

[Federal Register: January 29, 2007 (Volume 72, Number 18)]
[Proposed Rules]               
[Page 3958-3974]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29ja07-14]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 358

[Docket No. RM07-1-000]

 
Standards of Conduct for Transmission Providers

January 18, 2007.
AGENCY: Federal Energy Regulatory Commission; DOE.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The purpose of this Notice of Proposed Rulemaking is to 
propose permanent regulations regarding the standards of conduct 
consistent with the decision of the United States Court of Appeals of 
the District of Columbia in National Fuel Gas Supply Corporation v. 
FERC, 468 F.3d 831 (2006), regarding natural gas pipelines. On January 
9, 2007, the Commission issued an interim rule regarding the standards 
of conduct in response to the court's decision. The Commission is 
soliciting comments regarding whether or not the interim rule should be 
made permanent for natural gas transmission providers. The Commission 
is also soliciting comments regarding comparable changes for electric 
utility transmission providers: specifically, whether or not the 
standards of conduct should govern the relationship between electric 
utility transmission providers and their energy affiliates. Also, the 
Commission is proposing to: revise the definition of marketing, sales 
or brokering; make permanent the changes adopted in the interim rule 
for risk management employees and discretionary waivers; remove the 
regulations that permit the transmission provider to share information 
necessary to maintain the operations of its transmission system with 
its energy affiliates; add and revise various regulations to facilitate 
integrated resource planning and competitive solicitations; revise the 
regulations to require each transmission provider to post the name of 
its chief compliance officer, to delete outdated references, and to 
require that transmission provider employees certify that they have 
completed standards of conduct training; and, revise the definition of 
affiliate regarding exempt wholesale generators.

DATES: Comments must be filed on or before March 15, 2007. Reply 
comments must be filed on or before April 4, 2007.

ADDRESSES: You may submit comments identified by Docket No. RM07-1-000, 
by one of the following methods:
     Agency Web Site: http://ferc.gov. Follow the instructions 

for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to the Federal Energy Regulatory Commission, Office of the Secretary, 
888 First Street, NE., Washington, DC 20426. Please refer to the 
Comment Procedures Section of the preamble for additional information 
on how to file paper comments.

FOR FURTHER INFORMATION CONTACT: 

[[Page 3959]]

Eric Ciccoretti, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, Telephone: 
(202) 502-8493, E-mail: eric.ciccoretti@ferc.gov.
Deme Anas, Office of Enforcement, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, Telephone: (202) 502-8178, 
E-mail: demetra.anas@ferc.gov.
Stuart Fischer, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, Telephone: 
(202) 502-8517, E-mail: stuart.fischer@ferc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission) is 
proposing to adopt standards of conduct regulations that govern the 
relationship between natural gas transmission providers and their 
marketing affiliates in light of the decision of the United States 
Court of Appeals for the District of Columbia Circuit concerning the 
standards of conduct for transmission providers under Order No. 
2004.\1\ In National Fuel Gas Supply Corporation v. FERC (National 
Fuel),\2\ the court determined that the Commission did not support the 
standards of conduct's definition of energy affiliate and vacated Order 
Nos. 2004, 2004-A, 2004-B, 2004-C and 2004-D (collectively referred to 
as Order No. 2004) as applied to natural gas pipelines and remanded the 
orders to the Commission.\3\ Specifically, the court rejected the 
Commission's attempt to extend the standards of conduct beyond 
pipelines' relationships with their marketing affiliates to also govern 
pipelines' relationships with numerous non-marketing affiliates, such 
as producers, gatherers, and local distribution companies (energy 
affiliates). In light of this, the court found moot the other issues 
raised on appeal.\4\
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    \1\ On November 25, 2003, the Commission added Part 358 to the 
regulations adopting standards of conduct that apply uniformly to 
natural gas and electric utility transmission providers. Standards 
of Conduct for Transmission Providers, Order No. 2004, FERC Stats. & 
Regs., Regulations Preambles 2001-2005 ] 31,155 (2003), order on 
reh'g, Order No. 2004-A, FERC Stats. & Regs., Regulations Preambles 
2001-2005 ] 31,161 (2004), order on reh'g, Order No. 2004-B, FERC 
Stats. & Regs., Regulations Preambles 2001-2005 ] 31,166 (2004), 
order on reh'g, Order No. 2004-C, FERC Stats. & Regs., Regulations 
Preambles 2001-2005 ] 31,172, order on reh'g, Order No. 2004-D, 110 
FERC ] 61,320 (2005), remanded as it applies to natural gas 
pipelines, National Fuel Gas Supply Corporation v. FERC, 468 F.3d 
831, (D.C. Cir. Nov. 17, 2006).
    \2\ National Fuel, slip op. at 4.
    \3\ Id.
    \4\ Id.
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    2. On January 9, 2007, the Commission issued an interim rule that 
promulgated temporary regulations consistent with the court's decision, 
but designed to prevent a regulatory gap with respect to standards of 
conduct for natural gas transmission providers and their marketing 
affiliates.\5\ The purpose of this Notice of Proposed Rulemaking (NOPR) 
is to propose permanent regulations consistent with the court's 
decision regarding natural gas pipelines. The Commission is also 
soliciting comments regarding whether or not to make comparable changes 
for electric utility transmission providers. With respect to both 
industries, the Commission seeks evidence regarding the scope of the 
rules, including application of the rules to energy affiliates. This 
issuance will provide a forum to develop the appropriate record for any 
future action. Moreover, because we are initiating a rulemaking 
proceeding, the Commission also takes this opportunity to propose 
additional changes to the standards of conduct, including, among other 
things, proposing provisions to facilitate integrated resource planning 
and competitive solicitations for electric utility transmission 
providers.
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    \5\ Standards of Conduct for Transmission Providers, Order No. 
690, 72 FR 2427 (Jan. 19, 2007); FERC Stats. & Regs. ] 31,327 (Jan. 
9, 2007).
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    3. In this NOPR, the Commission proposes to make permanent the 
interim regulations that made the standards of conduct inapplicable to 
the relationship between natural gas pipeline transmission providers 
and their energy affiliates. The Commission also proposes to: (1) To 
revise the definition of marketing, sales or brokering at Sec.  
358.3(e) of the Commission's regulations; (2) make permanent the 
changes adopted in the interim rule for Sec.  358.4(a)(6) of the 
Commission's regulations regarding risk management employees and 
Sec. Sec.  358.5(c)(4)(i) and (ii) of the Commission's regulations 
regarding discretionary waivers; (3) remove Sec.  358.5(b)(8) of the 
Commission's regulations, which permits the transmission provider to 
share information necessary to maintain the operations of its 
transmission system with its energy affiliates; (4) add and revise 
various sections to facilitate integrated resource planning and 
competitive solicitations; (5) revise Sec.  358.4(e) of the 
Commission's regulations to require each transmission provider to post 
the name of its chief compliance officer, to delete outdated 
references, and to require that transmission provider employees certify 
that they have completed standards of conduct training; and (6) revise 
the definition of affiliate regarding exempt wholesale generators at 
Sec.  358.3(b)(2) of the Commission's regulations.

A. Order No. 2004

    4. Prior to Order No. 2004, the Commission had two separate sets of 
regulations governing standards of conduct for transmission providers. 
The regulations applicable to natural gas pipelines were issued in 
Order No. 497 in 1988,\6\ under sections 4 and 5 of the Natural Gas 
Act.\7\ In 1996, the Commission issued Order No. 889,\8\ which created 
standards of conduct regulations applicable to electric utilities under 
sections 205 and 206 of the Federal Power Act.\9\ Both rules had the 
same goal--to prevent transmission providers from wielding their market 
power over transmission to give undue preference or unduly 
discriminatory treatment in favor of their marketing affiliates over 
non-affiliates. Both rules employed the same general approach, e.g., 
requiring employees engaged in transmission services to function 
independently from employees of its marketing affiliates and imposing 
prohibitions restricting transmission providers from sharing certain 
information with their marketing affiliates. The rules were designed to 
ensure that affiliated and non-affiliated transmission customers were 
treated on an equal basis. However, the standards of conduct under 
Order Nos. 497 and 889 contained some differences, particularly with 
respect to the

[[Page 3960]]

information sharing prohibitions and posting requirements.
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    \6\ Inquiry Into Alleged Anticompetitive Practices Related to 
Marketing Affiliates of Interstate Pipelines, Order No. 497, 53 FR 
22139 (1988), FERC Stats. & Regs., Regulations Preambles 1986-1990 ] 
30,820 (1988); Order No. 497-A, order on reh'g, 54 FR 52781 (1989), 
FERC Stats & Regs., Regulations Preambles 1986-1990 ] 30,868 (1989); 
Order No. 497-B, order extending sunset date, 55 FR 53291 (1990), 
FERC Stats. & Regs., Regulations Preambles 1986-1990 ] 30,908 
(1990); Order No. 497-C, order extending sunset date, 57 FR 9 
(1992), FERC Stats. & Regs., Regulations Preambles 1991-1996 ] 
30,934 (1991), reh'g denied, 57 FR 5815 (1992), 58 FERC ] 61,139 
(1992); aff'd in part and remanded in part sub nom. Tenneco Gas v. 
FERC, 969 F.2d 1187 (D.C. Cir. 1992).
    \7\ 15 U.S.C. 717c and 717d; see also former 18 CFR part 161 
(2003).
    \8\ Open Access Same-Time Information System (Formerly Real-Time 
Information Network) and Standards of Conduct, Order No. 889, 61 FR 
21737 (May 10, 1996), FERC Stats. & Regs., Regulations Preambles 
Jan. 1991-June 1996 ] 31,035 (Apr. 24, 1996); Order No. 889-A, order 
on reh'g, 62 FR 12484 (Mar. 14, 1997), FERC Stats. & Regs., 
Regulations Preambles 1996-2000 ] 31,049 (Mar. 4, 1997); Order No. 
889-B, reh'g denied, 62 FR 64715 (Dec. 9, 1997), 81 FERC ] 61,253 
(Nov. 25, 1997).
    \9\ 16 U.S.C. 824d and 824e; see also former 18 CFR 37.4 (2003).
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    5. In Order No. 2004, the Commission revised the standards of 
conduct so that one set of regulations applied uniformly to both 
natural gas and electric utility transmission providers and their 
affiliates.\10\ In doing so, the Commission noted several reasons for 
issuing new standards of conduct.\11\ In Order No. 2004, the Commission 
also expanded the coverage of the standards of conduct to govern the 
relationships between transmission providers and energy affiliates.\12\ 
Previously, the standards of conduct governed the relationships between 
transmission providers and their marketing affiliates.\13\
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    \10\ 18 CFR 358.3(a)(1) and (2) (definition of transmission 
provider).
    \11\ Order No. 2004 at P 6-15.
    \12\ Section 358.3(d) defined energy affiliate as any affiliate 
which is engaged or involved in transmission transactions; manages 
or controls pipeline capacity; buys, sells, trades or administers 
natural gas or electric energy in domestic energy or transmission 
markets; and engages in financial transactions relating to the sale 
or transmission of natural gas or electric energy in such markets. 
18 CFR 358.3(d).
    \13\ Under Order No. 497, marketing included affiliates and 
business divisions engaged in making sales for resale of natural gas 
in interstate commerce (former 18 CFR 161.2(c)); and under Order No. 
889, marketing covered affiliates and business divisions engaged in 
making sales for resale of electric energy in interstate commerce 
(former 18 CFR 37.3(e)).
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B. Matters Appealed

    6. Five issues were appealed from Order No. 2004: (1) The extension 
of the standards of conduct to cover the relationship between natural 
gas transmission providers and their energy affiliates under Sec.  
358.3(d); (2) the scope of the restrictions on sharing risk management 
employees between natural gas pipeline transmission providers and their 
marketing/energy affiliates under Sec.  358.4(a)(6); (3) the scope of 
the restrictions on sharing lawyers between natural gas pipeline 
transmission providers and their marketing/energy affiliates; (4) the 
scope of the requirement for natural gas pipeline transmission 
providers to post all discretionary acts under Sec.  358.5(c)(4); and 
(5) the timing as to when newly certificated pipelines become subject 
to the standards of conduct.

C. The Court's Decision

    7. In National Fuel, the court vacated Order No. 2004 as applicable 
to natural gas pipelines because of the expansion of the standards of 
conduct to include energy affiliates. The court explained that the 
Commission relied on both theoretical grounds and on record evidence to 
justify this expansion. The court concluded that the Commission's 
record evidence did not withstand scrutiny and, thus, concluded the 
expansion was arbitrary and capricious in violation of the 
Administrative Procedure Act.\14\ The court vacated Order No. 2004 as 
applicable to natural gas pipelines. In light of this disposition, the 
court did not address the other four issues raised on appeal regarding 
Order No. 2004.
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    \14\ National Fuel, slip op. at 4.
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II. Discussion

    8. The NOPR proposes to make changes to Part 358 (discussed in 
greater detail below) consistent with National Fuel, seeks comment on 
other issues, and clarifies that waivers or exemptions that the 
Commission issued under Order No. 2004 remain valid and are not 
negatively impacted by the National Fuel decision.

