The Federal Energy Regulatory Commission, in an order on rehearing Wednesday, fine-tuned its final rule on the standards of conduct governing the relationships between regulated natural gas/electric transmission providers and their affiliates. It also pushed back the deadline for regulated companies to implement the rule to Sept. 1 of this year.

Specifically, the rehearing order clarifies the definition of energy affiliate, sets out for the first time a definition of marketing affiliate, spells out when a transmission provider may share field and maintenance employees with an energy affiliate, clarifies that transmission providers may share with energy affiliates information necessary to maintain the operations of their transmission systems, allows transmission providers to share information for corporate governance purposes with their marketing and energy affiliates, provides an exception for transmission providers to share senior officers and directors with marketing and energy affiliates, and permits transmission providers to share the risk management function with affiliates.

Commissioner Suedeen Kelly said several of the changes were particularly favorable to natural gas. The final rule now exempts small pipelines from the stringent affiliate guidelines, as well as natural gas storage providers that are authorized to charge market-based rates and are not interconnected to affiliate jurisdictional gas facilities, and local distribution companies (LDCs) that buy or sell a “de minimis amount” of gas to remain in balance [RM01-10].

Moreover, she noted the rule now permits transmission providers to share information that is necessary to operate their systems on a day-to-day basis, such as confirmations, nominations and schedules. She also pointed out that the exception that allows for the sharing of field maintenance workers also covers technicians, mechanics and their immediate supervisors.

“There is no prohibition in this rule on a transmission provider doing business with an affiliate. What this rule is aimed at is ensuring that those business relationships are carried out in a way that does not give [an affiliate] the advantage in a competitive market” over non-affiliates, Kelly said.

In the 200-page-plus final rule, which was issued last November, the Commission combined the standards of conduct for both jurisdictional gas pipelines and transmission-owning public utilities, and significantly expanded the existing Order 497 regulations that bar gas pipeline/power transmission companies from giving preferential treatment solely to their marketing and wholesale merchant affiliates.

The rule extended the FERC restrictions against preferential treatment, information disclosure and employee sharing to a number of other affiliates of regulated pipeline/transmission providers, including traders, producers, gatherers, processors, intrastate and Hinshaw pipelines, and any affiliate making a sale for resale of natural gas or electric energy in interstate commerce.

Although he voted in favor of the rehearing order, Commissioner Joseph Kelliher questioned whether the rationale behind FERC action in the final rule — “suspicions” of abuse between transmission providers and affiliates — was enough to justify the decision to expand the scope of the standards of conduct beyond marketing affiliates.

Kelly countered that it wasn’t necessary for FERC to see abuse first before expanding the standards. Rather, she said it was important for the Commission to have standards in place before any abuse occurs. She called the approach taken by FERC in the final rule a “reasonable one.”

Noting that the order was of “seismic proportion,” Commissioner Nora Brownell said she was most concerned that the industry knows what is required of it in the final rule, and urged Commission colleagues and staff to make themselves available to companies to answer questions. She noted a workshop is planned for May 10 in Houston at which FERC wants to hear what steps companies are taking to comply with the rule.

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