2016-25571
Federal Register, Volume 81 Issue 205 (Monday, October 24, 2016)
[Federal Register Volume 81, Number 205 (Monday, October 24, 2016)]
[Notices]
[Pages 73062-73087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25571]
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COMMODITY FUTURES TRADING COMMISSION
Final Order Regarding Southwest Power Pool, Inc. Application To
Exempt Specified Transactions; Amendment to the Final Order Exempting
Specified Transactions of Certain Independent System Operators and
Regional Transmission Organizations
AGENCY: Commodity Futures Trading Commission.
ACTION: Final order.
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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is issuing a final order in response to an application
from Southwest Power Pool, Inc. (``SPP'') to exempt specified
transactions from certain provisions of the Commodity Exchange Act
(``CEA'' or ``Act'') and Commission regulations. In this release, the
Commission is also amending an order issued on March 28, 2013 exempting
other specified transactions from certain provisions of the CEA and
Commission regulations.
DATES: The effective date for the SPP Final Order and the Amended RTO-
ISO Order is October 24, 2016.
FOR FURTHER INFORMATION CONTACT: Robert B. Wasserman, Chief Counsel,
202-418-5092, [email protected], Alicia L. Lewis, Special Counsel,
202-418-5862, [email protected], or Andr[eacute]e Goldsmith, Special
Counsel, 202-418-6624, [email protected], Division of Clearing and
Risk; David P. Van Wagner, Chief Counsel, 202-418-5481,
[email protected], or Riva Spear Adriance, Senior Special Counsel,
202-418-5494, [email protected], Division of Market Oversight, in each
case at the Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Overview
The Commission is issuing a final order (``SPP Final Order'') in
response to an application (``Exemption Application'') \1\ from SPP to
exempt certain Transmission Congestion Rights, Energy Transactions, and
Operating Reserve Transactions (collectively, the ``SPP Covered
Transactions'') from certain provisions of the CEA \2\ and Commission
regulations. The SPP Final Order exempts contracts, agreements, and
transactions for the purchase or sale of the limited electric energy-
related products that are specifically described within the SPP Final
Order from certain provisions of the CEA and Commission regulations,
with the exception of the Commission's general anti-fraud and anti-
manipulation authority, and scienter-based prohibitions, under CEA
sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 4s(h)(4)(A),
6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13 of the Act, and any implementing
regulations promulgated under these sections including, but not limited
to, Commission regulations Sec. 23.410(a) and (b), Sec. 32.4, and
part 180.\3\ The exemption in the SPP Final Order also will exempt such
transactions from private actions pursuant to CEA section 22.\4\ To be
eligible for the exemption contained in the SPP Final Order, the
contract, agreement, or transaction must be offered or entered into in
a market administered by SPP pursuant to SPP's tariff, rate schedule,
or protocol (collectively, ``Tariff''), and the Tariff must have been
approved by the Federal Energy Regulatory Commission (``FERC''). In
addition, the contract, agreement, or transaction must be entered into
by persons who are ``appropriate persons,'' as defined in sections
4(c)(3)(A) through (J) of the Act,\5\ ``eligible contract
participants,'' as defined in section 1a(18)(A) of the Act and
Commission regulations,\6\ or persons who are 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. The SPP Final Order also
extends to any person or class of persons offering, entering into,
rendering advice, or rendering other services with respect to the SPP
Covered Transactions. Finally, the SPP Final Order is subject to other
conditions set forth therein. Authority for issuing the exemption is
found in section 4(c)(6) of the Act.\7\ The Commission issued a
proposed order and request for comment with respect to SPP's Exemption
Application (``SPP Proposed Order'') on May 18, 2015.\8\
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\1\ In the Matter of the Application for an Exemptive Order
Under Section 4(c) of the Commodity Exchange Act by Southwest Power
Pool, Inc., Oct. 17, 2013, as amended Aug. 1, 2014.
\2\ 7 U.S.C. 1 et seq.
\3\ The foregoing provisions are referred to as the ``Excepted
Provisions.''
\4\ 7 U.S.C. 25.
\5\ 7 U.S.C. 6(c)(3)(A) through (J).
\6\ 7 U.S.C. 1a(18)(A). See also Further Definition of ``Swap
Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap
Participant,'' ``Major Security-Based Swap Participant'' and
``Eligible Contract Participant,'' 77 FR 30596, May 23, 2012.
\7\ 7 U.S.C. 6(c)(6).
\8\ Notice of Proposed Order and Request for Comment on an
Application for an Exemptive Order From Southwest Power Pool, Inc.
From Certain Provisions of the Commodity Exchange Act Pursuant to
the Authority Provided in Section 4(c)(6) of the Act, 80 FR 29490,
May 21, 2015. The SPP Proposed Order was published in the Federal
Register on May 21, 2015.
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[[Page 73063]]
A copy of the Exemption Application is available on the
Commission's Web site at http://www.cftc.gov/stellent/groups/public/@requestsandactions/documents/ifdocs/spp4camdappl080114.pdf; the
attachments to the Application are posted at http://www.cftc.gov/stellent/groups/public/@requestsandactions/documents/ifdocs/spp4cattach-a-gg080114.pdf. A chart submitted by SPP that sets forth
the status of its implementation of the standards set forth in FERC
Order No. 741 is posted at http://www.cftc.gov/stellent/groups/public/@requestsandactions/documents/ifdocs/spp4caddendum_b.pdf. A copy of the
SPP Proposed Order is available at 80 FR 29490, and on the Commission's
Web site at http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2015-12346a.pdf. A copy of the comment file with respect
to the SPP Proposed Order is available on the Commission's Web site at
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1586.
The Commission is also amending an order issued on March 28, 2013
pursuant to the authority in section 4(c)(6) of the Act exempting
specified electric energy transactions from certain provisions of the
CEA and Commission regulations (``RTO-ISO Order'').\9\ The RTO-ISO
Order was issued in response to a consolidated petition from certain
regional transmission organizations (``RTOs'') and independent system
operators (``ISOs''). The RTO-ISO Order exempted contracts, agreements,
and transactions for the purchase or sale of the limited electric
energy-related products that are specifically described within the RTO-
ISO Order from certain provisions of the CEA and Commission
regulations, with the exception of the Commission's general anti-fraud
and anti-manipulation authority, and scienter-based prohibitions, under
CEA sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 4s(h)(4)(A),
6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13 of the Act, and any implementing
regulations promulgated under these sections including, but not limited
to, Commission regulations 23.410(a) and (b), 32.4, and part 180. The
RTO-ISO Order did not specifically mention CEA section 22. The
Commission issued a proposal to amend the RTO-ISO Order and request for
comment on May 9, 2016 (``RTO-ISO Order Proposed Amendment'').\10\ The
Commission is amending the text of the RTO-ISO Order to also exempt the
transactions covered under that order from private actions pursuant to
CEA section 22 (``Amended RTO-ISO Order'').
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\9\ Final Order in Response to a Petition From Certain
Independent System Operators and Regional Transmission Organizations
to Exempt Specified Transactions Authorized by a Tariff or Protocol
Approved by the Federal Energy Regulatory Commission or the Public
Utility Commission of Texas From Certain Provisions of the Commodity
Exchange Act Pursuant to the Authority Provided in the Act, 78 FR
19880, Apr. 2, 2013. The RTO-ISO Order was published in the Federal
Register on April 2, 2013.
\10\ Notice of Proposed Amendment to and Request for Comment on
the Final Order in Response to a Petition from Certain Independent
System Operators and Regional Transmission Organizations to Exempt
Specified Transactions Authorized by a Tariff or Protocol Approved
by the Federal Energy Regulatory Commission or the Public Utility
Commission of Texas From Certain Provisions of the Commodity
Exchange Act Pursuant to the Authority Provided in the Act, 81 FR
30245, May 16, 2016. The RTO-ISO Order Proposed Amendment was
published in the Federal Register on May 16, 2016.
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A copy of the RTO-ISO Order is available at 78 FR 19880 (April 2,
2013), and on the Commission's Web site at http://www.cftc.gov/idc/groups/public/@lrfederalregister/documents/file/2013-07634a.pdf. A copy
of the RTO-ISO Order Proposed Amendment is available at 81 FR 30245
(May 16, 2016), and on the Commission's Web site at http://www.cftc.gov/idc/groups/public/@lrfederalregister/documents/file/2016-11385a.pdf. A copy of the comment file with respect to the RTO-ISO
Order Proposed Amendment is available on the Commission's Web site at
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1697.
Table of Contents
I. Relevant Dodd-Frank Provisions
II. Background
A. RTO-ISO Order
B. SPP Exemption Application
C. SPP Proposed Order
1. Transactions Proposed To Be Exempted
2. Conditions to the SPP Proposed Order
3. Additional Limitations
D. Aspire v. GDF Suez
E. RTO-ISO Order Proposed Amendment
III. Summary of Comments
A. Overview of Comments
B. Private Right of Action Under CEA Section 22
1. Summary of Comments
2. Commission Determination
C. Use of the Term ``Member'' in the SPP Proposed Order
IV. Section 4(c) Determinations
A. Section 4(c) Analysis
1. Overview of CEA Section 4(c)
a. Sections 4(c)(6)(A) and (B)
b. Section 4(c)(1)
c. Discussion of Comments on Sections 4(c)(6) and 4(c)(1)
d. Section 4(c)(2)
e. Section 4(c)(3)
2. CEA Section 4(c) Determinations--SPP Final Order
a. Commission Jurisdiction
b. Consistent With the Public Interest and Purposes of the CEA
c. CEA Section 4(a) Should Not Apply to the Transactions or
Entities Eligible for the Exemption
d. Appropriate Persons
e. Effect on the Commission's or Any Contract Market's Ability
To Discharge Its Regulatory or Self-Regulatory Duties Under the CEA
3. CEA Section 4(c) Determinations--Amended RTO-ISO Order
a. Consistent With the Public Interest and Purposes of the CEA
b. Other Section 4(c) Determinations
B. Additional Limitations and Provisions--SPP Final Order
V. Related Matters
A. Regulatory Flexibility Act
1. Introduction
2. SPP Final Order
3. Amended RTO-ISO Order
B. Paperwork Reduction Act
1. Introduction
2. SPP Final Order
3. Amended RTO-ISO Order
C. Cost-Benefit Considerations
1. Introduction
2. SPP Final Order
a. Background
b. SPP Proposed Order and Request for Comment on the
Commission's Proposed Consideration of Costs and Benefits
c. Summary of the SPP Final Order
d. Baseline
e. Benefits
f. Costs
g. Consideration of Alternatives
h. Consideration of CEA Section 15(a) Factors
3. Amended RTO-ISO Order
a. Background
b. RTO-ISO Order Proposed Amendment and Request for Comment on
the Commission's Proposed Consideration of Costs and Benefits
c. Summary of the Amended RTO-ISO Order
d. Baseline
e. Benefits
f. Costs
g. Consideration of Alternatives
h. Consideration of CEA Section 15(a) Factors
VI. SPP Final Order
VII. Amended RTO-ISO Order
I. Relevant Dodd-Frank Provisions \11\
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\11\ For a fuller discussion, see RTO-ISO Order at 19881-82.
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On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act (``Dodd-Frank Act'').\12\ Title VII
of the Dodd-Frank Act amended the CEA and altered the scope of the
Commission's
[[Page 73064]]
exclusive jurisdiction.\13\ In particular, it expanded the Commission's
exclusive jurisdiction, which had included futures traded, executed,
and cleared on CFTC-regulated exchanges and clearinghouses, to also
cover swaps traded, executed, or cleared on CFTC-regulated exchanges or
clearinghouses.\14\ As a result, the Commission's exclusive
jurisdiction now includes swaps as well as futures.
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\12\ See Dodd-Frank Act, Public Law 111-203, 124 Stat. 1376
(2010). The text of the Dodd-Frank Act may be accessed at http://www.cftc.gov/ucm/groups/public/@swaps/documents/file/hr4173_enrolledbill.pdf.
\13\ Section 722(e) of the Dodd-Frank Act.
\14\ See 7 U.S.C. 2(a)(1)(A). The Dodd-Frank Act also added
section 2(h)(1)(A), which requires swaps to be cleared if required
to be cleared and not subject to a clearing exception or exemption.
See 7 U.S.C. 2(h)(1)(A).
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The Dodd-Frank Act also added a savings clause that addresses the
roles of the Commission, FERC, and state regulatory authorities as they
relate to certain agreements, contracts, or transactions traded
pursuant to the tariff or rate schedule of an RTO or ISO that has been
approved by FERC or the state regulatory authority.\15\ That savings
clause, paragraph (I)(i) of CEA section 2(a)(1), preserves the
statutory authority of FERC and state regulatory authorities over
agreements, contracts, or transactions entered into pursuant to a
tariff or rate schedule approved by FERC or a State regulatory
authority, that are (I) not executed, traded, or cleared on an entity
or trading facility subject to registration, or (II) executed, traded,
or cleared on a registered entity or trading facility owned or operated
by an RTO or ISO.\16\ However, paragraph (I)(ii) of CEA section 2(a)(1)
also preserves the Commission's statutory authority over such
agreements, contracts, or transactions.\17\
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\15\ See 7 U.S.C. 2(a)(1)(I).
\16\ 7 U.S.C. 2(a)(1)(I)(i).
\17\ See 7 U.S.C. 2(a)(1)(I)(ii).
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The Dodd-Frank Act granted the Commission specific powers to exempt
certain contracts, agreements, or transactions from duties otherwise
required by statute or Commission regulation by adding, as relevant
here, new section 4(c)(6) to the CEA. Section 4(c)(6) provides that the
Commission shall, if certain conditions are met, issue exemptions from
the ``requirements'' of the CEA for certain transactions entered into
pursuant to a tariff or rate schedule approved or permitted to take
effect by FERC or a state regulatory authority.\18\
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\18\ See 7 U.S.C. 6(c)(6). CEA section 4(c)(6) provides that the
Commission shall issue an exemption only if the Commission
determines that the exemption would be consistent with the public
interest and the purposes of this Act. Moreover, the Commission must
act in accordance with 4(c)(1) and 4(c)(2) when issuing an exemption
under section 4(c)(6).
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The Commission must act ``in accordance with'' sections 4(c)(1) and
(2) of the CEA when issuing an exemption under section 4(c)(6).\19\
Section 4(c)(1) grants the Commission the authority to exempt any
agreement, contract, or transaction or class of transactions, including
swaps, from certain provisions of the CEA, in order to promote
responsible economic or financial innovation and fair competition.\20\
Section 4(c)(2) \21\ of the Act further provides that the Commission
may not grant exemptive relief unless it determines that: (1) The
exemption would be consistent with the public interest and the purposes
of the CEA; (2) the transaction will be entered into solely between
``appropriate persons'' as that term is defined in section 4(c); \22\
and (3) the exemption will not have a material adverse effect on the
ability of the Commission or any contract market to discharge its
regulatory or self-regulatory responsibilities under the CEA.\23\ In
enacting section 4(c), Congress noted that the purpose of the provision
is to give the Commission a means of providing certainty and stability
to existing and emerging markets so that financial innovation and
market development can proceed in an effective and competitive
manner.\24\
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\19\ 7 U.S.C. 6(c)(6).
\20\ 7 U.S.C. 6(c)(1).
\21\ 7 U.S.C. 6(c)(2).
\22\ Section 4(c)(3) of the CEA further outlines who may
constitute an appropriate person for the purpose of a particular
4(c) exemption and includes, as relevant to the SPP Final Order: (a)
Any person that qualifies for one of ten defined categories of
appropriate persons; or (b) such other persons that the Commission
determines to be appropriate in light of their financial or other
qualifications, or the applicability of appropriate regulatory
protections.
\23\ 7 U.S.C. 6(c)(2).
\24\ H.R. Rep. No. 102-978, 102d Cong. 2d Sess., 1992
U.S.C.C.A.N. 3179, 3213 (1992).
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II. Background
A. RTO-ISO Order
On March 28, 2013, the Commission issued the RTO-ISO Order, which
exempts specified transactions of particular RTOs and ISOs \25\ from
certain provisions of the CEA and Commission regulations. The scope of
the RTO-ISO Order includes transactions that fall within the
definitions of ``Financial Transmission Rights,'' ``Energy
Transactions,'' ``Forward Capacity Transactions,'' or ``Reserve or
Regulation Transactions'' \26\ (collectively, the ``RTO-ISO Covered
Transactions'') and that are offered or sold in a market administered
by one of the petitioning RTOs or ISOs pursuant to a tariff, rate
schedule, or protocol that has been approved or permitted to take
effect by FERC or PUCT.\27\ In addition, to be eligible for the
exemption in the RTO-ISO Order, all parties to the agreements,
contracts, or transactions that are covered by the RTO-ISO Order must
be: (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)(A) of the CEA and in Commission regulation
1.3(m); 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.\28\ To be eligible for the exemption in the RTO-
ISO Order, the transactions must comply with all other enumerated terms
and conditions in the RTO-ISO Order.\29\ The relief granted in, and the
conditions imposed by, the SPP Proposed Order are consistent with the
analogous provisions of the RTO-ISO Order.
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\25\ Six entities (the ``Requesting Parties'') jointly filed a
petition requesting the exemption provided in the RTO-ISO Order:
Midwest Independent Transmission System Operator, Inc. (``MISO''),
ISO New England, Inc. (``ISO NE''), and PJM Interconnection, L.L.C.
(``PJM'') are RTOs subject to regulation by FERC; California
Independent System Operator Corporation (``CAISO'') and New York
Independent System Operator, Inc. (``NYISO'') are ISOs subject to
regulation by FERC; and the Electric Reliability Council of Texas,
Inc. (``ERCOT'') performs the role of an ISO and is subject to
regulation by the Public Utility Commission of Texas (``PUCT''). See
RTO-ISO Order at 19882.
\26\ See id. at 19912-13.
\27\ See id. at 19913. The exemption in the RTO-ISO Order also
applies to ``any person or class of persons offering, entering into,
rendering advice, or rendering other services with respect'' to any
of the RTO-ISO Covered Transactions. See id. at 19912. These
entities, including the six Requesting Parties (see supra note 25)
are hereinafter referred to collectively as the ``RTO-ISO Covered
Entities.''
\28\ See id. at 19913-14.
\29\ See id. at 19912-15.
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In the RTO-ISO Order, the Commission excepted from the exemption
the Commission's general anti-fraud and anti-manipulation authority,
and scienter-based prohibitions, under CEA sections 2(a)(1)(B), 4(d),
4b, 4c(b), 4o, 4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8,
9, and 13 of the Act, and any implementing regulations promulgated
under these sections including, but not limited to, Commission
regulations 23.410(a) and (b), 32.4, and part 180.\30\ The RTO-ISO
Order did not discuss CEA section 22.
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\30\ See id. at 19912.
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B. SPP Exemption Application
On October 17, 2013, SPP filed an Exemption Application \31\ with
the Commission requesting that the
[[Page 73065]]
Commission exercise its authority under section 4(c)(6) of the CEA \32\
and section 712(f) of the Dodd-Frank Act \33\ to exempt certain
contracts, agreements, and transactions for the purchase or sale of
specified electric energy products, that are offered pursuant to a
FERC-approved Tariff, from most provisions of the Act.\34\ SPP is an
RTO subject to regulation by FERC. As described in greater detail
below, FERC encouraged the formation of RTOs to administer the electric
energy transmission grid on a regional basis.\35\
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\31\ SPP filed an amended Exemption Application on August 1,
2014. Citations herein to ``Exemption Application'' are to the
amended Exemption Application.
\32\ 7 U.S.C. 6(c)(6).
\33\ See section 712(f) of the Dodd-Frank Act.
\34\ See Exemption Application at 1.
\35\ See id. at 2 n.7.
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SPP specifically requested that the Commission exempt from most
provisions of the CEA certain ``transmission congestion rights,''
``energy transactions,'' and ``operating reserve transactions,'' as
those terms are defined in the Exemption Application, if such
transactions are offered or entered into pursuant to a Tariff under
which SPP operates that has been approved by FERC, as well as any
persons (including SPP, its members and its market participants)
offering, entering into, rendering advice, or rendering other services
with respect to such transactions.\36\ SPP asserted that each of the
transactions for which an exemption is requested is: (a) Subject to a
long-standing, comprehensive regulatory framework for the offer and
sale of such transactions established by FERC, and (b) part of, and
inextricably linked to, SPP's delivery of electric energy and the
organized wholesale electric energy markets that are subject to
regulation and oversight by FERC.\37\ SPP expressly excluded from the
Exemption Application any request for relief from the Commission's
general anti-fraud and anti-manipulation authority, and scienter-based
prohibitions, under sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o,
4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13 of the
Act, and any implementing regulations promulgated under these sections
including, but not limited to, Commission regulations 23.410(a) and
(b), 32.4 and part 180,\38\ and such provisions explicitly have been
carved out of the SPP Proposed Order. SPP asserted that it is seeking
the requested exemption in order to provide greater legal certainty
with respect to the regulatory requirements that apply to the
transactions that are the subject of the Exemption Application.\39\
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\36\ See id. at 11-15.
\37\ See id. at 17.
\38\ See id. at 1.
\39\ See id. at 11.
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As discussed above,\40\ the relief that SPP requested is
substantially similar to the relief the Commission granted in the RTO-
ISO Order.
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\40\ See supra section II.A.
