124 FERC ¶ 61,048 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 33 

[Docket No. RM07-21-001; Order No. 708-A] 

BLANKET AUTHORIZATION UNDER FPA SECTION 203 

(Issued July 17, 2008) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule; Order on Rehearing. 

SUMMARY: In this order on rehearing, the Federal Energy Regulatory Commission 

(Commission) affirms its determinations in part and grants rehearing in part of Order No. 

708. Order No. 708 amended the Commission’s regulations to establish blanket 

authorizations under section 203 of the Federal Power Act to facilitate investment in the 

electric industry and, at the same time, ensure that public utility customers are adequately 

protected from any adverse effects of such transactions. 

EFFECTIVE DATE: This order on rehearing will become effective [Insert Date 30 days 

after publication in the FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT: 

Carla Urquhart (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8496 
Docket No. RM07-21-001 - 2 - 

Mosby Perrow (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6498 

Andrew Mosier (Technical Information) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6274 

Ronald Lafferty (Technical Information) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8026 

SUPPLEMENTARY INFORMATION
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Suedeen G. Kelly, Marc Spitzer, 

 Philip D. Moeller, and Jon Wellinghoff. 

 

Blanket Authorization Under FPA Section 203 Docket No. RM07-21-001

ORDER ON REHEARING 

ORDER NO. 708-A 

(Issued July 17, 2008) 

1. This order addresses requests for rehearing and clarification of Order No. 708.1

 

That order amended Commission regulations pursuant to section 203 of the Federal 

Power Act (FPA) to provide for additional blanket authorizations under FPA section 

203(a)(1).2

 This order on rehearing affirms the five categories of blanket authorizations 

set forth in Order No. 708 with certain modifications, and, as discussed below, grants, in 

part, and denies, in part, the requests for rehearing. 

 1

 Blanket Authorization Under FPA Section 203, Order No. 708, 73 FR 11003 

(Feb. 29, 2008), FERC Stats. & Regs. ¶ 31,265 (2008). 

2

 16 U.S.C. 824b(a)(1). 
Docket No. RM07-21-001 - 2 - 

I. Background

2. Based on comments to the Blanket Authorization Notice of Proposed 

Rulemaking,3

 the Commission in Order No. 708 established five blanket authorizations to 

facilitate investment in the electric utility industry and, at the same time, ensure that 

public utility customers are adequately protected from any adverse effects of such 

transactions. First, a public utility was granted a blanket authorization under FPA section 

203(a)(1) to transfer its outstanding voting securities to any holding company granted 

blanket authorization under 18 CFR 33.1(c)(2)(ii) if, after the transfer, the holding 

company and any of its associate or affiliate companies in aggregate will own less than 

10 percent of the outstanding voting interests of such public utility.4

 Second, a public 

utility was granted a blanket authorization under FPA section 203(a)(1) to transfer its 

outstanding voting securities to any holding company granted blanket authorization under 

18 CFR 33.1(c)(8)5

 if, after the transfer, the holding company and any of its associate or 

affiliate companies, in the aggregate, will own less than 10 percent of the outstanding 

voting interests of such public utility.6

 Third, a public utility was granted a blanket 

authorization under FPA section 203(a)(1) to transfer its outstanding voting securities to 

 3

 Blanket Authorization Under FPA Section 203, 72 FR 41640 (July 31, 2007), 

FERC Stats. & Regs. ¶ 32,619 (2007) (Blanket Authorization NOPR). 

4

 Order No. 708, FERC Stats. & Regs. ¶ 31,265 at P 19 and 18 CFR 33.1(c)(12)). 

5

 These holding companies’ ownership of utilities includes only exempt wholesale 

generators (EWGs), foreign utility companies (FUCOs), and qualifying facilities (QFs). 

6

 Order No. 708, FERC Stats. & Regs. ¶ 31,265 at P 40. 
Docket No. RM07-21-001 - 3 - 

any holding company granted blanket authorization in 18 CFR 33.1(c)(9).7

 Fourth, a 

public utility was granted blanket authorization under FPA section 203(a)(1) to transfer 

its outstanding voting securities to any holding company granted a blanket authorization 

in 18 CFR 33.1(c)(10).8

 

3. Fifth, a public utility was granted a blanket authorization under FPA 

section 203(a)(1) for the acquisition or disposition of a jurisdictional contract where 

neither the acquirer nor transferor has captive customers or owns or provides 

transmission service over jurisdictional transmission facilities, the contract does not 

convey control over the operation of a generation or transmission facility, the parties to 

the transaction are neither affiliates nor associate companies, and the acquirer is a public 

utility.9

 In addition, Order No. 708 clarified certain aspects of existing blanket 

authorizations and clarified the terms “affiliate” and “captive customers.” 

 7

 Id. P 43. These holding companies are regulated by the Board of Governors of 

the Federal Reserve Bank or by the Comptroller of the Currency. 

8

 Id. P 45. This authorization applies, in certain circumstances, to holding 

companies conducting underwriting activities or engaging in hedging transactions, 

generally limited to a 10 percent voting interest. 

9

 Id. P 51-53 and 18 CFR 33.1(c)(16). 
Docket No. RM07-21-001 - 4 - 

II. Requests for Rehearing

4. Order No. 708 was published in the Federal Register on February 29, 2008.10 

Timely requests for rehearing were filed by the American Public Power Association and 

the National Rural Electric Cooperative Association (APPA/NRECA), the Financial 

Institutions Energy Group (Financial Group), and the Electric Power Supply Association 

(EPSA). The Edison Electric Institute (EEI) filed a timely request for rehearing and 

clarification. 

5. As discussed below, parties seek rehearing and/or clarification with respect to: 

(1) extending the blanket authorization under 18 CFR 33.1(c)(12) to cover public utility 

dispositions, not just to certain holding companies but also to non-holding companies; 

(2) the blanket authorization in 18 CFR 33.1(c)(16) pertaining to the transfer of 

jurisdictional contracts; (3) the definition and/or scope of hedging activities permitted 

under 18 CFR 33.1(c)(10); (4) the determination in Order No. 708 not to impose 

additional reporting requirements related to the new blanket authorizations; and 

(5) clarification of the existing blanket authorization under 18 CFR 33.1(6) (authorization 

of internal reorganization not affecting a traditional public utility) identified in the 

Supplemental Policy Statement.11

 10 Supra note 1. 

11 FPA Section 203 Supplemental Policy Statement, 72 FR 42277 (August 2, 

2007), FERC Stats. & Regs. ¶ 31,253 (2007), order on clarification and reconsideration, 

122 FERC ¶ 61,157 (2008) (Supplemental Policy Statement). 
Docket No. RM07-21-001 - 5 - 

III. Discussion

A. Whether to Extend the Blanket Authorization in 18 CFR 33.1(c)(12) to 

Non-Holding Companies

6. In Order No. 708, the Commission adopted the proposed blanket authorization 

from the Blanket Authorization NOPR without modification.12 In order to prevent 

public utilities from transferring less than 10 percent of their voting securities in 

successive transfers, the Commission retained the “in aggregate” limitation contained in 

18 CFR 33.1(c)(12). In addition, the Commission rejected requests to extend the blanket 

authorization to “any person.” The Commission stated that these requests would expand 

the blanket authorization proposed in the Blanket Authorization NOPR beyond its 

original intent. The Commission also noted that if it were to expand the blanket 

authorization to “any person,” it would need to establish appropriate reporting 

requirements so that the Commission could monitor transfers to non-holding 

companies.13 

 12 Order No. 708, FERC Stats. & Regs. ¶ 31,265 at P 19. 18 CFR 33.1(c)(12) 

states that a public utility will be granted a blanket authorization under section 203(a)(1) 

of the Federal Power Act to transfer its outstanding voting securities to any holding 

company granted blanket authorizations in 18 CFR 33.1(c)(2)(ii) of this section if, after 

the transfer, the holding company and any of its associate or affiliate companies in 

aggregate will own less than 10 percent of the outstanding voting interests of the public 

utility. 

13 Order No. 708, FERC Stats. & Regs. ¶ 31,265 at P 20. 
Docket No. RM07-21-001 - 6 - 

Requests for Rehearing

7. Financial Group requests rehearing of the Commission’s decision declining to 

extend the blanket certificate to cover public utility dispositions to non-holding 

companies under 18 CFR 33.1(c)(12), subject to the same “in aggregate” limitations 

imposed on transfers to holding companies. Financial Group argues that the distinction 

between holding companies and non-holding companies is immaterial since the same 

benefits of reducing regulatory burdens and encouraging investment that accrue when 

applying this blanket to distributions to a holding company also will occur if the blanket 

is applied to distributions to a non-holding company. Financial Group reasons that it is 

the nature of the interest being disposed -- less than 10 percent of the voting securities 

being held in the aggregate -- and not whether the acquirer is a holding company that 

determines whether the disposition conveys control. 

8. Financial Group argues that the concern underlying the Commission’s refusal to 

extend the blanket certificate to cover public utility dispositions to non-holding 

companies could be addressed without the need for issuing such blanket authorizations on 

a case-by-case basis. Financial Group proposes reporting requirements for transactions 

involving non-holding companies that it says should be at least as helpful to the 

Commission as the preexisting reporting requirements applicable to holding companies.14 

 14 Financial Group proposes that within a specified time following consummation 

of the transaction (e.g., 30 days), the following information be reported: (1) names of all 

parties to the transaction; (2) identification of both the pre-transaction and posttransaction voting security holdings (and the percentage ownership) in the public utility 

(continued) 
Docket No. RM07-21-001 - 7 - 

In addition, Financial Group argues that this expansion of the blanket certificate is not 

beyond the scope of the Blanket Authorization NOPR. 

Commission Determination

9. As a preliminary matter, and upon further consideration, we do not consider 

Financial Group’s request to be beyond the scope of the Blanket Authorization NOPR. 