A. Partially Repromulgating Part 358

    9. Order No. 2004 codified many case-by-case exceptions that had 
evolved during the implementation of Order Nos. 497 and 889. These 
provisions included: codifying exceptions to the independent 
functioning requirement;\15\ revising information sharing prohibitions 
to reflect practical considerations \16\ and emergency 
circumstances;\17\ codifying a training requirement;\18\ revising and 
imposing new posting requirements to improve transparency;\19\ and 
requiring transmission providers to designate a chief compliance 
officer.\20\ The NOPR proposes to re-adopt those sections of Part 358 
that were not appealed and not found infirm in National Fuel.
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    \15\ 18 CFR 358.4.
    \16\ 18 CFR 358.5(b)(6) and (8).
    \17\ 18 CFR 358.4(a)(2).
    \18\ 18 CFR 358.4(e)(5).
    \19\ 18 CFR 358.5(a) and (b).
    \20\ 18 CFR 358.4(e)(6).
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B. The Definition of Energy Affiliates

    10. Because the court's decision focused on the Commission's lack 
of evidence to support expanding the standards of conduct to govern the 
relationship between natural gas transmission providers and their non-
marketing affiliates, the interim rule added a new provision stating 
that the standards of conduct do not govern the relationship between 
natural gas transmission providers and their energy affiliates.\21\ In 
this NOPR, consistent with the court's decision, the Commission 
proposes to retain this provision on a permanent basis for natural gas 
transmission providers. We seek comment on whether this is sufficient 
to protect customers.
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    \21\ Interim 18 CFR 358.1(e) states: ``The Standards of Conduct 
in this part do not govern the relationship between a natural gas 
Transmission Provider and its energy affiliates.''
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    11. The Commission also is seeking comment on the current 
restrictions relating to energy affiliates of electric utility 
transmission providers. The court in National Fuel did not address this 
issue because electric utility transmission providers did not appeal 
Order No. 2004. However, the Commission believes it is important to 
address the issue here.
    12. The Commission has reviewed the existing regulations, the 
rationale for promulgating them, and other modifications being 
discussed herein concerning whether or not to eliminate the 
restrictions on energy affiliates of electric utility transmission 
providers. If we were to eliminate these restrictions, the non-
marketing energy affiliates of electric transmission providers would no 
longer be subject to the standards of conduct. However, since we have 
not yet received comments on the issue or engaged in outreach, this 
NOPR does not suggest regulatory text on this issue. We intend to 
carefully examine any comments received on this issue and weigh them 
heavily in our deliberations on a Final Rule.
    13. When the Commission adopted the definition of energy affiliate 
in Order No. 2004, the Commission focused most closely on examples of 
the potential for undue discrimination in favor of energy affiliates of 
natural gas pipelines, rather than of electric utility transmission 
providers.\22\ Although the Commission noted certain violations of 
Order No. 889 by electric utility transmission providers,\23\ these 
instances involved undue preferences given to an electric transmission 
provider's merchant function. As we discuss further below, the 
definition of marketing affiliate expressly includes an electric 
transmission provider's merchant function and the Commission sees no 
reason to delete that important protection.\24\ Furthermore, in an area 
where the Commission made findings of undue discrimination that was not 
covered by Order No. 889--undue preferences given to asset managers--we 
are proposing, as discussed below, to broaden the definition of 
marketing affiliate so that the standards of conduct explicitly 
prohibit such undue preferences.
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    \22\ Order No. 2004 at P 10-11.
    \23\ Order No. 2004 at P 14.
    \24\ 18 CFR 358.3(c)(2).
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    14. Over the past three years, the Commission has engaged in 
extensive outreach and consultation with the industry regarding the 
standards of

[[Page 3961]]

conduct. This outreach has included three public technical conferences 
(held in Houston, Chicago, and Scottsdale, Arizona) and numerous 
meetings between industry participants and our staff. Over the course 
of this outreach, we have received information and comments on many 
important issues arising under the standards of conduct. However, this 
outreach did not cover the issue addressed here--energy affiliate 
restrictions for electric utility transmission providers. Accordingly, 
the Commission seeks comment on whether applying the standards of 
conduct to the relationship between electric utility transmission 
providers and their marketing affiliates, but not to their energy 
affiliates would be sufficient to protect customers. Commenters who 
believe that it is appropriate to retain the standards of conduct for 
the relationship between electric utility transmission providers and 
their energy affiliates should submit evidence to support continued 
application of the definition of energy affiliates to electric utility 
transmission providers. Commenters who believe that we should not apply 
the standards of conduct to the relationship between electric utility 
transmission providers and their energy affiliates should provide 
support for their position that customers will be sufficiently 
protected from undue discrimination.
    15. Commenters should include a focus on the type of energy 
affiliate that they are discussing. Making the standards of conduct 
inapplicable to electric utility transmission providers and their 
energy affiliates would affect the relationship between a transmission 
provider and the following types of non-marketing energy affiliates 
(except as otherwise noted):
    a. Affiliated asset managers; \25\
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    \25\ See 18 CFR 358.3(d)(1) (``involved in transmission 
transactions''). Below, the Commission proposes to separately make 
the relationship between transmission providers and asset managers 
subject to the standards of conduct by expanding the definition of 
marketing affiliate.
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    b. Affiliated transmission customers that do not make sales for 
resale; \26\
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    \26\ See 18 CFR 358.3(d)(1) (``engages in * * * transmission 
transactions''); Order No. 2004-A at P 44.
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    c. Affiliated gas entities, e.g., affiliated producers, affiliated 
gatherers, affiliated gas Local Distribution Companies (LDCs), and 
affiliated intrastate pipelines;
    d. Affiliated financial institutions that do not engage in physical 
transactions, but only financial transactions; \27\
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    \27\ See 18 CFR 358.3(d)(4).
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    e. Affiliated entities that aggregate and re-sell transmission 
capacity without making sales for resales of energy; \28\
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    \28\ See 18 CFR 358.3(d)(1).
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    f. Affiliated electric LDCs; \29\
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    \29\ See 18 CFR 358.3(d)(5); Order No. 2004-C at P 24-25.
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    g. Affiliated electronic trading platforms; \30\ and,
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    \30\ See 18 CFR 358.3(d)(1); Order No. 2004-A at P 4.
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    h. Affiliated entities that buy, trade or administer electric 
energy.\31\
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    \31\ See 18 CFR 358.3(d)(3) (``buys, sells, trades or 
administers electric energy''). The Commission believes that the 
relationship with affiliates that make wholesale sales of electric 
energy in interstate commerce is governed by the definition of 
marketing. See 18 CFR 358.3(k).
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    The Commission seeks comments on whether the standards of conduct 
should continue to apply to these relationships.
    16. In addition, the Commission seeks comment, particularly from 
companies subject to both sets of standards, on whether it is desirable 
to maintain consistency between the standards of conduct applicable to 
natural gas transmission providers and electric utility transmission 
providers. We note that retaining the energy affiliate restriction for 
electric transmission providers, but not for natural gas transmission 
providers, would create, for some companies, inconsistent rules for 
different subsidiaries within a holding company. For example, an energy 
affiliate of an electric utility transmission provider would be 
restricted in communicating with that transmission provider, but if a 
natural gas transmission provider owned that same energy affiliate 
there would be no such restriction. Similarly, if a holding company 
owned both electric utility and natural gas transmission providers, two 
differing sets of rules would apply within the same holding company 
system. The electric transmission provider would be precluded from 
dealing with all energy affiliates in that system, whereas the natural 
gas pipeline company would not. Uniformity could lessen the compliance 
burden on the industry and ease oversight of compliance by the 
Commission staff, but the Commission recognizes that uniformity does 
not override the Commission's mandate for customer protection.
    17. Under the Natural Gas Act and the Federal Power Act, the 
Commission has the statutory mandate to prevent and remedy undue 
discrimination.\32\ Even absent the standards of conduct regulations 
promulgated under that authority, the Commission has the authority to 
prevent and remedy a transmission provider's undue preference or 
advantage granted in favor of its affiliates. If a transmission 
provider provides an undue preference or advantage in favor of an 
affiliate that is not covered by the standards of conduct, that undue 
preference may still be prohibited by the Natural Gas Act or Federal 
Power Act.
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    \32\ Sections 4 and 5 of the Natural Gas Act, 15 U.S.C. 717c and 
717e, state that no natural gas company shall make or grant an undue 
preference or advantage with respect to any transportation or sale 
of natural gas subject to the Commission's jurisdiction. Similarly, 
under sections 205 and 206 of the Federal Power Act, 16 U.S.C. 824d 
and 824e, no public utility shall make or grant an undue preference 
with respect to any transmission or sale subject to the Commission's 
jurisdiction.
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    18. We are not disturbing the fundamental protections to consumers 
and competitors of electric transmission providers that were adopted in 
Order No. 889 and retained in Order No. 2004. It will continue to be 
unlawful for electric utility transmission providers to provide any 
undue preference to their merchant function or any affiliate that owns 
generation or sells electricity. These are the core protections that 
customers and competitors have long supported and that we retain here. 
It also will continue to be unlawful for electric transmission 
providers to provide any undue preference to an affiliate selling or 
trading natural gas. Each of these protections is covered explicitly by 
the definition of marketing affiliate and is left undisturbed.

C. Revising the Definition of Marketing, Sales or Brokering

    19. The interim rule adopted a temporary regulation for natural gas 
pipeline transmission providers at Sec.  358.3(l) that mirrored the 
exceptions to the definition of marketing that were found in Order No. 
497.\33\ Accordingly, marketing means a sale of natural gas to any 
person or entity by a seller that is not an interstate pipeline, except 
when: (1) The seller is selling gas solely from its own production; (2) 
the seller is selling gas solely from its own gathering or processing 
facilities; or (3) the seller is an intrastate natural gas pipeline or 
a local distribution company making an on-system sale. The NOPR 
proposes to remove the interim regulation codified at Sec.  358.3(l) 
and incorporate those

[[Page 3962]]

exceptions in the definition of ``Marketing, sales or brokering'' for 
natural gas transmission providers currently located at Sec.  358.3(e).
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    \33\ Interim 18 CFR 358.3(l) states:
    Marketing or brokering means a sale of natural gas to any person 
or entity by a seller that is not an interstate pipeline, except 
when:
    (1) the seller is selling gas solely from its own production;
    (2) The seller is selling gas solely from its own gathering or 
processing facilities; or
    (3) The seller is an intrastate natural gas pipeline or a local 
distribution company making an on-system sale.
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    20. The electric utility and natural gas industries differ in 
certain respects that are relevant to the energy affiliate issue. The 
Commission is proposing, consistent with the National Fuel decision, to 
revise the definition of marketing affiliate to include certain 
exceptions that were adopted in Order No. 497, but deleted in Order No. 
2004. These exceptions would remove standards of conduct restrictions 
for a natural gas pipeline with respect to an affiliate's sales of gas 
from its own production, gathering or processing facilities. However, 
sales of electricity from a transmission provider's own ``production'' 
facilities--i.e., the generating plants operated by its merchant 
function--were already covered in Order No. 889 and, hence, Order No. 
2004 did not represent a change in this regard. Thus, we do not propose 
to disturb this longstanding customer protection, and will therefore 
retain the Order No. 2004 definition of marketing affiliate that 
explicitly covers an electric utility transmission provider's merchant 
function. We also note that the gathering and processing exceptions are 
also inapplicable to electric utility transmission providers and, 
hence, require no comparable change. We seek comment on these revised 
definitions of marketing affiliate for natural gas and electric 
transmission providers.
    21. The Commission also is proposing to expand the definition of 
marketing, sales or brokering to include entities that manage or 
control transmission capacity, such as asset managers or agents.\34\ 
Frequently, asset managers and agents are involved extensively in 
transmission transactions, they stand in the shoes of the transmission 
customer and act as nominating/balancing agent, and have access to all 
the transmission customer's transmission information.\35\ The 
Commission is proposing to include asset managers/agents within the 
definition of marketing based on information gathered during 
investigations by the Commission's Enforcement staff. In each of these 
matters, staff investigated, among other issues, asset managers/agents 
that were also marketing affiliates and whether the asset managers 
received an undue preference from their affiliated transmission 
providers. All of these matters concluded with settlements approved by 
the Commission, including the payment by American Electric Power 
Company, Inc. (AEP) of $21 million, the largest civil penalty in 
Commission history,\36\ and the payment by Cleco Corporation of the 
largest civil penalty under section 214 of the Federal Power Act.\37\ 
The third settlement, involving South Carolina Electric and Gas Company 
(SCEG), resulted in SCEG agreeing to a compliance plan.\38\ Because 
these investigations were resolved by settlements, the Commission never 
made any specific findings that asset managers/agents and their 
affiliates engaged in undue discrimination. Still, the activities 
identified by staff provide a sufficient basis for the Commission to 
propose to include asset managers/agents in the definition of marketing 
affiliates. That is the case even though the settled investigations 
involved asset managers who were also marketing affiliates. However, a 
review of the voluntary consent postings \39\ on several transmission 
providers' OASIS and Internet Web sites shows that sometimes asset 
managers are marketing affiliates, but that sometimes they are not.\40\
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    \34\ Generally, asset managers manage or control gas or electric 
assets, often including a transmission customer's capacity. Agents 
frequently are authorized to act in the place of transmission 
customers with respect to specified transmission-related activities 
such as nominations, scheduling or billing.
    \35\ In the investigation of Cleco Corporation, Commission staff 
observed that corporation's asset manager performed the following 
services for Cleco Corporation: (1) Transmission scheduling 
services; (2) resource coordination and delivery of power trading 
and ancillary services; (3) fuel purchases for generation use; (4) 
marketing and customer relations services; (5) commodity trading; 
(6) monitoring, energy management, scheduling, dispatch and 
accounting and billing services; (7) interaffiliate billing; (8) 
retail and wholesale marketing; and (9) energy trading. Cleco 
Corporation, 104 FERC ] 61,025 (2003) (Cleco).
    \36\ American Electric Power Company, Inc., 110 FERC ] 61,061 
(2005).
    \37\ See Cleco, supra note 35.
    \38\ South Carolina Electric & Gas Company, 111 FERC ] 61,217 
(2005).
    \39\ Currently, 18 CFR 358.5(b)(4) requires a transmission 
provider to post notice if a non-affiliated transmission customer 
voluntarily consents, in writing, to allow the transmission provider 
to share the non-affiliated transmission customer's information with 
a marketing or energy affiliate. 18 CFR 358.5(b)(4).
    \40\ For example, El Paso Natural Gas Company's voluntary 
consent postings on its Internet Web site identify that non-
affiliated customers have voluntarily consented to allow El Paso to 
disclose their respective information to El Paso's marketing and 
energy affiliates, e.g., El Paso Field Services, L.P. (an energy 
affiliate) and El Paso Marketing L.P. (a marketing affiliate.) 
http://tebb.epenergy.com/ebbepg/notices/noticeView.asp?sPipelineCode=EPNG&sSubC
 (Dec. 8, 2006). Similar 

notices of asset management agreements or agency agreements can be 
found at the voluntary consent links of the OASIS or Internet Web 
sites for National Fuel Gas Supply Corp., Texas Eastern 
Transmission, LP, Tennessee Gas Pipeline Company, Potomac Electric 
Power Company, and Dominion Transmission Inc.
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    22. The Commission believes that the standards of conduct should 
govern the relationship between transmission providers and their 
affiliated asset managers. It would likely be unduly discriminatory to 
permit a transmission provider to inform its affiliated asset manager 
about an upcoming curtailment or outage, unless all other non-
affiliated asset managers or transmission customers have comparable 
access to that information. Including affiliated asset managers/agents 
in the definition of marketing would ensure that all asset managers are 
treated in a comparable fashion. The Commission is soliciting comments 
on whether to include this provision in the definition of marketing and 
encourages commenters to identify potential harm of including or not 
including asset managers/agents in the definition of marketing. For 
that purpose, proposed Sec.  358.3(e) reads as follows:

    Marketing, sales or brokering means a sale for resale of natural 
gas or electric energy in interstate commerce in U.S. energy or 
transmission markets. Marketing also includes managing or 
controlling transmission capacity of a third-party as an asset 
manager or agent.
    (1) A sales and marketing employee or unit includes:
    (i) An interstate natural gas pipeline's sales operating unit, 
to the extent provided in Sec.  284.286 of this chapter, and
    (ii) An electric public utility Transmission Provider's energy 
sales unit, unless such unit engages solely in bundled retail sales.
    (2) Marketing or sales does not include incidental purchases or 
sales of natural gas to operate interstate natural gas pipeline 
transmission facilities.
    (3) Marketing means a sale of natural gas to any person or 
entity by a seller that is not an interstate pipeline, except where:
    (i) The seller is selling gas solely from its own production;
    (ii) The seller is selling gas solely from its own gathering or 
processing facilities; or
    (iii) The seller is an intrastate natural gas pipeline or a 
local distribution company making an on-system sale.

D. Exceptions to the Independent Functioning Requirement--Risk 
Management Employees and Lawyers

    23. Section 358.4 requires, except in emergency circumstances, the 
transmission function employees \41\ of the transmission provider to 
function independently of the marketing affiliates' employees. 
Notwithstanding

[[Page 3963]]

this requirement, since 1988, the Commission has developed a body of 
case law, permitting certain types of employees to be shared between a 
transmission provider and its marketing affiliate. At the request of 
industry participants, Order No. 2004 reiterated these holdings by 
codifying exceptions to the independent functioning requirement that 
permit the sharing of officers and members of the board of directors 
(directors),\42\ support employees,\43\ field and maintenance 
employees,\44\ and risk management employees.\45\ Although industry 
participants urged the Commission to codify a general exception 
regarding the sharing of lawyers, the Commission did not do so stating 
that, if a lawyer participated in transmission policy decisions on 
behalf of a transmission provider, he or she would be considered a 
transmission function employee (and hence, not permissibly shared).\46\
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    \41\ Section 358.3(j) of the Commission's regulations currently 
defines transmission function employee as an employee, contractor, 
consultant or agent of a transmission provider who conducts 
transmission system operations or reliability functions, including, 
but not limited to, those who are engaged in day-to-day duties and 
responsibilities for planning, directing, organizing or carrying out 
transmission-related operations.
    \42\ 18 CFR 358.4(a)(5).
    \43\ 18 CFR 358.4(a)(4).
    \44\ 18 CFR 358.4(a)(4).
    \45\ 18 CFR 358.4(a)(6).
    \46\ Order No. 2004-A at P 157.
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    24. In describing these exceptions, the Commission stated that the 
sharing of these non-transmission functions allowed the transmission 
provider to realize the benefits of cost saving through integration 
where the shared employees do not have duties or responsibilities 
relating to transmission, and generally would not be in a position to 
give a marketing affiliate an undue preference.\47\ The Commission also 
stated that the exception allowing the sharing of officers and 
directors facilitated corporate governance activities, but that, to the 
extent a senior officer or director conducts transmission functions or 
is involved in planning, directing or organizing transmission 
functions, the officer's or director's status does not automatically 
exempt him/her from also being a transmission function employee.\48\ In 
Order No. 2004-A, the Commission stated that, although it permitted the 
sharing of these categories of employees, it would evaluate, in 
compliance audits and investigations, employees' actual duties to 
determine whether the transmission provider is appropriately applying 
the exception.\49\ In other words, regardless of an individual's title 
or how his or her responsibilities are labeled, if that individual is 
engaged in day-to-day duties and responsibilities for planning, 
directing, organizing or carrying out transmission-related operations, 
that individual is a transmission function employee (and may not be 
permissibly shared).
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    \47\ Order No. 2004 at P 97.
    \48\ Order No. 2004-B at P 57.
    \49\ Order No. 2004-A at P 134.
---------------------------------------------------------------------------

    25. Petitioners appealed the codification of the exception for 
permissibly shared risk management employees and the preamble 
discussion in Order No. 2004 regarding permissibly shared lawyers. As 
mentioned above, in National Fuel, the court did not address these 
matters, and, accordingly, sub silencio, invalidated these aspects of 
Order No. 2004. Accordingly, the Commission is seeking comment on 
whether to make permanent changes adopted by the interim rule by 
retaining Sec.  358.4(a)(6).\50\ The Commission also seeks comments on 
whether to make this change applicable to electric public utility 
transmission providers. The Commission is also seeking comments on 
whether additional guidance with respect to permissibly shared 
employees, such as shared risk management employees, lawyers and 
officers and directors, would be helpful given the different structure, 
sizes and operations of the various transmission providers.
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    \50\ Interim 18 CFR 358.4(a)(6) reads: ``Transmission Providers 
are permitted to share risk management employees that are not 
engaged in Transmission Functions or sales or commodity functions 
with their Marketing and Energy Affiliates. This provision does not 
apply to natural gas transmission providers.''
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E. Discretionary Tariff Provision

    26. In Order No. 2004, the Commission required each transmission 
provider to maintain a log detailing the circumstances and manner in 
which it exercised discretion under any terms of its tariff and post 
that information on its OASIS or Internet Web site.\51\ The regulatory 
language in Order No. 2004 was substantively identical to the 
requirement under Order No. 889, but it was different than the 
requirement under Order No. 497. Former Sec.  161.3(k) promulgated in 
Order No. 497 required a pipeline to maintain a written log of waivers 
that the pipeline grants with respect to tariff provisions that provide 
for such discretionary waivers and provide the log to any person 
requesting it within 24 hours of the request. On appeal, one of the 
petitioners claimed that Sec.  358.5(c)(4) was broader than former 
Sec.  161.3(k), arguing that there was a significant difference between 
granting waivers of tariff provisions that provide for such 
discretionary waivers (former Sec.  161.3(k)) and exercising discretion 
under any terms of its tariff (Sec.  358.5(c)(4)).
---------------------------------------------------------------------------

    \51\ 18 CFR 358.5(c)(4).
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    27. To comply with the court's mandate in National Fuel, the 
interim rule modified Sec.  358.5(c)(4)(i) \52\ so that it only applies 
to electric transmission providers and added a separate provision for 
natural gas transmission providers at Sec.  358.5(c)(4)(i) that 
provides that natural gas transmission providers must maintain a 
written log of waivers that the natural gas transmission provider 
grants with respect to tariff provisions that provide for such 
discretionary waivers and provide the log to any person requesting it 
within 24 hours of the request. The purpose of the discretionary waiver 
posting requirement is to enable transmission customers to determine 
whether they are similarly situated and potentially entitled to 
comparable treatment by the transmission provider.
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    \52\ Section 358.5(c)(4)(i) provides that Electric Transmission 
Providers must maintain a written log, available for Commission 
audit, detailing the circumstances and manner in which they 
exercised their discretion under any terms of the tariff. The 
information contained in this log is to be posted on the OASIS or 
Internet Web site within 24 hours of when a Transmission Provider 
exercises its discretion under any terms of the tariff. 18 CFR 
358.5(c)(4)(i).
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    28. As mentioned above, in National Fuel, the court did not address 
this matter, and, accordingly, sub silencio, invalidated this aspect of 
Order No. 2004. The Commission is faced with making permanent this 
requirement for electric transmission providers, while having different 
requirements for natural gas transmission providers. Accordingly, the 
Commission is seeking comment on whether to make permanent changes 
adopted in the interim rule by retaining Sec. Sec.  358.5(c)(4)(i) and 
(ii) and seeking suggestions on what type of requirement is appropriate 
to give similarly situated customers sufficient information to 
determine whether they are being treated in a non-discriminatory 
fashion with respect to a transmission provider's discretionary 
activities. The Commission also encourages commenters to include 
suggestions on how we can craft the scope of the discretionary waiver 
requirement to minimize the burden on transmission providers while 
balancing the need for transparency in the market.

F. Timing of When a New Natural Gas Transmission Provider Becomes 
Subject to the Standards of Conduct

    29. Under Order No 497, a natural gas transmission provider became 
subject to the standards of conduct when the transmission provider 
commenced transportation transactions with its marketing or brokering 
affiliate.\53\ In the preamble of Order No. 2004, the Commission stated 
that newly

[[Page 3964]]

certificated transmission providers would become subject to the 
standards of conduct when the transmission providers begin soliciting 
business or negotiating contracts as those are activities which the 
Commission considers transmission function activities. In Order No. 
2004-B, the Commission stated that a new interstate pipeline should 
observe the standards of conduct when the pipeline is granted and 
accepts a certificate of public convenience and necessity and becomes 
subject to the Commission's jurisdiction under the Natural Gas Act.\54\ 
The Commission stated that its goal was to ensure that newly formed 
pipelines provide non-discriminatory treatment and limit their ability 
to unduly favor their marketing and energy affiliates.\55\ The timing 
of applicability of the standards of conduct was one of the items 
appealed, but not addressed in the National Fuel decision and vacated 
sub silencio. In the interim rule, the Commission did not require 
natural gas transmission providers to observe the standards of conduct 
until they commence transportation transactions with their marketing 
affiliates.
---------------------------------------------------------------------------

    \53\ Former 18 CFR 161.1 (2003).
    \54\ Order No. 2004-B at P 136.
    \55\ Order No. 2004-C at P 46.
---------------------------------------------------------------------------

    30. The issue on appeal was whether the Commission could apply the 
standards of conduct to a holder of a certificate that has not yet 
commenced transportation of natural gas. The Commission does not have 
any evidence that affiliate abuse has occurred in the time period 
before transportation commences, but believes there is clearly an 
incentive for the transmission provider to give an undue preference to 
its affiliates. A transmission provider must observe the non-
discrimination provisions of sections 4 and 5 of the Natural Gas Act 
(and sections 205 and 206 of the Federal Power Act). The Commission 
seeks comment on when a transmission provider should be required to 
comply with the standards of conduct and is proposing the following 
modification to Sec.  358.4(e)(2).

    Each Transmission Provider must be in full compliance with the 
standards of conduct within 30 days of becoming subject to the 
Commission's jurisdiction.

