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Power & Pipes

FERC, CFTC, and State Energy Law Developments

On January 20, the Federal Energy Regulatory Commission (FERC) denied a request for rehearing of FERC’s April 15, 2010 order in Docket No. RM04-7-007, which had responded to a request for clarification regarding the categories of employees that may not be permissibly shared under FERC’s Affiliate Restrictions (Clarification Order). To the extent that FERC had stayed the requirement to comply with the Clarification Order, sellers will be required to comply with the Clarification Order within 90 days of the issuance of the January 20, 2011 order—that is, By April 20, 2011. FERC also terminated a rulemaking proceeding that would have codified in the regulations the findings in the Clarification Order.

FERC’s Affiliate Restrictions (promulgated in Order No. 697) for entities with market-based rate authority enumerate three categories of employees that may be permissibly shared By franchised public utilities with captive customers and their market-regulated power sales affiliates (i.e., those affiliates whose power sales are regulated in whole or in part at market-based rates): (1) support employees, (2) field and maintenance employees, (3) and senior officers and boards of directors. The Clarification Order elaborated that the following employees were prohibited from being shared under the Affiliate Restrictions: employees that determine the timing of scheduled outages or that engage in economic dispatch, fuel procurement, or resource planning.

Concurrent with the Clarification Order, FERC issued a Notice of Proposed Rulemaking (NOPR) on April 15, 2010 in Docket No. RM10-20-000, proposing to revise its regulations to reflect the clarification regarding the four types of employees that may not be shared.

Because of the potential for uncertainty regarding compliance with the Affiliate Restrictions after the issuance of the Clarification Order and the NOPR, FERC granted a request for stay of the Clarification Order regarding employees who engage in fuel procurement or resource planning until such time as FERC issued a final rule in the NOPR proceeding. However, FERC denied the request for a stay with respect to employees who engage in economic dispatch or who determine the timing of scheduled outages because FERC had already explicitly prohibited the sharing of such employees in Order No. 697-A.

FERC’s January 20, 2011 order rejected a request for rehearing of the Clarification Order. In the January 20, 2011 order, FERC reiterated that the Clarification Order was consistent with prior FERC precedent. Furthermore, because FERC determined that codifying the findings from the Clarification Order in the regulatory text was unnecessary, FERC issued a companion order withdrawing the NOPR in Docket No. RM10-20-000 and terminating that proceeding. FERC stated that the current regulations are sufficient insofar as they already require that, to the maximum extent possible, employees of a market-regulated power sales affiliate must operate separately from the employees of any affiliated franchised public utility with captive customers.

Sellers will be required to comply with the guidance provided in the Clarification Order with respect to employees that engage in fuel procurement or resource planning By April 20, 2011. As noted above, sellers should already be complying with the separation requirement for employees who engage in economic dispatch or who determine the timing of scheduled outages.

The FERC rehearing order and order terminating rulemaking are available on the FERC website: