FERC Denies Rehearing of Order Clarifying MBR Affiliate Restrictions and Withdraws NOPR to Amend Those Restrictions

The Commission has issued two separate, but related orders regarding its regulations governing the sharing employees by a franchised utility with captive customers and its market-regulated power sales affiliates under the FERC market-based rate (MBR) affiliate restrictions.  These two Commission’s orders are addressed below.  As a result of these orders, our clients that are franchised utilities with captive customers and that have market-regulated power sales affiliates should ensure that the utility and these affiliates do not share employees that determine the timing of scheduled outages, or that engage in economic dispatch, fuel procurement, or resource planning.  This separation of employees must be implemented by April 20, 2011, which is within 90 days of the January 20, 2011 issuance date of these orders.  Please note that our clients that have previously received waiver of the FERC MBR affiliate restrictions (formerly, the MBR Code of Conduct) are not affected by these orders.

1. Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services By Public Utilities, Order Denying Rehearing and Motion for Stay and Rescission, 134 FERC ¶ 61,046 (2011), issued in Docket No. RM04-7-009

The Commission has denied Edison Electronic Institute’s (EEI) motion for stay or rescission and request for rehearing of the Commission’s April 15, 2010 Clarification Order regarding the MBR affiliate restrictions.  The Commission’s April 15 Clarification Order provided guidance regarding which employees may not be shared under the MBR affiliate restrictions codified in Order No. 697.  Specifically, the employees that may not be shared include those with responsibility for economic dispatch or the timing of scheduled outages and those with responsibility for resource planning or fuel procurement.

Concurrent with its April 15 Clarification Order, the Commission issued a NOPR in Docket No. RM10-20-000 in which it proposed to revise the MBR affiliate restrictions in order to reflect the guidance provided in the April 15 Clarification Order.  EEI’s main argument was that by creating a bright-line rule in the April 15 Clarification Order that certain employees cannot be shared at the same time that it issued its NOPR codifying this rule, the Commission failed to provide the public with an effective opportunity for input prior to the implementation of the proposed rule.

The Commission rejected EEI’s argument and explained that its clarification regarding the fact that employees that determine the timing of scheduled outages, or that engage in economic dispatch, fuel procurement, or resource planning may not be shared is not a departure from Commission precedent.  The Commission’s existing regulations already require employees of the franchised utility with captive customers and the market-regulated power sales affiliates to operate separately to the maximum extent practical.   The Commission also reiterated and emphasized that, if they have obtained a case-specific waiver from the Commission or case-specific no action letter from Commission staff that permits them to share such employees, they may continue to do so.  Entities that have previously obtained waiver of certain MBR affiliate restrictions may continue to rely on those waivers as long as the facts and circumstances relied on by the Commission in granting the waiver remain true and accurate, and as long as any conditions set forth in the order granting the waiver continue to be satisfied.

The Commission requires sellers to comply with the guidance provided in its April 15 Clarification Order by April 20, 2011, which is within 90 days of the January 20, 2011 issuance date of the order.

2. Withdrawal of Notice of Proposed Rulemaking and Termination of Rulemaking Proceeding, 134 FERC ¶ 61,047 (2011), Docket No. RM10-20-000

FERC also withdrew its NOPR, in which it had proposed to amend its regulations to include language in the regulatory text stating that employees that determine the timing of scheduled outages or that engage in economic dispatch, fuel procurement or resource planning may not be shared under the MBR affiliate restrictions.  Given that the Commission’s existing regulations already require employees of the franchised utility with captive customers and the market-regulated power sales affiliate to operate separately to the maximum extent practical, the Commission found that amending the regulatory text through this NOPR was unnecessary.

For more information or a copy of either issuance, please contact Toni Frost at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 202-296-1500 or Nicole Allen at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 202-296-1500.