In general, the Commission is permitted to learn from comments submitted during its 

rulemaking process.15 In the Blanket Authorization NOPR, the Commission sought 

comments on proposals to reduce regulatory burdens and encourage investment under 

FPA section 203 while simultaneously protecting the public interest. Financial Group’s 

proposal to extend the proposed blanket authorization under 18 CFR 33.1(c)(12) to cover 

“any person” rather than just certain holding companies is a variation of the originally 

proposed regulation, and therefore, is a logical outgrowth of the Blanket Authorization 

 

held by the acquirer and its associates or affiliate companies; (3) the date the transaction 

was consummated; (4) identification of any public utility or holding company affiliates of 

the parties to the transaction; and (5) (if the Commission has particular concerns as to 

whether such a transaction would result in cross-subsidization) the same type of 

statement currently required under 18 CFR 33.2(j)(1), which describes Exhibit M to an 

FPA section 203 filing. 

15 Daniel Int’l Corp. v. OSHA, 656 F.2d 925, 932 (4th Cir. 1981) (The 

requirement of submission of a proposed rule for comment does not automatically 

generate a new opportunity for comment merely because the rule promulgated differs 

from the rule proposed, partly at least in response to submission). 
Docket No. RM07-21-001 - 8 - 

NOPR.16 Interested parties have had sufficient notice of the type of regulation that the 

Commission might adopt, and reasonably could have anticipated that other commenters 

might seek to expand the proposal. Moreover, commenters will have the opportunity for 

rehearing with respect to any modifications to the originally proposed section 

33.1(c)(12). 

10. Substantively, the distinction in 18 CFR 33.1(c)(12) between holding companies 

and non-holding companies is not determinative as to whether a particular transaction is 

consistent with the public interest, particularly if the “in aggregate” 10 percent limitation 

is in place to ensure that there is no likely opportunity for a transfer of control of a public 

utility. Moreover, expanding the 18 CFR 33.1(c)(12) blanket authorization to include 

non-holding companies would reduce regulatory burdens and encourage investment 

without causing harm to competition or captive customers. With such an expansion, 

however, it is important for the Commission and the public to monitor these activities. 

As the Commission stated in Order No. 708, although there is a presumption that less 

than 10 percent of a utility’s shares will not result in a change of control, this 

presumption is rebuttable.17 In some instances, the transfer of less than 10 percent of 

voting shares may constitute a transfer of control. Accordingly, we will extend the 

 16 See Owner-Operator Independent Drivers Assoc., Inc. v. Federal Motor Carrier 

Safety Administration, 494 F.3d 188, 209 (D.C. Cir. 2007) (the object of the logical 

outgrowth test is one of fair notice). 

17 Order No. 708, FERC Stats. & Regs. ¶ 31,265 at P 20. 
Docket No. RM07-21-001 - 9 - 

blanket authorization to “any person,” but we will require additional reporting for nonholding companies such as the requirements proposed by Financial Group. 

11. Specifically, the Commission will amend its regulations in 18 CFR 33.1(c)(12) to 

also authorize a public utility to transfer its outstanding voting securities to any person 

other than a holding company if, after the transfer, such person and any of its associate or 

affiliate companies will own less than 10 percent of the outstanding voting interests of 

such public utility. In addition, the Commission will adopt a reporting requirement for 

entities that transact under this blanket authorization. In order to properly tailor 

additional reporting requirements, however, we will issue concurrently with this order a 

request for supplemental comments that will seek comments on the narrow issue of the 

scope and form of the reporting requirements under the expanded blanket authorization. 

The expanded blanket authorization under 18 CFR 33.1(c)(12) will not become effective 

until a Commission decision on reporting requirements becomes effective. We further 

note that the Commission retains its jurisdiction under section 203(b) of the FPA to issue 

further orders as appropriate with respect to transactions authorized under blanket 

authority.18 

 18 16 U.S.C. 824b(b). 
Docket No. RM07-21-001 - 10 - 

B. Blanket Authorization for the Transfer of Jurisdictional Contracts 

under 18 CFR 33.1(c)(16)

 1. Order No. 708

12. Order No. 708 extended a blanket authorization under FPA section 203(a)(1) for 

the acquisition and disposition of jurisdictional contracts where neither the acquirer nor 

the transferor has captive customers or owns or provides transmission service over 

jurisdictional transmission facilities, the contract does not convey control over the 

operation of a generation or transmission facility, the parties to the transaction are neither 

associate nor affiliate companies, and the acquirer is a public utility.19 Based, in part, on 

the Commission’s experience with intra-corporate transfers of jurisdictional contracts and 

concerns raised in the Blanket Authorization NOPR, Order No. 708 narrowed this blanket 

authorization somewhat from the proposal in the Blanket Authorization NOPR, to include 

the phrase “the parties to the transaction are neither associate nor affiliate companies, and 

the acquirer is a public utility.”20 The Commission also stated that this added condition 

(that parties to the transaction are neither affiliated nor associated companies) helps 

ensure that the transfer of such contracts would be consistent with the public interest.21

 19 18 CFR 33.1 (c)(16). 

