FERC reiterates that simultaneous exchanges between affiliates require prior approval and clarifies the types of transactions covered by this policy and the showing necessary to receive FERC approval.
On November 2, the Federal Energy Regulatory Commission (FERC or the Commission) rejected challenges to its 2012 order on “simultaneous exchange transactions.” Under the order, affiliates may enter into simultaneous exchanges as long as they obtain prior approval from FERC and FERC finds that there are not attempts to circumvent transmission service regulation or concerns of affiliate abuse or separation of functions violations. FERC also provided key clarifications to its policy by explaining the types of transactions included within or excluded from the requirement of prior FERC approval.
Simultaneous exchange transactions occur when a pair of wholesale power transactions are simultaneously arranged (i.e., are part of the same negotiations) between the same two counterparties such that Party A sells an electricity product to Party B at one location and Party B sells a similar electricity product to Party A at a different location with both transactions having an overlapping delivery period. The simultaneous exchange is the overlapping portion (both in volume and delivery period) of these wholesale power transactions.
In the 2012 order, FERC ruled that entities are permitted to engage in simultaneous exchanges without prior FERC approval (beyond the necessary authorization under section 205 of the Federal Power Act for the sale for resale of electric energy) if such transactions do not include the marketing function of a transmission provider conducting simultaneous exchange transactions involving that transmission provider’s system. In contrast, the marketing function of a transmission provider is not permitted to engage in simultaneous exchanges “involving” that transmission provider’s system absent prior Commission authorization, as evaluated on a case-by-case basis.
In the rehearing order, FERC rejected arguments that it had not adequately explained its reasoning for requiring the marketing function of a transmission provider to seek prior approval for simultaneous exchanges. FERC reiterated that affiliates can enter into simultaneous exchange transactions only with prior FERC approval, which would depend on FERC finding that the transaction would not reflect affiliate abuse or circumvent FERC’s transmission service and separation of function requirements.
In the rehearing order, FERC also clarified the 2012 order:
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Joseph W. Lowell
 Puget Sound Energy, Inc., 138 FERC ¶ 61,121 (2012).
 Puget Sound Energy, Inc., Order on Rehearing, 153 FERC ¶ 61,131 (2015).
 “Involvement of the transmission provider’s system means that one point of the simultaneous exchange is either within or on the border of the transmission provider’s system. 2012 order at P 11 n. 22.