
[Federal Register: October 27, 2008 (Volume 73, Number 208)]
[Rules and Regulations]               
[Page 63795-63832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc08-19]                         


[[Page 63795]]

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Part III





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Part 358



Standards of Conduct for Transmission Providers; Final Rule


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 358

[Docket No. RM07-1-000; Order No. 717]

 
Standards of Conduct for Transmission Providers

Issued October 16, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission is amending its 
regulations adopted on an interim basis in Order No. 690, in order to 
make them clearer and to refocus the rules on the areas where there is 
the greatest potential for abuse. The Final Rule is designed to foster 
compliance, facilitate Commission enforcement, and conform the 
Standards of Conduct to the decision of the U.S. Court of Appeals for 
the DC Circuit in National Fuel Gas Supply Corporation v. FERC, 468 F. 
3d 831 (DC Cir. 2006). Specifically, the Final Rule eliminates the 
concept of energy affiliates and eliminates the corporate separation 
approach in favor of the employee functional approach used in Order 
Nos. 497 and 889.

DATES: Effective Date: This rule will become effective November 26, 
2008.

FOR FURTHER INFORMATION CONTACT:
Kathryn Kuhlen, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, 
Kathryn.Kuhlen@FERC.gov, (202) 502-6855.
Jamie A. Jordan, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, 
Jamie.Jordan@FERC.gov (202) 502-6628.

                            Table of Contents

                                                               Paragraph
                                                                Number

I. Introduction.............................................           1
II. Background..............................................           3
III. Discussion.............................................           9
    A. Overall Approach.....................................           9
        1. Commission Proposal..............................           9
        2. Comments.........................................          10
        3. Commission Determination.........................          12
    B. Jurisdiction and Applicability of the Standards......          13
        1. Applicability to Pipelines Operating Under Part            13
         157................................................
        2. Applicability to Pipelines with No Marketing               16
         Affiliate Transactions.............................
        3. Commencement Date................................          24
        4. Waivers from Coverage of the Standards...........          27
    C. Independent Functioning Rule.........................          34
        1. Transmission Functions...........................          37
        2. Transmission Function Employee...................          41
        3. Marketing Functions..............................          50
        4. Marketing Function Employee......................          97
        5. Supervisors, Managers and Corporate Executives...         106
        6. Elimination of Shared Employees Concept..........         122
        7. Long-Range Planning and Procurement..............         134
        8. Exclusion for Permitted Information Exchanges....         152
    D. The No Conduit Rule..................................         187
        1. Commission Proposal..............................         188
        2. Comments.........................................         189
        3. Commission Determination.........................         197
    E. Transparency Rule....................................         204
        1. Waivers and Exercises of Discretion..............         205
        2. Other Posting Requirements.......................         218
    F. Other Definitions....................................         249
        1. Affiliate........................................         250
        2. Transmission.....................................         259
        3. Transmission Customer............................         265
        4. Transmission Function Information................         267
        5. Transmission Provider............................         277
    G. Per Se Violation.....................................         283
        1. Commission Proposal..............................         284
        2. Comments.........................................         285
        3. Commission Determination.........................         291
    H. Training Requirements................................         295
        1. Commission Proposal..............................         295
        2. Comments.........................................         296
        3. Commission Determination.........................         305
    I. Compliance Date......................................         310
    J. Miscellaneous Matters................................         313
        1. Comments.........................................         313
        2. Commission Determination.........................         314
IV. Information Collection Statement........................         318
V. Environmental Analysis...................................         324
VI. Regulatory Flexibility Act..............................         325
VII. Document Availability..................................         326
VIII. Effective Date and Congressional Notification.........         329

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Regulatory Text
Appendix A


Before Commissioners: Joseph T. Kelliher, Chairman; Svedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

I. Introduction

    1. This Final Rule amends the Standards of Conduct for Transmission 
Providers (the Standards of Conduct or the Standards) to make them 
clearer and to refocus the rules on the areas where there is the 
greatest potential for abuse. The Standards have substantially evolved 
over the twenty years since they were first adopted for the gas 
industry in 1988. During that time, the Commission added numerous 
exceptions and additions to the original regulations (and to the 
regulations adopted for the electric industry in 1996), including 
revisions made in Order No. 2004,\1\ in which the Commission combined 
the separate Standards for the gas and electric industry, expanded the 
scope of the Standards to include the new concept of energy affiliates, 
and adopted a corporate separation approach to the relationship of 
transmission providers and their marketing arms. The cumulative effect 
of many of these changes rendered the Standards as a whole difficult 
for regulated entities to apply and for the Commission to enforce. 
Furthermore, on appeal of Order No. 2004, the U.S. Court of Appeals for 
the DC Circuit disapproved of the expansion of the Standards to include 
energy affiliates, and vacated Order No. 2004 as it applied to the gas 
industry.\2\
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    \1\ 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 (2004), order on 
reh'g, Order No. 2004-D, 110 FERC ] 61,320 (2005), vacated and 
remanded as it applies to natural gas pipelines sub nom. Nat'l Fuel 
Gas Supply Corporation v. FERC, 468 F.3d 831 (DC Cir. 2006) 
(National Fuel).
    \2\ National Fuel, 468 F. 3d at 845.
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    2. The reforms adopted in this Final Rule are designed to eliminate 
the elements that have rendered the Standards difficult to enforce and 
apply. They combine the best elements of Order No. 2004 (especially the 
integration of gas and electric Standards, an element not contested in 
National Fuel), with those of the Standards originally adopted for the 
gas industry in Order No. 497 \3\ and for the electric industry in 
Order No. 889.\4\ Specifically, the Final Rule (i) eliminates the 
concept of energy affiliates and (ii) eliminates the corporate 
separation approach in favor of the employee functional approach used 
in Order Nos. 497 and 889. In addition, the reforms adopted here 
conform the Standards to the National Fuel opinion. At bottom, these 
reforms, by making the Standards clearer and by refocusing them on the 
areas where there is the greatest potential for affiliate abuse, will 
make compliance less elusive and subjective for regulated entities, and 
will facilitate enforcement of the Standards by the Commission.
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    \3\ 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 (DC Cir. 1992) (collectively, Order No. 497) 
(Tenneco).
    \4\ 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 
January 1991-June 1996 ] 31,035 (1996); Order No. 889-A, order on 
reh'g, 62 FR 12484 (Mar. 14, 1997), FERC Stats. & Regs., Regulations 
Preambles July 1996--December 2000 ] 31,049 (1997); Order No. 889-B, 
reh'g denied, 62 FR 64715 (Dec. 9, 1997), 81 FERC ] 61,253 (1997) 
(collectively, Order No. 889).
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II. Background

    3. The Commission first adopted Standards of Conduct in 1988, in 
Order No. 497. These initial Standards prohibited interstate natural 
gas pipelines from giving their marketing affiliates or wholesale 
merchant functions undue preferences over non-affiliated customers. 
Citing demonstrated record abuses, the U.S. Court of Appeals for the DC 
Circuit upheld these Standards in 1992.\5\ The Commission adopted 
similar Standards for the electric industry in 1996, in Order No. 889, 
prohibiting public utilities from giving undue preferences to their 
marketing affiliates or wholesale merchant functions. Both the electric 
and gas Standards sought to deter undue preferences by: (i) Separating 
a transmission provider's employees engaged in transmission services 
from those engaged in its marketing services, and (ii) requiring that 
all transmission customers, affiliated and non-affiliated, be treated 
on a non-discriminatory basis.
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    \5\ Tenneco, 969 F. 2d at 1214.
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    4. Changes in both the electric and gas industries, in particular 
the unbundling of sales from transportation in the gas industry and the 
increase in the number of power marketers in the electric industry, led 
the Commission in 2003 to issue Order No. 2004, which broadened the 
Standards to include a new category of affiliate, the energy 
affiliate.\6\ The new Standards were made applicable to both the 
electric and gas industries, and provided that the transmission 
employees of a transmission provider \7\ must function independently 
not only from the company's marketing affiliates but from its energy 
affiliates as well, and that transmission providers may not treat 
either their energy affiliates or their marketing affiliates on a 
preferential basis. Order No. 2004 also imposed requirements to 
publicly post information concerning a transmission provider's energy 
affiliates.
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    \6\ The new Standards defined an Energy Affiliate as an 
affiliate of a transmission provider that (1) engages in or is 
involved in transmission transactions in U.S. energy or transmission 
markets; (2) manages or controls transmission capacity of a 
transmission provider in U.S. energy or transmission markets; (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. 18 CFR 
358.3(d). Certain categories of entities were excluded from this 
definition in following subsections of the regulations.
    \7\ A transmission provider was defined as (1) any public 
utility that owns, operates or controls facilities used for 
transmission of electric energy in interstate commerce; or (2) any 
interstate natural gas pipeline that transports gas for others 
pursuant to subpart A or part 157 or subparts B or G of part 284 of 
the same chapter of the regulations. 18 CFR 358.3(a).
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    5. On appeal by members of the natural gas industry, the U.S. Court 
of Appeals for the DC Circuit overturned the Standards as applicable to 
gas transmission providers, on the grounds that the evidence of energy 
affiliate

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abuse cited by the Commission was not in the record.\8\ The court noted 
that the dissenting Commissioners in Order No. 2004 had expressed 
concern that the Order would diminish industry efficiencies without 
advancing the FERC policy of preventing unduly discriminatory 
behavior.\9\
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    \8\ National Fuel, 468 F. 3d at 841.
    \9\ Id. at 838.
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    6. The Commission issued an Interim Rule on January 9, 2007,\10\ 
which repromulgated the portions of the Standards not challenged in 
National Fuel. The Commission then set about determining how to respond 
to the DC Circuit's order on a permanent basis. On January 18, 2007, 
the Commission issued its initial NOPR,\11\ requesting comment on 
whether the concept of energy affiliates should be retained for the 
electric industry, proposing the creation of two new categories of 
employees denominated as Competitive Solicitation Employees and 
Planning Employees, carrying over the Interim Rule's new definition of 
marketing to cover asset managers, and making numerous other proposals. 
The Commission received thousands of pages of both initial and reply 
comments from some 95 individuals, companies, and organizations.
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    \10\ Standards of Conduct for Transmission Providers, Order No. 
690, 72 FR 2427 (Jan. 19, 2007); FERC Stats. & Regs. ] 31,237 (2007) 
(Interim Rule); clarified by, Standards of Conduct for transmission 
providers, Order No. 690-A, 72 FR 14235 (Mar. 27, 2007); FERC Stats. 
& Regs. ] 31,243 (2007) (Order on Clarification and Rehearing).
    \11\ Standards of Conduct for Transmission Providers, 72 FR 3958 
(Jan. 29, 2007), FERC Stats. & Regs. ] 32,611 (2007) (initial NOPR).
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    7. Consideration of these comments, coupled with the Commission's 
own experience in administering the Standards, persuaded the Commission 
to modify the approach advanced in the initial NOPR. For that reason, 
the Commission issued a new NOPR on March 27, 2008,\12\ and invited 
comment both on its general approach and on its specific provisions. In 
the NOPR, the Commission proposed to return to the approach of 
separating by function transmission personnel from marketing personnel, 
an approach that had been adopted in Order Nos. 497 and 889. The 
Commission also proposed to clarify and streamline the Standards in 
order to enhance compliance and enforcement, and to increase 
transparency in the area of transmission/affiliate interactions that 
would aid in the detection of any undue discrimination. Comments were 
received from 62 companies and organizations, which are listed in 
Appendix A.\13\ The vast majority of the comments were laudatory both 
of the Commission's efforts to simplify and clarify the Standards, and 
of the general approaches taken by the Commission to achieve that goal.
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    \12\ Standards of Conduct for Transmission Providers, 73 Fed. 
Reg. 16,228 (March 27, 2008), FERC Stats. & Regs. ] 32,630 (2008) 
(NOPR).
    \13\ The acronyms used throughout are defined in Appendix A.
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    8. Notwithstanding general agreement with the Commission's overall 
approach, many commenters submitted requests for clarification and 
modifications. In most instances, the modifications proposed were 
advanced with the stated goal either to make the Standards even 
clearer, or to address matters which some entities believed had fallen 
between the cracks in the transition from the existing Standards to a 
more streamlined approach. The Commission has carefully considered 
these comments and agrees that in several areas, modifications to the 
regulatory text are needed. This Final Rule adopts the overall approach 
set forth in the NOPR, but modifies the regulatory text to better 
achieve the goals of clarity and enforceability. It also provides 
clarifications in several areas in order to aid regulated entities in 
applying the Standards.

III. Discussion

A. Overall Approach

1. Commission Proposal
    9. The NOPR proposed to simplify and clarify the Standards, and in 
particular to: (i) Eliminate the concept of energy affiliates, and (ii) 
eliminate the corporate separation approach to separating a 
transmission provider's transmission function employees from its 
marketing function employees, instead returning to the employee 
functional approach utilized in Order Nos. 497 and 889. The NOPR 
pointed out that the corporate separation approach had proven difficult 
to implement, as evidenced by the scores of waiver requests submitted 
to the Commission, and impeded legitimate integrated resource planning 
and competitive solicitations, as reflected in the concerns raised by 
the electric industry in particular and also by state commissions. The 
Commission also found that the existing Standards are too complex to 
facilitate compliance or support enforcement efforts, and have had the 
unintended effect of making it more difficult for transmission 
providers to reasonably manage their businesses.
2. Comments
    10. The vast majority of commenters agreed with the Commission's 
goals of simplifying the Standards in order to achieve greater clarity, 
efficiencies of operation, and ease of compliance. They also applauded 
the proposed return to the employee functional approach, stating that 
it would better promote regulatory certainty than had the corporate 
separation approach.\14\
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    \14\ Most commenters expressly support the change in approach to 
the independent functioning rule from ``corporate separation'' to 
``employee functional,'' including ALCOA; Ameren; AGA; APPA; ATC; 
Arizona PSC; Bonneville; CenterPoint; Chandeleur; California PUC 
(particularly supporting the Commission's efforts to remove 
impediments to integrated resource planning); Destin; Dominion 
Resources; Duke; E.ON; EEI; El Paso; EPSA; Idaho Power; FirstEnergy; 
INGAA; Iroquois; Kinder Morgan; LPPC; MidAmerican; NARUC; National 
Grid; NGSA; New York PSC; Nisource; NCPA; PG&E PSEG; Puget Sound; 
SMUD; Salt River; SCE; Southern Co. Services; Spectra; TAPS; TANC; 
TDU Systems; Vectren; WA UTC; Western Utilities Compliance Group; 
Wisconsin Electric; and Xcel.
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    11. No commenters proposed that the corporate separation approach 
be continued, and no commenters requested continuation of the energy 
affiliate concept. The FTC, however, contended that behavioral rules, 
including the employee functional approach, cannot fully achieve 
independent functioning because such an approach remains vulnerable to 
subtle events of discrimination and preference that may be difficult to 
detect and document.\15\ The FTC and ITC recommend instead that the 
Commission require vertically integrated firms to structurally unbundle 
transmission and place operation of the transmission function in the 
hands of the relevant Regional Transmission Organization (RTO) or 
Independent System Operator (ISO).\16\
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    \15\ FTC at 6-7.
    \16\ FTC at 9-10; ITC Reply at 4-5.
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3. Commission Determination
    12. The overwhelming support from commenters on the NOPR's overall 
approach confirms the Commission's conviction that simplifying and 
clarifying the Standards in the manner proposed will best achieve the 
twin goals of compliance and enforcement. The Commission therefore 
adopts the employee functional approach, as set forth in the regulatory 
text, and eliminates the concept of energy affiliates. Specifics and 
definitions regarding the employee functional approach, as well as 
other matters, are discussed below. With respect to the comments of the 
FTC and ITC, there has been no demonstration that the proposed rules 
are inadequate to address the potential for undue preferences. Nor do 
we believe this proceeding is the proper forum to

[[Page 63799]]

address issues as complex and far-reaching as those raised by the FTC 
and ITC.

B. Jurisdiction and Applicability of the Standards

1. Applicability to Pipelines Operating Under Part 157
a. Commission Proposal
    13. In the NOPR, the Commission carried forward from the existing 
Standards the essence of the language in section 358.1 governing the 
applicability of the Standards to interstate natural gas pipelines. The 
proposed text reads in pertinent part: ``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 
and conducts transmission transactions with an affiliate that engages 
in marketing functions.'' Likewise, the definition of transmission 
provider in proposed section 358.3(k), insofar as it pertains to the 
gas industry, reads as follows: ``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. Comments
    14. Hampshire Gas and Northwest Natural object that the texts of 
proposed sections 358.1(a) and 358.3(k) bring within the ambit of the 
Standards certain gas pipelines that did not fall within the Standards 
as issued under Order No. 497.\17\ They contend that the NOPR's use of 
the word ``or'' instead of ``and'' in proposed section 358.1(a) expands 
the ambit of the regulations to any pipeline that transports gas either 
under subpart A of part 157 or under subpart B or G of part 284. Both 
commenters note that a pipeline operating only under part 157 does not 
have the authority to provide open access transportation, as it may 
only transport for specific authorized shippers, and thus it is not 
possible for a part 157 pipeline to engage in discrimination in favor 
of an affiliate. Hampshire and Northwest Natural urge the Commission to 
change the Standards' applicability to cover only those pipelines that 
operate under both parts 157 and 284.\18\
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    \17\ Hampshire Gas at 6-9; Northwest Natural at 3-7.
    \18\ Id.
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c. Commission Determination
    15. The current Standards, as well as the proposed Standards, 
contain the word ``or'' instead of ``and'' in sections 358.1(a) and 
358.3(k)(2). The fact that the Commission is returning to the employee 
functional approach used in Order No. 497 does not automatically mean, 
however, that it must resurrect all other aspects of Order No. 497. 
Each provision must be considered on a case-by-case basis. The 
Commission has evaluated the comments contending that part 157 
pipelines should not be included in the ambit of section 358.1(a), and 
determines that their position is well-taken. Pipelines operating only 
under part 157 cannot discriminate in favor of an affiliate, because 
such pipelines can only transport for specific shippers authorized by 
their certificates. Put another way, in this Final Rule, we are 
concerned about the relationship between pipelines and their shippers 
where the pipelines are providing transportation service pursuant to 
part 284 blanket certificate authorization and open access rules, which 
give the pipelines the flexibility to discriminate in favor of their 
affiliates because they may commence and terminate service without ex 
ante review by market participants or the Commission. By contrast, the 
very few pipelines that are not part 284 open-access transporters must 
receive shipper-specific certificate authorization from the Commission, 
which must find the service is required by the public convenience and 
necessity under Section 7 of the Natural Gas Act. Accordingly, part 157 
transporters do not have the flexibility that could lead to 
discriminating unduly in favor of their affiliates. The Commission will 
therefore eliminate the reference to part 157, leaving only interstate 
pipelines that transport gas for others pursuant to subparts B or G of 
part 284 subject to the Standards and within the scope of the 
definition of transmission provider. Accordingly, the Standards now 
apply to those pipelines subject to the Commission's open access rules 
under part 284.
2. Applicability to Pipelines With No Marketing Affiliate Transactions
a. Commission Proposal
    16. The NOPR requested comment as to whether the statement of the 
Standards' applicability to interstate pipelines in section 358.1(a) 
should parallel the statement of the Standards' applicability to the 
electric industry set forth in section 358.1(b).\19\ The language in 
question reads: ``and conducts transmission transactions with an 
affiliate that engages in marketing functions.''
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    \19\ NOPR at P 58.
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b. Comments
    17. INGAA asserts that the cited language is essential, because it 
exempts those pipelines with affiliates that have marketing function 
employees, but with which the pipeline conducts only non-transmission 
transactions. INGAA argues that these non-transmission transactions do 
not pose the potential for the types of abuse the rules seek to 
prevent. According to INGAA, the cited language also ensures that the 
proposed Standards operate within the boundaries set forth in National 
Fuel, by not extending coverage to relationships and transactions for 
which the Commission has no record evidence of undue discrimination or 
preference.\20\
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    \20\ INGAA at 9-12.
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    18. NGSA argues that the limitation in the current language implies 
an exemption from the Standards for sales of gas in which the gas is 
not shipped using capacity held or controlled by the seller's 
affiliated transmission provider. NGSA urges the Commission to either: 
(i) Clarify that the No Conduit Rule (and the Standards generally) 
would nonetheless apply to such gas sellers when they share the same 
facilities or trading floor with marketing function employees who are 
not exempt from the Standards, or (ii) require entities that house 
exempt marketing function employees in the same facility as non-exempt 
marketing function employees to provide some physical separation 
between the two groups, to prevent uncontrolled flow of restricted 
information.\21\
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    \21\ NGSA Reply Comments at 12-14.
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    19. While agreeing with INGAA, other commenters would apply the 
conditional language in section 358.1(a) to public utilities as well as 
pipelines, thereby limiting the Standards' application to both public 
utilities and interstate natural gas pipelines that conduct 
transportation transactions with marketing affiliates.\22\
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    \22\ Nisource at 25-28; DCP Midstream at 2; Southwest Gas at 18-
20.
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c. Commission Determination
    20. The Commission agrees with INGAA that there is no evidence in 
the record to suggest that pipelines that do not conduct transmission 
transactions with an affiliate engaged in marketing functions are in a 
position to engage in the type of affiliate abuse to which the 
Standards are directed. Therefore, the Commission will retain the 
language in section 358.1(a) that sets forth this limitation.
    21. The Commission disagrees with NGSA's contention that certain 
sales of gas have, by implication, been made

[[Page 63800]]

exempt. The Commission is not exempting any sales of gas; the Standards 
apply to conduct, not to products. Section 358.1 addresses which 
pipelines and which electric utilities fall within the ambit of the 
Standards. A pipeline may have some marketing affiliates with which it 
conducts transmission transactions, and some with which it does not. A 
pipeline that conducts transmission transactions with a marketing 
affiliate must comply with the Standards, including the No Conduit 
Rule.
    22. If a pipeline has affiliates of both types (some with which it 
conducts transmission transactions and some with which it does not), 
the pipeline must ensure that there is no prohibited communication with 
marketing function employees, in accordance with the requirements of 
the No Conduit Rule. The pipeline can determine how best to ensure 
compliance with the regulation, and we decline to order physical 
separation of employees on a generic basis. We might consider it on a 
case-specific basis, however, in the event the Commission found a 
violation.\23\
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    \23\ C.f., e.g., Southern Co. Serv. Inc., 117 FERC ] 61,021 
(2006).
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    23. The Commission agrees with those commenters that suggest 
parallelism between the electric and gas industries could be achieved 
by also applying to public utilities the limitation applicable to 
pipelines. Because the core abuse to which the Standards are directed 
is that of undue preference in favor of an affiliate (defined to 
include divisions of the transmission provider as well as separate 
corporate entities), a public utility that does not engage in any 
transmission transactions with a marketing affiliate should be excluded 
from the Standards' coverage, just as should a pipeline. Therefore, the 
Commission modifies the language of section 358.1(b) accordingly.
3. Commencement Date
a. Commission Proposal
    24. The Commission proposed in section 358.8(a) that a transmission 
provider must comply with the Standards as of the earlier of the date 
it has a rate on file with the Commission or the date it commences 
transmission transactions.
b. Comments
    25. INGAA and APGA disagree with the commencement date proposed in 
section 358.8(a). INGAA asserts that the Standards should not apply to 
a pipeline unless and until the pipeline engages in transportation 
transactions with a marketing or brokering affiliate. INGAA believes 
that proposed section 358.8(a) is inconsistent with the Standards' 
purpose of preventing preferential treatment and with proposed section 
358.1(a), which applies the Standards only to pipelines conducting 
transmission transactions with an affiliate engaging in marketing 
functions.\24\ Conversely, APGA would have the Standards apply to a 
newly-certificated pipeline as soon as the pipeline begins soliciting 
customers or negotiating contracts, rather than deferring compliance 
until such time as the pipeline commences transportation.\25\
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    \24\ INGAA at 58-61.
    \25\ APGA at 8-10.
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c. Commission Determination
    26. The Commission believes that INGAA's comments on this point are 
well-taken. Under section 358.1, a pipeline that does not conduct 
transmission transactions with an affiliate that engages in marketing 
functions need not comply with the Standards. In this Final Rule, we 
expand that same provision to apply to public utilities as well, as 
discussed above. Therefore, we will modify the effective date upon 
which a transmission provider must be in full compliance with the 
Standards to provide that a transmission provider must comply with the 
Standards on the date it commences transmission transactions with an 
affiliate that engages in marketing functions. See section 358.8(a).
4. Waivers From Coverage of the Standards
a. Commission Proposal
    27. In the NOPR, the Commission did not address the issue of 
whether existing waivers from the Standards should apply to the new 
Standards.
b. Comments
    28. Numerous commenters request that the Commission clarify that 
existing waivers from the application of the current Standards remain 
in effect upon finalization of this rulemaking, to the extent they 
remain relevant.\26\ Questar further requests that exemptions and 
waivers granted under Order No. 2004 be functionally adapted to the 
rules as proposed in the NOPR.\27\
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    \26\ AGA at 26; INGAA at 61-62; New York PSC at 5-6; National 
Grid at 28-29; Northwest Natural at 6-7; Questar at 2; TDU Systems 
at 18; Unitil at 4-5. New York PSC adds that without such 
confirmation, existing sales activities authorized under the 
standing waivers may be disrupted at the expense of the public 
interest. New York PSC at 5. New York PSC offers the example of 
National Fuel Gas Distribution Corporation (NFGD), which it states 
received a waiver to make off-system sales from contract storage 
located on an affiliated pipeline system to marketers who resell 
that gas to NFGD's retail customer under a New York PSC-approved 
retail choice program. New York PSC states that uncertainty 
regarding status of the waiver may compel NFGD to terminate those 
sales. Id. at 5-6.
    \27\ Questar at 2.
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    29. Northwest Natural requests that the Commission broaden existing 
waivers from ``partial'' to ``full'' for pipelines that provide 
transportation for a single affiliated shipper.\28\ Similarly, USG 
believes that pipelines transporting gas only for affiliated shippers 
should be exempted from the rules. It recommends that the Commission 
either amend proposed section 358.1(a) to exclude pipelines that do not 
serve unaffiliated customers, amend the exceptions to the proposed 
definition of ``marketing functions,'' or grant USG and B-R Pipeline a 
waiver.\29\
---------------------------------------------------------------------------

    \28\ Northwest Natural at 7.
    \29\ USG at 10-12.
---------------------------------------------------------------------------

    30. With regards to the Commission's continued willingness to 
consider requests for waivers, Unitil seeks clarification that the 
Commission will continue to consider requests for waivers by entities 
that would have qualified for waivers under the requirements of Order 
Nos. 889, 497, or 2004.\30\ TDU Systems supports the Commission's 
proposal to allow transmission owners who are members of RTOs and ISOs, 
do not operate or control their transmission facilities, and have no 
access to transmission function information, to request waivers from 
the Standards.\31\
---------------------------------------------------------------------------

    \30\ Unitil at 4-5.
    \31\ TDU Systems at 17.
---------------------------------------------------------------------------

c. Commission Determination
    31. The Commission agrees that it would be both burdensome and 
unfair to require entities that have already received waivers from the 
Standards on a case-by-case basis to file their requests again. 
Therefore, existing waivers relating to the Standards shall continue in 
full force and effect.
    32. The determination as to whether a waiver is appropriate for an 
entity that serves only a single, affiliated customer is best made on 
an individual basis. Any entity that believes it is entitled to a 
waiver may apply for one, and any entity that has already received a 
full or partial waiver may continue to rely upon it. This Final Rule is 
not the appropriate vehicle to grant or modify individual waivers for 
specific entities, as requested by Questar and USG. We note, however, 
that many of the waivers previously granted transmission providers may 
be rendered moot by the revisions made here to the Standards.

[[Page 63801]]

    33. The Commission clarifies that nothing in this Final Rule 
precludes an entity from seeking a waiver. Indeed, section 358.1(d) 
specifically so provides. If an entity believes it is entitled to a 
waiver but has not yet applied for one, it is thus free to do so. The 
appropriateness of granting such a waiver will be based on the facts 
and circumstances of the individual case, examined in light of the 
specific provisions and stated principles of the Standards adopted in 
this Final Rule.

C. Independent Functioning Rule

    34. In the NOPR, the Commission proposed to continue the policy, 
established in Order Nos. 497 and 889 and referred to as the 
Independent Functioning Rule, of requiring the transmission function 
employees of a transmission provider to function independently of the 
marketing employees of the transmission provider. However, the NOPR 
proposed eliminating the corporate separation approach to the 
Independent Functioning Rule, which was adopted in Order No. 2004, and 
replacing it with the employee functional approach previously utilized 
in Order Nos. 497 and 889. Under the NOPR proposal, the relevant 
consideration for purposes of applying the Independent Functioning Rule 
is the function performed by the employee himself (or herself). Thus, 
while under the current Standards any employee of a marketing or energy 
affiliate is prohibited from interacting with transmission function 
employees, the proposed Standards restricted the category of employees 
who must function independently from transmission function employees to 
those who actively and personally engage in marketing functions.
    35. To implement this approach, the NOPR proposed definitions of 
certain key terms, the principal two being ``transmission functions'' 
and ``marketing functions.'' The definitions of ``transmission function 
employee,'' ``marketing function employee,'' ``transmission function 
information'' and ``marketing function information'' all keyed off 
these two core definitions.
    36. Commenters generally approved of the NOPR approach, but raised 
certain concerns about the manner of its implementation and about the 
proposed definitions of terms. They also requested clarification on 
various matters. These topics are addressed below.
1. Transmission Functions
a. Commission Proposal
    37. The NOPR proposed to define ``transmission functions'' as 
``transmission system operations and the planning, directing, 
organizing or carrying out of transmission operations, including the 
granting and denying of transmission service requests.'' See proposed 
section 358.3(h).
b. Comments
    38. ALCOA requests clarification that the word ``planning'' in the 
definition of transmission function applies only to planning associated 
with transmission operations. ALCOA proposes that the Commission refine 
the term ``planning,'' as used in this definition, so that it is 
limited to current, near-term and real-time operations, and requests 
that the Commission exclude long-range system planning.\32\
---------------------------------------------------------------------------

    \32\ ALCOA at 4.
---------------------------------------------------------------------------

    39. In asserting that the proposed definition of transmission 
functions is ambiguous, National Grid urges the Commission to adopt a 
more precise definition of ``transmission function'' that encompasses 
those activities that directly affect open access, i.e., real-time 
control of the transmission system; planning of electric transmission 
facilities or expansions; and the receipt, processing and granting of 
transmission service requests.\33\ For other functions that could 
reasonably be interpreted to relate to transmission, National Grid 
posits, the No-Conduit Rule will prevent abuses.\34\ Furthermore, 
National Grid requests clarification of the scope of the phrases 
``operations,'' ``transmission system operations,'' and ``transmission 
operations.'' \35\
---------------------------------------------------------------------------

    \33\ National Grid would exclude the planning of gas 
transmission from the scope of the definition because pipeline open 
seasons allow all interested parties to seek capacity in gas 
expansion projects; it states that such conversations therefore do 
not create concerns about preferential sharing of information. 
Alternatively, it suggests that the definition of transmission 
function could expressly exempt natural gas transmission planning 
discussions that involve projects subject to an open season. 
National Grid at 9-10.
    \34\ National Grid at 7-11.
    \35\ Id. at 9.
---------------------------------------------------------------------------

c. Commission Determination
    40. The proposed NOPR definition of ``transmission functions'' 
carries over the principal concepts contained in the existing 
definition of ``transmission function employee'' (there is no 
definition of the term ``transmission functions'' in the existing 
Standards). We agree, however, that additional language may be needed 
to clarify that the Commission intends the definition to apply to day-
to-day operations, not long-range planning. Therefore, we will modify 
the definition in section 383.3(h) to read: ``the planning, directing, 
organizing or carrying out of day-to-day transmission operations, 
including the granting and denying of transmission service requests.'' 
This modification focuses the definition on those areas most 
susceptible to affiliate abuse. Furthermore, information about long-
range activities, such as planned transmission lines, are likely 
already to be in the public sphere.\36\ The definition we adopt in this 
Final Rule is directed at short-term real time operations, including 
those decisions made in advance of real time but directed at real time 
operations. To the extent the Commission's prior cases and No Action 
Letters are in accord with this principle, they may be consulted for 
guidance as to individual activities in question.
---------------------------------------------------------------------------

    \36\ Issues relating to long-range planning are governed by 
other Commission actions, such as in Order No. 890 for electric 
utilities and in the long-standing policies regarding open seasons 
subject to certificate policies for gas pipelines. See, e.g., Gulf 
Crossing Pipeline Co., LLC, 123 FERC ] 61,100 at P 105 (2008).
---------------------------------------------------------------------------

2. Transmission Function Employee
a. Commission Proposal
    41. In the NOPR, the Commission proposed to define transmission 
function employee as: ``an employee, contractor, consultant or agent of 
a transmission provider who actively and personally engages in 
transmission functions.'' See proposed section 358.3(i).
b. Comments
    42. Many commenters disagreed with the proposed classification of 
field, maintenance, and construction employees as ``transmission 
function employees'' \37\ for a variety of reasons, including the fact 
that field employees do not actively and personally engage in system 
operations \38\ and do not have access to transmission information.\39\ 
Similarly, MidAmerican requests that the definition of transmission 
function employee expressly exclude the following categories: Engineers 
who plan, design and oversee construction of transmission facilities; 
construction workers who build transmission facilities; engineers who 
make engineering decisions regarding the operation and maintenance of 
transmission facilities; engineers who determine whether transmission

[[Page 63802]]

requests can be accommodated by the existing transmission system; 
utility line workers who operate, repair and maintain transmission 
facilities according to orders; and clerical staff and mapping 
personnel who draw plans for and process communications about 
transmission facilities.\40\
---------------------------------------------------------------------------

    \37\ ATC at 18; Dominion Resources at 14; EEI at 54; Puget Sound 
at 7-8; INGAA; Nisource; Southern Co. Services at 24-25.
    \38\ Southern Co. Services at 25.
    \39\ Puget Sound at 8.
    \40\ MidAmerican at 11-12.
---------------------------------------------------------------------------

    43. To mirror the language in the preamble of the NOPR, Bonneville 
suggests that a transmission or marketing function employee be one who 
actively and personally engages in ``more than a de minimis amount of'' 
transmission or marketing functions.\41\ In addition, E.ON seeks more 
clarity on the scope of the de minimis exception proposed in the 
preamble, so as to avoid contrasting interpretations by transmission 
providers.\42\
---------------------------------------------------------------------------

    \41\ Bonneville at 4-5. See also AGA at 18.
    \42\ E.ON at 12-13.
---------------------------------------------------------------------------

    44. Wisconsin Electric is unclear as to whether the standards 
applicable to transmission function employees also apply to employees 
engaged in certain reliability functions. More specifically, Wisconsin 
Electric requests clarification that balancing authority employees are 
not transmission function employees or agents under the proposed 
rules.\43\
---------------------------------------------------------------------------

    \43\ Wisconsin Electric at 6.
---------------------------------------------------------------------------

    45. Commenters also raised concerns regarding the use of the phrase 
``actively and personally engages.'' EEI requests that the Commission 
clarify that an employee is not ``actively and personally engaged'' in 
transmission or marketing functions so long as the employee is not 
engaged in such activities on a day-to-day basis. Furthermore, EEI 
believes that precedent under Order No. 889 regarding the ``day to day 
activities'' standard should continue to apply, except for certain 
precedent that undermined the ``day-to-day'' standard as it applied to 
officers.\44\ Idaho Power requests that the Commission explain any 
difference between the term ``actively and personally engages in'' and 
the ``directing, organizing, or executing'' classification standard of 
Order No. 889.\45\
---------------------------------------------------------------------------

    \44\ EEI at 5-6, 11-12; Entergy at 2-3.
    \45\ Idaho Power at 6-7.
---------------------------------------------------------------------------

c. Commission Determination
    46. The Commission agrees that field, maintenance and construction 
workers, as well as engineers and clerical workers, are not normally 
involved in the day-to-day operations of the transmission system. 
Therefore, they would not fall within the scope of the definition of 
transmission function employee, unless in addition to functioning in 
their stated capacity they also engaged in the day-to-day operation of 
the transmission system.
    47. The Commission declines to add a further exclusion in the 
regulatory text for de minimis involvement. As discussed in the section 
on officers, directors and supervisors, the Commission has determined 
to add the phrase ``day-to-day'' to further clarify the scope of 
activity covered by the definition. This addition should capture the 
concerns of the commenters who requested inclusion of the phrase de 
minimis. However, as noted in the preamble of the NOPR, if a non-
transmission function employee were pressed into service on an isolated 
occasion to perform a transmission function, perhaps under emergency 
conditions, such de minimis involvement would not convert him into a 
transmission function employee. The remote possibility that such a 
scenario would occur does not warrant adding exclusion language to the 
text, which would unduly elevate the exclusion and raise more questions 
than it answers.
    48. Similarly, the question of whether balancing authority 
personnel are included in the definition of transmission function 
employees depends on the circumstances. If the transmission provider 
also serves as a balancing authority, and an employee's duties 
encompass both transmission provider and balancing authority 
activities, such an employee would be a transmission function employee 
(provided his or her duties are encompassed by the definition of 
transmission function employee). If, however, the two functions are 
separate, and the employee performs no duties outside of those specific 
to a balancing authority employee, he or she would not be considered a 
transmission function employee.
    49. The phrase ``actively and personally'' applies to marketing 
function employees as well as transmission function employees, and its 
application arises most notably with respect to supervisory personnel. 
The comments relating to that phrase, and the Commission's 
determination with respect to it, are set forth below in the section 
entitled Supervisors, Managers and Corporate Executives.

3. Marketing Functions

a. Commission Proposal
    50. The NOPR proposed defining marketing functions as ``the sale 
for resale in interstate commerce, or the submission of offers or bids 
to buy or sell natural gas or electric energy or capacity, demand 
response, virtual electric or gas supply or demand, or financial 
transmission rights in interstate commerce,'' subject to the following 
``exemptions'':
    (1) Bundled retail sales, including sales of electric energy made 
by providers of last resort (POLRs),
    (2) Incidental purchases or sales of natural gas to operate 
interstate natural gas pipeline transmission facilities,
    (3) Sales of natural gas solely from the transmission provider's 
own production,
    (4) Sales of natural gas solely from the transmission provider's 
own gathering or processing facilities, and
    (5) Sales by an intrastate natural gas pipeline or local 
distribution company making an on-system sale.
b. Comments
    51. Several commenters recommend that the Commission consider the 
differences between the electric and gas industries and adopt separate 
definitions of the term marketing functions for each of the 
industries.\46\
---------------------------------------------------------------------------

    \46\ INGAA at 14; NGSA at 10-11; Nisource at 10; AGA at 11-13; 
Williston at 3.
---------------------------------------------------------------------------

i. Electric Industry
    52. Commenters from the electric industry raised concerns about the 
inclusion of ``bids to buy'' in the definition of marketing functions, 
and the effects of such inclusion on planning activities. Commenters 
also sought clarification and modification as to various individual 
components of the definition, and identified a number of issues 
regarding the bundled retail sales exemption and the inclusion of POLRs 
in that exemption.
(a) Bids to Buy and Other Terms Listed in the Definition
    53. Dominion Resources believes that the definition, as it applies 
to the electric industry, should be limited to sales for resale or 
purchases for resale of electricity in interstate commerce,\47\ while 
NiSource proposes limiting the definition to wholesale sales of 
electricity.\48\ On the other hand, TAPS believes that the definition 
of marketing functions is too narrow, in that it only covers purchases 
that involve the ``submission of offers or bids to buy or sell.'' It 
argues that the definition of marketing functions should include 
purchases, as well as sales, for resale of energy, in order to ensure 
that all transmission provider activities in wholesale markets, 
including the purchase of electric energy, capacity,

[[Page 63803]]

and physical and financial transmission rights and other energy related 
products for bundled retail load, are covered by the Standards. TAPS 
requests that the proposed definition be modified to include purchases, 
regardless of whether they are accomplished through the submission of a 
bid or offer.\49\
---------------------------------------------------------------------------

    \47\ Dominion Resources at 11-13.
    \48\ NiSource at 10.
    \49\ TAPS at 11-14.
---------------------------------------------------------------------------

    54. Some commenters requested clarification of various terms used 
in the definition of marketing functions. First, commenters ask the 
Commission to clarify that the scope of the term ``demand response'' is 
limited to the bidding or supply of demand response in a FERC 
jurisdictional context, and does not cover the development of a retail 
customer demand response program or a balancing authority's dispatch of 
demand response for reliability.\50\ Dominion Resources requests that 
the definition exclude regulated utilities demand/load response 
programs in their regulated service territories, as being part of their 
integrated resource planning.\51\
---------------------------------------------------------------------------

    \50\ Arizona PSC at 6; EEI at 48; SCE at 8-9; Western Utilities 
at 10.
    \51\ Dominion Resources at 12-13.
---------------------------------------------------------------------------

    55. Second, commenters request clarification of the term 
``capacity'' as used in the marketing functions definition. Dominion 
Resources and EEI request that the term refer to generation and not 
transmission capacity.\52\ Some commenters seek further clarifications 
on other terms used in the definition of marketing functions. Dominion 
Resources and MidAmerican request that the Commission confirm that 
certain terms carry the same meaning in the Standards as they do in 
Commission-administered organized markets, or, alternatively, that the 
terms should be interpreted in a manner that limits the definition to 
activities that occur in interstate commerce. These terms include: (i) 
``Virtual electric or gas supply or demand;'' (ii) ``financial 
transmission rights;'' (iii) ``offer'' or ``bid;'' (iv) ``demand 
response;'' and (v) ``bundled retail sales.'' \53\ Similarly, NiSource 
requests that the definition of marketing functions, as it applies to 
the natural gas industry, should exclude the terms demand response, 
virtual bids, and allocations of financial transmission rights.\54\
---------------------------------------------------------------------------

    \52\ Id. at 12; EEI at 49.
    \53\ Dominion Resources at 12; MidAmerican at 9-10.
    \54\ NiSource at 10-11.
---------------------------------------------------------------------------

    56. APPA and TAPS are concerned that the definition of marketing 
functions, although it includes financial transmission rights, excludes 
resale of a public utility transmission provider's physical electric 
system transmission rights. These commenters believe that the omission 
allows transmission provider employees engaging in such transmission 
activities to communicate with other personnel on a preferential basis 
regarding the availability of new firm transmission rights.\55\ TAPS 
further asserts that the definition should include transmission 
reservations and scheduling of transmission.\56\
---------------------------------------------------------------------------

    \55\ APPA at 6-9; TAPS at 28-31.
    \56\ TAPS at 30.
---------------------------------------------------------------------------

(b) Exclusions
    57. Commenters express varying opinions on the proposed exclusion 
in section 358.3(c)(1) for ``bundled retail sales, including sales of 
electric energy made by providers of last resort (POLRs).'' National 
Grid and EEI generally supported the exemption.\57\ National Grid 
recommends, however, that the proposed exemption be revised to read 
``bundled retail sales or retail sales of electric energy made by 
providers of last resort,'' rather than treating POLR sales as a subset 
of bundled retail sales.\58\ Ameren believes that the POLR exclusion 
should apply to all procurement or sale of energy by a POLR in support 
of its POLR function, and urges the Commission to clarify that 
incidental sales or purchases of energy by a POLR that benefit POLR 
customers who are required to meet reliability or RTO requirements are 
not activities within the scope of marketing functions, even if made on 
an unbundled basis.\59\
---------------------------------------------------------------------------

    \57\ National Grid at 12-13; EEI at 34.
    \58\ National Grid at 12-13.
    \59\ Ameren at 22-24.
---------------------------------------------------------------------------

    58. On the other hand, EPSA and TAPS both oppose a blanket 
exemption for POLRs.\60\ TAPS asserts that the Commission has denied 
waivers to some affiliated POLRs in the past, and the waivers it has 
granted have been fact-specific.\61\ TAPS likewise opposes a blanket 
exclusion for all bundled retail sales,\62\ suggesting it be limited to 
cases in which the retail marketing function has been separated from 
the wholesale marketing function,\63\ and EPSA would eliminate an 
exclusion both for POLRs and for all bundled retail sales insofar as 
the exclusion would apply to utilities engaged in both bundled retail 
sales and wholesale sales.\64\ TAPS requests that the Commission 
clarify that the bundled retail sales exemption does not extend to 
activities of the transmission provider's merchant function.\65\
---------------------------------------------------------------------------

    \60\ EPSA at 6-8; TAPS at 26-28.
    \61\ TAPS at 26-27.
    \62\ Id. at 15-25.
    \63\ Id.
    \64\ EPSA at 7-8.
    \65\ TAPS at 25-26.
---------------------------------------------------------------------------

    59. Many commenters request clarifications on the scope of the 
bundled retail sales exclusion. EEI requests that the Commission 
confirm that the exclusion covers purchases in support of retail sales 
only as long as the resale of excess purchased power is made by 
separate employees.\66\ WA UTC urges the Commission to include in the 
exclusion the incidental wholesale power purchases and sales a utility 
serving bundled retail load must make to balance its variable output 
resources with variations in its actual bundled retail loads.\67\
---------------------------------------------------------------------------

    \66\ EEI at 34.
    \67\ WA UTC at 8-10.
---------------------------------------------------------------------------

    60. Several commenters sought additional exclusions from the 
marketing functions definition as it applies to the electric industry. 
California PUC recommends that the Commission exclude from the 
marketing functions definition utility employees engaged in state-
regulated activities, such as engaging in purchases necessary to serve 
bundled retail load or to meet the requirements of state-mandated 
programs, because these activities are overseen by state 
regulators.\68\ MidAmerican asks the Commission to clarify that all 
planning personnel, whether or not engaged in state-mandated integrated 
resource planning, be excluded from the definition of marketing 
functions.\69\
---------------------------------------------------------------------------

    \68\ California PUC at 10. California PUC also asks the 
Commission not to exempt any interactions between a utility's 
transmission function employees and the employees of a utility's 
unregulated affiliates, on the grounds that state regulators do not 
oversee the activities of a utility's unregulated affiliates. Id.
    \69\ MidAmerican at 8-9.
---------------------------------------------------------------------------

    61. LPPC requests that the definition of marketing functions 
expressly exclude electricity exchanges, arguing they are often 
necessary to accomplish a transmission transaction, such as when access 
to renewable sources of power requires crossing multiple systems.\70\
---------------------------------------------------------------------------

    \70\ LPPC at 15-16.
---------------------------------------------------------------------------

ii. Natural Gas Industry
    62. Commenters from the natural gas industry raised concerns about 
the inclusion of ``bids to buy'' in the definition of marketing 
functions, as had commenters from the electric industry. They also seek 
modifications of existing exclusions and the addition of new 
exclusions, and request clarification as to whether various activities 
that arise in the gas industry are encompassed by the definition.

[[Page 63804]]

(a) Bids To Buy and Other Terms Listed in the Definition
    63. Many commenters believe that purchases should be excluded from 
the definition of marketing functions as it applies to the natural gas 
industry, arguing that their inclusion would extend the Standards 
beyond the limits set by National Fuel.\71\ Southwest Gas requests that 
the Commission clarify that the definition of marketing functions 
covers only the sale of gas in interstate commerce,\72\ and AGA and 
Dominion Resources request that marketing functions be defined in terms 
of natural gas sales for resale in interstate commerce.\73\ AGA and 
Southwest Gas believe this approach appropriately excludes natural gas 
hedging activities.\74\ NGSA, rather than deleting purchases from the 
definition itself, requests that purchase be included in the exclusions 
to the definition in proposed sections 358.3(c)(3-5).\75\
---------------------------------------------------------------------------

    \71\ Salt River at 7-9; INGAA at 14; Nisource at 10.
    \72\ Southwest Gas at 5-9.
    \73\ AGA at 12-13; Dominion Resources at 7-8.
    \74\ AGA at 12-13; Southwest Gas at 14-15. Southwest Gas further 
requests confirmation that the proposed definition reflect its view 
that financial transactions designed to hedge price risk associated 
with on-system retail sales are an important tool for an LDC's 
provision of economical retail sales service, citing to Order No. 
2004-C. Id.
    \75\ NGSA at 13.
---------------------------------------------------------------------------

    64. Several commenters believe that the phrase ``natural gas or 
electric energy or capacity'' is ambiguous as to whether it encompasses 
natural gas capacity, which they argue should not be included in the 
definition.\76\ NGSA believes that an extension of the concept to 
natural gas is not supported and is unnecessary due to the extensive 
regulations governing pipeline capacity marketing.\77\ Southwest Gas 
requests that, if the Commission intends to include pipeline capacity 
in the definition, it amend proposed section 358.3(c)(5) to expressly 
exempt a purchase or release of interstate pipeline capacity by a local 
distribution company (LDC).\78\
---------------------------------------------------------------------------

    \76\ National Grid at 11-12; NGSA at 9-11; Williston at 13-14; 
Southwest Gas at 16-17.
    \77\ NGSA at 11-13.
    \78\ Southwest Gas at 16-17.
---------------------------------------------------------------------------

(b) Exclusions
    65. With respect to the exclusion for bundled retail sales, New 
York PSC requests that the Commission add to the exclusion the 
purchasing of natural gas to make such sales.\79\
---------------------------------------------------------------------------

    \79\ New York PSC at 3.
---------------------------------------------------------------------------

    66. With respect to the exclusions for sales of gas from one's own 
production or from one's own gathering or processing facilities, some 
commenters assert that these exclusions have been narrowed from the 
prior Standards without explanation. First, commenters observe that 
proposed sections 358.3(c)(3) and (c)(4) exclude sales of natural gas 
from a transmission provider's own production, gathering or processing 
facilities, whereas the prior Standards extended the exclusion to also 
include sales of natural gas from gathering and processing facilities 
that are owned by the transmission provider's affiliate.\80\ INGAA 
finds no reason to distinguish between a transmission provider's 
directly and indirectly owned gathering and processing facilities. 
INGAA and others request that these proposed exclusions be modified to 
encompass sales and purchases of gas from the production, gathering or 
processing facilities owned by either a transmission provider or its 
affiliate.\81\
---------------------------------------------------------------------------

    \80\ INGAA at 15; NGSA at 14-15; Williston at 14-15.
    \81\ Id.
---------------------------------------------------------------------------

    67. Calypso urges the Commission either to clarify that the term 
``transmission provider's own production'' encompasses a transmission 
provider's foreign-sourced natural gas, or that the Commission extend 
the exclusion to cover such gas.\82\
---------------------------------------------------------------------------

    \82\ Calypso at 2-4.
---------------------------------------------------------------------------

    68. With respect to the exclusion for sales by an intrastate 
natural gas pipeline or LDC making an on-system sale, some commenters 
would expand the exclusion to cover sales by LDCs that are off-system 
but entered into with non-affiliated pipelines,\83\ to exclude 
intrastate and Hinshaw pipelines that must buy enough gas to meet 
predicted peak loads and sometimes must make off-system sales when 
circumstances create surpluses,\84\ and to exclude 7(f) companies, 
arguing the Commission recognized in Order No. 2004 that there is no 
reason to treat 7(f) companies differently than LDCs with respect to 
this exclusion.\85\ Alternatively, to the extent the Commission 
believes exclusion of additional sales would create a potential area of 
abuse, INGAA recommends that the transactions be evaluated on a case-
by-case basis.\86\ On the other hand, AGA disapproves of the proposed 
exclusion, because it believes it creates potential for abuse and is 
inconsistent with the NGA's prohibition against undue 
discrimination.\87\ Southwest Gas believes that Hinshaw pipelines 
should be excluded from the Standards altogether, arguing that doing so 
would be consistent with Order No. 497 and the Commission's treatment 
of Hinshaw pipelines as LDCs under the NGPA.\88\
---------------------------------------------------------------------------

    \83\ INGAA at 18-19; SCANA at 3-4; AGA at 14-15; National Grid 
at 13-14; New York PSC at 3-4; Northwest Natural at 7-8; Dominion 
Resources at 8; Duke at 8-9; Southwest Gas at 12-13.
    \84\ INGAA at 18-19; SCANA at 3-4.
    \85\ Southwest Gas at 18.
    \86\ INGAA at 20.
    \87\ AGA at 5-8.
    \88\ Southwest Gas at 17-18.
---------------------------------------------------------------------------

    69. INGAA and Unitil also object that certain sales by LDCs, 
intrastate pipelines and other shippers necessary to maintain balances 
are captured in the proposed definition of marketing functions, and 
argue that Order No. 2004 excluded these sales as operational through 
the concept of energy affiliates. INGAA believes the Commission should 
restore this exclusion.\89\ Unitil argues further that Order No. 2004-A 
excluded from the Standards de minimis off-system sales related to an 
LDC's balancing requirements.\90\
---------------------------------------------------------------------------

    \89\ INGAA at 16-17.
    \90\ Until at 6-7.
---------------------------------------------------------------------------

    70. Questar requests that exchanges of gas for the purpose of 
reducing transmission costs be excluded from the definition of 
marketing functions.\91\
---------------------------------------------------------------------------

    \91\ Questar at 4-5.
---------------------------------------------------------------------------

    71. Commenters contend that, as proposed, the Standards may be read 
to cover a natural gas pipeline's relationship with its electric 
marketing affiliates or employees, or with its other employees who are 
not making sales of natural gas.\92\ As remedies, MidAmerican proposes 
to exclude the activities of an LDC, including those affiliated with an 
electric transmission provider,\93\ and TDU Systems proposes to remove 
from the definition of marketing functions the purchase or sale of 
natural gas by an electric transmission provider.\94\
---------------------------------------------------------------------------

    \92\ INGAA at 14; MidAmerican at 16-18; TDU Systems at 14-15.
    \93\ MidAmerican at 16-18.
    \94\ TDU Systems at 14-15.
---------------------------------------------------------------------------

(c) Clarifications
    72. Several commenters raise concerns that, as proposed, the NOPR 
would apply the Standards to a pipeline's relationship with affiliates 
that do not hold capacity on the affiliate pipeline.\95\ These 
commenters request that the Commission clarify that the Standards apply 
only to the relationship between the pipeline and affiliates that hold 
or control capacity on the affiliate pipeline.
---------------------------------------------------------------------------

    \95\ INGAA at 17-18; USG at 7-10; Spectra at 5-7; PSEG at 10-11; 
AGA at 14-16.
---------------------------------------------------------------------------

    73. Spectra asks the Commission to clarify that the definition of 
marketing functions excludes affiliated foreign pipelines that either 
do not participate

[[Page 63805]]

in the U.S. energy markets or that are interconnected with U.S. 
pipelines, but are subject to a foreign country's regulation, stating 
that the current Standards exclude them from the definition of energy 
affiliate.\96\
---------------------------------------------------------------------------

    \96\ Spectra at 7-8.
---------------------------------------------------------------------------

    74. SCANA requests clarification that if an LDC sells gas to an 
asset manager in connection with establishing an asset management 
arrangement for its off-system sales, the LDC is not engaging in a 
marketing function or compromising its supposed status as an entity 
exempt from the Standards.\97\
---------------------------------------------------------------------------