20 Order No. 708, FERC Stats. & Regs. ¶ 31,265 at P 51. 

21 Id. P 52. 
Docket No. RM07-21-001 - 11 - 

Requests for Rehearing

13. APPA/NRECA argues that the Commission has not shown how this blanket 

authorization is consistent with the public interest. If the blanket authorization is not 

retracted, APPA/NRECA asks the Commission to narrow its scope by excluding 

contracts in which a load-serving entity (LSE) is the purchaser and does not consent to 

the subject transfer. It contends that the existing authorization creates a situation in 

which public power utilities, cooperatives and other LSEs might have their contract sold 

without their consent and without specific Commission approval. It claims that these 

LSEs rely on these contracts for reliable power and the blanket authorization would allow 

for the transfer of the contract from a well-established marketer or generator with whom 

the LSE originally contracted to an entity with less assurance of its ability to perform. In 

addition, APPA/NRECA additionally argues that the Commission’s reasoning in 

dismissing the same argument in Order No. 708 is flawed. 

14. Further, APPA/NRECA claims that this blanket authorization itself could 

undermine LSEs’ bargaining power and their ability to enforce their contractual rights. It 

notes that many standard power contracts contain “boilerplate” language that requires a 

buyer’s consent for the transfer of a contract not to be “unreasonably withheld.” It argues 

that if the Commission grants this blanket authorization on the basis that it is consistent 

with the public interest, sellers could then argue that it is unreasonable for a buyer to 

withhold its consent for a given transfer. Thus, APPA/NRECA claims that this blanket 

authorization could force LSEs to bargain for stronger prohibitions limiting assignment in 
Docket No. RM07-21-001 - 12 - 

their contracts at the likely expense of other contract features and to enforce such 

language by litigation when necessary. 

15. EPSA and EEI request the removal of the clause “the parties to the transaction 

are neither associate nor affiliate companies” from the blanket authorization granted in 

18 CFR 33.1(c)(16). EPSA and EEI state that the clause was added in Order No. 708 

without being previously proposed in the Blanket Authorization NOPR or sought by any 

commenter. In addition, both EPSA and EEI argue that the clause conflicts with the 

blanket orders that the Commission granted in Order No. 669-A.22 EPSA argues that the 

clause limits blanket certificate availability to transactions involving only non-affiliated 

entities, and, therefore, it reverses the blanket certificate for internal reorganizations 

granted in 18 CFR 33.1(c)(6)23 without making a finding that Order No. 669-A is no 

 22 Transactions Subject to FPA Section 203, Order No. 669, 71 FR 1348 

(January 6, 2006), FERC Stats. & Regs. ¶ 31,200 (2005), order on reh’g, Order 

No. 669-A, 71 FR 28422 (May 16, 2006), FERC Stats. & Regs. ¶ 31,214 (2006), order on 

reh’g, Order No. 669-B, 71 FR 42579 (July 27, 2006), FERC Stats. & Regs. ¶ 31,225 

(2006). 

23 18 CFR 33.1(c)(6) states that any public utility or any holding company in a 

holding company system that includes a transmitting utility or an electric utility will be 

granted a blanket authorization under sections 203(a)(1) or 203(a)(2) of the FPA, as 

relevant, for internal corporate reorganizations that do not result in the reorganization of a 

traditional public utility that has captive customers or that owns or provides transmission 

service over jurisdictional transmission facilities, and that do not present crosssubsidization issues. 
Docket No. RM07-21-001 - 13 - 

longer valid. EEI argues that the clause undercuts the blanket certificate authorizing the 

transfer of wholesale market-based contracts to other affiliates in 18 CFR 33.1(c)(11).24 

16. EPSA also argues that the clause “and the acquirer is a public utility” should be 

removed. EPSA argues that there is no concern regarding competition or crosssubsidization when one affiliate transfers a wholesale contract to another affiliate, as long 

as the affiliates involved are not themselves traditional public utilities with captive 

customers. EPSA also maintains that the clause creates an unnecessary burden on the 

Commission and unnecessary delay and costs for the applicants. 

17. EEI requests that if rehearing is not granted, the Commission specify that 

18 CFR 33.1(c)(16) does not override other blanket authorizations or require approval of 

a transaction if another blanket authorization such as 18 CFR 33.1(c)(11) (authorizing the 

transfers of wholesale market-based rate contracts to other affiliates) applies. 

Commission Determination

18. APPA/NRECA raised no new arguments on rehearing, and its request that the 

blanket authorization in 18 CFR 33.1(c)(16) be retracted or modified is denied. 

 24 18 CFR 33.1(c)(11) states any public utility will be granted a blanket 

authorization under section 203(a)(1) of the FPA to transfer a wholesale market-based 

rate contract to any other public utility affiliate that has the same ultimate upstream 

ownership, provided that neither affiliate is affiliated with a traditional public utility with 

captive customers. 
Docket No. RM07-21-001 - 14 - 

19. We found in Order No. 708 that the transfer of a wholesale power contract which 

does not provide for the transfer of control of generation or transmission cannot affect 

horizontal or vertical market power. In addition, we note that Order No. 708 added a 

condition to address, in part, the concerns raised by APPA/NRECA.25 We also found 

that, with the modification proposed by APPA/NRECA, the transfer of a wholesale 

power contract from one party that does not have captive customers or own or provide 

transmission service over jurisdictional transmission facilities, to another party that also 

does not have captive customers or own or provide transmission service over 

jurisdictional transmission facilities, cannot affect the rates of captive customers or 

transmission customers (and therefore has no rate or cross-subsidization impacts). As we 

reasoned in Order No. 708, in response to the same arguments that APPA/NRECA raises 

again on rehearing, purchasers can protect their interests by exercising contractual 

provisions, and, if necessary, by filing an FPA section 206 complaint.26 We note that the 

issuance of this blanket authorization should not be construed as an expression of opinion 

by the Commission as to whether it is (or is not) reasonable for an entity to withhold 

consent as to a particular proposed transfer. Moreover, as we noted in Order No. 708, 

