19670 Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 

behaviors those individuals exhibited; 

and 

(ix). A description of the 

implementation and effectiveness of the 

mitigation measures of the Incidental 

Harassment Authorization. 

(b). When shutdown is required for 

mitigation purposes, the following 

information will also be recorded: 

(i). The basis for decisions resulting in 

shutdown of active acoustic 

transmissions; 

(ii). Information needed to estimate 

the number of marine mammals 

potentially taken by harassment; 

(iii). Information on the frequency of 

occurrence, distribution, and activities 

of marine mammals in the 

demonstration area; 

(iv). Information on the behaviors and 

movements of marine mammals during 

and without operation of active acoustic 

sources; and 

(v). Any adverse effects the shutdown 

had on the demonstration. 

(c). Submit a final report to the Chief, 

Permits and Conservation Division, 

Office of Protected Resources, NMFS, 

1315 East West Highway, Silver Spring, 

Maryland, 20910, within 30 days after 

receiving comments from NMFS on the 

draft report. If NMFS decides that the 

draft report needs no comments, the 

draft report shall be considered the final 

report. 

(d). In the unanticipated event that 

the specified activity clearly cause the 

take of a marine mammal in a manner 

prohibited by this Authorization, such 

as an injury (Level A harassment), 

serious injury, or mortality (e.g., shipstrike, gear interaction, and/or 

entanglement), ONR shall immediately 

cease operations and report the incident 

to the Chief of the Permits and 

Conservation Division, Office of 

Protected Resources, NMFS, at 301– 

427–8401 and/or by email to 

Michael.Payne@noaa.gov and 

Michelle.Magliocca@noaa.gov. The 

report must include the following 

information: 

(i) Time, date, and location (latitude/ 

longitude) of the incident; 

(ii) The name and type of vessel 

involved; 

(iii) The vessel’s speed during and 

leading up to the incident; 

(iv) Description of the incident; 

(v) Status of all sound source use in 

the 24 hours preceding the incident; 

(vi) Water depth; 

(vii) Environmental conditions (e.g., 

wind speed and direction, Beaufort sea 

state, cloud cover, and visibility); 

(viii) Description of marine mammal 

observations in the 24 hours preceding 

the incident; 

(ix) Species identification or 

description of the animal(s) involved; 

(x) The fate of the animal(s); and 

(xi) Photographs or video footage of 

the animal (if equipment is available). 

Activities shall not resume until 

NMFS is able to review the 

circumstances of the prohibited take. 

NMFS will work with ONR to determine 

what is necessary to minimize the 

likelihood of further prohibited take and 

ensure MMPA compliance. ONR may 

not resume their activities until notified 

by NMFS via letter, email, or telephone. 

(e). In the event that ONR discovers 

an injured or dead marine mammal, and 

the lead protected species observer 

determines that the cause of the injury 

or death is unknown and the death is 

relatively recent (i.e., in less than a 

moderate state of decomposition as 

described in the next paragraph), ONR 

shall immediately report the incident to 

the Chief of the Permits and 

Conservation Division, Office of 

Protected Resources, NMFS, at 301– 

427–8401, and/or by email to 

Michael.Payne@noaa.gov and 

Michelle.Magliocca@noaa.gov. The 

report shall include the same 

information identified in the paragraph 

above. Activities may continue while 

NMFS reviews the circumstances of the 

incident. NMFS will work with ONR to 

determine whether modifications in the 

activities are appropriate. 

(f). In the event that ONR discovers an 

injured or dead marine mammal, and 

the lead protected species observer 

determines that the injury or death is 

not associated with or related to the 

activities authorized in Condition 2 of 

this Authorization (e.g., previously 

wounded animal, carcass with moderate 

to advanced decomposition, or 

scavenger damage), ONR shall report the 

incident to the Chief of the Permits and 

Conservation Division, Office of 

Protected Resources, NMFS, at 301– 

427–8401, and/or by email to 

Michael.Payne@noaa.gov and 

Michelle.Magliocca@noaa.gov within 24 

hours of the discovery. ONR shall 

provide photographs or video footage (if 

available) or other documentation of the 

stranded animal sighting to NMFS and 

the Marine Mammal Stranding Network. 

Activities may continue while NMFS 

reviews the circumstances of the 

incident. 

9. The Holder of this Authorization is 

required to comply with the Terms and 

Conditions of the Incidental Take 

Statement (ITS) corresponding to 

NMFS’ Endangered Species Act 

Biological Opinion issued to both the 

Office of Naval Research and NMFS’ 

Office of Protected Resources. 

10. A copy of this Authorization must 

be in the possession of all contractors 

and protected species observers 

operating under the authority of this 

Incidental Harassment Authorization. 

11. Penalties and Permit Sanctions 

Any person who violates any 

provision of this Incidental Harassment 

Authorization is subject to civil and 

criminal penalties, permit sanctions, 

and forfeiture as authorized under the 

MMPA. 

Dated: March 28, 2013. 

Helen M. Golde, 

Acting Director, Office of Protected Resources, 

National Marine Fisheries Service. 

