Market-Based Rate Affiliate Restrictions, 4569-4574 [2011-1488]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 76, Number 17 (Wednesday, January 26, 2011)]
[Proposed Rules]
[Pages 4569-4574]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1488]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM10-20-000]


Market-Based Rate Affiliate Restrictions

AGENCY: Federal Energy Regulatory Commission.

ACTION: Withdrawal of notice of proposed rulemaking and termination of 
rulemaking proceeding.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) 
withdraws a notice of proposed rulemaking, which proposed to amend its 
regulations governing market-based rates for public utilities pursuant 
to section 205 of the Federal Power Act (FPA) to include in the 
regulatory text the clarification that employees that determine the 
timing of scheduled outages or that engage in economic dispatch, fuel 
procurement or resource planning may not be shared under the market-
based rate affiliate restrictions codified in Order No. 697.

DATES: Effective Date: This withdrawal will become effective February 
25, 2011.

FOR FURTHER INFORMATION CONTACT:

Michelle Barnaby (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8407.
Stephen J. Hug (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8009.

SUPPLEMENTARY INFORMATION:
    Issued January 20, 2011.
    1. On April 15, 2010, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) in this proceeding.\1\ For the reasons set forth 
below, we are exercising our discretion to withdraw the NOPR and 
terminate this rulemaking proceeding.
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    \1\ Market-Based Rate Affiliate Restrictions, 75 FR 20796 (Apr. 
21, 2010), Notice of Proposed Rulemaking, FERC Stats. & Regs. ] 
32,567 (2010).
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I. Background

    2. In Order No. 697,\2\ the Commission adopted affiliate 
restrictions that govern the relationship between franchised public 
utilities with captive customers and their ``market-regulated'' power 
sales affiliates, i.e., affiliates whose power sales are regulated in 
whole or in part on a market-based rate basis. These market-based rate 
affiliate restrictions govern the separation of functions, the sharing 
of market information, sales of non-power goods or services, and power 
brokering. The Commission requires that, as a condition of receiving 
and retaining market-based rate authority, sellers comply with these 
affiliate restrictions unless explicitly permitted by Commission rule 
or order. Failure to satisfy the conditions set forth in the affiliate 
restrictions constitutes a violation of a seller's market-based rate 
tariff.\3\
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    \2\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, Order No. 697, 
FERC Stats. & Regs. ] 31,252, clarified, 121 FERC ] 61,260 (2007), 
order on reh'g, Order No. 697-A, FERC Stats. & Regs. ] 31,268, 
clarified, 124 FERC ] 61,055, order on reh'g, Order No. 697-B, FERC 
Stats. & Regs. ] 31,285 (2008), order on reh'g, Order No. 697-C, 
FERC Stats. & Regs. ] 31,291 (2009), order on reh'g, Order No. 697-
D, FERC Stats. & Regs. ] 31,305 (2010).
    \3\ Order No. 697, FERC Stats. & Regs. ] 31,252 at P 549-550.
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    3. On March 9, 2009, the Compliance Working Group \4\ submitted a 
request for clarification in the Commission's market-based rate 
rulemaking proceeding regarding which employees can be shared for 
purposes of compliance with the Commission's market-based rate 
affiliate restrictions. On October 28, 2009, the Compliance Working 
Group submitted an amended request for clarification. In response to 
the Compliance Working Group's request, the Commission provided 
clarification regarding which employees may not be shared under the 
affiliate

[[Page 4570]]