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C. SPP Proposed Order
On May 18, 2015, the Commission issued the SPP Proposed Order.\41\
The exemptive relief proposed in the SPP Proposed Order was
substantially similar to the exemptive relief granted by the Commission
in the RTO-ISO Order.
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\41\ 80 FR 29490 (May 21, 2015).
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1. Transactions Proposed To Be Exempted
In the SPP Proposed Order, the Commission proposed to exempt the
purchase and sale of three types of SPP Covered Transactions: (1)
Transmission Congestion Rights (``TCRs''), (2) Energy Transactions, and
(3) Operating Reserve Transactions, each as defined below, pursuant to
section 4(c)(6) of the CEA.\42\
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\42\ Id. at 29493-94, 29516-17. As set forth in the SPP Proposed
Order, SPP represents that the terms ``Transmission Congestion
Rights,'' ``Energy Transactions,'' and ``Operating Reserve
Transactions'' are SPP's equivalent of the following terms set forth
in the RTO-ISO Order: ``Financial Transmission Right,'' ``Energy
Transactions,'' and ``Reserve or Regulation Transactions,''
respectively. SPP also avers that its transactions are defined in a
manner consistent with the terms set forth in the RTO-ISO Order. Id.
at 29493 n.51.
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A TCR \43\ was proposed to be defined as ``a transaction, however
named, that entitles one party to receive, and obligates another party
to pay, an amount based solely on the difference between the price for
electric energy, established on an electric energy market administered
by SPP, at a specified source (i.e., where electric energy is deemed
injected into SPP's grid) and a specified sink (i.e., where electric
energy is deemed withdrawn from SPP's grid).'' \44\ As set forth in the
SPP Proposed Order, TCRs would be exempt only where each TCR is linked
to, and the aggregate volume of TCRs for any period of time is limited
by, the physical capability (after accounting for counterflow) of SPP's
electric energy transmission system for such period; SPP serves as the
market administrator for the market on which the TCRs are transacted;
each party to the transaction is a market participant of SPP (or is SPP
itself) and the transaction is executed on a market administered by
SPP; and the transaction does not require any party to make or take
physical delivery of electric energy.\45\
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\43\ As set forth in the SPP Proposed Order, SPP's markets will
also include Auction Revenue Rights (``ARRs''). ARRs are allocated
to transmission customers based on historical network load or
transmission service reservations (or equivalent service taken under
a grandfathered agreement between an SPP transmission owner and a
customer). ARRs are granted exclusively to transmission service
customers (i.e., not to other market participants or speculators)
based on their transmission service (or grandfathered service) and
are subject to SPP's simultaneous feasibility analysis of the
capability of the SPP Transmission System. ARRs are not traded in
SPP's market; instead, ARRs entitle the holder to a share of
revenues from SPP-administered transmission congestion right
auctions or may be ``self-converted'' at the customer's election
into a transmission congestion right. Id. at 29493 n.52.
\44\ Id. at 29493; see also id. at 29517. The proposed
definition of TCR is similar to the definition of financial
transmission right (``FTR'') in the RTO-ISO Order. However, the
proposed definition of TCR does not include TCR options, whereas the
RTO-ISO Order's definition of FTR includes such rights in the form
of options. Id. at 29493 n.53; cf. RTO-ISO Order at 19913 (defining
the term FTR to include FTRs and FTRs in the form of options).
\45\ 80 FR at 29493.
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``Energy Transactions'' were proposed to be defined as transactions
in the SPP ``Day-Ahead Market'' \46\ or ``Real-Time Balancing Market,''
\47\ as those terms are defined in the SPP Proposed Order, for the
purchase or sale of a specified quantity of electric energy at a
specified location (including virtual bids and offers) where the price
of electric energy is established at the time the transaction is
executed.\48\ Performance occurs in the Real-Time Balancing Market by
either the physical delivery or receipt of the specified electric
energy or a cash payment or receipt at the price established in the
Day-Ahead Market or Real-Time Balancing Market; and the aggregate
cleared volume of both physical and cash-settled energy transactions
for any period of time is limited by the physical capability of the
electric energy transmission system operated by SPP for that period of
time.\49\
\46\ ``Day-Ahead Market'' was defined in the SPP Proposed Order
as ``an electric energy market administered by SPP on which the
price of electric energy at a specified location is determined, in
accordance with SPP's Tariff, for specified time periods, none of
which is later than the second operating day following the day on
which the Day Ahead Market clears.'' Id. at 29517.
\47\ ``Real-Time Balancing Market'' was defined in the SPP
Proposed Order as ``an electric energy market administered by SPP on
which the price of electric energy at a specified location is
determined, in accordance with SPP's Tariff, for specified time
periods within the same 24-hour period.'' Id.
\48\ Id. at 29493; see also id. at 29517. The definition of
Energy Transactions is similar to the definition used by the
Commission in the RTO-ISO Order. See RTO-ISO Order at 19913.
\49\ 80 FR at 29493; see also id. at 29517.
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``Operating Reserve Transactions'' were proposed to be defined
as transactions:
(1) In which SPP, for the benefit of load-serving entities and
resources, purchases, through auction, the right, during a period of
[[Page 73066]]
time as specified in SPP's Tariff, to require the seller of such
right to operate electric energy facilities in a physical state such
that the facilities can increase or decrease the rate of injection
or withdrawal of a specified quantity of electric energy into or
from the electric energy transmission system operated by SPP with:
(a) Physical performance by the seller's facilities within a
response time interval specified in SPP's Tariff (Reserve
Transaction); or
(b) prompt physical performance by the seller's facilities (Area
Control Error Regulation Transaction);
(2) For which the seller receives, in consideration, one or more
of the following:
(a) Payment at the price established in SPP's Day-Ahead or Real-
Time Balancing Market, as those terms are defined in the SPP
Proposed Order, price for electric energy applicable whenever SPP
exercises its right that electric energy be delivered (including
``Demand Response,'' as defined in the SPP Proposed Order);
(b) Compensation for the opportunity cost of not supplying or
consuming electric energy or other services during any period during
which SPP requires that the seller not supply energy or other
services;
(c) An upfront payment determined through the auction
administered by SPP for this service;
(d) An additional amount indexed to the frequency, duration, or
other attributes of physical performance as specified in SPP's
Tariff; and
(3) In which the value, quantity, and specifications of such
transactions for SPP for any period of time shall be limited to the
physical capability of the electric energy transmission system
operated by SPP for that period of time.\50\
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\50\ Id. at 29517; see also id. at 29493-94.
Finally, in the SPP Proposed Order, the Commission clarified that
financial transactions that are not tied to the allocation of the
physical capabilities of an electric energy transmission grid would not
be suitable for exemption, and were therefore not covered by the SPP
Proposed Order, because such activity would not be inextricably linked
to the physical delivery of electric energy.\51\
---------------------------------------------------------------------------
\51\ See id. at 29494.
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2. Conditions to the SPP Proposed Order
In the SPP Proposed Order, the Commission proposed four conditions,
each of which is consistent with the RTO-ISO Order. First, the
Commission proposed that all parties to the agreements, contracts, or
transactions that are covered by the SPP Proposed Order must be
``appropriate persons,'' as such term is defined in sections 4(c)(3)(A)
through (J) of the Act, ``eligible contract participants,'' as such
term is defined in section 1a(18)(A) of the Act and in Commission
regulation 1.3(m),\52\ or persons who are 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.\53\
---------------------------------------------------------------------------
\52\ Id. Consistent with the RTO-ISO Order, the Commission
proposed to use its authority pursuant to CEA section 4(c)(3)(K) to
include eligible contract participants as appropriate persons for
the purposes of this SPP Final Order. See RTO-ISO Order at 19896,
19913; see also 7 U.S.C. 1a(18)(A) and Further Definition of ``Swap
Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap
Participant,'' ``Major Security-Based Swap Participant'' and
``Eligible Contract Participant,'' 77 FR 30596, May 23, 2012.
\53\ 80 FR at 29494. Consistent with the RTO-ISO Order, the
Commission also proposed to use its authority pursuant to CEA
section 4(c)(3)(K) to include persons who are 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. See RTO-
ISO Order at 19899, 19913, 19914.
---------------------------------------------------------------------------
Second, the Commission proposed that the agreements, contracts, or
transactions that are covered by the SPP Proposed Order must be offered
or sold pursuant to SPP's Tariff, which has been approved or permitted
to take effect by FERC.\54\
---------------------------------------------------------------------------
\54\ 80 FR at 29494.
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Third, the Commission proposed that neither SPP's Tariff nor other
governing documents may include any requirement that SPP notify a
member prior to providing information to the Commission in response to
a subpoena or other request for information or documentation.\55\
---------------------------------------------------------------------------
\55\ Id.
---------------------------------------------------------------------------
Finally, the Commission proposed that information-sharing
arrangements that are satisfactory to the Commission between the
Commission and FERC must remain in full force and effect.\56\ The
Commission proposed that this condition also requires that SPP comply
with the Commission's requests on an as-needed basis for related
transactional and positional market data.\57\
---------------------------------------------------------------------------
\56\ Id. The CFTC and FERC signed a Memorandum of Understanding
(``MOU'') Regarding Information Sharing and Treatment of Proprietary
Trading and Other Information on January 2, 2014 (``CFTC-FERC
Information Sharing MOU''), which addresses the sharing of
information in connection with market surveillance and
investigations into potential market manipulation, fraud, or abuse.
The MOU is available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/cftcfercismou2014.pdf.
\57\ 80 FR at 29494.
---------------------------------------------------------------------------
3. Additional Limitations
In the SPP Proposed Order, the Commission expressly noted that the
proposed exemption was based upon the representations made in the
Exemption Application and in the supporting materials provided by SPP
and its counsel, and that any material change or omission in the facts
and circumstances that alter the grounds for the SPP Proposed Order
might require the Commission to reconsider its finding that the
exemption contained therein is appropriate and/or in the public
interest and consistent with the purposes of the CEA.\58\ The
Commission highlighted several of SPP's representations as being of
particular importance, including: (1) The exemption sought by SPP
relates to the transactions described in the SPP Proposed Order, which
are primarily entered into by commercial participants that are in the
business of generating, transmitting, and distributing electric energy;
\59\ (2) SPP was established for the purpose of providing affordable,
reliable electric energy to consumers within its geographic region;
\60\ (3) the transactions described in the SPP Proposed Order are an
essential means, designed by FERC as an integral part of its statutory
responsibilities, to enable the reliable delivery of affordable
electric energy; \61\ (4) each of the transactions defined in the SPP
Proposed Order taking place on SPP's markets is monitored by both a
market administrator (SPP) and an independent market monitor (``SPP
Market Monitor'') responsible to FERC; \62\ and (5) each transaction
defined in the SPP Proposed Order is directly tied to the physical
capabilities of SPP's electric energy grid.\63\
---------------------------------------------------------------------------
\58\ See id.; see also id. at 29518. These limitations are
consistent with the RTO-ISO Order. See RTO-ISO Order at 19914-15.
\59\ See 80 FR at 29494; see also Exemption Application at 17.
\60\ See 80 FR at 29494; see also Exemption Application at 2,
17.
\61\ See 80 FR at 29494; see also generally FERC Order No. 888;
FERC Order No. 2000; 18 CFR 35.34(k)(2); Exemption Application at
17.
\62\ See 80 FR at 29494; see also Exemption Application at 17.
\63\ See 80 FR at 29494; see also Exemption Application at 12-
15.
---------------------------------------------------------------------------
In the SPP Proposed Order, the Commission explicitly reserved the
authority to, in its discretion, revisit any of the terms of the relief
provided by the SPP Proposed Order, including, but not limited to,
making a determination that certain entities and transactions should be
subject to the Commission's jurisdiction.\64\ The Commission also
explicitly reserved the authority to, in its discretion, suspend,
terminate, or otherwise modify or restrict the exemption granted in the
SPP Proposed Order.\65\ Finally, the Commission announced its intention
to exclude from the exemptive relief its general anti-fraud and anti-
manipulation authority,
[[Page 73067]]
and scienter-based prohibitions, under the CEA over SPP and the
transactions defined in the SPP Proposed Order, including sections
2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d),
6(e), 6c, 6d, 8, 9, and 13 of the CEA and any implementing regulations
promulgated thereunder including, but not limited to, Commission
regulations 23.410(a) and (b), 32.4, and part 180.\66\
---------------------------------------------------------------------------
\64\ See 80 FR at 29518.
\65\ See id.
\66\ See id. at 29515, 29516.
---------------------------------------------------------------------------
The Commission explained in the SPP Proposed Order that neither the
proposed nor the final RTO-ISO Order discussed, referred to, or
mentioned CEA section 22, which provides for private rights of action
for damages against persons who violate the CEA, or persons who
willfully aid, abet, counsel, induce, or procure the commission of a
violation of the Act.\67\ The Commission explained that by enacting CEA
section 22, Congress provided private rights of action as a means for
addressing violations of the Act as an alternative or supplement to
Commission enforcement action.\68\ The Commission observed that it
would be highly unusual for the Commission to reserve to itself the
power to pursue claims for fraud and manipulation--a power that
includes the option of seeking restitution for persons who have
sustained losses from such violations or a disgorgement of gains
received in connection with such violations--while at the same time,
without explanation, denying private rights of action and damages
remedies for the same violations.\69\ The Commission stated that if it
intended to take such a differentiated approach (i.e., to limit the
rights of private persons to bring such claims while reserving to
itself the right to bring the same claims), the RTO-ISO Order would
have included a discussion or analysis of the reasons therefore.\70\
The Commission therefore stated that, in the Commission's view, the
RTO-ISO Order does not prevent private claims for fraud or manipulation
under the CEA.\71\ The Commission further stated that this view would
apply equally to the SPP Proposed Order.\72\
---------------------------------------------------------------------------
\67\ Id. at 29493.
\68\ Id.
\69\ Id.
\70\ Id.
\71\ Id.
\72\ Id.
---------------------------------------------------------------------------
D. Aspire v. GDF Suez
In February 2015, the United States District Court for the Southern
District of Texas dismissed a private lawsuit on the ground that the
CEA section 22 private right of action was not available to the
plaintiffs under the RTO-ISO Order.\73\ The lawsuit alleged that
certain electricity generators in ERCOT's market manipulated the market
price of electricity by, among other things, intentionally withholding
electricity generation during times of tight supply.\74\ The suit
further alleged that this conduct created artificial and unpredictable
prices in the secondary futures markets.\75\ The claim thus alleged
that defendants were manipulating contract prices in the derivatives
commodities market in violation of the Act.\76\ The District Court
dismissed the claim, finding that under the RTO-ISO Order, the private
right of action in CEA section 22 was ``unavailable to [p]laintiffs.''
\77\ In February 2016, the United States Court of Appeals for the Fifth
Circuit affirmed the District Court's ruling.\78\
---------------------------------------------------------------------------
\73\ Aspire Commodities, L.P. v. GDF Suez Energy N. Am., Inc.,
No. H-14-1111, 2015 WL 500482 (S.D. Tex. Feb. 3, 2015).
\74\ Id. at *1-*2.
\75\ Id. at *2.
\76\ See id.
\77\ Id. at *5.
\78\ See Aspire Commodities, L.P. v. GDF Suez Energy N. Am.,
Inc., No. 15-20125, 640 F. App'x 358 (5th Cir. Feb. 25, 2016).
---------------------------------------------------------------------------
E. RTO-ISO Order Proposed Amendment
On May 9, 2016, the Commission issued a notice of proposed order
and request for comment which proposed to amend the text of the RTO-ISO
Order to explicitly provide that the RTO-ISO Order does not exempt the
entities covered under the RTO-ISO Order from the private right of
action found in section 22 of the CEA\79\ with respect to the Excepted
Provisions.\80\
---------------------------------------------------------------------------
\79\ 7 U.S.C. 25.
\80\ 81FR 30245.
---------------------------------------------------------------------------
In the RTO-ISO Order Proposed Amendment, the Commission noted that,
currently, Paragraph 1 of the RTO-ISO Order states that the Commission:
Exempts, subject to the conditions and limitations specified herein,
the execution of the electric energy-related agreements, contracts,
and transactions that are specified in paragraph 2 of this Order and
any person or class of persons offering, entering into, rendering
advice, or rendering other services with respect thereto, from all
provisions of the CEA, except, in each case, the Commission's
general anti-fraud and anti-manipulation authority, and scienter-
based prohibitions, under CEA sections 2(a)(1)(B), 4(d), 4b, 4c(b),
4o, 4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and
13, and any implementing regulations promulgated under these
sections including, but not limited to, Commission regulations
23.410(a) and (b), 32.4, and part 180.\81\
---------------------------------------------------------------------------
\81\ 81 FR at 30247; see also RTO-ISO Order at 19912.
The RTO-ISO Order Proposed Amendment stated that, under the RTO-ISO
Order, for those CEA requirements from which the RTOs and ISOs are
exempt, there can be no claim under CEA section 22 with respect to
those requirements.\82\ The Commission further stated RTO-ISO Order did
not specifically note that the exemption contained therein did not
apply to actions pursuant to CEA section 22 with respect to the
Excepted Provisions.\83\
---------------------------------------------------------------------------
\82\ 81 FR 30247.
\83\ Id.
---------------------------------------------------------------------------
In light of the Aspire court ruling discussed above,\84\ in the
RTO-ISO Order Proposed Amendment, the Commission proposed to amend the
text of the RTO-ISO Order to clarify that the RTO-ISO Covered Entities
are not exempt from the private right of action in CEA section 22 with
respect to the Excepted Provisions. Specifically, the Commission
proposed to amend Paragraph 1 of the RTO-ISO Order to read as follows
(the additional language is italicized):
---------------------------------------------------------------------------
\84\ See supra section II.D.
Exempts, subject to the conditions and limitations specified herein,
the execution of the electric energy-related agreements, contracts,
and transactions that are specified in paragraph 2 of this Order and
any person or class of persons offering, entering into, rendering
advice, or rendering other services with respect thereto, from all
provisions of the CEA, except, in each case, the Commission's
general anti-fraud and anti-manipulation authority, and scienter-
based prohibitions, under CEA sections 2(a)(1)(B), 4(d), 4b, 4c(b),
4o, 4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and
13, and any implementing regulations promulgated under these
sections including, but not limited to, Commission regulations
23.410(a) and (b), 32.4, and part 180. This exemption also does not
apply to actions pursuant to CEA section 22 with respect to the
foregoing enumerated provisions.\85\
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\85\ 81 FR 30248. The RTO-ISO Order Proposed Amendment did not
alter any of the other terms or conditions of the RTO-ISO Order.
The Commission proposed the foregoing amendment to the RTO-ISO Order in
order to ensure clarity.\86\ In addition, the RTO-ISO Order Proposed
Amendment gave the following additional reasons for proposing the
amendment: (1) Amending the RTO-ISO Order to explicitly preserve the
private right of action with respect to fraud and manipulation would
not cause regulatory uncertainty or duplicative or inconsistent
regulation; (2) conflicting judicial interpretations regarding the
nature of the RTO-ISO Covered Transactions would not affect the
jurisdiction of FERC or any relevant state regulatory authority; (3)
the private
[[Page 73068]]
right of action in the CEA is instrumental in protecting the American
public, deterring bad actors, and maintaining the credibility of the
markets subject to the Commission's jurisdiction; (4) the private right
of action under CEA section 22 was established by Congress as an
integral part of the CEA's enforcement and remedial scheme; and (5) the
Commission's preservation of section 22 liability with respect to the
Excepted Provisions is consistent with the Commission's actions in
prior 4(c) orders.\87\
---------------------------------------------------------------------------
\86\ Id.
\87\ See id. at 30248-49.
---------------------------------------------------------------------------
III. Summary of Comments
A. Overview of Comments
The Commission requested public comments on both the SPP Proposed
Order and the RTO-ISO Order Proposed Amendment.
The public comment period on the SPP Proposed Order ended on June
22, 2015. The Commission received thirteen (13) comment letters on the
SPP Proposed Order from twelve (12) commenters,\88\ the majority of
which provided general support for the proposed exemption.\89\ The
comment letters on the SPP Proposed Order addressed the following
issues: preservation of the private right of action found in section 22
of the CEA; the Commission's jurisdiction; and the use of the term
``member'' in the SPP Proposed Order. In determining the scope and
content of the SPP Final Order, the Commission has taken into account
the issues raised by commenters.
---------------------------------------------------------------------------
\88\ All comment letters are available through the Commission's
Web site at: http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1586. Comments addressing the SPP Proposed Order
were received from: Aspire Commodities, LP (``Aspire (1)'');
Association of Electric Companies of Texas, Inc. (``AECT'');
Coalition of Physical Energy Companies (``COPE''); Staff of the
Federal Energy Regulatory Commission (``FERC Staff (1)''); First
Principles Economics, LLC (``First Principles''); GDF Suez Energy
North America, Inc. (``GSENA (1)''); International Energy Credit
Association (``IECA (1)''); Joint Trade Associations (collectively
referring to the American Public Power Association, Edison Electric
Institute, Electric Power Supply Association, and the National Rural
Electric Cooperative Association); Public Utility Commission of
Texas (``PUCT (1)''); RTO-ISO Commenters (collectively referring to
PJM Interconnection, L.L.C., Electric Reliability Council of Texas,
Inc., and the California Independent System Operator Corporation);
SPP; and Texas Competitive Power Advocates (``TCPA''). COPE
submitted an original comment letter on June 22, 2015 and submitted
a second comment letter on June 23, 2015. The second comment letter,
which was dated June 22, 2015, contained a correction to the version
of COPE's comment letter that was originally submitted, and
therefore superseded COPE's original comment letter. The corrected
version of COPE's comment letter is herein referred to as ``COPE
(1).'' COPE submitted a third comment letter after the expiration of
the comment period, on June 25, 2015.
