The Federal Energy Regulatory Commission on Thursday issued a final rule that expressly prohibits companies holding natural gas blanket marketing certificates or electric market-based rate authority from engaging in actions that “are intended or foreseeably could manipulate” energy prices and markets.

In short, the final rule directs companies that have FERC approval to sell gas or electricity at market rates to “be truthful, don’t engage in conduct which a reasonable market participant [sees] as being manipulative, [and] follow the market rules,” said Commissioner William Massey. “I think this [rule] is the right thing to do,” he noted, adding that he had only “one quibble with it.” He believes that financial remedies should not be limited to the disgorgement of profits derived from manipulative actions. Violators also could face non-financial remedies — being stripped of their blanket certificate or market-based rate authority under the FERC rule.

The proposed rule, which FERC issued in June, has been “generally retained,” but revisions and clarifications were made, according to a Commission staff member. In June, the agency proposed amendments to blanket marketing certificates and market-based rate tariffs to bar companies from engaging in price and market manipulation, require them to be complete and accurate when reporting prices on trades to published price indexes, and to comply with codes of conduct. FERC also sought to require companies to retain transaction records and records of their submissions to index developers for at least three years [RM03-10].

“Notable clarifications [in the final rule] include that the market rules upon which market-based rate tariffs are conditioned must be Commission-approved rules. We have made clear that these rules do not impose a must-offer requirement on market-based rate sellers. The definition of manipulation for [those] gas and electric sellers has been revised to relate to actions that are intended or foreseeably could manipulate markets,” FERC staff noted. In addition, “the proposed component of a manipulation standard that had been previously put forth concerning legitimate forces of supply and demand has been removed.”

Moreover, gas and electric sellers reporting to index providers are required to do so in a manner that is consistent with the Commission’s index-related policy statement, and will receive “safe harbor” protection, staff clarified.

The final rule also gives aggrieved third parties more time to file complaints at FERC. They now have 90 days (rather than 60 days) after the quarter in which a violation occurred to file a complaint, according to the agency. If the Commission discovers a violation on its own, it has 90 days to initiate a proceeding, said Chairman Pat Wood.

The rule further clarifies that unless enforcement and associated sanctions have been allocated to market monitoring units (MMUs) by FERC, the Commission will have sole purview over matters involving tariff violations.

The “first and foremost responsibility” of the MMUs is to be “the eyes and ears” of the agency, but the enforcement of tariff violations is up to the Commission, staff said.

The final rule will take effect 30 days after being published in the Federal Register.

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