restrictions.\5\ Concurrently with the April 15 Clarification Order, 
the Commission issued the NOPR, in which it proposed to revise the text 
of the separation of functions and information sharing provisions of 
the affiliate restrictions contained in Sec.  35.39 of the Commission's 
regulations in order to reflect the clarification provided in response 
to the Compliance Working Group's request.
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    \4\ The Compliance Working Group stated that it consists of 27 
energy companies, which include integrated electric businesses, 
merchant generators, marketing and trading businesses, and natural 
gas distributors, and explains that the group was formed in mid-2008 
``to develop a model [Commission] compliance program guide.'' 
Compliance Working Group Request for Clarification, Docket No. RM04-
7-007, at 2 (filed Mar. 9, 2009); Compliance Working Group Amended 
Request for Clarification, Docket No. RM04-7-007, at 3 (filed Oct. 
28, 2009). The members of the Compliance Working Group taking part 
in its request for clarification are: Allegheny Energy, Inc., 
American Electric Power Company, Inc., Cleco Corporation, Consumers 
Energy Company, Dominion Resources, Inc., Duke Energy Corporation, 
Edison International, El Paso Electric Company, Energy East Corp., 
Entergy Corporation, Exelon Corporation, FirstEnergy Corp., FPL 
Group, Inc., Pacific Gas and Electric Co., Progress Energy, Inc., 
Public Service Enterprise Group Incorporated, and Westar Energy, 
Inc.
    \5\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services By Public Utilities, 131 FERC ] 
61,021 (2010) (April 15 Clarification Order).
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    4. In the April 15 Clarification Order, the Commission denied the 
Compliance Working Group's request that the Commission interpret the 
market-based rate affiliate restrictions to permit the sharing of 
employees who are neither transmission function employees nor marketing 
function employees under the Standards of Conduct. However, in order to 
address the Compliance Working Group's concerns regarding compliance 
with the market-based rate affiliate restrictions, the April 15 
Clarification Order provided guidance regarding which employees may not 
be shared under the affiliate restrictions.\6\ Specifically, the 
Commission rejected the Compliance Working Group's interpretation of 
the market-based rate affiliate restrictions because the Compliance 
Working Group's interpretation would permit the sharing of employees 
who are prohibited from being shared under the market-based rate 
affiliate restrictions (for instance, employees that make economic 
dispatch decisions or that determine the timing of scheduled outages). 
Thus, the Commission explained that granting the Compliance Working 
Group's requested interpretation would permit market-based rate sellers 
to share employees that may not currently be shared under the affiliate 
restrictions.
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    \6\ April 15 Clarification Order, 131 FERC ] 61,021 at P 39-42.
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    5. The April 15 Clarification Order explained that ``marketing 
function employee'' is not a defined term in the market-based rate 
regulations adopted in Order No. 697, and explained that the 
restrictions on which employees may be shared under the market-based 
rate affiliate restrictions are not limited to those employees who are 
engaged in sales.\7\ It stated that, as clarified in Order No. 697-A, 
under the market-based rate affiliate restrictions, ``shared employees 
may not be involved in decisions regarding the marketing or sale of 
electricity from the facilities, may not make economic dispatch 
decisions, and may not determine the timing of scheduled outages for 
facilities.'' \8\ In this regard, the April 15 Clarification Order 
explained that responsibility for economic dispatch or the timing of 
scheduled outages, for example, is not a ``marketing function'' under 
the Standards of Conduct and, therefore, employees engaging in economic 
dispatch or that determine the timing of scheduled outages would not be 
marketing function employees under the Standards of Conduct. Therefore, 
those employees could be shared under the Standards of Conduct, despite 
the fact that sharing of such employees is prohibited under the 
affiliate restrictions. Thus, consistent with the Commission's 
determinations in Order No. 697-A, the April 15 Clarification Order 
clarified that, for purposes of compliance with the market-based rate 
affiliate restrictions, a franchised public utility with captive 
customers and its market-regulated power sales affiliates may not share 
