

    \78\ The term ``bundled retail sales employees'' means those 
employees of the public utility transmission provider or its 
affiliates who market or sell the bundled electric energy product 
(including generation, transmission, and distribution) delivered to 
the transmission provider's firm and non-firm retail customers. 
Order No. 2004-A, FERC Stats. & Regs. ] 31,161 at P 119 n.80.
    \79\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, FERC Stats. & Regs. ] 31,036, 31,781 (1996), order on 
reh'g, Order No. 888-A, FERC Stats. & Regs. ] 31,048 (1997), order 
on reh'g, Order No. 888-B, 81 FERC ] 61,248, order on reh'g, Order 
No. 888-C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. 
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. 
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
    \80\ Id.
    \81\ New York v. FERC, 535 U.S. 1 at 28.
---------------------------------------------------------------------------

    38. We also deny TAPS' request that we reconsider the decision to 
exempt retail sales by a POLR from the definition of marketing 
functions. TAPS asserts that POLR service constitutes unbundled retail 
sales.\82\ However, the Commission stated in Order No. 2004 that POLR 
sales could be accorded treatment equivalent to that accorded to 
bundled retail sales.\83\ Bundled retail sales are sales where the 
power and transmission components associated with the sale of electric 
energy to retail customers are provided together in a single bundled 
package.\84\ The important distinction between unbundled and retail 
sales is that the generation component may be purchased separately in 
unbundled service.\85\ Under POLR service the generation offered can 
only be purchased through the regulated public utility as a part of the 
``bundled'' package of transmission, distribution and generation. 
Generally, POLR service is offered in states that permit retail 
competition. POLR service is also generally state-mandated with either 
state-approved rates or a part of a state-approved and regulated 
process for deriving the generation price. The POLR service is provided 
to retail customers on a default basis and POLR employees do not market 
POLR service.
---------------------------------------------------------------------------

    \82\ TAPS at 39-40.
    \83\ See Order No. 2004-A, FERC Stats. & Regs. ] 31,161 at P 
127.
    \84\ See, e.g., Revision of Annual Charges Assessed to Public 
Utilities, 94 FERC ] 61,290, at 62,037 (2001). We note that the 
Supreme Court has described ``bundled'' as meaning that consumers 
pay a single charge that includes both the cost of electric energy 
and the cost of its delivery. New York v. FERC, 535 U.S. 1, 5 
(2002).
    \85\ We note that even if the rates or prices for components are 
separately stated, or itemized, on the end users' bills this does 
not render the POLR service ``unbundled.'' See, e.g., Northern 
Natural Gas Co., v. FERC, 929 F.2d 1261, 1273 (8th Cir. 1991). 
(Stating a rate separately from the related jurisdictional rate does 
not ``magically unbundle'' the activity).
---------------------------------------------------------------------------

    39. Previously, we declined to accord POLR service the same 
exemption as other bundled retail sales, opting instead to consider its 
status on a case-by-case basis.\86\ The Commission has granted past 
waivers based on the fact that POLR employees do not market POLR 
service, do not engage in competitive functions and do not schedule or 
reserve transmission service.\87\ This experience with waiver requests 
has led us to the conclusion that no justification exists for treating 
POLR sales differently than other bundled retail sales. Therefore, we 
will deny TAPS' request for rehearing concerning POLR.
---------------------------------------------------------------------------

    \86\ TAPS' reliance on the few cases in which we denied a waiver 
request is misplaced. None of the denials were based on the risk of 
abuse being too great. For example, in Allegheny Power Service 
Corp., 85 FERC ] 61,390 (1998), Allegheny requested a waiver of the 
functional unbundling requirement with regard to employees who made 
wholesale purchases for unbundled retail sales. Thus, this decision 
does not constitute precedent regarding a request for a bundled 
retail sales waiver. See also, PECO, 89 FERC ] 61,014 (1999). 
(PECO's Supply Acquisition unit performed unbundled retail merchant 
services and thus the Standards applied).
    \87\ See, e.g., High Island Offshore System, 116 FERC ] 61,047 
(2006).
---------------------------------------------------------------------------

    40. Finally, as TDUS requests, we clarify that if an employee of a 
generation and transmission cooperative simply serves retail load and 
does not engage in activities included in the ``marketing functions'' 
definition in Sec.  358.3, then this employee is not a ``marketing 
function employee.''