\89\ See, e.g., Aspire at 1; AECT at 1; COPE (1) at 2; First
Principles at 1; GSENA (1) at 2; IECA at 3; Joint Trade Associations
at 2; PUCT (1) at 2; SPP at 1; and TCPA at 2.
---------------------------------------------------------------------------
The public comment period on the RTO-ISO Order Proposed Amendment
ended on June 15, 2016. The Commission received forty-eight (48)
comment letters on the RTO-ISO Order Proposed Amendment from forty-six
(46) commenters,\90\ all of which addressed the proposed preservation
of the private right of action found in section 22 of the CEA. In
determining the scope and content of the Amended RTO-ISO Order, and the
scope and content of the portions of the SPP Final Order related to the
private right of action, the Commission has taken into account the
issues raised by commenters.
---------------------------------------------------------------------------
\90\ All comment letters are available through the Commission's
Web site at: http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1697. Comments addressing the RTO-ISO Order
Proposed Amendment were received from: AKCSC; American Electric
Power Company, Inc. (``AEP''); American Gas Association (``AGA'');
Arizona Electric Power Cooperative, Inc.; Aspire Commodities, LP
(``Aspire (2)'') Basin Electric Power Cooperative (``Basin'');
Better Markets; Catherine Corn; bilmem ne; Coalition of Physical
Energy Companies (``COPE (2)''); Commercial Energy Working Group
(``CEWG''); Delaware Division of the Public Advocate, Indiana Office
of Utility Consumer Counselor, Maryland Office of People's Counsel,
Office of People's Counsel for the District of Columbia, New Jersey
Division of Rates Council, Pennsylvania Office of Consumer Advocate,
Consumer Advocate Division of the Public Service Commission of West
Virginia (``PJM JCA''); East Kentucky Power Cooperative, Inc.; East
Texas Electric Cooperative, Inc.; Edison Electric Institute
(``EEI''); Electric Power Supply Association (``EPSA''); Exelon
Generation Company (``Exelon''); Staff of the Federal Energy
Regulatory Commission Staff (``FERC Staff (2)''); GDF Suez Energy
North America, Inc. (``GSENA (2)''); Golden Spread Electric
Cooperative (``Golden Spread''); Hoosier Energy Rural Electric
Cooperative, Inc.; International Energy Credit Association (``IECA
(2)''); ISO/RTO Council (``IRC''); ITC Great Plains, LLC (``ITC'');
Kansas City Power & Light Company (``KCP&L''); Large Public Power
Council (``LPPC''); Minnkota Power Cooperative, Inc.; MISO
Transmission Owners; Missouri Joint Municipal Electric Utility
Commission (``MJMEUC''); National Association of Regulatory Utility
Commissioners (``NARUC''); National Rural Electric Cooperative
Association and American Public Power Association (collectively, the
``NFP Electric Associations''); North Carolina Electric Membership
Corporation; Oklahoma Municipal Power Authority (``OMPA''); Old
Dominion Electric Cooperative; Omaha Public Power District
(``OPPD''); Prairie Power, Inc.; PSEG Companies (``PSEG''); Public
Utility Commission of Texas (``PUCT (2)''); Raiden Commodities
(``Raiden''); Southern Illinois Power Cooperative; Sunflower
Electric Power Corporation; Tenaska Energy, Inc. (``Tenaska'');
Texas Industrial Energy Consumers (``TIEC''); Westar Energy, Inc.
(``Westar''); Western Farmers Electric Cooperative; and Xcel Energy
Services Inc. (``Xcel''). Both Exelon and Golden Spread submitted
two duplicate comments; any reference to either commenter below
refers to the letter attachment on the Commission's Web site at the
above link. In addition, twelve electric cooperatives submitted
substantively identical comment letters: Arizona Electric Power
Cooperative, Inc., East Kentucky Power Cooperative, Inc., East Texas
Electric Cooperative, Inc., Golden Spread Electric Cooperative,
Inc., Hoosier Energy Rural Electric Cooperative, Inc., Minnkota
Power Cooperative, Inc., North Carolina Electric Membership
Corporation, Old Dominion Electric Cooperative, Prairie Power, Inc.,
Southern Illinois Power Cooperative, Sunflower Electric Power
Corporation, and Western Farmers Electric Cooperative. These twelve
commenters are collectively referred to in the discussion that
follows as the ``Electric Cooperative Commenters,'' and any
citations to such commenters are to the letter of the Arizona
Electric Power Cooperative.
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B. Private Right of Action Under CEA Section 22
1. Summary of Comments
In response to the SPP Proposed Order, a number of commenters
objected to the inclusion in the SPP Proposed Order of language
proposing to preserve, in the RTO-ISO Order, private rights of action
under CEA section 22 with respect to the Excepted Provisions, and these
commenters asked that such language not be included in the SPP Final
Order.\91\ Some commenters asserted that the Commission's proposed
clarification of the RTO-ISO Order would deprive the RTOs and ISOs of
due process and the right to comment on this aspect of the RTO-ISO
Order. The Joint Trade Associations, for example, argued that the
Commission's preservation of a private right of action under section 22
of the CEA in the proposed exemption would retroactively impose
requirements that were not contemplated or discussed in prior
proceedings.\92\ GSENA likewise stated that the Commission cannot
retroactively alter the RTO-ISO Order ``by simply reciting its belief
or intent.'' \93\ COPE echoed this objection.\94\ A number of
commenters asserted that the language regarding the preservation of
private rights of action under CEA section 22 would amount to a
retroactive alteration of the RTO-ISO Order, so the Commission should
have provided notice to market participants and an opportunity to
comment on the alteration.\95\ Also, commenters argued that the
inclusion in the SPP Proposed Order of language stating that the intent
of the RTO-ISO Order was to preserve such private rights of action
would be
[[Page 73069]]
contrary to the plain meaning of the RTO-ISO Order.\96\ In addition, in
response to the SPP Proposed Order, commenters asserted that allowing
private rights of action could (1) create a regulatory conflict that
would be inconsistent with Congress' directive that the CFTC and FERC
coordinate their actions to avoid conflicting or duplicative
regulation; \97\ (2) give rise to inconsistent rulings among the
Commission, FERC, state regulatory agencies and federal district courts
regarding the regulatory scheme for transactions in the RTO-ISO
markets; \98\ (3) adversely affect the ability of the Commission and
FERC to determine under the CFTC-FERC jurisdictional MOU \99\ how to
exercise their respective authorities; \100\ (4) result in inconsistent
court decisions; \101\ (5) be costly; \102\ and (6) be inconsistent
with other orders issued by the Commission pursuant to the authority in
CEA section 4(c).\103\ Separately, in response to the SPP Proposed
Order, FERC Staff raised concerns about the effect of allowing private
rights of action under CEA section 22 on FERC's regulatory authority,
and requested that the Commission clarify that its action on SPP's
application does not limit or otherwise affect FERC's authority.\104\
---------------------------------------------------------------------------
\91\ See, e.g., Joint Trade Associations at 5; COPE (1) at 3, 5;
GSENA (1) at 3; PUCT (1) at 3.
\92\ Joint Trade Associations at 5.
\93\ GSENA (1) at 3.
\94\ COPE (1) at 5 (``[A] retroactive statement of agency
intent'' is not sufficient to change the plain meaning of the RTO-
ISO Order).
\95\ Joint Trade Associations at 5-6; COPE (1) at 5; IECA (1) at
2; RTO-ISO Commenters at 3; PUCT (1) at 4.
\96\ See, e.g., Joint Trade Associations at 5; COPE (1) at 3;
PUCT (1) at 3-4.
\97\ Joint Trade Associations at 7; IECA at 3.
\98\ RTO-ISO Commenters at 5.
\99\ Memorandum of Understanding Between the Federal Energy
Regulatory Commission and the Commodity Futures Trading Commission
(``CFTC-FERC Jurisdictional MOU''), Jan. 2, 2014, available at
http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/cftcfercjmou2014.pdf.
\100\ RTO-ISO Commenters at 5-6; 9-10.
\101\ Joint Trade Associations at 6; RTO-ISO Commenters at 8-9.
\102\ COPE (1) at 4; PUCT (1) at 6.
\103\ RTO-ISO Commenters at 6-7.
\104\ FERC Staff (1) at 2.
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In light of the comments received with respect to the SPP Proposed
Order, the Commission proposed an amendment to the RTO-ISO Order to
address the private right of action issue directly and to solicit
further comment from the public on that issue.
As noted above, the Commission received comments in response to the
RTO-ISO Order Proposed Amendment. Specifically, a number of commenters
asserted that the private right of action is not necessary in the
context of the RTO-ISO markets given the comprehensive regulatory
scheme to which those markets are subject. For example, IRC asserted
that the RTO-ISO markets are ``comprehensively regulated'' by FERC and
PUCT, with substantial enforcement tools, resources, and
experience.\105\ According to several commenters, FERC's broad
enforcement authority over the RTO-ISO markets, including the authority
to conduct investigations, re-settle markets, grant refunds, order
disgorgement, impose civil penalties, and refer cases to the Department
of Justice for criminal prosecution, renders the private right of
action unnecessary in such markets.\106\ In addition, FERC Staff noted
that section 206 of the Federal Power Act (``FPA'') authorizes FERC to
determine, either on its own motion or as a result of a complaint, that
an existing rate or market feature is unjust and unreasonable, and to
establish prospectively a just and reasonable rate.\107\ Similarly,
PUCT argued that it has an established complaint process to accommodate
claims of fraud and manipulation.\108\ More broadly, commenters
asserted that both FERC and PUCT have sufficient processes in place for
private parties to air their concerns.\109\ Commenters also noted that
the RTO-ISO markets are subject to an additional layer of oversight by
independent market monitors, which are tasked with tracking the
behavior of RTO-ISO market participants and reporting suspicious
behavior to FERC or PUCT.\110\ On the other hand, Aspire, Better
Markets, and Raiden asserted that the private right of action protects
market participants by deterring fraudulent or manipulative conduct in
the RTO-ISO markets, and that private rights of action serve as a vital
tool to augment the Commission's limited resources.\111\ Aspire and
Raiden further argued that market participants are in the best position
to observe and take action with respect to market manipulation, and
that they are properly incentivized to bring private claims to seek
compensation for any damages suffered.\112\
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\105\ IRC at 5-6. The IRC also argued that a Commission order
should not be amended, expanded, or withdrawn absent a change in the
law or the facts underlying the order. Id. at 12.
\106\ See, e.g., EPSA at 4; GSENA (2) at 3; MISO Transmission
Owners at 5; PSEG at 2.
\107\ FERC Staff (2) at 3.
\108\ PUCT (2) at 11.
\109\ See, e.g., AGA at 3; EPSA at 5; GSENA (2) at 3; PUCT (2)
at 11.
\110\ See, e.g., EEI at 10; PJM JCA at 4; MISO Transmission
Owners at 5-6; PUCT (2) at 11-12; Xcel at 2.
\111\ Aspire (2) at 2; Better Markets at 2-3; Raiden at 4.
\112\ Aspire (2) at 6; Raiden at 6.
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In addition, several commenters argued that preserving the CEA
section 22 private right of action in this context would result in
regulatory and/or legal uncertainty. A number of commenters asserted
that private rights of action could disrupt the regulatory framework in
place over the RTO-ISO markets,\113\ undermine the efficiency and
effectiveness of the RTO-ISO markets,\114\ interfere with FERC's and
PUCT's ability to maintain the integrity and efficiency of the RTO-ISO
markets,\115\ and interfere with FERC's and PUCT's ability to determine
how the transactions in the RTO-ISO markets should be regulated so as
to produce just and reasonable rates.\116\ Several commenters asserted
that a judicial determination regarding the nature of the transactions
in the RTO-ISO markets (i.e., whether a particular transaction is a
swap) could affect FERC's or PUCT's jurisdiction over such
transactions.\117\ In response to the Commission's question regarding
the effect of the CEA's savings clause on such concerns, several
commenters expressed the view that such clause is subject to differing
interpretations, and as such, it is not clear how a court would
interpret the interaction between the savings clause in CEA section
2(a)(1)(I) and the ``exclusive jurisdiction'' language in section
2(a)(1)(A).\118\ Better Markets and Aspire, on the other hand, argued
that allowing private rights of action in the RTO-ISO markets would not
blur the boundaries of the Commission's and FERC's jurisdiction over
such markets, and that the savings clause in CEA section 2(a)(1)(I)
would prevent any judicial interpretations regarding the nature of the
transactions in the RTO-ISO markets from affecting FERC's or PUCT's
jurisdiction over such transactions.\119\ Separately, FERC Staff
requested that, if the Commission were to amend the RTO-ISO Order to
provide a private right of action under the CEA in the RTO-ISO markets,
the Commission reiterate in its final order that the Commission does
not have exclusive jurisdiction over transactions covered by the RTO-
ISO Order.\120\
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\113\ See, e.g., Basin at 1; EEI at 8; ITC at 2; OMPA at 1; TIEC
at 1-2.
\114\ Westar at 2.
\115\ EPSA at 8.
\116\ IRC at 8.
\117\ See, e.g., EEI at 7; IRC at 9; MISO Transmission Owners at
12.
\118\ See, e.g., MISO Transmission Owners at 12; PUCT at 11.
\119\ Better Markets at 3-4; Aspire at 7.
\120\ FERC Staff (2) at 4.
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Separately, a number of commenters argued that permitting private
actions under CEA section 22 against RTO-ISO market participants could
result in conflicting or inconsistent court decisions.\121\ In
addition, commenters
[[Page 73070]]
claimed that allowing private rights of action in the RTO-ISO markets
could provide an opportunity for private plaintiffs to collaterally
attack market rules, tariffs, or filed rates that have been approved or
permitted to take effect by the relevant regulator.\122\ Such a result,
commenters argued, could make it difficult for market participants to
rely on the established market rules, resulting in a chilling effect on
otherwise appropriate market behavior, and could inject uncertainty and
instability into the RTO-ISO markets.\123\ Several commenters also
suggested that private rights of action could create an opportunity for
courts to second-guess policy decisions made by FERC and PUCT,\124\ or
for private litigants to force judicial revision of RTO-ISO market
rules with which they disagree.\125\ Aspire and Better Markets argued,
on the other hand, that the private right of action does not present
any increased risk of inconsistent judicial decisions, as the
Commission already has the authority to bring actions under the fraud
and manipulation provisions that are reserved in the RTO-ISO
Order.\126\
---------------------------------------------------------------------------
\121\ See, e.g., AGA at 3-4; PUCT (2) at 5.
\122\ See, e.g., AEP at 2; AGA at 3; COPE (2) at 6, 7; EPSA at
7; Exelon at 2; GSENA at 2; IRC at 10; MISO Transmission Owners at
7; OPPD at 5; PUCT (2) at 5; Tenaska at 2; Westar at 3. In response
to the Commission's request for comments regarding the filed rate
doctrine, the IRC and PUCT noted that courts have identified several
exceptions to the filed rate doctrine, so there is no guarantee that
a federal judge would grant a motion to dismiss based on such
doctrine. IRC at 11; PUCT (2) at 10-11; see also MISO Transmission
Owners at 11-12. The IRC further argued that, to the extent the
filed rate doctrine would bar the types of private claims brought
under CEA section 22, such a fact would undercut the rationale for
allowing such private claims. IRC at 11.
\123\ See, e.g., PUCT (2) at 5; MISO Transmission Owners at 7;
COPE (2) at 7; EPSA at 7; GSENA (2) at 2-3; OMPA at 3; OPPD at 5;
PSEG at 3; Tenaska at 2-3; TIEC at 3-4; Xcel at 3.
\124\ AGA at 4; TIEC at 3.
\125\ EEI at 10.
\126\ Aspire at 7; Better Markets at 3.
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Furthermore, a number of commenters argued that allowing private
rights of action in the RTO-ISO markets would be contrary to
congressional intent. Several commenters pointed out that the FPA
expressly prohibits private rights of action; thus, commenters argued
that allowing CEA section 22 private actions in the RTO-ISO markets
would be contrary to the express intent of Congress.\127\ Commenters
also urged that allowing private rights of action would create a
regulatory conflict that is inconsistent with Congress' directive that
the CFTC and FERC coordinate their actions to avoid conflicting or
duplicative regulation,\128\ and would adversely affect the ability of
the Commission and FERC to determine under the CFTC-FERC Jurisdictional
MOU \129\ how to exercise their respective authorities.\130\ On the
other hand, Better Markets argued that preserving the private right of
action would not be contrary to congressional intent, since Congress
specifically included a private right of action in the CEA.\131\
---------------------------------------------------------------------------
\127\ See, e.g., CEWG at 2; EEI at 8; Exelon at 2; IRC at 6;
KCP&L at 7; MISO Transmission Owners at 9; IECA at 4; FERC Staff (2)
at 2-3.
\128\ AGA at 3; CEWG at 5; FERC Staff (2) at 3.
\129\ See supra note 99.
\130\ OPPD at 2-3; FERC Staff (2) at 2.
\131\ Better Markets at 3.
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Several commenters also claimed that preserving the CEA section 22
private right of action would be inconsistent with prior Commission
action. According to EEI, the RTO-ISO Order was consistent with
previous orders issued by the Commission in that it did not contain any
reference to or discussion of CEA section 22.\132\ EEI further pointed
to a grant of temporary exemptive relief from provisions of the CEA
added or amended by Title VII of the Dodd-Frank Act that referenced
certain terms that the Commission had not yet defined.\133\ That order
expressly stated that ``[t]o the extent that the Final Order provides
[4(c)] exemptive relief [from certain provisions of the CEA], such
exemptive relief would, in effect, preclude a person from succeeding in
a private right of action under CEA section 22(a) for violation of such
provisions.'' \134\ Both the IRC and EEI noted that the Commission has
only expressly preserved the CEA section 22 private right of action in
two prior 4(c) orders, both of which were superseded by Congress.\135\
The IRC claimed that it is not unusual for the Commission to reserve
its own authority to address fraud and manipulation without also
reserving private litigants' right to do so.\136\ COPE argued that
there is no valid policy argument to require all orders issued under
CEA section 4(c) to be the same.\137\ EPSA echoed this argument, noting
that the Commission's actions in prior 4(c) orders should not control
its decision on the private right of action here.\138\
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\132\ EEI at 6.
\133\ Effective Date for Swap Regulation, 76 FR 42508, July 19,
2011.
\134\ EEI at 6-7.
\135\ EEI at 7 n.19; IRC at 12 n.32.
\136\ IRC at 12.
\137\ COPE (2) at 8.
\138\ EPSA at 11.
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A number of commenters addressed the cost implications of allowing
private rights of action in the RTO-ISO markets. For instance, several
commenters argued that allowing private actions in the RTO-ISO markets
would be costly, and that costs will be passed onto electricity
consumers.\139\ The Electric Cooperative Commenters noted that costs
will arise due to private litigation whether or not a private plaintiff
can prove that market manipulation occurred.\140\ In addition, COPE
asserted that private litigants could be motivated in part by monetary
gain, whereas FERC, PUCT, and the Commission are motivated by the
public interest.\141\ A number of commenters further asserted that
consumers will bear the indirect costs of increased private litigation
in the RTO-ISO markets, claiming that such costs would include indirect
costs due to (1) increased regulatory uncertainty; \142\ (2) increased
risk; \143\ (3) decreased liquidity in RTO-ISO products that are used
to hedge and manage risk as market participants limit or forego
activity in the RTO-ISO markets; \144\ and (4) court decisions forcing
RTOs and ISOs to change their infrastructure.\145\ PUCT also argued
that allowing private litigants to bring actions against participants
in the RTO-ISO markets would increase the costs associated with
operating those markets.\146\ On the other hand, Better Markets argued
that if the private right of action were available, market participants
would not incur any increased costs of compliance because they would
already be on notice of, and complying with, the fraud and manipulation
provisions in the CEA.\147\
---------------------------------------------------------------------------
\139\ See, e.g., AGA at 4; CEWG at 4; EPSA at 5-6; Exelon at 3-
4; IRC at 10; KCP&L at 4; MISO Transmission Owners at 9; MJMEUC at
3; NFP Electric Associations at 6; PUCT (2) at 5; and TIEC at 4.
\140\ Electric Cooperative Commenters at 3. The Electric
Cooperative Commenters also requested that, if the Commission were
to allow private rights of action under CEA section 22 in the RTO-
ISO markets, such actions not be allowed (1) against commercial end-
user-only entities, or (2) to challenge commercial-end-user-only
hedging transactions. Id.
\141\ COPE (2) at 6; see also AEP at 2-3; EEI at 11; NFP
Electric Associations at 5-6; Xcel at 3.
\142\ AEP at 2.
\143\ Exelon at 3-4.
\144\ Id.
\145\ EPSA at 6.
\146\ PUCT (2) at 5.
\147\ Better Markets at 3.
---------------------------------------------------------------------------
Lastly, Xcel and GSENA argued that allowing private rights of
action in the RTO-ISO markets would ultimately result in reduced
investment in renewable and efficient energy.\148\
---------------------------------------------------------------------------
\148\ Xcel at 3-4; GSENA (2) at 4.