    \97\ SCANA at 3-6.
---------------------------------------------------------------------------

c. Commission Determination
    75. The definition of ``marketing functions'' was designed to 
encompass both the electric and gas industries, as do the Standards as 
a whole. The list of activities in proposed section 358.3(c) therefore 
listed concepts that are not only applicable to both industries, but 
also concepts applicable to one or the other. For instance, virtual 
bidding is currently limited to the electric industry, as are financial 
transmission rights. The many requests for clarification by commenters, 
however, suggest this combined definition is confusing, exacerbated by 
the fact that some concepts have different meanings in the two 
industries, such as the word ``capacity.'' Therefore, in order to avoid 
any further confusion regarding such matters, the Commission agrees 
with those commenters who request separate definitions for the electric 
and gas industries, and modifies the regulatory text at section 
358.3(c) to so provide. We also clarify several of the terms used in 
the definitions, as requested by commenters, and discuss separately 
below other issues pertaining to the electric or gas industries.
i. Electric Industry
    76. Besides modifying section 358.3(c) to provide a separate 
definition of marketing functions for public utilities and their 
affiliates, the Commission revises the definition to read as follows: 
``the sale for resale in interstate commerce, or the submission of 
offers to sell in interstate commerce, of electric energy or capacity, 
demand response, virtual transactions, or financial or physical 
transmission rights, all as subject to an exclusion for bundled retail 
sales, including sales of electric energy made by providers of last 
resort (POLRs) acting in their POLR capacity.'' See section 
358.3(c)(1).
(a) Bids To Buy and Other Terms Listed in the Definition
    77. Importantly, in addition to separating electric from gas, this 
definition removes ``bids to buy'' from the category of marketing 
functions. Many commenters requested this exclusion, for reasons that 
include the jurisdictional reach of the Commission and National Fuel 
concerns. The Commission agrees that restricting the definition of 
marketing functions to include only sales, rather than purchases, more 
closely matches the statutory prohibitions against undue 
preferences.\98\ Furthermore, the removal of purchases from the 
definition of marketing functions frees companies to conduct the 
informational exchanges necessary to engage in integrated resource 
planning,\99\ and eliminates the difficulties which might otherwise be 
experienced by executive personnel who have overall procurement 
responsibilities that include both transmission and marketing. At the 
same time, it preserves protection against affiliate abuse, as it is 
those employees who are making wholesale sales of electricity, not 
purchases, who can improperly benefit from transmission function 
information obtained from the affiliated transmission provider. (The 
issue of long-range planning is discussed more fully below in the 
section entitled Long-Range Planning and Procurement.) It also 
addresses the concern of California PUC that purchases of power to 
serve bundled retail load or to meet the requirements of state-mandated 
programs should not be considered marketing functions.
---------------------------------------------------------------------------

    \98\ Statutory coverage encompasses any transmission or sale of 
electric energy subject to the Commission's jurisdiction, and any 
transportation or sale of natural gas subject to the Commission's 
jurisdiction; sales subject to the Commission's jurisdiction being 
sales for resale in interstate commerce. Sections 205 and 206 of the 
Federal Power Act (FPA), 16 U.S.C. 824d-824e (2000), Sections 4 and 
5 of the Natural Gas Act (NGA), 15 U.S.C. 717c-717d (2000).
    \99\ Many commenters requested that long-range planning be 
excluded from the scope of the Standards. Comments on this topic are 
set forth below in the section entitled Long-Range Planning and 
Procurement.
---------------------------------------------------------------------------

    78. The Commission also clarifies what is meant by certain of the 
categories listed within the definition of marketing functions, or that 
are subsumed in the categories listed. The Commission clarifies that 
inclusion of the term ``demand response'' in this definition is not 
intended to interfere with demand response programs that a load-serving 
entity (LSE) has established for its customers.\100\ Confusion over the 
terms ``capacity,'' ``virtual'' and ``financial transmission rights'' 
are eliminated by restricting their application to the electric 
industry. The Commission also agrees with APPA and TAPS that inasmuch 
as physical as well as financial transmission rights may be sold by 
marketing function employees, physical transmission rights should be 
added to the definition of marketing functions, and so modifies the 
regulatory text. Ancillary services, when referring to sales for resale 
as opposed to an integrated public utility's actions in calling on its 
own generation or demand response resources for ancillary services 
purposes, are included within the definition of marketing functions as 
sales for resale either of generation or demand response. For example, 
a number of RTOs and ISOs have established or are in the process of 
establishing ancillary services markets, and sales into these markets 
would fall within the definition of marketing functions.\101\
---------------------------------------------------------------------------

    \100\ If concerns remain despite this clarification, interested 
persons may present them to the Commission on a case-by-case basis.
    \101\ See, e.g., Midwest Independent Transmission System 
Operator, Inc., 122 FERC ] 61,172 (2008), reh'g granted in part and 
denied in part and clarification granted, 123 FERC ] 61,297 (2008); 
New England Power Pool, 115 FERC ] 61,175 (2006), reh'g denied, 117 
FERC ] 61,106 (2006); Atlantic City Electric Company, 86 FERC ] 
61,248 (1999), clarification granted, 86 FERC ] 61,310 (1999).
---------------------------------------------------------------------------

    79. We decline to grant APPA's and TAPS's further request that we 
add to the definition of marketing functions both the making of 
transmission reservations and the scheduling of transmission. These 
activities are beyond the scope of electric energy sales. However, we 
note that marketing function employees making sales of energy will need 
to schedule transmission for such sales (at least outside of organized 
electric energy markets), and thus those individuals will most likely 
already fall within the definition of marketing function employees and 
within the scope of the Independent Functioning Rule.
(b) Exclusions
    80. Some commenters objected to the proposed inclusion of POLRs in 
the exclusion for bundled retail sales, while others suggested the 
exclusion should be broader and encompass all procurement or sales by a 
POLR in support of its POLR function. As the Commission explained in 
the NOPR, actual instances of abuse in this regard have not been 
presented, even though entities have been granted waivers to exempt 
their POLR activities from the

[[Page 63806]]

Standards.\102\ Inasmuch as entities acting as POLRs are providing 
bundled retail service, it is appropriate to include POLR sales in the 
definition of bundled retail sales. However, we decline to extend the 
exclusion to cover all procurement or sale of energy by a POLR in 
support of its POLR function, as requested by Ameren. POLRs should not 
have special exclusions not shared by other providers of bundled retail 
service. (However, we note that insofar as Ameren is concerned about 
procurement of energy for POLR purposes, that concern is mooted by our 
removal of purchases from the definition of marketing functions.) We 
also decline Ameren's request to exclude incidental sales of energy by 
a POLR. Public utilities serving retail load often make off-system 
wholesale sales, which are not covered by the exclusions for bundled 
retail sales and which are susceptible to affiliate abuse. Likewise, 
off-system wholesale sales made by POLRs should not be excluded. 
Furthermore, activities made by a POLR that is not acting within its 
POLR capacity are not covered by the exclusion.
---------------------------------------------------------------------------

    \102\ See High Island Offshore System, L.L.C., 116 FERC ] 61,047 
(2006); Cinergy Services Inc., 111 FERC ] 61,512 (2005); Exelon 
Corp., 123 FERC ] 61,167 (2008).
---------------------------------------------------------------------------

    81. We also decline to extend the exclusion for bundled retail 
sales to include incidental off-system sales by a utility serving 
bundled retail load, as requested by WA UTC. Once the utility is making 
wholesale sales off-system, it is no longer serving retail load but 
engaging in marketing transactions, and should be treated no 
differently than other marketers making wholesale sales. Otherwise, a 
utility could purchase quantities of power excess to its needs and then 
sell the power off-system, free of the restrictions pertaining to 
marketing function employees that are imposed by the Standards.
    82. The Commission also declines to grant LPPC's request that 
exchanges of electricity designed to work around scarce transmission 
should be excluded from the definition of marketing functions. It is 
not always obvious whether such exchanges should be classified as 
transmission or as the purchase and sale of generation. The 
determination of that question often turns on the specifics of the 
transactions in question,\103\ making a blanket exclusion 
inappropriate. An entity seeking guidance for its individual situation 
may file for a waiver or pursue other means of resolution, such as a No 
Action Letter or a General Counsel opinion letter.\104\ Further, as 
noted with respect to Ameren's request regarding POLR purchases and 
sales, to the extent such exchanges involve purchases, those purchases 
are not included in the definition of marketing functions which we 
adopt in this Final Rule.
---------------------------------------------------------------------------

    \103\ See, e.g., Utah Assoc. Mun. Power Sys., 83 FERC ] 61,337 
(1998); El Paso Elec. Co., 115 FERC ] 61,312 (2006).
    \104\ A comprehensive discussion of the various sources of 
guidance available from the Commission and its staff is set forth in 
our recent Interpretative Order Modifying No-Action Letter Process 
and Reviewing Other Mechanisms for Obtaining Guidance. See Obtaining 
Guidance on Regulatory Requirements, 123 FERC ] 61,157 (2008).
---------------------------------------------------------------------------

ii. Natural Gas Industry
    83. In accordance with our determination to provide separate 
definitions for the electric and gas industries, the Commission adopts 
the following definition of marketing functions for pipelines and their 
affiliates: ``the sale for resale in interstate commerce, or the 
submission of offers to sell in interstate commerce, of natural gas, 
subject to the following exclusions: (i) Bundled retail sales, (ii) 
Incidental purchases or sales of natural gas to operate interstate 
natural gas pipeline transmission facilities, (iii) Sales of natural 
gas solely from a seller's own production, (iv) Sales of natural gas 
solely from a seller's own gathering or processing facilities, and (v) 
Sales by an intrastate natural gas pipeline, by a Hinshaw pipeline 
exempt from the Natural Gas Act, or by a local distribution company 
making an on-system sale.'' This revised definition reflects our 
response to the various requests made by the commenters pertaining to 
the natural gas aspects of the definition of marketing functions, as 
discussed below.
(a) Bids to Buy and Other Terms Listed in the Definition
    84. The major alteration in the definition from that proposed in 
the NOPR is the elimination of ``bids to buy.'' As with the case of the 
electric industry, this elimination will address jurisdictional and 
National Fuel concerns.
    85. The Commission agrees with the commenters who contend that 
``capacity'' is a term that should be confined to the electric industry 
insofar as the definition of marketing functions is concerned; that in 
fact had been the intent of the NOPR. Accordingly, the term is removed 
from the gas specific definition.
(b) Exclusions
    86. New York PSC's requested clarification, regarding whether the 
exclusion for bundled retail sales should include the purchase of 
natural gas to make such sales, has been rendered unnecessary by the 
Commission's determination to exclude purchases from the definition of 
marketing functions.
    87. The Commission agrees with INGAA's observation that in the 
reworking of the regulatory text, the NOPR inadvertently limited two of 
the existing exclusions applicable to sales from a transmission 
provider's production or gathering or processing facilities, thus not 
also encompassing sales from an affiliate's production or gathering or 
processing facilities. Exclusions (iii) and (iv) should not focus on 
the transmission provider but on the seller. Therefore, we modify 
exclusion (iii) to read ``sales of natural gas solely from a seller's 
own production,'' and exclusion (iv) to read ``sales of natural gas 
solely from a seller's own gathering or processing facilities.''
    88. The Commission also agrees with Calypso's request for 
clarification that foreign-sourced gas be included in the exclusion for 
sales of natural gas from an entity's own production. Whether the gas 
is foreign or domestic, the operative consideration is whether it is 
from the entity's own production.
    89. The Commission likewise grants Spectra's request for 
confirmation that sales by foreign LDCs are covered by the exclusion 
for sales by an intrastate natural gas pipeline or local distribution 
company making an on-system sale.
    90. In regard to Southwest Gas' request for a similar clarification 
regarding Hinshaw pipelines, the Commission determines that exclusion 
(v) for intrastate pipelines should also apply to Hinshaw 
pipelines,\105\ which are exempted from coverage under section 1(c) of 
the NGA,\106\ and modifies the wording of the exclusion accordingly.
---------------------------------------------------------------------------

    \105\ Hinshaw pipelines are interstate pipelines in which all 
the gas is consumed within one state and the pipeline is subject to 
regulation by a state commission.
    \106\ 15 U.S.C. 1(c) (2006).
---------------------------------------------------------------------------

    91. Several commenters request that the Commission add a new 
exclusion to the definition of marketing functions, to encompass off-
system sales by LDCs on non-affiliated pipelines. The Commission 
declines to do so. If the LDC in question makes sales of gas off-system 
for resale, that sale qualifies as a marketing function. As discussed 
above, however, if a pipeline does not conduct transmission 
transactions with an affiliate that engages in marketing functions, it 
is not subject to the Standards under section 358.1(a).

[[Page 63807]]

Therefore, if the LDC in question does not conduct transmission 
transactions with an affiliated interstate pipeline, its off-system 
sales on an unaffiliated pipeline are irrelevant insofar as the 
Standards are concerned. In support of its request for this new 
exclusion, AGA cites Order No. 497-A and a waiver granted to National 
Fuel Gas Supply Corporation in 1993.\107\ In Order No. 497-A, however, 
the Commission affirmatively stated that when a pipeline or LDC sells 
gas off-system, it is a marketer of that gas within the scope of the 
rule.\108\ The referenced waiver addressed the issue of applicability, 
not the definition of marketing, pointing out that a pipeline that does 
not conduct transportation transactions with its affiliated marketer is 
not subject to the Standards.\109\ It is thus inapposite to AGA's point 
(and in accord with our observation above on applicability).
---------------------------------------------------------------------------

    \107\ AGA at 14-15, citing Order No. 497-A at p. 31,592 and 
Nat'l Fuel Gas Supply Corp., 64 FERC ] 61,192 (1993).
    \108\ Order No. 497-A at p. 31,592.
    \109\ Id. p. 31,590-91.
---------------------------------------------------------------------------

    92. Similarly, several commenters express concern that the 
definition of marketing functions may sweep within its scope LDCs that 
do not sell gas from capacity held or controlled by them on their 
affiliated pipeline. As discussed above, the Standards do not apply to 
pipelines that do not conduct transmission transactions with an 
affiliate that engages in marketing functions, and such pipelines 
therefore need not concern themselves with the definition.
    93. Questar's request that exchanges of gas for the purpose of 
reducing transportation costs be excluded from the definition of 
marketing functions \110\ is the analog on the gas side of LPPC's 
request concerning exchanges on the electric side, and the same 
reasoning and result apply. However, we note that the procurement of 
gas during the exchange would not be covered by the definition of 
marketing functions, inasmuch as purchases are no longer included. This 
also applies to the situation in which the receipt of a ``field 
exchange'' serves to supply on-system bundled retail customers.\111\
---------------------------------------------------------------------------

    \110\ Questar at 4-5.
    \111\ A field exchange is the exchange of natural gas in the 
field from company-owned production for equivalent quantities of gas 
that is closer to the entity's distribution system, made to lower 
the delivered costs of gas for on-system retail sales. Alcoa Power 
Generating Inc., 108 FERC ] 61,243 (2004) at P 179.
---------------------------------------------------------------------------

(c) Clarifications
    94. Spectra contends that a foreign entity that does not 
participate in United States energy markets had been excluded from the 
definition of energy affiliate, and requests that such exclusion 
continue to apply. The revised Standards have discarded the concept of 
energy affiliate, so there is no need to address Spectra's request. As 
to whether such an entity would be subject to the Standards, section 
358.1 controls the question of applicability, as discussed above.
    95. INGAA and SCANA request that not only should on-system sales by 
LDCs be excluded from the definition of marketing functions, but off-
system sales should be as well, on the grounds such sales are entered 
into by non-marketing affiliates. However, the categorization of the 
affiliate is immaterial. If employees of an LDC make an off-system sale 
for resale in interstate commerce, they qualify as marketing function 
employees (assuming they are employed by a marketing affiliate of a 
transmission provider with which the affiliate conducts transmission 
transactions).
    96. INGAA's and other commenters' contention that a pipeline should 
only be concerned with interactions with its gas marketing function 
employees, not with affiliated electric marketing function employees, 
is misplaced (or has been subsumed in the exclusion of energy affiliate 
from coverage of the Standards). Gas marketing function employees would 
not be making a sale for resale to electric marketing function 
employees, who would be purchasing the gas for consumption and thus in 
a retail capacity. Therefore, the definition of marketing function 
would not be triggered.
    97. SCANA inquires whether pipelines and LDCs may remove themselves 
from coverage of the Standards by contracting with asset managers to 
make their off-system sales, and Southwest Gas requests clarification 
regarding the definition of ``marketing function employees'' in 
relation to asset management agreements. The Commission clarifies that 
under the Independent Functioning Rule and the No Conduit Rule, it 
would be the employees of the asset manager, acting as agents or 
contractors for the pipeline or LDC, rather than employees of the 
pipeline or LDC, who would qualify as marketing function employees 
after the asset arrangement was consummated, inasmuch as they would be 
the persons making all the subsequent sales for resale. The inclusion 
of agents and contractors in the definition of transmission function 
employee or marketing function employee is discussed in more detail 
below in the section entitled Elimination of Shared Employees Concept.

4. Marketing Function Employee
a. Commission Proposal
    98. The NOPR proposed defining a marketing function employee as 
``an employee, contractor, consultant or agent of a transmission 
provider or of an affiliate of a transmission provider who actively and 
personally engages in marketing functions.'' See proposed section 
358.3(d).
b. Comments
    99. Xcel seeks clarification as to whether the employees who 
purchase natural gas and interstate pipeline capacity to deliver fuel 
to the utility's electric generation fleet are marketing function 
employees under the revised definition.\112\
---------------------------------------------------------------------------

    \112\ Xcel at 20-21.
---------------------------------------------------------------------------

    100. Several commenters request amendments to the definition of 
marketing function employees that would limit its application. AGA, 
Destin, and EPSA recommend that the Commission limit the definition of 
a marketing function employee to employees who actively and personally 
engage in marketing functions ``involving an affiliated transmission 
provider'' to ensure that the Standards are narrowly directed at the 
activities that give rise to concerns of undue preference.\113\ EPSA 
would also include employees who engage in marketing functions on 
behalf of a transmission provider located within its affiliated 
transmission provider's electric control area.\114\
---------------------------------------------------------------------------

    \113\ AGA at 16; Destin at 8; EPSA at 6.
    \114\ EPSA at 6.
---------------------------------------------------------------------------

    101. Other commenters request clarifications regarding which 
employees are included in the definition of marketing function 
employees. Arizona PSC suggests that the employees who perform 
competitive solicitations should not be categorized as marketing 
function employees, because their inclusion may unnecessarily limit 
their ability to obtain the non-public transmission function 
information necessary to make competitive solicitations as efficient 
and cost effective as possible.\115\ MidAmerican seeks clarification 
that generator operating personnel are not a subcategory of marketing 
function employees.\116\ Finally, EEI seeks clarification on which 
types of ``analysts,'' such as forecasters and employees who coordinate 
strategic planning and regulatory services, would

[[Page 63808]]

be considered marketing function employees under the proposed 
rule.\117\
---------------------------------------------------------------------------

    \115\ Arizona PSC at 5.
    \116\ MidAmerican at 7.
    \117\ EEI at 49.
---------------------------------------------------------------------------

c. Commission Determination
    102. The Commission adopts the proposed definition of marketing 
function employee in section 358.3(d), with the addition of the 
adverbial phrase ``on a day-to-day basis.'' A discussion of the 
comments which prompted this addition is set forth in the section on 
Supervisors, Managers and Corporate Executives. In this section, we 
address the other concerns of commenters with respect to the 
definition.
    103. Xcel's requested clarification as to whether employees who 
purchase natural gas for their electric fleet are marketing function 
employees is rendered moot inasmuch as we have deleted purchases from 
the definition of marketing functions, and such employees would thus 
not be marketing function employees. (Furthermore, such a purchase 
would be one made at retail, rather than wholesale, and thus not 
subject to the definition of marketing function for that reason as 
well.)
    104. We decline to limit the definition of marketing function 
employee by adding a requirement that the employee be engaged in 
marketing functions ``involving an affiliated transmission provider.'' 
An employee making off-system sales could potentially use non-public 
transmission function information to its advantage. However, as 
described in more detail above, if a transmission provider does not 
conduct any transmission transactions with an affiliate that engages in 
marketing functions, it does not fall within the scope of the Standards 
under section 358.1.
    105. EPSA's concerns regarding the definition of marketing function 
employee in relation to transactions with affiliates that do not 
conduct transmission transactions with their affiliated transmission 
provider within the latter's electric control area mixes two unrelated 
concepts. Whether a transmission provider conducts transmission 
transactions with a marketing affiliate governs the question of the 
applicability of the Standards under section 358.1, not the definition 
of marketing function employee. If a transmission provider does not 
fall within the scope of the Standards under that provision, it need 
not concern itself with the definitions relating to the Standards' 
proscribed activities.
    106. Arizona PSC's concerns regarding competitive solicitations are 
resolved by the removal of purchases from the definition of marketing 
functions. We also clarify, in response to Arizona PSC's request, that 
generating operator personnel are not marketing function employees, 
unless they also engage in marketing functions. The question of whether 
analysts (such as forecasters and employees who coordinate strategic 
planning and regulatory services) are marketing function employees can 
be answered by reference to the definition itself. If such analysts are 
not actively and personally involved on a day-to-day basis in the sale 
for resale of electric energy (or the other items mentioned in the 
definition), they are not marketing function employees.
5. Supervisors, Managers and Corporate Executives
a. Commission Proposal
    107. The second sentence of the proposed NOPR definitions of 
transmission function employee and marketing function employee stated 
that an officer, director or other supervisory employee is not 
considered to be a transmission function or marketing function employee 
if he or she does not actively and personally engage in transmission or 
marketing functions. See proposed sections 358.3(d) and (i).
b. Comments
    108. Concerns surrounding whether officers, directors or 
supervisors could be classified as marketing or transmission function 
employees generated many comments, more than on almost any other issue. 
Many commenters agree with the NOPR formulation that officers, 
directors and other supervisory employees that do not ``actively and 
personally engage'' in marketing or transmission functions should be 
exempted from the definition of a marketing function employee or 
transmission function employee.\118\ Idaho Power, on the other hand, 
asserts that the explicit carve-out of officers, directors and other 
supervisors who do not ``actively and personally engage'' in the 
functions is redundant and therefore superfluous.\119\
---------------------------------------------------------------------------

    \118\ See AGA at 18, Ameren at 20-22, Duke at 4-5; SCE at 9-10; 
Vectren at 3-4; INGAA at 21.
    \119\ Idaho Power at 7-8.
---------------------------------------------------------------------------

    109. Some commenters raise concerns about the application of the 
``actively and personally engaged'' standard to different types of 
corporations. Salt River, for example, requests clarification that 
high-level officials of vertically integrated utilities will not be 
deemed either transmission or marketing function employees for 
approving department budgets or signing large value contracts.\120\ In 
addition, INGAA requests guidance on how to apply the definitions of 
transmission and marketing function employees to organizations of 
varying sizes and structure, considering the different levels of 
involvement that supervisory employees must have depending on the size 
of the organization.\121\
---------------------------------------------------------------------------

    \120\ Salt River at 10-14.
    \121\ INGAA at 33.
---------------------------------------------------------------------------

    110. Several commenters recommended alternative approaches to 
determine whether officers, directors or other supervisory employees 
should be classified as marketing or transmission function employees. 
For example, many commenters requested that the Commission re-introduce 
the concept of ``day-to-day'' involvement, used in Order No. 2004, to 
make the distinction between an ``employee'' and a supervisor or 
executive.\122\
---------------------------------------------------------------------------

    \122\ NGSA at 25-28; Southern Co. Services at 15-20; LPPC at 13. 
Southern Co. Services further requests the Commission to eliminate 
what it regards as the confusing precedent regarding the treatment 
of shared officers set forth in Ameren Serv. Co., 87 FERC ] 61,145 
(1999). Southern Co. Services at 15-20.
---------------------------------------------------------------------------

    111. National Grid, however, suggests using a corporate governance 
approach to make the distinction, as follows: Managers and employees 
negotiating deals and undertaking certain activities would fall within 
the definition of transmission or marketing function employee; senior 
executives and members of risk management committees who oversee the 
managers and employees would not.\123\ Vectren believes that any 
confusion might be eliminated by deleting ``supervisory'' from the 
proposed definition.\124\
---------------------------------------------------------------------------

    \123\ INGAA also comments on the status of risk management 
personnel in the context of the concept of ``shared employees.'' 
INGAA at 36-40.
    \124\ TDU Systems at 10.
---------------------------------------------------------------------------

    112. Numerous commenters seek additional guidance on the de minimis 
language used in the preamble of the NOPR.\125\ Commenters object that 
the NOPR guidance regarding de minimis involvement does not indicate 
what amount and kind of activity exceeds the threshold. They request a 
more precise discussion with specific activities that would require 
classifying the employee as either marketing or transmission.\126\ Both 
Idaho Power and Bonneville request that the Commission include the de 
minimis language directly in the

[[Page 63809]]

regulatory text and provide guidance as to its meaning.\127\
---------------------------------------------------------------------------

    \125\ EPSA at 6; Idaho Power at 7; MidAmerican at 12; National 
Grid at 17, PG&E at 16-18; Puget Sound at 4-6.
    \126\ Idaho Power at 7; NGSA at 5, National Grid at 17, PG&E at 
16-18; Puget Sound at 4-6. INGAA requests a list of factors the 
Commission will consider in evaluating whether a particular employee 
qualifies as a marketing or transmission function employee. INGAA at 
25-28.
    \127\ Idaho Power at 7; Bonneville at 4-5.
---------------------------------------------------------------------------

    113. Commenters also requested further guidance from the Commission 
as to which type of conduct would classify a supervisory employee as 
actively and personally engaged in one of these functions.\128\ Many of 
these commenters seek assurance from the Commission that officers, 
directors and other supervisory employees will not be classified as 
marketing or transmission function employees by fulfilling their 
fiduciary duties and informing themselves of business operations.\129\ 
Southern Co. Services is concerned that some may construe the 
``actively and personally engaged'' standard to be the same as the 
standard used to determine professional conflicts of interest, which 
would inhibit effective corporate governance.\130\
---------------------------------------------------------------------------

    \128\ E.ON at 10, AGA at 20, El Paso at 1; Idaho Power at 7; TDU 
Systems at 8-9; Western Utilities at 4-5; Williston at 12-13. INGAA 
presents hypothetical examples of varying levels of supervisory 
involvement in a number of different transactions, seeking guidance 
as to what level of involvement distinguishes supervisory personnel 
from those that fall within the definition of marketing function 
employee. INGAA at 30-32.
    \129\ INGAA at 112; LPPC at 11-12; Western Utilities at 4-5; 
Idaho Power at 7, National Grid at 17, PG&E at 16-18; Puget Sound at 
4-6; E.ON at 10. AGA would add fulfilling obligations associated 
with corporate delegation policy or strategic or long-term planning. 
AGA at 20. Nisource asserts that the Commission has permitted 
transmission providers to allow senior managers, officers or 
directors to have ultimate responsibility for transmission 
operations and wholesale merchant functions, as long as they do not 
participate in directing, organizing or executing transmission 
system operations or reliability functions or wholesale merchant 
functions. Nisource at 13.
    \130\ Southern Co. Services at 21-22.
---------------------------------------------------------------------------

    114. Commenters request that the Commission confirm that if an 
officer, director, or other supervisory employee engages in the 
following activities, they will not be classified as marketing or 
transmission function employees. These activities include (i) passive 
involvement in contracting, so long as employees do not take an active 
role in the decision-making process and do not disclose non-public 
transmission information; \131\ (ii) occasional participation in 
routine customer meetings; \132\ (iii) executing and/or approving large 
wholesale sales or purchase agreements consistent with the officer's 
delegated approval authority and fiduciary obligations on behalf of the 
company; \133\ and (iv) participating in the formulation of an overall 
wholesale strategy for a utility, and establishing general parameters 
for negotiation of wholesale contracts.\134\ Similarly, MidAmerican 
requests that the definition clarify that it excludes officers and 
personnel who do not have first line reporting relationships with 
transmission or marketing function personnel.\135\
---------------------------------------------------------------------------

    \131\ TDU Systems at 9-11; SCANA at 7-8. TDU Systems also asks 
that the Commission clarify and expand its explanation of the 
activities that would cause a supervisor or director to be regarded 
as actively and personally engaged in transmission functions. TDU 
Systems at 9.
    \132\ SCANA at 7-8.
    \133\ Duke at 5-6.
    \134\ Id.
    \135\ MidAmerican at 12.
---------------------------------------------------------------------------

    115. Instead of specifically addressing each type of conduct, INGAA 
recommends that the Commission adopts a rule of reason approach to 
determining, on a case-by-case basis, whether or not an executive's or 
supervisor's conduct was a good faith attempt to fulfill his corporate 
responsibilities.\136\
---------------------------------------------------------------------------

    \136\ INGAA at 112.
---------------------------------------------------------------------------

c. Commission Determination
    116. In an effort to provide clarity in this area, which has long 
been the subject of much discussion and concern, the Commission in the 
NOPR included a second sentence in the definition of both transmission 
and marketing function employees that specifically addressed corporate 
executives and supervisory personnel. The proposed sentence provided 
that such employees were not considered to be transmission or marketing 
function employees if they were not actively and personally engaged in 
such functions, and was included to provide reassurance to officers, 
directors and supervisors that a mere oversight role did not render 
them transmission or marketing function employees. As Idaho Power 
points out, however, the sentence is redundant, as no employee, 
contractor or agent not so engaged is considered to be a transmission 
or marketing function employee. Therefore, we delete the sentence from 
the definitions of transmission and marketing function employees.
    117. The Commission's intention in introducing the phrase 
``actively and personally engaged,'' which is retained in the first 
sentence of each definition, was similar to that implicit in use of the 
phrase ``day-to-day.'' \137\ The concept underlying both is simply 
this: If an employee regularly carries out or supervises the details of 
the activities in question, he or she is actively and personally 
engaged in them; if he or she merely signs off on the activities 
without having directed or organized the activities, he or she is not 
personally engaged in them. Thus, for example, supervisors who are not 
involved in the negotiation of a gas or electric energy sale, and who 
do not oversee or provide input into the details of the negotiations 
being carried out by another employee (e.g., by editing and revising 
material elements of a contract), but rather simply approve the 
contract governing the sale, are not marketing function employees. 
Furthermore, as we noted in the preamble of the NOPR, de minimis 
involvement in transmission and marketing functions will not render a 
person a transmission or marketing function employee. Therefore, a 
supervisor who on rare occasions has tangential involvement in a 
negotiation, such as being called in to meet the negotiating parties 
from the other side, is not thereby rendered a marketing function 
employee.
---------------------------------------------------------------------------

    \137\ The phrase ``day-to-day'' appears in the definition of 
transmission function employee in the existing Standards. 15 CFR 
358.3(j).
---------------------------------------------------------------------------

    118. That said, the Commission will add the phrase ``day-to-day'' 
to the definition of transmission and marketing function employees, in 
order to provide even greater certainty. Our addition of the phrase 
``day-to-day'' also obviates the need to add the phrase de minimis in 
the regulatory text.
    119. As noted, INGAA posits a number of hypotheticals involving 
varying percentages of time that a supervisor spends reviewing trades, 
and seeks guidance as to when such involvement would rise to the level 
of rendering him a marketing function employee. It is unnecessary to 
address each of these hypotheticals, because the key to the question 
lies in the fact that if a supervisor is simply signing off on a deal 
negotiated or proposed by someone else, and is not involved in 
overseeing and providing input into the negotiations, he is not himself 
engaged in the marketing function activity. Likewise, upper level 
management personnel who review contracts over a certain dollar amount 
are not converted into deal-makers themselves, simply by virtue of that 
review. This is also true for other personnel, such as attorneys, 
accountants and other advisors who may examine a contract for its 
conformity to legal, accounting or other requirements. Such review does 
not render them marketing function employees.
    120. It may be objected that a lower level supervisor on the 
trading floor could hardly ignore proscribed transmission function 
information with which he is familiar in reviewing a deal. However, the 
closer the supervisory employee is to the trading activity, the more 
likely it is that he will be overseeing and providing input into the 
trades, and not simply signing off on a deal, and thus would be 
considered a marketing function employee.