 25 APPA/NRECA’s comments led to adding to the blanket authorization the 

condition that “...neither the acquirer nor transferor has captive customers or owns or 

provides transmission service over jurisdictional transmission facilities ....” See Order 

No. 708, FERC Stats. & Regs. ¶ 31,265 at P 48, 51. 

26 Id. P 52. 
Docket No. RM07-21-001 - 15 - 

APPA/NRECA’s concerns regarding the potential effect of the blanket on the bargaining 

power of LSEs is a speculative matter. 

20. The Commission grants EPSA’s and EEI’s requests to remove the clause “the 

parties to the transaction are neither associate nor affiliate companies” from 

18 CFR 33.1(c)(16). EPSA and EEI have convincingly explained why the clause is 

inappropriate. In particular, where neither the acquirer nor the transferor has captive 

customers or owns or provides transmission service over jurisdictional transmission 

facilities, and the contract does not convey control over the operation of a generation or 

transmission facility, the price of the jurisdictional contract’s transfer does not affect the 

rates of captive customers or transmission customers and therefore has no rate or crosssubsidization impact affecting captive generation customers or transmission customers. 

21. EPSA’s request to remove from 18 CFR 33.1(c)(16) the clause “and the acquirer is 

a public utility” is denied. Order No. 708 added this clause because of the possibility of a 

jurisdictional contract being transferred to a non-jurisdictional entity, in which case the 

Commission would lose the ability to regulate the contract and parties involved.27 EPSA 

has presented no reason why the clause is not necessary to prevent that possibility. 

 27 Id. P 51. 
Docket No. RM07-21-001 - 16 - 

C. Hedging

 1. Order No. 708

22. In Order No. 708, the Commission extended to public utilities a blanket 

authorization to transfer securities to holding companies that have blanket authorizations 

to acquire public utility securities under FPA section 203(a)(2) for certain underwriting or 

hedging purposes.28 In doing so, the Commission observed that the condition for the 

parallel blanket authorization under FPA section 203(a)(2), limiting the acquiring entity 

to a voting right of less than 10 percent of the relevant class of securities, should ensure 

 

28 18 CFR 33.1(c)(15) states that a public utility is granted a blanket authorization under 

section 203(a)(1) of the FPA to transfer its outstanding voting securities to any holding 

company granted blanket authorization in 18 CFR 33.1(c)(10). 18 CFR 33.1(c)(10) states 

that any holding company, or a subsidiary of that company, is granted a blanket 

authorization under section 203(a)(2) of the FPA to acquire any security of a public 

utility or a holding company that includes a public utility: (i) for purposes of conducting 

underwriting activities, subject to the condition that holdings that the holding company or 

its subsidiary are unable to sell or otherwise dispose of within 45 days are to be treated as 

holdings as principal and thus subject to a limitation of 10 percent of the stock of any 

class unless the holding company or its subsidiary has within that period filed an 

application under section 203 of the FPA to retain the securities and has undertaken not 

to vote the securities during the pendency of such application; and the parent holding 

company files with the Commission on a public basis and within 45 days of the close of 

each calendar quarter, both its total holdings and its holdings as principal, each by class, 

unless the holdings within a class are less than one percent of outstanding shares, 

irrespective of the capacity in which they were held; (ii) for purposes of engaging in 

hedging transactions, subject to the condition that if such holdings are 10 percent or more 

of the voting securities of a given class, the holding company or its subsidiary shall not 

vote such holdings to the extent that they are 10 percent or more. 
Docket No. RM07-21-001 - 17 - 

that any disposing entity facilitating such transactions does not affect a disposition or 

change in control of the issuer of the public utility securities.29

Requests for Rehearing

23. APPA/NRECA argues that this blanket authorization is contrary to the law and 

that the Commission should only allow such transactions on a case-by-case basis, with 

full disclosure of the specific business arrangements being contemplated. Because the 

Commission did not define “hedging transaction(s),” APPA/NRECA contends that the 

Commission cannot reasonably determine that the authorization is consistent with the 

public interest. It further argues that this blanket authorization, like the parallel blanket 

authorization under FPA section 203(a)(2), does not assure that the hedging transaction is 

only incidental to the acquirer’s main business, since the blanket authorization does not 

require that the hedging transaction relate to the utility, power or energy business. 

APPA/NRECA believes that ratepayers should not be exposed to the complex and risky 

transactions sometimes undertaken by financial market participants to the harm of 

innocent third parties. 