---------------------------------------------------------------------------
2. Commission Determination
The Commission has determined, in the limited context of the RTO-
ISO markets which are the subject of the Amended RTO-ISO Order and the
SPP
[[Page 73071]]
Final Order, to issue a complete exemption from the private right of
action in CEA section 22, including with respect to claims based on
fraud or manipulation. The Commission is persuaded by several factors
raised by the commenters. Considering all of these factors together,
rather than any of these factors alone, or any subset of these factors,
the Commission concludes that in the limited context of activities
within the RTO-ISO markets, there should be a complete exemption from
private claims under CEA section 22.
Initially, the Commission agrees that the unique nature of the RTO-
ISO markets differentiates this issue from other contexts in which a
private right of action is essential.
The RTO-ISO markets are heavily regulated by FERC and PUCT, with
whom the Commission shares jurisdiction. This regulation is
``pervasive'' and it includes rate monitoring, tariff approval,
authorization of market rules and pricing mechanisms, and real-time
oversight of markets.\149\ As part of an articulated regulatory
structure, these markets are also subject to close surveillance not
only by the regulators but also by independent market monitors.\150\ In
addition, FERC and PUCT support their regulation of the electric power
markets with an enforcement program that includes the authority to
order civil penalties, disgorgement, and to resettle the market.\151\
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\149\ FERC Staff (2) at 1-3.
\150\ E.g., FERC Staff (2) at 2; PJM JCA at 4; PUCT (2) at 11-
12.
\151\ FERC Staff (2) at 2; EPSA at 3-4.
---------------------------------------------------------------------------
Furthermore, the Commission will continue to police these markets
for fraud, manipulation and other unfair trading activities and, as
contemplated by Congress, it can and will cooperate with these fellow
regulators to deter and prevent unlawful trading activities in the RTO-
ISO markets. In the same vein, the Commission and FERC both have the
authority to take enforcement action, and to seek restitution on behalf
of injured market participants that fall in their jurisdiction.\152\
---------------------------------------------------------------------------
\152\ 7 U.S.C. 13a-1(d)(3) (Commission authority to seek
restitution); 16 U.S.C. 825h (describing FERC's remedial authority
under the FPA); Pub. Util. Comm'n of Cal. v. FERC, 462 F.3d 1027,
1047-48 (9th Cir. 2006) (holding that section 309 of the FPA
authorizes FERC to order restitution for profits gained as a result
of a statutory or tariff violation); see also Consol. Edison Co. of
N.Y., Inc. v. FERC, 347 F.3d 964, 967 (D.C. Cir. 2003) (same).
---------------------------------------------------------------------------
Moreover, the Commission is further persuaded to issue an express
exemption from the private right of action in the context of the RTO-
ISO markets because private rights of action appear in tension with the
intent of Congress in this context. In 2005, Congress amended the FPA
to give FERC the authority to pursue manipulation of the electricity
markets.\153\ At that time, Congress focused on whether there should be
a private right of action for manipulation of these specific markets.
Congress explicitly declined to grant such a right of action.\154\ This
was a more particularized determination regarding the merits of private
enforcement in these unique markets than the legislative judgment
reflected in CEA section 22 that there should be a generally applicable
private right of action for fraud and manipulation in the Commission's
jurisdictional markets.
---------------------------------------------------------------------------
\153\ E.g., FERC Staff (2) at 2-3 & n.2.
\154\ Id.
---------------------------------------------------------------------------
Finally, the Commission is persuaded that there is a potential for
private rights of action regarding the entities and transactions in the
RTO-ISO markets to interfere with FERC and PUCT oversight of these
markets. Based on the totality of these factors, the Commission
concludes that in the limited context of activities within these unique
markets, there should be a complete exemption from private claims under
CEA section 22.
The Commission's determination regarding the CEA section 22 private
right of action does not in any way affect the Commission's own
authority to address fraudulent or manipulative conduct in these
markets within the Commission's jurisdiction And, in cooperation with
electricity regulators, the Commission will remain vigilant in policing
these markets for fraud, manipulation and other illegal activity.
In addition, in light of the above, the Commission encourages
market participants who observe potential fraud or manipulation in the
markets subject to the Commission's jurisdiction to bring their
concerns to the Commission. The whistleblower provisions of the
Commodity Exchange Act and Commission regulations continue to apply in
this context and are available pursuant to their terms.\155\
---------------------------------------------------------------------------
\155\ The Commission recognizes the arguments of Aspire, Raiden,
and Better Markets regarding the fact that the existence of a
private right of action would protect market participants by
deterring fraudulent or manipulative conduct in the RTO-ISO markets.
Aspire (2) at 2; Raiden at 4; Better Markets at 2-3. However, the
Commission is of the view that, for all of the reasons stated in
this section, such concerns are mitigated.
---------------------------------------------------------------------------
C. Use of the Term ``Member'' in the SPP Proposed Order
With respect to the Commission's use of the term ``member'' in the
SPP Proposed Order, the Joint Trade Associations noted that the
Commission used the term ``member'' throughout the SPP Proposed Order,
and that while such term may have a defined meaning within the context
of other Commission-regulated markets, such term is not defined for
purposes of the SPP Proposed Order in the context of RTO and ISO
markets.\156\ The Joint Trade Associations urged the Commission to
clarify that the term ``member,'' as used in the context of RTO and ISO
markets, refers to a market participant that is bound by the relevant
tariff and that also meets the conditions to be considered an
``appropriate person'' that are set forth in the SPP Proposed
Order.\157\ The Commission notes that this is consistent with its
understanding of the term ``member'' in this context.\158\
---------------------------------------------------------------------------
\156\ Joint Trade Associations at 8.
\157\ Id.
\158\ This is also intended to address the concerns raised in
SPP's comment letter with respect to the use of the terms ``member''
and ``market participant.'' SPP at 3-4.
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IV. Section 4(c) Determinations
A. Section 4(c) Analysis
1. Overview of CEA Section 4(c)
a. Sections 4(c)(6)(A) and (B)
As discussed above in section I., the Dodd-Frank Act amended CEA
section 4(c) to add sections 4(c)(6)(A) and (B), which provide
authority to exempt certain transactions entered into: (a) Pursuant to
a tariff or rate schedule approved or permitted to take effect by FERC,
or (b) pursuant to a tariff or rate schedule establishing rates or
charges for, or protocols governing, the sale of electric energy
approved or permitted to take effect by the regulatory authority of the
State or municipality having jurisdiction to regulate rates and charges
for the sale of electric energy within the State or municipality.\159\
Indeed, section 4(c)(6) provides that if the Commission determines that
the exemption would be consistent with the public interest and the
purposes of this Act, the
[[Page 73072]]
Commission shall issue such an exemption.\160\ However, any exemption
considered under section 4(c)(6)(A) and/or (B) must be done ``in
accordance with [CEA sections 4(c)(1) and (2)].'' \161\
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\159\ The exemption language in section 4(c)(6) states that if
the Commission determines that the exemption would be consistent
with the public interest and the purposes of this Act, the
Commission shall, in accordance with paragraphs (1) and (2) of
section 4(c), exempt from the requirements of this Act an agreement,
contract, or transaction that is entered into (A) pursuant to a
tariff or rate schedule approved or permitted to take effect by the
Federal Energy Regulatory Commission; (B) pursuant to a tariff or
rate schedule establishing rates or charges for, or protocols
governing, the sale of electric energy approved or permitted to take
effect by the regulatory authority of the State or municipality
having jurisdiction to regulate rates and charges for the sale of
electric energy within the State or municipality; or (C) between
entities described in section 201(f) of the Federal Power Act (16
U.S.C. 824(f)).
\160\ 7 U.S.C. 6(c)(6).
\161\ CEA section 4(c)(6) explicitly directs the Commission to
consider any exemption proposed under 4(c)(6) in accordance with CEA
sections 4(c)(1) and (2).
---------------------------------------------------------------------------
b. Section 4(c)(1)
As described above in section I., CEA section 4(c)(1) requires that
the Commission act ``by rule, regulation, or order, after notice and
opportunity for hearing.'' It also provides that the Commission may act
``either unconditionally or on stated terms or conditions or for stated
periods and either retroactively or prospectively, or both'' and that
the Commission may provide an exemption from any provisions of the CEA
except subparagraphs (C)(ii) and (D) of section 2(a)(1).
c. Discussion of Comments on Sections 4(c)(6) and 4(c)(1)
The Commission noted in the RTO-ISO Order Proposed Amendment that,
based on the difference in language between CEA sections 4(c)(6) and
4(c)(1), it is not clear that section 4(c)(6) provides the Commission
with the authority to exempt from the section 22 private right of
action. The Commission further noted that, while section 4(c)(1)
authorizes the Commission to grant exemptions from the Act's
``requirements'' or ``from any other provision of this Act,'' section
4(c)(6) authorizes the Commission to exempt from the Act's
``requirements'' only.\162\
---------------------------------------------------------------------------
\162\ See 81 FR 30249.
---------------------------------------------------------------------------
In response to this discussion, Aspire argued that section 4(c)(6),
in authorizing exemptions from the CEA's ``requirements'' only, does
not authorize the Commission to grant an exemption from the section 22
private right of action, since the private right of action is not a
``requirement'' of the CEA.\163\ IRC argued, on the other hand, that
the narrower language in section 4(c)(6) does not limit the scope of
the exemptions that the Commission may grant under sections 4(c)(1) and
4(c)(2).\164\
---------------------------------------------------------------------------
\163\ See Aspire (2) at 4.
\164\ See IRC at 13.
---------------------------------------------------------------------------
As noted above in section IV.A.1.a., in granting an exemption under
section 4(c)(6) of the CEA, the Commission must act ``in accordance
with'' section 4(c)(1), which grants the Commission the discretionary
authority to exempt from the Act's ``requirements'' or ``from any other
provision of this Act'' if it makes certain findings.\165\ The policy
basis for the Commission's decision to grant an exemption from the CEA
section 22 private right of action under section 4(c)(6) applies
equally, in the context of the present issue, to a decision to take the
same action pursuant to section 4(c)(1), and the Commission has made
the findings required under that provision in sections III.B.2.,
IV.A.2., and IV.A.3. Accordingly, even if the Commission were limited
under section 4(c)(6) from granting an exemption from the CEA section
22 private right of action in the present context, the Commission would
and does, for the reasons discussed above in section III.B.2., in the
alternative exercise its discretion to grant such an exemption pursuant
to its authority in section 4(c)(1) of the Act.
---------------------------------------------------------------------------
\165\ 7 U.S.C. 6(c)(1). The Commission has also considered that
CEA section 22 may in fact be interpreted to impose a
``requirement.'' Section 22 states that certain persons who violate
the Act or Commission regulations ``shall be liable for actual
damages.'' 7 U.S.C. 25(a). This could be construed as a
``requirement'' to compensate the victim.
---------------------------------------------------------------------------
d. Section 4(c)(2)
As set forth above in section I., CEA section 4(c)(2) requires the
Commission to determine that: To the extent an exemption provides
relief from any of the requirements of CEA section 4(a), the
requirement should not be applied to the agreement, contract or
transaction; the exempted agreement, contract, or transaction will be
entered into solely between appropriate persons; \166\ and the
exemption will not have a material adverse effect on the ability of the
Commission or any contract market to discharge its regulatory or self-
regulatory duties under the CEA.\167\
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\166\ See CEA section 4(c)(2)(B)(i) and the discussion of CEA
section 4(c)(3) below.
\167\ See CEA section 4(c)(2)(B)(ii). CEA section 4(c)(2)(A)
also requires that the exemption would be consistent with the public
interest and the purposes of the CEA, but that requirement
duplicates the requirement of section 4(c)(6).
---------------------------------------------------------------------------
e. Section 4(c)(3)
As explained in section I. above, CEA section 4(c)(3) outlines who
may constitute an appropriate person for the purpose of a 4(c)
exemption, including as relevant to this SPP Final Order: (a) Any
person that fits in one of ten defined categories of appropriate
persons; or (b) such other persons that the Commission determines to be
appropriate in light of their financial or other qualifications, or the
applicability of appropriate regulatory protections.\168\
---------------------------------------------------------------------------
\168\ CEA section 4(c)(3), 7 U.S.C. 6(c)(3), provides that the
term ``appropriate person'' shall be limited to the following
persons or classes thereof: (A) A bank or trust company (acting in
an individual or fiduciary capacity); (B) A savings association; (C)
An insurance company; (D) An investment company subject to
regulation under the Investment Company Act of 1940 (15 U.S.C. 80a-1
et seq.); (E) A commodity pool formed or operated by a person
subject to regulation under this Act; (F) A corporation,
partnership, proprietorship, organization, trust, or other business
entity with a net worth exceeding $1,000,000 or total assets
exceeding $5,000,000, or the obligations of which under the
agreement, contract or transaction are guaranteed or otherwise
supported by a letter of credit or keepwell, support, or other
agreement by any such entity or by an entity referred to in
subparagraph (A), (B), (C), (H), (I), or (K) of this paragraph; (G)
An employee benefit plan with assets exceeding $1,000,000, or whose
investment decisions are made by a bank, trust company, insurance
company, investment adviser registered under the Investment Advisers
Act of 1940 (15 U.S.C. 80a-1 et seq.), or a commodity trading
advisor subject to regulation under this Act; (H) Any governmental
entity (including the United States, any state, or any foreign
government) or political subdivision thereof, or any multinational
or supranational entity or any instrumentality, agency, or
department of any of the foregoing; (I) A broker-dealer subject to
regulation under the Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) acting on its own behalf or on behalf of another
appropriate person; (J) A futures commission merchant, floor broker,
or floor trader subject to regulation under this Act acting on its
own behalf or on behalf of another appropriate person; (K) Such
other persons that the Commission determines to be appropriate in
light of their financial or other qualifications, or the
applicability of appropriate regulatory protections.
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2. CEA Section 4(c) Determinations--SPP Final Order
a. Commission Jurisdiction
Subject to the limitations set forth in the CEA, sections
4(c)(6)(A) and (B) of the Act grant the Commission the authority to
exempt certain electric energy transactions provided that the
Commission determines, among other things, that such exemption is
consistent with the public interest and purposes of the CEA.\169\ The
Commission received a comment from FERC in response to the SPP Proposed
Order relating to the Commission's interpretation of its jurisdiction
pursuant to section 4(c)(6).\170\
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\169\ See discussion regarding CEA section 4(c)(6) in section
IV.A.1.a. supra. As noted above in section IV.A.1.c., to the extent
that the Commission's action on the private right of action issue,
with respect to both the SPP Final Order and the Amended RTO-ISO
Order, requires further authority under section 4(c)(1), the
Commission can and does exercise its discretion to take such action
pursuant to such authority.
\170\ FERC Staff (1) at 2. The Commission received the same
comment from FERC Staff in response to the RTO-ISO Order Proposed
Amendment. See FERC Staff (2) at 2. The Commission's determination
with respect to this comment applies to both the SPP Final Order and
the Amended RTO-ISO Order.
---------------------------------------------------------------------------
FERC argued that the Commission should ``interpret the [Dodd-Frank
Act] as not applying to any contract or instrument traded in an RTO or
ISO market pursuant to a FERC-accepted or
[[Page 73073]]
approved tariff or rate schedule.'' \171\ Specifically, in its comment
letter in response to the SPP Proposed Order, FERC maintained that RTO
and ISO markets and transmission services are ``tightly integrated''
and ``regulated to a greater extent than other commodity markets.''
\172\ FERC thus asserted that interpreting the Dodd-Frank Act to not
apply to contracts or instruments traded in an RTO or ISO market
pursuant to a FERC-accepted or approved tariff or rate schedule is
``the most appropriate application of [the Dodd-Frank Act] to these
circumstances.'' \173\ FERC further asserted that, while it does not
take issue with the Commission's retention of anti-manipulation
authority in the SPP Proposed Order, FERC also ``retains its anti-
manipulation authority, as well as its regulatory and oversight
responsibilities, with respect to RTO and ISO markets.'' \174\ FERC
accordingly requested that the Commission ``clarify that its action on
SPP's application, including any statements in this proceeding with
respect to private claims for fraud or manipulation under the Commodity
Exchange Act, do not limit or otherwise affect FERC's authority.''
\175\
---------------------------------------------------------------------------
\171\ FERC Staff (1) at 2; see also FERC Staff (2) at 2.
\172\ FERC Staff (1) at 2.
\173\ Id.
\174\ Id.
\175\ Id.
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In response to FERC's comment, the Commission notes that the
interpretation of the Dodd-Frank Act proffered by FERC is contrary to
the express language of that statute. The Dodd-Frank Act added a
savings clause to the CEA that addresses the roles of the Commission,
FERC, and state agencies as they relate to transactions traded pursuant
to FERC- or state-approved tariffs or rate schedules. As noted above in
section I., section 2(a)(1)(I) of the Act states that nothing in the
Act limits or affects the statutory authority of FERC and state
regulatory authorities over agreements, contracts, or transactions
entered into pursuant to a tariff or rate schedule approved by FERC or
a state regulatory authority, and also preserves the Commission's
statutory authority over such agreements, contracts, or transactions.
Moreover, while section 4(c)(6) of the CEA, added by the Dodd-Frank
Act, empowers the Commission to exempt contracts, agreements, or
transactions traded pursuant to a Tariff or rate schedule that has been
approved or permitted to take effect by FERC or a state regulatory
authority, it does not permit the Commission to automatically or
mechanically apply the exemption. Instead, section 4(c)(6) mandates
that the Commission initially determine that the exemption would be in
the public interest and consistent with the purposes of the CEA, that
the exemption would be applied only to agreements, contracts, or
transactions that are entered into solely between appropriate persons,
and that the exemption will not have a material adverse effect on the
ability of the Commission or any contract market to discharge its
regulatory or self-regulatory duties under the CEA.
The Commission further notes, for purposes of clarification and as
requested by FERC, that nothing in the SPP Final Order (or in the
Amended RTO-ISO Order) limits or otherwise affects FERC's authority.
b. Consistent With the Public Interest and the Purposes of the CEA
As required by CEA section 4(c)(2)(A), as well as section 4(c)(6),
the Commission determines that the SPP Final Order is consistent with
the public interest and the purposes of the CEA. Section 3(a) of the
CEA provides that transactions subject to the CEA affect the national
public interest by providing a means for managing and assuming price
risks, discovering prices, or disseminating pricing information through
trading in liquid, fair and financially secure trading facilities.\176\
Section 3(b) of the CEA identifies the purposes of the CEA as follows:
(1) To serve the public interests described in subsection (a) through a
system of effective self-regulation of trading facilities, clearing
systems, market participants and market professionals under the
oversight of the Commission; and (2) to deter and prevent price
manipulation or any other disruptions to market integrity; to ensure
the financial integrity of all transactions subject to this Act and the
avoidance of systemic risk; to protect all market participants from
fraudulent or other abusive sales practices and misuses of customer
assets; and to promote responsible innovation and fair competition
among boards of trade, other markets and market participants.\177\
---------------------------------------------------------------------------
\176\ 7 U.S.C. 5(a).
\177\ 7 U.S.C. 5(b).
---------------------------------------------------------------------------
Consistent with the proposed determinations set forth in the SPP
Proposed Order,\178\ the Commission finds that: (a) The SPP Covered
Transactions have been, and are, subject to a long-standing regulatory
framework for the offer and sale of the Transactions established by
FERC; and (b) the SPP Covered Transactions administered by SPP are part
of, and inextricably linked to, the organized wholesale electric energy
markets that are subject to FERC regulation and oversight. For example,
FERC Order No. 2000 (which, along with FERC Order No. 888, encouraged
the formation of RTOs and ISOs to operate the electronic transmission
grid and to create organized wholesale electric energy markets)
requires an RTO to demonstrate that it has four minimum
characteristics: (1) Independence from any market participant; (2) a
scope and regional configuration which enables the RTO to maintain
reliability and effectively perform its required functions; (3)
operational authority for its activities, including being the security
coordinator for the facilities that it controls; and (4) short-term
reliability.\179\ In addition, SPP stated that an RTO must demonstrate
to FERC that it performs certain self-regulatory and/or market
monitoring functions.\180\ SPP also represented that it is
``responsible for ensur[ing] the development and operation of market
mechanisms to manage transmission congestion'' \181\ and for
establishing ``market mechanisms [that] must accommodate broad
participation by all market participants, and must provide all
transmission customers with efficient price signals that show the
consequences of their transmission usage decisions.'' \182\
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\178\ See 80 FR at 29495-96.
\179\ See id. at 29495.
\180\ See id.; see also id. at 29495 n.81 (explaining that,
according to SPP, SPP must employ a transmission pricing system that
promotes efficient use and expansion of transmission and generation
facilities; develop and implement procedures to address parallel
path flow issues within its region and with other regions; serve as
a provider of last resort of all ancillary services required by FERC
Order No. 888 including ensuring that its transmission customers
have access to a Real-Time balancing market; be the single OASIS
(Open-Access Same-Time Information System) site administrator for
all transmission facilities under its control and independently
calculate Total Transmission Capacity and Available Transmission
Capability; provide reliable, efficient, and not unduly
discriminatory transmission service, it must provide for objective
monitoring of markets it operates or administers to identify market
design flaws, market power abuses and opportunities for efficiency
improvements; be responsible for planning, and for directing or
arranging, necessary transmission expansions, additions, and
upgrades; and ensure the integration of reliability practices within
an interconnection and market interface practices among regions).
