Academic journal article Energy Law Journal

North American Energy Standards Board: Legal and Administrative Underpinnings of a Consensus Based Organization

Academic journal article Energy Law Journal

North American Energy Standards Board: Legal and Administrative Underpinnings of a Consensus Based Organization

Article excerpt

I. INTRODUCTION

The Gas Industry Standards Board (GISB), formed by the wholesale natural gas industry in 1992, has expanded its charter to include the voluntary development of consensus-based business practice standards for the wholesale electric industry as well as the retail natural gas and electric industries. The new organization, called the North American Energy Standards Board (NAESB), was formed in 2002 based on many of the same successful principles developed and refined by the GISB. Although the standards developed are intended to be voluntary, the regulatory community, most notably the U.S. Federal Energy Regulatory Commission (FERC or Commission), has adopted them by reference into their regulatory framework thereby making the standards mandatory for the entities under their jurisdiction.

This article will review the history behind the formation of the GISB and its evolution into the NAESB and describe the organization's procedures. We will then discuss the constitutional and statutory considerations relating to a regulatory agency's delegation of certain responsibilities to voluntary industry organizations. Unlike previous articles published in the Energy Law Journal, this one will conclude that regulatory agencies in general, and the FERC in particular, have not delegated authority to the NAESB. Rather, this article will go on to examine the statutory and regulatory underpinnings that permit a regulatory agency to incorporate by reference copyrighted industry developed standards into its regulatory framework.

This method, and not complete delegation of authority to private bodies, has become the preferred means for a regulatory agency to encapsulate industry consensus standards in developing uniform and enforceable regulations. We conclude that incorporation by reference works best where the groups setting industry standards are truly representative of the many segments in the industry and the standards are the product of a consensus-based process. Accordingly, we turn first to the formation and structure of the GISB and the NAESB, and their procedures for standards development.

II. THE TRANSFORMATION OF THE GISB INTO THE NAESB

A. Formation and Structure of the GISB

Although the GISB received its charter in 1994,1 the effort to establish the organization actually began in 1992, when the FERC issued Order 636.2 In that order, the FERC required interstate pipelines to post various information about capacity on their systems, including service available through capacity-release transactions and firm and interruptible capacity available directly from the pipelines, on electronic bulletin boards (EBBs). In September of the same year, the FERC and the U.S. Department of Energy (DOE) issued a joint report recommending the adoption of standard electronic data interchange (EDI) protocols, the standardization of pipeline electronic bulletin boards, and other measures designed to improve the accuracy and timeliness of natural gas deliverability data to the marketplace.3

This led the industry to begin discussions on how electronic communications systems would work in the fast-developing marketplace for natural gas. In 1993, five working groups were established to iron out the details of implementing EBBs. The groups operated under FERC auspices, with participation by FERC staff and representatives of all segments of the gas industry. The working groups resolved a number of technical issues, including an agreement to base gas industry standards on the already established EDI protocols. The FERC issued Order 563 accepting the reports of the working groups with minor modifications.4 The separate discussions begun by the Natural Gas Council (NGC) and the FERC-which frequently involved the same industry participants-led to the general acceptance of the concept of a permanent board to develop and maintain voluntary standards for electronic information exchange and electronic communications necessary to promote reliable gas service. …

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