G. Revising Sec.  358.5(b)(8)

    31. Currently, Sec.  358.5(b)(8) states that a transmission 
provider is permitted to share information necessary to maintain the 
operations of the transmission system with its energy affiliates. In 
the Order No. 2004 proceeding, natural gas commenters asked the 
Commission to adopt a provision allowing communication of operational 
information with energy affiliates, such a producers, gatherers or 
LDCs. They argued that prohibiting the sharing of operational 
information might endanger the reliability of the gas transmission 
systems.\56\ Accordingly, Order No. 2004 codified current Sec.  
358.5(b)(8). In Order No. 2004, the Commission provided additional 
clarification explaining that this provision permits a transmission 
provider to share day-to-day, operational-type information with 
interconnected energy affiliates necessary to maintain the pipelines' 
operations, such information includes confirmations, nominations and 
schedulers with upstream producers and gathering facilities, 
operational data relating to interconnection points and communications 
related to the maintenance of interconnected facilities. The Commission 
added that it expected that these types of communications would take 
place between the operators of the pipeline or gas control 
facilities.\57\ As the Commission is proposing that the standards of 
conduct will no longer govern the relationship between natural gas 
transmission providers and their energy affiliates, it appears that 
this provision is no longer necessary because communications between a 
natural gas transmission provider and its affiliated/interconnected 
gatherer(s), \58\producer(s) and LDCs are not restricted by the 
standards of conduct. Therefore, the Commission proposes to delete 
Sec.  358.5(b)(8) from the regulations and seeks comments on this 
proposal.
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    \56\ For electric transmission providers, a provision allowing 
communications relating to generation dispatch exists at 18 CFR 
358.5(b)(6) of the Commission's regulations.
    \57\ Order No. 2004-A at P 203.
    \58\ Under section 201(e) of the Federal Power Act, a public 
utility is ``any person who owns or operates facilities subject to 
the jurisdiction of the Commission.'' 16 U.S.C. 824(e). The 
standards of conduct apply to a public utility that is a 
transmission provider, which is defined as ``any public utility that 
owns, operates or controls facilities used for the transmission of 
electric energy in interstate commerce'' in addition to certain 
interstate natural gas pipelines. 18 CFR 358.3(a).
---------------------------------------------------------------------------

H. Changes To Facilitate Integrated Resource Planning and Competitive 
Solicitations

    32. Since Order No. 2004 was issued, industry participants have 
sought staff guidance on standards of conduct requirements to assist 
with their compliance efforts. To provide further guidance, the 
Commission held three standards of conduct technical conferences, the 
most recent being held on April 7, 2006, and staff posted a 
``Frequently Asked Questions'' (FAQs) page on the Commission's Internet 
Web site. Following the April 7, 2006 technical conference, staff began 
a series of outreach meetings with various industry participants, 
including public utilities, industry trade associations and state 
commissions, to discuss ways for the Commission to address the 
applicability of the standards of conduct in the context of business 
activity that the Commission did not address in Order No. 2004, such as 
integrated resource planning and competitive solicitations.
    33. To address integrated resource planning and competitive 
solicitations, the Commission proposes to make changes to the standards 
of conduct intended to make public utilities \58\ integrated resource 
planning and procurement more accurate and efficient, particularly in 
their consideration of electric transmission. The standards of conduct 
apply to ``any public utility that owns, operates or controls 
facilities used for the transmission of electric energy in interstate 
commerce,'' but do not apply to independent system operators (ISOs) or 
regional transmission organizations (RTOs).\59\ In conducting 
integrated resource planning, a public utility evaluates its current 
and future mix of generation, transmission, demand-side management and 
other resources to meet future demand while minimizing costs, ensuring 
reliability, and complying with a state's environmental requirements. 
As an example, integrated resource planning may help a public utility 
or state commission choose to meet load growth through the addition of 
a new generation resource, a new demand resource, or through new 
transmission resources. There is a wide variety of methods for 
conducting integrated resource planning. Some states require public 
utilities to periodically submit an integrated resource plan. Such 
submissions are typically subject to some review and comment by the 
public and review and approval by the applicable state commission.
---------------------------------------------------------------------------

    \58\ Under section 201(e) of the Federal Power Act, a public 
utility is ``any person who owns or operates facilities subject to 
the jurisdiction of the Commission.'' 16 U.S.C. 824(e). The 
standards of conduct apply to a public utility that is a 
transmission provider, which is defined as ``any public utility that 
owns, operates or controls facilities used for the transmission of 
electric energy in interstate commerce'' in addition to certain 
interstate natural gas pipelines. 18 CFR 358.3(a).
    \59\ 18 CFR 358.1(b).
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    34. The Commission believes that improved coordination between 
transmission planning, generation planning and demand response 
programs, which are the main elements of integrated resource planning, 
is

[[Page 3965]]

necessary to improve the economics and reliability of the transmission 
grid. In the next several years, reliability concerns are expected to 
grow as transmission investment has lagged behind load growth.\60\ As 
recently stated by North American Electric Reliability Council (NERC), 
``[b]ulk power system reliability and adequacy depends on close 
coordination of generation and transmission planning and demand 
response programs.'' \61\ The Commission also understands that some 
states are requiring greater consideration of transmission in public 
utilities' integrated resource planning. In consideration of these 
developments, the Commission seeks to ensure that the evaluation of 
transmission in public utilities' planning and procurement is as 
accurate and efficient as possible. The Commission proposes to create a 
category of employees under the standards of conduct, ``planning 
employees,'' who are permitted to engage in all aspects of ``integrated 
resource planning'' for bundled retail load, to receive non-public 
transmission information, and to interact with transmission function 
employees, provided that the integrated resource planning is conducted 
pursuant to state mandate.
---------------------------------------------------------------------------

    \60\ After an extensive assessment, the NERC recently concluded 
that ``[e]xpansion and strengthening of the transmission system 
continues to lag demand growth and expansion of generating resources 
in most areas.'' NERC, 2006 Long-Term Reliability Assessment, at p. 
7 (Oct. 16, 2006). See also Promoting Transmission Investment 
through Pricing Reform, Order No. 679, 71 FR 43293 (July 31, 2006), 
FERC Stats. & Regs. ] 31,222, at P 10 (July 20, 2006) (citations 
omitted) (observing that transmission investment has declined while 
load has doubled), order on reh'g, Order No. 679-A, 117 FERC ] 
61,327 (Dec. 22, 2006).
    \61\ NERC, 2006 Long-Term Reliability Assessment, at p. 8; see 
also id. at p. 13 (``In the long term, reliable transmission will 
depend upon the close coordination of generation and transmission 
planning and construction and the adoption of longer term planning 
horizons * * * '').
---------------------------------------------------------------------------

    35. The Commission also understands that transmission concerns are 
becoming a greater factor in resource procurement. A public utility's 
integrated resource plan often serves as the road map for the public 
utility's resource procurement. For instance, a public utility may 
present an integrated resource plan that specifically calls for long-
term procurement of a certain type of energy resource through a 
competitive solicitation. Such competitive solicitations may also be 
subject to state review and, if they result in the award of long-term 
contract to an affiliate, review by the Commission.\62\ The Commission 
understands the importance of ensuring that the evaluation of 
transmission in procurement is as accurate and efficient as possible. 
The Commission also proposes to create a category of employees under 
the standards of conduct, ``competitive solicitation employees,'' who 
are permitted to conduct competitive solicitations intended to serve 
bundled retail load, and to receive non-public transmission information 
and to interact with transmission function employees in order to 
evaluate proposals submitted in a competitive solicitation.
---------------------------------------------------------------------------

    \62\ See, e.g., Southern California Edison on behalf of 
Mountainview Power Co., LLC, 106 FERC ] 61,183, at P 58 (2004) 
(setting forth criteria for section 205 review of affiliate sales 
for contracts of one year or longer), order on reh'g, 109 FERC ] 
61,086, order on reh'g, 110 FERC ] 61,319 (2005).
---------------------------------------------------------------------------

    36. These Commission proposals to relax the standards of conduct to 
facilitate integrated resource planning and competitive solicitations 
are consistent with the treatment of bundled retail load in the 
standards of conduct as outlined in Order No. 2004. The standards of 
conduct exempt from the definition of marketing affiliate employees, 
those employees involved ``solely in bundled retail sales.'' \63\ As 
such, bundled retail sales employees are not subject to the standards 
of conduct in most respects. In an extension of this policy, the 
Commission's proposals are restricted to integrated resource planning 
for, and competitive solicitations to procure supply to serve, bundled 
retail load.
---------------------------------------------------------------------------

    \63\ 18 CFR 358.3(e)(2).
---------------------------------------------------------------------------

    37. In proposing to facilitate integrated resource planning and 
competitive solicitations through changes to the standards of conduct, 
the Commission is mindful of the goal of the standards of conduct to 
prevent undue preferences, specifically by preventing transmission 
providers from providing unduly preferential treatment to their 
marketing and energy affiliates. Thus, the Commission will place 
restrictions on both planning employees and competitive solicitation 
employees in order to prevent those employees from providing an undue 
preference to the transmission provider's marketing and energy 
affiliates. The Commission seeks to strike a balance between the goal 
of diminishing opportunities for undue preferences with the goal of 
improving the efficiency and accuracy of integrated resource planning 
and competitive solicitations. Along these lines, as discussed below, 
the Commission seeks comment on whether or not the proposal to limit 
the new categories of planning employees and competitive solicitation 
employees to perform their functions only for bundled retail load is 
necessary to prevent undue discrimination.
1. Integrated Resource Planning--Planning Employees
    38. In its outreach regarding integrated resource planning, staff 
heard a common refrain from public utilities, that the standards of 
conduct restrict their ability to conduct integrated resource planning 
because they restrict access to non-public transmission information and 
restrict transmission function employees from interacting with 
employees conducting integrated resource planning. Similarly, in its 
comments on the Open Access Transmission Tariff (OATT) Reform NOPR,\64\ 
the National Association of Regulatory Utility Commissioners called for 
``allow[ing] communications between resource and transmission planners 
for the purpose of developing long-term resource planning documents to 
satisfy State-commission integrated resource planning 
requirements.''\65\
---------------------------------------------------------------------------

    \64\ Preventing Undue Discrimination and Preference in 
Transmission Service, Docket No. RM05-25-000, 71 FR 32635 (June 6, 
2006), 71 FR 39251 (July 12, 2006), FERC Stats. & Regs. ] 32,603 
(May 19, 2006) (OATT Reform NOPR).
    \65\ Comments of National Association of Regulatory Utility 
Commissioners, Preventing Undue Discrimination and Preference in 
Transmission Service, Docket No. RM05-25-000, at p. 12 (filed Aug. 
8, 2006).
---------------------------------------------------------------------------

    39. The information sharing prohibitions of the standards of 
conduct affect the type of transmission information that planners use 
to conduct integrated resource planning. Public utilities relying on 
marketing or energy affiliate employees to perform their integrated 
resource planning are prohibited from obtaining non-public transmission 
information from the transmission provider and, instead, use publicly-
available information. In staff's outreach sessions, some public 
utilities raised concerns, for example, that this prohibition precludes 
long-term planners from obtaining information about generation projects 
in the interconnection queue, or from obtaining information regarding 
planned retirements of generation. With incomplete transmission 
information, public utilities contended, transmission analysis for 
integrated resource planning is incomplete. As a result, they added, 
the IRP process is less efficient and more costly, and the resulting 
integrated resource plan is inferior. Public utilities contended, in 
effect, that the information sharing prohibitions of the standards of 
conduct create a gap between the transmission information needed to 
conduct integrated resource planning and the transmission information 
available to their employees

[[Page 3966]]

who conduct integrated resource planning.
    40. Public utilities also asserted that the independent functioning 
requirement of the standards of conduct hinders integrated resource 
planning because the requirement prohibits planners from working with 
transmission function employees and taking advantage of their 
understanding of the transmission system.
    41. The Commission seeks comment on whether and how the standards 
of conduct preclude those who conduct integrated resource planning from 
obtaining needed transmission information. Commenters should explain 
what types of information, if any, cannot reach such planners under the 
current standards of conduct and how such information assists in 
creating an accurate integrated resource plan. The Commission also 
seeks comment on whether planning employees would also need access to 
non-public customer information in addition to non-public transmission 
information.
    42. The Commission proposes to create a new category of employees 
called ``planning employees'' who would be permitted to direct, 
organize, and carry out all aspects of integrated resource planning 
including aspects related to transmission and generation planning. For 
the purpose of conducting integrated resource planning, planning 
employees would be permitted to receive non-public transmission 
information (but not non-public customer information) from the 
transmission provider and to interact with transmission function 
employees. \66\ In order to allow planning employees to interact with 
transmission function employees, planning employees would be exempt 
from the independent functioning requirement. The Commission seeks 
comment on the creation of this category, including the potential 
benefit and harm to the market.
---------------------------------------------------------------------------

    \66\ To the extent that transmission function employees disclose 
non-public transmission information that is not related to 
integrated resource planning, the transmission provider must observe 
the posting requirements of 18 CFR 358.5(b)(2).
---------------------------------------------------------------------------