See Exemption Application at 18.
\181\ See 80 FR at 29495-96; see also Exemption Application at
18.
\182\ See 80 FR at 29496; see also Exemption Application at 18-
19; 18 CFR 35.34(k)(2).
---------------------------------------------------------------------------
Furthermore, as explained by SPP and discussed in the SPP Proposed
Order, the Commission notes that the SPP
[[Page 73074]]
Covered Transactions are entered into by commercial participants that
are in the business of generating, transmitting, and distributing
electric energy,\183\ and that SPP was established for the purpose of
providing affordable, reliable electric energy to consumers within its
geographic region.\184\ Additionally, the SPP Covered Transactions that
take place on SPP's markets are overseen by the SPP Market Monitor,
required by FERC to identify manipulation of electric energy on SPP's
markets.\185\
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\183\ See 80 FR at 29496; see also Exemption Application at 17.
\184\ See id.
\185\ See id.
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Moreover, fundamental to the Commission's ``public interest'' and
``purposes of the [Act]'' analysis is the fact that the SPP Covered
Transactions are inextricably tied to SPP's physical delivery of
electric energy.\186\ Another important factor is that the SPP Final
Order is explicitly limited to SPP Covered Transactions taking place on
markets that are monitored by the SPP Market Monitor, SPP, or both, and
FERC. In contrast, an exemption for transactions that are not so
monitored, or not related to the physical capacity of an electric
transmission grid, or not directly linked to the physical generation
and transmission of electric energy, or not limited to appropriate
persons,\187\ is unlikely to be in the public interest or consistent
with the purposes of the CEA, taking such transactions outside the
scope of the SPP Final Order.
---------------------------------------------------------------------------
\186\ See 80 FR at 29496; see also Exemption Application at 12-
15, 17 (describing the SPP Covered Transactions and noting that each
of them ``is part of, and inextricably linked to, the organized
wholesale electric energy markets that are subject to FERC's
regulation and oversight'').
\187\ See appropriate persons discussion infra IV.A.2.d.
---------------------------------------------------------------------------
Finally, the extent to which the SPP Final Order is consistent with
the public interest and the purposes of the Act can, in major part, be
assessed by the extent to which the Tariff and activities of SPP, and
supervision by FERC, are congruent with, and sufficiently accomplish,
the regulatory objectives of the relevant Core Principles set forth in
the CEA for derivatives clearing organizations (``DCOs'') and swap
execution facilities (``SEFs''). Specifically, ensuring the financial
integrity of the SPP Covered Transactions and the avoidance of systemic
risk, as well as protection from the misuse of participant assets, are
addressed by the Core Principles for DCOs. Providing a means for
managing or assuming price risk and discovering prices, as well as
prevention of price manipulation and other disruptions to market
integrity, are addressed by the Core Principles for SEFs. Deterrence of
price manipulation (or other disruptions to market integrity) and
protection of market participants from fraudulent sales practices is
achieved by the Commission retaining and exercising its jurisdiction
over these matters. Therefore, the Commission has incorporated its DCO
and SEF Core Principle analyses, set forth in the SPP Proposed
Order,\188\ into its consideration of the SPP Final Order's consistency
with the public interest and the purposes of the Act. In the same way,
the Commission has considered how the public interest and the purposes
of the CEA are also addressed by the manner in which SPP complies with
FERC's credit reform policy.\189\
---------------------------------------------------------------------------
\188\ See 80 FR at 29499-515.
\189\ See section IV.B. infra; 80 FR at 29498-99.
---------------------------------------------------------------------------
The Commission specifically requested comment on (a) whether it
used the appropriate standard in making its section 4(c) determination,
and (b) whether the SPP Proposed Order is consistent with the public
interest and the purposes of the CEA. The Commission received no
comments in response to these requests. The Commission therefore
determines that it used the appropriate standard in making its public
interest and purposes of the CEA determination. The Commission believes
that the standards set forth in FERC regulation 35.47 appear to achieve
goals similar to the regulatory objectives of the Commission's DCO Core
Principles.\190\ Moreover, as set forth in the Commission's DCO Core
Principle analysis in the SPP Proposed Order, the Commission determines
that SPP's policies and procedures appear to be consistent with, and to
accomplish sufficiently for purposes of this SPP Final Order, the
regulatory objectives of the DCO Core Principles in the context of the
SPP Covered Transactions.\191\ Also, as set forth in the Commission's
SEF Core Principles analysis in the SPP Proposed Order, the Commission
has determined that SPP's policies and procedures appear to be
consistent with, and to accomplish sufficiently for purposes of this
SPP Final Order, the regulatory objectives of the SEF Core Principles
in the context of the SPP Covered Transactions.\192\ The Commission
further determines that, for the reasons set forth in this SPP Final
Order, the requested exemptive relief is consistent with the public
interest and the purposes of the CEA.
---------------------------------------------------------------------------
\190\ Cf. RTO-ISO Order at 19900-01.
\191\ Cf. id. at 19901.
\192\ Cf. id. at 19902.
---------------------------------------------------------------------------
c. CEA Section 4(a) Should Not Apply to the Transactions or Entities
Eligible for the Exemption
CEA section 4(c)(2)(A) requires, in part, that the Commission
determine that the SPP Covered Transactions described in the SPP Final
Order should not be subject to CEA section 4(a)--generally, the
Commission's exchange trading requirement for a contract for the
purchase or sale of a commodity for future delivery. As set forth in
the SPP Proposed Order, the Commission has examined the SPP Covered
Transactions, SPP, and its markets using the CEA Core Principle
requirements applicable to a DCO and to a SEF as a framework for its
public interest and purposes of the CEA determination.\193\ As further
support for this determination, the Commission also is relying on the
public interest and the purposes of the Act analysis in subsection
IV.A.2.b. above. In so doing, the Commission has determined that, due
to the FERC regulatory scheme and the RTO market structure applicable
to the SPP Covered Transactions, the linkage between the SPP Covered
Transactions and that regulatory scheme, and the unique nature of the
market participants that would be eligible to rely on the
exemption,\194\ CEA section 4(a) should not apply to the SPP Covered
Transactions under the SPP Final Order.\195\
---------------------------------------------------------------------------
\193\ See 80 FR at 29499-515.
\194\ See appropriate persons analysis, section IV.A.2.d. infra;
see also 80 FR at 29496-97.
\195\ The Commission notes that such a determination would be
consistent with a similar determination made in the RTO-ISO Order.
See RTO-ISO Order at 19895.
---------------------------------------------------------------------------
d. Appropriate Persons
Section 4(c)(2)(B)(i) of the CEA \196\ requires that the Commission
determine that the exemption is restricted to SPP Covered Transactions
entered into solely between ``appropriate persons,'' as that term is
defined in section 4(c)(3) of the Act.\197\ Section 4(c)(3) defines the
term ``appropriate person'' to include: (1) any person that falls
within one of the ten categories of persons delineated in sections
4(c)(3)(A) through (J) of the Act; or (2) such other persons that the
Commission determines to be appropriate pursuant to the limited
authority provided by section 4(c)(3)(K).\198\ The Commission may
determine that persons that do not meet the requirements of sections
4(c)(3)(A) through (J) are ``appropriate persons'' for purposes of
section 4(c) only if it determines that such persons are
[[Page 73075]]
``appropriate in light of their financial or other qualifications, or
the applicability of appropriate regulatory protections.'' \199\
---------------------------------------------------------------------------
\196\ 7 U.S.C. 6(c)(2)(B)(i).
\197\ 7 U.S.C. 6(c)(3).
\198\ Id.; see also supra note 168.
\199\ 7 U.S.C. 6(c)(3)(K).
---------------------------------------------------------------------------
Consistent with the RTO-ISO Order, the Commission proposed to limit
the exemption to transactions where all parties thereto are
``appropriate persons,'' as defined in sections 4(c)(3)(A) through (J)
of the Act,\200\ ``eligible contract participants,'' as defined in
section 1a(18)(A) of the Act \201\ and in Commission regulation
1.3(m),\202\ or persons who are 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.\203\ The Commission did not
receive any comments objecting to this proposed limitation. Therefore,
pursuant to the authority set forth in section 4(c)(3)(K) of the CEA
and consistent with the RTO-ISO Order, the Commission has determined
that ``eligible contract participants,'' as defined in section
1a(18)(A) of the CEA and in Commission regulation 1.3(m), and ``persons
who are 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,'' are appropriate persons for purposes of the SPP
Final Order, in light of their financial or other qualifications.
Accordingly, this limitation has been incorporated into the SPP Final
Order unchanged.
---------------------------------------------------------------------------
\200\ 7 U.S.C. 6(c)(3)(A)-(J).
\201\ 7 U.S.C. 1a(18)(A).
\202\ 17 CFR 1.3(m).
\203\ 80 FR 29496-97. The Commission notes that the proposed
limitation is consistent with the RTO-ISO Order. See RTO-ISO Order
at 19913.
---------------------------------------------------------------------------
The Commission believes that this expansion, when combined with the
``appropriate persons'' definition delineated in sections 4(c)(3)(A)
through (J) of the CEA, would appear to strike the appropriate balance
because the exemption would apply only to those market participants
that can demonstrate the financial wherewithal or the requisite
business activities and congruent expertise to qualify as appropriate
persons under section 4(c)(3)(K) of the CEA.\204\ The Commission has
determined that ``eligible contract participants,'' as defined in
section 1a(18)(A) of the CEA and in Commission regulation 1.3(m), are
appropriate persons for purposes of the SPP Final Order in light of
their financial or other qualifications, or the applicability of
regulatory protections. Moreover, the Commission is using the authority
provided by section 4(c)(3)(K) of the CEA to determine that a ``person
who actively participates in the generation, transmission, or
distribution of electric energy,'' as defined within the SPP Final
Order, is an appropriate person for purposes of the exemption provided
therein.\205\ The SPP Final Order defines a ``person who actively
participates in the generation, transmission, or distribution of
electric energy'' as ``a person that is in the business of: (1)
Generating, transmitting, or distributing electric energy; or (2)
providing electric energy services that are necessary to support the
reliable operation of the transmission system.'' The Commission has
determined that the inclusion of transactions entered into by such
persons is proper because such persons' active participation in the
physical markets provides them with the requisite ``qualifications''
necessary to be deemed an ``appropriate person'' under CEA section
4(c)(3)(K) for purposes of the SPP Final Order.
---------------------------------------------------------------------------
\204\ Cf. RTO-ISO Order at 19899.
\205\ Cf. id. at 19897.
---------------------------------------------------------------------------
e. Effect on the Commission's or Any Contract Market's Ability To
Discharge Its Regulatory or Self-Regulatory Duties Under the CEA
CEA section 4(c)(2)(B)(ii) requires the Commission to make a
determination regarding whether exempting the SPP Covered Transactions
will have a material adverse effect on the ability of the Commission or
any contract markets to perform regulatory or self-regulatory
duties.\206\ In making this determination, the Commission should
consider such regulatory concerns as ``market surveillance, financial
integrity of participants, protection of customers, and trade practice
enforcement.'' \207\ These considerations are similar to the purposes
of the CEA as defined in section 3, initially addressed in the public
interest and purposes of the CEA discussion.
---------------------------------------------------------------------------
\206\ 7 U.S.C. 6(c)(2)(B)(ii).
\207\ See H.R. Rep. No. 102-978, 102d Cong. 2d Sess., 1992
U.S.C.C.A.N. 3179, 3211 (1992).
---------------------------------------------------------------------------
The Commission proposed to determine that the exemption would not
have a material adverse effect on the Commission's or any contract
market's ability to discharge its regulatory function.\208\ In the SPP
Proposed Order, the Commission noted the following assertion by SPP as
support for its determination:
---------------------------------------------------------------------------
\208\ 80 FR 29497-98.
Under Section 4(d) of the Act, the Commission will retain
authority to conduct investigations to determine whether SPP is in
compliance with any exemption granted in response to this request. .
. . [T]he requested exemptions would also preserve the Commission's
existing enforcement jurisdiction over fraud and manipulation. This
is consistent with section 722 of the Dodd-Frank Act, the existing
MOU between the FERC and the Commission and other protocols for
inter-agency cooperation. SPP will continue to retain records
related to the Transactions, consistent with existing obligations
under FERC regulations.
The regulation of exchange-traded futures contracts and
significant price discovery contracts (``SPDCs'') will be unaffected
by the requested exemptions. Futures contracts based on electricity
prices set in SPP's markets that are traded on a designated contract
market and SPDCs will continue to be regulated by and subject to the
requirements of the Commission. No current requirement or practice
of SPP or of a contract market will be affected by the Commission's
granting the requested exemptions.\209\
---------------------------------------------------------------------------
\209\ Id. at 29497 (quoting Exemption Application at 22).
In addition, the Commission stated that the limitation in the SPP
Proposed Order to SPP Covered Transactions between certain appropriate
persons avoids potential issues regarding financial integrity and
customer protection.\210\
---------------------------------------------------------------------------
\210\ Id.
---------------------------------------------------------------------------
Moreover, the Commission did not propose to exempt SPP from certain
CEA provisions, including sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o,
4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13, and
any implementing regulations promulgated thereunder including, but not
limited to, Commission regulations 23.410(a) and (b), 32.4, and part
180, to the extent that those sections prohibit fraud or manipulation
of the price of any swap, contract for the sale of a commodity in
interstate commerce, or for future delivery on or subject to the rules
of any contract market.\211\ As such, the Commission proposed to
expressly retain authority to pursue fraudulent or manipulative
conduct.\212\
---------------------------------------------------------------------------
\211\ Id.
\212\ Id. Nor did SPP seek an exemption from these provisions.
See id. at 29497 n.107; Exemption Application at 1.
---------------------------------------------------------------------------
In addition, the Commission proposed that granting the SPP Proposed
Order for the SPP Covered Transactions would not have a material
adverse effect on the ability of any contract market to discharge its
self-regulatory duties under the Act.\213\ Specifically, with respect
to TCRs and Operating Reserve Transactions, the Commission found that
the exemption would not have a material adverse effect on any contract
market carrying out its self-regulatory function because these
transactions did
[[Page 73076]]
not appear to be used for price discovery or as settlement prices for
other transactions in Commission-regulated markets.\214\ With respect
to Energy Transactions, the Commission proposed that, while these
transactions did have a relationship to Commission-regulated markets
because they can serve as a source of settlement prices for other
transactions within Commission jurisdiction, they should not pose
regulatory burdens on a contract market because SPP has market
monitoring systems in place to detect and deter manipulation that takes
place on its markets.\215\ In addition, the Commission noted that, as a
condition to the SPP Proposed Order, the Commission would be able to
obtain data from FERC with respect to activity on SPP's markets that
may impact trading on Commission-regulated markets.\216\
---------------------------------------------------------------------------
\213\ 80 FR at 29497.
\214\ Id.
\215\ Id.; see also id. at 29494, 29496.
\216\ Id. at 29497.
---------------------------------------------------------------------------
Finally, the Commission noted that if the SPP Covered Transactions
ever could be used in combination with trading activity or in a
position in a designated contract market (``DCM'') contract to conduct
market abuse, both the Commission and DCMs have sufficient independent
authority over DCM market participants to monitor for such
activity.\217\
---------------------------------------------------------------------------
\217\ Id. at 29497-98.
---------------------------------------------------------------------------
While the Commission did not receive any comments on its proposed
determination that the exemption would not have a material adverse
effect on the Commission's ability to discharge its regulatory duties,
an important caveat should be made. With regard to the SEF Core
Principle 3 analysis and general statements regarding the SPP Market
Monitor's ability to detect and deter manipulation, the Commission
notes that such statements were not meant to be construed as a final
and irrevocable approval of the integrity of reference prices derived
from SPP's markets. The Commission retains the authority to question
and obtain additional information in a timely manner regarding the
underlying prices to which TCRs and other electric energy contracts,
which are subject to the Commission's jurisdiction, settle. As
previously discussed, the Commission maintains the responsibility of
ensuring that exchange-traded and cleared financial electric energy
contracts are constructed such that the settlement mechanism produces
prices that accurately reflect the underlying supply and demand
fundamentals of SPP's markets and are not readily susceptible to
manipulation. For this reason, as originally proposed, the Commission
has conditioned the SPP Final Order upon access to related
transactional and positional data from SPP's markets.\218\
---------------------------------------------------------------------------
\218\ See section IV.B. infra.
---------------------------------------------------------------------------
For the reasons set forth herein and in the SPP Proposed Order, the
Commission determines that the exemption for the SPP Covered
Transactions in this SPP Final Order would not have a material adverse
effect on the Commission's or any contract market's ability to
discharge its regulatory function.
3. CEA Section 4(c) Determinations--Amended RTO-ISO Order
a. Consistent With the Public Interest and Purposes of the CEA
As required by CEA section 4(c)(2)(A), as well as section 4(c)(6),
the Commission previously determined that the exemption set forth in
the RTO-ISO Order is consistent with the public interest and the
purposes of the CEA.\219\ The amendment to the RTO-ISO Order does not
alter the Commission's prior determinations with respect to the public
interest and purposes of the CEA, and the Commission incorporates such
prior determinations into the Amended RTO-ISO Order.
---------------------------------------------------------------------------
\219\ See RTO-ISO Order at 19894-95, 19900-02. The Commission's
prior determination was based on a number of findings, including
that (a) the RTO-ISO Covered Transactions have been, and are,
subject to a long-standing, regulatory framework for the offer and
sale of the Transactions established by FERC or PUCT; (b) the RTO-
ISO Covered Transactions administered by the RTOs, ISOs, or ERCOT
are part of, and inextricably linked to, the organized wholesale
electric energy markets that are subject to FERC and PUCT regulation
and oversight; (c) the RTO-ISO Covered Transactions are entered into
primarily by commercial participants that are in the business of
generating, transmitting, and distributing electric energy; (d) the
Requesting Parties were established for the purpose of providing
affordable, reliable electric energy to consumers within their
geographic region; (e) the RTO-ISO Covered Transactions that take
place on the Requesting Parties' markets are overseen by Market
Monitoring Units, required by FERC and PUCT to identify manipulation
of electric energy on the RTO-ISO Covered Entities' markets; (f) the
RTO-ISO Covered Transactions are inextricably tied to the Requesting
Parties' physical delivery of electric energy; (g) the RTO-ISO Order
is explicitly limited to RTO-ISO Covered Transactions taking place
on markets that are monitored by either an independent Market
Monitoring Unit, a market administrator (the RTO, ISO, or ERCOT), or
both, and a government regulator (FERC or PUCT); (h) the standards
set forth in FERC regulation 35.47 appear to achieve goals similar
to the regulatory objectives of the Commission's DCO Core
Principles, and substantial compliance with such requirements was
key to the Commission's determination that the tariffs and
activities of the Requesting Parties and supervision by FERC or PUCT
are congruent with, and--in the context of the RTO-ISO Covered
Transactions--sufficiently accomplish, the regulatory objectives of
each DCO Core Principle; (i) the Requesting Parties' policies and
procedures appear to be consistent with, and to accomplish
sufficiently for purposes of the RTO-ISO Order, the regulatory
objectives of the DCO Core Principles in the context of the RTO-ISO
Covered Transactions; and (j) the Requesting Parties' policies and
procedures appear to be consistent with, and to accomplish
sufficiently for purposes of the RTO-ISO Order, the regulatory
objectives of the SEF Core Principles in the context of the RTO-ISO
Covered Transactions. Id.
---------------------------------------------------------------------------
In addition, the Commission determines that the current amendment
to the RTO-ISO Order, which explicitly provides that the exemption set
forth therein extends to private actions under CEA section 22, is in
the public interest for all of the reasons stated in section
III.B.2.\220\
---------------------------------------------------------------------------
\220\ The Commission received one comment regarding the public
interest findings in the RTO-ISO Order Proposed Amendment. EPSA
argued that in the RTO-ISO Order Proposed Amendment, the Commission
proposed to ``automatically or mechanically bypass the required
analysis'' under CEA sections 4(c)(1) and 4(c)(2), and that the
Commission's proposed public interest findings with respect the
proposed amendment to explicitly preserve the CEA section 22 private
right of action were insufficient. EPSA at 7-8. The Commission is of
the view that the public interest analysis in the RTO-ISO Order
Proposed Amendment, and that set forth herein, is neither automatic
nor mechanical, and that such analyses meet the requirements of
sections 4(c)(1) and 4(c)(2). Moreover, given the Commission's
determination with respect to the private right of action issue, the
Commission is of the view that EPSA's concern is now moot.
---------------------------------------------------------------------------
b. Other Section 4(c) Determinations
In the RTO-ISO Order, the Commission made a number of other
determinations under CEA section 4(c), including:
The Dodd-Frank Act applies to contracts and instruments
traded in RTO or ISO markets pursuant to a FERC- or state-approved
tariff or rate schedule, subject to the Commission's authority under
CEA section 4(c)(6) to exempt contracts, agreements, or transactions
traded pursuant to such a tariff or rate schedule upon determining that
the exemption would be in the public interest and consistent with the
purposes of the CEA; that the exemption would be applied only to
agreements, contracts, or transactions that are entered into solely
between appropriate persons; and that the exemption will not have a
material adverse effect on the ability of the Commission or any
contract market to discharge its regulatory or self-regulatory duties
under the CEA.\221\
---------------------------------------------------------------------------
\221\ See RTO-ISO Order at 19893-94; see also CEA section
4(c)(6).