[[Page 63810]]

    121. A principal goal of the reforms made in this Final Rule is to 
provide greater certainty to regulated entities and their employees 
regarding the scope of the Independent Functioning Rule and the No 
Conduit Rule. The carefully circumscribed nature of the definitions of 
transmission functions and of transmission and marketing function 
employees should provide greater clarity than is contained in the 
existing Standards with regard to the permissible activities of 
supervisors, managers, and corporate executives. We suggest that if a 
situation truly does appear to be a close call, that in itself should 
be a red flag that suggests conservatism in applying the rule. In this 
area, it is best to err on the side of caution.\138\
---------------------------------------------------------------------------

    \138\ As observed above, entities also have several avenues by 
which to receive guidance on such issues from the Commission or 
Commission staff. See Obtaining Guidance on Regulatory Requirements, 
123 FERC ] 61,157 (2008).
---------------------------------------------------------------------------

    122. For further clarification as to what is included in the day-
to-day operation of the transmission system (and thus which employees 
would be considered transmission function employees), we mention the 
following examples, in addition to the granting and denying of service 
requests already specified in the definition: Coordinating the actual 
physical flows of power or gas, balancing load with energy or capacity, 
isolating portions of the system to prevent cascades, imposing 
transmission loading relief, and the like. Supervisors who are not 
actively and personally engaged in activities of these or a similar 
nature would not be considered to be transmission function employees. 
In regard to AGA's and Duke's requests for clarification regarding the 
roles of managers and officers who are involved in corporate 
governance, strategic and long-range planning, and development of 
general negotiating parameters for wholesale contracts, we clarify that 
these types of activities go beyond the day-to-day activities that 
characterize transmission function employees and marketing function 
employees, and participation in them would not make an employee a 
transmission function employee or a marketing function employee.
6. Elimination of Shared Employees Concept
a. Commission Proposal
    123. In the NOPR, the Commission noted that the corporate 
separation approach instituted in Order No. 2004 made it difficult for 
companies to transact needed business because all the employees of a 
marketing affiliate would be walled off from the transmission 
provider's transmission function employees. The corporate separation 
approach required the creation of whole categories of employees who 
could be shared between the transmission provider and the marketing 
affiliate, such as officers and members of the board, field and 
maintenance employees, and risk management employees.\139\ Issues have 
also arisen under the existing Standards as to whether such employees 
as lawyers, accountants, and rate design personnel should be exempted. 
The NOPR's substitution of the employee functional approach in place of 
the corporate separation approach eliminates the need for shared 
employees, since it is now only marketing function employees who must 
function independently from transmission function employees. Therefore, 
the regulatory text omitted any mention of shared employees.
---------------------------------------------------------------------------

    \139\ NOPR at P 24.
---------------------------------------------------------------------------

b. Comments
    124. The elimination of the concept of shared employees seemed to 
have confused some commenters. Idaho Power requests that the Commission 
clarify what it means when it states in the NOPR that there is no 
longer a need for the concept of shared employees, considering that 
those employees' roles have not changed.\140\ EPSA requests that the 
Commission either amend all other orders that reference shared 
employees or address the ambiguity in the Final Rule by stating the 
concept no longer exists in Commission regulations.\141\ However, 
NiSource requests that the Commission confirm that the categories of 
employees identified by Order No. 2004 as ``shared'' continue to exist 
with the same status under the proposed Standards.\142\
---------------------------------------------------------------------------

    \140\ Idaho Power at 9.
    \141\ EPSA at 5.
    \142\ NiSource at 11-12.
---------------------------------------------------------------------------

    125. Wisconsin Electric and INGAA request additional guidance on 
how some formerly ``shared employees'' would be classified. These 
employees include attorneys, accountants, risk management personnel, 
and regulatory personnel who must approve the transactions made by 
marketing function employees.\143\ Wisconsin Electric and INGAA request 
that these employees should not be classified as marketing or 
transmission function employees and INGAA proposes that the Commission 
modify the definitions of transmission and marketing function employees 
to expressly exclude risk management employees.\144\
---------------------------------------------------------------------------

    \143\ INGAA at 36-40; Wisconsin Electric at 4-5; LPPC at 18-19.
    \144\ INGAA at 36-40.
---------------------------------------------------------------------------

    126. Similarly, PSEG requests clarification as to the comment in 
paragraph 41 of the NOPR that rate design employees fall within the 
current Standards' concept of ``shared employees.'' PSEG asks whether 
this comment indicates that the Commission is abandoning what PSEG 
states was its position in Order No. 2004-C as to considering certain 
rate design functions to be transmission functions.\145\ PSEG also 
requests that the Commission clarify that employees who are shared 
between affiliated transmission and marketing functions and whose 
primary purpose is to develop and implement policy for the companies, 
advocate policies in various forums, or engage in strategic planning or 
financial decision making do not fall within the definitions of 
``transmission function employee'' or ``marketing function employee.'' 
\146\
---------------------------------------------------------------------------

    \145\ PSEG at 7.
    \146\ PSEG at 5.
---------------------------------------------------------------------------

    127. EPSA asks the Commission to clarify whether the Independent 
Functioning Rule extends to consultant companies that offer both 
transmission and marketing services for corporate companies.\147\ In 
addition, National Grid asks whether contractor firms who are retained 
to provide services may be considered transmission and marketing 
function employees.\148\ Although National Grid does not believe 
contracting firms should be tied to a function, EPSA and National Grid 
would subject employees of these respective companies to the No Conduit 
Rule as appropriate.\149\
---------------------------------------------------------------------------

    \147\ EPSA at 6.
    \148\ National Grid at 20.
    \149\ EPSA at 6; National Grid at 20.
---------------------------------------------------------------------------

    128. Idaho Power seeks clarification that despite the elimination 
of the shared employee concept, those employees who were formerly 
considered shared employees will still be subject to the No Conduit 
Rule.\150\
---------------------------------------------------------------------------

    \150\ Idaho Power at 9.
---------------------------------------------------------------------------

c. Commission Determination
    129. As discussed in the NOPR, the substitution of the employee 
functional approach for the corporate separation approach renders 
continuation of the concept of ``shared employees'' unnecessary. Since 
only those individuals who engage in transmission or marketing 
functions now fall within the scope of the Independent Functioning 
Rule, support personnel of the type formerly included in the concept of 
shared employees, and who

[[Page 63811]]

do not meet those definitions, do not. Therefore, there is no need to 
further exempt them under the outmoded rubric of shared employees.
    130. We decline to amend prior orders that mention shared 
employees; guidance from prior orders will be applicable or not 
depending on whether those orders address concepts that survive the 
revisions made in this Final Rule. We also decline to grant NiSource's 
request that employees formerly classified as ``shared'' continue in 
that classification. This would entail resurrecting the concept, and is 
unnecessary.
    131. Commenters raise questions as to whether various types of 
employees formerly classified as shared employees are beyond the scope 
of the Independent Functioning Rule, citing such employees as 
attorneys, accountants, risk management personnel, regulatory 
personnel, rate design personnel, and strategic planning personnel. 
Again, the determination depends on the answer to a more fundamental 
question: Do such employees function in their stated roles, or do they 
also actively and personally perform day-to-day transmission functions 
or marketing functions? If they do not perform transmission functions 
or marketing functions, they are not subject to the Independent 
Functioning Rule. Therefore, if an attorney is rendering legal advice, 
he may consult with both transmission function employees and marketing 
function employees. Likewise, a risk management employee may develop 
risk guidelines for both transmission function employees and marketing 
function employees. And regulatory personnel may present before 
regulatory bodies filings that cover both transmission and marketing 
issues. Of course, all such employees would remain subject to the No 
Conduit Rule, and are prohibited from transmitting transmission 
function information to marketing function employees.
    132. We disagree with PSEG's contention that the Commission is 
abandoning its position in Order No. 2004-C, which PSEG characterizes 
as determining that certain rate design functions qualified as 
transmission functions. Order No. 2004-C specifically stated that we 
would consider ``the actual duties and responsibilities of employees in 
determining whether they are transmission function employees.'' \151\ 
Here, as well, if a rate design employee were also assigned the 
responsibility for performing transmission functions, he or she would 
be a transmission function employee. However, if the rate design 
employee is merely calculating rates to propose to the appropriate 
regulatory body, the employee would not be a transmission function 
employee; as discussed above, we are restricting the definition of 
transmission functions to the day-to-day operation of the transmission 
system.
---------------------------------------------------------------------------

    \151\ Order No. 2004-C at P 30.
---------------------------------------------------------------------------

    133. We grant EPSA's and National Grid's requests for clarification 
as to whether consultants and contractors are subject to the 
Independent Functioning Rule, and whether their firms are as well. 
Agents and outside consultants and contractors who serve as 
transmission function employees must function independently of 
marketing function employees, and vice versa. However, the fact that 
given individuals employed by a consulting firm may function in one of 
the two categories does not bar other individuals employed by the same 
firm from functioning in the other category. Of course, consultants and 
contractors functioning as transmission function employees may not 
interact with consultants and contractors functioning as marketing 
function employees, and all such consultants and contractors must abide 
by the No Conduit Rule.
    134. We also grant Idaho Power's request for clarification that 
employees formerly classified as shared employees are still subject to 
the No Conduit Rule. Not only are these employees subject to the No 
Conduit Rule, but so are all employees, regardless of their status or 
classification.
7. Long-Range Planning and Procurement
a. Commission Proposal
    135. The corporate separation approach of the former Standards 
created difficulties for public utilities engaged in long-range 
planning, and this difficulty was one of the impetuses that led to the 
reforms instituted in this Final Rule. Because such planning activities 
frequently encompass both transmission and generation issues, and 
because under the existing Standards none of the employees of a 
marketing or energy affiliate (except for shared employees) could 
interact with the transmission function employees of a transmission 
provider, it was difficult for planning personnel to gather needed 
information and to consult with appropriate personnel in order to make 
decisions on such basic matters as whether to build generation or to 
buy power. It was never the intent of the Commission to interfere with 
legitimate planning activities, something that is vital for the 
continued efficient operation of both the electric and natural gas 
industries.
    136. The NOPR proposed substituting the employee functional 
approach for the corporate separation approach to the Independent 
Functioning Rule, thus permitting most company employees to interact 
with one another, and eliminating the wholesale walling off of all 
marketing and energy affiliate employees from the transmission function 
employees of the transmission provider.
b. Comments
    137. Many commenters seek additional clarification from the 
Commission regarding the effect of the proposed Standards on long-range 
planning, and urge the Commission to clarify that employees do not 
become marketing or transmission function personnel by engaging in 
activities such as integrated resource planning (IRP), competitive 
solicitations, or non-competitive solicitations that are conducted 
under state supervision.\152\
---------------------------------------------------------------------------

    \152\ EEI at 33; California PUC at 4, 7-8; Entergy at 2; TANC at 
4-5; SCE at 7-8; Vectren at 6-8, 10.
---------------------------------------------------------------------------

    138. Some commenters ask the Commission to clarify whether 
``transmission functions'' includes long-range operations of the 
transmission system. SMUD and Idaho Power request that the proposed 
Standards exclude long-term transmission system planning, and the 
specific activities involved in that planning, from the definitions 
transmission function.\153\ TDU Systems, on the other hand, requests 
that the Standards do apply to transmission function employees who 
engage in long-term transmission planning. However, TDU Systems also 
believes that transmission function employees should be permitted to 
provide limited information to marketing function employees regarding 
the feasibility of generation proposals.\154\
---------------------------------------------------------------------------

    \153\ SMUD at 2; Idaho Power at 12-13.
    \154\ TDU Systems at 5, 11-12.
---------------------------------------------------------------------------

    139. SCANA requests that neither generation-related employees that 
are physically located onsite at the generating facilities nor 
employees that are responsible for short and long-term resource 
planning be classified into one of the functions.\155\
---------------------------------------------------------------------------

    \155\ SCANA at 10-15. Similarly, PG&E requests that the 
Commission confirm that the transmission function employees who have 
the responsibility to serve retail load may work cooperatively to 
plan transmission and generation on an integrated basis as required 
to meet state mandates. PG&E at 8.
---------------------------------------------------------------------------

    140. Many commenters also object to the Commission's inclusion of 
``submission of offers or bids to buy or sell'' in the proposed 
definition of

[[Page 63812]]

marketing functions. These commenters identify numerous barriers that 
the inclusion of this phrase would place on long-range planning.\156\ 
These stated barriers include (i) preventing employees engaged in 
resource procurement from having access to transmission planning 
information to meet their state obligations; \157\ (ii) limiting a 
company's ability to design and implement effective demand response 
programs for retail load; \158\ (iii) restricting employees from 
accessing transmission information needed to engage in competitive 
solicitations for service to retail native load; \159\ (iv) restricting 
integrated resource planning and competitive procurement employees from 
accessing transmission information needed to engage in power purchases 
and requests for proposals to serve native load; \160\ and (v) 
interfering with the ability of planning employees to obtain non-public 
transmission function information necessary to make solicitations as 
efficient and cost effective as possible.\161\
---------------------------------------------------------------------------

    \156\ Puget Sound at 5-6.
    \157\ Id.; NARUC at 7.
    \158\ LPPC at 13-14.
    \159\ Salt River at 8-10; NARUC at 7; SCE at 7-8; Xcel at 13-14; 
PG&E at 12-14; EEI at 31-34.
    \160\ Salt River at 8-10; EEI at 31-36; LPPC at 8; Southern Co. 
Services at 12-13. Southern Co. Services contends that including 
these activities in the definition would conflict with state law 
requiring IRP and requests for proposal (RFP). Southern Co. Services 
at 11. Southern Co. Services requests that the Commission modify the 
definition of marketing functions to exclude RFP. Id. at 14.
    \161\ Western Utilities at 7-8; SCE at 8.
---------------------------------------------------------------------------

    141. Many commenters also seek clarifications regarding whether 
certain activities are considered long-range planning or marketing 
functions. Idaho Power requests clarification that employees performing 
non-transmission function planning may consult with transmission 
function employees, without compromising their non-transmission-
function-employee status.\162\ Xcel asks the Commission to clarify (i) 
how the marketing function definition applies to both short-term and 
long-term transactions and to IRP related gas activities; \163\ (ii) 
that marketing function excludes offers to buy or sell natural gas 
transportation or storage capacity that is the product of long-range 
planning to serve the native retail load of the gas LDC or to deliver 
natural gas fuel to electric generating plants owned or controlled by 
the utility; \164\ and (iii) that the proposed standards allow 
utilities the flexibility to pursue self-build or build/transfer 
options without running afoul of the Independent Functioning Rule.\165\
---------------------------------------------------------------------------

    \162\ Idaho Power at 12-13.
    \163\ Xcel at 14-16; SCANA at 10-15. Xcel believes that short-
term wholesale purchase transactions should be treated comparably 
with long-term capacity and energy acquisitions to serve native 
load, since the function is the same: serving native load. Xcel at 
14-16.
    \164\ Xcel at 15-16.
    \165\ Xcel at 16-18. Xcel also questions whether the marketing 
function definition should apply to the Xcel Energy Transmission 
Access Group, which it states acts as the transmission service 
customer in arranging the long-term transmission service 
requirements for retail and wholesale native load customers of all 
four Xcel Energy Operating Companies. Xcel notes that this group 
does not offer, bid, buy, or sell electric energy or natural gas nor 
does it take positions on financial transmission rights in organized 
markets. Xcel at 19-20.
---------------------------------------------------------------------------

    142. Many commenters also propose amendments to the proposed 
standards to remedy their concerns. Multiple commenters propose to 
remove ``buy'' from section 358.3(c), asserting that the Commission 
does not have direct authority over purchases.\166\ PG&E's proposed 
resolution is to amend the definition by introducing language limiting 
the scope of the definition to wholesale purchases and sales.\167\ Salt 
River suggests defining ``marketing functions'' simply as sales for 
resale.\168\ To ensure that demand response is construed as a planning, 
rather than marketing, function, LPPC requests an additional exception 
for development, administration or implementation of demand response 
programs, including the issuance of requests for proposals or the 
awarding of contracts for demand response.\169\ Commenters stress that 
these modifications are sufficient because such employees would remain 
subject to the No Conduit Rule to protect improper disclosure of 
protected information.\170\
---------------------------------------------------------------------------

    \166\ Western Utilities at 8-9; Salt River at 8-9; SCE at 8.
    \167\ PG&E at 12-14.
    \168\ Salt River at 8-10.
    \169\ LPPC at 13-14.
    \170\ Salt River at 8-10.
---------------------------------------------------------------------------

    143. Commenters request that the Commission clarify that the 
Standards do not prevent transmission providers from sharing 
transmission planning information with unaffiliated network service 
transmission customers. TAPS requests that the Commission clarify that 
the proposed Standards do not preclude transmission providers from 
providing unaffiliated network customers' planning personnel with the 
same types of information as is made available to the planning 
personnel of the transmission provider and its affiliates.\171\ TAPS, 
TDU Systems and APPA request assurances that unaffiliated planning 
representatives involved in the regional joint planning process 
contemplated by Order 890 have the same access to transmission 
information as does the transmission provider's own generation planners 
and affiliates.\172\
---------------------------------------------------------------------------

    \171\ TAPS at 38.
    \172\ TAPS at 38; TDU Systems at 4; APPA at 6.
---------------------------------------------------------------------------

c. Commission Determination
    144. As stated in the NOPR, one of the principal concerns the 
Commission had with the current Standards was the barriers they appear 
to have erected to coordinated resource planning, the critical 
importance of which the Commission stressed in Order Nos. 890 and 890-
A.\173\ Public utilities complained they were finding it difficult to 
gather together the necessary personnel and data to efficiently analyze 
their long-range needs for both transmission and generation, due to the 
strictures imposed by the corporate separation approach to the 
Independent Functioning Rule. For that reason, as well as others, the 
Commission revised the scope of the Independent Functioning Rule to 
encompass only transmission function employees and marketing function 
employees, thereby concentrating the rule on the area that presented 
the greatest potential for undue preferences.
---------------------------------------------------------------------------

    \173\ NOPR at P 32. See Preventing Undue Discrimination and 
Preference in Transmission Service, Order No. 890, FERC Stats. & 
Regs. ] 31,241, at P 425 (2007), order on reh'g and clarifications, 
Order No. 890-A, FERC Stats. & Regs. ] 31,261, at P 171 (2007), 
order on reh'g, Order No. 890-B, 123 FERC ] 61,299 (2008).
---------------------------------------------------------------------------

    145. Commenters expressed approval of the Commission's efforts to 
remove unnecessary barriers to resource planning, but many raised 
concerns that some barriers still remain. Others sought clarification 
as to the implications of the proposed Standards on the transparency of 
the resource planning process. These concerns fall in two main areas: 
whether ``transmission functions'' include long-range operation of the 
transmission system, thereby implicating employees involved in long-
range transmission planning; and whether the definition of ``marketing 
functions'' should include the phrase ``submission of offers or bids to 
buy or sell,'' rather than simply ``offers to sell.'' A few commenters 
also raised concerns about access by third parties to transmission 
function information in the context of open planning programs.
    146. As stated earlier in connection with the discussion of the 
definition of ``transmission functions,'' the Commission in this Final 
Rule clarifies that the term refers to the day-to-day operation of the 
transmission system, and has modified the definition accordingly. Long-
range planning regarding the transmission system would not be included, 
and employees

[[Page 63813]]

engaged in such long-range planning, provided they were not also 
actively and personally involved in the day-to-day operation of the 
transmission system, would not be considered transmission function 
employees. Therefore, the Independent Functioning Rule would not apply 
to them.
    147. Idaho Power Company requests clarification that long-range 
planning functions such as integrated resource planning and preparation 
of system impact studies not be considered transmission functions. We 
reiterate that so long as these activities do not implicate the day-to-
day operation of the transmission system, they are not transmission 
functions. SMUD likewise questions whether long-range transmission 
planning is included in the definition; our amendment in this Final 
Rule clarifies that it is not. And SCANA requests that employees who 
perform generation-related resource planning not be considered 
transmission function employees (or marketing function employees). 
These employees do not perform day-to-day transmission operations, and 
thus are not transmission function employees. Furthermore, they are not 
engaged in sales of energy for resale, and thus are not marketing 
function employees under our revised definition of the term.
    148. As discussed above, the Commission has determined to remove 
``bids to buy'' from the definition of marketing functions, in large 
part because the Commission's jurisdiction centers on sales for resale 
in interstate commerce, not on purchases. It is also unnecessary to 
include purchases in the scope of the rule in order to categorize 
marketers making off-system sales as marketing function employees; 
personnel making purchases destined to serve off-system sales would be 
so categorized by virtue of their involvement in the sale portion of 
the transaction. The removal of purchases from the definition of 
marketing functions addresses the concerns of the many commenters who 
feared that barriers to long range resource planning might still remain 
under the proposed Standards.
    149. LPPC is concerned that inclusion of demand response in the 
definition of marketing functions could interfere with the development 
of demand response programs as a part of long-range planning. As 
discussed above, the Commission does not intend to interfere with 
demand response programs that an LSE has established for its customers, 
and inclusion of the term demand response in the definition would thus 
not impede planning for demand response programs. PG&E's request to 
exclude from the definition of marketing functions those purchases made 
to serve bundled native load or pursuant to state obligations is mooted 
by our limitation of the definition to sales and not purchases.
    150. Our revised definition of transmission functions, limiting it 
to the day-to-day operation of the transmission system, should enable 
the free flow of the type of transmission information needed for 
planning purposes. And the removal of purchases from the definition of 
marketing functions should expand the category of personnel who are 
permitted access to the type of information necessary to engage in 
long-range system planning and competitive solicitations, whether 
conducted pursuant to state mandate or not.
    151. Idaho Power Company seeks guidance as to whether long-range 
planning personnel will be able to discuss information with 
transmission function employees. If the planning personnel do not 
otherwise qualify as marketing function personnel, they may hold such 
discussions. However, if the transmission employees in question have 
access to transmission function information and share it with the 
planning personnel, under the No Conduit Rule the planning personnel 
may not pass such information on to marketing function personnel.
    152. In Order No. 890, the Commission deferred consideration of the 
impediments to the planning process which some commenters therein 
stated were created by the Standards.\174\ Our modifications to the 
proposed definition of transmission functions (limiting such functions 
to the day-to-day operation of the transmission system) and to the 
proposed definition of marketing functions (removing purchases from the 
definition) address those concerns. TAPS and TDU Systems, however, 
raise a separate concern, asserting that the ability of public 
utilities to enjoy the relatively free flow of information permitted 
under the revised Standards may encourage them to refrain from sharing 
such information with non-affiliated entities in the planning process. 
We reiterate our commitment, set forth in Order No. 890, as to the 
desirability of a coordinated and open planning process.\175\ This 
proceeding is not the proper forum to address the appropriate extent of 
participation by interested entities in the planning processes of 
public utilities. However, as we stated in Order No. 890, the 
transmission provider must make available to any interested party the 
same data, information, and models it uses in the transmission planning 
process.\176\
---------------------------------------------------------------------------

    \174\ Order No. 890 at n.269.
    \175\ Id. at P 425.
    \176\ Id. at P 471.
---------------------------------------------------------------------------

8. Exclusion for Permitted Information Exchanges
a. Commission Proposal
    153. In the NOPR, the Commission proposed an exclusion to both the 
Independent Functioning Rule and the No Conduit Rule for information 
that we believed required communication between transmission function 
employees and marketing function employees. Two categories of 
information were implicated: information regarding generation necessary 
to perform generation dispatch, and information necessary to maintain 
or restore operation of the transmission system. The Commission 
proposed that in situations requiring the exchange of such information, 
contemporaneous records be made of the communication, except in cases 
of emergency, when recordation was to be made as soon after the fact as 
practicable. The NOPR also proposed that the records of the 
communications be retained for a period of five years. See proposed 
sections 358.5(b), 358.6(b), 358.7(h).
b. Comments
    154. Commenters raised the general concern that the provisions 
designating the proposed permitted interactions are drafted too 
narrowly to fully cover the types of communications they purport to 
exclude.\177\ With respect to generation dispatch, MidAmerican believes 
that the exclusion should cover all communications necessary to perform 
generation dispatch, and suggests eliminating the words ``regarding 
generation.'' \178\ ALCOA suggests the exclusion should cover the 
situation where transmission function employees perform generation 
dispatch.\179\ NiSource asks the Commission to delineate which 
generation-related information is exempted.\180\ Bonneville contends 
that communications necessary to provide generation inputs for 
ancillary and control area services should be permissible, and not 
subject to the contemporaneous record requirement.\181\
---------------------------------------------------------------------------