employees that make economic dispatch decisions or that determine the 
timing of scheduled outages.\9\
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    \7\ Under the Standards of Conduct regulations, ``marketing 
function employee'' is defined 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.'' 18 CFR 358.3(d) (2010). 
``Marketing functions'' means ``in the case of public utilities and 
their affiliates, the sale for resale in interstate commerce, or the 
submission of offers to sell in interstate commerce, of electric 
energy or capacity, demand response, virtual transactions, or 
financial or physical transmission rights, all as subject to an 
exclusion for bundled retail sales, including sales of electric 
energy made by providers of last resort. * * *'' 18 CFR 358.3(c) 
(2010). As the Commission stated in the April 15 Clarification 
Order, the Standards of Conduct definition of ``marketing function 
employee'' may be read to be limited to those employees engaged in 
sales.
    \8\ April 15 Clarification Order, 131 FERC ] 61,021 at P 37 
(citing Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 253).
    \9\ Order No. 697-A, FERC Stats. & Regs. ] 31,268 at P 253.
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    6. The April 15 Clarification Order also explained that franchised 
public utilities with captive customers should be prohibited from 
sharing employees that engage in resource planning or fuel procurement 
with their market-regulated power sales affiliates. The Commission 
explained that if the franchised public utility and its market-
regulated power sales affiliate are permitted to share employees that 
make strategic decisions about future generation supply, such as 
deciding when and/or where to build or acquire generating capacity, 
such strategic decision making by a shared employee could result in 
generation being built or acquired for the benefit of the market-
regulated power sales affiliate, and at the expense of the captive 
customers of the franchised public utility. The April 15 Clarification 
Order also explained that a shared employee that procures fuel for both 
the franchised public utility and the market-regulated power sales 
affiliate may have the incentive to allocate purchases of lower priced 
fuel supplies to the market regulated power sales affiliate while 
allocating purchases of higher priced fuel supplies to the franchised 
public utility. Therefore, given that the definition of marketing 
function employee under the Standards of Conduct does not specifically 
address employees that determine the timing of scheduled outages or 
that engage in economic dispatch, fuel procurement, or resource 
planning,\10\ the April 15 Clarification Order clarified that employees 
engaging in these activities are prohibited from being shared under the 
market-based rate affiliate restrictions, absent an explicit waiver 
from the Commission.
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    \10\ The prohibition on sharing employees that engage in 
resource planning applies only to the sharing of employees between a 
franchised public utility and its market-regulated power sales 
affiliate, and is not intended to alter resource planning activities 
by transmission providers that are permitted under the Standards of 
Conduct. See Standards of Conduct for Transmission Providers, Order 
No. 717, FERC Stats. & Regs. ] 31,280, at P 144 (2008) (Standards of 
Conduct Final Rule), order on reh'g, Order No. 717-A, FERC Stats. & 
Regs. ] 31,297, order on reh'g, Order No. 717-B, 129 FERC ] 61,123 
(2009).
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    7. In order to reflect these clarifications, the Commission 
proposed in the NOPR to revise Sec.  35.39 of its regulations in order 
to clarify that employees that determine the timing of scheduled 
outages or that engage in economic dispatch, fuel procurement, or 
resource planning may not be shared under the market-based rate 
affiliate restrictions. Accordingly, the Commission proposed to revise 
the separation of functions provision contained in Sec.  
35.39(c)(2)(ii) of the regulations to include the provision that 
franchised public utilities with captive customers are prohibited from 
sharing employees that determine the timing of scheduled outages or 
that engage in economic dispatch, fuel procurement, or resource 
planning with their market-regulated power sales affiliates.
    8. The Commission also proposed to revise the information sharing 
provision contained in Sec.  35.39(d)(2) of the regulations to include 
the provision that employees that determine the timing of scheduled 
outages or that engage in economic dispatch, fuel procurement, or 
resource planning may not have access to information covered by the 
prohibition of Sec.  35.39(d)(1).