[[Page 54470]]

b. Natural Gas Industry
    41. We noted in Order No. 717 that if a local distribution company 
(LDC) does not conduct transmission transactions with an affiliated 
pipeline, its off-system sales on non-affiliated pipelines are 
irrelevant as far as the Standards are concerned.\88\ However, there 
may be situations where an affiliated LDC, an intrastate pipeline, and 
a Hinshaw pipeline could be subject to the Standards of Conduct, such 
as when one of these affiliates engages in off-system sales of gas that 
has been transported on the affiliated pipeline. In such a case, the 
pipeline and the affiliate (which is engaging in marketing functions) 
will be required to observe the Standards of Conduct by, among other 
things, having the marketing function employees function independently 
from the transmission function employees.
---------------------------------------------------------------------------

    \88\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 91.
---------------------------------------------------------------------------

(i) Off-System Sales by LDCs
    42. The American Gas Association (AGA), Duke Energy Corporation 
(Duke), National Fuel Gas Distribution Corporation and National Fuel 
Gas Supply Corporation (National Fuel), the New York Public Service 
Commission (NYPSC), and Southwest Gas Corporation (Southwest Gas) all 
ask the Commission to clarify that an LDC may make off-system sales on 
non-affiliated pipelines without being subject to the Standards.\89\ 
Specifically, the concern raised is whether an LDC that makes off-
system sales on non-affiliated pipelines would be subject to the 
Standards for those sales because it also conducts transmission 
transactions with an affiliated interstate pipeline for the purpose of 
making bundled retail sales or on-system sales.\90\ These parties all 
rely on Order No. 497 and National Fuel Gas Supply Corp.\91\ to support 
their contention that the Commission should find that the Standards do 
not apply in this instance. \92\
---------------------------------------------------------------------------

    \89\ AGA Nov. 17, 2008 Request for Clarification or Rehearing at 
8; Duke Nov. 17, 2008 Request for Rehearing or Clarification at 4; 
National Fuel Nov. 17, 2008 Motion for Clarification or Rehearing 
or, in the Alternative, Request for Limited Waiver at 7-8; NYPSC 
Nov. 17, 2008 Request for Rehearing or Clarification at 3-4; and 
Southwest Gas at 9-10.
    \90\ See, e.g., AGA Request at 4.
    \91\ 64 FERC ] 61,192 (1993).
    \92\ See, e.g., AGA at 9 (citing National Fuel Gas Supply 
Corp.).
---------------------------------------------------------------------------

    43. The parties argue that failing to make this clarification will 
have effectively expanded the Standards beyond those adopted under 
Order No. 497 to encompass all of an LDC's off-system sales for resale 
including those sales where the gas was not transported on the 
affiliated interstate pipeline.\93\ To resolve this matter, Duke 
suggests that the Commission either (1) revise the definition of 
``marketing function'' in Sec.  358.3(c)(2) of the regulations to 
exempt off-system sales by an LDC that do not involve the use of 
transmission capacity of an affiliated transmission provider; or (2) 
revise the applicability language of Sec.  358.1(a) to make clear that 
the Standards of Conduct do not apply to an interstate pipeline's 
transportation of gas for an affiliate, if it ``does not involve 
transportation of gas for the affiliate's marketing function.'' \94\
---------------------------------------------------------------------------

    \93\ See, e.g., id. at 11.
    \94\ Duke Request at 3.
---------------------------------------------------------------------------

    44. Southwest Gas contends that both Order Nos. 497 and 690 
excluded LDC sales from the definition of ``marketing'' if the gas was 
sold on-system to retail end-users, as well as if the gas was sold 
outside of its service territory as long as none of the gas sold off-
system was also transported by an affiliated interstate pipeline.\95\ 
Southwest Gas states that an LDC's sale of gas outside its retail 
service area in a transaction that does not involve the affiliated 
pipeline should not trigger the Standards nor should they be triggered 
if the LDC ships gas on an affiliated pipeline in other transactions 
for sale within the LDC's retail service territory.\96\
---------------------------------------------------------------------------

    \95\ Southwest Gas at 9-10.
    \96\ Id. at 11-12. Southwest Gas also states in its pleading 
that there is no evidence that regulated LDCs could abuse their 
relationship with an affiliated pipeline if the LDC sells gas 
outside its retail service area and none of the off-system gas is 
transported on an affiliated pipeline. Southwest Gas at 2. Southwest 
Gas argues that Order No. 717 improperly expands the applicability 
criteria from those in effect under Order No. 497 to cover any 
transportation by a pipeline for an affiliate that engages in 
marketing functions even if none of those transactions involved 
transportation by the affiliate pipeline. Id.
---------------------------------------------------------------------------

    45. If the Commission denies the request for clarification or 
rehearing, National Fuel requests a waiver of the Standards necessary 
for National Fuel Distribution Corporation to conduct off-system sales 
that do not involve its affiliated pipeline.\97\ Similarly, the NYPSC 
seeks clarification that the waiver previously granted to National Fuel 
remains in effect pursuant to the Commission's related determination 
that all existing waivers relating to the Standards remain in full 
force and effect.\98\
---------------------------------------------------------------------------

    \97\ National Fuel at 31. National Fuel also requests a waiver 
of the Standards as they may pertain to de minimis sales necessary 
to remain in balance. This waiver request is addressed infra.
    \98\ NYPSC at 7. The NYPSC disputes the interpretation of 
National Fuel Gas Supply Corp., 64 FERC ] 61,192 (1993), as the 
granting of a waiver request. However, if the Commission concludes 
that a waiver was granted in that proceeding, the NYPSC contends 
that the waiver should be continued.
---------------------------------------------------------------------------