    \177\ See, e.g., Nisource at 21-22; MidAmerican at 15-16.
    \178\ MidAmerican at 15.
    \179\ ALCOA at 6.
    \180\ Nisource at 23.
    \181\ Bonneville at 6.
---------------------------------------------------------------------------

    155. Commenters also seek clarification on the type of generation

[[Page 63814]]

information transmission function employees may share with generation 
employees. E.ON and PSEG seek confirmation that employees engaged in 
generation-related activities may receive transmission function 
information from transmission function employees.\182\ Likewise, EEI 
requests that the Commission clarify that the exclusion for information 
necessary to maintain or restore operation of the transmission system 
includes information necessary for the scheduling of transmission-
related generation outages.\183\ PSEG further requests that the 
Commission address the circumstance where employees performing 
generation-related activities are the same employees performing trading 
activities.\184\
---------------------------------------------------------------------------

    \182\ PSEG at 8; E.ON at 21.
    \183\ EEI at 53; ATC at 10; Wisconsin Electric at 6-7.
    \184\ PSEG at 9.
---------------------------------------------------------------------------

    156. Numerous commenters requested clarification on the scope of 
the reliability exemption.\185\ National Grid requests clarification 
that the reliability exclusion is not limited to those communications 
related only to transmission system reliability,\186\ and other 
commenters believe the exclusion should cover all types of reliability 
communications.\187\ PSEG requests, instead, specific examples of 
permitted reliability communications.\188\ E.ON suggests that these 
excluded communications for reliability purposes can only be made to 
the same extent that a transmission provider would communicate with a 
similarly situated non-affiliated entity engaged in wholesale merchant 
operations.\189\
---------------------------------------------------------------------------

    \185\ See, e.g., National Grid at 10-11; PSEG at 17-18; Nisource 
at 22-23; ATC at 4; EEI at 51-52; Destin at 13; E.ON at 19-20; 
MidAmerican at 14. Reliability Standards refer to the standards 
promulgated by the North American Electric Reliability Corporation 
(NERC) and approved by the Commission.
    \186\ National Grid at 10-11.
    \187\ See, e.g., National Grid at 10-11; MidAmerican at 14; 
Ameren at 25; Wisconsin Electric at 6-7.
    \188\ PSEG at 6.
    \189\ E.ON at 19-20; see also TAPS at 45.
---------------------------------------------------------------------------

    157. Destin contends that the proposed rule discriminates against 
natural gas transmission providers, averring that the two types of 
permitted information apply only to electric transmission 
providers.\190\
---------------------------------------------------------------------------

    \190\ Destin at 12.
---------------------------------------------------------------------------

    158. Ameren notes that elsewhere in the proposed regulations, the 
Commission uses the terms ``permitted information'' or ``permitted 
information exchanges.'' Ameren requests that the Commission be 
consistent throughout the Final Rule.\191\
---------------------------------------------------------------------------

    \191\ Ameren at 27.
---------------------------------------------------------------------------

    159. Some commenters propose alternative methods of defining 
permitted exchanges. Western Utilities urges the Commission to 
recategorize the descriptions proposed in sections 358.5(b), 358.6(b) 
and 358.7(h) as a permissible subset of non-public transmission 
function information.\192\ SCE prefers a modification to section 
358.6(b) that describes a particular set of safe harbor exchanges.\193\
---------------------------------------------------------------------------

    \192\ Western Utilities at 10-11.
    \193\ SCE at 6.
---------------------------------------------------------------------------

    160. EEI contends that the Commission's exclusions for permitted 
information exchanges should be phrased as ``exemptions'' rather than 
``permitted communications'' to clarify that other forms of 
communication, such as social conversations, are not implicitly barred 
because they are not identified as ``permitted'' communications.\194\
---------------------------------------------------------------------------

    \194\ EEI at 50.
---------------------------------------------------------------------------

    161. SCANA would like confirmation that if generation dispatch 
employees are part of the company's transmission function, not its 
marketing function, then communications between such employees and non-
dispatch-oriented transmission function employees necessary to perform 
generation dispatch and to maintain or restore operation of the 
transmission system are permissible.\195\
---------------------------------------------------------------------------

    \195\ SCANA at 8-10.
---------------------------------------------------------------------------

    162. SCE requests that the Commission include the phrase ``non-
public transmission'' to the exclusion for permitted information 
exchanges to avoid the unintended implication that all exchanges 
between marketing function employees and transmission function 
employees are banned except the specific exchanges described.\196\
---------------------------------------------------------------------------

    \196\ SCE at 6-7.
---------------------------------------------------------------------------

    163. PSEG seeks clarification that marketing function employees may 
communicate with employees of a gas LDC that is not affiliated with a 
gas transmission provider. PSEG asserts that communications in such a 
circumstance are essential for generation dispatch purposes and pose no 
threat of prohibited communications.\197\
---------------------------------------------------------------------------

    \197\ PSEG at 6, 10-11.
---------------------------------------------------------------------------

    164. Ameren requests that the Commission clarify that proposed 
section 358.6(b) does not preclude support personnel from sharing 
information related to a marketing affiliate's specific transmission 
service request.\198\ Ameren also asks the Commission to clearly state 
in the Final Rule that the permitted information exclusion includes the 
operating information exemption it states is permitted under Order No. 
2004.\199\
---------------------------------------------------------------------------

    \198\ Ameren at 27.
    \199\ Id.
---------------------------------------------------------------------------

    165. Many commenters express confusion with respect to the record 
requirement arising from proposed sections 358.2(d) and 358.7(h). 
Commenters request clarification that the record retention requirement 
is limited to the two narrow categories of permitted communications 
identified in section 358.7(h).\200\ Likewise, National Grid requests 
the Commission confirm that the contemporaneous record requirement 
applies only to the types of communications addressed in sections 
358.5(b), 358.6(b) and 358.7(h).\201\
---------------------------------------------------------------------------

    \200\ See, e.g., Idaho Power at 9-10; National Grid at 22-24; 
MidAmerican at 13; Xcel at 22.
    \201\ National Grid at 22-23.
---------------------------------------------------------------------------

    166. Some commenters expressed the concern that the contemporaneous 
record requirement presents too great an administrative burden.\202\ 
NiSource would eliminate the contemporaneous requirement, stating the 
Commission neither explains why the records are necessary, nor 
justifies the burden placed on transmission providers.\203\
---------------------------------------------------------------------------

    \202\ See, e.g. , NiSource at 19; Destin at 13; ATC at 16.
    \203\ NiSource at 19.
---------------------------------------------------------------------------

    167. Other commenters seek clarifications on the mechanics of the 
record requirement. Idaho Power and Puget Sound ask whether a recorded 
phone line satisfies the recordation requirement.\204\ Puget Sound 
requests that the Commission not require indexing of these recorded 
communications.\205\ ATC requests that the Commission expressly clarify 
that permitted communications need not also be contemporaneously posted 
on the OASIS.\206\
---------------------------------------------------------------------------

    \204\ Idaho Power at 9-10; Puget Sound at 11.
    \205\ Puget Sound at 12-13.
    \206\ ATC at 8.
---------------------------------------------------------------------------

    168. Commenters disagree on how much detail should be required for 
cross-functional meeting records. Puget Sound prefers to record only 
who attended, the agenda, verification that no discussion of nonpublic 
transmission function information took place, and any items circulated 
for the meeting, instead of keeping detailed records.\207\ Similarly, 
E.ON would like assurance that these meeting records need not contain a 
``word-for-word'' transcription, so long as the key points are 
addressed.\208\ EPSA, however, believes that there should be an actual 
transcript or recording of any interaction between restricted 
employees.\209\
---------------------------------------------------------------------------

    \207\ Puget Sound at 13.
    \208\ E.ON at 23.
    \209\ EPSA at 10-11.

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[[Page 63815]]

    169. INGAA contends that this recordation requirement implies, 
through the use of the word ``exchange,'' that it extends to 
information received from the marketing function employee.\210\ INGAA 
asks the Commission to clarify that the recordation requirement applies 
only to non-public transmission information provided to a marketing 
function employee, and not to information received from a marketing 
function employee.\211\
---------------------------------------------------------------------------

    \210\ INGAA at 55-58.
    \211\ INGAA at 57-58.
---------------------------------------------------------------------------

    170. Wisconsin Electric urges the Commission to consider adopting a 
six-month time period, after which disclosure of non-public 
transmission function information to a marketing employee is no longer 
a violation.\212\ And Williston requests that the five-year retention 
requirement for the contemporaneous records of its communications be 
reduced to three years.\213\
---------------------------------------------------------------------------

    \212\ Wisconsin Electric at 7-8.
    \213\ Williston at 11.
---------------------------------------------------------------------------

    171. Williston believes that the new Standards should allow 
whatever steps are necessary to be taken during an emergency, without 
regard to the record requirement.\214\ Likewise, ATC and EEI state that 
any contemporaneous records created after an emergency should simply be 
assembled only to the extent possible and to the best knowledge of that 
company at that time, and that no extraordinary duties should be 
imposed to meet the Standards' requirements.\215\
---------------------------------------------------------------------------

    \214\ Williston at 9-10.
    \215\ ATC at 16; EEI at 4.
---------------------------------------------------------------------------

    172. Williston asserts that requiring records for non-emergency 
communications places more onerous controls on the sharing of 
information, without justification.\216\ Williston also requests 
assurances that in situations where such communications are provided to 
the Commission, that they will remain non-public.\217\
---------------------------------------------------------------------------

    \216\ Williston at 10.
    \217\ Id. at 11.
---------------------------------------------------------------------------

    173. National Grid proposes that the Commission eliminate the 
proposed requirement that each company's Chief Compliance Officer 
direct and manage contemporaneous recordings, and allow each company to 
individually determine how best to comply with the contemporaneous 
record requirement.
c. Commission Determination
    174. As discussed above, the Commission is eliminating the 
corporate separation approach to the Independent Functioning Rule, and 
transmission function employees are no longer barred from interacting 
with all the employees of a marketing or energy affiliate (only 
marketing function employees). Therefore, the occasions where 
transmission function employees will legitimately need to interact in a 
professional capacity with employees barred from doing so under the 
Independent Functioning Rule is greatly reduced from the current 
Standards. This is especially true in the critical areas of reliability 
and generation dispatch, as it is rarely marketing function personnel 
who engage in these activities. However, to cover any isolated 
circumstances that may remain, such as in the case of smaller utilities 
whose employees may perform multiple job duties, the Commission 
proposed in the NOPR an exclusion to the Independent Functioning Rule 
and the No Conduit Rule to ensure that where certain critical functions 
were concerned, employees would not hesitate to interact with one 
another for fear of violating the Standards.
    175. The bulk of the confusion which seems to have arisen over the 
exclusion, as expressed in the comments, centers on generation 
dispatch. Because dispatch is not inherently a marketing function, and 
because persons engaged in marketing are very unlikely to also be 
engaged in generation dispatch, commenters have assumed the Commission 
meant the exclusion to cover some broader situation. That is not the 
case. It was intended only for those rare instances, such as with 
smaller utilities, where some overlap of duties might exist.
    176. To avoid any further confusion, the Commission eliminates from 
section 358.7(h) the exclusion pertaining to generation dispatch, and 
instead broadens the exclusion for reliability to include generation 
concerns. The Commission further broadens the exclusion for reliability 
to include compliance with reliability standards generally. The 
proposed first exclusion is thus eliminated and the proposed second 
exclusion is split into two parts, to read as follows: ``information 
pertaining to compliance with Reliability Standards approved by the 
Commission,'' and ``information necessary to maintain or restore 
operation of the transmission system or generating units, or that may 
affect the dispatch of generating units.'' Furthermore, to avoid 
duplication, the Commission deletes the redundant statements of the 
exclusion in sections 358.5(b) and 358.6(b). The Commission also 
deletes the statement of the exclusion from section 358.2, as it 
contains a level of detail inappropriate for a statement of general 
principles. The statements of both the exclusion and the retention 
requirement pertaining to it are now contained in section 358.7(h), 
under the Transparency Rule.
    177. The Commission agrees with SCE that the phrase ``non-public 
information'' should be added to the statement of the exclusion, to 
avoid the implication that exchanges of public information must also be 
recorded, and modifies the text accordingly. Likewise, the Commission 
clarifies, in response to a request from INGAA, that it is transmission 
function information that is not to be disclosed, and as to which the 
exclusion applies, and modifies the language of the exclusion 
accordingly. However, we remind INGAA that with respect to the 
Independent Functioning Rule, it is the interaction of transmission 
function employees and marketing function employees that is at issue. 
Such interactions ought not to occur, except for non-business related 
activities or in connection with the exclusion under discussion.
    178. Some commenters are concerned that acceptable interactions 
among employees not covered by the exclusion might be inadvertently 
swept into the recordation requirement by use of the term 
``permitted.'' To avoid any confusion over the scope of the term, the 
heading will read: ``Exclusion for and recordation of certain 
information exchanges.'' We point out, however, that while transmission 
function employees and marketing function employees may talk about 
personal matters, which certainly need not be recorded, they are 
required to function independently from one another with respect to 
their work activities. Therefore, their interactions should be limited 
to social activities or to the necessary discussion of information that 
falls within the exclusion discussed. And, as indicated, in the latter 
case appropriate recordation is to be made.
    179. SCANA states that the employees of its affiliated utility who 
perform generation dispatch are included in the utility's transmission 
function, and requests guidance as to their status as it pertains to 
the exclusion. The Commission confirms that if such employees are not 
performing marketing functions, they may freely interact with other 
transmission function employees, and need not be concerned with the 
exclusion in question.
    180. PSEG seeks clarification that marketing function employees may 
communicate with employees of a gas LDC that is not affiliated with a 
gas transmission provider. Such communications would not involve 
transmission function employees or the dissemination of transmission 
function

[[Page 63816]]

information to an affiliated marketing function employee, and thus 
would be permissible.
    181. The Commission confirms that the exclusion does not implicate 
the processing of transmission service requests from an affiliate, 
which is permissible. Ameren requests the Commission to carry over into 
the revised Standards the following provision: ``A transmission 
provider is permitted to share information necessary to maintain the 
operations of the transmission system with its Energy Affiliates.'' 
This provision is no longer needed, due to the elimination of the 
concept of energy affiliates and the restrictions pertaining to such 
affiliates.
    182. Some commenters suggest the recordation requirements of the 
exclusion create an added burden on their operations. To the contrary, 
the Standards greatly reduce the burdens on operations. Under the 
existing Standards, transmission function employees must function 
independently from all the employees of a marketing affiliate, not just 
the marketing function employees. It can readily be seen that limiting 
the restriction on interactions to marketing function employees 
virtually eliminates the need for the exclusion itself. And in those 
rare cases noted in the exclusion where interaction between 
transmission function employees and marketing function employees may be 
required, the transmission provider is not prohibited from allowing the 
interaction, it simply must keep a record to enable the Commission to 
ascertain whether the communications fell within the scope of the 
exclusion or not.
    183. The Commission clarifies that the recording of any meetings 
and exchanges of information under the exclusion need not take any 
particular form; thus, a recorded phone line is sufficient. The 
Commission declines to require a transcript, as one commenter suggests, 
as this would be impracticable. The important element of the 
requirement is to make a record of what generally was discussed, and 
the date and persons involved. Puget Sound requests that entities not 
be required to index the communications. No particular extraction 
method for the data is required; however, communications subject to the 
exclusion must be retrievable in some fashion, in order for Commission 
staff to review them if necessary.
    184. The Commission agrees that an entity may designate someone 
other than its chief compliance officer as the person responsible for 
managing the recordings under the exclusion, and eliminates that 
restriction from the regulatory text. The five-year holding period 
matches that set forth in proposed section 358.4, and will be retained. 
This period, rather than the requested three-year period that governs 
the retention of certain shipper data under 18 CFR 284.12 (2008), will 
better enable Commission staff to access the information in the course 
of periodic audits or other interactions with the entity in question, 
which may occur on an infrequent basis.\218\
---------------------------------------------------------------------------

    \218\ It is also consistent with the time period adopted by the 
Commission in Order No. 677, amending the retention period for price 
data under 18 CFR 284.288(b) and 284.403(b) (natural gas) and 18 CFR 
35.37(d) (electricity), Revisions to Record Retention Requirements 
for Unbundled Sales Service, Persons Holding Blanket Marketing 
Certificates, and Public Utility Market-Based Rate Authorization 
Holders,FERC Stats. & Regs. ] 31,218 (2006); Order No. 670 
prohibiting market manipulation under 18 CFR part 1c, Prohibition of 
Energy Market Manipulation, FERC Stats. & Regs. ] 31,202 (2006); and 
the generally applicable five-year statute of limitations where a 
penalty provision does not impose its own statute of limitations. 
See FERC Stats. & Regs. ] 31,218 at n.6.
---------------------------------------------------------------------------

    185. With respect to emergency circumstances during which 
contemporaneous recordation cannot be made, the Commission clarifies 
that after-the-fact recordation need be assembled only to the extent 
possible; we recognize that the thoroughness of such notes or other 
recordation will vary greatly depending on the nature and extent of the 
emergency.
    186. The Commission declines to adopt a time period for the 
possible transition of non-public information to public information. 
The continued usefulness of such information to an affiliated marketing 
function employee will depend on the circumstances, and thus does not 
lend itself to a generic rule. The Commission also notes that its 
regulations govern whether information it receives is treated as non-
public or otherwise; as a general matter, information received in 
connection with investigations is so treated.\219\
---------------------------------------------------------------------------

    \219\ See 18 CFR part 1b (2008). See also 18 CFR 388.112 and 
388.113 (2008).
---------------------------------------------------------------------------

    187. Lastly, Destin suggests the proposed exclusion by its terms 
discriminates against the gas industry. That is not correct. The 
definition of transmission in section 358.3(f) includes gas 
transportation as well as electric transmission. Therefore, information 
necessary to maintain or restore operation of the transmission system 
refers to pipelines as well as to electric transmission.

D. The No Conduit Rule

    188. In the NOPR, the Commission proposed carrying forward the no 
conduit prohibition of the existing Standards, but modified it to 
encompass only marketing function employees, not all employees of a 
marketing or (for the electric industry) an energy affiliate, as the 
persons who could not receive transmission function information. As in 
the case of the analogous reform to the Independent Functioning Rule, 
this change restricts the category of individuals who should be walled 
off from transmission function information to those who can capitalize 
on it in the form of an undue preference.
1. Commission Proposal
    189. The Commission proposed prohibiting employees of a 
transmission provider from disclosing non-public transmission function 
information to the transmission provider's marketing function employees 
(defined to include employees of an affiliate). The Commission also 
proposed prohibiting the receipt of transmission function information 
by a transmission provider's marketing function employees. See proposed 
section 358.6.(a).
2. Comments
    190. EPSA agrees with all the NOPR proposals designed to strengthen 
the No Conduit Rule and approves broadening the scope of the term 
``non-public'' as much as feasible.\220\
---------------------------------------------------------------------------

    \220\ EPSA at 8.
---------------------------------------------------------------------------

    191. SCE states that the prohibition set forth in proposed section 
358.6(a)(1), prohibiting transmission function employees from 
disclosing non-public transmission function information to marketing 
function employees, is redundant, since all employees are so prohibited 
under proposed section 358.6(a)(4). SCE recommends that the provision 
be amended by substituting the words ``non-marketing function employees 
and affiliate employees'' for ``transmission function employees'' and 
deleting the proposed section 358.6(a)(4).\221\
---------------------------------------------------------------------------

    \221\ SCE at 6.
---------------------------------------------------------------------------

    192. Many commenters object that the prohibition against receiving 
non-public transmission function information ``from any source'' is, in 
one or more ways, unworkable and unenforceable.\222\ SCE claims the 
proposed section is also unfair because of what it sees as the 
Commission's intent to approach violations to the proposed Standards as 
per se violations.\223\ Commenters argue

[[Page 63817]]

that transmission providers cannot control whether affiliated marketing 
function employees receive non-public transmission function information 
from third parties, and many commenters further contend that the 
receiving marketing function employee may not have a way to know 
whether the information is non-public.\224\ SCE states that because the 
proposed prohibition operates against marketing function employees who 
work for transmission providers and not against those who do not, the 
Commission is providing the latter a competitive advantage in that they 
can receive information the former cannot.\225\ Western Utilities also 
complains that no posting ``cure'' provision has been provided for 
improper disclosures by a third party to a marketing function 
employee.\226\
---------------------------------------------------------------------------

    \222\ See, e.g., AGA at 23-25, ALCOA at 6-8, Ameren at 29-30, 
Arizona PSC at 3-5, Bonneville at 9-10, E.ON. at 14-15, EEI at 42-
44, Entergy at 3, Idaho Power at 10, INGAA at 43-45, INGAA Response 
at 3, NiSource at 19-20, PG&E at 22, PSEG at 15-16, Puget Sound at 
10-11, SCE at 2-5, Southern Co. Services at 25-26, Western Utilities 
at 5-7, and Wisconsin Electric at 9.
    \223\ SCE at 3.
    \224\ Western Utilities observes that the rule could potentially 
require a marketing function employee to maintain detailed records 
of all transmission function information he or she hears, and spend 
significant amounts of time investigating each item to ascertain 
whether it is non-public. SCE and Western Utilities state the 
prohibition could also be interpreted as preventing a marketing 
function employee from attending any meeting involving an ISO, NERC 
or Regional Entity because of the potential for disclosure of non-
public information. SCE at 4; Western Utilities at 6.
    \225\ SCE at 5.
    \226\ Western Utilities at 7.
---------------------------------------------------------------------------

    193. Many commenters recommend either amending this prohibition or 
eliminating it. Some commenters believe that the other sections of the 
No Conduit Rule adequately ensure that improper transfers of non-public 
information will not occur, and request that the Commission eliminate 
the proposed prohibition.\227\ SCE prefers amending the provision to 
prohibit disclosure or access to, rather than receipt of, non-public 
transmission function information.\228\ INGAA suggests, and others 
agree, that the prohibition ``from any source'' be eliminated and 
substituted with language limiting the provision to information 
received from a transmission function employee of the transmission 
provider.\229\
---------------------------------------------------------------------------

    \227\ NiSource at 19-20; Vectren at 6; Williston at 11-12.
    \228\ SCE at 5.
    \229\ INGAA at 45; PSEG at 15; E.ON at 3; Southern Co. Services 
at 26; E.ON at 3. Western Utilities contends that while the 
transmission provider cannot impose or enforce a compliance program 
on unaffiliated third parties, it may be liable under the proposed 
rule for prohibited disclosures by third parties. Western Utilities 
at 5.
---------------------------------------------------------------------------

    194. NGSA believes that the language of the No Conduit Rule 
prohibits distribution of non-public transmission information only to a 
pipeline's in-house marketing function, but does not reach marketing 
function employees of an affiliate. NGSA proposes amendments that it 
believes ensure that the prohibition reaches both.\230\ On the other 
hand, AGA does not believe that the No Conduit Rule should apply to 
non-jurisdictional marketing affiliates.\231\
---------------------------------------------------------------------------

    \230\ NGSA Reply Comments at 10-11.
    \231\ AGA at 3.
---------------------------------------------------------------------------

    195. Destin is concerned that the No Conduit Rule requires a 
transmission provider to ensure compliance by the marketing function 
employees, a task it contends is impracticable in the context of a 
large and diverse corporate family. Destin believes the proposed 
Standards effectively adopt a strict liability standard for 
transmission providers with respect to any violations that may be 
committed by a marketing affiliate, and that could subject a company to 
a double penalty for a violation.\232\ Dominion Resources agrees with 
Destin and queries whether the Commission has the authority to enforce 
violations of the Standards by employees of a transmission provider's 
affiliates.\233\
---------------------------------------------------------------------------

    \232\ Destin at 4-6.
    \233\ Dominion Resources at 15.
---------------------------------------------------------------------------

    196. TDU Systems requests that the Final Rule clarify that 
generation planners are subject to the No Conduit Rule.\234\
---------------------------------------------------------------------------

    \234\ TDU Systems at 5-6.
---------------------------------------------------------------------------

    197. Finally, Vectren asks the Commission to modify section 
358.2(c) to change it from passive voice to active voice, in order to 
make it consistent with other subsections of section 358.2 and to 
clarify who must comply with the provision.\235\
---------------------------------------------------------------------------

    \235\ Vectren at 11.
---------------------------------------------------------------------------

3. Commission Determination
    198. The Commission believes that the No Conduit Rule is at least 
equally as critical to the regulatory scheme of the Standards as is the 
Independent Functioning Rule, and adopts it in this Final Rule. 
However, we find that certain of the commenters' objections to the 
proposed regulatory text are well-taken, and modify it to (i) eliminate 
redundancies and (ii) address the concerns of those who interpret the 
rule as reaching the unwitting receipt of transmission function 
information by marketing function employees.
    199. We agree with SCE that the first subsection of the rule, 
proposed section 358.6(a)(1), which prohibits transmission function 
employees from disclosing non-public transmission function information 
to their transmission provider's marketing function employees, is 
redundant. This prohibition is necessarily included in the broader 
prohibition of the fourth subsection, proposed section 358.6(a)(4), 
which prohibits any employee of the transmission provider or of its 
marketing affiliates from making such disclosures. Therefore, we revise 
the regulatory text to eliminate the proposed first prohibition, and 
rearrange the remaining list of prohibitions.
    200. Many commenters object to the prohibition in proposed section 
358.6(a)(2), which prohibits marketing function employees from 
receiving non-public transmission function information from any source. 
They argue that such receipt could be unwitting, or forced upon the 
employees unwillingly. In light of the difficulties in determining 
whether a marketing function employee may have willingly and knowingly 
received such information, or rather whether he inadvertently received 
it, the Commission will eliminate this prohibition in section 358.6. 
The statement of the No Conduit Rule in the general principles section, 
section 358.2, is likewise revised to reflect this modification.
    201. We further clarify that contractors, consultants or agents, as 
well as employees, are covered by the prohibition in section 358.6(b), 
and modify the regulatory text accordingly. We also modify the 
corresponding regulatory text in the statement of general principles, 
section 358.2(c).
    202. NGSA contends that marketing function employees of an 
affiliate would not be reached under the No Conduit Rule. That is not 
the case. Marketing function employees are defined in section 358.3(d) 
to include employees, contractors, consultants or agents not only of 
the transmission provider, but also of an affiliate of the transmission 
provider.
    203. Destin claims that the proposed rule makes transmission 
providers responsible for the actions of their affiliates with respect 
to the disclosure of transmission function information. That is also 
not the case. Only one of the prohibitions is solely directed against 
transmission providers, and it prohibits them from using anyone as a 
conduit for improper disclosures, something that is clearly within 
their power. Of course, to the extent transmission providers have 
corporate control over an affiliate, they are expected to require the 
affiliate to abide by the Standards.
    204. TDU Systems requests clarification that generation planners 
are subject to the No Conduit Rule. The Commission confirms that not 
only are generation planners subject to the No Conduit Rule, but so are 
all other employees of a transmission provider or its marketing 
affiliate. In response to

[[Page 63818]]

Vectrin's request that the active voice be used in section 358.2(c) 
(the statement of general principles relating to the No Conduit Rule), 
the Commission believes no change is appropriate. The preceding two 
general principles refer to affirmative obligations, whereas the 
principle in question refers to an obligation to refrain from taking 
certain actions, which lends itself to the passive voice.