[[Page 4571]]

II. Comments

    9. The Edison Electric Institute (EEI), Ameren Services Company 
(Ameren), Dominion Resources Services, Inc. (Dominion), Duke Energy 
Corporation (Duke), Entergy Services, Inc. (Entergy), and the Nuclear 
Energy Institute (NEI) \11\ filed comments opposing the codification of 
the clarifications provided in the April 15 Clarification Order. The 
Transmission Access Policy Study Group (TAPS) submitted comments in 
support of the NOPR's proposed codification of the clarifications 
provided.
    10. EEI contends that the April 15 Clarification Order bypassed the 
notice-and-comment proceeding established in the NOPR, depriving the 
public of an effective opportunity to provide input on the Commission's 
proposed changes. According to EEI, the NOPR is evidence that the April 
15 Clarification Order does more than merely clarify existing 
restrictions. NEI also states that the April 15 Clarification Order is 
effectively amending the Commission's affiliate restrictions 
regulations without notice and comment. NEI contends that the NOPR is 
not a logical outgrowth of the Compliance Working Group's request for 
clarification or the notice associated with the request and that, as a 
result, the notice and comment on the Compliance Working Group's 
request for clarification does not satisfy the Administrative Procedure 
Act.\12\
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    \11\ NEI represents the commercial nuclear energy industry in 
regulatory communications, public policy and other matters. NEI 
states that its members generate electricity for sale in both 
regulated and deregulated markets. NEI Comments at 2-3.
    \12\ NEI Comments at 10 (citing Shell Oil Co. v. E.P.A., 950 
F.2d 741, 747 (D.C. Cir. 1991).
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    11. EEI opposes adoption of the proposed changes to the market-
based rate affiliate restrictions because it believes that the 
Commission's current regulations provide a solid and a sufficient 
framework to protect captive customers.\13\ EEI contends that the April 
15 Clarification Order could impose new obligations on a number of 
utilities and require reorganization and operational changes by 
affected entities.\14\ EEI argues that the Commission should not adopt 
any such changes absent evidence that captive retail customers are at 
risk of subsidizing the activities of market-regulated power sales 
affiliate operations. EEI requests that the Commission find that 
franchised public utilities with captive customers and their market-
regulated power sales affiliates may share employees who: (1) Perform 
economic dispatch and outage scheduling functions, but are abiding by 
guidance provided by the Commission or its staff permitting the sharing 
of these employees; (2) provide inputs and other support to the 
resource planning process but do not exercise decisional authority with 
respect to such matters; \15\ or (3) provide shared fuel procurement 
services within the corporate family when the Commission or a state 
commission has approved such sharing of employees, or sharing is 
consistent with no-action letters or other such guidance. EEI also 
states that the Commission should find that franchised public utilities 
with captive customers and their market regulated power sales 
affiliates may continue to rely on waivers, no-action letters, audit 
reports, informal guidance, or other documents that the Commission or 
its staff has issued, even if those documents precede or depart from 
the April 15 Clarification Order or the Final Rule issued pursuant to 
the NOPR.
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    \13\ EEI Comments at 5.
    \14\ Id. at 16-17.
    \15\ While it is unclear what EEI means by its use of the term 
``inputs,'' EEI appears to use the term ``inputs'' to describe 
support services.
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    12. With respect to fuel procurement employees, EEI requests that, 
at a minimum, the Commission clarify that: (1) Those franchised public 
utilities with captive customers and their market-regulated power sales 
affiliates that currently rely on a shared fuel procurement unit may 
continue to do so; and (2) companies may seek waivers in the future to 
