134 FERC ¶ 61,047 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 35 

[Docket No. RM10-20-000] 

Market-Based Rate Affiliate Restrictions 

(Issued January 20, 2011) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Withdrawal of Notice of Proposed Rulemaking and Termination of 

Rulemaking Proceeding. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) withdraws a 

notice of proposed rulemaking, which proposed to amend its regulations governing 

market-based rates for public utilities pursuant to section 205 of the Federal Power Act 

(FPA) to include in the regulatory text the clarification 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 market-based rate affiliate restrictions 

codified in Order No. 697. 

EFFECTIVE DATE: This withdrawal will become effective [Insert_date that is 30 days 

after publication in the FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT: 

Michelle Barnaby (Technical Information) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8407 
Docket No. RM10-20-000 - 2 - 

Stephen J. Hug (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8009 

SUPPLEMENTARY INFORMATION

:
134 FERC ¶ 61,047 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Market-Based Rate Affiliate Restrictions Docket No. RM10-20-000 

WITHDRAWAL OF NOTICE OF PROPOSED RULEMAKING AND 

TERMINATION OF RULEMAKING PROCEEDING 

(Issued January 20, 2011) 

1. On April 15, 2010, the Commission issued a Notice of Proposed Rulemaking 

(NOPR) in this proceeding.1

 For the reasons set forth below, we are exercising our 

discretion to withdraw the NOPR and terminate this rulemaking proceeding. 

I. Background

2. In Order No. 697,2

 the Commission adopted affiliate restrictions that govern the 

relationship between franchised public utilities with captive customers and their “marketregulated” power sales affiliates, i.e., affiliates whose power sales are regulated in whole 

or in part on a market-based rate basis. These market-based rate affiliate restrictions 

govern the separation of functions, the sharing of market information, sales of non-power 

 1 Market-Based Rate Affiliate Restrictions, 75 FR 20796 (Apr. 22, 2010), Notice 

of Proposed Rulemaking, FERC Stats. & Regs. ¶ 32,567 (2010). 

2 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, Order No. 697, FERC Stats. & Regs. ¶ 31,252, 

clarified, 121 FERC ¶ 61,260 (2007), order on reh’g, Order No. 697-A, FERC Stats. & 

Regs. ¶ 31,268, clarified, 124 FERC ¶ 61,055, order on reh’g, Order No. 697-B, FERC 

Stats. & Regs. ¶ 31,285 (2008), order on reh’g, Order No. 697-C, FERC Stats. & Regs. 

¶ 31,291 (2009), order on reh’g, Order No. 697-D, FERC Stats. & Regs. ¶ 31,305 (2010). 
Docket No. RM10-20-000 - 2 -

 

goods or services, and power brokering. The Commission requires that, as a condition of 

receiving and retaining market-based rate authority, sellers comply with these affiliate 

restrictions unless explicitly permitted by Commission rule or order. Failure to satisfy 

the conditions set forth in the affiliate restrictions constitutes a violation of a seller’s 

market-based rate tariff.3

3. On March 9, 2009, the Compliance Working Group4

 submitted a request for 

clarification in the Commission’s market-based rate rulemaking proceeding regarding 

which employees can be shared for purposes of compliance with the Commission’s 

market-based rate affiliate restrictions. On October 28, 2009, the Compliance Working 

Group submitted an amended request for clarification. In response to the Compliance 

Working Group’s request, the Commission provided clarification regarding which 

3

 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 549-550. 

4

 The Compliance Working Group stated that it consists of 27 energy companies, 

which include integrated electric businesses, merchant generators, marketing and trading 

businesses, and natural gas distributors, and explains that the group was formed in mid2008 “to develop a model [Commission] compliance program guide.” Compliance 

Working Group Request for Clarification, Docket No. RM04-7-007, at 2 (filed Mar. 9, 

2009); Compliance Working Group Amended Request for Clarification, Docket 

No. RM04-7-007, at 3 (filed Oct. 28, 2009). The members of the Compliance Working 

Group taking part in its request for clarification are: Allegheny Energy, Inc., American 

