FERC Orders ISO-NE to Clarify Tariff Provisions Related to CFTC Exemption due to Impact on Small Retail Suppliers

On August 30, FERC conditionally accepted a tariff filing by ISO New England Inc. to reflect that market participants may qualify for an exemption from certain provisions of the Commodities Exchange Act (CEA) and Commodity Futures Trading Commission (CFTC) regulations when engaging in specified transactions, with FERC's conditions meant to address concerns raised by small retail electric suppliers (Docket ER13-1875).

Of note is the CFTC exemption for those entities which, "actively participate in the generation, transmission or distribution of electric energy."

A transmittal letter filed by the ISO indicated that a market participant may qualify for the exemption by, "owning physical assets that accomplish these functions." Several small retail suppliers feared that this language excluded non-asset owning entities from qualifying for the exemption, and therefore exposed them to more burdensome credit requirements.

FERC directed ISO-NE to submit a compliance filing clarifying whether it intends for the proposed tariff language to impose a physical-asset-ownership requirement on market participants in order to qualify for the exemption. "In this regard, we share protestors' concerns that such an ownership requirement may unduly discriminate against smaller load-serving entities, and, given the record here, we see no reason for the distinction," FERC said.

The ISO's proposal also included new credit requirements to reflect the thresholds needed to qualify for the CFTC exemption. Specifically, the ISO submitted tariff revisions reflecting that market participants will be able to qualify for the exemption by having a net worth exceeding $1 million or total assets exceeding $5 million.

However, FERC found ambiguous the ISO's proposal to allow a letter of credit to be used to meet the difference between a market participant's actual net worth or assets and the qualifying thresholds described above, and directed the ISO to clarify its position.