    43. To ensure that an undue preference is not given to marketing or 
energy affiliates, the Commission also proposes several restrictions 
and limitations. As part of this proposal, the Commission would add a 
definition for the term ``integrated resource planning'' to the 
standards of conduct, which would serve to describe and delineate the 
types of resource planning activities in which planning employees could 
participate. The definition is intended to include all integrated 
resource planning to serve bundled retail load conducted by public 
utilities that is mandated by the states. The Commission does not 
intend to exclude from this definition any state's mandated integrated 
resource planning to serve bundled retail load.\67\
---------------------------------------------------------------------------

    \67\ The Commission also understands that some states refer to 
integrated resource planning by different terms.
---------------------------------------------------------------------------

    44. We understand that some public utilities conduct integrated 
resource planning that is not subject to state review. Under the 
proposed regulations, if a public utility conducts integrated resource 
planning that is not required by state mandate, it could not take 
advantage of the planning employees category. The Commission also seeks 
comment on this limitation. For example, are there states that do not 
have an explicit integrated resource planning mandate, but that, 
nonetheless, review and approve integrated resource plans prepared and 
submitted by the public utilities?
    45. The Commission also proposes to limit the definition of 
``integrated resource planning'' to planning that is designed to meet 
``future bundled retail load obligations.'' This limitation cabins the 
work of planning employees to work on bundled retail load obligations 
and, thereby, precludes them from working on a public utility's other 
load obligations, such as wholesale load obligations arising from 
contract. By this limitation, the Commission seeks to ensure that the 
benefits of this proposal accrue to a public utility in service of its 
retail customers and not to benefit a utility in competition with other 
wholesale market participants. We seek comments on whether or not this 
limitation is necessary to prevent undue discrimination.
    46. To further restrict opportunities for planning employees to 
provide undue preferences to the transmission provider's marketing or 
energy affiliates, planning employees would be subject to the ``no-
conduit rule;'' that is, they could not relay any non-public 
transmission information received to any marketing or energy affiliate. 
Planning employees also would be restricted from participating in the 
sales or purchases of energy, capacity, ancillary services or 
transmission services to ensure that they did not use their access to 
transmission information and to transmission function employees to 
benefit the public utility or its affiliates in transactions with other 
market participants. In other words, if the integrated resource 
planning involves bundled retail load and is the result of a state 
mandate, the planning and the employees conducting it are not subject 
to all of the usual restrictions of the standards of conduct, although 
they would be subject to other restrictions outlined here.
    47. The Commission seeks comment on whether planning employees 
should be restricted to planning for bundled retail load or whether 
they should also be permitted to plan for Provider of Last Resort 
(POLR) load, grandfathered wholesale requirements contracts, and 
wholesale full requirements load. Commenters addressing this issue 
should indicate the type of load for which they conduct integrated 
resource planning or for which their state requires integrated resource 
planning, e.g., only for bundled retail load, or for bundled retail 
load, POLR load, and wholesale requirements load.\68\ We note that for 
purposes of Order No. 888 and the Commission's enforcement practices, 
we have treated pre-1996, grandfathered wholesale requirements 
contracts similar to how we have treated bundled retail load.\69\ We 
seek comments on whether or not the Commission should continue this 
practice for integrated resource planning. Commenters should also 
address whether the Commission could sufficiently facilitate integrated 
resource planning by limiting the definition of integrated resource 
planning in the regulations to planning only for bundled retail load. 
Commenters should address whether it is more cost-effective and 
efficient to permit planning employees to conduct integrated resource 
planning for obligations other than bundled retail sales and what, if 
any, protections should be put in place to guard against undue 
preferences to marketing and energy affiliates. Does limiting planning 
employees to bundled retail sales load unnecessarily divide a utility's 
integrated resource planning?
---------------------------------------------------------------------------

    \68\ Here, the Commission delineates integrated resource 
planning by type of load or contract. Staff research indicates that 
some state regulations do not delineate the scope of their 
integrated resource planning requirement in the same way. For 
instance, some states require that a utility conduct integrated 
resource planning for its ``customers'' without any delineation 
between wholesale or retail customers. Other states require planning 
for ``wholesale customers'' without delineation between wholesale 
requirements customers and other wholesale customers. To assist in 
clarification of this issue, commenters should delineate precisely 
the scope of a state's planning requirements.
    \69\ Cf. 18 CFR 35.28(c)(2)(i) and (ii).
---------------------------------------------------------------------------

    48. Under this proposal, public utility transmission providers that 
no longer have bundled retail load obligations but have POLR 
obligations because they operate in states that have retail access or 
retail choice would not be permitted to share non-public transmission

[[Page 3967]]

information to conduct integrated resource planning.\70\ In Order No. 
2004-A, the Commission rejected a generic request to treat POLR service 
obligations under state law as equivalent to a transmission provider's 
bundled retail sales obligations, which would have exempted POLR 
service from the definition of marketing affiliate.\71\ The Commission 
also indicated that it would entertain case-by-case requests for 
exemption of POLR service. In several instances, the Commission has 
granted requests by transmission providers that, under specific 
conditions, the POLR service should be accorded the same treatment as 
bundled retail sales.\72\ The Commission seeks comment on whether 
utilities with POLR service obligations also should be allowed to take 
advantage of the planning employees category, or whether expanding the 
category to include POLR service obligations might harm competition or 
give marketing or energy affiliates an undue preference.
---------------------------------------------------------------------------

    \70\ The standards of conduct apply to merchant functions that 
are engaged in sales or purchases of power that will be resold at 
retail under state retail choice programs. Order No. 2004 at P 78.
    \71\ See Order No. 2004-A at P 127.
    \72\ See, e.g., Cinergy Services, Inc., 111 FERC ] 61,512 
(2005).
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    49. Finally, we are concerned that planning employees not be used 
in a manner that unduly discriminates against non-affiliated wholesale 
suppliers. Specifically, in permitting planning employees access to 
non-public transmission information and to transmission function 
employees, we are concerned that such access could be used to favor 
utility-owned generation over purchases from non-affiliates. For 
example, in the IRP process, planning employees could use non-public 
transmission information to evaluate only self-build options and ignore 
any consideration of purchases from third parties. Such an action would 
be inconsistent with the underlying purpose of the proposal, which is 
to increase the economic use of the grid by allowing planning employees 
to integrate the consideration of economic alternatives.
    50. To address this concern, the Commission proposes to limit the 
definition of integrated resource planning to instances in which the 
IRP process includes evaluation of third-party resources. The proposed 
limit is designed to balance the goal of facilitating least-cost 
resource procurement with the concern that the planning employees 
category not be used to discriminate against non-affiliates. We wish to 
clarify, however, that such a limitation does not mean the Commission 
intends to supervise or otherwise prescribe the manner in which states 
consider third-party resources as part of their IRP processes or that 
the Commission intends a final integrated resource plan to necessarily 
include third-party resources. The states are in the best position to 
make those decisions as they are responsible for resource procurement 
for bundled retail load. Therefore, the Commission will not second-
guess the manner in which states evaluate third-party resources; we 
only require that such resources be considered if a public utility 
seeks to use the planning employees category.\73\
---------------------------------------------------------------------------

    \73\ This approach is consistent with the category being created 
below for competitive solicitations. We would permit competitive 
solicitation employees to have access to non-public transmission 
information and transmission function employees because, in those 
situations, the utility has allowed participation by third-party 
suppliers.
---------------------------------------------------------------------------

    51. We seek comment on the foregoing restrictions placed on 
planning employees' activities. In their comments, commenters should 
address the balance the Commission is trying to achieve between 
providing planning employees with sufficient access to transmission 
information and to transmission function employees to conduct accurate 
and efficient integrated resource planning while at the same time 
ensuring that such access does not enlarge opportunities for planning 
employees to provide undue preferences to the transmission provider's 
marketing or energy affiliates. Thus, commenters who believe that the 
restrictions go too far should explain why, and, also, explain why the 
restrictions are unnecessary to prevent granting an undue preference. 
Likewise, commenters who believe that the restrictions do not go far 
enough to prevent the granting of undue preferences should explain why 
and articulate how further restrictions can be fashioned while still 
providing planning employees with sufficient access to transmission 
information and to transmission function employees. Finally, commenters 
supporting the restrictions should explain the basis for their support. 
We urge commenters to be as specific as possible in their comments.
2. Competitive Solicitation Employees
    52. In staff's outreach sessions, some public utilities also 
asserted that the standards of conduct hinder their ability to conduct 
efficient competitive solicitations, which are often conducted pursuant 
to an integrated resource plan. Some public utilities contended that 
the standards of conduct hinder their ability to evaluate the 
transmission impacts and costs of proposals responsive to competitive 
solicitations.
    53. In raising this concern, some public utilities focused on the 
independent functioning requirement of the standards of conduct, 
because this requirement prohibits transmission function employees from 
working with bid evaluators to determine the transmission costs of bids 
responsive to a competitive solicitation. To make the evaluation of 
transmission costs more accurate, public utilities that conduct 
competitive solicitations seek to allow greater interaction between 
transmission function employees and those employees who conduct 
competitive solicitations. In staff's outreach, some public utilities 
contended that greater interaction would allow employees conducting 
competitive solicitations to engage in an iterative method for 
determining the ``all-in'' costs of a bid or combination of bids, i.e., 
the ``net effect of a portfolio.'' For instance, two 100-MW projects 
evaluated together may cost less in transmission upgrades than the same 
two projects would cost if calculated separately because one may 
alleviate a constraint caused by the other. Through an iterative 
method, bid evaluators could, for example, submit a portfolio of bid 
options to transmission function employees, receive feedback on 
transmission costs related to the portfolio, refine the portfolio, and 
re-submit it to transmission function employees for further evaluation, 
and, if necessary, repeat these steps until a complete evaluation is 
achieved. In sum, some public utilities contended that, currently, they 
are unable to obtain an accurate picture of the true transmission costs 
of a bid and may not select the least-cost proposal.
    54. The Commission proposes to add a new category of ``competitive 
solicitation employees,'' who would be permitted to direct, organize 
and execute certain ``competitive solicitations.'' Under this proposal, 
competitive solicitation employees could obtain non-public transmission 
information (but not non-public customer information) from the 
transmission provider to the extent necessary to evaluate bids or 
proposals responsive to a competitive solicitation.\74\ The Commission 
does not believe that competitive solicitation employees have a need 
for non-public customer information. To the same extent, competitive 
solicitation employees could interact with

[[Page 3968]]

transmission function employees. In order to allow competitive 
solicitation employees to interact with transmission function 
employees, competitive solicitation employees would be exempt from the 
independent functioning requirement.
---------------------------------------------------------------------------

    \74\ To the extent that transmission function employees disclose 
transmission information that is not related to competitive 
solicitations, the transmission provider must observe the posting 
requirements of 18 CFR 358.5(b)(3).
---------------------------------------------------------------------------

    55. To ensure that an undue preference is not given to marketing or 
energy affiliates, the Commission proposes several restrictions and 
limitations.\75\ The term ``competitive solicitations'' would be 
defined as a solicitation by a public utility to obtain energy, 
capacity, or ancillary services to serve bundled retail load pursuant 
to an integrated resource plan. The definition would be limited to 
competitive solicitations that: (1) Are for the purposes of meeting 
bundled retail load and (2) are made pursuant to a state-mandated 
integrated resource plan. The Commission intends the first limitation 
to ensure that competitive solicitation employees are acting for the 
benefit of bundled retail load customers and not obtaining energy, 
capacity, or ancillary services for the purpose of meeting a public 
utility's other obligations. The Commission intends the second 
limitation to ensure that the public utility does not use competitive 
solicitation employees for any attempt to obtain energy, capacity or 
ancillary services. Thus, this limitation ensures that competitive 
solicitation employees are used only for relatively major procurements 
by virtue of their having been conducted as part of integrated resource 
planning. This limitation on competitive solicitations would also 
ensure state involvement as integrated resource planning is defined as 
planning undertaken pursuant to state mandate.
---------------------------------------------------------------------------

    \75\ If a utility's competitive solicitation results in the 
award of a contract to its affiliate, the Commission will review the 
resulting contract under the guidelines set forth in Allegheny 
Energy Supply Company, LLC, 108 FERC ] 61,082, at P 22 (2004).
---------------------------------------------------------------------------

