The Federal Energy Regulatory Commission last Thursday issued a series of orders aimed at strengthening its protections against market manipulation in the natural gas and electricity industries.
In order to make way for stronger anti-manipulation rules, the Commission in two companion orders proposed repealing its market behavior rules that were adopted in November 2003 that prohibited holders of market-based rate tariffs for wholesale power, holders of blanket certificate authority for resale of natural gas and pipelines that provide unbundled gas sales service from engaging in manipulative transactions or practices. FERC is seeking industry comment on the twin orders within 30 days of publication in the Federal Register [RM06-5, EL06-16].
This action comes nearly a month after FERC, subject to its new authority under Energy Policy Act of 2005, proposed the adoption of new rules that would broaden its anti-manipulation reach in the natural gas and electricity markets. Under the proposed rules, FERC would have the authority to police any potential market manipulation by energy companies, even by firms over which the agency does not have jurisdiction (see NGI, Oct. 24).
FERC is seeking to repeal the older market behavior rules to make room for the proposed broader, tougher anti-manipulation rules and prevent any overlap that could cause confusion in the energy markets.
"There are significant differences between the anti-manipulation rules proposed last month and the anti-manipulation provisions of the market behavior rules. The new rules are broader in scope, apply to all wholesale power sellers and all wholesale transactions, and the intent standard is different. For these reasons, it makes sense to give serious thought to repealing the market behavior rules. Having two sets of rules barring the same behavior does not offer more protection to consumers," said Chairman Joseph T. Kelliher.
In a related order issued at the agency's regular meeting, FERC decided to follow the practice of other federal agencies and implement "no action" letters in which agency staff would provide informal advice to energy companies on whether a planned transaction or practice could lead to enforcement action by the Commission. If a company were to proceed with a transaction or practice, contrary to staff's advice that it may be questionable, staff could then recommend that FERC take enforcement action. Staff's advice would not be binding on the Commission [PL06-4].
The no-action process "can be used to obtain written and informal staff advice on whether staff will recommend that the Commission take no enforcement actions" with respect to a particular transaction, practice or situation, FERC staff said. "Initially, the topic for no-action letter advice from staff would be limited to matters relating to Part 358 standards of conduct for transmission providers; the existing market behavior rules for electric power and [natural gas]; and when a final rule is effective, the new anti-manipulation rules."
Requests by market participants for no-action letters should be submitted to FERC's general counsel, staff said. The process "[would] provide another avenue for market participants to obtain informal, advance advice by staff on transactions or matters that could otherwise lead to enforcement action." The chief purpose of the no-action letters is "to continue [the] clarity and regulatory certainty regarding the Commission's enforcement program."
Referring to the three separate orders, Kelliher said, "This is an enforcement package."
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