UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 284 

(Docket No. RM06-5-000) 

Amendments to Codes of Conduct for Unbundled Sales Service 

and for Persons Holding Blanket Marketing Certificates 

(November 21, 2005) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Proposed Rulemaking. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) is proposing 

to amend its regulations regarding the blanket certificates for unbundled gas sales 

services held by interstate natural gas pipelines and the blanket marketing certificates 

held by persons making sales for resale of gas at negotiated rates in interstate commerce. 

Specifically, the Commission proposes to repeal sections 284.288 and 284.403 of the 

Commission’s regulations, 18 CFR 284.288 and 284.403 (2005), pertaining to codes of 

conduct with respect to certain sales of natural gas once we have issued final regulations 

implementing the anti-manipulation provisions of the Energy Policy Act of 2005 and 

have incorporated other aspects of such regulations in appropriate Commission orders, 

rules and regulations. The Commission seeks public comment on whether such 

regulations should be repealed as proposed herein. 

DATES: Comments are due [insert date 30 days after publication in the FEDERAL 

REGISTER]. Reply comments are due [insert date fifteen days after comment date]. 
ADDRESSES: Comments may be filed electronically via the eFiling link on the 

Commission's web site at http://www.ferc.gov. Commenters unable to file comments 

electronically must send an original and 14 copies of their comments to: Federal Energy 

Regulatory Commission, Office of the Secretary, 888 First Street, N.E., Washington, 

D.C., 20426. Refer to the Comment Procedures section of the preamble for additional 

information on how to file comments. 

FOR FURTHER INFORMATION CONTACT: 

Frank Karabetsos 

Office of General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8133 

Frank.Karabetsos@ferc.gov

SUPPLEMENTARY INFORMATION:
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Amendments to Codes of Conduct for Unbundled Sales 

Service and for Persons Holding Blanket Marketing 

Certificates

Docket No. RM06-5-000 

NOTICE OF PROPOSED RULEMAKING 

(November 18, 2005) 

Introduction

1. In this Notice of Proposed Rulemaking (NOPR), the Commission seeks comments 

on whether to repeal sections 284.288 and 284.403 of its regulations,1

 which requires that 

pipelines and all sellers for resale adhere to a code of conduct with respect to certain sales 

of natural gas, as implemented pursuant to Order No. 644.2

 The central purpose of 

sections 284.288 and 284.403 of the Commission’s regulations is to prohibit market 

manipulation. In the Energy Policy Act of 2005 (EPAct 2005),3

 Congress enacted new 

section 4A of the Natural Gas Act (NGA) which specifically bars manipulation in 

 1

 18 CFR 284.288 and 284.403 (2005). Sections 284.288 and 284.403 of the 

Commission’s regulations are provided in Attachment A hereto. 

2 Amendments to Blanket Sales Certificates, Order No. 644, 105 FERC ¶ 61,217 

(2003), reh’g denied 107 FERC ¶ 61,174; 68 Fed. Reg. 66,323 (Nov. 26, 2003); 18 CFR 

284.288(a) and 284.403(a) (2003) (Order No. 644). Order No. 644 is currently on appeal. 

See Cinergy Marketing & Trading, L.P. v. FERC, No. 04-1168 et al. (D.C. Cir., appeal 

filed April 28, 2004). 

3

 Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005). 
Docket No. RM06-5-000 - 2 - 

connection with the purchase or sale of natural gas or transportation services and 

authorizes the Commission to promulgate rules and regulations prohibiting market 

manipulation. In a Notice of Proposed Rulemaking issued October 20, 2005, the 

Commission has proposed rules to implement the new statutory anti-manipulation 

provisions.4

 We propose repealing sections 284.288 and 284.403 of the Commission’s 

regulations once we have issued final regulations implementing the anti-manipulation 

provisions of EPAct 2005 and have incorporated other aspects of sections 284.288 and 

284.403 of the Commission’s regulations in appropriate Commission orders, rules, and 

regulations. We are also requesting comment on whether sections 284.288 and 284.403 

should be repealed prospectively. 

