FERC Staff: 90% of Transmission Providers Complying with Standards of Conduct Requirements
Following some prodding from FERC's audit and enforcement staffs, 90% of the 190 natural gas and electric transmission providers that are subject to the expanded standards of conduct governing their relationships with affiliates are now in compliance with agency requirements, the Commission staff reported last Wednesday.
This was a significant improvement from FERC staff's initial review in December when it found that 69% (132 transmission providers) were not in compliance with the expanded standards of conduct rule, which took effect in late September. As of Jan. 16, staff said 113 of the 132 transmission providers had satisfied the requirements, leaving only 19 transmission providers out of compliance with the FERC rule (Order 2004).
The 190 transmission providers included 95 natural gas pipeline providers and 95 electric transmission providers, according to staff.
"We're interested in compliance, not gotchas," said FERC Chairman Pat Wood. Although the initial 69% non-compliance rate was not acceptable, "I think that this [90%] is a pretty good track record," noted Commissioner Nora Brownell. She believes the majority of regulated energy companies are making their best effort to comply with requirements of the expanded standards of conduct rule.
The final rule, which the Commission approved in November 2003 and affirmed in later decisions, combined the standards of conduct for both jurisdictional natural gas pipelines and transmission-owning public utilities, and significantly expanded the Order 497 regulations that barred pipeline/transmission providers from giving preferential treatment to their marketing and wholesale merchant affiliates.
Aimed at thwarting abuse in the energy industry, the new standards of conduct rule and subsequent rehearing orders extended the FERC restrictions against preferential treatment, information disclosure and employee sharing to a number of other affiliates of regulated pipeline/transmission providers in certain circumstances, including traders, producers, gatherers, processors, and intrastate and Hinshaw pipelines.
In its December review, FERC staff said it examined 190 Internet web sites to determine whether transmission providers were posting 12 elements of required information, including written procedures on how the transmission provider intends to implement the standards of conduct rule; emergency deviations from standards of conduct; names and addresses of marketing affiliates; identifying shared facilities as marketing and energy affiliates; organizational charts; job descriptions; potential merger partners; transfers of employees; a link to post a notice when a non-affiliated customer authorizes a transmission provider to share its information with marketing or energy affiliates; discount information; and a listing of incidences of disclosure of information from the transmission provider to marketing or energy affiliates.
The majority of regulated transmission providers, (161 of 190) posted on their web sites written procedures on how they intended to implement the standards of conduct, FERC staff said. After further nudging, staff reported that 25 more energy companies complied with this requirement by mid-January.
Most transmission providers (117 of 190), however, failed initially to provide a link for posting notices when a non-affiliated customer authorizes a transmission provider to share its information with marketing or energy affiliates, staff said. After being contacted by FERC, staff reported that 96 additional transmission providers later added the link.
FERC's Office of Market Oversight and Investigations in February plans to undertake more in-depth compliance audits of transmission providers, where it will review Internet postings and compare the information with a company's internal records and data to verify the accuracy of the postings, according to FERC staff.
Staff recommended that the Commission host a conference for regulated companies' chief compliance officers in the spring to address questions about best practices and implementation issues.