New FERC NOPR Will Have Impacts on the Financial Trading Community

Overview

On Thursday, July 21, 2016, FERC issued a new Notice of Proposed Rulemaking on Data Collection and Surveillance, which is to replace the prior Connected Entities and MBR Ownership NOPRs.  A copy of the NOPR can be found here. 

The new NOPR will apply to: (1) entities with market-based rate authority (“MBR”), (2) entities trading virtual products, and (3) FTR holders.  It collects certain data about legal and financial connections to other entities, and changes MBR data submission requirements.  It also replaces the two NOPRs from last fall, on Connected Entities and MBR Ownership, and is substantially different from the Connected Entities proposal.

Details

All entities will need to obtain a Legal Entity Identifier (“LEI”) number.  Entities will need to share information regarding their “Connected Entities,” defined as:  (1) the “ultimate affiliate owner” under 18 CFR § 35.37(a)(2); (2) any entity that participates in FERC-jurisdictional markets; or (3) any entity that purchases or sells natural gas or electricity derivatives that settle on physical prices.  Entities will also need to note their Contractual Connected Entities, which applies to those that have entered into an agreement which “confers control over an electric generation asset that is used in, or offered into, wholesale electricity markets.” Information will be submitted directly to FERC, which will maintain a relational database, rather than to the ISO/RTOs as previously proposed.

MBR Entities must:

• Share data on ownership and affiliates, including the above defined Connected Entities, as well as all other affiliates with market-based rate authority, a franchised service territory, generation, transmission or other inputs into electric power production;
• Obtain and include LEI number on EQR submission;
• Continue to prepare and update an asset appendix as part of their market-based rate application, albeit with certain changes outlined in the NOPR; and
•  Update this data on a quarterly basis.

Virtual/FTR Participants must:

• Share data on its Connected Entities, as defined above;
• Identify employees that fall within the definition of “Trader,” defined as “a person who makes, or participates in, decisions and/or devises strategies for buying and selling physical or financial electric or natural gas products;” and
• Provide PSE ID as part of the Connected Entity submission, if available.

FERC is proposing a new section requiring duty of candor in communications, 18 CFR § 35.50(d), which will mirror existing section 18 CFR §  35.41(b)’s requirements, and specifically be applicable to Virtual/FTR Participants who do not have market-based rate authority in their Connected Entity submissions. 

Contacts

For  questions regarding the NOPR or any other energy issue, please contact Andrew Kaplan at akaplan@pierceatwood.com or 617.488.8104.