    56. The Commission seeks comment on the type of load and contracts 
that would fall within the definition of a competitive solicitation 
and, thereby, be eligible to be supplied through a competitive 
solicitation that benefits from non-public transmission information and 
access to transmission function employees and what, if any, other 
protections should be put in place to guard against undue preferences 
to marketing and energy affiliates. As noted above, for purposes of 
Order No. 888 and the Commission's enforcement practices, we have 
treated pre-1996, grandfathered wholesale requirements contracts 
similar to how we have treated bundled retail load. We seek comments on 
whether or not the Commission should continue this practice for 
competitive solicitations. Should load arising from POLR obligations or 
from wholesale requirements contracts, full or partial, be supplied 
through such a competitive solicitation? The Commission recognizes that 
supply obtained for bundled retail sales sometimes is used to make 
wholesale sales, for instance, when bundled retail load decreases. Does 
this make restricting competitive solicitations to bundled retail sales 
unworkable?
    57. In order to protect against the potential for undue 
preferences, the Commission proposes further restrictions on 
competitive solicitation employees' activities similar to the 
restrictions on planning employees. Competitive solicitation employees 
would be subject to the ``no-conduit rule,'' that is, they could not 
relay any non-public transmission information received to any marketing 
or energy affiliate.\76\ Competitive solicitation employees also would 
be restricted from participating in the sales or purchases of energy, 
capacity, ancillary services or transmission services, other than in 
competitive solicitations, to ensure that they do not use their access 
to non-public transmission information and to transmission function 
employees to benefit the public utility or its affiliates in 
transactions with other market participants. Competitive solicitation 
employees could not direct, organize, or participate in the development 
of a bid, or proposal submitted in a competitive solicitation or a 
benchmark used in a competitive solicitation. Further, analogous to the 
no-conduit rule, competitive solicitation employees could not provide 
any non-public bid or competitive solicitation information to marketing 
or energy affiliates. In other words, if the competitive solicitation 
involves bundled retail load and is the result of a state-mandated 
integrated resource plan, the competitive solicitation and the 
employees conducting it are not subject to all of the usual 
restrictions of the standards of conduct, although they would be 
subject to other restrictions outlined here.
---------------------------------------------------------------------------

    \76\ Proposed 18 CFR 358.5(b)(9).
---------------------------------------------------------------------------

    58. The Commission seeks comment on its competitive solicitation 
employees proposal and the restrictions that should apply to their 
activities, including the potential benefit and harm to the market, 
specifically, whether competitive solicitation employees would need 
access to non-public customer information in addition to non-public 
transmission information. The Commission would permit planning 
employees to serve as competitive solicitation employees and vice-
versa. The Commission seeks comment on whether employees should be 
permitted to serve in both capacities. Because competitive solicitation 
employees would have access to non-public transmission information and 
to transmission function employees only for the purpose of conducting a 
competitive solicitation, the Commission expects that competitive 
solicitation employees would not need this access until after responses 
to a competitive solicitation are received. The Commission seeks 
comment on this restriction.
    59. This proposed category of competitive solicitation employees 
may increase the opportunities to provide an undue preference that is 
not sufficiently offset by the proposed restrictions on the activities 
of competitive solicitation employees. Concerns about undue preferences 
are greater in the competitive solicitation process than in the IRP 
process, because an undue preference provided in a competitive 
solicitation can lead to a more concrete, nearer-term benefit, e.g., a 
contract, than a similar preference granted in the IRP process, which 
has a longer term focus and typically results in non-binding 
recommendations. Further, competitive solicitation employees may be 
evaluating third-party proposals in competition with proposals by 
affiliates or proposals by the public utility to build itself the 
resources required. Thus, it is important to ensure that competitive 
solicitation employees do not provide an undue preference, particularly 
through the use of non-public transmission information or access to 
transmission function employees, throughout the competitive 
solicitation process from design through contract award.\77\ 
Accordingly, the Commission seeks comments on whether its proposal 
strikes an appropriate balance between allowing access to transmission 
information and to transmission function employees while at the same 
time including appropriate restrictions to prevent undue preferences.
---------------------------------------------------------------------------

    \77\ This concern about undue preference is lessened in states 
that require an independent evaluator to play a role in a public 
utility's competitive solicitation.
---------------------------------------------------------------------------

    60. The Commission seeks comment on whether, instead of having 
separate categories for planning employees and for competitive 
solicitation employees, it should establish one category to include 
both sets of employees. States and utilities treat integrated resource 
planning and competitive solicitations

[[Page 3969]]

differently in some respects; in other respects, the two are treated 
together. Commenters should explain whether they would use the same 
personnel for each category. Commenters should also address whether 
keeping the categories separate assists in preventing undue 
discrimination. Commenters advocating a single category for both 
planning and competitive solicitation employees should describe the 
permissible activities for such employees and set forth the 
restrictions that would apply to their activities.
3. Specific Proposals
    61. In light of the discussion above, the Commission proposes the 
following regulatory changes. We propose the following revision to the 
definition of Transmission Function employee in Sec.  358.3(j):

    Transmission Function employee means an employee, contractor, 
consultant or agent of a Transmission Provider, other than a 
Planning Employee as defined in Sec.  358.3(o), who conducts 
transmission system operations or reliability functions, including, 
but not limited to, those who are engaged in day-to-day duties and 
responsibilities for planning, directing, organizing or carrying out 
transmission-related operations.

    We propose the following additions to the definitions in Sec.  
358.3:

    (1) Integrated Resource Planning means a process to establish a 
plan, required by state law, regulation or other state mandate, for 
a public utility to meet its future bundled retail load obligations 
that evaluates a range of alternatives that includes consideration 
of third party resources.
    (2) Competitive Solicitation means a solicitation by a public 
utility to obtain energy, capacity, or ancillary services for the 
purposes of meeting the public utility's bundled retail load 
obligations pursuant to an Integrated Resource Planning obligation.
    (3) Competitive Solicitation Employee means an employee, 
contractor, consultant or agent of a public utility who directs, 
organizes, or executes the public utility's Competitive 
Solicitations.
    (4) Planning Employee means an employee, contractor, consultant 
or agent of a public utility who directs, organizes or conducts the 
public utility's Integrated Resource Planning.

    We propose the following additions to the Independent Functioning 
section, Sec.  358.4:

    (1) A Transmission Function employee may interact with a 
Planning Employee for the purpose of engaging in Integrated Resource 
Planning. A Planning Employee, who receives non-public transmission 
information pursuant to Sec.  358.5(b)(8) or who interacts with a 
Transmission Function employee, must not:
    (i) Participate in sales of energy, capacity or ancillary 
services or in sales of transmission services, including directing, 
organizing, or otherwise preparing a bid, benchmark, or proposal by 
the public utility or by the public utility's Marketing or Energy 
Affiliates to supply energy, capacity or ancillary services;
    (ii) Participate in purchases of energy, capacity or ancillary 
services or of purchases of transmission services other than in a 
Competitive Solicitation on behalf of its public utility 
Transmission Provider; or
    (iii) Participate in non-planning transmission functions.
    (2) A Transmission Function employee may interact with a 
Competitive Solicitation Employee for the purpose of evaluating the 
transmission component of bids or proposals considered in a 
Competitive Solicitation. A Competitive Solicitation Employee, who 
receives non-public transmission information pursuant to Sec.  
358.5(b)(9) or who interacts with a Transmission Function employee, 
must not:
    (i) Provide any non-public bid, proposal, or Competitive 
Solicitation information to the Marketing or Energy Affiliate 
employees;
    (ii) Participate in sales of energy, capacity, ancillary 
services or in sales of transmission services, including directing, 
organizing, or otherwise preparing a bid, benchmark, or proposal by 
the public utility or by the public utility's Marketing or Energy 
Affiliates to supply energy, capacity or ancillary services; or
    (iii) Participate in any purchases of energy, capacity or 
ancillary services or of transmission services other than a 
Competitive Solicitation on behalf of its public utility 
Transmission Provider.

    We propose the following additions to the Non-Discrimination 
Requirements section in Sec.  358.5(b):

    (1) A Transmission Provider may share transmission information 
covered by Sec. Sec.  358.5(a) and (b)(1) with Planning Employees to 
the extent those employees need that information to direct, organize 
or carry out Integrated Resource Planning, provided that such 
employees do not act as a conduit to share such information with any 
Marketing or Energy Affiliates.
    (2) A Transmission Provider may share transmission information 
covered by Sec. Sec.  358.5(a) and (b)(1) with Competitive 
Solicitation Employees to the extent those employees need that 
information to direct, organize, or execute Competitive 
Solicitations, provided that such employees do not act as a conduit 
to share such information with any Marketing or Energy Affiliates.

I. Changes to the Definition of Exempt Wholesale Generator

    62. Currently, the standards of conduct define affiliate for an 
exempt wholesale generator (EWG) by referring to section 32a of Public 
Utility Holding Company Act of 1935 (PUHCA) and section 214 of the 
Federal Power Act (which in turn references, section 2(a) of 
PUHCA).\78\ With respect to the standards of conduct, a determination 
of affiliation for EWGs is based on whether one company controls five 
percent or more of its stock.\79\ The Commission proposes changes to 
the definition of affiliate with respect to EWGs in light of the repeal 
of the PUHCA. Specifically, the Commission proposes to make conforming 
changes to the definition of EWG to delete the reference to PUHCA and 
direct the reader to 18 CFR 366.1, which contains a definition of EWG 
and a definition of affiliate that applies to an EWG.\80\
---------------------------------------------------------------------------

    \78\ 18 CFR 358.3(b)(2).
    \79\ For non-EWG affiliates, a voting interest of 10 percent or 
more creates a rebuttable presumption of control or affiliation. 18 
CFR 358.3(c).
    \80\ 18 CFR 366.1 implements the Public Utility Holding Company 
Act of 2005. (PUHCA 2005). The Energy Policy Act of 2005 (EPAct 
2005), Pub. L. No. 109-58, 119 Stat. 594 (2005), repealed PUHCA, 15 
U.S.C. 79a et seq. (2000), and enacted the Public Utility Holding 
Company Act of 2005 (PUHCA 2005), EPAct 2005 at 1261 et seq.
---------------------------------------------------------------------------

    63. Accordingly, the Commission proposes that Sec.  358.3(b)(2) 
will read as follows:

    For any exempt wholesale generator (as defined under Sec.  366.1 
of this chapter), an affiliate means the same as the definition of 
``affiliate'' provided in Sec.  366.1 of this chapter.

J. Revisions to Written Procedures

    64. The Commission proposes several changes to the written 
procedures required of a transmission provider to delete outdated 
references, to clarify training certification, and to post the name of 
a transmission provider's chief compliance officer.
    65. Currently, Sec.  358.4(e)(1) of the Commission's regulations 
reads:

    By February 9, 2004, each Transmission Provider is required to 
file with the Commission and post on the OASIS or Internet website a 
plan and schedule for implementing the standards of conduct.

    Currently, Sec.  358.4(e)(3) of the Commission's regulations reads:

    The Transmission Provider must post on the OASIS or Internet 
website, current written procedures implementing the standards of 
conduct in such detail as will enable customers and the Commission 
to determine that the Transmission Provider is in compliance with 
the requirements of this section by September 22, 2004 or within 30 
days of becoming subject to the requirements of part 358.

The Commission proposes to delete Sec.  358.4(e)(1) because the date 
for submitting a plan and schedule for implementing the standards of 
conduct has passed and the Commission does not need a new plan and 
schedule with respect to Sec.  358.4(e)(3). The Commission proposes 
deleting ``by September 22, 2004 or'' because that date has passed and 
we are proposing to require in Sec.  358.4(e)(3) that a transmission 
provider must comply with the

[[Page 3970]]

standards of conduct within 30 days of becoming subject to the 
requirements of part 358.
    66. Section 358(e)(5) of the Commission's regulations require 
training on the standards of conduct for certain employees of the 
transmission provider. Those employees are required to ``sign a 
document or certify electronically that s/he has participated in the 
training.'' In order to ensure that such employees not only participate 
in, but, also, complete such training, the Commission proposes 
replacing the words ``participated in'' with the word ``completed'' so 
that the applicable sentence would read: ``The Transmission Provider 
must require each employee to sign a document or certify electronically 
signifying that s/he has completed the training.'' \81\
---------------------------------------------------------------------------

    \81\ Proposed 18 CFR 358.3(e)(5).
---------------------------------------------------------------------------

    67. Section 358.4(e)(6) requires transmission providers to 
designate a chief compliance officer who will be responsible for 
standards of conduct compliance. Recently, Commission staff has tried 
to identify the name of the chief compliance officers of several 
transmission providers, and noticed that some transmission providers do 
not publicly identify the name of the chief compliance officer. 
Therefore, the Commission proposes to add the following sentence to 
Sec.  358.4(e)(6) as follows: ``Transmission Providers must post the 
name of the Chief Compliance Officer and provide contact information on 
the OASIS or Internet Web site, as applicable.''