---------------------------------------------------------------------------
Due to the FERC or PUCT regulatory scheme and the RTO or
ISO market structure already applicable to the SPP Covered
Transactions, the linkage between the SPP Covered Transactions and
those regulatory schemes, and the unique nature of the market
participants that are eligible to rely on the exemption in the RTO-ISO
Order, CEA section 4(a) should not
[[Page 73077]]
apply to the SPP Covered Transactions under the RTO-ISO Order.\222\
---------------------------------------------------------------------------
\222\ See RTO-ISO Order at 19895; see also CEA section
4(c)(2)(A).
---------------------------------------------------------------------------
Eligible contract participants, as defined in section
1a(18)(A) of the CEA and in Commission regulation 1.3(m), are
appropriate persons for purposes of the RTO-ISO Order in light of their
financial or other qualifications, or the applicability of regulatory
protections.\223\ In addition, a ``person who actively participates in
the generation, transmission, or distribution of electric energy,'' as
defined within the RTO-ISO Order, is an appropriate person for purposes
of the exemption provided therein.\224\
---------------------------------------------------------------------------
\223\ See RTO-ISO Order at 19896; see also CEA section
4(c)(2)(B)(i).
\224\ See RTO-ISO Order at 19897; see also CEA section
4(c)(2)(B)(i).
---------------------------------------------------------------------------
The exemption in the RTO-ISO Order for the SPP Covered
Transactions would not have a material adverse effect on the
Commission's or any contract market's ability to discharge its
regulatory function.\225\
---------------------------------------------------------------------------
\225\ See RTO-ISO Order at 19903-04; see also CEA section
4(c)(2)(B)(ii).
---------------------------------------------------------------------------
The amendment to the RTO-ISO Order does not alter the Commission's
determination with respect to any of the above 4(c) determinations.
Therefore, the Commission hereby incorporates such prior 4(c)
determinations, and the findings on which such determinations are
based, into the Amended RTO-ISO Order. All transactions that were
permitted pursuant to the exemption set forth in the RTO-ISO Order are
still permitted under the Amended RTO-ISO Order. The only change made
by the amendment to the RTO-ISO Order is that the Amended RTO-ISO Order
provides explicitly that the exemption set forth therein also extends
to actions pursuant to CEA section 22.
B. Additional Limitations and Provisions--SPP Final Order
As described in detail above,\226\ the Commission expressly noted
in the SPP Proposed Order \227\ that the proposed exemption was based
upon the representations made in the Exemption Application and in the
supporting materials provided by SPP and its counsel,\228\ and that any
material change or omission in the facts and circumstances that alter
the grounds for the SPP Proposed Order might require the Commission to
reconsider its finding that the exemption contained therein is
appropriate and/or in the public interest and consistent with the
purposes of the CEA. The Commission did not receive any comments on
this proposal. As such, the SPP Final Order is based on the
representations made by SPP and its counsel in the Exemption
Application, the supplemental information, and supporting materials
filed with the Commission. In particular, the Commission notes that the
following representations are of particular importance and integral to
the Commission's decision to grant the exemption set forth in this SPP
Final Order: (1) The exemption requested by SPP relates to SPP Covered
Transactions that are primarily entered into by commercial participants
that are in the business of generating, transmitting and distributing
electric energy; \229\ (2) SPP was established for the purpose of
providing affordable, reliable electric energy to consumers within its
geographic region; \230\ (3) the SPP Covered Transactions are an
essential means, designed by FERC as an integral part of its statutory
responsibilities, to enable the reliable delivery of affordable
electric energy; \231\ (4) each of the SPP Covered Transactions taking
place on SPP's markets is monitored by both a market administrator
(SPP) and the SPP Market Monitor; \232\ and (5) each SPP Covered
Transaction is directly tied to the physical capabilities of SPP's
electric energy grid.\233\ Therefore, the Commission affirms that any
material change or omission in the facts and circumstances that alter
the grounds for the SPP Final Order might require the Commission to
reconsider its finding that the exemption contained therein is
appropriate and consistent with the public interest and purposes of the
CEA. The Commission reiterates that the SPP Covered Transactions must
be tied to the allocation of the physical capabilities of an electric
energy transmission grid in order to be suitable for exemption because
such activity would be inextricably linked to the physical delivery of
electric energy.
---------------------------------------------------------------------------
\226\ See section II.C.3. supra.
\227\ See 80 FR at 29494, 29518.
\228\ As part of its Exemption Application, SPP provided the
Commission with a legal opinion that provided the Commission with
assurance that the netting arrangements contained in the approach
selected by SPP to satisfy the obligations contained in FERC
regulation 35.47(d) will, in fact, provide SPP with enforceable
rights of setoff against any of its market participants under Title
11 of the United States Code in the event of the bankruptcy of the
market participant. See Memorandum regarding Enforceability of
Netting Practices from Hunton & Williams LLP to SPP, dated December
2, 2013.
\229\ See 80 FR at 29494; see also Exemption Application at 17.
\230\ See 80 FR at 29494; see also Exemption Application at 2,
17.
\231\ See 80 FR at 29494; see also generally FERC Order No. 888;
FERC Order No. 2000; 18 CFR 35.34(k)(2); see also Exemption
Application at 17.
\232\ See 80 FR at 29494; see also Exemption Application at 17.
\233\ See 80 FR at 29494; see also Exemption Application at 12-
15.
---------------------------------------------------------------------------
In addition, the Commission proposed to exclude from the exemptive
relief its general anti-fraud and anti-manipulation, and scienter-based
prohibitions over SPP and the SPP Covered Transactions under the CEA,
including sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A),
4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13 of the CEA and any
implementing regulations promulgated thereunder including, but not
limited to, Commission regulations 23.410(a) and (b), 32.4, and part
180.\234\ The Commission received no comments regarding this
reservation of authority.
---------------------------------------------------------------------------
\234\ See 80 FR at 29515, 29516.
---------------------------------------------------------------------------
The Commission believes it prudent to reserve in the SPP Final
Order its anti-fraud and anti-manipulation authority, as well as those
scienter-based prohibitions in the specified provisions of the Act and
Commission regulations (without finding it necessary in this particular
context to preserve other enforcement authority). The Commission notes
that reservation of enforcement authority is standard practice with
exemptive orders issued pursuant to CEA section 4(c). The Commission
also believes it is important to highlight that, as with all exemptions
issued pursuant to CEA section 4(c), the exemption shall not affect the
authority of the Commission under any other provision of the CEA to
conduct investigations in order to determine compliance with the
requirements or conditions of such exemption or to take enforcement
action for any violation of any provision of the CEA or any rule,
regulation or order thereunder caused by the failure to comply with or
satisfy such conditions or requirements.\235\
---------------------------------------------------------------------------
\235\ See 7 U.S.C. 6(d).
---------------------------------------------------------------------------
In the SPP Proposed Order, the Commission also proposed to make a
number of additional determinations, including but not limited to the
following:
The Commission proposed to determine that the requirements
set forth in FERC regulation 35.47 appear to achieve goals similar to
the regulatory objectives of the Commission's DCO Core Principles, and
substantial compliance with such requirements is key to the
Commission's determination that the Tariff and activities of SPP and
supervision by FERC are congruent with, and--in the context of the SPP
Covered Transactions--sufficiently accomplish, the regulatory
objectives of each DCO Core Principle.\236\
---------------------------------------------------------------------------
\236\ 80 FR 29498-99.
---------------------------------------------------------------------------
The Commission proposed to determine that, on the basis of
SPP's
[[Page 73078]]
representations and consistent with the RTO-ISO Order, it is not
necessary, when considering the requisite public interest and purposes
of the CEA determinations, to impose position limits on SPP's
Integrated Marketplace.\237\
---------------------------------------------------------------------------
\237\ Id. at 29511.
---------------------------------------------------------------------------
The Commission proposed to determine that SPP's practices
or Tariff and supervision by FERC are congruent with, and, in the
context of the SPP Covered Transactions, sufficiently accomplish, the
regulatory objectives of the Core Principles set forth in the CEA for
DCOs.\238\
---------------------------------------------------------------------------
\238\ Id. at 29499-508.
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The Commission proposed to determine that SPP's practices
or Tariff and supervision by FERC are congruent with, and, in the
context of the SPP Covered Transactions, sufficiently accomplish, the
regulatory objectives of the Core Principles set forth in the CEA for
SEFs.\239\
---------------------------------------------------------------------------
\239\ Id. at 29508-15.
---------------------------------------------------------------------------
In the SPP Proposed Order, the Commission proposed to limit the
scope of the exemption to certain specified transactions:
The SPP Proposed Order would exempt Transmission
Congestion Rights, Energy Transactions, and Operating Reserve
Transactions from most requirements of the CEA, and the SPP Proposed
Order would not extend the exemption beyond these three specifically-
defined transactions.\240\ The SPP Proposed Order would include any
modifications to existing transactions that do not alter the SPP
Covered Transactions' characteristics in a way that would cause them to
fall outside the definitions of the SPP Covered Transactions, and that
are offered by SPP pursuant to a FERC-approved Tariff.
---------------------------------------------------------------------------
\240\ Id. at 29515.
---------------------------------------------------------------------------
The SPP Proposed Order would exempt products that qualify
as one of the three defined SPP Covered Transactions, regardless of
whether or not SPP offers the particular product at the present
time.\241\
---------------------------------------------------------------------------
\241\ Id. at 29516.
---------------------------------------------------------------------------
In the SPP Proposed Order, the Commission proposed to condition the
exemption on the following:
The SPP Proposed Order would be conditioned upon requiring
(1) that an information sharing arrangement acceptable to the
Commission be executed between the Commission and FERC and continue to
be in effect, and (2) ``SPP's compliance with the Commission's requests
through FERC to share, on an as-needed basis and in connection with an
inquiry consistent with the CEA and Commission regulations, positional
and transactional data within SPP's possession for products in SPP's
markets that are related to markets that are subject to the
Commission's jurisdiction, including any pertinent information
concerning such data.''\242\
---------------------------------------------------------------------------
\242\ Id. at 29517.
---------------------------------------------------------------------------
The SPP Proposed Order would be conditioned upon requiring
that ``[n]either the Tariff nor any other governing documents of SPP
shall include any requirement that SPP notify its members prior to
providing information to the Commission in response to a subpoena or
other request for information or documentation.''\243\
---------------------------------------------------------------------------
\243\ Id.
---------------------------------------------------------------------------
The Commission received no comments on the above proposed
determinations, limitations, and conditions, and hereby incorporates
such determinations, limitations, and conditions into the SPP Final
Order. As noted in the SPP Proposed Order and earlier in this SPP Final
Order, the SPP Covered Transactions are inextricably tied to SPP's
physical delivery of electric energy, and they take place on markets
that are monitored by the SPP Market Monitor, SPP, or both, and FERC.
Specifically, with respect to TCRs and Operating Reserve Transactions,
the Commission found that the exemption would not have a material
adverse effect on any contract market carrying out its self-regulatory
function because these transactions did not appear to be used for price
discovery or as settlement prices for other transactions in Commission-
regulated markets. With respect to Energy Transactions, while Energy
Transactions did have a relationship to Commission-regulated markets
because they can serve as a source of settlement prices for other
transactions within Commission jurisdiction, they should not pose
regulatory burdens on a contract market because SPP has market
monitoring systems in place to detect and deter manipulation that takes
place on its markets. Furthermore, conditioning the exemption provided
in the SPP Final Order upon the Commission's ability to obtain related
transactional and positional data from SPP, and SPP's compliance with
such requests by sharing the requested information, is meant to enable
the Commission to continue discharging its regulatory duties under the
Act as set forth in CEA section 3.\244\
---------------------------------------------------------------------------
\244\ 7 U.S.C. 5.
---------------------------------------------------------------------------
V. Related Matters
A. Regulatory Flexibility Act
1. Introduction
The Regulatory Flexibility Act (``RFA'') requires that the
Commission consider whether the exemptions set forth in the SPP Final
Order and in the Amended RTO-ISO Order will have a significant economic
impact on a substantial number of small entities and, if so, provide a
regulatory flexibility analysis respecting the impact.\245\
---------------------------------------------------------------------------
\245\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------
2. SPP Final Order
In the SPP Proposed Order, the Commission found that SPP should not
be considered a small entity based on the central role it plays in the
operation of the electronic transmission grid and the creation of
organized wholesale electric markets that are subject to FERC
regulatory oversight,\246\ analogous to functions performed by DCMs and
DCOs, which the Commission has previously determined not to be ``small
entities.''\247\ The SPP Proposed Order included entities that qualify
as (1) ``appropriate persons'' pursuant to CEA sections 4(c)(3)(A)
through (J), (2) ``eligible contract participants'' (``ECPs''), as
defined in CEA section 1a(18)(A) and Commission regulation 1.3 (m), or
(3) persons who are 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.\248\ The Commission previously determined that
ECPs are not ``small entities'' for purposes of the RFA.\249\ As a
result, the
[[Page 73079]]
Commission certified that the SPP Proposed Order would not have a
significant economic impact on a substantial number of small entities
for purposes of the RFA, and requested written comments regarding this
certification.\250\ The Commission did not receive any comments with
respect to its RFA analysis in the SPP Proposed Order.
---------------------------------------------------------------------------
\246\ 80 FR at 29518. See Enhancement of Electricity Market
Surveillance and Analysis Through Ongoing Electronic Delivery of
Data From Regional Transmission Organizations and Independent System
Operators, 77 FR 26674, 26685-86, May 7, 2012 (RFA analysis as
conducted by FERC regarding six RTOs and ISOs, including SPP).
Commission staff also performed an independent RFA analysis
based on Subsector 221 of sector 22 (utilities companies) of the
Small Business Administration (``SBA''), which defines any small
utility corporation as one that does not have more than 250
employees. See 13 CFR 121.201 (1-1-15 Edition). Staff concludes that
SPP is not a small entity, since SPP represents that it employs more
than 500 employees. See Exemption Application Attachments at 8.
\247\ See A New Regulatory Framework for Clearing Organizations,
66 FR 45604, 45609, Aug. 29, 2001 (DCOs); Policy Statement and
Establishment of Definitions of ``Small Entities'' for Purposes of
the Regulatory Flexibility Act, 47 FR 18618, 18618-19, Apr. 30, 1982
(DCMs).
\248\ See 80 FR at 29517. Under CEA section 2(e), only ECPs are
permitted to participate in a swap, subject to the end-user clearing
exception.
\249\ See Opting Out of Segregation, 66 FR 20740, 20743, Apr.
25, 2001.
\250\ 80 FR at 29518.
---------------------------------------------------------------------------
The relief provided in the SPP Final Order to a person who actively
participates in the generation, transmission, or distribution of
electric energy may impact some small entities to the extent they may
fall within standards established by the SBA regulations defining any
small utility corporation as one that does not have more than 250
employees.\251\ However, based on the Commission's existing information
about SPP's markets, its market participants consist mostly of entities
exceeding the thresholds defining ``small entities'' set out above.
---------------------------------------------------------------------------
\251\ See note 246 supra (citing 13 CFR 121.201).
---------------------------------------------------------------------------
The Commission is of the view that the SPP Final Order alleviates
the economic impact that the exempt entities, including any small
entities that may opt to take advantage of the exemption set forth in
the SPP Final Order, otherwise would be subjected to by exempting
certain of their transactions from the application of substantive
regulatory compliance requirements of the CEA and Commission
regulations thereunder. Accordingly, the Commission is of the view that
the SPP Final Order does not have a significant economic impact on a
substantial number of small entities. Therefore, the Chairman, on
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.
605(b), that the exemption set forth in the SPP Final Order would not
have a significant economic impact on a substantial number of small
entities.
3. Amended RTO-ISO Order
With respect to the Amended RTO-ISO Order, the Commission
previously determined that the RTO-ISO Order would not have a
significant economic impact on a substantial number of small
entities.\252\ The Amended RTO-ISO Order does not substantively change
the scope of the exemption set forth in the RTO-ISO Order. Furthermore,
the RFA analysis in the RTO-ISO Order is still valid. Specifically, the
RTOs and ISOs covered by the Amended RTO-ISO Order should not be
considered small entities based on the central role they play in the
operation of the electronic transmission grid and the creation of
organized wholesale electric markets that are subject to FERC and PUCT
regulatory oversight,\253\ analogous to functions performed by DCMs and
DCOs, which, as noted above, the Commission has previously determined
not to be ``small entities.'' \254\ In addition, the Amended RTO-ISO
Order includes entities that qualify as (1) ``appropriate persons''
pursuant to CEA sections 4(c)(3)(A) through (J), (2) ECPs, as defined
in CEA section 1a(18)(A) and Commission regulation 1.3 (m), or (3)
persons who are 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. As noted above, the Commission has previously
determined that ECPs are not ``small entities'' for purposes of the
RFA.\255\ The Commission is of the view that, based on the Commission's
existing information about the RTOs' and ISOs' markets, their market
participants consist mostly of entities exceeding the thresholds
defining ``small entities.'' \256\
---------------------------------------------------------------------------
\252\ See RTO-ISO Order at 19906-07.
\253\ See note 246 supra; see also RTO-ISO Order at 19906.
\254\ See note 247 supra; see also RTO-ISO Order at 19906.
\255\ See note 249 supra; see also RTO-ISO Order at 19906.
\256\ See note 246 supra (citing 13 CFR 121.201). The threshold
established by the SBA regulations define any small utility
corporation as one that does not have more than 250 employees; see
also RTO-ISO Order at 19907.
---------------------------------------------------------------------------
Also, the Amended RTO-ISO Order would continue to alleviate the
economic impact that the exempt entities, including any small entities
that may opt to take advantage of the exemption set forth in the RTO-
ISO Order, otherwise would be subjected to by continuing to exempt
certain of their transactions from the application of substantive
regulatory compliance requirements of the CEA and Commission
regulations thereunder. Accordingly, the Commission does not expect the
Amended RTO-ISO Order to have a significant economic impact on a
substantial number of small entities. Therefore, the Chairman, on
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.
605(b), that the exemption set forth in the Amended RTO-ISO Order would
not have a significant economic impact on a substantial number of small
entities.\257\
---------------------------------------------------------------------------
\257\ The Commission received one comment with respect to the
RFA analysis in the RTO-ISO Order Proposed Amendment. The NFP
Electric Associations argued that the RFA analysis in the RTO-ISO
Order Proposed Amendment was ``abbreviated and conclusory,'' that
the members of the NFP Electric Associations are ``small entities''
for purposes of the RFA, and that the amendment proposed in the RTO-
ISO Order Proposed Amendment would have a negative impact on such
entities. See NFP Electric Associations at 8. The Commission is of
the view that the RFA analysis in the RTO-ISO Order Proposed
Amendment, and that set forth herein, is sufficiently detailed and
not conclusory. Moreover, given the Commission's determination with
respect to the private right of action issue, the Commission is of
the view that the NFP Electric Associations' concern is now moot.
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B. Paperwork Reduction Act
1. Introduction
The purposes of the Paperwork Reduction Act of 1995 (``PRA'') \258\
are, among other things, to minimize the paperwork burden to the
private sector, ensure that any collection of information by a
government agency is put to the greatest possible uses, and minimize
duplicative information collections across the government. The PRA
applies to all information, ``regardless of form or format,'' whenever
the government is ``obtaining, causing to be obtained [or] soliciting''
information, and includes and requires ``disclosure to third parties or
the public, of facts or opinions,'' when the information collection
calls for ``answers to identical questions posed to, or identical
reporting or recordkeeping requirements imposed on, ten or more
persons.'' \259\
---------------------------------------------------------------------------
\258\ 44 U.S.C. 3501 et seq.
\259\ 44 U.S.C. 3502(3).
---------------------------------------------------------------------------
2. SPP Final Order
The SPP Proposed Order provided that the exemption would be
expressly conditioned upon information sharing arrangements between the
Commission and FERC that are acceptable to the Commission continuing to
be in effect.\260\ The Commission determined that the PRA would not
apply because the SPP Proposed Order did not impose any new
recordkeeping or information collection requirements, or other
collections of information on ten or more persons that require approval
of the Office of Management and Budget (``OMB''). The Commission did
not receive any comments regarding this determination. The SPP Final
Order thus incorporates the information sharing condition unchanged
from the SPP Proposed Order, and this condition is consistent with the
RTO-ISO Order.
---------------------------------------------------------------------------
\260\ 80 FR at 29517.
---------------------------------------------------------------------------
3. Amended RTO-ISO Order
With respect to the Amended RTO-ISO Order, the Commission
previously determined that the RTO-ISO Order did not impose any new
recordkeeping or information collection requirements, or other
collections of information on ten or more persons that require OMB
[[Page 73080]]
approval.\261\ The Amended RTO-ISO Order does not impose any
recordkeeping or information collection requirements, or other
collections of information on ten or more persons that require OMB
approval.
---------------------------------------------------------------------------
\261\ See RTO-ISO Order at 19907-08.