Commission Determination

24. While the Commission agrees with APPA/NRECA’s general proposition that 

electric ratepayers should not be exposed to unnecessary harm caused by risky 

 29 Order No. 708, FERC Stats & Regs. ¶ 31,265 at P 45 (citing Order No. 669 at 

P 132). 
Docket No. RM07-21-001 - 18 - 

transactions of financial market participants, we disagree that the blanket authorizations 

previously granted to holding companies in Order No. 669-A (18 CFR 33.1(c)(10)), or 

the parallel authorization granted to public utilities in Order No. 708 (18 CFR 

33.1(c)(15)), will cause such harm. 

25. Nor do we believe that the authorization in Order No. 708 is contrary to law. 

These authorizations are limited, and any hedging in public utility securities that is within 

the scope of section 203 is allowed only to the extent that it falls under one of the 

Commission’s blanket authorizations or a specific authorization granted by the 

Commission on a case-by-case basis. Specifically, an existing condition in 18 CFR 

33.1(c)(10)(ii) limits the voting ability of the entity acquiring securities for hedging 

purposes, so transactions under the new blanket authorizations should not result in a 

change in control of a public utility. Furthermore, the first part of the blanket 

authorization, 18 CFR 33.1(c)(10)(i), concerns underwriting and is directed at financial 

entities such as a bank, investment bank, or broker/dealer that engages in underwriting 

activities that may involve public utilities, but this authorization also has a 10 percent 

limitation and is subject to a reporting requirement. It is unlikely that the acquirers in the 

hedging transactions authorized would be public utilities because most holding 

companies are not also public utilities as most do not operate jurisdictional facilities. In 

fact, we are unaware of any public utility with captive customers that engages in hedging 
Docket No. RM07-21-001 - 19 - 

transactions involving the securities of other public utilities.30 Therefore, we believe that 

the potential for harm to ratepayers of public utilities as a result of the blanket 

authorization is minimal. 

26. In addition, it should be noted that states oversee cost recovery associated with 

their franchised public utilities’ hedging activities involving purchases of power or fuel as 

part of an overall purchasing strategy in the interests of ratepayers. We think it would be 

unlikely that a state regulatory body would authorize the recovery from ratepayers of the 

costs incurred by one public utility to engage in hedging activities concerning the 

securities of another public utility. We further note that the Commission is not making 

any finding as to whether the costs associated with such hedging are appropriately 

recovered in rates. 

27. We reject APPA/NRECA’s request to deny any blanket authority for hedging 

transactions. APPA/NRECA’s arguments, in large part, are a collateral attack of Order 

No. 669-A. Order No. 669-A determined that a blanket authorization under FPA section 

203(a)(2), involving hedging for holding companies was in the public interest because 

such a blanket authorization would not give the acquiring entity additional market power 

or enable it to undermine competition or disadvantage captive customers. The 

 30 We note that it was the investment firm Morgan Stanley Capital Group, Inc., not 

a franchised public utility, that requested rehearing of Order No. 669 to request the 

blanket authorization regarding hedging for a non-bank holding company. See Order 

No. 669-A, FERC Stats. & Regs. ¶ 31,214 at P 119-120. 
Docket No. RM07-21-001 - 20 - 

Commission agreed that the blanket authority would promote the public interest by 

bringing more capital investment to the utility industry. The Commission also found that 

the condition removing the holder’s power to vote the securities held for hedging 

purposes to the extent they are 10 percent or more of the securities in the class 

outstanding, even though the amount held for hedging is not limited, would address its 

concerns regarding control.31 Subject to certain limitations, Order No. 708 merely 

granted the mirror image of this blanket for public utilities under FPA section 203(a)(1), 

in part, because the Commission had already determined in Order No. 669-A that there 

were adequate controls on these transactions. 

28. Further, the Commission will not codify a definition of “hedging” in this 

proceeding. This decision is based in part on our observation that hedging activities may 

be accomplished in a variety of ways and defining hedging may inappropriately limit it or 

may create situations that are inconsistent with usage by other government agencies. In 

general, hedging is an approach to risk management that uses financial instruments to 

manage identified risk. We note that various regulators have defined “hedging” and have 

promulgated rules and policies concerning such activities.32 We will generally follow 

those principles with respect to the blanket authorizations granted under our rules. 

 31 Order No. 669-A, FERC Stats. & Regs. ¶ 31,214 at P 121, 132. 

32 For example, the Commodities Futures Trading Commission, defines bona fide 

hedging transactions in its regulations. 17 CFR 1.3(z). The Internal Revenue Service 

defines a qualified hedging transaction in its regulations. 26 CFR 1.988-5. The Financial 

(continued) 
Docket No. RM07-21-001 - 21 - 

D. Other

1. Reporting Requirements

Requests for Rehearing

29. In Order No. 708, the Commission declined to impose additional reporting 

requirements in connection with the new blanket authorizations.33 Although the 

Commission agreed with APPA/NRECA’s argument in its comments on the Blanket 

Authorization NOPR that additional reporting requirements could provide greater 

efficiency, on balance, the Commission determined that the potential burdens would 

outweigh any efficiency gains.34 In its comments on rehearing, APPA/NRECA reasserts 

its request that the Commission require public utilities to report all dispositions of 

securities undertaken pursuant to a blanket authorization on the ground that the 

Commission failed to explain why it dismissed its request in Order No. 708. 