Electric Power Company, Inc., Cleco Corporation, Consumers Energy Company, 

Dominion Resources, Inc., Duke Energy Corporation, Edison International, El Paso 

Electric Company, Energy East Corp., Entergy Corporation, Exelon Corporation, 

FirstEnergy Corp., FPL Group, Inc., Pacific Gas and Electric Co., Progress Energy, Inc., 

Public Service Enterprise Group Incorporated, and Westar Energy, Inc. 
Docket No. RM10-20-000 - 3 -

 

employees may not be shared under the affiliate restrictions.5

 Concurrently with the 

April 15 Clarification Order, the Commission issued the NOPR, in which it proposed to 

revise the text of the separation of functions and information sharing provisions of the 

affiliate restrictions contained in § 35.39 of the Commission’s regulations in order to 

reflect the clarification provided in response to the Compliance Working Group’s request. 

4. In the April 15 Clarification Order, the Commission denied the Compliance 

Working Group’s request that the Commission interpret the market-based rate affiliate 

restrictions to permit the sharing of employees who are neither transmission function 

employees nor marketing function employees under the Standards of Conduct. However, 

in order to address the Compliance Working Group’s concerns regarding compliance 

with the market-based rate affiliate restrictions, the April 15 Clarification Order provided 

guidance regarding which employees may not be shared under the affiliate restrictions.6

Specifically, the Commission rejected the Compliance Working Group’s interpretation of 

the market-based rate affiliate restrictions because the Compliance Working Group’s 

interpretation would permit the sharing of employees who are prohibited from being 

shared under the market-based rate affiliate restrictions (for instance, employees that 

make economic dispatch decisions or that determine the timing of scheduled outages). 

5 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services By Public Utilities, 131 FERC ¶ 61,021 (2010) (April 15 Clarification 

Order). 

6

 April 15 Clarification Order, 131 FERC ¶ 61,021 at P 39-42. 
Docket No. RM10-20-000 - 4 -

Thus, the Commission explained that granting the Compliance Working Group’s 

requested interpretation would permit market-based rate sellers to share employees that 

may not currently be shared under the affiliate restrictions. 

5. The April 15 Clarification Order explained that “marketing function employee” is 

not a defined term in the market-based rate regulations adopted in Order No. 697, and 

explained that the restrictions on which employees may be shared under the market-based 

rate affiliate restrictions are not limited to those employees who are engaged in sales.7

 It 

stated that, as clarified in Order No. 697-A, under the market-based rate affiliate 

restrictions, “shared employees may not be involved in decisions regarding the marketing 

or sale of electricity from the facilities, may not make economic dispatch decisions, and 

may not determine the timing of scheduled outages for facilities.”8

 In this regard, the 

April 15 Clarification Order explained that responsibility for economic dispatch or the 

 7

 Under the Standards of Conduct regulations, “marketing function employee” is 

defined as “an employee, contractor, consultant or agent of a transmission provider or of 

an affiliate of a transmission provider who actively and personally engages on a day-today basis in marketing functions.” 18 CFR 358.3(d) (2010). “Marketing functions” 

means “in the case of public utilities and their affiliates, the sale for resale in interstate 

commerce, or the submission of offers to sell in interstate commerce, of electric energy or 

capacity, demand response, virtual transactions, or financial or physical transmission 

rights, all as subject to an exclusion for bundled retail sales, including sales of electric 

energy made by providers of last resort. . . .” 18 CFR 358.3(c) (2010). As the 

Commission stated in the April 15 Clarification Order, the Standards of Conduct 

definition of “marketing function employee” may be read to be limited to those 

employees engaged in sales. 

8

 April 15 Clarification Order, 131 FERC ¶ 61,021 at P 37 (citing Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 253). 
Docket No. RM10-20-000 - 5 -

 

timing of scheduled outages, for example, is not a “marketing function” under the 

Standards of Conduct and, therefore, employees engaging in economic dispatch or that 

determine the timing of scheduled outages would not be marketing function employees 

under the Standards of Conduct. Therefore, those employees could be shared under the 

Standards of Conduct, despite the fact that sharing of such employees is prohibited under 

the affiliate restrictions. Thus, consistent with the Commission’s determinations in Order 

No. 697-A, the April 15 Clarification Order clarified that, for purposes of compliance 

with the market-based rate affiliate restrictions, a franchised public utility with captive 

customers and its market-regulated power sales affiliates may not share employees that 

make economic dispatch decisions or that determine the timing of scheduled outages.9

 

6. The April 15 Clarification Order also explained that franchised public utilities 

with captive customers should be prohibited from sharing employees that engage in 

resource planning or fuel procurement with their market-regulated power sales affiliates. 