III. Information Collection Statement

    68. The Office of Management and Budget (OMB) regulations require 
approval of certain information collection requirements imposed by 
agency rules.\82\ In this NOPR, the Commission proposes to reinstate 
the provisions remanded by the court in National Fuel.
---------------------------------------------------------------------------

    \82\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    69. Previously, the Commission submitted to OMB the information 
collection requirements arising from the standards of conduct adopted 
in Order No. 2004. OMB approved those requirements.\83\ The revisions 
to the standards of conduct proposed in this issuance do not impose any 
additional information collection burden on industry participants. In 
fact, by proposing that the standards of conduct will no longer govern 
the relationship between transmission providers and their energy 
affiliates, the information collection burden will likely decrease.
---------------------------------------------------------------------------

    \83\ Letter from OMB to the Commission (Jan. 20, 2004) (OMB 
Control Number 1902-0157); ``Notice of Action'' letter from OMB to 
the Commission (Jan. 20, 2004) (OMB Control Number 1902-0173).
---------------------------------------------------------------------------

    70. The Commission is submitting notification of the information 
collection requirements imposed in the NOPR to OMB for its review and 
approval under section 3507(d) of the Paperwork Reduction Act of 
1995.\84\ Comments are solicited on the Commission's need for this 
information, whether the information will have practical utility, the 
accuracy of provided burden estimates, ways to enhance the quality, 
utility, and clarity of the information to be collected, and any 
suggested methods of minimizing respondent's burden, including the use 
of automated information techniques.
---------------------------------------------------------------------------

    \84\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    71. OMB regulations require OMB to approve certain information 
collection requirements imposed by agency rule. The Commission is 
submitting notification of this proposed rule to OMB.
    Title: FERC-592 and 717.
    Action: Proposed Collection.
    OMB Control No: 1902-0157 and 1902-173.
    Respondents: Business or other for profit.
    Frequency of Responses: On occasion.
    Necessity of the Information: The information is necessary to 
ensure that all regulated transmission providers treat all transmission 
customers on a non-discriminatory basis.
    Internal Review: The Commission has reviewed the requirements 
pertaining to natural gas pipelines and transmitting electric utilities 
and determined the proposed revisions are necessary because of changes 
in transmission provider practices and in the energy market. The 
Commission proposes to revise the standards of conduct to be consistent 
with the recent court decisions and to make certain transmission 
provider practices more efficient and less costly.
    72. These requirements conform to the Commission's plan for 
efficient information collection, communication, and management within 
the natural gas and electric utility industries. The Commission has 
assured itself, by means of internal review, that there is specific, 
objective support for the burden estimates associated with the 
information requirements.
    73. Interested persons may obtain information on the reporting 
requirements by contacting: Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426, [Attention: Michael Miller, 
Office of the Chief Information Officer], phone: (202) 502-8415, fax: 
(202) 208-2425, e-mail: Michael.miller@ferc.gov. Comments on the 
requirements of the proposed rule also may be sent to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Washington, DC 20503 [Attention: Desk Officer for the Federal Energy 
Regulatory Commission].

IV. Environmental Analysis

    74. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\85\ The 
Commission has categorically excluded certain actions from these 
requirements as not having a significant effect on the human 
environment.\86\ The action proposed here falls within the categorical 
exclusions provided in the Commission's regulations because this rule 
is clarifying and corrective and does not substantially change the 
effect of the regulations being amended.\87\ Therefore, an 
environmental assessment is unnecessary and has not been prepared in 
this rulemaking.
---------------------------------------------------------------------------

    \85\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
Preambles 1986-1990 ] 30,783 (1987).
    \86\ 18 CFR 380.4.
    \87\ 18 CFR 380.4(a)(2)(ii) and 380.4(a)(5).
---------------------------------------------------------------------------

V. Regulatory Flexibility Act

    75. The Regulatory Flexibility Act of 1980 (RFA) \88\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
Because most transmission providers do not fall within the definition 
of ``small entity,'' \89\ the Commission certifies that this rule will 
not have a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \88\ 5 U.S.C. 601-612.
    \89\ See 5 U.S.C. 601(3).
---------------------------------------------------------------------------

VI. Comment Procedures

    76. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice to be adopted, including 
any related matters or alternative proposals that commenters may wish 
to discuss. Comments must be filed on or before March 15, 2007. Reply 
comments must be filed on or before April 4, 2007. Comments and reply 
comments must refer to Docket No. RM07-1-000, and must include the 
commenter's name, the organization he or she represents, if applicable, 
and his or her address.
    77. Comments may be filed electronically via the eFiling link on 
the

[[Page 3971]]

Commission's Web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats, and commenters may attach 
additional files with supporting information in certain other file 
formats. Commenters filing electronically do not need to make a paper 
filing.
    78. Commenters who are not able to file comments electronically 
must send an original and 14 copies of their comments to: Federal 
Energy Regulatory Commission, Office of the Secretary, 888 First 
Street, NE., Washington, DC 20426.
    79. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this NOPR are not 
required to serve copies of their comments on other commenters.

VII. Document Availability

    80. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 

Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington DC 20426.
    81. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    82. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from our Help line at (202) 502-8222 
or the Public Reference Room at (202) 502-8371 Press 0, TTY (202) 502-
8659. E-Mail the Public Reference Room at 
public.referenceroom@ferc.gov.


List of Subjects in 18 CFR Part 358

    Electric power plants, Electric utilities, Natural gas, Reporting 
and recordkeeping requirements.

    By direction of the Commission.
Magalie R. Salas,
Secretary.
    In consideration of the foregoing, the Commission proposes to 
revise part 358, Chapter I, Title 18, Code of Federal Regulations, as 
follows:

PART 358--STANDARDS

Sec.
358.1 Applicability.
358.2 General principles.
358.3 Definitions.
358.4 Independent functioning.
358.5 Non-discrimination requirements.

    Authority: 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791-825r, 
2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352.


Sec.  358.1  Applicability.

    (a) This part applies to any interstate natural gas pipeline that 
transports gas for others pursuant to subpart A of part 157 or subparts 
B or G of part 284 of this chapter.
    (b) This part applies to any public utility that owns, operates, or 
controls facilities used for the transmission of electric energy in 
interstate commerce.
    (c) This part does not apply to a public utility Transmission 
Provider that is a Commission-approved Independent System Operator 
(ISO) or Regional Transmission Organization (RTO). If a public utility 
transmission owner participates in a Commission-approved ISO or RTO and 
does not operate or control its transmission facilities and has no 
access to transmission, customer or market information covered by Sec.  
358.5(b), it may request an exemption from this part.
    (d) A Transmission Provider may file a request for an exemption 
from all or some of the requirements of this part for good cause.
    (e) The Standards of Conduct in this part do not govern the 
relationship between a natural gas Transmission Provider as defined in 
Sec.  358.3(a)(2) and its Energy Affiliates.


Sec.  358.2  General principles.

    (a) A Transmission Provider's employees engaged in transmission 
system operations must function independent from employees of its 
Marketing and Energy Affiliates.
    (b) A Transmission Provider must treat all transmission customers, 
affiliated and non-affiliated, on a non-discriminatory basis, and must 
not operate its transmission system to preferentially benefit Marketing 
and Energy Affiliates.


Sec.  358.3  Definitions.

    (a) Transmission Provider means:
    (1) Any public utility that owns, operates or controls facilities 
used for the transmission of electric energy in interstate commerce; or
    (2) Any interstate natural gas pipeline that transports gas for 
others pursuant to subpart A of part 157 or subparts B or G of part 284 
of this chapter.
    (3) A Transmission Provider does not include a natural gas storage 
provider authorized to charge market-based rates that is not 
interconnected with the jurisdictional facilities of any affiliated 
interstate natural gas pipeline, has no exclusive franchise area, no 
captive ratepayers and no market power.
    (b) Affiliate means:
    (1) Another person which controls, is controlled by or is under 
common control with, such person. An affiliate includes a division that 
operates as a functional unit,
    (2) For any exempt wholesale generator (as defined under Sec.  
366.1 of this chapter), an affiliate means the same as the definition 
of ``affiliate'' provided in Sec.  366.1 of this chapter.
    (c) Control (including the terms ``controlling,'' ``controlled 
by,'' and ``under common control with'') as used in this part and Sec.  
250.16 of this chapter, includes, but is not limited to, the 
possession, directly or indirectly and whether acting alone or in 
conjunction with others, of the authority to direct or cause the 
direction of the management or policies of a company. A voting interest 
of 10 percent or more creates a rebuttable presumption of control.
    (d) Energy Affiliate means an affiliate of a Transmission Provider 
that:
    (1) Engages in or is involved in transmission transactions in U.S. 
energy or transmission markets; or
    (2) Manages or controls transmission capacity of a Transmission 
Provider in U.S. energy or transmission markets; or
    (3) Buys, sells, trades or administers natural gas or electric 
energy in U.S. energy or transmission markets; or
    (4) Engages in financial transactions relating to the sale or 
transmission of natural gas or electric energy in U.S. energy or 
transmission markets.
    (5) An LDC division of an electric public utility Transmission 
Provider shall be considered the functional equivalent of an Energy 
Affiliate, unless it qualifies for the exemption in Sec.  
358.3(d)(6)(v).
    (6) An Energy Affiliate does not include:
    (i) A foreign affiliate that does not participate in U.S. energy 
markets;
    (ii) An affiliated Transmission Provider or an interconnected 
foreign affiliated natural gas pipeline that is engaged in natural gas 
transmission activities that are regulated by the state, provincial or 
national regulatory boards of the foreign country in which such 
facilities are located.
    (iii) A holding, parent or service company that does not engage in 
energy or natural gas commodity markets or is not involved in 
transmission transactions in U.S. energy markets;

[[Page 3972]]

    (iv) An affiliate that purchases natural gas or energy solely for 
its own consumption. ``Solely for its own consumption'' does not 
include the purchase of natural gas or energy for the subsequent 
generation of electricity.
    (v) A State-regulated local distribution company that acquires 
interstate transmission capacity to purchase and resell gas only for 
on-system sales, and otherwise does not engage in the activities 
described in Sec.  358.3(d)(1), (2), (3) or (4), except to the limited 
extent necessary to support on-system sales and to engage in de minimis 
sales necessary to remain in balance under applicable pipeline tariff 
requirements.
    (vi) A processor, gatherer, Hinshaw pipeline or an intrastate 
pipeline that makes incidental purchases or sales of de minimis volumes 
of natural gas to remain in balance under applicable pipeline tariff 
requirements and otherwise does not engage in the activities described 
in Sec. Sec.  358.3(d)(1), (2), (3) or (4).
    (e) Marketing, sales or brokering means a sale for resale of 
natural gas or electric energy in interstate commerce in U.S. energy or 
transmission markets. Marketing also includes managing or controlling 
transmission capacity of a third-party as an asset manager or agent.
    (1) A sales and marketing employee or unit includes:
    (i) An interstate natural gas pipeline's sales operating unit, to 
the extent provided in Sec.  284.286 of this chapter, and
    (ii) A public utility Transmission Provider's energy sales unit, 
unless such unit engages solely in bundled retail sales.
    (2) Marketing or sales does not include incidental purchases or 
sales of natural gas to operate interstate natural gas pipeline 
transmission facilities.
    (3) Marketing means a sale of natural gas to any person or entity 
by a seller that is not an interstate pipeline, except where:
    (i) The seller is selling gas solely from its own production;
    (ii) The seller is selling gas solely from its own gathering or 
processing facilities; or
    (iii) The seller is an intrastate natural gas pipeline or a local 
distribution company making an on-system sale.
    (f) Transmission means natural gas transportation, storage, 
exchange, backhaul, or displacement service provided pursuant to 
subpart A of part 157 or subparts B or G of part 284 of this chapter; 
and electric transmission, network or point-to-point service, 
reliability service, ancillary services or other methods of 
transportation or the interconnection with jurisdictional transmission 
facilities.
    (g) Transmission Customer means any eligible customer, shipper or 
designated agent that can or does execute a transmission service 
agreement or can or does receive transmission service, including all 
persons who have pending requests for transmission service or for 
information regarding transmission.
    (h) Open Access Same-time Information System or OASIS refers to the 
Internet location where a public utility posts the information, by 
electronic means, required by part 37 of this chapter.
    (i) Internet Web site refers to the Internet location where an 
interstate natural gas pipeline posts the information, by electronic 
means, required by Sec. Sec.  284.12 and 284.13 of this chapter.
    (j) Transmission Function employee means an employee, contractor, 
consultant or agent of a Transmission Provider, other than a Planning 
Employee as defined in Sec.  358.3(o), who conducts transmission system 
operations or reliability functions, including, but not limited to, 
those who are engaged in day-to-day duties and responsibilities for 
planning, directing, organizing or carrying out transmission-related 
operations.
    (k) Marketing Affiliate means an Affiliate as that term is defined 
in Sec.  358.3(b) or a unit that engages in marketing, sales or 
brokering activities as those terms are defined at Sec.  358.3(e).
    (l) Integrated Resource Planning means a process to establish a 
plan, required by state law, regulation or other state mandate, for a 
public utility to meet its future bundled retail load obligations that 
evaluates a range of alternatives that includes consideration of third 
party resources.
    (m) Competitive Solicitation means a solicitation by a public 
utility to obtain energy, capacity, or ancillary services for the 
purposes of meeting the public utility's bundled retail load 
obligations pursuant to an Integrated Resource Planning obligation.
    (n) Competitive Solicitation Employee means an employee, 
contractor, consultant or agent of a public utility who directs, 
organizes, or executes the public utility's Competitive Solicitations.
    (o) Planning Employee means an employee, contractor, consultant or 
agent of a public utility who directs, organizes or conducts the public 
utility's Integrated Resource Planning.


Sec.  358.4  Independent functioning.