30. It also asks the Commission to impose a requirement that public utilities certify 

their continued compliance with any “in aggregate” limitation in light of each new 

transaction. APPA/NRECA argues that, since the only reporting requirement is under 

18 CFR 33.1(c)(2), a transfer of control in a public utility could occur over a series of 

transactions without the Commission’s knowledge. Accordingly, APPA/NRECA asserts 

 

Accounting Standards Board, the New York Mercantile Exchange, and the Chicago 

Mercantile Exchange all have policies concerning and defining hedging. 

33 Order No. 708, FERC Stats & Regs. ¶ 31,265 at P 33. 

34 Id.
Docket No. RM07-21-001 - 22 - 

that the Commission cannot be sure that it is being provided with all the information 

necessary to ensure that a transfer of control does not occur. 

Commission Determination

31. APPA/NRECA has not presented any convincing reason to impose additional 

reporting requirements at this time and therefore its request for rehearing is denied. We 

first point out that APPA/NRECA is incorrect that there are no reporting requirements 

under 18 CFR 33.1(c)(9) (authorization of certain activities by a company regulated by 

the Board of Governors of the Federal Reserve Bank or by the Comptroller of the 

Currency) and 18 CFR 33.1(c)(10) (authorization for a holding company to engage in 

certain underwriting and hedging activities).35 Further, the Commission does not believe 

that reports by a company regulated by the Board of Governors of the Federal Reserve 

Bank or by the Comptroller of the Currency are necessary when securities are held as a 

fiduciary or as principal for derivatives hedging purposes, since such activities by the 

holding company are overseen and closely monitored by the Board of Governors of the 

Federal Reserve Bank or by the Office of the Comptroller of the Currency as described in 

18 CFR 33.1(c)(9). In addition, holding of shares as collateral for a loan does not change 

control of a public utility. Although 18 CFR 33.1(c)(10)(ii) does not have an explicit 

 35 The reporting requirements under 18 CFR 33.1(c)(9)(iv) and 18 CFR 

33.1(c)(10)(i) require the parent holding company to filewithin 45 days of the close of 

each calendar quarter, both its total holdings and its holdings as principal, each by class, 

unless the holdings within a class are less than one percent of outstanding share, 

irrespective of the capacity in which they were held. 
Docket No. RM07-21-001 - 23 - 

reporting requirement when securities are held for purposes of engaging in hedging 

transactions, this authorization does limit voting ability of the company acquiring the 

securities, eliminating the concern over transfer of control over a public utility. The 

transfer of wholesale contracts under 18 CFR 33.1(c)(16) is subject to section 205 filing 

requirements, which include, among other things, designation of the jurisdictional entity 

that will be the supplier under the contract.36 

32. APPA/NRECA was correct in stating that 18 CFR 33.1(c)(8) (authorization for a 

person being a holding company solely with respect to EWGs, FUCOs, or QFs to acquire 

the securities of additional EWGs, FUCOs, or QFs) does not include a reporting 

requirement. The parallel authorization to public utilities under 18 CFR 33.1(c)(13), 

however, limits the acquiring holding company and its affiliates to less than 10 percent of 

the outstanding voting securities of the public utility. As we stated in Order No. 708, we 

believe this protection ensures that this blanket authorization is in the public interest. 

33. The Commission does not, however, foreclose the possibility of imposing 

additional reporting requirements in the future, should circumstances change and it 

become apparent that additional reporting requirements would help us better monitor 

industry transactions that could adversely affect public utilities or their captive customers 

or transmission customers. We also note that, as discussed above, the Commission is 

concurrently issuing a supplemental request for comments on the narrow issue of 

 36 Order No. 669-A at P 83. 
Docket No. RM07-21-001 - 24 - 

reporting requirements for the extension of 18 CFR 33.1(c)(12) to cover public utility 

dispositions to non-holding companies. 

2. Clarification of the Supplemental Policy Statement

Request for Clarification 

34. In the Supplemental Policy Statement,37 the Commission declined to grant a 

generic blanket authorization for internal corporate reorganizations for the “transfer of 

assets” from one non-traditional utility subsidiary (for example, power marketer, EWG, 

or qualifying facility) to another non-traditional utility subsidiary, because the 

Commission cannot be certain in every situation of the impact of such transactions on 

utility affiliates. 

35. EEI requests that the Commission clarify that the internal corporate reorganization 

of non-traditional public utilities, such as a merger or consolidation, in which a single 

entity survives the transaction does not constitute the “transfer of assets” that the 

Commission has excluded from the blanket authorization. It argues that the Commission 

made clear in Order No. 669-A that the blanket authorization covers internal corporate 

reorganizations of non-traditional utilities whether they are accomplished through the 

acquisition of securities or through a merger or consolidation. It also argues that internal 

corporate reorganizations of non-traditional utilities in the form of mergers and 

consolidations will not cause an anticompetitive effect or present cross-subsidization 

 37 Supplemental Policy Statement at P 38. 
Docket No. RM07-21-001 - 25 - 

issues because, in such transactions, ownership control over the assets will simply go 

from indirect to direct. EEI also notes that in reorganizations in which only one of the 

transacting entities survives the transaction, such as a merger or consolidation, ownership 

of jurisdictional assets by the surviving entity is assumed by law. 