The Commission explained that if the franchised public utility and its market-regulated 

power sales affiliate are permitted to share employees that make strategic decisions about 

future generation supply, such as deciding when and/or where to build or acquire 

generating capacity, such strategic decision making by a shared employee could result in 

generation being built or acquired for the benefit of the market-regulated power sales 

affiliate, and at the expense of the captive customers of the franchised public utility. The 

9

 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 253. 
Docket No. RM10-20-000 - 6 -

 

April 15 Clarification Order also explained that a shared employee that procures fuel for 

both the franchised public utility and the market-regulated power sales affiliate may have 

the incentive to allocate purchases of lower priced fuel supplies to the market regulated 

power sales affiliate while allocating purchases of higher priced fuel supplies to the 

franchised public utility. Therefore, given that the definition of marketing function 

employee under the Standards of Conduct does not specifically address employees that 

determine the timing of scheduled outages or that engage in economic dispatch, fuel 

procurement, or resource planning,10 the April 15 Clarification Order clarified that 

employees engaging in these activities are prohibited from being shared under the 

market-based rate affiliate restrictions, absent an explicit waiver from the Commission. 

7. In order to reflect these clarifications, the Commission proposed in the NOPR to 

revise § 35.39 of its regulations in order to clarify 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 market-based rate affiliate restrictions. 

Accordingly, the Commission proposed to revise the separation of functions provision 

contained in § 35.39(c)(2)(ii) of the regulations to include the provision that franchised 

10 The prohibition on sharing employees that engage in resource planning applies 

only to the sharing of employees between a franchised public utility and its marketregulated power sales affiliate, and is not intended to alter resource planning activities by 

transmission providers that are permitted under the Standards of Conduct. See Standards 

of Conduct for Transmission Providers, Order No. 717, FERC Stats. & Regs. ¶ 31,280, at 

P 144 (2008) (Standards of Conduct Final Rule), order on reh’g, Order No. 717-A, FERC 

Stats. & Regs. ¶ 31,297, order on reh’g, Order No. 717-B, 129 FERC ¶ 61,123 (2009). 
Docket No. RM10-20-000 - 7 -

public utilities with captive customers are prohibited from sharing employees that 

determine the timing of scheduled outages or that engage in economic dispatch, fuel 

procurement, or resource planning with their market-regulated power sales affiliates. 

8. The Commission also proposed to revise the information sharing provision 

contained in § 35.39(d)(2) of the regulations to include the provision that employees that 

determine the timing of scheduled outages or that engage in economic dispatch, fuel 

procurement, or resource planning may not have access to information covered by the 

prohibition of § 35.39(d)(1).

II. Comments

9. The Edison Electric Institute (EEI), Ameren Services Company (Ameren), 

Dominion Resources Services, Inc. (Dominion), Duke Energy Corporation (Duke), 

Entergy Services, Inc. (Entergy), and the Nuclear Energy Institute (NEI)11 filed 

comments opposing the codification of the clarifications provided in the April 15 

Clarification Order. The Transmission Access Policy Study Group (TAPS) submitted 

comments in support of the NOPR’s proposed codification of the clarifications provided. 

10. EEI contends that the April 15 Clarification Order bypassed the notice-andcomment proceeding established in the NOPR, depriving the public of an effective 

opportunity to provide input on the Commission’s proposed changes. According to EEI, 

 11 NEI represents the commercial nuclear energy industry in regulatory 

communications, public policy and other matters. NEI states that its members generate 

electricity for sale in both regulated and deregulated markets. NEI Comments at 2-3. 
Docket No. RM10-20-000 - 8 -