establish new shared fuel procurement units. EEI asserts that joint 
fuel procurement would be governed by the requirements of the 
regulations adopted in Order Nos. 667 and 707, and by applicable state 
orders and regulations, and argues that the Commission has not 
previously proscribed the use of joint fuel procurement units.\16\
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    \16\ EEI Comments at 13-14 (citing Repeal of the Public Utility 
Holding Company Act of 1935 and Enactment of the Public Utility 
Holding Company Act of 2005, Order No. 667, FERC Stats. & Regs. ] 
31,197 (2005), order on reh'g, Order No. 667-A, FERC Stats. & Regs. 
] 31,213 (2006), order on reh'g, Order No. 667-B, FERC Stats. & 
Regs. ] 31,224 (2006), order on reh'g, Order No. 667-C, 118 FERC ] 
61,133 (2007); Cross-Subsidization Restrictions on Affiliate 
Transactions, Order No. 707, FERC Stats. & Regs. ] 31,264 (2008), 
order on reh'g, Order No. 707-A, 124 FERC ] 61,047 (2008)).
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    13. Dominion, Ameren, Duke, Entergy, and NEI make arguments similar 
to those of EEI. Dominion, Duke, Entergy, and NEI argue that sharing of 
nuclear fuel procurement employees should be permitted. NEI argues that 
a categorical prohibition on the sharing of employees that engage in 
fuel procurement is unnecessary given that there is no record of abuse 
and that such a prohibition would negatively affect the ability of 
utilities to procure nuclear fuel. NEI argues that the Commission has 
allowed the sharing of fuel procurement employees in the past, and 
suggests that the Commission's concerns regarding the sharing of fuel 
procurement employees could be better addressed through procedural 
approaches, such as requiring separate contracts for each entity and 
auditable records to justify specific procurement actions.\17\ 
According to Entergy, market-based rate affiliate personnel with 
information on regulated utility nuclear fuel prices could not use that 
information in electricity trading or dispatch decisions in any manner 
to the detriment of ratepayers, even if the no-conduit rule were 
ineffective in ensuring that marketing personnel do not have access to 
that information.\18\
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    \17\ NEI Comments at 4-7 (citing Entergy Corp., No-Action 
Letter, Docket No. NL07-4-000 (Feb. 8, 2007)).
    \18\ Entergy Comments at 15, 17.
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    14. Dominion claims that state regulation of fuel procurement 
protects captive ratepayers, and states that it currently uses shared 
fuel procurement personnel in accordance with state commission-approved 
affiliate agreements. Dominion proposes that the Commission create safe 
harbors, which Dominion describes as pre-defined categories for fast-
track waiver requests that permit the sharing of resource planning and/
or fuel procurement employees. Dominion argues that creating safe 
harbors would minimize utilities having to make a fact-specific showing 
that part or all of the affiliate restrictions should not apply and 
minimize problems with showings becoming outdated.\19\
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    \19\ Dominion Comments at 8, 19-22.
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    15. Entergy argues that, particularly in the nuclear context, the 
prohibition on the sharing of outage schedulers should be read 
narrowly, so that employees that support the outage scheduling process 
may continue to be shared. Entergy seeks confirmation that its 
interpretation of the words ``determine the timing of'' as being 
limited to a small group of personnel, such as site outage managers and 
senior vice presidents, who are the outage decision-makers, is correct 
\20\ and requests that the Commission clarify that after-the-fact 
sharing of certain information does not constitute the sharing of 
market information.\21\
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    \20\ Entergy Comments at 20-21.
    \21\ Specifically, Entergy argues that the sharing of 
information concerning the causes of forced outages, system weakness 
or equipment failures, other potential concerns, and best practices 
should be permitted. Id. at 21-22.