    46. Finally, AGA states that in Order No. 717, the Commission 
exempted from the definition of ``marketing functions'' as applied to 
natural gas pipelines ``sales by an intrastate natural gas pipeline, by 
a Hinshaw interstate pipeline exempt from the Natural Gas Act, or by a 
local distribution company making an on-system sale.'' \99\ AGA states 
that the comma placements in separating each entity suggests that only 
an LDC's on-system sales are exempt and that all of a Hinshaw 
pipeline's sales are exempt.\100\ AGA requests that the Commission 
clarify whether it intended to exempt all of a Hinshaw pipeline's sales 
or only its on-system sales.\101\
---------------------------------------------------------------------------

    \99\ AGA Request for Clarification or Rehearing at 14 (quoting 
18 CFR 358.3(c)(2)(v)).
    \100\ Id. at 14.
    \101\ Id.
---------------------------------------------------------------------------

Commission Determination
    47. In Order No. 717, the Commission stated that if a pipeline does 
not conduct transmission transactions with an affiliate that engages in 
marketing functions, it is not subject to the Standards under Sec.  
358.1(a).\102\ We further explained that if an LDC does not conduct 
transmission transactions with an affiliated interstate pipeline, its 
off-system sales on an unaffiliated pipeline are irrelevant insofar as 
the Standards are concerned.\103\
---------------------------------------------------------------------------

    \102\ Order No. 717, FERC Stats. & Regs. ] 31,280 at P 91.
    \103\ Id.
---------------------------------------------------------------------------

    48. Consistent with National Fuel Gas Supply Corp.,\104\ we further 
clarify that an LDC making off-system sales of gas that has been 
transported on non-affiliated pipelines is not subject to the Standards 
of Conduct if it conducts transmission transactions with an affiliated 
interstate pipeline for the purpose of making bundled retail sales or 
on-system sales. In light of this clarification we reject Duke Energy's 
suggested amendments to the Standards. We also reject National Fuel's 
request for a waiver of the Standards because it has been rendered 
moot.
---------------------------------------------------------------------------

    \104\ 64 FERC ] 61,192 (1993).
---------------------------------------------------------------------------

    49. We agree with AGA that the comma placements separating each 
entity in the definition of ``marketing functions'' in Sec.  358.3(c) 
creates confusion. The Commission clarifies that we intended to exempt 
all on-system sales by an intrastate natural gas pipeline, by a Hinshaw 
interstate pipeline exempt from the NGA, or by a local distribution 
company and we will accordingly revise Sec.  358.3(c)(2)(v).\105\
---------------------------------------------------------------------------

    \105\ The change to include a local distribution company 
operating under section 7(f) of the Natural Gas Act in 18 CFR 
358.3(c)(2)(v) is discussed infra.

---------------------------------------------------------------------------

[[Page 54471]]

(ii) Sales From Own Production
    50. The American Public Gas Association (APGA) objects to the 
Commission's determination to exclude from the definition of 
``marketing functions'' the sale of natural gas from a seller's own 
production and from a seller's own gathering or processing 
facilities.\106\ APGA states that there is no logical, legal or factual 
basis for including within the Standards affiliated sellers of third 
party gas, but excluding from the rule the pipeline itself and 
affiliated sellers where they are selling from their own 
production.\107\
---------------------------------------------------------------------------

    \106\ APGA Nov. 17, 2009 Request for Rehearing at 4.
    \107\ Id. at 5.
---------------------------------------------------------------------------

    51. APGA argues that because the Commission has adopted an employee 
functional approach, the available evidence of actual abuse between 
sales employees and affiliated transmission providers fully supports a 
rule requiring their separation.\108\ APGA states that while these 
cases may not have been sufficient under the corporate separation 
approach to the Standards under Order No. 2004 and that the court 
reviewed in National Fuel, under the employee functional approach, 
certain cases of abuse support the discrete proposition that all 
employees who actively and personally engage on a day-to-day basis in 
natural gas sales should be prohibited from obtaining non-public 
information about the day-to-day transmission operations of affiliated 
pipelines. APGA asserts that the origin of the natural gas involved 
should have no bearing on the issue whatsoever.\109\
---------------------------------------------------------------------------

    \108\ Id. at 6.
    \109\ Id.
---------------------------------------------------------------------------

    52. Calypso U.S. Pipeline LLC and Calypso LNG LLC (Calypso) ask the 
Commission to further clarify the term ``seller's own production'' in 
Sec.  358.3(c)(3). Specifically, Calypso contends that the exemption 
should encompass foreign-sourced gas regardless of whether the 
transmission provider owns the mineral rights at the foreign wellhead 
or acquires ownership of the gas at the outlet of the liquefaction 
facility, or on board a liquefied natural gas (LNG) vessel, so long as 
it owns the gas when it is introduced into the transmission provider's 
facilities as the only gas that the transmission provider is 
transporting.\110\ Calypso interprets the term ``own production'' to 
m