 

the NOPR is evidence that the April 15 Clarification Order does more than merely clarify 

existing restrictions. NEI also states that the April 15 Clarification Order is effectively 

amending the Commission’s affiliate restrictions regulations without notice and 

comment. NEI contends that the NOPR is not a logical outgrowth of the Compliance 

Working Group’s request for clarification or the notice associated with the request and 

that, as a result, the notice and comment on the Compliance Working Group’s request for 

clarification does not satisfy the Administrative Procedure Act.12

11. EEI opposes adoption of the proposed changes to the market-based rate affiliate 

restrictions because it believes that the Commission’s current regulations provide a solid 

and a sufficient framework to protect captive customers.13 EEI contends that the April 15 

Clarification Order could impose new obligations on a number of utilities and require 

reorganization and operational changes by affected entities.14 EEI argues that the 

Commission should not adopt any such changes absent evidence that captive retail 

customers are at risk of subsidizing the activities of market-regulated power sales affiliate 

operations. EEI requests that the Commission find that franchised public utilities with 

captive customers and their market-regulated power sales affiliates may share employees 

who: (1) perform economic dispatch and outage scheduling functions, but are abiding by 

12 NEI Comments at 10 (citing Shell Oil Co. v. E.P.A., 950 F.2d 741, 747 (D.C. 

Cir. 1991). 

13 EEI Comments at 5. 

14 Id. at 16-17. 
Docket No. RM10-20-000 - 9 -

 

guidance provided by the Commission or its staff permitting the sharing of these 

employees; (2) provide inputs and other support to the resource planning process but do 

not exercise decisional authority with respect to such matters;15 or (3) provide shared fuel 

procurement services within the corporate family when the Commission or a state 

commission has approved such sharing of employees, or sharing is consistent with noaction letters or other such guidance. EEI also states that the Commission should find 

that franchised public utilities with captive customers and their market regulated power 

sales affiliates may continue to rely on waivers, no-action letters, audit reports, informal 

guidance, or other documents that the Commission or its staff has issued, even if those 

documents precede or depart from the April 15 Clarification Order or the Final Rule 

issued pursuant to the NOPR. 

12. With respect to fuel procurement employees, EEI requests that, at a minimum, the 

Commission clarify that: (1) those franchised public utilities with captive customers and 

their market-regulated power sales affiliates that currently rely on a shared fuel 

procurement unit may continue to do so; and (2) companies may seek waivers in the 

future to establish new shared fuel procurement units. EEI asserts that joint fuel 

procurement would be governed by the requirements of the regulations adopted in Order 

15 While it is unclear what EEI means by its use of the term “inputs,” EEI appears 

to use the term “inputs” to describe support services. 
Docket No. RM10-20-000 - 10 -

 

Nos. 667 and 707, and by applicable state orders and regulations, and argues that the 

Commission has not previously proscribed the use of joint fuel procurement units.16 

13. Dominion, Ameren, Duke, Entergy, and NEI make arguments similar to those of 

EEI. Dominion, Duke, Entergy, and NEI argue that sharing of nuclear fuel procurement 

employees should be permitted. NEI argues that a categorical prohibition on the sharing 

of employees that engage in fuel procurement is unnecessary given that there is no record 

of abuse and that such a prohibition would negatively affect the ability of utilities to 

procure nuclear fuel. NEI argues that the Commission has allowed the sharing of fuel 

procurement employees in the past, and suggests that the Commission’s concerns 

regarding the sharing of fuel procurement employees could be better addressed through 

procedural approaches, such as requiring separate contracts for each entity and auditable 

records to justify specific procurement actions.17 According to Entergy, market-based 

rate affiliate personnel with information on regulated utility nuclear fuel prices could not 

use that information in electricity trading or dispatch decisions in any manner to the 

16 EEI Comments at 13-14 (citing Repeal of the Public Utility Holding Company 

Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order 

No. 667, FERC Stats. & Regs. ¶ 31,197 (2005), order on reh’g, Order No. 667-A, FERC 

Stats. & Regs. ¶ 31,213 (2006), order on reh’g, Order No. 667-B, FERC Stats. & Regs. 

¶ 31,224 (2006), order on reh’g, Order No. 667-C, 118 FERC ¶ 61,133 (2007); CrossSubsidization Restrictions on Affiliate Transactions, Order No. 707, FERC Stats. & Regs. 

¶ 31,264 (2008), order on reh’g, Order No. 707-A, 124 FERC ¶ 61,047 (2008)). 