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[[Page 4572]]

    16. Ameren argues that the use of shared employees allows the 
utilities to avoid having to hire duplicate sets of employees, and 
asserts that the Commission has found the sharing of resource planning 
and fuel procurement personnel appropriate in other circumstances.\22\ 
Ameren also argues that the proposed prohibitions against the sharing 
of resource planning or fuel procurement employees would contradict the 
findings in National Fuel Gas Supply Corp. v. FERC,\23\ where the court 
found that the record did not support the Commission's attempt to 
extend the Standards of Conduct to relationships between pipelines and 
an additional class of their affiliates. Similarly, Duke argues that 
the Commission has not previously prohibited sharing of employees who 
engage in fuel procurement, and has not provided evidence that would 
support imposing new restrictions.\24\
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    \22\ Ameren Comments at 14-15 (citing Standards of Conduct Final 
Rule, FERC Stats. & Regs. ] 31,280 at P 146; Entergy Services, Inc., 
No-Action Letter, Docket No. NL07-4-000 (Feb. 8, 2007); Cinergy 
Services, Inc., No-Action Letter, Docket No. NL06-1-000 (Jan. 31, 
2006)).
    \23\ 468 F.3d 831 (D.C. Cir. 2006).
    \24\ Duke Comments at 3-4 (citing Order No. 697, FERC Stats. & 
Regs. ] 31,252 at P 564-565; Order No. 697-B, 125 FERC ] 61,326 at P 
59).
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    17. EEI contends that the proposed ``blanket proscriptions'' would 
run afoul of individual orders, notices, waivers, and no-action letters 
issued to companies that allow the sharing of employees that schedule 
outages or that engage in economic dispatch, resource planning or fuel 
procurement. Entergy argues that the Commission has previously 
recognized that co-owned units and plants should be excepted from 
certain prohibitions in the affiliate restrictions, as long as such 
sharing is kept to the minimum practicable level. Entergy seeks 
clarification as to whether the guidance provided by no-action letters 
and cases granting waivers to entities that co-own generation remains 
valid, and argues that if the Commission prefers that entities that 
have relied on this guidance but never submitted a waiver request, 
submit a waiver, it should so clarify.\25\
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    \25\ Entergy Comments at 22-23.
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    18. Entergy argues that in the situation where a franchised public 
utility with captive customers and its market-regulated power sales 
affiliate co-own generation, there is a significant likelihood that 
market information about the level of dispatch of the total plant may 
become known to market-based rate affiliate personnel, despite co-
owners taking steps to ensure that disclosures are kept to a minimum. 
Entergy argues that the Commission should clarify that the unintended, 
incidental sharing of market information regarding economic dispatch as 
well as after-the-fact operational information does not violate the 
affiliate restrictions in the situation of co-owned generation, as long 
as economic dispatch decisions are made separately, and not by shared 
employees, and as long as the no-conduit rule is strictly followed.\26\ 
Entergy also argues that the Commission should continue to permit 
sharing (for co-owned units) or coordination (for co-owned plants) of 
outage scheduling, to the extent necessary given the joint ownership 
arrangement, as well as the information sharing that inevitably 
results.\27\ Entergy argues that the Commission should clarify that it 
recognizes the need for fuel procurement sharing in the situation of 
co-owned generation.\28\
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    \26\ Id. at 23-24.
    \27\ Id. at 25 (citing Allegheny Energy, Inc., 119 FERC ] 61,025 
(2007)).
    \28\ Id. at 26-28.
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    19. With respect to employees that engage in resource planning, EEI 
states that it has understood that ``traditional'' resource planning 
employees who make direct resource planning decisions could not be 
shared under the affiliate restrictions. However, it states that the 
Commission's proposed proscription is written so broadly that it could 
inadvertently prevent the sharing of support staff, which is explicitly 
permitted by the Commission's regulations.\29\ EEI also states that it 
assumes that by the term ``employee,'' the Commission does not mean to 
include senior executives responsible for overseeing corporate 
activities from a family-wide perspective and who have fiduciary 
responsibilities, including responsibilities regarding the acquisition 
of significant assets and corporate finance.\30\
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    \29\ EEI Comments at 7-8.
    \30\ Id. at 8, n.10.
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    20. TAPS argues that the Commission should revise its regulations 
as proposed in the NOPR and should emphasize that its proposed 
clarifications concerning the sharing of employees are not an 
exhaustive listing of prohibited shared employees. TAPS states that the 
Commission correctly identified situations where the sharing of 
employees between affiliated market-based rate power sellers and 
franchised public utilities with captive customers could harm the 
captive customers of the franchised public utility.
    21. EEI argues that the Commission should provide affected 
companies with 60 days of transition time to comply with the changes 
adopted in the Final Rule or to file a request for waiver.\31\ Ameren 
argues that if the Commission adopts the changes proposed in the NOPR, 
the Commission should only apply the prohibition against the sharing of 
fuel procurement and resource planning employees prospectively, 
beginning no earlier than 180 days after the Final Rule becomes 
effective, and that the Commission should grandfather existing sharing 
agreements.\32\ Dominion requests that the Commission provide ``a 
significant amount of time'' to undertake the structural 
reorganizations that will be required if the proposed changes are 
adopted. Dominion requests that the Commission require companies to be 
in compliance within one year of the later of: (1) The date of issuance 
of the Final Rule; (2) the date of Commission action on any waiver 
request filed within 30 days of the issuance of the Final Rule; or (3) 
the date of state commission action on any approval required in 
connection with a proposed restructuring to comply with the Final 
Rule.\33\
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    \31\ Id. at 17.
    \32\ Ameren Comments at 23-25.
    \33\ Dominion Comments at 23-24.
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III. Discussion

    22. Upon further consideration, we will withdraw the NOPR because 
the current regulations are sufficient insofar as they already require 
that employees of a market-regulated power sales affiliate operate 
separately from the employees of any affiliated franchised public 
utility with captive customers, to the maximum extent practical. While 
the NOPR was intended to provide additional clarity to the industry by 
identifying in the regulatory text certain employees who cannot be 
shared, we find that codifying these clarifications in the regulatory 
text is unnecessary because the separation of functions requirement in 
the existing regulations already requires that, ``[t]o the maximum 
extent practical, the employees of a market-regulated power sales 
affiliate must operate separately from the employees of any affiliated 
franchised public utility.'' \34\ The existing regulations also provide 
that ``[a] franchised public utility with captive customers may not 
share market information with a market-regulated power sales affiliate 
if the sharing could be used to the detriment of captive customers, 
unless simultaneously disclosed to the public.'' \35\ Because we find 
that codifying these clarifications