Background

2. On November 17, 2003, acting pursuant to section 7 of the NGA, we issued a final 

rule, Order No. 644, amending blanket certificates for unbundled gas sales services held 

by interstate natural gas pipelines and blanket marketing certificates held by persons 

making sales for resale of natural gas at negotiated rates in interstate commerce. This 

rule requires that pipelines that provide unbundled natural gas sales service and all sellers 

of natural gas for resale adhere to a code of conduct with respect to natural gas sales. The 

Commission determined that in order to protect and maintain the competitive natural gas 

 4 Prohibition of Energy Market Manipulation, 113 FERC ¶ 61,067 (2005) 

(Prohibition of Energy Market Manipulation NOPR). 
Docket No. RM06-5-000 - 3 - 

 

market and to continue its light-handed regulation of the gas sales within its jurisdiction, 

it was necessary to place additional conditions on its grant of market-based sales 

certificates. In formulating such conditions to the market-based rate certificates the 

Commission was fulfilling its obligation to appropriately monitor markets and to ensure 

that market-based rates remain within the zone of reasonableness required by the NGA.5

3. Under sections 284.288(a) and 284.403(a) of the Commission’s regulations, a 

pipeline providing unbundled natural gas sales service under section 284.284, or any 

person making natural gas sales for resale in interstate commerce pursuant to section 

284.402, “is prohibited from engaging in actions or transactions that are without a 

legitimate business purpose and that are intended to or foreseeably could manipulate 

market prices, market conditions, or market rules for natural gas.” Prohibited actions or 

transactions include wash trades and collusion for the purpose of market manipulation.6

4. Sections 284.288(b) and 284.403(b) deal with reporting of transaction information 

to price index publishers. They require that if a seller reports transaction data, the data be 

accurate and factual, and not knowingly false or misleading, and be reported in 

accordance with the Commission’s Policy Statement on price indices.7

 Sections 

5

 105 FERC ¶ 61,217 at P 91 (2003). 

6

 18 CFR 284.288(a)(1)-(2) and 284.403(a)(1)-(2) (2005). 

7 Policy Statement on Natural Gas and Electric Price Indices, 104 FERC ¶ 61,121 

(2003). 
Docket No. RM06-5-000 - 4 - 

284.288(b) and 284.403(b) also require that sellers notify the Commission of whether 

they report transaction data to price index publishers in accordance with the Policy 

Statement, and to update any changes in their reporting status. 

5. Sections 284.288(c) and 284.403(c) require that sellers retain for a minimum three 

year period all data and information upon which they billed the prices charged for natural 

gas sales made under their market-based sales certificates or in transactions the prices of 

which were reported to price index publishers. 

6. Sections 284.288(d)-(e) and 284.403(d)-(e) of the Commission’s regulations are 

largely procedural in nature. Specifically, sections 284.288(d) and 284.403(d) deal with 

remedies for violations of the codes of conduct requirements set forth in preceding 

paragraphs (a) through (c) of sections 284.288 and 284.403. Sections 284.288(e) and 

284.403(e) deal with time limits on complaints and Commission enforcement of the 

codes of conduct requirements. 

7. At the same time that Order No. 644 was adopted for pipelines that provide 

unbundled natural gas sales service and holders of blanket certificate authority that make 

sales for resale of natural gas, the Commission also issued an order to require wholesale 
Docket No. RM06-5-000 - 5 - 

sellers of electricity at market-based rates to adhere to certain behavioral rules when 

making sales of electricity.8

 

EPAct 2005 and Proposed New Rules

8. As noted, section 315 of EPAct 2005 amended the NGA to add a new section 4A, 

which prohibits the use or employment of “any manipulative or deceptive device or 

contrivance” in connection with the purchase or sale of natural gas or the purchase or sale 

of transportation services subject to the jurisdiction of the Commission. In order to 

implement the anti-manipulation provisions of NGA section 4A, we issued the 

Prohibition of Energy Market Manipulation NOPR, proposing new regulations (proposed 

Part 159 regulations) to make it unlawful for any entity, directly or indirectly, in 

connection with the purchase or sale of natural gas or the purchase or sale of 

transportation services subject to the jurisdiction of the Commission (1) to use or employ 

any device, scheme, or artifice to defraud, (2) to make any untrue statement of a material 

fact or to omit to state a material fact necessary in order to make the statements made, in 

the light of the circumstances under which they were made, not misleading, or (3) to 

