By Michael Brooks

WASHINGTON — FERC on Thursday adopted two new rules intended to reduce paperwork for electricity sellers with market-based rate authority (MBRA), acting on a proposal issued more than three years ago (Order 860, RM16-17).

Currently, sellers are required to describe the activities of all their upstream owners, often requiring them to submit multiple amendments to their filings. Once the new rule goes into effect on Oct. 1, 2020, sellers will only need to identify their “ultimate” upstream affiliate — the furthest upstream owner.

Sellers will also no longer be required to report assets — such as generators and long-term power purchase agreements — owned by its affiliates with MBRA. They will also no longer have to submit corporate organizational charts. They will, however, be required to report assets owned by affiliates without MBRA, as these are relevant to the seller’s market power analysis, the commission said.

FERC will collect all seller information through a relational database to be created by the order.

“The relational database construct modernizes the commission’s data collection processes, eliminates duplications and renders information collected through its market-based rate program usable and accessible for the commission,” FERC said.

Connected Entity Info Tossed

Under the proposal, sellers would have had to identify all affiliate owners with franchised service areas or MBRA, or that directly own or control generation; transmission; intrastate natural gas transportation, storage or distribution facilities; coal supply sources; or access to transportation of coal supplies.

Collectively known as connected entity information (CEI), this new class of information was panned by market participants in late 2015 and again in response to FERC’s proposed 2016 revision. (See FERC Issues Revised Connected Entity, Data Collection Proposal.)

Speakers at a 2015 technical conference and commenters on the proposal said it would create significant reporting burdens.

On Thursday, FERC declined to adopt the CEI provision, instead opening a new docket (AD19-17) “should the commission wish to consider this again in the future,” staff said.

This move was strongly criticized by Commissioner Richard Glick, who issued a partial dissent. “I’m really having a hard time figuring out how that’s any different from killing the proposal altogether, and that’s what I’m very much troubled by,” he said at the commission’s open meeting Thursday.

“In my opinion, through its actions today, the commission is dropping the ball to the detriment of consumers across the country,” he continued. He called CEI “critical” to preventing market manipulation and the exercise of market power. “What I want to know is, why was this information no longer considered to be necessary, or [do] we simply no longer care about how we’re addressing market manipulation?”

FERC also dropped the proposed requirement that traders of financial transmission rights and virtual products also submit affiliate information, which Glick also criticized.

“Virtual/FTR participants are very active in RTO/ISO markets, and surveilling their activity for potentially manipulative acts consumes a significant share of the Office of Enforcement’s time and resources,” Glick said in his dissent. “It may, therefore, be surprising that the commission collects only limited information about virtual/FTR participants and often cannot paint a complete picture of their relationships with other market participants.”

He pointed to the Order to Show Cause issued this month to Federico Corteggiano, whom Enforcement alleged manipulated CAISO’s market to limit losses on Vitol’s congestion revenue rights. Enforcement said Corteggiano engaged in similar behavior while employed by Deutsche Bank. (See FERC Proposes $6.8M Fine for CAISO Market Manipulation.)

“Without the connected entity reporting requirements contemplated in the [proposal], the commission lacks any effective means of tracking individuals who perpetrate a manipulative scheme at one entity and then move locations and engage in similar conduct elsewhere, as Corteggiano is alleged to have done,” Glick said. “That makes no sense. We should not be leaving the Office of Enforcement to play ‘whack-a-mole,’ addressing recidivist fraudsters only when evidence of their latest fraud comes to light.”

“I know that there are some who will construe our decision not to move forward with the connected entities proposal as a lack of commitment to our Enforcement program,” Chairman Neil Chatterjee said before Glick spoke at the meeting. “To anyone with that misconception, let me be clear: Robust enforcement of our orders and regulations is and will remain one of the commission’s most critical objectives.”

Speaking to reporters after the meeting, Chatterjee said, “I respect Commissioner Glick, but I disagree with the point that he made. I think it’s a matter of good governance. We were ready to move forward with a piece of it; we weren’t ready on the connected entities part, so rather than hold up the MBR piece, which has been out there for three years, we moved forward with it.” He also said he didn’t think “it was a fair characterization” to say that opening the new docket ends the process.

The order is “a critical step in our ongoing efforts to modernize and, where possible, streamline the MBR program to ensure that we have the information we need to evaluate market power while not unduly burdening market participants,” Commissioner Cheryl LaFleur said. “I recognize that these reforms do not address all the issues the connected entities proposal would have covered, particularly with respect to financial market participants and traders. I made the pragmatic decision that it was important to move forward on the MBR improvements that have been held up for three years due to being placed in the same [proposal] as the connected entities.”

Commissioner Bernard McNamee did not participate in the ruling.

Screens Eliminated for 4 RTOs

FERC also approved eliminating the requirement for power sellers with MBRA to submit pivotal supplier and wholesale market share screens in PJM, ISO-NE, MISO and NYISO (Order 861, RM19-2). FERC will now presume that the grid operators’ commission-approved monitoring and mitigation rules provide adequate protection against market power abuse.

MBR sellers of capacity in SPP and CAISO, which do not have capacity markets, will still need to submit the screens. The order’s relief also does not apply to any participants in CAISO’s Energy Imbalance Market.

Effective 60 days after its publication in the Federal Register, the order’s relief would begin with MBR sellers scheduled to file their triennial updates for the Northeast region in December 2019 and June 2020, commission staff said.

Sellers filed almost 600 indicative screens over the last three years, according to staff. Once the rule goes into effect, sellers would be relieved of submitting more than half of those screens, they said.

FERC clarified certain details about its initial proposal, issued last December, but it did not decline to adopt or alter any of its provisions. (See FERC Proposes Market Screen Exemptions.) Though paired with RM16-17 for discussion at Thursday’s open meeting, it received little mention in comparison.

Rehearing Denied on Interlocking Directors

In a third ruling, the commission denied rehearing but made one clarification on its February order updating its regulations on commission authorization of interlocking positions between public utilities and financial companies. (Order 856-A, RM18-15-001). The revised rule provides an exemption for some applicants for interlocking positions between utilities and companies that underwrite public utility securities. (See “Other Rules,” ‘Boring Good’ Rulemaking Seeks to Clean up Order 845.)

The commission denied El Paso Electric’s rehearing request that FERC grant equal treatment to all interlocks authorized under section 45 of its regulations.

“The commission has recognized a difference between holding interlocks among two or more commonly owned or controlled public utilities, and holding an interlock between, for example, a public utility and an electrical equipment supplier,” FERC said. “Interlocks that fall under section 45.2 and are not between two or more commonly owned or controlled public utilities (and therefore are outside the scope of section 45.9a) are reviewed by the commission so that the commission can be sure that the ‘evils to be eliminated by the enactment of [Federal Power Act] Section 305b’ are not present. By contrast, for interlocks that fall under section 45.9a’s automatic authorization, the commission has found that the evils to be eliminated by the enactment of Federal Power Act Section 305b are not present because the potential for abuse would be unlikely to result from such interlocks.”

The commission did grant a clarification on another question raised by EPE, saying that “if, as a result of the change in FPA Section 305b(2) in 1999 and the corresponding changes to section 45.2 of the commission’s regulations made by Order No. 856, an individual no longer holds an interlock that requires commission authorization, that individual no longer needs to adhere to the requirements of [sections] 45 and 46 of the commission’s regulations governing commission approval of such interlocks.”