---------------------------------------------------------------------------
C. Cost-Benefit Considerations
1. Introduction
Section 15(a) of the CEA\262\ requires the Commission to ``consider
the costs and benefits'' of its actions before promulgating a
regulation under the CEA or issuing certain orders. In issuing the SPP
Final Order and the Amended RTO-ISO Order, the Commission is required
by CEA sections 4(c)(6) and 4(c)(1) to ensure that they are consistent
with the public interest. In much the same way, section 15(a) further
specifies that the costs and benefits shall be evaluated in light of
five broad areas of market and public concern: (1) Protection of market
participants and the public; (2) efficiency, competitiveness, and
financial integrity of futures markets; (3) price discovery; (4) sound
risk management practices; and (5) other public interest
considerations. The Commission considers the costs and benefits
resulting from its discretionary determinations with respect to the
section 15(a) factors.
---------------------------------------------------------------------------
\262\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
1. SPP Final Order
a. Background
On October 17, 2013, SPP filed an Exemption Application \263\ with
the Commission requesting that the Commission exercise its authority
under section 4(c)(6) of the CEA and section 712(f) of the Dodd-Frank
Act to exempt certain contracts, agreements, and transactions for the
purchase or sale of specified electric energy products, that are
offered pursuant to a FERC-approved Tariff, from most provisions of the
Act.\264\ SPP asserted that each of the transactions for which an
exemption is requested is (a) subject to a long-standing, comprehensive
regulatory framework for the offer and sale of such transactions
established by FERC, and (b) part of, and inextricably linked to, the
organized wholesale electric energy markets that are subject to
regulation and oversight by FERC. SPP expressly excluded from the
Exemption Application any request for relief from the Commission's
general anti-fraud and anti-manipulation authority, and scienter-based
prohibitions, under sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o,
4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13 of the
Act, and any implementing regulations promulgated under these sections
including, but not limited to, Commission regulations 23.410(a) and
(b), 32.4 and part 180,\265\ and such provisions explicitly have been
carved out of the SPP Final Order.\266\
---------------------------------------------------------------------------
\263\ As noted above, SPP filed an amended Exemption Application
on August 1, 2014, and citations to ``Exemption Application'' herein
are to the amended Exemption Application. See note 31 supra.
\264\ See 80 FR at 29491; see also Exemption Application at 1-2,
11-15.
\265\ See 80 FR at 29491; see also Exemption Application at 1.
\266\ See paragraph 1 of the SPP Final Order.
---------------------------------------------------------------------------
b. SPP Proposed Order and Request for Comment on the Commission's
Proposed Consideration of Costs and Benefits
Upon consideration of the Exemption Application, the Commission
issued the SPP Proposed Order, which proposed to exempt Transmission
Congestion Rights, Energy Transactions, and Operating Reserve
Transactions pursuant to section 4(c)(6) of the CEA.\267\ The
Commission proposed to limit the exemption set forth in the SPP
Proposed Order to persons who are (1) ``appropriate persons,'' as
defined in CEA sections 4(c)(3)(A) through (J); (2) ``eligible contract
participants,'' as defined in CEA section 1a(18)(A) and Commission
regulation 1.3(m); or (3) persons who actively participate in the
generation, transmission, or distribution of electric energy.\268\
Furthermore, under the SPP Proposed Order, the agreement, contract, or
transaction must be offered or sold pursuant to SPP's Tariff, which has
been approved by FERC.\269\ The exemption in the SPP Proposed Order
would extend to any person or class of persons offering, entering into,
rendering advice, or rendering other services with respect to the SPP
Covered Transactions.\270\
---------------------------------------------------------------------------
\267\ See 80 FR at 29516-18; see also section II.C.1. supra.
\268\ See 80 FR at 29517.
\269\ See id.
\270\ See id. at 29516.
---------------------------------------------------------------------------
In the SPP Proposed Order, the Commission clarified that financial
transactions that are not tied to the allocation of the physical
capabilities of an electric energy transmission grid would not be
suitable for exemption, and were therefore not covered by the SPP
Proposed Order because such activity would not be inextricably linked
to the physical delivery of electric energy.\271\
---------------------------------------------------------------------------
\271\ See id. at 29494.
---------------------------------------------------------------------------
The SPP Proposed Order expressly requested public comment on the
Commission's proposed cost-benefit considerations, including with
respect to reasonable alternatives; the magnitude of specific costs and
benefits, and data or other information to estimate a dollar valuation;
and any impact on the public interest factors specified in CEA section
15(a).\272\ The Commission did not receive any comments on its proposed
cost-benefit considerations as set forth in the SPP Proposed Order.
---------------------------------------------------------------------------
\272\ See id. at 29522. As a general matter, in considering the
costs and benefits of its actions, the Commission endeavors to
quantify estimated costs and benefits where reasonably feasible.
Here, however, the Commission considers the costs and benefits of
this SPP Final Order mostly in qualitative terms because the
commenters provided no such data or information to assist the
Commission in doing so despite the SPP Proposed Order's request.
---------------------------------------------------------------------------
c. Summary of the SPP Final Order
As discussed above, the SPP Final Order makes certain
determinations with respect to the scope of relief, including the scope
of the SPP Covered Transactions.\273\ The Commission determined that
any products that are offered by SPP, presently or in the future,
pursuant to a Tariff that has been approved by FERC and that fall
within the provided definitions of the SPP Covered Transactions, as
well as any modifications to existing products that are offered by SPP
pursuant to a Tariff that has been approved by FERC and that do not
alter the characteristics of the SPP Covered Transactions in a way that
would cause such products to fall outside these definitions, are
intended to be included within the SPP Final Order.\274\ In this way,
the Commission's SPP Final Order provides beneficial flexibility and
efficiency in that, if the product qualifies as one of the three SPP
Covered Transactions in the SPP Final Order, SPP would not be required
to request or to obtain future supplemental relief for a modified
product. At the same time, however, the Commission declined to include
the phrase ``directly related to, and a logical outgrowth of'' in the
definitions of the SPP Covered Transactions because such phrase is too
vague and too potentially far reaching to permit meaningful analysis
under the Commission's statutory standard of review.
---------------------------------------------------------------------------
\273\ See section IV.B. supra.
\274\ See id.
---------------------------------------------------------------------------
The SPP Final Order also sets forth certain conditions to the
effectiveness of the exemption set forth therein. First, the Commission
must be able to obtain through FERC positional and transactional data
within SPP's possession for products in SPP's markets that are related
to markets
[[Page 73081]]
subject to the Commission's jurisdiction, including any pertinent
information concerning such data.\275\ Second, the exemption is
expressly conditioned upon the requirement that neither the Tariff nor
any other governing documents of SPP shall include any requirement that
SPP notify its members prior to providing information to the Commission
in response to a subpoena or other request for information or
documentation.\276\
---------------------------------------------------------------------------
\275\ Paragraph 4(a) of the SPP Final Order.
\276\ Paragraph 4(b) of the SPP Final Order.
---------------------------------------------------------------------------
In the discussion that follows, the Commission considers the costs
and benefits of the SPP Final Order to the public and market
participants generally, and to SPP specifically. It also considers the
costs and benefits of the exemption described in the SPP Final Order,
in light of the public interest factors enumerated in CEA section
15(a).
d. Baseline
The Commission's baseline for consideration of the costs and
benefits of the SPP Final Order is the costs and benefits that the
public and market participants (including SPP) would experience in the
absence of this proposed regulatory action. In other words, the
baseline is a situation in which the Commission takes no action and
exercises jurisdiction, meaning that the transactions that are the
subject of SPP's Exemption Application would be required to comply with
all of the CEA and Commission regulations, as applicable.\277\ In such
a scenario, the public and market participants would experience the
full benefits and costs related to the CEA and Commission regulations,
but as discussed in detail above, the transactions would still be
subject to the congruent regulatory regime of FERC.\278\
---------------------------------------------------------------------------
\277\ Under this situation, the statutory private right of
action in CEA section 22 would remain intact and would apply, in
accordance with its terms, to all applicable provisions of the CEA.
\278\ Some benefits of CFTC regulation overlap with benefits of
FERC regulation and, therefore, are attributable to both regimes.
---------------------------------------------------------------------------
The Commission also considers the regulatory landscape as it exists
outside the context of the Dodd-Frank Act's enactment. In this
instance, it also is important to highlight the fact that each of the
transactions for which an exemption is requested is already subject to
a long-standing, comprehensive regulatory framework for the offer and
sale of such transactions established by FERC.\279\ For example, the
costs and benefits attendant to the Commission's condition that
transactions be entered into between ``appropriate persons'' as
described in CEA section 4(c)(3) has an analog outside the context of
the Dodd-Frank Act in FERC's minimum criteria for RTO market
participants as set forth in FERC Order No. 741. Moreover, the
Commission has granted similar relief to other RTOs and ISOs regulated
by either FERC or PUCT.\280\
---------------------------------------------------------------------------
\279\ See supra section IV.A.2.b.
\280\ See RTO-ISO Order; see also supra section II.A.
---------------------------------------------------------------------------
In the discussion that follows, the Commission endeavored to, where
reasonably feasible, estimate quantifiable dollar costs of the SPP
Final Order. The benefits and costs of the SPP Final Order, however,
are not presently susceptible to meaningful quantification. Most of the
costs arise from limitations on the scope of the SPP Final Order, and
many of the benefits tied to those limitations arise from avoiding
defaults and their implications that are clearly large in magnitude,
but impracticable to estimate. Being unable to quantify, the Commission
discusses proposed costs and benefits in qualitative terms.
e. Benefits
The Commission's comprehensive action in this SPP Final Order
benefits the public and market participants in several substantial if
unquantifiable ways, as discussed below. First, by cabining the SPP
Covered Transactions to the definitions provided in this SPP Final
Order, the Commission limits the financial risk that may impact the
markets. The mitigation of such risk inures to the benefit of SPP,
market participants, and the public, especially SPP's members and
electric energy ratepayers.
The condition that only ``appropriate persons'' may enter into the
SPP Covered Transactions benefits the public and the entities that fall
under the ``appropriate persons'' definition themselves, by ensuring
that only persons with resources sufficient to understand and manage
the risks of the transactions are permitted to engage in the same.
Further, the condition requiring that the SPP Covered Transactions only
be offered or sold pursuant to a FERC-approved Tariff benefits the
public by, for example, ensuring that the SPP Covered Transactions are
subject to a regulatory regime that is focused on the physical
provision of reliable electric energy, and also has credit requirements
that are designed to achieve risk management goals congruent with the
regulatory objectives of the Commission's DCO and SEF Core Principles.
Absent these and other similar limitations on participant- and
financial-eligibility, the integrity of the markets at issue could be
compromised, and members and ratepayers left unprotected from
potentially significant losses resulting from purely financial,
speculative activity.
The Commission's retention of power to redress any fraud or
manipulation in connection with the SPP Covered Transactions protects
market participants and the public generally, as well as the financial
markets for electric energy products. For example, the SPP Final Order
is conditioned upon the Commission's ability to obtain certain
positional and transactional data within SPP's possession from SPP.
Through this condition, the Commission expects that it will be able to
continue discharging its regulatory duties under the CEA. Further, the
condition that SPP may not, in the future, maintain any Tariff
provisions that would require SPP to notify members prior to providing
the Commission with information will help maximize the effectiveness of
the Commission's enforcement program.
In addition, explicitly providing an exemption from private claims
under CEA section 22 will benefit market participants by allowing them
to avoid legal and compliance costs due to an increased risk of private
litigation under section 22. Moreover, granting an explicit exemption
from the CEA section 22 private right of action reflects Congress'
intent regarding how manipulation and fraud in the context of the RTO-
ISO markets should be addressed. Lastly, providing an exemption from
private actions pursuant to CEA section 22 will prevent any potential
tension between the enforcement programs of FERC and PUCT, on the one
hand, and private enforcement under the CEA, on the other.
f. Costs
The SPP Final Order is exemptive and provides ``appropriate
persons'' engaging in SPP Covered Transactions relief from certain
requirements of the CEA and attendant Commission regulations. As with
any exemptive rule or order, the exemption in the SPP Final Order is
permissive, meaning that SPP was not required to request it and is not
required to rely on it. Accordingly, the Commission assumes that SPP
would rely on the exemption only if the anticipated benefits warrant
the costs of the exemption.
The Commission is of the view that SPP, market participants, and
the public will experience minimal, if any, ongoing costs as a result
of the determinations
[[Page 73082]]
and conditions set forth in the SPP Final Order because, as SPP
certifies pursuant to Commission regulation 140.99(c)(3)(ii), the
attendant conditions are substantially similar to requirements that SPP
and its market participants already incur in complying with FERC
regulations.
The requirement that all parties to the agreements, contracts, or
transactions that are covered by the exemption in the SPP Final Order
must be (1) an ``appropriate person,'' as defined sections 4(c)(3)(A)
through (J) of the CEA; (2) an ``eligible contract participant,'' as
defined in section 1a(18)(A) of the CEA and in Commission regulation
1.3(m); or (3) a ``person who actively participates in the generation,
transmission, or distribution of electric energy,'' as defined in
paragraph 5(f) of the SPP Final Order--is not likely to impose any
significant, incremental costs on SPP because its existing legal and
regulatory obligations under the FPA and FERC regulations mandate that
only eligible market participants may engage in the SPP Covered
Transactions.
The requirement that the SPP Covered Transactions must be offered
or sold pursuant to SPP's Tariff, which has been approved by FERC, is a
statutory requirement for the exemption set forth in CEA section
4(c)(6) and therefore is not a cost attributable to an act of
discretion by the Commission.\281\ Moreover, requiring that SPP not
operate outside its approved Tariff derives from existing legal
requirements and is not a cost attributable to this SPP Final Order.
---------------------------------------------------------------------------
\281\ See 7 U.S.C. 6(c)(6)(A), (B).
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As described above, FERC imposes on SPP and the SPP Market Monitor
various information management requirements.\282\ These existing
requirements are not materially different from the condition that
neither SPP's Tariff nor other governing documents may include any
requirement that SPP notify a member prior to providing information to
the Commission in response to a subpoena, special call, or other
request for information or documentation. This requirement is not
likely to impose any significant, incremental costs on SPP because
SPP's existing Tariff governing the sharing of information meets this
condition.
---------------------------------------------------------------------------
\282\ See section IV.A.2.b. supra.
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Requiring that an information sharing arrangement between the
Commission and FERC be in full force and effect is not a cost to SPP or
to other members of the public because it has been an inter-agency norm
since 2005.\283\ The requirement that SPP comply with the Commission's
requests on an as-needed basis for related transactional and positional
market data will impose only minimal costs on SPP to respond because
the Commission contemplates that any information requested will already
be in SPP's possession.\284\
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\283\ The CFTC and FERC first signed an information sharing MOU
on October 12, 2005. On January 2, 2014, as directed by Congress
under the Dodd-Frank Act, the Commission and FERC entered into the
CFTC-FERC Information Sharing MOU, which superseded the 2005 MOU and
provided for the sharing of information for use in analyzing market
activities and protecting market integrity. See supra note 56.
\284\ SPP represents that its Tariff requires the sharing of
information with the Commission without prior notice to market
participants. See Exemption Application Attachments at 52, 54; see
also section IV.B. supra.
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In addition, in granting an explicit exemption from the CEA section
22 private right of action, the Commission notes that there may be
minimal costs associated with the fact that private litigants will not
be permitted to vindicate their own interests or directly contribute to
those interests through litigation with respect to fraud and
manipulation in the RTO-ISO markets. However, as stated above in
section III.B.2., such costs are mitigated by the fact that FERC and
PUCT will continue to pervasively regulate such markets. In addition,
nothing in the SPP Final Order affects the Commission's own authority
to address fraudulent or manipulative conduct in the RTO-ISO markets,
including the Commission's authority to seek restitution for the
benefit of victims. Also, as noted above in section III.B.2., the
Commission encourages market participants who observe potential fraud
or manipulation in the markets subject to the Commission's jurisdiction
to bring their concerns to the Commission.
g. Consideration of Alternatives
The Commission considered the costs and benefits of not issuing the
exemption found in the SPP Final Order. The Commission declined this
approach as inconsistent with Congressional intent and contrary to the
public interest, since Congress, in the Dodd-Frank Act, required the
Commission to exempt certain contracts, agreements or transactions from
duties otherwise required by statute or Commission regulation by adding
a new section that requires the Commission to exempt from its
regulatory oversight agreements, contracts, or transactions traded
pursuant to a FERC-approved tariff, where such exemption is in the
public interest and consistent with the purposes of the CEA. In
addition, not issuing the exemption found in the SPP Final Order would
result in SPP being treated differently from the RTOs and ISOs covered
by the Commission's previous RTO-ISO Order.
The Commission also considered the costs and benefits of expanding
the definition of SPP Covered Transactions to include future products
that are ``directly related to, and a logical outgrowth of'' existing
products, as requested by SPP. The Commission declined this approach in
part because of the concern that such an open-ended definition could
present risks beyond those contemplated. At the same time, the
Commission made clear that any new transactions that fall within the
SPP Covered Transactions, which are explicitly defined in the SPP Final
Order, and any modifications to existing transactions that do not alter
the SPP Covered Transactions' characteristics in a way that would cause
them to fall outside those definitions, that are offered by SPP
pursuant to a FERC-approved Tariff, are intended to be included within
the exemption in the SPP Final Order.\285\ This provides a benefit in
that no supplemental relief for such products would be required, which
is a cost-mitigating efficiency gain for SPP.
---------------------------------------------------------------------------
\285\ See section IV.B. supra.
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The Commission also considered expressly preserving the statutory
private right of action found in CEA section 22 with respect to fraud
and manipulation. The Commission has considered the costs and benefits
of such action in light of the comments received, and, for the reasons
stated in section III.B.2., has been persuaded that issuing an explicit
exemption from CEA section 22 is the appropriate course of action.
h. Consideration of CEA Section 15(a) Factors
i. Protection of Market Participants and the Public
As explained above, the Commission does not foresee that the SPP
Final Order will have any negative effect on the protection of market
participants and the public. More specifically, the SPP Covered
Transactions, in light of the representations of SPP and in the context
of SPP's regulation by FERC, do not appear to generate significant
risks of the nature of those addressed by the CEA. The Commission has
attempted to delineate the definitional boundaries for the SPP Covered
Transactions in a manner that appropriately ring-fences
[[Page 73083]]
against the possibility that they could generate such risks, either now
or as they may evolve in the future. In addition, the Commission has
limited the exemption set forth in the SPP Final Order to persons with
resources sufficient to understand and manage the risks of the SPP
Covered Transactions. This requirement serves to protect excluded
market participants and it minimizes the risk of potential misuse of
the exempt transactions.
ii. Efficiency, Competitiveness, and Financial Integrity of Futures
Markets
The Commission foresees little, if any, negative impact from the
SPP Final Order on the efficiency, competitiveness, and financial
integrity of markets regulated under the CEA. As discussed above, the
Commission believes that the SPP Final Order will promote efficiency by
allowing entities who partake of the exemption delineated therein
transactional flexibility that the Commission understands to be
valuable to their ability to efficiently deploy their limited
resources. Further, the Commission believes that the SPP Final Order
will increase competition by granting an exemption to SPP and
appropriate persons, as defined in the SPP Final Order, that is similar
in scope to the exemption granted to other RTOs and ISOs in the RTO-ISO
Order. In addition, as discussed above, the Commission's retention of
its full enforcement authority will help ensure that any misconduct in
connection with the exempted transactions does not jeopardize the
financial integrity of the markets under the Commission's jurisdiction.
iii. Price Discovery
The Commission does not believe that the SPP Final Order will
materially impair price discovery in non-exempt markets subject to the
Commission's jurisdiction. As discussed above, the SPP Covered
Transactions are used to manage unique electric industry operational
risks. As such, Transmission Congestion Rights and Operating Reserve
Transactions appear to be ill-suited for exchange trading and/or to
serve a useful price discovery function. In addition, as discussed
above, while Energy Transactions can serve as a source of settlement
prices for other transactions in Commission-regulated markets, SPP has
a market monitoring system in place to detect and deter manipulation
that takes place on its markets.
iv. Sound Risk Management Practices
The Commission believes that the SPP Final Order will promote the
ability of SPP and its market participants to manage the operational
risks posed by unique electric energy market characteristics, including
the non-storable nature of electric energy and demand that can and
frequently does fluctuate dramatically within a short time-span. As
discussed above, the Commission understands that the SPP Covered
Transactions are an important tool facilitating SPP's ability to
efficiently manage operational risk in fulfillment of its public
service mission to provide affordable, reliable electric energy.
v. Other Public Interest Considerations
In exercising its sections 4(c)(1) and 4(c)(6) exemptive authority
in the SPP Final Order, the Commission is acting to promote the broader
public interest by facilitating the supply of affordable, reliable
electric energy, as contemplated by Congress.\286\
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\286\ See related discussion in section I. supra.
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3. Amended RTO-ISO Order
a. Background
As discussed above, the RTO-ISO Order currently exempts contracts,
agreements, and transactions for the purchase or sale of the limited
electric energy-related products that are specifically described within
the RTO-ISO Order from certain provisions of the CEA and Commission
regulations, with the exception of the Commission's general anti-fraud
and anti-manipulation authority, and scienter-based prohibitions, under
CEA sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 4s(h)(4)(A),
6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13, and any implementing
regulations promulgated under these sections including, but not limited
to, Commission regulations 23.410(a) and (b), 32.4, and part 180.\287\
The RTO-ISO Order did not discuss CEA section 22.
---------------------------------------------------------------------------
\287\ See RTO-ISO Order at 19912.