 8 Investigation of Terms and Conditions of Public Utility Market-Based Rate 

Authorizations, “Order Amending Market-Based Rate Tariffs and Authorizations,” 

105 FERC ¶ 61,218 (2003), reh’g denied, 107 FERC ¶ 61,175 (2004) at Appendix A. 
Docket No. RM06-5-000 - 6 - 

engage in any act, practice, or course of business that operates or would operate as a 

fraud or deceit upon any person.9

 

9. In the Prohibition of Energy Market Manipulation NOPR, we recognized that 

sections 284.288(a) and 284.403(a) of the Commission’s regulations also prohibit 

manipulative conduct. We noted that conduct that violates sections 284.288(a) or 

284.403(a) and the proposed Part 159 regulations will be treated as one violation of antimanipulation rules, and that we will not apply duplicative penalties for the same conduct 

in the event that conduct were to violate both sections 284.288(a) or 284.403(a) and the 

proposed Part 159 regulations. We also indicated that we would seek comment on 

whether sections 284.288(a) and 284.403(a) of the Commission’s regulations should be 

revised or repealed in light of the proposed Part 159 regulations. 

Discussion

10. Our goal is to provide firm but fair enforcement of the statutes, orders, rules, and 

regulations we administer. To do so, it is important that our rules be as clear as possible 

so that market participants and entities subject to our rules and regulations understand 

what conduct is proscribed and can act accordingly.10 We propose to repeal sections 

 9

 The proposed Part 159 regulations are also provided in Attachment A hereto. 

10 As discussed in the Prohibition of Energy Market Manipulation NOPR (at P 14), 

section 4A of the NGA, as added by section 315 of EPAct 2005, and the proposed 

implementing rules are patterned after section 10(b) of the Securities Exchange Act of 

1934 and related regulations, which provides a level of certainty as to how the proposed 

rules will operate that is not typically available. 
Docket No. RM06-5-000 - 7 - 

 

284.288 and 284.403 in light of the proposed Part 159 regulations to implement the new 

anti-manipulation provisions contained in section 4A of the NGA and of the 

Commission’s other rules and regulations.11 All market participants subject to sections 

284.288 and 284.403 are “entities” subject to EPAct 2005 and therefore will be subject to 

the new regulations prohibiting manipulation, deceit, and fraud in connection with 

wholesale natural gas transactions. Other aspects of sections 284.288 and 284.403 of the 

Commission’s regulations either reflect existing requirements or can be incorporated into 

other rules, making it unnecessary to retain the separate list of rules in sections 

284.288(a)-(e) and 284.403(a)-(e) of the Commission’s regulations. 

11. We think that repeal of sections 284.288 and 284.403 of the Commission’s 

regulations will simplify the Commission’s rules and regulations, avoid confusion, and 

provide greater clarity and regulatory certainty to the industry. At the same time, we 

think that the behaviors described in sections 284.288 and 284.403 of the Commission’s 

regulations will still be addressed through other rules and regulations. We emphasize our 

belief that repeal of sections 284.288 and 284.403 of the Commission’s regulations is 

intended to take into account the passage of EPAct 2005, which has provided the 

Commission with expanded anti-manipulation authority, and to simplify and streamline 

11 Concurrently with this NOPR, we are issuing an order pursuant to section 206 

of the Federal Power Act (FPA) in Docket No. EL06-16-000 to consider similar changes 

to the Market Behavior Rules, which are currently included in all public utility sellers’ 

market-based rate tariffs and authorizations. 
Docket No. RM06-5-000 - 8 - 

 

the rules and regulations sellers must follow, not to eliminate beneficial rules governing 

market behavior. 

12. The heart of sections 284.288 and 284.403 of the Commission’s regulations is 

subparagraph (a), prohibiting manipulation. We recognize that there is overlap between 

sections 284.288(a) and 284.403(a) of the Commission’s regulations and the proposed 

Part 159 regulations. We are concerned that this could cause unnecessary confusion and 

regulatory uncertainty once the proposed Part 159 regulations are in place. It is our view 

that the scope of the new statutory prohibition on manipulation and the reach of the 

proposed Part 159 regulations eliminate the need for sections 284.288(a) and 284.403(a) 

of the Commission’s regulations. 