36. EEI maintains that the Commission’s concern over the transfer of assets in a 

reorganization applies not to internal corporate reorganizations of non-traditional utilities 

in the form of mergers and consolidations, but to the contrasting type of reorganization 

where assets are transferred from one affiliate to another and both legal entities survive 

the transfer. EEI argues that if 18 CFR 33.1(c)(6) (authorization of internal 

reorganization not affecting a traditional public utility) were not interpreted so as to 

authorize the mergers of EWGs and other public utilities that do not have franchised 

territories simply because jurisdictional assets were transferred by operation of law in 

such mergers, there would be no practical distinction in the way the two types of 

reorganizations are treated under the 18 CFR 33.1(c)(6) blanket authorization. 

Commission Determination

37. We grant EEI’s request for clarification that the blanket authorization in 18 CFR 

33.1(c)(6) applies to transactions involving the transfer of assets from one non-traditional 

utility subsidiary (i.e., a public utility that does not have captive customers and does not 

own or control transmission facilities) to another non-traditional utility subsidiary when 

only one of the two non-traditional utility subsidiaries survives the transaction. We find 

that such a transaction will be consistent with the public interest and not entail cross-
Docket No. RM07-21-001 - 26 - 

subsidization issues. Such a transaction would have no adverse effect on competition 

because market power is analyzed by the corporate family on an aggregate basis rather 

than on an individual corporate subsidiary basis (e.g., the transfer of the ownership of a 

generator between wholly-owned subsidiaries has no effect on the potential market power 

of the parent corporation). Such a transaction would also have no adverse effect on rates, 

regulation, or inappropriate cross-subsidization because the participants in the transaction 

neither have captive customers nor own or control transmission facilities. 

IV. Information Collection Statement

38. The Office of Management and Budget (OMB) regulations require that OMB 

approve certain information collection requirements imposed by an agency.38 The Final 

Rule’s information collections were approved under OMB control no. 1902-0082. While 

this rule clarifies aspects of the existing information collection requirements, it does not 

add to these requirements. Accordingly, a copy of this Final Rule will be sent to OMB 

for informational purposes only. 

V. Document Availability

39. 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 

 38 5 CFR 1320.12. 
Docket No. RM07-21-001 - 27 - 

(http://www.ferc.gov) and in FERC’s Public Reference Room during normal business 

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

Washington DC 20426. 

40. From FERC’s Home Page on the Internet, this information is available on 

eLibrary. The full text of this document is available on eLibrary 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. 

41. User assistance is available for eLibrary and FERC’s website during normal 

business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676) 

or email at ferconlinesupport@ferc.gov, or the Public Reference Room at 

(202) 502-8371, TTY (202)502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

V. Effective Date 

42. These revisions in this order on rehearing are effective [insert date 30 days from 

publication in FEDERAL REGISTER]. 

List of subjects in 18 CFR part 33 

Electric utilities, Reporting and recordkeeping requirements, Securities. 

By the Commission. 

( S E A L ) 

 

 Kimberly D. Bose, 

 Secretary. 
Docket No. RM07-21-001 - 28 - 

 

In consideration of the foregoing, the Commission amends Part 33, Chapter I, 

Title 18, Code of Federal Regulations, to read as follows: 

PART 33 – APPLICATIONS UNDER FEDERAL POWER ACT SECTION 203 

1. The authority citation for part 33 continues to read as follows: 

 Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-

7352; Pub. L. No. 109-58, 119 Stat. 594. 

2. In 33.1, paragraph (c)(12) is revised and paragraph (c)(16) is added to read as 

follows: 

§ 33.1 Applicability, definitions, and blanket authorizations.

* * * * * 

(c) Blanket Authorizations. 

* * * * * 

(12) A public utility is granted a blanket authorization under section 203(a)(1) of 

the Federal Power Act to transfer its outstanding voting securities to: 

(i) any holding company granted blanket authorizations in paragraph (c)(2)(ii) of 

this section if, after the transfer, the holding company and any of its associate or affiliate 

companies in aggregate will own less than 10 percent of the outstanding voting interests 

of such public utility; or 
Docket No. RM07-21-001 - 29 - 

(ii) any person other than a holding company if, after the transfer, such person and 

any of its associate or affiliate companies in aggregate will own less than 10 percent of 

the outstanding voting interests of such public utility. 

* * * * * 

 (16) A public utility is granted a blanket authorization under section 

203(a)(1) of the Federal Power Act for the acquisition or disposition of a 

jurisdictional contract where neither the acquirer nor transferor has captive 

customers or owns or provides transmission service over jurisdictional 

transmission facilities, the contract does not convey control over the operation of a 

generation or transmission facility, and the acquirer is a public utility.