By Tom Kleckner

U.S. Commodity Futures Trading Commission Chairman Timothy Massad said Tuesday he will recommend the commission abandon its proposal to allow private rights of action against energy market transactions in RTOs and ISOs, reversing his position on the issue (81 FR 30245).

Massad said that after a “careful review of the issue” and public comments, he plans to recommend CFTC’s final order exempt RTOs and ISOs “from all private rights of action under Section 22 of the Commodity Exchange Act (CEA).”

“As regulators, I believe it is our goal to provide effective and efficient oversight of our markets,” Massad said. “While private rights of action will remain critical overall in our markets, I am persuaded that … their preservation could result in greater costs and uncertainties without necessarily enhancing of markets or consumer protection.”

Massad’s comments came in a letter sent to U.S. Sen. John Boozman (R-Ark.), chairman of the Senate Appropriations Committee’s Subcommittee on Financial Services and General Government. In April, Boozman included an amendment to CFTC’s reauthorization bill that would have granted SPP the same exemptions the commission granted other grid operators in a 2013 order. (See Congress May Order CFTC to Back Down on Private Rights.)

“I appreciate the chairman listening to my concerns and those of others,” Boozman said in a statement. “This is an important decision that will prevent unnecessary increases in electricity costs for consumers in Arkansas and around the country.”

Private rights of action are judicially inferred rights to relief. Their use could have left the RTOs and their market participants as potential targets for lawsuits outside the FERC process.

The issue arose with the 2010 passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act. The legislation revised the CEA and provided CFTC with authority to exempt RTO markets from its rules.

Six of the seven RTOs filed for exemptions, which CFTC granted in 2013. SPP filed for a “me-too” exemption in 2013 when it became apparent its day-ahead market would be going live. In a 2-1 vote, the commission issued a draft order on the SPP request in May 2016, which included preamble language that said it never intended to exempt RTOs from private rights of action. (See CFTC to Add ‘Private Rights’ to RTO Exemption.)

Massad’s change of heart will swing CFTC’s final order in favor of the RTOs and ISOs. He joins Commissioner J. Christopher Giancarlo, who filed a dissent against the draft order and wrote an op-ed on the matter in August for The Record, the second-largest newspaper in New Jersey.

In a statement put out by his office, Giancarlo said he looks forward to “approving a final order soon that recognizes the clear intent of Congress that the CFTC and FERC work together to ensure effective and efficient oversight of America’s electricity markets.”

He said it was “welcome news” that the commission “has decided to cut consumers a break and not unleash a torrent of costly lawsuits against public utilities that would have certainly raised power bills for millions of Americans.”

Commissioner Sharon Y. Bowen was unavailable for comment, as she left Tuesday for a one-and-a-half-week trip to China.

It’s unclear when CFTC will make its final decision. The commission has held only four open meetings in less than two years, but it often makes it decisions via a seriatim process, in which commissioners vote in sequence and in private, rather than at an open meeting. Commissioners can still release public statements in connection with their seriatim votes, however.

SPP helped lead the effort against the draft order, inundating CFTC with 38 (out of a total 43) comments. Industry groups, the House of Representatives’ Committees on Energy and Commerce and Agriculture, and FERC, which has had several jurisdictional tiffs with CFTC in recent years, were among those supplying comments before the June 15 deadline. (See Electric Industry Lobbies, Waits on CFTC Private Rights Ruling.)

The ISO/RTO Council said it was pleased with Massad’s statement. “The ISOs/RTOs, which have maintained that current oversight of competitive markets provides adequate protections for consumers, appreciate the chairman’s thoughtful consideration and recommendation.”

SPP CEO Nick Brown expressed his gratitude to Boozman for helping resolve the proposed regulatory action and potential regulatory overlap.

“The wholesale electric markets are already regulated by” FERC, Brown said in a statement. “The proposed resolution to this issue will still provide CFTC with broad behavioral enforcement authority but will no longer expand their scope as they had considered doing.”