13. We recognize there are some differences, but the differences do not seem to 

require keeping sections 284.288 and 284.403 of the Commission’s regulations once the 

new Part 159 regulations are final.12 For instance, there is a difference in the standard of 

proof between sections 284.288(a) and 284.403(a) of the Commission’s regulations and 

the proposed Part 159 regulations. In new section 4A of the NGA, Congress used the 

terms “manipulative or deceptive device or contrivance” and directed that they be given 

the same meaning as used in section 10b of the Securities Exchange Act of 1934.13 

12 The timing of proposed repeal is important. We do not intend to leave any gap 

in our regulations prohibiting manipulation of energy markets or other requirements of 

sections 284.288 and 284.403 of the Commission’s regulations. 

13 15 U.S.C. § 78j(b) (2005). 
Docket No. RM06-5-000 - 9 - 

 

Those terms have been interpreted to require a showing of scienter, that is, an intent to 

deceive, manipulate or defraud.14 In other words, knowing, intentional, or reckless 

conduct is proscribed.15 In contrast, sections 284.288(a) and 284.403(a) of the 

Commission’s regulations do not require a showing of scienter, as they prohibit actions or 

transactions that “foreseeably” could manipulate market prices, conditions, or rules. The 

“foreseeably” requirement has generated controversy and uncertainty, however. We 

believe the use of a scienter standard, given the precedent in other regulatory contexts, 

will draw a clearer line between acceptable and prohibited behavior. 

14. We also note that the new authority granted to the Commission in section 4A of 

the NGA and our proposed Part 159 regulations governs more transactions and more 

entities than is the case for sections 284.288(a) and 284.403(a) of the Commission’s 

regulations, which covers only certain natural gas sellers. More precisely, Congress 

made the anti-manipulation provisions of section 315 applicable to “any entity” and in 

connection with both the purchase and sale of natural gas, as well as the purchase or sale 

of transportation services subject to our jurisdiction. Sections 284.288(a) and 284.403(a) 

14 Ernst & Ernst v. Hochfelder, 425 U.S. 185, 201 (1976). 

15 Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033 (7th Cir. 1977), cert. 

denied, 434 U.S. 875 (1977) (defining recklessness in the section 10(b) and Rule 10b-5 

context as “a highly unreasonable omission, involving not merely simple, or even 

inexcusable negligence, but an extreme departure from the standards of ordinary care, 

and which presents a danger of misleading buyers or sellers that is either known to the 

defendant or is so obvious that the actor must have been aware of it.”); accord In Re 

Silicon Graphics Securities Litigation, 183 F.3d 970, 977 (9th Cir. 1999). 
Docket No. RM06-5-000 - 10 - 

of the Commission’s regulations, on the other hand, are applicable only to a pipeline 

providing unbundled natural gas sales service under section 284.284, or any person 

making natural gas sales for resale in interstate commerce pursuant to section 284.402, a 

smaller subset of the entities and types of transactions than those subject to EPAct 2005 

section 315 prohibition of manipulation. 

15. Additionally, it is our view that it is not necessary to retain the explicit 

prohibitions against certain conduct set forth in sections 284.288(a)(1)-(2) and 

284.403(a)(1)-(2) (wash trades and collusion for the purpose of market manipulation). 

These are examples of prohibited manipulation, both of which are manipulative or 

deceptive devices or contrivances. Thus, both would be barred by the proposed Part 159 

regulations. For example, wash trades would be devices or schemes to defraud (proposed 

section 159.1(a)(1)). It is our view that market participants are on notice that wash trades 

and colluding to manipulate are prohibited activities under the proposed Part 159 

regulations, subject to penalty and remedial action. 