[FR Doc. 2013–07606 Filed 4–1–13; 8:45 am] 

BILLING CODE 3510–22–P 

COMMODITY FUTURES TRADING 

COMMISSION 

RIN 3038–AE01 

Order Exempting, Pursuant to 

Authority of the Commodity Exchange 

Act, Certain Transactions Between 

Entities Described in the Federal 

Power Act, and Other Electric 

Cooperatives 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final order. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or 

‘‘Commission’’) is exempting certain 

transactions between entities described 

in section 201(f) of the Federal Power 

Act (‘‘FPA’’), and/or other electric 

utility cooperatives, from the provisions 

of the Commodity Exchange Act (‘‘CEA’’ 

or ‘‘Act’’) and the Commission’s 

regulations, subject to certain anti-fraud, 

anti-manipulation, and record 

inspection conditions. Authority for this 

exemption is found in section 4(c) of the 

CEA. 

DATES: Effective date: April 2, 2013. 

FOR FURTHER INFORMATION CONTACT: 

David Van Wagner, Chief Counsel, (202) 

418–5481, dvanwagner@cftc.gov, or 

Graham McCall, Attorney-Advisor, (202) 

418–6150, gmccall@cftc.gov, Division of 

Market Oversight; or David Aron, 

Counsel, (202) 418–6621, 

daron@cftc.gov, Office of General 

Counsel; Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. Petition for Relief 

B. Summary of Proposed Order 

II. Comments Received and Commission 

Response 

A. Clarification With Respect to the 

Definition of ‘‘Exempt Entity’’ 


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Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 19671 

1The Petition was submitted by the National 

Rural Electric Cooperative Association, the 

American Public Power Association, the Large 

Public Power Council, the Transmission Access 

Policy Study Group and the Bonneville Power 

Administration (collectively, ‘‘Petitioners’’), and is 

available on the Commission’s Web site at http:// 

www.cftc.gov/stellent/groups/public/ 

@rulesandproducts/documents/ifdocs/ 

nrecaetalltr060812.pdf. 

2 7 U.S.C. 1 et seq. 

3The Commission’s regulations are set forth in 

title 17 of the Code of Federal Regulations (‘‘CFR’’). 

4 7 U.S.C. 6(c). 

5House Conf. Report No. 102–978, 1992 

U.S.C.C.A.N. 3179, 3213 (‘‘4(c) Conf. Report’’). 

6The 4(c) Conference Report provides in relevant 

part that 

[t]he Conferees do not intend that the exercise of 

exemptive authority by the Commission would 

require any determination beforehand that the 

agreement, instrument, or transaction for which an 

exemption is sought is subject to the [CEA]. Rather, 

this provision provides flexibility for the 

Commission to provide legal certainty to novel 

instruments where the determination as to 

jurisdiction is not straightforward. Rather than 

making a finding as to whether a product is or is 

not a futures contract, the Commission in 

appropriate cases may proceed directly to issuing 

an exemption. 

Id. at 3214–15. 

7Public Law 111–203, 124 Stat. 1376 (2010). The 

text of the Dodd-Frank Act may be accessed at 

http://www.cftc.gov/LawRegulation/DoddFrankAct/ 

index.htm. 

8 7 U.S.C. 6(c)(6)(C) (as added by section 722(f) of 

the Dodd-Frank Act). 

9Per the Petition, Part II of the FPA governs the 

transmission of electric energy in interstate 

commerce, the sale at wholesale of electric energy 

in interstate commerce, and the facilities used for 

such transmission or sale. See Petition at 15 (citing 

FPA section 201(b)); Petition Exhibit 1, at 1 

(providing the full text of 16 U.S.C. 824 et seq.). 

Petitioners represented that section 201(f) does not, 

however, provide an exemption from FPA parts I 

or III. Part I of the FPA deals with the establishment 

and functioning of FERC and the regulation of 

hydroelectric resources. See Petition at 15 n.31 

(citing 16 U.S.C. 792 et seq.). Part III of the FPA 

deals with recordkeeping and reporting 

requirements and FERC’s procedural rules 

concerning complaints, investigations, and 

hearings. See id. (citing 16 U.S.C. 825 et seq.). 

Additionally, section 201(f) does not provide an 

exemption from FERC’s refund authority, 16 U.S.C. 

824e, reliability standards, 16 U.S.C. 824o(b)(1), or 

jurisdiction over transmission facilities and 

services, 16 U.S.C. 824(i)–(j). See Petition at 16–17. 

10FPA section 201(f) provides in relevant part 

that 

[n]o provision in [Part II of the FPA] shall apply 

to, or be deemed to include, the United States, a 

State or any political subdivision of a State, an 

electric cooperative that receives financing under 

the Rural Electrification Act of 1936 (7 U.S.C. 901 

et seq.) or that sells less than 4,000,000 megawatt 

hours of electricity per year, or any agency, 

authority, or instrumentality of any one or more of 

the foregoing, or any corporation which is wholly 

owned, directly or indirectly, by any one or more 

of the foregoing, or any officer, agent, or employee 

of any of the foregoing acting as such in the course 

of his official duty, unless such provision makes 

specific reference thereto. 

Petition at 16 (quoting 16 U.S.C. 824(f)). 

11See Petition at 17–18. Petitioners explained 

that the FPA was enacted originally ‘‘to remedy 

rampant abuses in the investor-owned electric 

utility industry.’’ See Salt River Project Agric. 