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b. RTO-ISO Order Proposed Amendment and Request for Comment on the
Commission's Proposed Consideration of Costs and Benefits
As discussed above, the Commission issued the RTO-ISO Order
Proposed Amendment on May 9, 2016. The RTO-ISO Order Proposed Amendment
proposed to amend the RTO-ISO Order to clarify that the RTO-ISO Order
would not exempt the RTO-ISO Covered Entities from the private right of
action found in section 22 of the CEA with respect to the Excepted
Provisions.\288\
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\288\ See supra section II.E.
---------------------------------------------------------------------------
The RTO-ISO Order Proposed Amendment expressly requested public
comment on the Commission's proposed cost-benefit considerations,
including with respect to reasonable alternatives; the magnitude of
specific costs and benefits, and data or other information to estimate
a dollar valuation; and any impact on the public interest factors
specified in CEA section 15(a).\289\
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\289\ 81 FR at 30253.
---------------------------------------------------------------------------
The Commission received four comments regarding the cost-benefit
analysis in the RTO-ISO Order Proposed Amendment. The four commenters
argued that the Commission's cost-benefit analysis of the amendment
proposed in the RTO-ISO Order Proposed Amendment was inadequate or
insufficient, and/or that the Commission underestimated the legal and
regulatory costs of allowing private claims against market participants
in the RTO-ISO markets.\290\
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\290\ EEI at 11; EPSA at 10; IRC at 13; NFP Electric
Associations at 7.
---------------------------------------------------------------------------
c. Summary of the Amended RTO-ISO Order
The Amended RTO-ISO Order exempts the RTO-ISO market participants
and RTO-ISO Covered Transactions from private actions pursuant to CEA
section 22.
In the discussion that follows, the Commission considers the costs
and benefits of the Amended RTO-ISO Order to the public and market
participants generally, and to the RTO-ISO Covered Entities
specifically. It also considers the costs and benefits of the Amended
RTO-ISO Order in light of the public interest factors enumerated in CEA
section 15(a).
d. Baseline
In the RTO-ISO Order Proposed Amendment, the Commission proposed to
exclude from the exemption set forth in the RTO-ISO Order the private
right of action under CEA section 22. Thus, the Commission's proposed
baseline for consideration of the costs and benefits was the opposite
of that action, i.e. the costs and benefits that the public and market
participants would experience if the existing RTO-ISO Order were to be
interpreted to exempt market participants from liability under the CEA
section 22 private right of action.\291\ As discussed above,\292\ the
Commission received a number of comments in response to the RTO-ISO
[[Page 73084]]
Order Proposed Amendment, and was persuaded by specific points made by
such commenters to amend the RTO-ISO Order to grant an explicit
exemption from the CEA section 22 private right of action. Given this
change, the Commission believes it is more informative, for purposes of
this analysis, to use as the baseline the costs and benefits that the
public and market participants would have experienced if the RTO-ISO
Order were amended as the Commission originally proposed to do in the
RTO-ISO Order Proposed Amendment (in other words, if the RTO-ISO Order
were amended to explicitly preserve the CEA section 22 private right of
action).\293\
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\291\ See 81 FR at 30252.
\292\ See supra sections III.B.1. and III.B.2.
\293\ See 81 FR 30247-48.
---------------------------------------------------------------------------
In the discussion that follows, the Commission endeavored to, where
reasonably feasible, estimate quantifiable dollar costs of the
amendment to the RTO-ISO Order. The costs and benefits of the
amendment, however, are not presently susceptible to meaningful
quantification. Being unable to quantify, the Commission discusses
proposed costs and benefits in qualitative terms.
e. Benefits
Using the baseline described above,\294\ amending the RTO-ISO Order
to address the issue of exemption from the CEA section 22 private right
of action one way or another will prevent future uncertainty with
respect to the scope of the RTO-ISO Order. Amending the RTO-ISO Order
to provide an express exemption from CEA section 22 will benefit RTO-
ISO market participants by allowing them to avoid legal and compliance
costs due to an increased risk of private litigation under section 22.
Moreover, granting an explicit exemption from the CEA section 22
private right of action reflects Congress' intent regarding how
manipulation and fraud in the context of the RTO-ISO markets should be
addressed. Lastly, providing an exemption from private actions pursuant
to CEA section 22 will prevent any potential tension between the
enforcement programs of FERC and PUCT, on the one hand, and private
enforcement under the CEA, on the other.
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\294\ See supra section V.C.3.d.
---------------------------------------------------------------------------
f. Costs
Using the baseline described above,\295\ the Commission notes that
there may be minimal costs associated with the fact that private
litigants will not be permitted to vindicate their own interests or
directly contribute to those interests through litigation with respect
to fraud and manipulation in the RTO-ISO markets. However, as stated
above in section III.B.2., such costs are mitigated by the fact that
FERC and PUCT will continue to pervasively regulate such markets. In
addition, nothing in the Amended RTO-ISO Order affects the Commission's
own authority to address fraudulent or manipulative conduct in the RTO-
ISO markets, including the Commission's authority to seek restitution
for the benefit of victims. Also, as noted above in section III.B.2.,
the Commission encourages market participants who observe potential
fraud or manipulation in the markets subject to the Commission's
jurisdiction to bring their concerns to the Commission.
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\295\ See id.
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g. Consideration of Alternatives
The Commission considered not issuing the Amended RTO-ISO Order.
The Commission considered the uncertainty that has arisen with respect
to the scope of the RTO-ISO Order and the availability of a private
right of action under the RTO-ISO Order, particularly following the
court rulings in the Aspire v. GDF Suez action,\296\ and has determined
that a no-amendment alternative would prolong such uncertainty and thus
be contrary to the public interest.
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\296\ See supra section II.D.
---------------------------------------------------------------------------
The Commission also proposed to amend the RTO-ISO Order to
explicitly preserve the CEA section 22 private right of action with
respect to fraud and manipulation.\297\ The Commission has considered
the costs and benefits of its proposed amendment in light of the
comments received, and, for the reasons stated in section III.B.2., has
been persuaded that issuing an explicit exemption from CEA section 22
is the appropriate course of action.
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\297\ See 81 FR 30245.
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h. Consideration of CEA Section 15(a) Factors
i. Protection of Market Participants and the Public
The Commission notes that, while under the Amended RTO-ISO Order,
private litigants will not be permitted to pursue fraud or manipulation
claims under CEA section 22 with respect to the RTO-ISO markets, market
participants will still be protected through the pervasive regulation
of those markets by FERC and PUCT, and by the Commission's own
authority to address fraud and manipulation in such markets.
ii. Efficiency, Competitiveness, and Financial Integrity of Futures
Markets
The Commission does not believe that the amendment to the RTO-ISO
Order will have an effect on the efficiency, competitiveness, and
financial integrity of the futures markets.
iii. Price Discovery
The Commission does not believe that the amendment to the RTO-ISO
Order will have an effect on price discovery.
iv. Sound Risk Management Practices
The Commission does not believe that the amendment to the RTO-ISO
Order will have a material effect on sound risk management practices.
v. Other Public Interest Considerations
The Commission believes that the amendment to the RTO-ISO Order
will foster the public interest for the reasons discussed above in
section III.B.2.
VI. SPP Final Order
Upon due consideration and consistent with the determinations set
forth above, the Commission hereby issues the following order
(``Order''):
Pursuant to its authority under sections 4(c)(1) and 4(c)(6) of the
Commodity Exchange Act (``CEA'' or Act'') and in accordance with
sections 4(c)(1) and (2) of the Act, the Commodity Futures Trading
Commission (``CFTC'' or ``Commission'')
1. Exempts, subject to the conditions and limitations specified
herein, the execution of the electric energy-related agreements,
contracts, and transactions that are specified in paragraph 2 of this
Order and any person or class of persons offering, entering into,
rendering advice, or rendering other services with respect thereto,
from all provisions of the CEA, except, in each case, the Commission's
general anti-fraud and anti-manipulation authority, and scienter-based
prohibitions, under CEA sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o,
4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13, and
any implementing regulations promulgated under these sections
including, but not limited to, Commission regulations 23.410(a) and
(b), 32.4, and part 180. For the avoidance of doubt, this exemption
applies to private actions pursuant to CEA section 22 with respect to
all provisions of the Act, including the foregoing enumerated
provisions, but does not restrict the Commission's enforcement
authority pursuant to those provisions.
2. Scope. This exemption applies only to agreements, contracts and
[[Page 73085]]
transactions that satisfy each of the following requirements:
a. The agreement, contract or transaction is for the purchase and
sale of one of the following electric energy-related products:
(1) ``Transmission Congestion Rights'' defined in paragraph 5(a) of
this Order, except that the exemption shall only apply to such
Transmission Congestion Rights where:
(a) Each Transmission Congestion Right is linked to, and the
aggregate volume of Transmission Congestion Rights for any period of
time is limited by, the physical capability (after accounting for
counterflow) of the electric energy transmission system operated by SPP
for such period;
(b) SPP serves as the market administrator for the market on which
the Transmission Congestion Rights are transacted;
(c) Each party to the transaction is a member of SPP (or is SPP
itself) and the transaction is executed on a market administered by
SPP; and
(d) The transaction does not require any party to make or take
physical delivery of electric energy.
(2) ``Energy Transactions'' as defined in paragraph 5(b) of this
Order.
(3) ``Operating Reserve Transactions'' as defined in paragraph 5(c)
of this Order.
b. Each party to the agreement, contract or transaction is:
(1) An ``appropriate person,'' as defined in sections 4(c)(3)(A)
through (J) of the CEA;
(2) an ``eligible contract participant,'' as defined in section
1a(18)(A) of the CEA and in Commission regulation 1.3(m); or
(3) a ``person who actively participates in the generation,
transmission, or distribution of electric energy,'' as defined in
paragraph 5(f) of this Order.
c. The agreement, contract or transaction is offered or sold
pursuant to SPP's Tariff and that Tariff has been approved by the
Federal Energy Regulatory Commission (``FERC'').
3. Applicability to SPP. Subject to the conditions contained in the
Order, the Order applies to SPP with respect to the transactions
described in paragraph 2 of this Order.
4. Conditions. The exemption provided by this Order is expressly
conditioned upon the following:
a. Information sharing: Information sharing arrangements between
the Commission and FERC that are acceptable to the Commission continue
to be in effect, and SPP's compliance with the Commission's requests
through FERC to share, on an as-needed basis and in connection with an
inquiry consistent with the CEA and Commission regulations, positional
and transactional data within SPP's possession for products in SPP's
markets that are related to markets that are subject to the
Commission's jurisdiction, including any pertinent information
concerning such data.
b. Notification of requests for information: Neither the Tariff nor
any other governing documents of SPP shall include any requirement that
SPP notify its members prior to providing information to the Commission
in response to a subpoena or other request for information or
documentation.
5. Definitions. The following definitions shall apply for purposes
of this Order:
a. A ``Transmission Congestion Right'' is a transaction, however
named, that entitles one party to receive, and obligates another party
to pay, an amount based solely on the difference between the price for
electric energy, established on an electric energy market administered
by SPP, at a specified source (i.e., where electric energy is deemed
injected into the grid of SPP) and a specified sink (i.e., where
electric energy is deemed withdrawn from the grid of SPP).
b. ``Energy Transactions'' are transactions in a ``Day-Ahead
Market'' or ``Real-Time Balancing Market,'' as those terms are defined
in paragraphs 5(d) and 5(e) of this Order, for the purchase or sale of
a specified quantity of electric energy at a specified location
(including virtual bids and offers), where:
(1) The price of the electric energy is established at the time the
transaction is executed;
(2) Performance occurs in the Real-Time Balancing Market by either:
(a) Delivery or receipt of the specified electric energy, or
(b) A cash payment or receipt at the price established in the Day-
Ahead Market or Real-Time Balancing Market (as permitted by SPP in its
Tariff); and
(3) The aggregate cleared volume of both physical and cash-settled
energy transactions for any period of time is limited by the physical
capability of the electric energy transmission system operated by SPP
for that period of time.
c. ``Operating Reserve Transactions'' are transactions:
(1) In which SPP, for the benefit of load-serving entities and
resources, purchases, through auction, the right, during a period of
time as specified in SPP's Tariff, to require the seller of such right
to operate electric energy facilities in a physical state such that the
facilities can increase or decrease the rate of injection or withdrawal
of a specified quantity of electric energy into or from the electric
energy transmission system operated by SPP with:
(a) Physical performance by the seller's facilities within a
response time interval specified in SPP's Tariff (Reserve Transaction);
or
(b) prompt physical performance by the seller's facilities (Area
Control Error Regulation Transaction);
(2) For which the seller receives, in consideration, one or more of
the following:
(a) Payment at the price established in SPP's Day-Ahead or Real-
Time Balancing Market, as those terms are defined in paragraphs 5(d)
and 5(e) of this Order, price for electric energy applicable whenever
SPP exercises its right that electric energy be delivered (including
``Demand Response,'' as defined in paragraph 5(g) of this Order);
(b) Compensation for the opportunity cost of not supplying or
consuming electric energy or other services during any period during
which SPP requires that the seller not supply energy or other services;
(c) An upfront payment determined through the auction administered
by SPP for this service;
(d) An additional amount indexed to the frequency, duration, or
other attributes of physical performance as specified in SPP's Tariff;
and
(3) In which the value, quantity, and specifications of such
transactions for SPP for any period of time shall be limited to the
physical capability of the electric energy transmission system operated
by SPP for that period of time.
d. ``Day-Ahead Market'' means an electric energy market
administered by SPP on which the price of electric energy at a
specified location is determined, in accordance with SPP's Tariff, for
specified time periods, none of which is later than the second
operating day following the day on which the Day-Ahead Market clears.
e. ``Real-Time Balancing Market'' means an electric energy market
administered by SPP on which the price of electric energy at a
specified location is determined, in accordance with SPP's Tariff, for
specified time periods within the same 24-hour period.
f. ``Person who actively participates in the generation,
transmission, or distribution of electric energy'' means a person that
is in the business of: (1) Generating, transmitting, or distributing
electric energy; or (2) providing electric energy services that are
necessary to support the reliable operation of the transmission system.
g. ``Demand Response'' means the right of SPP to require that
certain
[[Page 73086]]
sellers of such rights curtail consumption of electric energy from the
electric energy transmission system operated by SPP during a future
period of time as specified in SPP's Tariff.
h. ``SPP'' means Southwest Power Pool, Inc. or any successor in
interest to Southwest Power Pool.
i. ``Tariff.'' Reference to a SPP ``Tariff'' includes a tariff,
rate schedule or protocol.
j. ``Exemption Application'' means the application for an exemptive
order under 4(c)(6) of the CEA filed by SPP on October 17, 2013, as
amended August 1, 2014.
6. Effective Date. This Order is effective upon publication in the
Federal Register.
7. Delegation of Authority. The Commission hereby delegates, until
such time as the Commission orders otherwise, to the Director of the
Division of Market Oversight (``Division'') and to such members of the
Division's staff acting under his or her direction as he or she may
designate, in consultation with the General Counsel or such members of
the General Counsel's staff acting under his or her direction as he or
she may designate, the authority to request information from SPP
pursuant to section 4(a) of this Order.
This Order is based upon the representations made in the Exemption
Application for an exemptive order under section 4(c) of the CEA filed
by SPP,\298\ including those representations with respect to compliance
with FERC regulation 35.47. It is also based on supporting materials
provided to the Commission by SPP and its counsel, including a legal
memorandum that, in the Commission's sole discretion, provides the
Commission with assurance that the netting arrangements contained in
the approach selected by SPP to satisfy the obligations contained in
FERC regulation 35.47(d) will, in fact, provide SPP with enforceable
rights of setoff against any of its market participants under title 11
of the United States Code in the event of the bankruptcy of the market
participant. Any material change or omission in the facts and
circumstances pursuant to which this Order is granted might require the
Commission to reconsider its finding that the exemption contained
therein is appropriate and/or consistent with the public interest and
purposes of the CEA. Further, the Commission reserves the right, in its
discretion, to revisit any of the terms and conditions of the relief
provided herein, including but not limited to, making a determination
that certain entities and transactions described herein should be
subject to the Commission's full jurisdiction, and to condition,
suspend, terminate or otherwise modify or restrict the exemption
granted in this Order, as appropriate, upon its own motion.
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\298\ In the Matter of the Application for an Exemptive Order
Under Section 4(c) of the Commodity Exchange Act by Southwest Power
Pool, Inc., amended Aug. 1, 2014.
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VII. Amended RTO-ISO Order
The Preamble to and Paragraph 1 of the RTO-ISO Order are revised to
read as follows:
Pursuant to its authority under sections 4(c)(1) and 4(c)(6) of the
Commodity Exchange Act (``CEA'') or (``Act'') and in accordance with
sections 4(c)(1) and (2) of the Act, the Commodity Futures Trading
Commission (``Commission'')
1. Exempts, subject to the conditions and limitations specified
herein, the execution of the electric energy-related agreements,
contracts, and transactions that are specified in paragraph 2 of this
Order and any person or class of persons offering, entering into,
rendering advice, or rendering other services with respect thereto,
from all provisions of the CEA, except, in each case, the Commission's
general anti-fraud and anti-manipulation authority, and scienter-based
prohibitions, under CEA sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o,
4s(h)(1)(A), 4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13, and
any implementing regulations promulgated under these sections
including, but not limited to, Commission regulations 23.410(a) and
(b), 32.4, and part 180. For the avoidance of doubt, this exemption
applies to private actions pursuant to CEA section 22 with respect to
all provisions of the Act, including the foregoing enumerated
provisions, but does not restrict the Commission's enforcement
authority pursuant to those provisions.
Issued in Washington, DC, on October 18, 2016 by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Appendices to Final Order in Response to an Application From Southwest
Power Pool, Inc. To Exempt Specified Transactions; Amendment to the
Final Order Exempting Specified Transactions of Certain Independent
System Operators and Regional Transmission Organizations--Commission
Voting Summary, Chairman's Statement, and Commissioner's Statement
Appendix 1--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
Appendix 2--Statement of Chairman Timothy G. Massad
I support this order, which comes after careful review of the
issue, including comments from many market participants.
Our electric markets are subject to regulation by the Federal
Energy Regulatory Commission (FERC) and state regulators. Those
regulators work to ensure that energy rates remain reasonable,
transmission systems function reliably, and the interests of market
participants are balanced with the protection of electricity
consumers. In light of this, the CFTC exempted certain transactions
in the regional transmission organization (RTO) and independent
system operator (ISO) markets from most provisions of the Commodity
Exchange Act (CEA), other than our own authority to pursue fraud and
manipulation in those markets.
One issue was left uncertain, which was whether private rights
of action under the CEA could be brought against RTOs, ISOs, and
other market participants. As a general matter, private rights of
action are important to our regulatory structure. They can deter bad
actors and protect market participants. But many market participants
expressed concern that private actions could create costs within the
markets in ways regulators did not anticipate. For example, several
state consumer advocate offices noted that private rights of action
could inadvertently introduce regulatory uncertainty and increase
costs for consumers. So while private rights of action will remain
critical overall in our markets, I am persuaded that, in this
limited instance, they could cause instability and adversely affect
consumers without necessarily enhancing supervision of markets or
consumer protection.
In making this determination, it is important that the CFTC
continues to retain the authority to pursue fraud and manipulation
within those markets. Aggrieved market participants and consumers
also still have the ability to file complaints with the CFTC and our
Whistleblower program.
I thank the CFTC staff and my fellow Commissioners for their
work on this matter, as well as those who took the time to provide
us with feedback.
[[Page 73087]]
Appendix 3--Statement of Commissioner J. Christopher Giancarlo
I support this commonsense decision that it is not in the public
interest to allow private lawsuits against electric utilities
trading in wholesale energy markets.
Two months ago, I visited a construction site for a state-of-
the-art electric power plant in my home state of New Jersey. The
facility was being built to withstand future weather events like
Superstorm Sandy. The power it will produce will serve millions of
local residents.
Without today's practical decision, power utilities across the
country may have hesitated or delayed building such new power plants
because of the regulatory uncertainty and costs associated with
private litigation--costs that surely would be passed on to millions
of ratepayers throughout the country.
As I have observed, preserving the Section 22 private right of
action is not necessary in these heavily regulated markets.\1\ Both
the CFTC and the FERC have the authority to seek redress for the
claims of private persons who raise meritorious allegations of fraud
or manipulation.
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\1\ See Notice of Proposed Amendment to and Request for Comment
on the Final Order in Response to a Petition From Certain
Independent System Operators and Regional Transmission Organizations
To Exempt Specified Transactions Authorized by a Tariff or Protocol
Approved by the Federal Energy Regulatory Commission or the Public
Utility Commission of Texas From Certain Provisions of the Commodity
Exchange Act Pursuant to the Authority Provided in the Act, 81 FR
30245, 30254-55 (May 16, 2016) (Statement of Dissent by Commissioner
J. Christopher Giancarlo); J. Christopher Giancarlo, Op-Ed, Unneeded
mandate would hurt N.J. consumers, The Record, Aug. 18, 2016,
available at http://www.northjersey.com/opinion/opinion-guest-writers/unneeded-mandate-would-hurt-n-j-consumers-1.1647129.
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I am heartened that the Commission now agrees and has concluded,
with today's action, that allowing private lawsuits is not in the
public interest.
It is just commonsense.
[FR Doc. 2016-25571 Filed 10-21-16; 8:45 am]
BILLING CODE 6351-01-P