• FERC Generally Reaffirms Standards of Conduct
  • October 21, 2009
  • Law Firm: Troutman Sanders LLP - Atlanta Office
  • On October 15, 2009, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued its rehearing of Order No. 717, Standards of Conduct for Transmission Providers (“SOC”).  In Order No. 717-A, the Commission generally reaffirmed its prior determinations but granted rehearing and clarified a number of provisions, including: (1) the applicability of the SOC to transmission owners with no marketing affiliate transactions; (2) whether the Independent Functioning Rule applies to balancing authority employees; and (3) issues related to applicabiltiy of the SOC to Local Distribution Companies and pipelines.

    In Order 717-A, the Commission found that a public utility or interstate natural gas pipeline that does not engage in any transmission transactions with a marketing affiliate should be excluded from SOC coverage.  The Commission went on to clarify that the term “marketing function employee” does not include “an employee of an affiliate that does not engage in transmission transactions on the affiliated transmission provider’s transmission system.”  The Commission also confirmed that “an employee who makes sales of electric energy is performing a marketing function only if the employee works for a public utility transmission provider or a company affiliated with such a provider.”

    The Commission also clarified that an employee whose duties encompass both transmission provider activities and balancing authority activities would be considered a transmission function employee.  However, if the employee performs no duties outside of those specific to a balancing authority, then the employee would not be considered a transmission function employee.

    Furthermore, the Commission clarified that “any sale of transmission service under an open access transmission service or a pre-Order No. 888 grandfathered agreement be considered a transmission function, while a resale or reassignment of such service be considered a marketing function.”

    With regard to the Gas Industry, the Commission clarified among other things that a local distribution company “making off-system sales of gas that has been transported on non-affiliated pipelines is not subject to the Standards of Conduct if it conducts transmission transactions with an affiliated interstate pipeline for the purpose of making bundled retail sales or on-system sales.”  The Commission also clarified that a “releasing shipper is not performing a marketing function when it assigns gas supply pursuant to an asset management agreement.”  However, if the asset management agreement leaves the releasing shipper any ability to conduct sales for resale then the releasing shipper is still subject to the Independent Functioning Rule of the SOC.