[[Page 4573]]

provided in the April 15 Clarification Order in the regulatory text is 
unnecessary, we conclude that it is no longer necessary to adopt the 
amendments to the regulations proposed in the NOPR. Sellers will be 
required to comply with the guidance provided in the April 15 
Clarification Order within 90 days of the date of issuance of the order 
addressing EEI's request for rehearing of the April 15 Clarification 
Order in Docket No. RM04-7-009, which is being issued concurrently with 
this order.\36\
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    \34\ 18 CFR 35.39(c)(2)(i) (2010).
    \35\ 18 CFR 35.39(d)(1) (2010).
    \36\ Market-Based Rates for Wholesale Sales of Electric Energy, 
Capacity and Ancillary Services by Public Utilities, 134 FERC ] 
61,046, at P 27 (2011).
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    23. We find that commenters' arguments objecting to the amendments 
to the regulatory text proposed in the NOPR and their arguments that 
adequate notice and opportunity for comment were not provided on the 
amendments to the regulatory text are rendered moot by our withdrawal 
of this NOPR. We address below commenters' remaining arguments.
    24. A number of commenters request that we clarify that franchised 
public utilities with captive customers may share employees with their 
market-regulated power sales affiliates where they are abiding by 
guidance provided by the Commission or by a state commission or in 
certain circumstances, such as in the case of co-owned generation 
facilities. We decline to grant such clarification on a generic basis.
    25. While the Commission has granted waiver of its market-based 
rate affiliate restrictions to permit the sharing of certain employees 
in certain circumstances, such as employees that schedule outages at 
co-owned generation facilities, these waivers were based on case-
specific circumstances and representations made by the specific 
applicants in those cases. For example, in Cleco Power LLC, the waiver 
of certain affiliate restrictions was limited to three employees, was 
limited to the ``specific facts and circumstances'' presented by the 
applicants, and was conditioned on the requirement that the applicants 
maintain sufficient records to allow the Commission to audit their 
compliance with the conditions of the waiver.\37\ We believe that the 
Commission, for purposes of the affiliate restrictions, should retain 
its authority to review on a case-by-case basis circumstances where 
affiliates seek to share employees or market information. Accordingly, 
we clarify that prior orders granting waiver are case specific and 
apply only to the entities that were specifically granted waiver in 
those cases. Therefore, entities that have relied on this previous 
guidance but who have not submitted a waiver request themselves should 
submit such a request. Entities that have previously obtained waiver of 
certain of the affiliate restrictions may continue to rely on those 
waivers as long as the facts and circumstances relied upon by the 
Commission in granting the waiver remain true and accurate, and as long 
as any conditions set forth in the order granting waiver continue to be 
satisfied.
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    \37\ 130 FERC ] 61,102, at P 22-25 (2010) (granting limited 
waiver to permit sharing of employees that determine the timing of 
scheduled outages based on the conjoined nature of the facilities 
and the applicants'' representations that the waiver was necessary 
to allow for the practical and efficient operation of the conjoined 
facilities); see also Allegheny Energy Inc., 119 FERC ] 61,025 at P 
20, 22 (granting waiver of the market-based rate code of conduct 
information sharing provision (the market-based rate code of conduct 
was the predecessor to the affiliate restrictions codified in Order 
No. 697) based on the applicants' representations that the waiver 
was necessary to allow for the practical and efficient operation of 
the conjoined facilities); American Electric Power Service Corp., 
119 FERC ] 61,064, at P 20 (2007) (granting waiver of the market-
based rate code of conduct (the market-based rate code of conduct 
was the predecessor to the affiliate restrictions codified in Order 
No. 697) to allow sharing of a senior executive officer based on the 
applicants' representations that the senior executive officer was 
not involved in the daily functions of directing, organizing and 
executing business decisions).
    Further, the Commission has granted waiver of the affiliate 
restrictions where a seller demonstrates and the Commission agrees 
that the seller has no captive customers. See Order No. 697, FERC 
Stats. & Regs. ] 31,252 at P 552, 589. Likewise, sellers have the 
option of seeking waiver of the separation of functions requirement 
to allow the sharing of employees that engage in fuel procurement or 
resource planning.
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    26. Similarly, we clarify that an entity may rely on the guidance 
provided by Commission staff in a no-action letter if the letter was 
issued in response to that entity's request, and if the specific facts 
and representations relied on by Commission staff in responding to the 
no-action letter request remain true and accurate.\38\
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    \38\ See Interpretative Order Modifying No-Action Letter Process 
and Reviewing Other Mechanisms for Obtaining Guidance, 123 FERC ] 
61,157, at P 10-12 (2008) (explaining that no-action letters ``can 
offer useful guidance to the industry,'' however, are non-binding on 
the Commission, and must relate to a specific, actual transaction, 
practice or situation in which the applicant is or may be involved, 
and that the applicant must explain the specific details of the 
transaction, practice or situation).
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    27. While we reject the notion that the Commission should rely on 
determinations made by state commissions with respect to the sharing of 
employees, we clarify that to the extent that an affected entity 
believes that a state commission's determination supports waiver of our 
market-based rate affiliate restrictions, the Commission will consider 
this argument on a case-by-case basis if this argument is presented in 
a request for a no-action letter regarding specific proposed 
transactions, practices or situations, or in a case-specific request 
for waiver of the affiliate restrictions.
    28. Similarly, in response to commenters' arguments that sharing of 
nuclear fuel procurement and other fuel procurement employees should be 
permitted, an entity can seek waiver of the affiliate restrictions to 
permit the sharing of certain employees based on case-specific 
circumstances.
    29. We deny Entergy's request that the Commission confirm which of 
Entergy's personnel determine the timing of scheduled outages, and its 
request as to whether after-the-fact sharing of certain information 
constitutes the sharing of market information, and whether unintended 
sharing of market information regarding economic dispatch and 
operational information violates the affiliate restrictions when such 
sharing occurs in the context of co-owned generation.\39\ As we explain 
above, prior orders granting waiver of the affiliate restrictions are 
case specific, and apply only to the entities that were specifically 
granted waiver in those cases. Further, Entergy does not provide 
sufficient detail regarding the activities of its personnel that 
determine the timing of scheduled outages, or sufficient detail 
regarding the facts and circumstances of the information sharing that 
it believes is permitted for the Commission to confirm whether 
Entergy's sharing of employees and market information is permitted.\40\ 
To