E. Transparency Rule

    205. In addition to the Independent Functioning Rule and the No 
Conduit Rule, the NOPR proposed a Transparency Rule, the provisions of 
which are designed to alert interested persons and the Commission to 
potential acts of undue preference. Most of the various posting 
requirements of the existing Standards were placed in this section, and 
in some cases modified to streamline them and conform them to the new 
approaches proposed in the NOPR. The various posting requirements are 
discussed below.
1. Waivers and Exercises of Discretion
a. Commission Proposal
    206. The Commission proposed carrying forward most of the existing 
provisions regarding the non-discrimination requirements of section 
358.4, including the provisions regarding the posting of waivers and 
exercises of discretion. These provisions were proposed to remain under 
section 358.4.
b. Comments
    207. Many commenters contend that the requirement that pipelines 
log and post all ``exercises of discretion'' is vague, unnecessarily 
broad, and overly burdensome.\236\ Both Williston and INGAA argue that 
the NOPR expands this requirement without justification.\237\ INGAA and 
NiSource request that the Commission eliminate the requirement 
altogether.\238\
---------------------------------------------------------------------------

    \236\ See, e.g., INGAA at 50; Nisource at 17; NGSA Reply 
Comments at 5-7; Kinder Morgan at 5-6; Spectra at 9-10; Williston at 
15-17.
    \237\ Williston at 15-17; INGAA at 50.
    \238\ INGAA at 50; Nisource at 17.
---------------------------------------------------------------------------

    208. As an alternative to eliminating the requirement, several 
commenters request that the Commission further clarify its scope.\239\ 
INGAA requests that the Commission clarify that a pipeline need not 
post all acts of discretion inherent in its day-to-day operations. 
INGAA and Kinder Morgan request clarification that the provision does 
not cover information that must be posted under other regulatory or 
tariff requirements, arguing that would create duplicative posting 
requirements.\240\ Many commenters request clarification that the 
provision does not apply to acts of discretion regarding tariff 
provisions that, by their own terms, allow for discretion in their 
application.\241\ INGAA and Dominion Resources assert that subsequent 
acts of discretion within the tariff's parameters should be presumed 
non-discriminatory, unless and until someone raises a concern.\242\
---------------------------------------------------------------------------

    \239\ See, e.g., INGAA at 50; NGSA Reply Comments at 5-7; Kinder 
Morgan at 5-6; Spectra at 9-10; Williston at 15-17.
    \240\ INGAA at 52-53; Kinder Morgan at 6.
    \241\ See, e.g., INGAA at 53-54; NGSA Reply Comments at 5-7; 
Spectra at 9-10; Dominion Resources at 19; NiSource at 18.
    \242\ INGAA at 53-54; Dominion Resources at 19.
---------------------------------------------------------------------------

    209. Other commenters propose to limit the scope of this posting 
requirement in varying ways. NGSA proposes that the Commission adopt 
the following rule of thumb: That the pipeline need not post each 
individual use of a waiver that is generic in application, posted, 
available to all shippers and cannot be denied when requested; but that 
the pipeline should post non-generic waivers that are not applied on 
every request or that are shipper-specific.\243\ Alternatively, 
Williston believes that only a discretionary waiver of a tariff 
provision that specifically provides for discretionary waiver need be 
posted.\244\ Similarly, Dominion Resources contends that only waivers 
should be posted, and not ``acts of discretion,'' noting that myriad 
acts of discretion are continually being made.\245\ Chandeleur believes 
that the retention of documents requirement should refer only to the 
log of the acts of waiver and exercises of discretion, contending that 
retention requirements and reproduction specifications for Internet Web 
site information is addressed in the Commission's regulations at 
section 284.12(b)(3)(v).\246\
---------------------------------------------------------------------------

    \243\ NGSA Reply Comments at 7.
    \244\ Williston at 16.
    \245\ Dominion Resources at 17-20.
    \246\ Chandeleur at 5.
---------------------------------------------------------------------------

    210. Commenters also suggest other modifications to this 
requirement. NGSA urges that the Commission clarify that the non-
discrimination posting requirements set forth in proposed section 358.4 
apply uniformly to all gas industry transmission providers, regardless 
of whether the transmission provider has marketing affiliates or 
whether those marketing affiliates transact business on the 
pipeline.\247\ In addition, NGSA requests that the Commission establish 
a standardized format for the posting of offers of a discount and 
discretionary waivers, to ensure that the disclosures are more 
accessible and include all relevant information.\248\ And Williston 
requests that the Commission reduce the retention period to three 
years, instead of five.\249\
---------------------------------------------------------------------------

    \247\ NGSA Reply Comments at 3-5. NGSA alternatively requests, 
in the event the Commission believes the scope of this request falls 
outside of this proceeding, that the Commission initiate an 
expedited ``companion proceeding'' that seeks to apply the posting 
requirements generally to all pipelines and not only to a particular 
subset of pipelines.
    \248\ NGSA Reply Comments at 16-17.
    \249\ Williston at 15-17.
---------------------------------------------------------------------------

    211. Commenters also request modifications to the proposed 
requirement regarding posting of discounts, set forth in section 
358.4(b). Chandeleur believes that proposed section 358.4(b) contains 
unnecessary overlap with the existing regulatory text in section 
250.16(d) of the Commission's regulations, and requests that the 
Commission adopt the approach of having only one subparagraph within 
the regulation setting out the elements required to meet the reporting 
burden for Form 592.\250\
---------------------------------------------------------------------------

    \250\ Chandeleur at 6.
---------------------------------------------------------------------------

    212. ATC believes that the discount requirement should not apply to 
transmission providers that participate in an RTO or ISO, if the 
discount is granted by the RTO or ISO without the consent or approval 
of the transmission provider.\251\
---------------------------------------------------------------------------

    \251\ ATC at 14.
---------------------------------------------------------------------------

c. Commission Determination
    213. Proposed section 358.4, which generally deals with non-
discrimination requirements, also contains the posting requirements for 
notices of waivers, notices of exercises of discretion, and discounts. 
Inasmuch as these posting aspects of the proposed section relate to the 
Transparency Rule, we move them to section 358.7, which includes the 
other posting requirements under the Standards. Further, in response to 
NGSA's request, we clarify that section 358.4 as a whole, as well as 
the posting requirements moved to section 358.7, apply to all 
transmission providers, in accordance with the limitations set forth in 
section 358.1.
    214. Commenters had no objections to the general requirements of 
section 358.4, other than regarding waivers, exercises of discretion 
and discounts. The Commission is persuaded by the arguments of many 
commenters that a blanket requirement to post all waivers and exercises 
of discretion goes beyond what is needed to alert customers and others 
to possible acts of undue discrimination or preferences in favor of an 
affiliate. Furthermore, such posting is

[[Page 63819]]

in some cases redundant to the posting requirements set forth elsewhere 
in our regulations. Therefore, although the Commission confirms the 
substantive non-discrimination requirements of section 358.4, we modify 
the posting requirements in a number of ways.
    215. As a preliminary matter, the Commission clarifies that for 
these purposes, a waiver is considered to be a determination to do or 
not do something that is specifically required to be done or not done 
by the transmission provider's tariff. An act of discretion, on the 
other hand, is an action that is within the scope of the tariff 
provision in question, and which typically involves an exercise of 
judgment on the part of the transmission provider. The Commission has 
in some cases approved tariffs for interstate pipelines that grant the 
pipeline the right to waive compliance with provisions of its tariff, 
typically for a given entity for a limited term.\252\ We will continue 
to require transmission providers to record in a log such waivers, if 
granted in favor of an affiliate, and to post the log on the 
transmission provider's Internet Web site (however, if a specific 
waiver is approved by Commission order, such waiver need not be posted 
as it will already be public). We also add a definition of waiver to 
the regulatory text, to read: ``Waiver means the determination by a 
transmission provider, if authorized by its tariff, to waive any 
provisions of its tariff for a given entity.'' See section 358.3(m). 
Limiting the recording of waivers to those in favor of an affiliate 
will reduce the administrative burden on the pipeline, while capturing 
any instances of potential undue discrimination.
---------------------------------------------------------------------------

    \252\ See, e.g., CenterPoint Energy Gas Transmission Company 
FERC Gas Tariff, Sixth Revised Volume No. 1, Sec.  15.1.
---------------------------------------------------------------------------

    216. The Commission further determines that transmission providers 
need not post exercises of discretion that are within the scope of a 
tariff provision, unless in any given instance such posting is required 
under any other of our regulations. Such acts are already permitted by 
the tariff, and therefore fall within the scope of matters which the 
Commission has approved. Furthermore, a transmission provider, in 
particular a pipeline, makes many of these judgment calls every day on 
an ongoing basis; recording all these matters would place a substantial 
administrative burden on it.
    217. The Commission declines to modify the proposed five-year 
retention requirement for recordation of the acts of waiver, as the 
five-year period will better enable Commission staff to monitor 
compliance.\253\ Records may be examined only periodically, as when an 
audit is performed, and therefore earlier deletion could impede the 
necessary review. However, we observe that the volume of material to be 
retained should be substantially reduced, in light of the Final Rule's 
more circumscribed reporting requirements.
---------------------------------------------------------------------------

    \253\ See also our discussion above concerning the five-year 
retention period for certain information exchanges under section 
358.7(h).
---------------------------------------------------------------------------

    218. The Commission further clarifies that where the information 
called for under the posting requirements of the Standards is 
duplicative of information required to be posted by transmission 
providers under other provisions of our regulations or orders, such as 
the posting requirements of 18 CFR part 284 and 18 CFR part 37, only a 
single posting is required, and the transmission provider is to follow 
the posting requirements, inclusive of substance, venue, and timing, of 
the other regulations or orders. We believe the posting requirements 
contained in such regulations or orders are sufficient to fulfill the 
transparency goals of the Standards of Conduct. Inasmuch as discount 
information is required to be posted both for the gas and electric 
industries under other provisions of our regulations, we delete 
proposed section 358.4(b), which had set forth proposed requirements 
for the posting of discount information. Also, if a transmission owner 
is a member of an RTO or ISO and has not participated in the granting 
of a discount by the RTO or ISO, it would not be subject to the 
obligation to post such discounts.
 2. Other Posting Requirements
a. Commission Proposal
    219. In addition to the posting requirements relating to the non-
discrimination provisions of section 358.4, the NOPR proposed 
streamlining and updating other posting requirements imposed on 
transmission providers by the Standards, and modifying them to take 
into account elimination of the concept of energy affiliates.
b. Comments
i. Contemporaneous Disclosure
    220. INGAA requests the Commission to modify section 358.7(a), 
which requires the contemporaneous posting of improper disclosures of 
non-public transmission function information, to also provide for 
posting of a notice of a marketing function employee's receipt of non-
public transmission function information (unless the Commission deletes 
proposed section 358.6(a)(2) of the No Conduit Rule prohibiting such 
receipt).\254\ NGSA disagrees with INGAA that posting be made of a 
notice only, and not the disclosure itself, when the information 
received by a marketing function employee comes from a third party and 
not from the affiliated transmission provider.\255\ It further requests 
that the Commission require that the marketing function employee 
immediately alert its affiliated transmission provider when it becomes 
aware it has received non-public transmission information, so that the 
transmission provider may post the disclosure.\256\
---------------------------------------------------------------------------

    \254\ INGAA at 45; INGAA Response at 3.
    \255\ NGSA Reply Comments at 8.
    \256\ Id.
---------------------------------------------------------------------------

    221. EEI supports the proposed provision requiring a transmission 
provider that discloses non-public transmission customer information to 
only post notice that such non-public transmission customer information 
was disclosed, and not the contents of the information. EEI proposes 
that a similar distinction be applied to Critical Energy Infrastructure 
Information (CEII) that has been inadvertently disclosed.\257\ 
Likewise, National Grid proposes posting only a notice when disclosure 
of the information itself may breach some other public policy 
goal.\258\
---------------------------------------------------------------------------

    \257\ EEI at 54.
    \258\ National Grid at 26-27.
---------------------------------------------------------------------------

    222. ATC requests that the regulatory language be revised to 
indicate the transmission provider must post immediately ``upon 
discovery of disclosure,'' rather than upon the actual disclosure.\259\
---------------------------------------------------------------------------

    \259\ ATC at 2, 12.
---------------------------------------------------------------------------

ii. Specific Transaction Information
    223. Many commenters request that the Commission clarify the 
exclusion to contemporaneous disclosure of non-public transmission 
function information that proposed section 358.7(b) provides for a 
marketing function employee's specific request for transmission 
service.\260\ MidAmerican proposes that the definition of 
``transmission customer'' be modified to add that they could be either 
affiliated or unaffiliated.\261\ Although Ameren supports proposed 
section 358.7(b), it seeks clarification that the transaction-specific 
exclusion includes information that relates to its ability to take 
service on an ongoing basis, including outages or other system 
conditions.\262\ Dominion Resources requests that the Commission modify 
the exclusion so that

[[Page 63820]]

transmission function employees may discuss with marketing function 
employees any information that relates solely to service provided by 
the transmission provider to the employer of the marketing function 
employee, or requests for such service.\263\
---------------------------------------------------------------------------

    \260\ NOPR at P 58.
    \261\ MidAmerican at 18-19.
    \262\ Ameren at 33.
    \263\ Dominion Resources at 21.
---------------------------------------------------------------------------

iii. Voluntary Consent Provision
    224. SCE requests that section 358.7(c), providing for a 
transmission customer's voluntary consent to disclosure of its customer 
information, be moved to section 358.5(c), which deals with the 
separation of functions under the Independent Functioning Rule, to 
suggest a limitation for non-affiliated customers.\264\
---------------------------------------------------------------------------

    \264\ SCE at 7.
---------------------------------------------------------------------------

    225. MidAmerican asks the Commission to clarify that the proposed 
voluntary consent provision is unnecessary for generation output where 
the host utility has a legal obligation to purchase the output of the 
generator. It also requests the Commission to modify the provision to 
clarify that the rule refers specifically to the transmission 
``function'' and disclosure of ``non-public transmission'' 
information.\265\
---------------------------------------------------------------------------

    \265\ MidAmerican at 19.
---------------------------------------------------------------------------

iv. Identification of Affiliate Information
    226. APGA and EPSA urge the Commission to retain the requirement to 
post organizational charts under section 358.7(e),\266\ which deals 
with identification of affiliate information, and APGA requests the 
charts be color-coded as well.\267\ APGA submits that the elimination 
of the energy affiliates concept does not eliminate the need for such a 
color-coded organizational chart.\268\
---------------------------------------------------------------------------

    \266\ APGA at 3-4; EPSA at 11.
    \267\ APGA at 3-4.
    \268\ APGA at 3-4.
---------------------------------------------------------------------------

    227. With respect to the requirement that a pipeline post the names 
and addresses of all its affiliates that employ or retain marketing 
function employees,\269\ INGAA requests that the Commission confirm 
that the posting requirements are limited to information related only 
to those marketing affiliates that hold or control capacity on their 
affiliated pipeline, and that this posting requirement does not apply 
to a marketing function that does not hold capacity on its affiliated 
pipeline. INGAA requests that if the Commission so confirms, it should 
amend the provision to make the distinction clear.\270\
---------------------------------------------------------------------------

    \269\ NOPR at P 59.
    \270\ INGAA at 54-55.
---------------------------------------------------------------------------

    228. MidAmerican requests that proposed section 358.7(e)(2), which 
requires a listing of employee-staffed facilities shared by the 
transmission provider and marketing function employees, be limited only 
to those buildings where the transmission provider and its marketing 
function employees conduct customary duties, so as to exclude 
facilities where marketing function employees visit only on 
occasion.\271\ Similarly, ATC requests that the Commission clarify the 
definition of ``employee-staffed facilities'' to limit its 
applicability to places at which both transmission function and 
marketing function employees have offices or are regularly 
located.\272\
---------------------------------------------------------------------------

    \271\ MidAmerican at 19-20.
    \272\ ATC at 15.
---------------------------------------------------------------------------

v. Identification of Employee Information
    229. MidAmerican requests that the provision in proposed section 
358.7(f) that requires a transmission provider to post on its OASIS or 
Internet Web site the job titles and job descriptions of its 
transmission function employees, with the exception of clerical, 
maintenance, and field positions,\273\ be clarified to indicate which 
positions are excluded as ``clerical, maintenance and field 
positions.'' \274\
---------------------------------------------------------------------------

    \273\ NOPR at P 59-60.
    \274\ MidAmerican at 11-12.
---------------------------------------------------------------------------

    230. EEI believes that this posting requirement should conform to 
the employee functional approach. EEI asserts that the proposed 
requirement, if left in place, would grandfather much of the 
inefficiency and confusion of the corporate separation approach.\275\
---------------------------------------------------------------------------

    \275\ EEI at 55-56.
---------------------------------------------------------------------------

vi. Timing and General Requirements of Postings
    231. SCE recommends that the Commission eliminate the distinction 
in proposed section 358.7(g) between Internet Web sites and OASIS, and 
allow electric utilities as well as pipelines to post information on 
their Internet Web sites.\276\ SCE states that, as a member of an ISO, 
it does not maintain its own OASIS.\277\ ALCOA requests that the 
Commission recognize that marketing function employees are not granted 
access to OASIS, and provide an avenue for them to cure the prohibited 
disclosure of non-public information.\278\
---------------------------------------------------------------------------

    \276\ The definition of Internet Web site in proposed section 
358.3(b) indicated that pipelines post the information required 
under sections 284.12 and 284.13 on their Internet Web site, and the 
definition of OASIS in proposed section 358.3(e) indicated that 
public utilities post the information required under part 37 on 
their OASIS. Various subsections of proposed section 358.7 continued 
this distinction between pipelines and public utilities for the 
posting requirements under the Standards. See, e.g., proposed 
sections 368.7(a)(1), (a)(2), (c), (d), (e)(1), (e)(2), (f)(1), 
(f)(2) and (g)(1).
    \277\ SCE at 10.
    \278\ ALCOA at 7-8.
---------------------------------------------------------------------------

    232. With respect to the suspension of posting requirements during 
an emergency, SCE recommends that ``earthquake'' be added to the list 
of emergencies that qualify as allowing a transmission provider to 
suspend posting requirements.\279\
---------------------------------------------------------------------------

    \279\ SCE at 11.
---------------------------------------------------------------------------

    233. While supporting the Commission's decision to suspend posting 
requirements in the event of an emergency, Chandeleur requests 
clarification on the method of implementation for this 
requirement.\280\ And E.ON states that the Commission should retain the 
existing exclusion from posting for emergency circumstances.\281\
---------------------------------------------------------------------------

    \280\ Chandeleur at 7.
    \281\ E.ON at 22-23.
---------------------------------------------------------------------------

vii. Other
    234. Commenters raised concerns about potential conflicts between 
the proposed posting requirements in the NOPR and the posting 
requirements in the NAESB standards. The Arizona PSC urges the 
Commission to clarify, pending revision of the NAESB standards, that 
the existing NAESB standards do not impose a posting requirement that 
is different from the modified posting requirements under the new 
rules.\282\ In addition, Chandeleur suggests that the Commission 
provide a waiver of those NAESB standards that relate to the format and 
content of postings which it contends will be outdated after the 
effective date of the new Standards.\283\
---------------------------------------------------------------------------

    \282\ Arizona PSC at 7; see also EEI at 53.
    \283\ Chandeleur at 8.
---------------------------------------------------------------------------

c. Commission Determination
i. Contemporaneous Disclosure
    235. Section 358.7(a)(1) requires that if non-public transmission 
function information is disclosed to a marketing function employee, the 
transmission provider must post the information on its Web site. Some 
commenters object to the posting requirement where non-public 
information is disclosed by the transmission provider, arguing that 
such posting will provide an advantage to a competitor. We disagree. 
Such posting, by making the information public, will place the 
competitor and the transmission provider's affiliated marketer on an 
even footing. Therefore, this provision will be retained.

[[Page 63821]]

    236. Western Utilities and INGAA raise concerns over the posting 
provision in instances where a marketing affiliate receives non-public 
transmission function information from a third party. Since we are 
eliminating that particular prohibition of the No Conduit Rule, no 
change to the posting provision is necessary. However, we note that if 
a transmission provider uses anyone as a conduit for improper 
disclosures, such an event would be considered an improper disclosure 
and should be posted.
    237. The Commission proposed in section 358.7(a)(2) that only a 
notice be posted in the event non-public transmission customer 
information is improperly disclosed, rather than requiring posting of 
the disclosure itself, to prevent a further breach of confidentiality. 
We extend this distinction between posting of a notice and posting the 
disclosure itself to include CEII,\284\ as well as any other 
information that the Commission by law has determined is to be subject 
to limited dissemination. However, we decline to extend it to cover 
information where disclosure may be deemed to breach some other public 
policy goal, as requested by National Grid. This standard is too 
imprecise to have practical application. If a transmission provider is 
concerned about disclosure in any given instance, it may seek guidance 
from the Commission.
---------------------------------------------------------------------------

    \284\ This limitation does not affect our determinations made 
elsewhere regarding the need to disclose information that may 
contain CEII, or the appropriate methods for entities to access such 
CEII, nor our adoption of mandatory reliability standards for CEII. 
See, e.g., Order 890 at P 403-404; Mandatory Reliability Standards 
for Critical Infrastructure Protection, Order No. 706, 73 Fed. Reg. 
7368 (Feb. 7, 2008), 122 FERC ] 61,040, reh'g denied and 
clarification granted, Order No. 706-A, 123 FERC ] 61,174 (2008).
---------------------------------------------------------------------------

    238. We decline to adopt ATC's proposal that with respect to non-
public transmission information that was improperly disclosed, the 
transmission provider must post it immediately ``upon discovery of 
disclosure,'' rather than upon the actual disclosure. The provision by 
its terms imposes the posting requirement on a transmission provider 
that wrongfully discloses such information, and it would be anomalous 
to assume the transmission provider was not aware of its own actions. A 
corporation can only act through its agents and employees, and those 
actions are taken on behalf of the corporation. Therefore, knowledge of 
the disclosure is imputed to the transmission provider, which is 
responsible both for the disclosure and for the posting.
ii. Specific Transaction Information
    239. Section 358.7(b) provides an exemption to the disclosure 
requirement for requests for transmission service made by a marketing 
function employee. The Commission agrees that the language should be 
modified to clarify that transmission function employees may discuss 
with marketing function employees the latter's specific request for 
transmission service (but not non-public matters beyond the specific 
request, such as outages or other system conditions). We therefore add 
the following sentence: ``A transmission provider's transmission 
function employee may discuss with its marketing function employee a 
specific request for transmission service submitted by the marketing 
function employee.''
iii. Voluntary Consent Provision
    240. The Commission declines to move the provision regarding the 
posting of voluntary employee consents in section 358.7(c) to the 
Independent Functioning Rule, as requested by SCE. The provision in 
question relates to posting, and is therefore appropriately included in 
the Transparency Rule. We also decline to include a specific exclusion 
to the customer consent provision for contracts involving generator 
output, as requested by MidAmerican. The posting requirements are 
general in application, and ought not to be so detailed as to cover 
every special circumstance that may apply to only one or a limited 
number of transmission providers. To do so would make the regulations 
unwieldy and subject to constant change. Therefore, we decline to 
include an exclusion covering a customer's consent for contracts 
involving generator output.
    241. Furthermore, we decline to distinguish between affiliated and 
non-affiliated customers in connection with the voluntary consent 
provision. The intent of the provision is to permit any customer to 
disclose customer information to marketing function employees of the 
transmission provider, should it desire to do so. Of course, an 
affiliated customer will already be aware of information pertaining to 
its own marketing affiliate, but there conceivably could be other 
marketing affiliates of the same transmission provider as to which the 
customer may wish to give its consent for disclosure.
    242. The Commission agrees that the voluntary consent provision 
refers to non-public customer information (including a customer's 
transmission request and accompanying information), and adds this 
phrase to section 358.7(c).
iv. Identification of Affiliate Information
    243. Section 358.7(e)(1) provides that a transmission provider post 
the names and addresses of all its affiliates that employ or retain 
marketing function employees. The Commission declines to revert to a 
requirement to post an organizational chart of all affiliates of a 
transmission provider, and further declines to extend this to a color-
coded chart. With the elimination from the Standards of the concept of 
energy affiliates, it is only necessary to be concerned with the 
marketing affiliates of a transmission provider. Therefore, an entire 
organizational chart is unnecessary, and an undue burden on 
transmission providers.
    244. With respect to INGAA's request that information need not be 
posted about affiliates that do not, for instance, hold or control 
capacity on its affiliated pipeline, the Commission notes that the 
proposed provision applies to affiliates ``that employ or retain 
marketing function employees.'' If an activity falls within one of the 
exclusions to the definition of marketing functions set forth in 
proposed section 358.3(c), its employees will not by definition be 
marketing function employees, and the posting rule would not apply. If, 
however, the activities do not fall within any of the exclusions to the 
definition, and the affiliate employs or retains marketing function 
employees, the posting provision would apply.
    245. We agree with MidAmerican and ATC that the posting 
requirements in section 358.7(e)(2) regarding shared facilities need 
not include facilities where transmission function employees and 
marketing function employees do not both transact their job-related 
activities, and modify the regulatory text accordingly. We further 
clarify that the phrase ``employee-staffed facilities'' is meant to 
exclude facilities where individuals do not typically transact 
business, such as substations.
v. Identification of Employee Information
    246. The Commission agrees with EEI that the proposed provision in 
section 358.7(f)(1) covering the posting of job titles and names of 
transmission function employees should conform more closely to the 
employee functional approach. Furthermore, in accordance with the 
clarification made in this Final Rule, such jobs as maintenance and 
field positions are not considered transmission functions, unless the 
employees also engage in the day-to-day operation of the transmission 
system.

[[Page 63822]]

Therefore, we will modify the wording of this provision to refer only 
to ``transmission function employees,'' and delete the reference to 
clerical, maintenance and field positions.
vi. Timing and General Requirements of Postings
    247. Section 358.7(g)(1) requires updated posting on a transmission 
provider's OASIS or Internet Web site. The Commission agrees with SCE 
that transmission owners who are members of RTOs or ISOs might not have 
their own OASIS. Furthermore, some interested entities or individuals 
might not have access to a transmission provider's OASIS. We therefore 
modify the venue for posting to require that the posting of information 
required under the Standards for both public utilities and interstate 
pipelines is to be made on the transmission provider's Web site, where 
it will be accessible to all interested entities. The various sections 
within the Transparency Rule are amended to conform to this change.
    248. Section 358.7(g)(2) provides suspension of postings in the 
case of emergencies. The Commission does not deem it necessary to list 
every conceivable natural disaster in this provision, but will add 
``earthquakes'' to the list, as requested by SCE. Chandeleur requests 
clarification as to the method of implementation of this provision. In 
the event the transmission provider needs suspension of postings beyond 
one month, it should publicly file with the Commission for a further 
period of suspension, in accordance with the provisions of part 385 of 
the Commission's regulations.
vii. Other
    249. Chandeleur suggests the Commission provide an anticipatory 
waiver of any changes to NAESB standards which may be made relating to 
the format and content of posting requirements, should they be 
inconsistent with the Standards here adopted. The NAESB standards 
currently adopted by the Commission are set forth in 18 CFR sections 
38.2 and 284.12 (2008), and relate to matters other than the Standards 
of Conduct. The provisions applicable to electric utilities in section 
38.2 include the Business Practices for Open Access Same-Time 
Information Systems (OASIS), which relate to requests for transmission 
service. The provisions applicable to pipelines in section 284.12 
include information which is to be posted on the pipeline's Internet 
Web site, covering such matters as the name of shippers taking service, 
the rate charged, the duration of the contract, receipt and delivery 
points, quantity, whether the shipper is an affiliate of the pipeline, 
and the like. These postings generally differ from the postings 
required under the Standards of Conduct. As discussed above, to the 
extent any of the information required under the Standards of Conduct 
is also required under other regulations or orders, duplicative 
postings are not required. Therefore, no anticipatory waiver of the 
type requested by Chandeleur is needed or appropriate.

