March 28, 2013

CFTC Issues Final Order to Exempt Certain Specified Transactions of Regional Transmission Organizations and Independent System Operators

Washington, DC - The Commodity Futures Trading Commission (CFTC) approved a final order that exempts certain specified transactions of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) from certain provisions of the Commodity Exchange Act (CEA) and Commission regulations. This order is in response to a petition from certain RTOs and ISOs that are subject to regulation by either the Federal Energy Regulatory Commission (FERC) or the Public Utility Commission of Texas (PUCT). The Commission voted 5 to 0 via seriatim.

The final order exempts the purchase or sale of specifically defined “financial transmission rights,” “energy transactions,” “forward capacity transactions,” and “reserve or regulation transactions” that are offered or sold in a market administered by one of the petitioning RTOs or ISOs pursuant to a tariff or protocol that has been approved or permitted to take effect by FERC or PUCT. The final order also exempts persons offering, entering into, rendering advice, or rendering other services with respect to those transactions.

To be eligible for the exemption, the transactions must be entered into by persons who are: (1) “appropriate persons,” as defined in section 4(c)(3)(A) through (J) of the CEA; (2) “eligible contract participants,” as defined in section 1a(18) of the CEA and Commission regulations; or (3) in the business of (i) generating, transmitting, or distributing electric energy, or (ii) providing electric energy services that are necessary to support the reliable operation of the transmission system. Under the order, the Commission’s anti-fraud and anti-manipulation authority, and scienter-based prohibitions will continue to apply. The exemption is also subject to certain conditions stated within the final order.

Last Updated: March 28, 2013