By Tom Kleckner
The U.S. Commodity Futures Trading Commission said Tuesday that it is amending its 2013 order exempting RTO energy transactions from certain provisions of the Commodity Exchange Act to clarify that it does not bar private rights of action.
The proposed amendment, approved in a 2-1 vote, would “explicitly” provide that the RTO-ISO order does not prevent private parties from filing lawsuits.
CFTC said the private right of action’s existence is “not inconsistent with or detrimental to cooperation between the CFTC and FERC.” Preserving that right, the commission said, “will not cause regulatory uncertainty or duplicative or inconsistent regulation.”
“Moreover, conflicting judicial interpretations regarding the nature of the covered transactions would not affect the jurisdiction of FERC or any relevant state regulatory authority.”
The amendment stems from CFTC’s April 2013 order, which exempted financial transmission rights and other electricity transactions subject to tariffs approved by FERC or the Public Utility Commission of Texas from most of the CEA’s provisions, while retaining its general anti-fraud and anti-manipulation authority.
SPP was the only grid operator not party to the order, as its day-ahead market did not become fully operational until March 2014. The RTO sought the same exemptions that the commission granted the others, but the commission’s May 2015 draft order on SPP included a preamble stating its intent to preserve private rights of action under Section 22 of the CEA.
Although the commission said it did not intend to exclude private suits in its 2013 order, the 5th Circuit Court of Appeals ruled in February that it had done so. The appellate court upheld a 2015 ruling by the U.S. District Court for the Southern District of Texas dismissing a lawsuit alleging that some generators in ERCOT were intentionally withholding electricity and manipulating prices in the derivatives commodities market (Aspire Commodities v. GDF Suez Energy N. Am., No. H-14-1111). The court said that the private right of action was “unavailable to [p]laintiffs” due to the CFTC’s exemption order.
In March, the ISO/RTO Council, the Texas PUC, the Edison Electric Institute and other witnesses asked the commission to reverse its position, saying the SPP order could undermine the broad exemptions earlier granted to the other grid operators. PJM, ERCOT and CAISO also raised objections last year.
Last month, U.S. Sen. John Boozman (R-Ark.) introduced an amendment to CFTC’s reauthorization bill that would prevent the agency from adding the private rights option to the 2013 order. (See Congress May Order CFTC to Back Down on Private Rights.)
CFTC Chairman Timothy Massad said he appreciated “the desire of businesses to have as little regulatory uncertainty as possible” but that the commission must also ensure “there is adequate recourse” for market participants.
“Private rights of action have been instrumental in helping to protect market participants and deter bad actors,” Massad said in a statement. “These actions can also augment the limited enforcement resources of the CFTC and serve the public interest by allowing harmed parties to seek damages in instances where the commission lacks the resources to do so on their behalf.”
In a lengthy dissent, Commissioner J. Christopher Giancarlo said the amendment “manages to simultaneously toss legal certainty to the wind and threaten the household budgets of low- and middle-income ratepayers by permitting private lawsuits in heavily regulated markets that are at the heart of the U.S. economy.”
The proposed amendment will be open for public comment for 30 days once it is published in the Federal Register.