    (a) Separation of functions. (1) Except in emergency circumstances 
affecting system reliability, the transmission function employees of 
the Transmission Provider must function independently of the 
Transmission Provider's Marketing or Energy Affiliates' employees.
    (2) Notwithstanding any other provisions in this section, in 
emergency circumstances affecting system reliability, a Transmission 
Provider may take whatever steps are necessary to keep the system in 
operation. Transmission Providers must report to the Commission and 
post on the OASIS or Internet Web site, as applicable, each emergency 
that resulted in any deviation from the standards of conduct, within 24 
hours of such deviation.
    (3) The Transmission Provider is prohibited from permitting the 
employees of its Marketing or Energy Affiliates from:
    (i) Conducting transmission system operations or reliability 
functions; and
    (ii) Having access to the system control center or similar 
facilities used for transmission operations or reliability functions 
that differs in any way from the access available to other transmission 
customers.
    (4) Transmission Providers are permitted to share support employees 
and field and maintenance employees with their Marketing and Energy 
Affiliates.
    (5) Transmission Providers are permitted to share with their 
Marketing or Energy Affiliates senior officers and directors who are 
not ``Transmission Function Employees'' as that term is defined in 
Sec.  358.3(j). A Transmission Provider may share transmission 
information covered by Sec. Sec.  358.5(a) and (b) with its shared 
senior officers and directors provided that they do not participate in 
directing, organizing or executing transmission system operations or 
marketing functions; or act as a conduit to share such information with 
a Marketing or Energy Affiliate.
    (6) Transmission Providers are permitted to share risk management 
employees that are not engaged in Transmission Functions or sales or 
commodity functions with their Marketing and Energy Affiliates. This 
provision does not apply to natural gas transmission providers.
    (7) A Transmission Function employee may interact with a Planning 
Employee for the purpose of engaging in Integrated Resource Planning. A 
Planning Employee, who receives non-public transmission information 
pursuant to Sec.  358.5(b)(8) or who interacts with a Transmission 
Function employee, must not:
    (i) Participate in sales of energy, capacity or ancillary services 
or in sales

[[Page 3973]]

of transmission services, including directing, organizing, or otherwise 
preparing a bid, benchmark, or proposal by the public utility or by the 
public utility's Marketing or Energy Affiliates to supply energy, 
capacity or ancillary services;
    (ii) Participate in purchases of energy, capacity or ancillary 
services or of purchases of transmission services other than in a 
Competitive Solicitation on behalf of its public utility Transmission 
Provider; or
    (iii) Participate in non-planning transmission functions.
    (8) A Transmission Function employee may interact with a 
Competitive Solicitation Employee for the purpose of evaluating the 
transmission component of bids or proposals considered in a Competitive 
Solicitation. A Competitive Solicitation Employee, who receives non-
public transmission information pursuant to Sec.  358.5(b)(9) or who 
interacts with a Transmission Function employee, must not:
    (i) Provide any non-public bid, proposal, or Competitive 
Solicitation information to the Marketing or Energy Affiliate 
employees;
    (ii) Participate in sales of energy, capacity, ancillary services 
or in sales of transmission services, including directing, organizing, 
or otherwise preparing a bid, benchmark, or proposal by the public 
utility or by the public utility's Marketing or Energy Affiliates to 
supply energy, capacity or ancillary services; or
    (iii) Participate in any purchases of energy, capacity or ancillary 
services or of transmission services other than a Competitive 
Solicitation on behalf of its public utility Transmission Provider.
    (b) Identifying affiliates on the public Internet. (1) A 
Transmission Provider must post the names and addresses of Marketing 
and Energy Affiliates on its OASIS or Internet Web site.
    (2) A Transmission Provider must post on its OASIS or Internet Web 
site, as applicable, a complete list of the facilities shared by the 
Transmission Provider and its Marketing and Energy Affiliates, 
including the types of facilities shared and their addresses.
    (3) A Transmission Provider must post comprehensive organizational 
charts showing:
    (i) The organizational structure of the parent corporation with the 
relative position in the corporate structure of the Transmission 
Provider, Marketing and Energy Affiliates;
    (ii) For the Transmission Provider, the business units, job titles 
and descriptions, and chain of command for all positions, including 
officers and directors, with the exception of clerical, maintenance, 
and field positions. The job titles and descriptions must include the 
employee's title, the employee's duties, whether the employee is 
involved in transmission or sales, and the name of the supervisory 
employees who manage non-clerical employees involved in transmission or 
sales.
    (iii) For all employees who are engaged in transmission functions 
for the Transmission Provider and marketing or sales functions or who 
are engaged in transmission functions for the Transmission Provider and 
are employed by any of the Energy Affiliates, the Transmission Provider 
must post the name of the business unit within the marketing or sales 
unit or the Energy Affiliate, the organizational structure in which the 
employee is located, the employee's name, job title and job description 
in the marketing or sales unit or Energy Affiliate, and the employee's 
position within the chain of command of the Marketing or Energy 
Affiliate.
    (iv) The Transmission Provider must update the information on its 
OASIS or Internet Web site, as applicable, required by Sec. Sec.  
358.4(b)(1), (2) and (3) within seven business days of any change, and 
post the date on which the information was updated.
    (v) The Transmission Provider must post information concerning 
potential merger partners as affiliates within seven days after the 
potential merger is announced.
    (vi) All OASIS or Internet Web site postings required by part 358 
must comply, as applicable, with the requirements of Sec.  37.6 or 
Sec. Sec.  284.12(a) and (c)(3)(v) of this chapter.
    (c) Transfers. Employees of the Transmission Provider, Marketing or 
Energy Affiliates are not precluded from transferring among such 
functions as long as such transfer is not used as a means to circumvent 
the Standards of Conduct. Notices of any employee transfers between the 
Transmission Provider, on the one hand, and the Marketing or Energy 
Affiliates on the other, must be posted on the OASIS or Internet Web 
site, as applicable. The information to be posted must include: the 
name of the transferring employee, the respective titles held while 
performing each function (i.e., on behalf of the Transmission Provider, 
Marketing or Energy Affiliate), and the effective date of the transfer. 
The information posted under this section must remain on the OASIS or 
Internet Web site, as applicable, for 90 days.
    (d) Books and records. A Transmission Provider must maintain its 
books of account and records (as prescribed under parts 101, 125, 201 
and 225 of this chapter) separately from those of its Energy Affiliates 
and these must be available for Commission inspections.
    (e) Written procedures. (1) [Reserved.]
    (2) Each Transmission Provider must be in full compliance with the 
standards of conduct within 30 days of becoming subject to the 
Commission's jurisdiction.
    (3) The Transmission Provider must post on the OASIS or Internet 
Web site, current written procedures implementing the standards of 
conduct in such detail as will enable customers and the Commission to 
determine that the Transmission Provider is in compliance with the 
requirements of this section within 30 days of becoming subject to the 
requirements of part 358.
    (4) Transmission Providers will distribute the written procedures 
to all Transmission Provider employees and employees of the Marketing 
and Energy Affiliates.
    (5) Transmission Providers shall train officers and directors as 
well as employees with access to transmission information or 
information concerning gas or electric purchases, sales or marketing 
functions. The Transmission Provider must require each employee to sign 
a document or certify electronically signifying that s/he has completed 
the training.
    (6) Transmission Providers are required to designate a Chief 
Compliance Officer who will be responsible for standards of conduct 
compliance. Transmission Providers must post the name of the Chief 
Compliance Officer and provide contact information on the OASIS or 
Internet Web site, as applicable.


Sec.  358.5  Non-discrimination requirements.

    (a) Information access. (1) The Transmission Provider must ensure 
that any employee of its Marketing or Energy Affiliate may only have 
access to that information available to the Transmission Provider's 
transmission customers (i.e., the information posted on the OASIS or 
Internet Web site, as applicable), and must not have access to any 
information about the Transmission Provider's transmission system that 
is not available to all users of an OASIS or Internet Web site, as 
applicable.
    (2) The Transmission Provider must ensure that any employee of its 
Marketing or Energy Affiliate is prohibited from obtaining information 
about the Transmission Provider's transmission system (including, but 
not limited to, information about available transmission capability, 
price, curtailments, storage, ancillary services,

[[Page 3974]]

balancing, maintenance activity, capacity expansion plans or similar 
information) through access to information not posted on the OASIS or 
Internet Web site or that is not otherwise also available to the 
general public without restriction.
    (b) Prohibited disclosure. (1) An employee of the Transmission 
Provider may not disclose to its Marketing or Energy Affiliates any 
information concerning the transmission system of the Transmission 
Provider or the transmission system of another (including, but not 
limited to, information received from non-affiliates or information 
about available transmission capability, price, curtailments, storage, 
ancillary services, balancing, maintenance activity, capacity expansion 
plans, or similar information) through non-public communications 
conducted off the OASIS or Internet Web site, through access to 
information not posted on the OASIS or Internet Web site that is not 
contemporaneously available to the public, or through information on 
the OASIS or Internet Web site that is not at the same time publicly 
available.
    (2) A Transmission Provider may not share any information, acquired 
from non-affiliated transmission customers or potential non-affiliated 
transmission customers, or developed in the course of responding to 
requests for transmission or ancillary service on the OASIS or Internet 
Web site, with employees of its Marketing or Energy Affiliates, except 
to the limited extent information is required to be posted on the OASIS 
or Internet Web site in response to a request for transmission service 
or ancillary services.
    (3) If an employee of the Transmission Provider discloses 
information in a manner contrary to the requirements of Sec.  
358.5(b)(1) and (2), the Transmission Provider must immediately post 
such information on the OASIS or Internet Web site.
    (4) A non-affiliated transmission customer may voluntarily consent, 
in writing, to allow the Transmission Provider to share the non-
affiliated customer's information with a Marketing or Energy Affiliate. 
If a non-affiliated customer authorizes the Transmission Provider to 
share its information with a Marketing or Energy Affiliate, the 
Transmission Provider must post notice on the OASIS or Internet Web 
site of that consent along with a statement that it did not provide any 
preferences, either operational or rate-related, in exchange for that 
voluntary consent.
    (5) A Transmission Provider is not required to contemporaneously 
disclose to all transmission customers or potential transmission 
customers information covered by Sec.  358.5(b)(1) if it relates solely 
to a Marketing or Energy Affiliate's specific request for transmission 
service.
    (6) A Transmission Provider may share generation information 
necessary to perform generation dispatch with its Marketing and Energy 
Affiliate that does not include specific information about individual 
third party transmission transactions or potential transmission 
arrangements.
    (7) Neither a Transmission Provider nor an employee of a 
Transmission Provider is permitted to use anyone as a conduit for 
sharing information covered by the prohibitions of Sec.  358.5(b)(1) 
and (2) with a Marketing or Energy Affiliate. A Transmission Provider 
may share information covered by Sec.  358.5(b)(1) and (2) with 
employees permitted to be shared under Sec.  358.4(a)(4), (5) and (6) 
provided that such employees do not act as a conduit to share such 
information with any Marketing or Energy Affiliates.
    (8) A Transmission Provider may share transmission information 
covered by Sec.  358.5(a) and (b)(1) with Planning Employees to the 
extent those employees need that information to direct, organize or 
carry out Integrated Resource Planning, provided that such employees do 
not act as a conduit to share such information with any Marketing or 
Energy Affiliates.
    (9) A Transmission Provider may share transmission information 
covered by Sec.  358.5(a) and (b)(1) with Competitive Solicitation 
Employees to the extent those employees need that information to 
direct, organize, or execute Competitive Solicitations, provided that 
such employees do not act as a conduit to share such information with 
any Marketing or Energy Affiliates.
    (c) Implementing tariffs. (1) A Transmission Provider must strictly 
enforce all tariff provisions relating to the sale or purchase of open 
access transmission service, if these tariff provisions do not permit 
the use of discretion.
    (2) A Transmission Provider must apply all tariff provisions 
relating to the sale or purchase of open access transmission service in 
a fair and impartial manner that treats all transmission customers in a 
non-discriminatory manner, if these tariff provisions permit the use of 
discretion.
    (3) A Transmission Provider must process all similar requests for 
transmission in the same manner and within the same period of time.
    (4)(i) Electric Transmission Providers must maintain a written log, 
available for Commission audit, detailing the circumstances and manner 
in which they exercised their discretion under any terms of the tariff. 
The information contained in this log is to be posted on the OASIS or 
Internet Web site within 24 hours of when a transmission Provider 
exercises its discretion under any terms of the tariff.
    (ii) Natural gas Transmission Providers must maintain a written log 
of waivers that the natural gas Transmission Provider grants with 
respect to tariff provisions that provide for such discretionary 
waivers and provide the log to any person requesting it within 24 hours 
of the request.
    (5) The Transmission Provider may not, through its tariffs or 
otherwise, give preference to its Marketing or Energy Affiliate, over 
any other wholesale customer in matters relating to the sale or 
purchase of transmission service (including, but not limited to, issues 
of price, curtailments, scheduling, priority, ancillary services, or 
balancing).
    (d) Discounts. Any offer of a discount for any transmission service 
made by the Transmission Provider must be posted on the OASIS or 
Internet Web site contemporaneous with the time that the offer is 
contractually binding. The posting must include: the name of the 
customer involved in the discount and whether it is an affiliate or 
whether an affiliate is involved in the transaction, the rate offered; 
the maximum rate; the time period for which the discount would apply; 
the quantity of power or gas upon which the discount is based; the 
delivery points under the transaction; and any conditions or 
requirements applicable to the discount. The posting must remain on the 
OASIS or Internet Web site for 60 days from the date of posting.

[FR Doc. E7-1118 Filed 1-26-07; 8:45 am]

BILLING CODE 6717-01-P