17 NEI Comments at 4-7 (citing Entergy Corp., No-Action Letter, Docket 

No. NL07-4-000 (Feb. 8, 2007)). 
Docket No. RM10-20-000 - 11 -

 

detriment of ratepayers, even if the no-conduit rule were ineffective in ensuring that 

marketing personnel do not have access to that information.18

14. Dominion claims that state regulation of fuel procurement protects captive 

ratepayers, and states that it currently uses shared fuel procurement personnel in 

accordance with state commission-approved affiliate agreements. Dominion proposes 

that the Commission create safe harbors, which Dominion describes as pre-defined 

categories for fast-track waiver requests that permit the sharing of resource planning 

and/or fuel procurement employees. Dominion argues that creating safe harbors would 

minimize utilities having to make a fact-specific showing that part or all of the affiliate 

restrictions should not apply and minimize problems with showings becoming outdated.19

15. Entergy argues that, particularly in the nuclear context, the prohibition on the 

sharing of outage schedulers should be read narrowly, so that employees that support the 

outage scheduling process may continue to be shared. Entergy seeks confirmation that its 

interpretation of the words “determine the timing of” as being limited to a small group of 

personnel, such as site outage managers and senior vice presidents, who are the outage 

18 Entergy Comments at 15, 17. 

19 Dominion Comments at 8, 19-22. 
Docket No. RM10-20-000 - 12 -

 

decision-makers, is correct20 and requests that the Commission clarify that after-the-fact 

sharing of certain information does not constitute the sharing of market information.21

16. Ameren argues that the use of shared employees allows the utilities to avoid 

having to hire duplicate sets of employees, and asserts that the Commission has found the 

sharing of resource planning and fuel procurement personnel appropriate in other 

circumstances.22 Ameren also argues that the proposed prohibitions against the sharing 

of resource planning or fuel procurement employees would contradict the findings in 

National Fuel Gas Supply Corp. v. FERC,

23 where the court found that the record did not 

support the Commission’s attempt to extend the Standards of Conduct to relationships 

between pipelines and an additional class of their affiliates. Similarly, Duke argues that 

the Commission has not previously prohibited sharing of employees who engage in fuel 

20 Entergy Comments at 20-21. 

21 Specifically, Entergy argues that the sharing of information concerning the 

causes of forced outages, system weakness or equipment failures, other potential 

concerns, and best practices should be permitted. Id. at 21-22. 

22 Ameren Comments at 14-15 (citing Standards of Conduct Final Rule, FERC 

Stats. & Regs. ¶ 31,280 at P 146; Entergy Services, Inc., No-Action Letter, Docket 

No. NL07-4-000 (Feb. 8, 2007); Cinergy Services, Inc., No-Action Letter, Docket 

No. NL06-1-000 (Jan. 31, 2006)). 

23 468 F.3d 831 (D.C. Cir. 2006). 
Docket No. RM10-20-000 - 13 -

 

procurement, and has not provided evidence that would support imposing new 

restrictions.24

17. EEI contends that the proposed “blanket proscriptions” would run afoul of 

individual orders, notices, waivers, and no-action letters issued to companies that allow 

the sharing of employees that schedule outages or that engage in economic dispatch, 

resource planning or fuel procurement. Entergy argues that the Commission has 

previously recognized that co-owned units and plants should be excepted from certain 

prohibitions in the affiliate restrictions, as long as such sharing is kept to the minimum 

practicable level. Entergy seeks clarification as to whether the guidance provided by noaction letters and cases granting waivers to entities that co-own generation remains valid, 

and argues that if the Commission prefers that entities that have relied on this guidance 

but never submitted a waiver request, submit a waiver, it should so clarify.25

18. Entergy argues that in the situation where a franchised public utility with captive 

customers and its market-regulated power sales affiliate co-own generation, there is a 

significant likelihood that market information about the level of dispatch of the total plant 

may become known to market-based rate affiliate personnel, despite co-owners taking 

steps to ensure that disclosures are kept to a minimum. Entergy argues that the 

Commission should clarify that the unintended, incidental sharing of market information 

24 Duke Comments at 3-4 (citing Order No. 697, FERC Stats. & Regs. ¶ 31,252 at 

P 564-565; Order No. 697-B, 125 FERC ¶ 61,326 at P 59). 