16. Turning to the other subparagraphs of sections 284.288 and 284.403 of the 

Commission’s regulations, it appears that the requirements imposed there either are 

duplicative of other rules or regulations or can be incorporated into other rules of general 

applicability. For instance, the first part of sections 284.288(b) and 284.403(b), requiring 

sellers to provide accurate data to price index publishers if the seller is reporting 

transactions to such publishers, calls for accurate and truthful representations. It is our 

view that failure to do so would be a violation of the proposed Part 159 regulations. 
Docket No. RM06-5-000 - 11 - 

 

Sections 284.288(b) and 284.403(b) of the Commission’s regulations also include a 

requirement that sellers notify the Commission of their price reporting status and any 

changes in that status. This does not appear elsewhere in our current or proposed 

regulations. We note, however, that price transparency is also addressed by EPAct 2005, 

which adds new section 23 to the NGA. Section 23 gives us authority to promulgate 

rules and regulations necessary to facilitate price transparency. We intend to address 

market transparency issues in a separate proceeding, and anticipate that rules adopted in 

that proceeding will address the sections 284.288(b) and 284.403(b) requirements for 

providing transaction information to price index publishers and informing the 

Commission of price reporting status. 

17. Sections 284.288(c) and 284.403(c) requires sellers to maintain certain records for 

a period of three years to reconstruct prices charged for natural gas. The Commission has 

a number of specific record retention requirements applicable to natural gas companies 

subject to the jurisdiction of the Commission in Part 225 of our regulations.16 In many 

cases, these requirements are for time periods longer than three years. The Part 225 

requirements are largely related to cost-of-service rate requirements, however. We 

believe it is important that all pipelines providing unbundled natural gas sales service and 

all persons holding blanket certificates making natural gas sales for resale in interstate 

commerce retain the data and information described in sections 284.288(c) and 

16 18 CFR Part 225 (2005). 
Docket No. RM06-5-000 - 12 - 

284.403(c) of the Commission’s regulations. We intend to address this retention 

requirement in the context of our rules under the NGA, such that there will be no gap in 

the retention requirement. We believe that doing so would eliminate the need to retain 

sections 284.288(c) and 284.403(c) of the Commission’s regulations. 

18. If the Commission decides to repeal sections 284.288(a)-(c) and 284.403(a)-(c) of 

its regulations, it is the Commission’s view that sections 284.288(d) and 284.403(d) of 

the Commissions’ regulations, dealing with remedies, and sections 284.288(e) and 

284.404(e), dealing with time limits on complaints and Commission enforcement, are 

largely procedural and would become superfluous without the underlying operative 

paragraphs and therefore should be deleted. 

19. In addition to simplifying our codes of conduct rules, avoiding confusion, and 

providing more regulatory certainty, it is also our view that a smooth transition from the 

existing codes of conduct regulations to the proposed Part 159 regulations and other rules 

and regulations achieves our original goal in adopting sections 284.288 and 284.403 of 

the Commission’s regulations, that is, to fulfill our obligation to ensure that market-based 

rates remain within the zone of reasonableness required by the NGA. In EPAct 2005, 

Congress has provided broad and strong prohibitions of market manipulation, and 

reliance on rules implementing these statutory prohibitions will likewise assure that 

wholesale markets reflect competitive forces and produce just and reasonable rates. 
Docket No. RM06-5-000 - 13 - 

20. We seek comment on whether sections 284.288 and 284.403 of the Commission’s 

regulations should be repealed prospectively, including responses to the following 

questions: 

A. Are there any aspects of sections 284.288 and 284.403 of the Commission’s 

regulations that should be retained, or can all substantive provisions of sections 

284.288 and 284.403 of the Commission’s regulations be reflected in the 

proposed Part 159 regulations and other Commission rules and regulations? 

B. Is there a need or basis for retaining existing sections 284.288(a) and 

284.403(a) of the Commission’s regulations in light of the anti-manipulation 

provisions set forth in the proposed Part 159 regulations? 

C. Should the affirmative defense of “legitimate business purpose” in existing 

sections 284.288(a) and 284.403(a) of the Commission’s regulations be retained 

in any form? 

D. Is the requirement of sections 284.288(b) and 284.403(b) of the Commission’s 

regulations to report transaction information accurately, to the extent a seller 

reports such information to price index publishers, necessary in light of the 

proposed Part 159 regulations? 