Improvement and Power District v. Fed. Power 

Comm’n, 391 F. 2d 470, 475 (D.C. Cir. 1968). 

Petitioners maintained that of all the major abuses 

considered by Congress as the impetus for enacting 

the FPA, ‘‘virtually none could be associated with 

the [electric] cooperative structure where 

ownership and control is vested in the consumerowners.’’ Id. at 475. Per the Petition, while FPA 

section 201(f), as originally enacted, exempted only 

government entities, the Federal Power Commission 

(‘‘FPC’’), FERC’s predecessor at the time, 

determined that Congress had intended also to 

exempt electric cooperatives financed under the 

REA from the FPC’s jurisdiction over ‘‘public 

utilities.’’ See Dairyland Power Coop. et al. v. Fed. 

Power Comm’n, 37 F.P.C. 12, 27 (1967). Finally, 

Petitioners explained that Congress codified the 

FPC’s interpretation as part of the Energy Policy Act 

of 2005 (‘‘EPAct 2005’’), as articulated in Dairyland 

and affirmed in Salt River, 391 F.2d 470, and 

further expanded the scope of FPA section 201(f) 

by also exempting electric cooperatives that sell less 

than 4,000,000 megawatt hours of electricity per 

month, regardless of financing under the REA. See 

Public Law 109–58, 1291, 119 Stat. 594, 985 (2005). 

Counsel for Petitioners represented that while 

Congress did not exempt electric cooperatives that 

sell in excess of 4,000,000 megawatt hours of 

electricity per month due to EPAct 2005 attempting 

to focus on issues with large electricity providers 

that had caused the 2003 blackouts in the northeast 

United States, FERC nonetheless often has allowed 

non-FPA 201(f) cooperatives additional regulatory 

flexibility, subject to ‘‘self-regulation’’ by the 

cooperatives’ member/owner boards. 

B. Clarification With Respect to the 

Definition of ‘‘Exempt Non-Financial 

Energy Transaction’’ 

C. Clarification With Respect to the 

Commission’s Right To Revisit the Terms 

of the Relief 

D. Request That Relief Not Be Conditioned 

Upon a Reservation of Jurisdiction Under 

the Commission’s Authority Over 

Options Transactions 

E. Other Clarification and Comments 

1. Clarification With Respect to the Ability 

of Exempt Entities To Use Exempt NonFinancial Energy Transactions To 

Manage Price Risks 

2. Request That Relief Be Retroactive To 

the Date of Enactment of the Dodd-Frank 

Act 

3. Request That Relief Be Categorical 

III. CEA Section 4(c) Determinations 

A. Applicability of CEA Section 4(a) 

B. Public Interest and the Purposes of the 

CEA 

C. Appropriate Persons 

D. Ability To Discharge Regulatory or SelfRegulatory Duties 

IV. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Consideration of Costs and Benefits 

1. The Statutory Mandate To Consider the 

Costs and Benefits of the Commission’s 

Action: Section 15(a) of the CEA 

2. Costs 

3. Benefits 

4. Consideration of Alternatives 

5. Consideration of CEA Section 15(a) 

Factors 

V. Final Order 

I. Background 

A. Petition for Relief 

On June 8, 2012, the Commission 

received a petition (‘‘Petition’’) from a 

group of trade associations and other 

organizations representing the interests 

of government and/or cooperativelyowned electric utilities 1 requesting 

relief from the requirements of the 

CEA 2 and Commission’s regulations 

issued thereunder,3 pursuant to its 

exemptive authority under CEA section 

4(c),4 for certain ‘‘Electric OperationsRelated Transactions’’ entered into 

between certain ‘‘NFP Electric Entities.’’ 

Section 4(c) of the CEA provides the 

Commission with broad authority to 

exempt certain transactions and market 

participants from the requirements of 

the Act in order to ‘‘provid[e] certainty 

and stability to existing and emerging 

markets so that financial innovation and 

market development can proceed in an 

effective and competitive manner.’’ 5

Importantly, the legislative history notes 

that the Commission need not 

determine whether the product for 

which an exemption is sought is within 

the Commission’s jurisdiction prior to 

issuing 4(c) relief.6 The Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (‘‘Dodd-Frank Act’’) 7

added section 4(c)(6) to the CEA, which 

builds upon the Commission’s existing 

4(c) exemptive authority by providing 

that the Commission ‘‘shall, in 

accordance with sections 4(c)(1) and 

4(c)(2), exempt from the requirements of 

th[e] Act an agreement, contract, or 

transaction that is entered into * * * 

between entities described in section 

201(f) of the Federal Power Act (16 

U.S.C. 824(f)),’’ but only ‘‘[i]f the 

Commission determines that the 

exemption would be consistent with the 

public interest and the purposes of th[e] 

Act.’’ 8

Petitioners represented that section 

201(f) of the Federal Power Act (‘‘FPA’’), 

administered by the Federal Energy 

Regulatory Commission (‘‘FERC’’), 

provides broad-based relief from most 

provisions of Part II of the FPA 9 for 

certain government and cooperativelyowned electric utility companies.10

According to Petitioners, Congress 

recognized that the same rampant 

abuses which existed with investorowned public utilities and that the 

Public Utility Act of 1935 and Rural 

Electrification Act of 1936 (‘‘REA’’) were 

enacted to combat simply did not exist 

with government and consumer-owned 

electric utilities.11 Rather, Petitioners 

maintain that Congress understood 

these utilities to exist as self-regulating, 

not-for-profit entities with a shared 

public service mission of providing 

reliable, low-cost electric energy service 

through the management and 

operational oversight of elected or 

appointed government officials or 


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12See Petition at 17–18, 22 (FPA section 201(f) 

entities are ‘‘effectively self-regulating’’ (quoting 

Salt River, 371 F.2d at 473)). 