25 Entergy Comments at 22-23. 
Docket No. RM10-20-000 - 14 -

 

regarding economic dispatch as well as after-the-fact operational information does not 

violate the affiliate restrictions in the situation of co-owned generation, as long as 

economic dispatch decisions are made separately, and not by shared employees, and as 

long as the no-conduit rule is strictly followed.26 Entergy also argues that the 

Commission should continue to permit sharing (for co-owned units) or coordination (for 

co-owned plants) of outage scheduling, to the extent necessary given the joint ownership 

arrangement, as well as the information sharing that inevitably results.27 Entergy argues 

that the Commission should clarify that it recognizes the need for fuel procurement 

sharing in the situation of co-owned generation.28

19. With respect to employees that engage in resource planning, EEI states that it has 

understood that “traditional” resource planning employees who make direct resource 

planning decisions could not be shared under the affiliate restrictions. However, it states 

that the Commission’s proposed proscription is written so broadly that it could 

inadvertently prevent the sharing of support staff, which is explicitly permitted by the 

Commission’s regulations.29 EEI also states that it assumes that by the term “employee,” 

the Commission does not mean to include senior executives responsible for overseeing 

26 Id. at 23-24. 

27 Id. at 25 (citing Allegheny Energy, Inc., 119 FERC ¶ 61,025 (2007)). 

28 Id. at 26-28. 

29 EEI Comments at 7-8. 
Docket No. RM10-20-000 - 15 -

 

corporate activities from a family-wide perspective and who have fiduciary 

responsibilities, including responsibilities regarding the acquisition of significant assets 

and corporate finance.30

20. TAPS argues that the Commission should revise its regulations as proposed in the 

NOPR and should emphasize that its proposed clarifications concerning the sharing of 

employees are not an exhaustive listing of prohibited shared employees. TAPS states that 

the Commission correctly identified situations where the sharing of employees between 

affiliated market-based rate power sellers and franchised public utilities with captive 

customers could harm the captive customers of the franchised public utility. 

21. EEI argues that the Commission should provide affected companies with 60 days 

of transition time to comply with the changes adopted in the Final Rule or to file a 

request for waiver.31 Ameren argues that if the Commission adopts the changes proposed 

in the NOPR, the Commission should only apply the prohibition against the sharing of 

fuel procurement and resource planning employees prospectively, beginning no earlier 

than 180 days after the Final Rule becomes effective, and that the Commission should 

grandfather existing sharing agreements.32 Dominion requests that the Commission 

provide “a significant amount of time” to undertake the structural reorganizations that 

30 Id. at 8, n.10. 

31 Id. at 17. 

32 Ameren Comments at 23-25. 
Docket No. RM10-20-000 - 16 -

will be required if the proposed changes are adopted. Dominion requests that the 

Commission require companies to be in compliance within one year of the later of: 

(1) the date of issuance of the Final Rule; (2) the date of Commission action on any 

waiver request filed within 30 days of the issuance of the Final Rule; or (3) the date of 

state commission action on any approval required in connection with a proposed 

restructuring to comply with the Final Rule.33

III. Discussion

22. Upon further consideration, we will withdraw the NOPR because the current 

regulations are sufficient insofar as they already require that employees of a marketregulated power sales affiliate operate separately from the employees of any affiliated 

franchised public utility with captive customers, to the maximum extent practical. While 

the NOPR was intended to provide additional clarity to the industry by identifying in the 

regulatory text certain employees who cannot be shared, we find that codifying these 

clarifications in the regulatory text is unnecessary because the separation of functions 

requirement in the existing regulations already requires that, “[t]o the maximum extent 

practical, the employees of a market-regulated power sales affiliate must operate 

separately from the employees of any affiliated franchised public utility.”34 The existing 

regulations also provide that “[a] franchised public utility with captive customers may not 

 33 Dominion Comments at 23-24. 

34 18 CFR 35.39(c)(2)(i) (2010). 
Docket No. RM10-20-000 - 17 -

y with this order.36 

 

share market information with a market-regulated power sales affiliate if the sharing 

could be used to the detriment of captive customers, unless simultaneously disclosed to 

the public.”35 Because we find that codifying these clarifications provided in the April 

15 Clarification Order in the regulatory text is unnecessary, we conclude that it is no 

longer necessary to adopt the amendments to the regulations proposed in the NOPR. 