21. We encourage responses to the specific questions above as well as additional 

relevant comments regarding whether sections 284.288 and 284.403 of the Commission’s 

regulations should be repealed. 
Docket No. RM06-5-000 - 14 - 

Information Collection Statement

22. This proposed rule implements the existing requirements as set forth in section 4A 

of the NGA and does not include new information requirements under the provisions of 

the Paperwork Reduction Act of 1995 (44 U.S.C. § 3501 et seq.). 

Environmental Analysis

23. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 

on the human environment.17 The Commission has categorically excluded certain 

actions from these requirements as not having a significant effect on the human 

environment.18 The actions proposed here fall within categorical exclusions in the 

Commission’s regulations for rules that are clarifying, corrective, or procedural, for 

information gathering, analysis, and dissemination, and for sales, exchange, and 

transportation of natural gas that requires no construction of facilities.19 Therefore, an 

environmental assessment is unnecessary and has not been prepared in this NOPR. 

 17 Order No. 486, Regulations Implementing the National Environmental Policy 

Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs., Regulations Preambles 1986-

1990 ¶ 30,783 (1987). 

18 18 CFR 380.4 (2005). 

19 See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27) (2005). 
Docket No. RM06-5-000 - 15 - 

Regulatory Flexibility Act 

24. The Regulatory Flexibility Act of 1980 (RFA)20 generally requires a description 

and analysis of final rules that will have significant economic impact on a substantial 

number of small entities.21 The Commission is not required to make such analyses if a 

rule would not have such an effect.

25. The Commission does not believe that this proposed rule would have such an 

impact on small entities. The proposed rule merely repeals sections 284.288 and 284.403 

of the Commission’s regulations. Therefore, the Commission certifies that this proposed 

rule, if finalized, will not have a significant economic impact on a substantial number of 

small entities.

Comment Procedures

26. The Commission invites interested persons to submit comments on the matters and 

issues proposed in this notice to be adopted, including any related matters or alternative 

proposals that commenters may wish to discuss. Comments are due [INSERT DATE 30 

 20 5 U.S.C. § 601-12 (2000). 

21 The RFA definition of “small entity” refers to the definition provided in the 

Small Business Act, which defines a “small business concern” as a business that is 

independently owned and operated and that is not dominant in its field of operation. 

15 U.S.C. § 632 (2000). The Small Business Size Standards component of the North 

American Industry Classification System defines a small electric utility as one that, 

including its affiliates, is primarily engaged in the generation, transmission, and/or 

distribution of electric energy for sale and whose total electric output for the preceding 

fiscal years did not exceed 4 million MWh. 13 CFR 121.201 (2004) (Section 22, 

Utilities, North American Industry Classification System, NAICS). 
Docket No. RM06-5-000 - 16 - 

days from publication in the FEDERAL REGISTER]. Reply comments are due 

fifteen days thereafter. Comments must refer to Docket No. RM06-5-000, and must 

include the commenter's name, the organization they represent, if applicable, and their 

address in their comments. Comments may be filed either in electronic or paper format. 

Comments may be filed electronically via the eFiling link on the Commission's web site 

at http://www.ferc.gov. The Commission accepts most standard word processing formats 

and commenters may attach additional files with supporting information in certain other 

file formats. Commenters filing electronically do not need to make a paper filing. 

Commenters that are not able to file comments electronically must send an original and 

14 copies of their comments to: Federal Energy Regulatory Commission, Office of the 

Secretary, 888 First Street N.E., Washington, D.C. 20426. 

27. All comments will be placed in the Commission's public files and may be viewed, 

printed, or downloaded remotely as described in the Document Availability section 

below. Commenters on this proposal are not required to serve copies of their comments 

on other commenters. 

Document Availability

28. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through FERC's Home Page 

(http://www.ferc.gov) and in FERC's Public Reference Room during normal business 
Docket No. RM06-5-000 - 17 - 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, N.E., Room 2A, 

Washington, D.C. 20426. 

29. From FERC's Home Page on the Internet, this information is available in the 

eLibrary. The full text of this document is available in the eLibrary both in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

document in eLibrary, type the docket number excluding the last three digits of this 

document in the docket number field. 