F. Other Definitions

    250. In addition to the definitions discussed above, the NOPR 
either carried over or modified a number of definitions contained in 
the current Standards, including ``affiliate,'' ``transmission,'' 
``transmission customer,'' ``transmission function information,'' and 
``transmission provider.''
1. Affiliate
a. Commission Proposal
    251. The Commission proposed to modify its definition of 
``affiliate'' to conform to the new definition of affiliate set forth 
in 18 CFR 35.43(a)(1).\285\ The only addition in the NOPR to that 
definition was the inclusion of ``a division that operates as a 
functional unit of the specified company.'' See proposed section 
358.3(a).
---------------------------------------------------------------------------

    \285\ This definition was promulgated in Cross-Subsidization 
Restrictions on Affiliate Transactions, Order No. 707, 73 FR 11,013 
(Feb. 29, 2008), FERC Stats. & Regs. ] 31,264 (2008), order on 
reh'g, 73 FR 43,072 (July 24, 2008), FERC Stats. & Regs. ] 31,272 
(2008).
---------------------------------------------------------------------------

b. Comments
    252. INGAA contends that the NOPR changed the definition of 
affiliate to be consistent with an order that addresses only electric 
transmission providers, and therefore is not a definition fairly 
applicable to the natural gas industry.\286\ INGAA and Iroquois request 
that the rules return to the longstanding definition of affiliate in 
the Standards and also retain the prior, integrally related definition 
of ``control.'' \287\ Iroquois adds that the proposed definition does 
not reflect the established scheme's rebuttable presumption of control, 
thereby expanding the reach of the Standards. To the extent the 
Commission declines to revert to the prior definitions of affiliate and 
control, Iroquois requests that the Commission modify the proposed 
definition to reinstate the concept that the definition of control 
establishes a rebuttable presumption, and also continue any exemptions 
from the definition of affiliate that were granted under the prior 
Standards.\288\
---------------------------------------------------------------------------

    \286\ INGAA at 12-13; see also Williston at 12.
    \287\ INGAA at 12-13; Iroquois at 14.
    \288\ Iroquois at 7-13.
---------------------------------------------------------------------------

    253. Both INGAA and Iroquois request that the Commission provide 
clarification as to how the definition would apply to interstate 
pipelines jointly owned by two or more otherwise non-affiliated 
companies.\289\ INGAA would like confirmation that, in the event an 
affiliate of one joint owner of a pipeline holds capacity on that 
pipeline, such relationship does not create an affiliation between the 
affiliates of the entities who are the joint owners.\290\
---------------------------------------------------------------------------

    \289\ Id. 13-14; INGAA at 13.
    \290\ INGAA at 13. For example, INGAA posits, if non-affiliated 
Companies A and B form a joint venture that holds Pipeline C, INGAA 
contends that transmission relationships between a marketing 
affiliate of Company A and Pipeline C do not create an affiliation 
between that marketing affiliate and other affiliates of Company B, 
because there is no common ownership and control between the 
marketing entity and Company B's affiliates. Id.
---------------------------------------------------------------------------

    254. TDU Systems asserts that the definition of affiliate should 
not include members of generation and transmission cooperatives.\291\
---------------------------------------------------------------------------

    \291\ TDU Systems at 13-14.
---------------------------------------------------------------------------

    255. Arizona PSC proposes a modification to the proposed definition 
to cure what it finds to be an inconsistency between the NOPR's 
definition and the definition of ``affiliate'' in Order No. 707. It 
would eliminate the words ``division that operates as a functional 
unit'' from proposed section 358.3(a)(1). Both Arizona PSC and EEI 
contend that this deletion is consistent with the NOPR's employee 
functional approach.\292\
---------------------------------------------------------------------------

    \292\ Arizona PSC at 6-7; EEI at 47.
---------------------------------------------------------------------------

c. Commission Determination
    256. Much of the concern over the definition of affiliate appears 
to stem from a misapprehension that affiliates themselves are still 
subject to the Independent Functioning Rule. As discussed throughout 
this Final Rule, it is only marketing function employees who are 
required to operate independently of a transmission provider's 
transmission function employees. Nonetheless, the concept of affiliate 
does retain importance, since marketing function employees by 
definition must be employed by the transmission provider or by its 
affiliates (unless the marketing function employees are 
contractors).\293\
---------------------------------------------------------------------------

    \293\ Inclusion of contractors in the definition of marketing 
function employee is discussed in the section entitled Elimination 
of Shared Employees Concept.
---------------------------------------------------------------------------

    257. Because the Standards follow a different regulatory scheme 
than Order

[[Page 63823]]

No. 707, the definition of affiliate here does not necessarily need to 
be identical to the more detailed definition set forth in Order No. 
707. As regulated entities have become familiar with the existing 
definition, the Commission sees no necessity to alter it. Therefore, 
the Commission will reinstate the major features of the definition of 
``affiliate'' found in the existing Standards, including the ability to 
rebut a presumption of control. See section 358.3(a)(1). The requests 
for the Commission to comment on the specifics of hypothetical 
corporate arrangements are accordingly answered by reference to that 
provision.
    258. The existing definition of exempt wholesale generators refers 
both to regulations and the FPA as the source of the definition, and 
does not provide for updating. We modify the definition so as to refer 
to the currently applicable section of the regulations defining exempt 
wholesale generators, section 366.1, and provide that such definition 
or any successor definition shall govern. See section 358.3(a)(2).
    259. Arizona PSC and EEI would eliminate the inclusion of a 
division (as opposed to a separate corporate entity) from the 
definition of affiliate. This inclusion, which is contained in the 
existing Standards, covers those marketing function employees who may 
be employed by the transmission provider itself, rather than by an 
affiliate of the transmission provider. Therefore, the provision will 
be retained.
2. Transmission
a. Commission Proposal
    260. The Commission proposed to streamline the current definition 
of transmission by defining it as ``electric transmission, network or 
point-to-point service, ancillary services or other methods of electric 
transmission, or the interconnection with jurisdictional transmission 
facilities, under part 35 of this chapter; and natural gas 
transportation, storage, exchange, backhaul, or displacement service 
provided pursuant to subpart A of part 157 or subparts B or G or part 
284 of this chapter.'' See proposed section 358.3(f).
b. Comments
    261. Many commenters raise concerns related to the Commission's 
inclusion of ancillary services in the definition of transmission. TAPS 
suggests that the Commission distinguish between a transmission 
provider's offering ancillary services to its customers pursuant to its 
Open Access Transmission Tariff, which it states is a transmission 
function, and offering ancillary services competitively, which it views 
as a marketing function.\294\ NCPA requests that in those markets where 
ancillary services are procured pursuant to a bidding process, the 
rules treat ancillary services as part of the marketing function and 
not as part of the transmission function.\295\ EEI requests 
clarification that the definition covers only those ``ancillary 
services'' and ``interconnection'' that are offered in connection with 
jurisdictional transmission service.\296\ Wisconsin Electric requests 
that the Commission deem the provision of ancillary services as a 
function outside of the operation of the Standards.\297\
---------------------------------------------------------------------------

    \294\ TAPS at 31-33.
    \295\ NCPA at 3-4.
    \296\ EEI at 44-46.
    \297\ Wisconsin Electric at 3-4.
---------------------------------------------------------------------------

    262. NiSource requests clarification as to whether generation is 
considered a subtype of transmission. It asserts that generation 
information is not a subtype of transmission or marketing function 
information and therefore should not be subject to the rules or 
included in its exclusions.\298\
---------------------------------------------------------------------------

    \298\ Nisource at 14-16.
---------------------------------------------------------------------------

c. Commission Determination
    263. The Commission agrees that inclusion of ancillary services in 
the definition of transmission, which is carried forward from the 
existing Standards, needs clarification. Ancillary services can either 
be transmission or covered under the definition of marketing functions, 
as discussed above. Therefore, we clarify that ancillary services, as 
used in the definition of transmission, refers to the use of an 
integrated public utility's own generation or demand response resources 
to provide ancillary services, and does not refer to the sale for 
resale of generation or demand response resources for ancillary 
services purposes.
    264. NiSource raises a concern as to whether the proposed exclusion 
for communications regarding generation dispatch in proposed section 
358.7(h) suggests we regard generation as a form of transmission. 
NiSource's concern is addressed by the modifications made in this Final 
Rule to that exclusion; however, we further clarify that generation is 
typically not a transmission function. Of course, operation of the 
transmission system may impact generation, and therefore some 
transmission function information may well implicate generation 
concerns. It was for that reason the above-cited exclusion was added to 
the Standards. See section 358.7(h).
    265. The Commission removes the reference to subpart A of part 157, 
in accordance with its elimination of this reference from section 
358.1(a), but otherwise adopts the NOPR definition of transmission. See 
section 358.3(f).
3. Transmission Customer
a. Commission Proposal
    266. The Commission proposed to carry forward the existing 
definition of ``transmission customer'' to mean ``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.'' See 
proposed section 358.3(g).
b. Comments
    267. MidAmerican requests that the Commission modify this 
definition so that it expressly includes affiliated and non-affiliated 
customers, shippers or designated agents.\299\
---------------------------------------------------------------------------

    \299\ MidAmerican at 10-11.
---------------------------------------------------------------------------

c. Commission Determination
    268. The Commission adopts proposed section 358.3(g). MidAmerican's 
requested addition is unnecessary, as on its face the definition of 
transmission customer does not distinguish between affiliated and non-
affiliated customers. To the extent clarification on this point is 
desired, we clarify that all customers that fit the definition are 
included.
4. Transmission Function Information
a. Commission Proposal
    269. The Commission proposed to define ``transmission function 
information'' to mean ``information relating to transmission 
functions,'' thus keying off the new definition of ``transmission 
function'' set forth in the proposed Standards. See proposed section 
358.3(j).
b. Comments
    270. Several commenters request that the Commission include in its 
definition specific examples or categories of information that it deems 
to be transmission information.\300\ EEI and Southern Co. Services 
suggest that the Commission use the guidance found in section 
358.5(b)(1) of the current Standards as a basis for amending the 
definition,\301\ and SCE provides a

[[Page 63824]]

proposed amendment that includes its recommended examples.\302\
---------------------------------------------------------------------------

    \300\ ATC at 11-12; EEI at 46; Southern Co. Services at 26-27; 
SCE at 10-11.
    \301\ EEI at 46; Southern Co. Services at 26-27.
    \302\ SCE at 10-11.
---------------------------------------------------------------------------

    271. National Grid and PSEG inquire whether the scope of the 
definition is the same as, more broad or more narrow than the scope of 
the definition of ``transmission'' information in the current 
Standards.\303\
---------------------------------------------------------------------------

    \303\ National Grid at 20-22; PSEG at 16-17.
---------------------------------------------------------------------------

    272. Southern Co. Services asserts that proposed sections 
358.6(a)(1) and 358.7(a) create ambiguity as to whether all ``customer 
information'' is ``transmission information,'' and requests 
clarification of the definition of ``transmission information.'' \304\ 
Bonneville requests clarification as to whether the definition is 
limited to non-public transmission information.\305\ And TDU Systems 
requests clarification that accounting records necessary for rate 
design do not constitute transmission function information.\306\
---------------------------------------------------------------------------

    \304\ Southern Co. Services at 27.
    \305\ Bonneville at 5-6.
    \306\ TDU Systems at 16.
---------------------------------------------------------------------------

    273. Spectra requests the Commission to amend the definition to 
indicate it does not include information relating to a marketing 
function employee's specific request for transmission service or 
interconnection.\307\
---------------------------------------------------------------------------

    \307\ Spectra at 11-12.
---------------------------------------------------------------------------

c. Commission Determination
    274. The Commission adopts the NOPR definition of transmission 
function information as information relating to ``transmission 
functions,'' which is the core definition where the crux of the 
requirements of the Independent Functioning Rule and the No Conduit 
Rule is found, and where any issues regarding interpretation should be 
focused. Indeed, as there is no debate on the meaning of 
``information,'' the Commission could have eliminated section 358.3(j) 
entirely. The Commission is retaining this section, however, to 
reinforce the prohibition on the improper disclosure of non-public 
transmission function information.
    275. Nevertheless, to provide clarity, the Commission will give 
examples of transmission function information, drawn from the current 
Standards. These include, for example, available transmission 
capability, price, curtailments, storage, and balancing. In response to 
the request for clarification by National Grid and PSEG, we observe 
that not all elements found in the existing Standards are relevant, due 
to the restriction in this Final Rule of the term ``transmission 
functions'' to day-to-day operations.
    276. We clarify that transmission customer information is a subset 
of transmission function information, as it is submitted in connection 
with a request for transmission service. We also clarify that rate 
design, in and of itself, is not a transmission function under the 
Standards.
    277. The term transmission function information is not limited to 
non-public information; however, it is only non-public transmission 
function information which the No Conduit Rule prohibits being passed 
to marketing function employees.
    278. Spectra requests the definition be amended to exclude 
information relating to a marketing function employee's specific 
request for service. We decline to do so. Such information is indeed 
transmission function information, as discussed above. Spectra's 
concerns, however, are addressed by section 358.7(b), which permits 
discussions regarding such requests between transmission function and 
marketing function employees.
5. Transmission Provider
a. Commission Proposal
    279. The Commission proposed to define ``transmission provider'' 
as:
    (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.
    See proposed section 358.3(k).
b. Comments
    280. Hampshire requests that subsection (3) of the definition be 
modified to apply to ``storage companies that already have been 
authorized by FERC to charge market-based rates based on a showing that 
they lacked market power,'' arguing the definition should not include 
the additional criteria listed. The criterion that the storage facility 
not have captive customers and not have market power is duplicative, 
according to Hampshire, because if the facility has captive customers 
then it has market power by definition. Hampshire further contends that 
the limitation against exclusive franchises is extraneous because the 
Natural Gas Act does not permit exclusive franchises.\308\
---------------------------------------------------------------------------

    \308\ Hampshire Gas at 9-12.
---------------------------------------------------------------------------

    281. The US DOI argues that the proposed language does not 
recognize that certain federal agencies may own transmission facilities 
without having functional responsibility for them. It requests that the 
Commission clarify that it is the operator of the transmission 
facility, and not the federal agency that owns the transmission 
facility, that is the transmission provider subject to the 
Standards.\309\
---------------------------------------------------------------------------

    \309\ US DOI at 1-2.
---------------------------------------------------------------------------

c. Commission Determination
    282. As a preliminary matter, the Commission will delete the 
reference to Part 157 from the definitions of transmission and 
transmission provider. See sections 358.3(f) and (k). This corresponds 
to our deletion of the same reference in section 358.1, the 
applicability provisions of the Standards, as discussed above.
    283. We will also accept Hampshire's proposed modification with 
respect to exclusive franchises and the Commission's jurisdiction over 
storage facilities under the NGA. While the Commission does not 
necessarily agree with Hampshire's description regarding market-based 
rates,\310\ the Commission does agree that the exclusion of natural gas 
storage providers authorized to charge market-based rates, which is an 
exclusion carried over from Order Nos. 497 and 2004 and not opposed in 
the comments, needs no further qualification. We modify proposed 
section 358.3(k)(3) accordingly.
---------------------------------------------------------------------------

    \310\ See Rate Regulation of Certain Natural Gas Storage 
Facilities, Order No. 678, 71 Fed. Reg. 36612 (June 27, 2006), FERC 
Stats. & Regs. ] 31,220 (2006).
---------------------------------------------------------------------------

    284. Lastly, we clarify that if a transmission provider is merely 
an owner of facilities but performs none of the functions of a 
transmission provider, it is in the same position as a public utility 
transmission owner that participates in a Commission-approved RTO or 
ISO. Section 358.1(c) provides that such a participating transmission 
owner may seek a waiver from the Standards. Similarly, if any other 
transmission owner meets the definition of transmission provider but 
does not operate or control its transmission system and has no access 
to transmission function information, it may request a waiver from the 
Standards, in whole or in part.

G. Per Se Violation

    285. In the course of the NOPR's discussion on the need for reform 
of the Standards, the Commission observed

[[Page 63825]]

that while the Standards establish per se rules, the Commission still 
possesses statutory authority to rectify and sanction, where necessary, 
instances of undue discrimination and preference even if they are not 
specifically addressed in the per se regulations of the Standards. This 
authority is derived from sections 205 and 206 of the FPA and sections 
4 and 5 of the NGA.
1. Commission Proposal
    286. No proposal was made in the NOPR regarding per se rules; the 
Commission merely pointed out the fact that the proposed Standards, 
just as do the current Standards, contain per se rules.
2. Comments
    287. Several commenters request that the Commission clarify how the 
proposed per se rules will be enforced. Idaho Power and Puget Sound 
requests confirmation that transmission providers will continue to have 
the opportunity to defend themselves against allegations of violations 
of the Standards, and that it is not the case that the Commission 
intends there will be violations of the per se rules ``for which no 
further investigation would be needed.'' \311\
---------------------------------------------------------------------------

    \311\ Idaho Power at 4-5, quoting NOPR at P 55; Puget Sound at 
9-10.
---------------------------------------------------------------------------

    288. INGAA and LPPC likewise note confusion about the NOPR's use of 
``per se'' because, they contend, in other contexts the term refers to 
the establishment of a set of facts that automatically creates a 
violation of law without reference to other or additional facts. INGAA 
urges that the Commission reject a per se approach and adopt a ``rule 
of reason'' approach to ascertaining violations of the Standards, in 
which the regulated entity may show legitimate purpose for or lack of 
harm caused by the subject behavior.\312\
---------------------------------------------------------------------------

    \312\ INGAA at 3-4.
---------------------------------------------------------------------------

    289. Commenters also raise concerns about the interplay between the 
Standards and the statutory prohibitions on undue discrimination and 
preference. Specifically, many commenters argue that the per se concept 
means a transmission provider may be accused of undue discrimination 
and preference even where its activity was permissible under the 
Standards.\313\ Southern Co. Services would like the Commission to 
clarify that the Standards occupy the field for the potential types of 
undue discrimination and preference addressed in the Standards, so that 
compliance with the Standards would create a safe harbor with respect 
to activities that fall within the scope of the Standards.\314\
---------------------------------------------------------------------------

    \313\ Southern Co. Services at 23-24; Ameren at 6,8; E.ON at 7; 
EEI at 41-42.
    \314\ Southern Co. Services at 23-24; see also EEI at 41-42; 
E.ON at 7.
---------------------------------------------------------------------------

    290. Ameren cautions the Commission against arbitrarily expanding 
the scope of the behavior that is deemed to violate the Standards on a 
case-by-case basis, noting that this could raise notice and due process 
issues.\315\ E.ON asserts that an undue preference analysis for 
subjects already covered by the Standards would greatly complicate 
training efforts.\316\
---------------------------------------------------------------------------

    \315\ Ameren at 6, 18.
    \316\ E.ON at 8.
---------------------------------------------------------------------------

    291. Both INGAA and LPPC note that many of the rules within the 
Standards are not amenable to a per se approach to enforcement because 
they are non-specific and broad.\317\
---------------------------------------------------------------------------

    \317\ INGAA at 8; LPPC at 17-18.
---------------------------------------------------------------------------

    292. Puget Sound raises additional questions about the enforcement 
of the Standards, e.g., how a per se violation may be distinguishable 
from noncompliance with other rules; whether disclosure by a 
transmission provider of non-public information to its marketing 
function is a per se violation and, if so, does the posting requirement 
cure the per se violation; whether a marketing function employee who 
receives transmission information from an unaffiliated third party is 
guilty of a per se violation; and whether inadvertent disclosure of 
non-public information to a marketing function employee is 
sanctionable.\318\
---------------------------------------------------------------------------

    \318\ Puget Sound at 10.
---------------------------------------------------------------------------

3. Commission Determination
    293. In response to commenters' confusion regarding the NOPR's 
reference to the term per se, the Commission clarifies that we did not 
mean to establish a new standard of review or impose different 
evidentiary burdens specific to these rules. Under these regulations, 
the Commission would still have to prove that a violation occurred, and 
an accused maintains the right to demonstrate that such a violation did 
not occur. Further, if it is established that a violation has occurred, 
such matters as whether the violations were inadvertent or, under the 
facts of the case, harmless, will be taken into account by the 
Commission in determining whether any remedy or sanction is 
appropriate.
    294. Some commenters request the Commission to declare that the 
Standards occupy the field with respect to the area of undue 
preferences, and that matters not specifically covered by the Standards 
may not be found to be violations of the undue preferences prohibition 
in the FPA or the NGA. This we decline to do. There are potentially an 
infinite number of ways undue preferences might arise, and the 
Standards are not intended to be exhaustive. It is possible that an 
entity might embark on a course of conduct not contemplated by the 
Standards, which could be found upon investigation to constitute a 
violation of the statutory undue preference prohibitions. In such case, 
the entity's compliance with the Standards in other aspects would not 
serve as a defense.
    295. Puget Sound asks whether posting would cure a transmission 
provider's disclosure of non-public transmission function information 
to a marketing function employee. Posting the information does not 
change the fact that a violation occurred, but it would be a vital 
consideration that the Commission would certainly take into account in 
deciding whether any remedy or sanction would be appropriate. We 
observe also, by way of further clarification, that if the transmission 
provider failed to post the disclosed information, this would 
constitute a second and separate violation, in this case of section 
358.7(a)(1).

H. Training Requirements

1. Commission Proposal
    296. The NOPR proposed modifications to the training requirements 
for the Standards, requiring annual training for transmission function 
employees, marketing function employees, officers, directors, 
supervisory employees, and any other employees likely to become privy 
to transmission function information; and requiring training on the 
Standards to new employees within the first 30 days of their 
employment. See proposed section 358.8(c)(1).
2. Comments
    297. Commenters raised various concerns about the scope of the 
proposed training requirements. Destin believes that the requirements 
are overly broad and unduly burdensome; arguing that a transmission 
provider cannot engage in affiliate abuse with employees that do not 
use its transmission services.\319\ Ameren states that the Commission's 
training requirement should apply only to employees who engage in 
transmission or marketing functions, as well as officers, directors and 
support or other employees who can be expected to have access to non-
public transmission information.

[[Page 63826]]

Ameren also states that a transmission provider should provide focused 
levels of training to certain specific classes of employees.\320\
---------------------------------------------------------------------------

    \319\ Destin at 8.
    \320\ Ameren at 31-32.
---------------------------------------------------------------------------

    298. Commenters seek clarification as to which employees must be 
trained, and some suggest modifications to the proposed regulatory 
text. MidAmerican and National Grid seek confirmation that the rule 
excludes supervisors of departments that have nothing to do with 
transmission.\321\ To clarify the regulatory text, National Grid 
proposes setting out that the training requirement applies to (i) 
transmission function employees; (ii) marketing functioning employees; 
and (iii) officers, directors, supervisory employees, and any other 
employees likely to become privy to transmission function 
information.\322\
---------------------------------------------------------------------------

    \321\ MidAmerican at 20-21; NationalGrid at 22.
    \322\ NationalGrid at 22.
---------------------------------------------------------------------------

    299. Some commenters request clarification as to which types of 
employees are captured by the ``likely to become privy to transmission 
function information'' language in sections 358.8(b)(2) and 
358.8(c)(1).\323\ Xcel urges the Commission to modify proposed section 
358.8(b)(2) by requiring a transmission provider to distribute 
materials only to those employees likely to become privy to non-public 
transmission information, instead of to any and all transmission 
function information.\324\
---------------------------------------------------------------------------

    \323\ MidAmerican at 20-21; Williston at 17-18.
    \324\ Xcel at 22.
---------------------------------------------------------------------------

    300. Commenters urge the Commission to modify the proposed 
regulation so as to eliminate the requirement to train marketing 
function employees. INGAA requests that marketing function employees 
should be excluded, arguing such training is infeasible and unnecessary 
in certain corporate structures.\325\ In addition, Williston questions 
the need to conduct annual training for employees who do not have 
access to non-public or privileged information and/or marketing 
function employees. If a transmission provider is required to train 
marketing function employees of its affiliates, Williston asserts this 
is an expansion of the current rules. If not, Williston questions 
whether a transmission provider would have employees that fit under the 
definition of marketing function employees that would need to be 
restricted from having access to company information.\326\
---------------------------------------------------------------------------

    \325\ INGAA at 49-50.
    \326\ Williston at 17-18.
---------------------------------------------------------------------------

    301. Commenters raise concerns over whether field and maintenance 
employees fall into the training requirements and request that the 
Commission exclude these employees. INGAA notes that field and 
maintenance employees may pick up transmission information in the 
nature of irrelevant raw data from time to time, and could therefore 
fall within the training requirement as set forth in the proposed 
provision.\327\ INGAA argues that these employees do not have access to 
information of a commercial value and including them within the 
training requirement would be an unwarranted burden. INGAA requests 
that the proposed provision be amended to exclude these employees.\328\
---------------------------------------------------------------------------

    \327\ INGAA at 47.
    \328\ Id. at 47; see also Vectren at 9-10.
---------------------------------------------------------------------------

    302. Commenters also request clarification on the application of 
these training requirements to agents, contractors, and 
consultants.\329\ TDU Systems recommends that agents, contractors, and 
consultants be trained only once per year, even if engaged by more than 
one transmission provider during that time, provided that they receive 
a copy of the current written compliance procedures for each of the 
relevant transmission providers.\330\ INGAA requests that the 
Commission clarify that contractor training may be limited to those 
specific contractors who may be considered transmission function 
employees if they worked directly for the pipeline.\331\
---------------------------------------------------------------------------

    \329\ INGAA at 48; TDU Systems at 16-17.
    \330\ TDU Systems at 16-17.
    \331\ INGAA at 48.
---------------------------------------------------------------------------

    303. Commenters request additional guidance on the timing of the 
required training. National Grid requests confirmation that companies 
may satisfy the annual training requirement by providing training once 
a year for all employees, rather than providing training on a rolling 
basis, to ensure that each relevant employee attends training at least 
once within each 365-day cycle.\332\ Ameren requests that the 
Commission clarify that employees trained within 12 months of the Final 
Rule's issuance do not need to be trained again until a year passes 
from the date of their most recent training.\333\
---------------------------------------------------------------------------

    \332\ National Grid at 25-26.
    \333\ Ameren at 35.
---------------------------------------------------------------------------

    304. E.ON urges the Commission to clarify that annual Standards 
training should be mandatory only for transmission and marketing 
function employees, and that employees who do not engage in 
transmission and marketing functions should be allowed to be trained on 
a less frequent basis.\334\ NiSource requests that the requirement in 
section 358.8(c) that new employees be trained within 30 days of hire 
be modified to require training within 60 days of hire, arguing that 
the 30 day limitation is overly burdensome.\335\
---------------------------------------------------------------------------

    \334\ E.ON at 25.
    \335\ NiSource at 28.
---------------------------------------------------------------------------

    305. The PUC of Ohio proposes that the Standards include a 
requirement that transmission providers post on their Internet Web 
sites a general overview of their unique training programs and 
schedules and the name of the designated chief compliance officer.\336\
---------------------------------------------------------------------------

    \336\ PUC of Ohio at 3.
---------------------------------------------------------------------------

3. Commission Determination
    306. The Commission endeavored in the NOPR to limit training to 
those employees who would be most likely to be exposed to transmission 
function information, or those to whom the disclosure of such 
information is strictly prohibited. Obviously, transmission function 
employees and marketing function employees are the two core categories 
of employees that should be most cognizant of the rules. Although we 
have deleted the prohibition against marketing function employees 
receiving transmission function information, due to the possibility 
such receipt could be inadvertent, it is expected that if someone 
attempted to pass such information to a marketing function employee, 
the marketing function employee would not only refuse it but would 
report the individual to the company's chief compliance officer or 
other appropriate individual.
    307. Officers, directors, and supervisory employees also have a 
clear need for an understanding of the Standards, as it is likely they 
will either be in a position to interact with both transmission 
function employees and marketing function employees, or be responsible 
for responding to any questions or concerns about the Standards from 
the employees who report to them. Other employees likely to become 
privy to transmission function information will vary from company to 
company; likely categories would include rate and regulatory personnel, 
lawyers, accountants, risk management personnel, and the like. This 
list is by no means exhaustive, but rather is included for illustrative 
purposes.
    308. Either a transmission provider or its affiliate should provide 
training to marketing function personnel employed by the affiliate; 
failure to do so would leave a major class of employees without the 
requisite training. As to whether field and maintenance workers should 
receive training, that would depend on the circumstances of the

[[Page 63827]]

particular transmission provider. As noted above, field and maintenance 
personnel are not considered transmission function employees if they 
are functioning in their stated capacity and do not engage in the day-
to-day operation of the transmission system. However, if it is likely 
they may become privy to transmission function information, then 
training on the Standards would be appropriate and called for under 
section 358.8(c)(1).
    309. Commenters seek clarification regarding the training of 
agents, contractors and consultants. If such individuals are acting 
within one of the categories specified for the provision of training to 
employees, then such individuals should receive the training as if they 
were permanent hires. If the consultants are hired on a short-term 
basis and provide proof that they have received the appropriate 
training from another transmission provider within the requisite 
period, then further training would not be necessary until the 
following year, although they should receive the specific written 
compliance materials applicable to each transmission provider. 
Furthermore, it is not necessary for the transmission provider to track 
annual dates for each employee; if the transmission provider prefers, 
it may train all its employees, or all its employees in a given 
category, at a certain time each year. New employees, after their 
initial training, can be fit within this schedule. However, the 
employee should not go longer than a year without participating in 
training.
    310. We decline to lengthen the period for initial training from 30 
days to 60 days, as requested by one commenter. It is especially 
important for new hires to receive the training, as they may not have 
been exposed to it before, as would be the case with existing 
employees. We also note that it is unnecessary to add a requirement to 
post training programs on the transmission provider's Internet Web 
site. Training is for the benefit of the transmission provider's 
employees, not the public at large. And as proposed section 358.8(c)(2) 
already requires posting the name of the transmission provider's chief 
compliance officer, it is unnecessary to add a further requirement in 
this regard.

I. Compliance Date

1. Commission Proposal
    311. The NOPR did not set forth a date by which existing 
transmission providers must be in full compliance with the new 
Standards (as noted above, a new transmission provider must be in 
compliance on the date it commences transmission transactions with an 
affiliate that engages in marketing functions).
2. Comments
    312. Commenters propose that the Commission allow 60 to 90 days 
after issuance of the Final Rule for its implementation by existing 
transmission providers.\337\
---------------------------------------------------------------------------

    \337\ TDU Systems at 17; Wisconsin Electric at 9-10; Ameren at 
35.
---------------------------------------------------------------------------

3. Commission Determination
    313. The Commission determines that the new Standards shall be 
effective 30 days from the date of publication in the Federal Register, 
and so provides in the section on Effective Date and Congressional 
Notification. The Commission further determines that transmission 
providers must be in full compliance with the Standards by that date, 
with the exception of the posting and training requirements, with which 
transmission providers must be in full compliance no later than 60 days 
from publication in the Federal Register, as set forth in that same 
section. The Commission does not envision that extensive changes would 
be needed by transmission providers in order to come into compliance; 
many if not most of the procedures they already have in place to comply 
with the existing Standards will be transferable with little 
modification.

J. Miscellaneous Matters

1. Comments
    314. Commenters raise a variety of miscellaneous matters as 
follows:
     Ameren asks the Commission consider extending the use of 
the employee functional approach to the Code of Conduct/affiliate 
restrictions promulgated by Order No. 697 and set forth in 18 CFR 35.39 
of the Commission's regulations.\338\
---------------------------------------------------------------------------

    \338\ Ameren at 36.
---------------------------------------------------------------------------

     NGSA asserts that third parties should never be privy to 
non-public pipeline information. It contends that in the rare 
circumstances in which a pipeline finds it necessary to share non-
public information with a third party (e.g., joint project development 
planning), the third party should be subject to a confidentiality 
agreement.\339\
---------------------------------------------------------------------------

    \339\ NGSA at 16.
---------------------------------------------------------------------------

     PUC of Ohio asserts that civil forfeiture should not be 
recovered by the operating company in such a way that the expense of 
recovery is passed to the customers (as opposed to the shareholders). 
It proposes that the Commission require ``ring fencing'' so that an 
operating company and its customers are insulated from other operations 
involving the corporation, and are only allocated those expenses that 
relate directly to an established benefit.\340\
---------------------------------------------------------------------------

    \340\ PUC Ohio at 3.
---------------------------------------------------------------------------

     NARUC recommends that the Commission monitor 
implementation of the Standards by requiring filed compliance plans and 
through the conduct of regular audits and reports.\341\
---------------------------------------------------------------------------

    \341\ NARUC at 4-5.
---------------------------------------------------------------------------

     MidAmerican requests that the Commission clarify that 
Order No. 2004 and any Commission guidance and case law issued pursuant 
to it should not constitute precedent for the new Standards. 
MidAmerican is concerned that unless the Commission clearly rescinds 
its prior precedent developed around Order No. 2004, companies will 
struggle to determine whether a precedent applies to a provision in the 
new Standards.\342\
---------------------------------------------------------------------------

    \342\ MidAmerican at 5-7.
---------------------------------------------------------------------------

     E.ON requests that the Commission clarify whether 
transmission providers can continue to rely on existing guidance 
regarding public meetings convened by utility companies. If the 
Commission concludes that it is appropriate to start from a ``clean 
slate'' on public meetings, then E.ON requests that the Commission 
provide additional relevant guidance.\343\
---------------------------------------------------------------------------

    \343\ E.ON at 25.
---------------------------------------------------------------------------

2. Commission Determination
    315. Ameren's request to extend the employee functional approach, 
NGSA's concerns regarding the dissemination of information to non-
affiliated third parties, and the PUC of Ohio's concern regarding the 
recovery of civil forfeitures, are all beyond the scope of this Final 
Rule, and the Commission declines to adopt their proposals or modify 
the Standards accordingly.
    316. The Commission also declines to impose the filing of 
compliance plans with the Commission, as requested by NARUC. Under 
section 358.8(b)(2), transmission providers are required to post on 
their Internet Web site written procedures implementing the Standards. 
It is thus unnecessary to require additional filings with the 
Commission. The Commission, however, is committed to ensuring 
compliance with its rules and regulations, and will thus seriously 
consider auditing on a regular basis transmission providers' compliance 
with the Standards. Also, of course, the Commission will investigate 
any credible allegation of violation of the Standards. To that end, the 
Commission

[[Page 63828]]

reminds market participants of the Enforcement Hotline,\344\ which was 
established twenty years ago to enforce the promulgation of the 
original Standards in Order No. 497.
---------------------------------------------------------------------------

    \344\ See 18 CFR1b.21 (2008).
---------------------------------------------------------------------------

    317. On the issue of guidance, the Commission will not impose a 
blanket provision stating that guidance issued by the Commission with 
respect to previous Standards has no precedential effect. Many of the 
Standards have been carried forward into the new regulations, and 
others are similar. The determination of whether previous statements 
and rulings made by the Commission may be useful in providing guidance 
as to the new Standards must be made on a case-by-case basis, and is 
very dependent on which provision of the Standards is in question.
    318. E.ON's related concern about public meetings, to the extent it 
does not entail matters relating to the Independent Functioning Rule 
and the No Conduit Rule, is beyond the scope of this Final Rule. To the 
extent E.ON's concern does involve those provisions, it may look for 
guidance to the discussions in this Final Rule regarding them, as well 
as to the regulatory text.

IV. Information Collection Statement

    319. The Office of Management and Budget (OMB) regulations require 
approval of certain information collection requirements imposed by 
agency rules.\345\
---------------------------------------------------------------------------

    \345\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    320. Previously, the Commission submitted to OMB the information 
collection requirements arising from the Standards of Compliance 
adopted in Order No. 2004. OMB approved those requirements.\346\ The 
revisions to the Standards proposed in this issuance are modifications 
of already approved information collection procedures, and do not 
impose any significant additional information collection burden on 
industry participants. Many of the changes consist merely of the 
rewording of definitions and the reordering of the various information 
collection requirements. Some information collection requirements have 
been deleted, such as the posting of organizational charts. A 
requirement has been added concerning the maintenance of records 
regarding certain informational exchanges between transmission function 
employees and marketing function employees, as well as a requirement 
regarding the posting of contact information regarding the 
identification of the Chief Compliance Officer. Neither of these should 
impose a significant burden on the transmission providers. In fact, by 
proposing that the Standards will no longer govern the relationship 
between transmission providers and their Energy Affiliates, the overall 
information collection burden will likely decrease.
---------------------------------------------------------------------------

    \346\ 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).
---------------------------------------------------------------------------

    321. The Commission is submitting notification of the information 
collection requirements imposed in this Final Rule to OMB for its 
review and approval under section 3507(d) of the Paperwork Reduction 
Act of 1995.\347\ 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.
---------------------------------------------------------------------------

    \347\ 44 U.S.C. 3507(d) (2000 and Supp. V 2005).
---------------------------------------------------------------------------

    322. 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.: 1902-0157-1902-173.
    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 to clarify the 
Standards, enhance compliance, increase efficiencies, and conform with 
a recent court decision.
    323. These requirements conform to the Commission's plan for 
efficient information collection, communication, and management with 
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.
    324. 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 Final 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).

V. Environmental Analysis

    325. 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.\348\ The 
Commission concludes that neither an Environmental Assessment nor an 
Environmental Impact Statement is required for this Final Rule under 
Sec.  380.4 of the Commission's regulations for certain actions. The 
actions proposed here fall within the categorical exclusions because 
this rule is clarifying and corrective, does not substantially change 
the effect of the regulations being amended and calls for information 
gathering and dissemination.\349\ Therefore, an environmental 
assessment is unnecessary and has not been prepared for this 
rulemaking.
---------------------------------------------------------------------------

    \348\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act of 1969, FERC Stats. & Regs. ] 30,783 
(1987).
    \349\ 18 CFR 380.4(a)(2)(ii) and 380.4(a)(5) (2008).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

    326. The Regulatory Flexibility Act of 1980 (RFA) \350\ 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,'' \351\ the Commission certifies that this rule will 
not have a significant economic impact on a substantial number of small 
entities. Furthermore, small entities may seek a waiver of these 
requirements, and those small entities that have already received a 
waiver of the Standards would be unaffected by the requirements of this 
proposed rulemaking.
---------------------------------------------------------------------------

    \350\ 5 U.S.C. 601-612 (2000 and Supp. V 2005).
    \351\ See 5 U.S.C. 601(3) and (6) (2000 and Supp. V 2005).
---------------------------------------------------------------------------

VII. Document Availability

    327. 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)

[[Page 63829]]

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.
    328. 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.
    329. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or e-mail at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at 
public.referenceroom@ferc.gov.

VIII. Effective Date and Congressional Notification

    330. These regulations are effective 30 days from the date of 
publication in the Federal Register. Transmission providers must be in 
full compliance with them by that date, with the exception of the 
posting and training requirements, with which transmission providers 
must be in full compliance no later than 60 days from the date of 
publication in the Federal Register.
    331. The Commission has determined, with the concurrence of the 
Administrator of the Office of Information and Regulatory Affairs of 
OMB, that this rule is not a ``major rule'' as defined in section 351 
of the Small Business Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 18 CFR Part 358

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

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

0
In consideration of the foregoing, the Commission revises part 358, 
Chapter I, Title 18, Code of Federal Regulations, to read as follows:
0
1. Part 358 is revised to read as follows:

PART 358--STANDARDS OF CONDUCT

Sec.
358.1 Applicability.
358.2 General principles.
358.3 Definitions.
358.4 Non-discrimination requirements.
358.5 Independent functioning rule.
358.6 No conduit rule.
358.7 Transparency rule.
358.8 Implementation 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 subparts B or G of part 284 of 
this chapter and conducts transmission transactions with an affiliate 
that engages in marketing functions.
    (b) This part applies to any public utility that owns, operates, or 
controls facilities used for the transmission of electric energy in 
interstate commerce and conducts transmission transactions with an 
affiliate that engages in marketing functions.
    (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 system and has no access 
to transmission function information, it may request a waiver from this 
part.
    (d) A transmission provider may file a request for a waiver from 
all or some of the requirements of this part for good cause.


Sec.  358.2   General principles.

    (a) A transmission provider must treat all transmission customers, 
affiliated and non-affiliated, on a not unduly discriminatory basis, 
and must not make or grant any undue preference or advantage to any 
person or subject any person to any undue prejudice or disadvantage 
with respect to any transportation of natural gas or transmission of 
electric energy in interstate commerce, or with respect to the 
wholesale sale of natural gas or of electric energy in interstate 
commerce.
    (b) A transmission provider's transmission function employees must 
function independently from its marketing function employees, except as 
permitted in this part or otherwise permitted by Commission order.
    (c) A transmission provider and its employees, contractors, 
consultants and agents are prohibited from disclosing, or using a 
conduit to disclose, non-public transmission function information to 
the transmission provider's marketing function employees.
    (d) A transmission provider must provide equal access to non-public 
transmission function information to all its transmission function 
customers, affiliated and non-affiliated, except in the case of 
confidential customer information or Critical Energy Infrastructure 
Information.


Sec.  358.3   Definitions.

    (a) Affiliate of a specified entity means:
    (1) Another person that controls, is controlled by or is under 
common control with, the specified entity. An affiliate includes a 
division of the specified entity that operates as a functional unit.
    (2) For any exempt wholesale generator (as defined under Sec.  
366.1 of this chapter), affiliate shall have the meaning set forth in 
Sec.  366.1 of this chapter, or any successor provision.
    (3) ``Control'' as used in this definition means the direct or 
indirect authority, whether acting alone or in conjunction with others, 
to direct or cause to direct the management policies of an entity. A 
voting interest of 10 percent or more creates a rebuttable presumption 
of control.
    (b) Internet Web site refers to the Internet location where an 
interstate natural gas pipeline or a public utility posts the 
information, by electronic means, required under this part 358.
    (c) Marketing functions means:
    (1) in the case of public utilities and their affiliates, the sale 
for resale in interstate commerce, or the submission of offers to sell 
in interstate commerce, of electric energy or capacity, demand 
response, virtual transactions, or financial or physical transmission 
rights, all as subject to an exclusion for bundled retail sales, 
including sales of electric energy made by providers of last resort 
(POLRs) acting in their POLR capacity; and
    (2) in the case of interstate pipelines and their affiliates, the 
sale for resale in interstate commerce, or the submission of offers to 
sell in interstate commerce, natural gas, subject to the following 
exclusions:
    (i) Bundled retail sales,
    (ii) Incidental purchases or sales of natural gas to operate 
interstate natural gas pipeline transmission facilities,
    (iii) Sales of natural gas solely from a seller's own production,
    (iv) Sales of natural gas solely from a seller's own gathering or 
processing facilities, and
    (v) Sales by an intrastate natural gas pipeline, by a Hinshaw 
interstate pipeline exempt from the Natural Gas Act, or by a local 
distribution company making an on-system sale.
    (d) Marketing function employee means an employee, contractor,

[[Page 63830]]

consultant or agent of a transmission provider or of an affiliate of a 
transmission provider who actively and personally engages on a day-to-
day basis in marketing functions.
    (e) Open Access Same Time Information System or OASIS refers to the 
Internet location where a public utility posts the information required 
by part 37 of this chapter, and where it may also post the information 
required to be posted on its Internet Web site by this part 358.
    (f) Transmission means electric transmission, network or point-to-
point service, ancillary services or other methods of electric 
transmission, or the interconnection with jurisdictional transmission 
facilities, under part 35 of this chapter; and natural gas 
transportation, storage, exchange, backhaul, or displacement service 
provided pursuant to subparts B or G of part 284 of this chapter.
    (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) Transmission functions means the planning, directing, 
organizing or carrying out of day-to-day transmission operations, 
including the granting and denying of transmission service requests.
    (i) Transmission function employee means an employee, contractor, 
consultant or agent of a transmission provider who actively and 
personally engages on a day-to-day basis in transmission functions.
    (j) Transmission function information means information relating to 
transmission functions.
    (k) 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 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.
    (l) Transmission service means the provision of any transmission as 
defined in Sec.  358.3(f).
    (m) Waiver means the determination by a transmission provider, if 
authorized by its tariff, to waive any provisions of its tariff for a 
given entity.


Sec.  358.4  Non-discrimination requirements.

    (a) A transmission provider must strictly enforce all tariff 
provisions relating to the sale or purchase of open access transmission 
service, if the tariff provisions do not permit the use of discretion.
    (b) 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 
not unduly discriminatory manner, if the tariff provisions permit the 
use of discretion.
    (c) A transmission provider may not, through its tariffs or 
otherwise, give undue preference to any person 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) A transmission provider must process all similar requests for 
transmission in the same manner and within the same period of time.


Sec.  358.5  Independent functioning rule.

    (a) General rule. Except as permitted in this part or otherwise 
permitted by Commission order, a transmission provider's transmission 
function employees must function independently of its marketing 
function employees.
    (b) Separation of functions. (1) A transmission provider is 
prohibited from permitting its marketing function employees to:
    (i) Conduct transmission functions; or
    (ii) Have access to the system control center or similar facilities 
used for transmission operations that differs in any way from the 
access available to other transmission customers.
    (2) A transmission provider is prohibited from permitting its 
transmission function employees to conduct marketing functions.


Sec.  358.6  No conduit rule.

    (a) A transmission provider is prohibited from using anyone as a 
conduit for the disclosure of non-public transmission function 
information to its marketing function employees.
    (b) An employee, contractor, consultant or agent of a transmission 
provider, and an employee, contractor, consultant or agent of an 
affiliate of a transmission provider that is engaged in marketing 
functions, is prohibited from disclosing non-public transmission 
function information to any of the transmission provider's marketing 
function employees.


Sec.  358.7  Transparency rule.

    (a) Contemporaneous disclosure. (1) If a transmission provider 
discloses non-public transmission function information, other than 
information identified in paragraph (a)(2) of this section, in a manner 
contrary to the requirements of Sec.  358.6, the transmission provider 
must immediately post the information that was disclosed on its 
Internet Web site.
    (2) If a transmission provider discloses, in a manner contrary to 
the requirements of Sec.  358.6, non-public transmission customer 
information, critical energy infrastructure information (CEII) as 
defined in Sec.  388.113(c)(1) of this chapter or any successor 
provision, or any other information that the Commission by law has 
determined is to be subject to limited dissemination, the transmission 
provider must immediately post notice on its Web site that the 
information was disclosed.
    (b) Exclusion for specific transaction information. A transmission 
provider's transmission function employee may discuss with its 
marketing function employee a specific request for transmission service 
submitted by the marketing function employee. The transmission provider 
is not required to contemporaneously disclose information otherwise 
covered by Sec.  358.6 if the information relates solely to a marketing 
function employee's specific request for transmission service.
    (c) Voluntary consent provision. A transmission customer may 
voluntarily consent, in writing, to allow the transmission provider to 
disclose the transmission customer's non-public information to the 
transmission provider's marketing function employees. If the 
transmission customer authorizes the transmission provider to disclose 
its information to marketing function employees, the transmission 
provider must post notice on its 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.
    (d) Posting written procedures on the public Internet. A 
transmission provider must post on its Internet Web site current 
written procedures implementing the standards of conduct.
    (e) Identification of affiliate information on the public Internet. 
(1) A transmission provider must post on its Internet Web site the 
names and addresses of all its affiliates that employ or retain 
marketing function employees.
    (2) A transmission provider must post on its Internet Web site a 
complete list of the employee-staffed facilities shared by any of the 
transmission provider's transmission function employees and marketing 
function employees. The list must include the types of facilities

[[Page 63831]]

shared and the addresses of the facilities.
    (3) The transmission provider must post information concerning 
potential merger partners as affiliates that may employ or retain 
marketing function employees, within seven days after the potential 
merger is announced.
    (f) Identification of employee information on the public Internet. 
(1) A transmission provider must post on its Internet Web site the job 
titles and job descriptions of its transmission function employees.
    (2) A transmission provider must post a notice on its Internet Web 
site of any transfer of a transmission function employee to a position 
as a marketing function employee, or any transfer of a marketing 
function employee to a position as a transmission function employee. 
The information posted under this section must remain on its Internet 
Web site for 90 days. No such job transfer may be used as a means to 
circumvent any provision of this part. The information to be posted 
must include:
    (i) The name of the transferring employee,
    (ii) The respective titles held while performing each function 
(i.e., as a transmission function employee and as a marketing function 
employee), and
    (iii) The effective date of the transfer.
    (g) Timing and general requirements of postings on the public 
Internet. (1) A transmission provider must update on its Internet Web 
site the information required by this part 358 within seven business 
days of any change, and post the date on which the information was 
updated. A public utility may also post the information required to be 
posted under part 358 on its OASIS, but is not required to do so.
    (2) In the event an emergency, such as an earthquake, flood, fire 
or hurricane, severely disrupts a transmission provider's normal 
business operations, the posting requirements in this part may be 
suspended by the transmission provider. If the disruption lasts longer 
than one month, the transmission provider must so notify the Commission 
and may seek a further exemption from the posting requirements.
    (3) All Internet Web site postings required by this part must be 
sufficiently prominent as to be readily accessible.
    (h) Exclusion for and recordation of certain information exchanges. 
(1) Notwithstanding the requirements of Sec. Sec.  358.5(a) and 358.6, 
a transmission provider's transmission function employees and marketing 
function employees may exchange certain non-public transmission 
function information, as delineated in Sec.  358.7(h)(2), in which case 
the transmission provider must make and retain a contemporaneous record 
of all such exchanges except in emergency circumstances, in which case 
a record must be made of the exchange as soon as practicable after the 
fact. The transmission provider shall make the record available to the 
Commission upon request. The record may consist of hand-written or 
typed notes, electronic records such as e-mails and text messages, 
recorded telephone exchanges, and the like, and must be retained for a 
period of five years.
    (2) The non-public information subject to the exclusion in Sec.  
358.7(h)(1) is as follows:
    (i) Information pertaining to compliance with Reliability Standards 
approved by the Commission, and
    (ii) Information necessary to maintain or restore operation of the 
transmission system or generating units, or that may affect the 
dispatch of generating units.
    (i) Posting of waivers. A transmission provider must post on its 
Internet Web site notice of each waiver of a tariff provision that it 
grants in favor of an affiliate, unless such waiver has been approved 
by the Commission. The posting must be made within one business day of 
the act of a waiver. The transmission provider must also maintain a log 
of the acts of waiver, and must make it available to the Commission 
upon request. The records must be kept for a period of five years from 
the date of each act of waiver.


Sec.  358.8  Implementation requirements.

    (a) Effective date. A transmission provider must be in full 
compliance with the standards of conduct on the date it commences 
transmission transactions with an affiliate that engages in marketing 
functions.
    (b) Compliance measures and written procedures. (1) A transmission 
provider must implement measures to ensure that the requirements of 
Sec. Sec.  358.5 and 358.6 are observed by its employees and by the 
employees of its affiliates.
    (2) A transmission provider must distribute the written procedures 
referred to in Sec.  358.7(d) to all its transmission function 
employees, marketing function employees, officers, directors, 
supervisory employees, and any other employees likely to become privy 
to transmission function information.
    (c) Training and compliance personnel. (1) A transmission provider 
must provide annual training on the standards of conduct to all the 
employees listed in paragraph (b)(2) of this section. The transmission 
provider must provide training on the standards of conduct to new 
employees in the categories listed in paragraph (b)(2) of this section, 
within the first 30 days of their employment. The transmission provider 
must require each employee who has taken the training to certify 
electronically or in writing that s/he has completed the training.
    (2) A transmission provider must designate a chief compliance 
officer who will be responsible for standards of conduct compliance. 
The transmission provider must post the name of the chief compliance 
officer and provide his or her contact information on its Internet Web 
site.
    (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 affiliates that 
employ or retain marketing function employees, and these must be 
available for Commission inspections.

    Note: The following appendix will not be published in the Code 
of Federal Regulations.

Appendix A

    Table of Commenters and Abbreviations for Commenters.

------------------------------------------------------------------------
              Commenter                          Abbreviation
------------------------------------------------------------------------
Alcoa Inc...........................  ALCOA.
Ameren Services Company.............  Ameren.
American Gas Association............  AGA.
American Public Gas Association.....  APGA.
American Public Power Association...  APPA.
American Transmission Company LLC...  ATC.
Arizona Public Service Company......  Arizona PSC.
Bonneville Power Administration.....  Bonneville.
California Public Utilities           California PUC.
 Commission.

[[Page 63832]]


Calypso U.S. Pipeline, LLC and        Calypso.
 Calypso LNG, LLC.
CenterPoint Energy Gas Transmission   CenterPoint.
 Company.
Chandeleur Pipeline Company and       Chandeleur.
 Sabine Pipeline Lince LLC.
DCP Midstream, LLC..................  DCP Midstream.
Destin Pipeline Company, L.L.C......  Destin.
Dominion Resources, Inc.............  Dominion Resources.
Duke Energy Corporation.............  Duke.
E.ON U.S. LLC.......................  E.ON.
Edison Electric Institute...........  EEI.
El Paso Corporation.................  El Paso.
Electric Power Supply Association...  EPSA.
Entergy Services Inc................  Entergy.
Federal Trade Commission............  FTC.
FirstEnergy Service Company.........  FirstEnergy.
Hampshire Gas Company and Washington  Hampshire.
 Gas Light Company.
Idaho Power Company.................  Idaho Power.
International Transmission Company..  ITC.
Interstate Natural Gas Association    INGAA.
 of America.
Iroquois Gas Transmission System,     Iroquois.
 L.P.
Kinder Morgan Interstate Pipelines..  Kinder Morgan.
Large Public Power Council..........  LPPC.
MidAmerican Energy Electric           MidAmerican.
 Utilities.
National Association of Regulatory    NARUC.
 Utility Commissioners.
National Grid USA...................  National Grid.
Natural Gas Supply Association......  NGSA.
New York Public Service Commission..  New York PSC.
NiSource, Inc.......................  NiSource.
Northern California Power Agency....  NCPA.
Northwest Natural Gas Company and KB  Northwest Natural.
 Pipeline Company.
Pacific Gas and Electric Company....  PG&E.
PSEG Companies......................  PSEG.
Public Utilities Commission of Ohio.  PUC of Ohio.
Puget Sound Energy, Inc. and Avista   Puget Sound.
 Corporation.
Questar Gas Company.................  Questar.
Sacramento Municipal Utility          SMUD.
 District.
Salt River Project Agricultural       Salt River.
 Improvement and Power District.
SCANA Corporation...................  SCANA.
Southern California Edison Company..  SCE.
Southern Company Services, Inc......  Southern Co. Services.
Southwest Gas Corporation...........  Southwest Gas.
Spectra Energy Transmission, LLC and  Spectra.
 Spectra Energy Partners, LP.
Transmission Access Policy Study      TAPS.
 Group.
Transmission Agency of Northern       TANC.
 California.
Transmission Dependent Utility        TDU Systems.
 Systems.
U.S. Department of the Interior.....  US DOI.
Unitil Corporation..................  Unitil.
USG Pipeline Company, et al.........  USG.
Vectren Corporation.................  Vectren.
Washington Utilities and              WA UTC.
 Transportation Commission.
Western Utilities...................  Western Utilities.
Williston Basin Interstate Pipeline   Williston.
 Company.
Wisconsin Electric Power Company....  Wisconsin Electric.
Xcel Energy Services Inc............  Xcel.
------------------------------------------------------------------------

 [FR Doc. E8-25105 Filed 10-24-08; 8:45 am]

BILLING CODE 6717-01-P