Sellers will be required to comply with the guidance provided in the April 15 

Clarification Order within 90 days of the date of issuance of the order addressing EEI’s 

request for rehearing of the April 15 Clarification Order in Docket No. RM04-7-009, 

which is being issued concurrentl

23. We find that commenters’ arguments objecting to the amendments to the 

regulatory text proposed in the NOPR and their arguments that adequate notice and 

opportunity for comment were not provided on the amendments to the regulatory text are 

rendered moot by our withdrawal of this NOPR. We address below commenters’ 

remaining arguments. 

24. A number of commenters request that we clarify that franchised public utilities 

with captive customers may share employees with their market-regulated power sales 

affiliates where they are abiding by guidance provided by the Commission or by a state 

35 18 CFR 35.39(d)(1) (2010). 

36 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, 134 FERC ¶ 61,046, at P 27 (2011). 
Docket No. RM10-20-000 - 18 -

 

commission or in certain circumstances, such as in the case of co-owned generation 

facilities. We decline to grant such clarification on a generic basis. 

25. While the Commission has granted waiver of its market-based rate affiliate 

restrictions to permit the sharing of certain employees in certain circumstances, such as 

employees that schedule outages at co-owned generation facilities, these waivers were 

based on case-specific circumstances and representations made by the specific applicants 

in those cases. For example, in Cleco Power LLC, the waiver of certain affiliate 

restrictions was limited to three employees, was limited to the “specific facts and 

circumstances” presented by the applicants, and was conditioned on the requirement that 

the applicants maintain sufficient records to allow the Commission to audit their 

compliance with the conditions of the waiver.37 We believe that the Commission, for 

(continued...) 

37 130 FERC ¶ 61,102, at P 22-25 (2010) (granting limited waiver to permit 

sharing of employees that determine the timing of scheduled outages based on the 

conjoined nature of the facilities and the applicants’ representations that the waiver was 

necessary to allow for the practical and efficient operation of the conjoined facilities); see 

also Allegheny Energy Inc., 119 FERC ¶ 61,025 at P 20, 22 (granting waiver of the 

market-based rate code of conduct information sharing provision (the market-based rate 

code of conduct was the predecessor to the affiliate restrictions codified in Order 

No. 697) based on the applicants’ representations that the waiver was necessary to allow 

for the practical and efficient operation of the conjoined facilities); American Electric 

Power Service Corp., 119 FERC ¶ 61,064, at P 20 (2007) (granting waiver of the marketbased rate code of conduct (the market-based rate code of conduct was the predecessor to 

the affiliate restrictions codified in Order No. 697) to allow sharing of a senior executive 

officer based on the applicants’ representations that the senior executive officer was not 

involved in the daily functions of directing, organizing and executing business 

decisions). 

 Further, the Commission has granted waiver of the affiliate restrictions where a 

seller demonstrates and the Commission agrees that the seller has no captive customers. 
Docket No. RM10-20-000 - 19 -

 

purposes of the affiliate restrictions, should retain its authority to review on a case-bycase basis circumstances where affiliates seek to share employees or market information. 

Accordingly, we clarify that prior orders granting waiver are case specific and apply only 

to the entities that were specifically granted waiver in those cases. Therefore, entities that 

have relied on this previous guidance but who have not submitted a waiver request 

themselves should submit such a request. Entities that have previously obtained waiver 

of certain of the affiliate restrictions may continue to rely on those waivers as long as the 

facts and circumstances relied upon by the Commission in granting the waiver remain 

true and accurate, and as long as any conditions set forth in the order granting waiver 

continue to be satisfied. 

26. Similarly, we clarify that an entity may rely on the guidance provided by 

Commission staff in a no-action letter if the letter was issued in response to that entity’s 

request, and if the specific facts and representations relied on by Commission staff in 

responding to the no-action letter request remain true and accurate.38 

See Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 552, 589. Likewise, sellers have 

the option of seeking waiver of the separation of functions requirement to allow the 

sharing of employees that engage in fuel procurement or resource planning. 

