Academic journal article Energy Law Journal

Report of the Competition and Antitrust Committee

Academic journal article Energy Law Journal

Report of the Competition and Antitrust Committee

Article excerpt

This report summarizes antitrust and competition developments of particular interest to energy law practitioners that occurred in 2008 and updates certain developments that occurred in 2009.*

I. FEDERAL ENERGY REGULATORY COMMISSION

A. Rules and Orders

1. Standards of Conduct for Transmission Providers: Order No. 717

On October 16, 2008, the Federal Energy Regulatory Commission (FERC) issued Order No. 717,1 which makes a number of fundamental changes to the Standards of Conduct, which were originally promulgated in Order No. 2004,2 and replaces the previous Part 358 of the FERC s regulations with a new Part 358.3 The Standards of Conduct generally seek to prevent electric and natural gas transmission providers4 from leveraging market power over transmission to give affiliated transmission customers an advantage over unaffiliated customers. The central reform instituted by Order No. 717, which responded to the D.C. Circuit's remand of Order No. -2004 in National Fuel, is the elimination of the "corporate separation" approach adopted in Order No. 2004 and the return to the "employee functional" approach adopted in Order Nos. 4975 and 889.6 Order No. 717 seeks to facilitate compliance and enforcement by streamlining the Order No. 2004 Standards of Conduct's two core rules: (1) the Independent Functioning Rule, which requires "[transmission function employee[s]"7 to function separately and independently from "[mjarketing function employee[s],"8 and (2) the No Conduit Rule, which prohibits disclosures of nonpublic transmission system or customer information to marketing function employees. Order No. 717 also pares back the coverage of the Order No. 2004 Standards of Conduct, simplifies and reorganizes the existing nondiscrimination, posting, and disclosure requirements, expands the scope of permitted information exchanges, and generally retains the existing training and implementation procedures. The FERC required transmission providers to be in full compliance with the Revised Standards by November 26, 2008, but granted them additional time to comply with the posting and training requirements.

Order No. 717 narrows the coverage of the Standards of Conduct. First, Order No. 717 eliminates the concept of "energy affiliate,"9 so that the Revised Standards do not govern the relationship between a transmission provider and its energy affiliates. Second, as was the case under Order No. 497, the Revised Standards apply to a transmission provider when it commences transmission transactions with an affiliate, whereas the Order No. 2004 Standards of Conduct applied to a newly-formed transmission provider and its affiliates prior to the construction or placement in service of its transmission facilities.10

The Revised Standards prohibit a transmission provider from unduly discriminating against any transmission customer, whether affiliated or nonaffiliated, and from making or granting any undue preference or advantage to any person or subjecting any person to any undue prejudice or disadvantage with respect to the interstate transmission or wholesale sale of electric energy or natural gas.11 A transmission provider must also provide equal access to nonpublic transmission function information to all of its transmission customers, except in the case of confidential customer information or Critical Energy Infrastructure Information (CEII).12 With respect to implementation of its tariff, a transmission provider must strictly enforce all tariff provisions relating to open access transmission service that do not permit the use of discretion,13 and for those that do, the transmission provider must treat all customers in a fair and impartial manner.14 Finally, a transmission provider must process all similar requests for transmission service in the same manner and timeframe.15

The Independent Functioning Rule requires a transmission provider to ensure that its transmission function employees operate independently of its marketing function employees. …

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