[[Page 4574]]

the extent that Entergy seeks clarification concerning whether it is 
complying with the market-based rate affiliate restrictions, or seeks 
waiver of certain affiliate restrictions, it may submit a request for a 
no-action letter regarding specific proposed transactions, practices or 
situations, or a case-specific request for waiver of the affiliate 
restrictions.
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    \39\ The Commission has adopted an exception to the independent 
functioning requirement and the information sharing restrictions for 
emergency circumstances affecting system reliability, provided that 
the subsequent reporting provisions are followed. Order No. 697, 
FERC Stats. & Regs. ] 31,252 at P 568; 18 CFR 35.39(c)(2)(iii) 
(2010). The Commission has also explained that, while shared field 
and maintenance employees may not make economic dispatch decisions 
or determine when scheduled maintenance outages will occur, they may 
do so during emergency forced outages. See Order No. 697-A, FERC 
Stats. & Regs. ] 31,268 at P 253; Order No. 697, FERC Stats. & Regs. 
] 31,252 at P 568. In addition, the Commission has explained that it 
permits the sharing of information to enable nuclear power plants to 
comply with the requirements of the Nuclear Regulatory Commission 
(NRC) as described in the NRC's February 1, 2006 Generic Letter 
2006-002, Grid Reliability and the Impact on Plant Risk and the 
Operability of Offsite Power. Order No. 697-A, FERC Stats. & Regs. ] 
31,268 at n.339 (citing Order No. 697, FERC Stats. & Regs. ] 31,252 
at P 581).
    \40\ With respect to Entergy's request that the Commission 
confirm that Entergy's interpretation of employees that determine 
the timing of scheduled outages is limited to a small group of 
personnel, such as site outage managers and senior vice presidents, 
who are the outage decision-makers, we note that the Commission has 
previously clarified ``that companies may share employees and 
supervisors who have the authority to curtail or stop the operation 
of generation facilities solely for operational reasons'' and that 
``shared employees may not be involved in decisions regarding the 
marketing or sale of electricity from the facilities, may not make 
economic dispatch decisions, and may not determine the timing of 
scheduled outages for facilities.'' Order No. 697-A, FERC Stats. & 
Regs. ] 31,268 at P 253.
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    30. For the reasons discussed above, the Commission withdraws the 
NOPR and terminates this rulemaking proceeding.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
 [FR Doc. 2011-1488 Filed 1-25-11; 8:45 am]
BILLING CODE 6717-01-P