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CFTC Issues Final Order to Exempt RTO Transactions From Private Rights of Action

October 19, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The U.S. Commodity Futures Trading Commission (CFTC) said that it approved a final order in response to a petition from Southwest Power Pool, Inc. (SPP) and has exempted certain specified transactions of SPP from the Commodity Exchange Act (CEA) and CFTC regulations, with the exception of the CFTC’s general anti-fraud and anti-manipulation authority, and scienter-based prohibitions.

The final order will expressly exempt such transactions from private actions under CEA section 22, the CFTC said

Other than the express addition of the exemption from private actions, the final order for SPP is similar to the March 28, 2013 final order issued by the Commission that exempted certain specified transactions of six other RTOs and Independent System Operators (ISOs) from certain provisions of the CEA and Commission regulations (RTO-ISO Order), the CFTC said

In addition, the CFTC is concurrently issuing an amendment to the RTO-ISO Order to provide that the exemption contained in that order also will expressly exempt the transactions covered under that order from private actions under CEA section 22.

The CFTC's intent to adopt such an order was previously reported by EnergyChoiceMatters.com

As previously reported, allowing private rights of action for RTO market outcomes could be used to challenge long-standing market rules and designs of the Texas electric market, such as the small fish swim free rule that is integral to an energy-only market which is dependent on the presence of scarcity pricing when conditions warrant to drive investment. Notably, a suit filed by Aspire Commodities L.P. and Raiden Commodities L.P. in federal court -- after failing in a bid to change the small fish swim free rule at the Texas PUC -- was dismissed in part because private rights of action were not allowed under the CFTC's prior RTO exemption order (click here for details)

In a presentation earlier this year on the CFTC's now-withdrawn proposal to allow private rights of action under the RTO order, Texas Public Utility Commissioner Kenneth Anderson had warned that, "private causes of action will allow collateral attacks on FERC and PUCT authorized valid market rules, undermining the efficient operation and regulation of electricity markets."

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