13See id. at 20 (citing City of Paris, KY vs. Fed. 

Power Comm’n, 399 F.2d 983 (D.C. Cir. 1968); 

Sovereign Power Inc., 84 FERC ¶ 61,014 (1998); 

Confederated Tribes of the Warm Springs 

Reservation of Or., a Federally Recognized Indian 

Tribe, and Warm Springs Power Enterprises, a 

Chartered Enter. of the Confederated Tribes of the 

Warm Springs Reservation of Or., 93 FERC ¶ 61,182 

at 61,599 (2000) (concluding that ‘‘the Tribes are an 

instrumentality of the ‘United States, a State or any 

political subdivision of a state’’’ and that Warm 

Springs Power Enterprises, a Chartered Enterprise 

of the Tribes, was entitled to Tribes’ Section 201(f) 

exemption)). 

14Per the Petition, the REA established the RUS 

as the federal agency to administer financing to 

rural utilities. See 7 U.S.C. 901 et seq. 

15Per the Petition, to be treated as a 

‘‘cooperative’’ under Federal tax law, regardless of 

FPA section 201(f) status, an electric cooperative 

must operate on a cooperative basis. See 26 U.S.C. 

501(c)(12), 1381(a)(2)(C). Petitioners explained that 

the United States Tax Court, in the seminal case of 

Puget Sound Plywood, Inc. v. Comm’r of Internal 

Revenue, held that operating on a cooperative basis 

means operating according to the cooperative 

principles of (i) democratic member control, (ii) 

operation at cost, and (iii) subordination of capital. 

See 44 T.C. 305 (1965); see also Internal Revenue 

Manual § 4.76.20.4 (2006). Additionally, for any 

electric cooperative to be exempt from Federal 

income taxation pursuant to IRC 501(c)(12), it must 

collect annually ‘‘85 percent or more of [its] income 

* * * from members for the sole purpose of 

meeting losses and expenses.’’ 26 U.S.C. 

501(c)(12)(A). Accordingly, Petitioners argued that 

an electric cooperative, regardless of FPA section 

201(f) status, lacks incentive or motivation to 

manipulate prices, disrupt market integrity, engage 

in fraudulent or abusive sales practices, or misuse 

customer assets because it: (i) Is a consumer 

cooperative; (ii) is controlled by its members; (iii) 

must operate at cost and ‘‘not operate either for 

profit or below cost;’’ (iv) may not benefit its 

individual members financially; and (v) if exempt 

from Federal income taxation, must collect at least 

85 percent of its income from members. 

16See generally Petition at 6–12, and Exhibit 2. 

17See id. at 13. 

18See id. at 12. 

19See id. at 5, 13. 

20 77 FR 50998 (August 23, 2012). 

21Exempt Entities are defined in Section IV.A of 

the Proposed Order. See id. at 51012. 

22Exempt Non-Financial Energy Transactions are 

defined in Section IV.B of the Proposed Order. See 

id. at 51012–13. 

23The conditions the Commission proposed to 

impose on the Proposed Order are described in 

Section IV.C thereof. See id. at 51013. 

24See id. at 51012. 

25See id. 

26 Id. at 51006, n.63. The Commission also 

declined to propose Petitioners’ secondary requests 

for i) an additional exempted transaction category 

for ‘‘trade options’’ and/or ii) delegated authority to 

Commission staff to review and approve new 

categories of exempted transactions, for the reasons 

set forth in the Petition. See id. Also, because the 

Commission has promulgated a trade option 

exemption in Commission regulation 32.3, there 

was no need to promulgate a separate trade option 

exemption for Petitioners, who, like all other 

persons whose transactions satisfy the terms of the 

trade option exemption, can rely thereon. 

27 77 FR 48208 (August 13, 2012) (‘‘Products 

Release’’). 

cooperative member/consumers, and 

thus excluded them from the same 

degree of federal oversight as investorowned public utilities by promulgating 

FPA section 201(f).12

While CEA section 4(c)(6) prompted 

the Petitioners to request relief for FPA 

section 201(f) entities, Petitioners also 

sought to include in their definition of 

NFP Electric Entities, in accordance 

with CEA sections 4(c)(1) and 4(c)(2), 

any Federally-recognized Indian tribe 

and the very small number of electric 

cooperatives that are not described by 

FPA section 201(f). Petitioners argued 

that FERC has precedent for treating 

Federally-recognized Indian tribes as 

FPA 201(f) government entities.13

Additionally, Petitioners argued that 

regardless of whether an electric 

cooperative is recognized under FPA 

section 201(f) by virtue of receiving 

funding from the Rural Utilities Service 

(‘‘RUS’’) 14 or selling less than 4 million 

megawatt hours of electricity per year, 

all cooperatively-owned electric utilities 

share certain distinguishing features—a 

common not-for-profit public service 

mission and self-regulating governance 

model—that form the underlying 

rationale for the FPA section 201(f) 

exemption.15

Petitioners limited the relief requested 

to certain Electric Operations-Related 

Transactions that meet defined criteria. 

The Petition described seven specific 

categories of transactions that 

traditionally occur between NFP 

Electric Entities and provided examples 

of each: Electric energy delivered, 

generation capacity, transmission 

services, fuel delivered, crosscommodity transactions, other goods 

and services, and environmental rights, 

allowances or attributes.16 Under the 

Petitioners’ proposed definition, Electric 

Operations-Related Transactions would 

not reference any ‘‘commodity’’ in the 

financial asset class or ‘‘Other 

Commodity’’ asset class that is based 

upon or derived from a metal, 

agricultural product or fuel of any grade 

not used for electric energy 

generation.17 In general, Petitioners 

represented that all transactions 

described by the seven categories fit 

within their proposed definition of 

Electric Operations-Related 

Transactions and were ‘‘intrinsically 

related’’ to the needs of NFP Electric 

Entities ‘‘to hedge or mitigate 

commercial risks’’ which arise from the 

entities’ public service obligations.18

Notably, however, Petitioners requested 

categorical relief for ‘‘any other electric 

operations-related agreement, contract 

or transaction to which the NFP Electric 

Entity is a party,’’ even if such 

transaction was not described by one of 

the Petition’s categories, but could be 

developed as a new category in the 

future.19

B. Summary of Proposed Order 

The Commission published for 

comment in the Federal Register a 

‘‘Proposal To Exempt Certain 

Transactions Involving Not-for-Profit 

Electric Utilities; Request for Comment’’ 

(‘‘Proposed Order’’).20 The Proposed 

Order identified (i) the entities eligible 

to rely on the exemption for purposes of 

entering into an exempt transaction 

(‘‘Exempt Entities’’); 21 (ii) the 

agreement, contract, or transaction for 

which the exemption could be relied 

upon (‘‘Exempt Non-Financial Energy 

Transactions’’); 22 and (iii) the 

provisions of the CEA and Commission 

regulations that would continue to 

apply to Exempt Entities entering into 

Exempt Non-Financial Energy 

Transactions with one another.23

The Commission proposed a 

definition of Exempt Entities intended 

to capture the same scope of entities for 

which relief was requested by 

Petitioners. Generally, these entities 

included (i) electric facilities owned by 

government entities described in FPA 

section 201(f), (ii) electric facilities 

owned by Federally-recognized Indian 

tribes, (iii) any cooperatively-owned 

electric utility treated as a cooperative 

under Federal tax laws, and (iv) any 

other not-for-profit entity wholly-owned 

by one or more of the foregoing.24 The 

Proposed Order provided the caveat that 

no Exempt Entity could qualify as a 

‘‘financial entity’’ as such term is 

defined in CEA section 2(h)(7)(C).25

The Commission’s proposed 

definition of Exempt Non-Financial 

Energy Transaction was narrower in 

scope than the transaction definition 

proposed by Petitioners. Namely, the 

Commission declined to propose 

categorical relief for any transaction not 

described by one of the seven categories 

included in the Petition because the 

broader transaction definition is too 

vague for the Commission to conduct a 

considered and robust public interest 

and CEA purposes analysis under CEA 

section 4(c).26 Additionally, due to 

overlap between certain transaction 

categories for which both Petitioners 

requested relief and the Commission’s 

joint final rule and interpretation with 

the Securities Exchange Commission 

(‘‘SEC’’) determined not to be swaps,27

the Commission believed it was 

unnecessary to provide additional relief 

pursuant to CEA section 4(c) for those 


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28See Proposed Order at 51008–09. Specifically, 

the Commission noted that certain ‘‘Fuel Delivered’’ 

transactions, as described in Exhibit B of the 

Petition, would be covered by the forward 

exclusion from the swap definition. Id. at 51008 

(citing Products Release, 77 FR 48236). 

Additionally, the Commission noted that 

agreements, contracts, and transaction involving the 

category of Environmental Rights, Allowances or 

Attributes, as specifically described by the Petition, 

would be covered by the forward exclusion from 

the swap definition. Id. (citing Products Release, 77 

FR 48233–34). 

29See id. at 51012–13. Generally, the description 

of each category mirrored the descriptions provided 

in the Petition. 

30 Id. at 51013 (reserving authority including, but 

not limited to, CEA sections 2(a)(1)(B), 4b, 4c(b), 4o, 

6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13, and Commission 

rules 32.4 and Part 180). 

31 Id. 

32 Id. at 51009. 

33See id. 

34See id. at 51010. 

35See id. 

36See id. at 51011. 

37See id. at 51011–12. 

38See id. at 51012. 

39See id. at 51013–14. 

40Letter from the Electric Power Supply 

Association and the Edison Electric Institute, at 

1–2 (September 24, 2012) (‘‘Joint Associations’ 

Letter’’) (‘‘The Joint Associations support the 

Commission’s Proposed 201(f) Exemption and agree 

that the Proposed 201(f) Exemption is in the public 

interest.’’). 

41Letter from the National Rural Electric 

Cooperative Association, the American Public 

Power Association, the Large Public Power Council, 

the Transmission Access Policy Study Group and 

the Bonneville Power Administration, at 1–2 

(September 24, 2012) (‘‘Petitioners’ Letter’’). As 

discussed below, the Petitioners did not respond 

directly to the Commission’s ‘‘Request for Public 

Comment on Costs and Benefits’’ of the Proposed 

Order. 

42See infra Section V. 

43See Proposed Order at 51006–09. 

44Specifically, the Commission asked whether it 

should ‘‘limit the scope of Exempt Entities to only 

those electric utilities described by FPA section 

201(f),’’ and even if not, ‘‘should the Commission 

still limit the scope of electric cooperatives 

included as Exempt Entities to only those 

cooperatives with tax exempt status[?]’’ Proposed 

Order at 51013. 

overlapping transaction categories.28

Otherwise, the Commission proposed a 

definition for Exempt Non-Financial 

Energy Transactions that was intended 

to capture a similar scope of 

transactions as described in the Petition, 

limited in the Proposed Order to 

Electric Energy Delivered, Generation 

Capacity, Transmission Services, Fuel 

Delivered, Cross-Commodity Pricing, 

and Other Goods and Services.29

Pursuant to CEA section 4(c)(1), the 

Commission also proposed conditioning 

its relief. First, the Commission 

proposed to reserve its general antifraud, anti-manipulation, and 

enforcement authority.30 Second, the 

Commission proposed to reserve its 

general authority to inspect books and 

records of Exempt Non-Financial Energy 

Transactions already kept in the normal 

course of business.31 The overarching 

goal of these proposed conditions would 

be to allow the Commission to gain 

greater visibility with respect to Exempt 

Non-Financial Energy Transactions to 

ensure Exempt Entities’ compliance 

with the terms of the order, provide a 

means to ensure that the relief provided 

in the order remains appropriate and in 

the public interest given the potential 

that Exempt Non-Financial Energy 

Transactions may continue to evolve 

and their usage otherwise change, and 

to maintain the ability to initiate 

enforcement proceedings against 

Exempt Entities’ found to be engaged in 

manipulative, fraudulent, or otherwise 

abusive trading schemes when 

executing Exempt Non-Financial Energy 

Transactions with other Exempt 

Entities.32

Given the scope of the relief 

contemplated by the Proposed Order as 

just described, the Commission was able 

to make the public interest 

determinations required under CEA 

sections 4(c)(1) and 4(c)(2). In the 

Proposed Order, the Commission 

determined that (i) Exempt NonFinancial Energy Transactions were 

innovative products necessary to meet 

the unique production, distribution, and 

usage needs of Exempt Entities that 

were constantly changing due to factors 

beyond their control; 33 (ii) CEA section 

4(a) should not apply to Exempt NonFinancial Energy Transactions, which 

were bespoke in nature and conducted 

in a closed loop between Exempt 

Entities, therefore making them 

unsuitable for exchange trading and less 

likely to affect price discovery in 

Commission-regulated markets; 34 (iii) 

relief for Exempt Non-Financial Energy 

Transactions between Exempt Entities 

was not inconsistent with the public 

interest because the transactions were 

used to ‘‘manage’’ commercial risks 

arising from electric operations and 

facilities, and therefore were not 

speculative in nature; 35 (iv) Exempt 

Entities were self-regulating, not-forprofit public utilities with no outside 

investors or shareholders to profit from 

transactions, and as such, were less 

vulnerable to fraudulent or 

manipulative trading activity in 

accordance with the purposes of the 

CEA; 36 (v) Exempt Entities were 

‘‘appropriate persons’’ for purposes of 

4(c) relief either by virtue of having 

been identified explicitly by Congress in 

CEA section 4(c)(6)(C) as being eligible 

for a 4(c) exemption, by being a 

government-sponsored entity, and/or 

otherwise being appropriate due to 

sufficient financial soundness and 

operational capabilities; 37 and (vi) 

because of the foregoing, nothing would 

prevent the Commission or any contract 

market from discharging its respective 

regulatory or self-regulatory duties 

under the CEA.38

In addition to requesting comment on 

the scope of the relief and the 

Commission’s 4(c) determinations, the 

Commission posed specific questions 39

related to different aspects of the 

Proposed Order and provided a 30-day 

comment period to respond. 

II. Comments Received and 

Commission Response 

In response to the Proposed Order’s 

Request for Comments, the Commission 

received two responses, both of which 

were generally supportive. The Electric 

Power Supply Association and the 

Edison Electric Institute, writing 

together (‘‘Joint Associations’’), voiced 

general support for the Proposed Order 

and the Commission’s determinations 

that the exemption would be in the 

public interest, and did not request any 

clarification or propose any changes.40

The Petitioners also submitted a 

comment letter which, while approving 

overall of the Proposed Order and the 

Commission’s ‘‘appropriate[ ] 

implement[ation] [of] Congressional 

intent,’’ requested that any final relief be 

clarified ‘‘in certain minor respects to 

align more closely with the 

Congressional intent,’’ and that 

responded directly to the Commission’s 

specific questions.41

Upon careful consideration of the 

comments received, the Commission 

has determined to finalize the Proposed 

Order, with certain revisions to the 

‘‘Final Order,’’42 the majority of which 

are in response to comments discussed 

below and subject to the following 

interpretive guidance used to clarify the 

Commission’s intent. Unless noted 

below, the Commission is finalizing the 

Proposed Order without change because 

it continues to believe that the scope of 

the Proposed Order is consistent with 

the public interest and purposes of the 

Act.43

A. Clarification With Respect to the 

Definition of ‘‘Exempt Entity’’ 

Generally, Petitioners agreed with the 

scope of entities included in the 

definition of Exempt Entity. In response 

to a question posed by the 

Commission,44 Petitioners commented 

that the scope of the Exempt Entities 

definition should not be limited further 

to include only those electric 

cooperatives with tax-exempt status 

under Federal tax law because ‘‘[t]here 

is no operational or governance 

difference between electric cooperatives 


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45Petitioners’ Letter at 9. 

46Specifically, the Commission sought comment 

‘‘on every aspect of the Proposed Order as it relates 

to Indian tribes.’’ Proposed Order at 51013. 

47Petitioners’ Letter at 10–11. 

48See Proposed Order at 51006–07. 

49See id. at 51007. 

50See id. 

51With regard to the Commission asking whether 

an Exempt Entity should be required to notify the 

Commission of any change in status under FPA 

section 201(f), Proposed Order at 51013, the 

Commission notes that the question was only 

relevant to electric cooperatives that fall in-and-out 

of FPA section 201(f) status based upon the amount 

of electricity they sell or from whom they receive 

financing. The Petitioners stated that such a change 

in status ‘‘would have no effect on outstanding 

Exempt Non-Financial Energy Transactions entered 

into with Exempt Entities prior to the change in 

status.’’ Petitioners’ Letter at 9. Having further 

considered the issue, the Commission confirms its 

belief that, for the reasons stated in the adopting 

release to the Proposed Order, an electric 

cooperative’s FPA 201(f) status should not be 

determinative of its inclusion in the relief provided 

herein as long as it continues to meet the criteria 

for cooperatives as noted herein. Furthermore, the 

Commission does not believe that being notified of 

an electric cooperative’s change in FPA 201(f) status 

would further any regulatory purposes under the 

Act, and therefore is not imposing any new 

reporting condition. The Commission is cognizant 

that any incentive provided by the Final Order for 

electric cooperatives to sell additional electricity 

and still be covered by the relief could be negated 

by the consequence of becoming fully regulated by 

FERC. The Commission stresses, however, that to 

the extent an electric cooperative no longer meets 

the criteria for cooperatives provided in the 

definition of an Exempt Entity, such electric 

cooperative may no longer rely on the relief 

provided in the Final Order. 

52 Id. at 3. 

53 Id. 

54The Commission understands that a ‘‘facility’’ 

refers to an asset used in relation to the generation, 

transmission and/or delivery of electricity, whereas 

a ‘‘utility’’ refers to the entity that owns and/or 

operates the facility. Additionally, to qualify under 

FPA section 201(f) and, by extension, CEA section 

4(c)(6)(C), an electric facility or utility cannot be 

partially-owned by an entity not described by FPA 

section 201(f). Furthermore, the Commission has 

clarified in the Final Order that, consistent with 

FPA section 201(f), an aggregated entity such as a 

Joint Power Administration can own facilities or 

utilities covered by the relief, subject to the caveat 

that the aggregated entity must consist solely of 

entities otherwise described as Exempt Entities. 

While not explicitly requested, the Commission has 

deleted the requirement that Federally-recognized 

Indian tribes must be ‘‘otherwise subject to 

regulation as a ‘public utility’ under the FPA’’ to 

account for the possibility that Indian tribes 

recognized by the U.S. government may someday be 

recognized explicitly under FPA section 201(f), at 

which point it could be confusing as to whether 

they are covered by the Final Order due to status 

with FERC as a public utility. 

55Petitioners’ Letter at 4. 

56See id. 

57See Petition at 26 (defining ‘‘at cost’’ as 

‘‘return[ing] excess operating revenues to [the 

cooperative’s] member-patrons,’’ which means the 

cooperative ‘‘must not operate either for profit or 

below cost’’ (citing Puget Sound Plywood v. 

Comm’r, 44 T.C. 305, 307–308 (1965)). 

58Petitioner’s Letter at 4. 

59 Id. (noting, as an example, that some Exempt 

Entities may have subsidiaries that provide their 

consumer-members with propane, on top of the 

subsidiary’s primary electric service obligations). 

60See FPA section 201(f), supra note 10. 

that are tax exempt under IRC Section 

501(c)(12) and those that are taxable 

under IRC Section 1381(a)(2)(C).’’ 45

Similarly, in response to a different 

question,46 Petitioners reiterated their 

support for including Federallyrecognized Indian tribes within the 

scope of the relief for the same reasons 

that they provided in the Petition.47

The Proposed Order defined Exempt 

Entities to include not only those 

entities described in FPA section 

201(f),48 but federally-recognized Indian 

tribes and non-FPA section 201(f) 

electric cooperatives. The Commission 

accepted Petitioners’ representations 

that FERC has traditionally treated 

federally-recognized Indian tribes as 

FPA section 201(f) entities due to the 

similarities they share with government 

entities.49 The Commission also 

accepted Petitioners’ representations 

that non-FPA section 201(f) electric 

cooperatives, so long as they are treated 

as cooperatives under Federal tax law 

but regardless of whether they have taxexempt status, are owned and operated 

in the same not-for-profit, self-regulated 

manner as FPA section 201(f) 