User assistance is available for eLibrary and the FERC's website during our normal 

business hours. For assistance contact FERC Online Support at 

FERCOnlineSupport@ferc.gov or toll-free at (866)208-3676, or for TTY, contact 

(202)502-8659. 

List of subjects

18 CFR Part 284

Natural Gas, Pipelines, Investigations, Penalties 

By direction of the Commission. 

 Magalie R. Salas, 

 Secretary. 

 
Docket No. RM06-5-000 - 18 - 

In consideration of the foregoing, the Commission proposes to amend Part 284, 

Chapter I, Title 18, Code of Federal Regulations, as follows. 

PART 284 - - CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS 

UNDER THE NATURAL GAS POLICY ACT OF 1978 AND RELATED 

AUTHORITIES 

1. The authority citation for part 284 continues to read as follows: 

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7532; 43 

U.S.C.1331-1356. 

2. § 284.288 [removed] 

Remove § 284.288. 

3. § 284.403 [removed] 

 Remove § 284.403. 

 
Docket No. RM06-5-000 - 19 - 

NOTE: This Attachment will not be published in the Federal Register. Please refer to 

the Document Availability section of this Notice of Proposed Rulemaking and the 

Commission’s eLibrary system at www.ferc.gov to view this Notice of Proposed 

Rulemaking with the Attachment. 

ATTACHMENT A 

SECTIONS 284.288 AND 284.403 OF THE COMMISSION’S REGULATIONS

§ 284.288 Code of conduct for unbundled sales service.

 (a) A pipeline that provides unbundled natural gas sales service under 

§ 284.284 is prohibited from engaging in actions or transactions that are without a 

legitimate business purpose and that are intended to or foreseeably could manipulate 

market prices, market conditions, or market rules for natural gas. Prohibited actions and 

transactions include but are not limited to: 

 (1) pre-arranged offsetting trades of the same product among the same parties, 

which involve no economic risk and no net change in beneficial ownership (sometimes 

called "wash trades"); and 

 (2) collusion with another party for the purpose of manipulating market prices, 

market conditions, or market rules for natural gas. 

 (b) To the extent Seller engages in reporting of transactions to publishers of 

electricity or natural gas indices, Seller shall provide accurate and factual information, 

and not knowingly submit false or misleading information or omit material information to 

any such publisher, by reporting its transactions in a manner consistent with the 

procedures set forth in the Policy Statement on Natural Gas and Electric Price Indices, 
Docket No. RM06-5-000 - 20 - 

issued by the Commission in Docket No. PL03-3-000 and any clarifications thereto. 

Seller shall notify the Commission within 15 days of the effective date of this regulation 

of whether it engages in such reporting of its transactions and update the Commission 

within 15 days of any subsequent change to its transaction reporting status. In addition, 

Seller shall adhere to such other standards and requirements for price reporting as the 

Commission may order. 

 (c) A pipeline that provides unbundled natural gas sales service under 

§ 284.284 shall retain, for a period of three years, all data and information upon which it 

billed the prices it charged for natural gas it sold pursuant to its market based sales 

certificate or the prices it reported for use in price indices. 

 (d) Any violation of the preceding paragraphs may subject Seller to 

disgorgement of unjust profits from the date when the violation occurred. Seller may 

also be subject to suspension or revocation of its blanket certificate under § 284.284 or 

other appropriate non-monetary remedies. 

 (e) Any person filing a complaint against a pipeline for violation of paragraphs 

(a) through (c) must do so no later than 90 days after the end of the calendar quarter in 

which the alleged violation occurred unless that person could not have known of the 

alleged violation, in which case the 90-day time limit will run from the discovery of the 

alleged violation. The Commission will act within 90 days from the date it knew of an 

alleged violation of these code of conduct regulations or knew of the potentially 

manipulative character of an action or transaction. Commission action in this context 
Docket No. RM06-5-000 - 21 - 

means a Commission order or the initiation of a preliminary investigation by Commission 

Staff pursuant to 18 CFR section 1b. If the Commission does not act within this time 

period, the seller will not be exposed to potential liability regarding the subject action or 

transaction. Knowledge on the part of the Commission will take the form of a call to our 

Hotline alleging inappropriate behavior or communication with our enforcement Staff. 