38 See Interpretative Order Modifying No-Action Letter Process and Reviewing 

Other Mechanisms for Obtaining Guidance, 123 FERC ¶ 61,157, at P 10-12 (2008) 

(explaining that no-action letters “can offer useful guidance to the industry,” however, are 

non-binding on the Commission, and must relate to a specific, actual transaction, practice 

or situation in which the applicant is or may be involved, and that the applicant must 

explain the specific details of the transaction, practice or situation). 
Docket No. RM10-20-000 - 20 -

 

27. While we reject the notion that the Commission should rely on determinations 

made by state commissions with respect to the sharing of employees, we clarify that to 

the extent that an affected entity believes that a state commission’s determination 

supports waiver of our market-based rate affiliate restrictions, the Commission will 

consider this argument on a case-by-case basis if this argument is presented in a request 

for a no-action letter regarding specific proposed transactions, practices or situations, or 

in a case-specific request for waiver of the affiliate restrictions. 

28. Similarly, in response to commenters’ arguments that sharing of nuclear fuel 

procurement and other fuel procurement employees should be permitted, an entity can 

seek waiver of the affiliate restrictions to permit the sharing of certain employees based 

on case-specific circumstances. 

29. We deny Entergy’s request that the Commission confirm which of Entergy’s 

personnel determine the timing of scheduled outages, and its request as to whether afterthe-fact sharing of certain information constitutes the sharing of market information, and 

whether unintended sharing of market information regarding economic dispatch and 

operational information violates the affiliate restrictions when such sharing occurs in the 

context of co-owned generation.39 As we explain above, prior orders granting waiver of 

(continued...) 

39 The Commission has adopted an exception to the independent functioning 

requirement and the information sharing restrictions for emergency circumstances 

affecting system reliability, provided that the subsequent reporting provisions are 

followed. Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 568; 18 CFR 

35.39(c)(2)(iii) (2010). The Commission has also explained that, while shared field and 
Docket No. RM10-20-000 - 21 -

 

the affiliate restrictions are case specific, and apply only to the entities that were 

specifically granted waiver in those cases. Further, Entergy does not provide sufficient 

detail regarding the activities of its personnel that determine the timing of scheduled 

outages, or sufficient detail regarding the facts and circumstances of the information 

sharing that it believes is permitted for the Commission to confirm whether Entergy’s 

sharing of employees and market information is permitted.40 To the extent that Entergy 

seeks clarification concerning whether it is complying with the market-based rate affiliate 

restrictions, or seeks waiver of certain affiliate restrictions, it may submit a request for a 

no-action letter regarding specific proposed transactions, practices or situations, or a 

case-specific request for waiver of the affiliate restrictions. 

maintenance employees may not make economic dispatch decisions or determine when 

scheduled maintenance outages will occur, they may do so during emergency forced 

outages. See Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 253; Order No. 697, 

FERC Stats. & Regs. ¶ 31,252 at P 568. In addition, the Commission has explained that 

it permits the sharing of information to enable nuclear power plants to comply with the 

requirements of the Nuclear Regulatory Commission (NRC) as described in the NRC’s 

February 1, 2006 Generic Letter 2006-002, Grid Reliability and the Impact on Plant Risk 

and the Operability of Offsite Power. Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 

at n.339 (citing Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 581). 

40 With respect to Entergy’s request that the Commission confirm that Entergy’s 

interpretation of employees that determine the timing of scheduled outages is limited to a 

small group of personnel, such as site outage managers and senior vice presidents, who 

are the outage decision-makers, we note that the Commission has previously clarified 

“that companies may share employees and supervisors who have the authority to curtail 

or stop the operation of generation facilities solely for operational reasons” and that 

“shared employees may not be involved in decisions regarding the marketing or sale of 

electricity from the facilities, may not make economic dispatch decisions, and may not 

determine the timing of scheduled outages for facilities.” Order No. 697-A, FERC Stats. 

& Regs. ¶ 31,268 at P 253. 
Docket No. RM10-20-000 - 22 -

30. For the reasons discussed above, the Commission withdraws the NOPR and 

terminates this rulemaking proceeding.

By the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary.