FERC Withdraws Proposal That Would Have Deployed Dragnet To Collect Information On Other Business Interests, Contractual Relationships Of Any RTO Market Participant; Limits Info Collected And Narrows Application

FERC has withdrawn a previously proposed rule that would have required any market participant in an RTO, including buyers, to file reports concerning the participant's "connected entities" (a new term broader than current affiliate reporting requirements)

Under the now-withdrawn proposal, FERC had proposed a broad definition of connected entity which would have defined such an entity as including, among other things, the holder of certain debt instruments, and entities that have entered into an agreement with the market participant that relates to the management of resources that participate in Commission-jurisdictional markets. All RTO market participants would have been required to file information on connected entities with FERC

Click here for the specific definition of connected entity under the now-withdrawn proposal

FERC has withdrawn the connected entity proposal in its entirety in Docket RM15-23, though it seeks to adopt a narrower version of the connected entity reporting requirements in new Docket RM16-17

In its new proposal, FERC would limit its collection of the data to entities with market-based rate (MBR) authority and entities trading virtual products or holding financial transmission rights

In other words, the old proposal would have applied to all RTO/ISO market participants. Now, the proposed reporting of connected entity information would apply only to all MBR sellers and Virtual/FTR Participants

Specifically, FERC now proposes that the definition of connected entity ownership information be limited to "affiliates," as defined for purposes of MBR requirements in section 35.36(a)(9) of the Commission’s regulations, that are either: (i) an "ultimate affiliate owner" of the entity, as defined for purposes of MBR requirements in section 35.37(a)(2); (ii) an entity that participates in Commission-jurisdictional organized wholesale electric markets; or (iii) an entity that purchases or sells financial natural gas or electric energy derivative products that settle off of the price of physical electric or natural gas energy products.

FERC also proposes to replace the category of "employees" proposed in the Connected Entity NOPR with a much narrower category of "Trader," which FERC proposes to define as, "a person who makes, or participates in, decisions and/or devises strategies for buying and selling physical or financial electric or natural gas energy products."

In addition, FERC proposes to eliminate entirely the reporting of debt instruments.

FERC also proposes to narrow and rework the category of contractual Connected Entities reported from that originally proposed in the Connected Entity NOPR. As narrowed, the category will refer only to entities that have entered into an agreement with a submitting entity that, "confers control over an electric generation asset that is used in, or offered into, wholesale electric markets."

Specifically, Connected Entity is now proposed to be defined as follows:

(1) Ownership. An entity that is an affiliate of a Seller or Virtual/FTR Participant pursuant to 35.36(a)(9), and meets one or more of the following criteria: (i) is an ultimate affiliate owner of the Seller or Virtual/FTR Participant, as defined in § 35.37(a)(2), (ii) participates in organized wholesale electric markets, or (iii) purchases or sells financial natural gas or electric energy derivative products that settle off the price of physical electric or natural gas energy products.

(2) Traders. Traders employed or engaged by the Seller or Virtual/FTR Participant. Trader means a person who makes, or participates in, decisions and/or devises strategies for buying or selling physical or financial Commission-jurisdictional electric products or physical natural gas.

(3) Contracts. An entity that has entered into an agreement with a Seller or Virtual/FTR Participant that confers control over an electric generation asset that is used in, or offered into, wholesale electric markets. Agreements that confer control are those that grant one of the parties the right to make trading decisions for an electric generation asset of another party or to offer an electric generation asset into the wholesale electric markets.

According to FERC, the new Connected Entity definition does not propose to include passive owners, holders of non-voting stock, or limited partners

Additionally, the original proposal would have required market participants to update their Connected Entity information with FERC within 15 days of any change

The new proposal would require the revised set of market participants covered by the rule to submit updates on their Connected Entity information within 30 days of a, "Change in Connection," meaning only a change in which any entity commences its status as a Connected Entity, or an entity ceases its status as a Connected Entity