§ 284.403 Code of conduct for persons holding blanket marketing 

 certificates. 

 (a) Any person making natural gas sales for resale in interstate commerce 

pursuant to § 284.402 is prohibited from engaging in actions or transactions that are 

without a legitimate business purpose and that are intended to or foreseeably could 

manipulate market prices, market conditions, or market rules for natural gas. Prohibited 

actions and transactions include but are not limited to: 

 (1) pre-arranged offsetting trades of the same product among the same parties, 

which involve no economic risk and no net change in beneficial ownership (sometimes 

called "wash trades"); and 

 (2) collusion with another party for the purpose of manipulating market prices, 

market conditions, or market rules for natural gas. 

 (b) To the extent Seller engages in reporting of transactions to publishers of 

electricity or natural gas indices, Seller shall provide accurate and factual information, 

and not knowingly submit false or misleading information or omit material information to 

any such publisher, by reporting its transactions in a manner consistent with the 
Docket No. RM06-5-000 - 22 - 

procedures set forth in the Policy Statement on Natural Gas and Electric Price Indices, 

issued by the Commission in Docket No. PL03-3-000 and any clarifications thereto. 

Seller shall notify the Commission within 15 days of the effective date of this regulation 

of whether it engages in such reporting of its transactions and update the Commission 

within 15 days of any subsequent change to its transaction reporting status. In addition, 

Seller shall adhere to such other standards and requirements for price reporting as the 

Commission may order. 

 (c) A blanket marketing certificate holder shall retain, for a period of three 

years, all data and information upon which it billed the prices it charged for the natural 

gas sold pursuant to its market based sales certificate or the prices it reported for use in 

price indices. 

 (d) Any violation of the preceding paragraphs may subject Seller to 

disgorgement of unjust profits from the date when the violation occurred. Seller may 

also be subject to suspension or revocation of its blanket certificate under § 284.284 or 

other appropriate non-monetary remedies. 

 (e) Any person filing a complaint against a blanket marketing certificate holder 

for violation of paragraphs (a) through (c) must do so no later than 90 days after the end 

of the calendar quarter in which the alleged violation occurred unless that person could 

not have known of the alleged violation, in which case the 90-day time limit will run 

from the discovery of the alleged violation. The Commission will act within 90 days 

from the date it knew of an alleged violation of these code of conduct regulations or knew 
Docket No. RM06-5-000 - 23 - 

of the potentially manipulative character of an action or transaction. Commission action 

in this context means a Commission order or the initiation of a preliminary investigation 

by Commission Staff pursuant to 18 CFR Section 1b. If the Commission does not act 

within this time period, the seller will not be exposed to potential liability regarding the 

subject action or transaction. Knowledge on the part of the Commission will take the 

form of a call to our Hotline alleging inappropriate behavior or communication with our 

enforcement Staff. 

PROPOSED REGULATIONS IN DOCKET NO. RM06-3-000 

IMPLEMENTING EPACT 2005 SECTION 31522

PART 159 - - PROHIBITION OF ENERGY MARKET MANIPULATION 

Authority: 15 U.S.C. 717-717z; 42 U.S.C. 7101-7352.

§ 159.1 Prohibition of Energy Market Manipulation.

(a) It shall be unlawful for any entity, directly or indirectly, in connection with the 

purchase or sale of natural gas or the purchase or sale of transportation services subject to 

the jurisdiction of the Commission, 

(1) to use or employ any device, scheme, or artifice to defraud, 

(2) to make any untrue statement of a material fact or to omit to state a material 

fact necessary in order to make the statements made, in the light of the circumstances 

 22 The text of the proposed Part 159 regulations was modified to conform to 

Federal Register requirements in the “Errata Notice” issued November 9, 2005, in Docket 

No. RM06-3-000. 
Docket No. RM06-5-000 - 24 - 

under which they were made, not misleading, or 

(3) to engage in any act, practice, or course of business that operates or would 

operate as a fraud or deceit upon any person. 

 (b) Nothing in this § 159.1 shall be construed to create a private right of action.