cooperatives, and their source of 

financing or amount of monthly 

electricity sold does not affect their 

sharing with FPA section 201(f) electric 

cooperatives the same underlying public 

service mission of providing affordable, 

reliable electric energy service to 

customers.50 Having received no 

comments challenging the 

Commission’s determination based 

upon these representations, the 

Commission continues to believe that 

the scope of Exempt Entities included in 

the Proposed Order is consistent with 

the public interest and purposes of the 

Act, and thus is adopting the same 

general scope of Exempt Entities in the 

Final Order.51

Petitioners suggested a number of 

minor revisions to the language used in 

defining Exempt Entities in the 

Proposed Order in order ‘‘to clearly 

encompass the appropriate categories of 

electric entities discussed in the Petition 

and elsewhere in the Proposal.’’ 52 For 

example, Petitioners suggested 

clarifying that Exempt Entities can own 

either a facility ‘‘or utility’’ that is 

subject to exemption under FPA section 

201(f), and that such a facility or utility 

should be ‘‘wholly-owned’’ instead of 

partially-owned by entities that qualify 

under FPA section 201(f).53 The 

Commission agrees that the proposed 

revisions would help align the Final 

Order with the Commission’s intent as 

expressed in the adopting release of the 

Proposed Order, and has modified the 

definition of ‘‘Exempt Entity’’ 

accordingly.54

Petitioners also requested that the 

Commission remove the reference to 

‘‘lowest cost possible’’ from clause (iii) 

in the Proposed Order’s definition of 

electric ‘‘cooperatives’’ that qualify as 

Exempt Entities in order ‘‘to recognize 

that electric cooperatives have 

operational objectives in addition to low 

cost, e.g., electric service reliability and 

environmental stewardship.’’ 55 The 

Petitioners represented that these are 

additional public service objectives that 

all Exempt Entities share as part of their 

collective public service mission, in 

addition to providing affordable electric 

energy service.56 Additionally, 

Petitioners originally maintained that 

providing electric energy service at the 

lowest cost possible may be an 

operational goal of a cooperative, and 

that Federal tax law requires 

cooperatives to operate ‘‘at cost,’’ as 

opposed to the lowest cost possible.57

The Commission agrees that this is a 

worthwhile clarification and, 

accordingly, has revised the language in 

clause (iii) of the Proposed Order 

describing electric cooperatives 

included in the definition of Exempt 

Entity to make clear that such 

cooperatives must provide electric 

energy service to their member/owner 

customers ‘‘at cost,’’ which the 

Commission intends to reflect the 

lowest cost possible in light of certain 

reliability and environmental standards 

and objectives, among others. 

Lastly, Petitioners requested that the 

Commission delete the qualifier, ‘‘notfor-profit,’’ from clause (iv) of the 

Exempt Entity definition describing 

entities that are wholly-owned by one or 

multiple other Exempt Entities.58 The 

Petitioners noted that ‘‘[e]ach of these 

subsidiary or aggregated entities are 

FPA 201(f) entities because they are 

wholly-owned by other FPA 201(f) 

entities, without regard to tax status,’’ 

and therefore ‘‘their activities do not 

benefit entities outside the ‘closed loop’ 

of entities’’ described in CEA section 

4(c)(6)(C).59 The Commission agrees that 

Petitioners’ interpretation is consistent 

with FPA section 201(f) and CEA 

section 4(c)(6)(C). FPA section 201(f) 

provides that ‘‘any corporation which is 

wholly owned, directly or indirectly, by 

any one or more of the foregoing 

[entities described in FPA section 

201(f)]’’ is exempted under the statute as 

well.60 Under the Proposed Order, relief 

is provided for transactions entered into 

solely between Exempt Entities, 

meaning that all exempted transactions, 

whether they generate profit or not, are 


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61Petitioners’ Letter at 4. 

62 Id. at 5. 

63 Id. at 7 (citing fuel delivery contracts and 

environmental commodity and other nonfinancial 

commodity transactions as examples of larger 

agreements, and noting that some such agreements 

may include governance or employee sharing 

provisions that have nothing to do with operational 

goods and services). 

64 Id. 

65See Petitioners’ Letter at 6–7. 

66See id. at 7. 

67The Commission notes that the definition of 

Exempt Non-Financial Energy Transaction is being 

revised in the Final Order to allow for pricehedging transactions, and that contrary to what was 

stated in the Proposed Order, some agreements may 

be variable price instead of fixed price. See infra 

Section II.E.1 and note 114 and accompanying text. 

68 Id. at 5. 

69 Id. 

70See id. 

71See id. 

72See supra Section IV.B. 

for the benefit of facilitating the closed 

loop’s public service mission. Because it 

has determined the qualifier to not be 

necessary, the Commission has struck 

the reference to ‘‘not-for-profit’’ status in 

clause iv) of the Exempt Entity 

definition. 

B. Clarification With Respect to the 

Definition of ‘‘Exempt Non-Financial 

Energy Transaction’’ 

Similar to their suggested revisions to 

the definition of Exempt Entity, 

Petitioners suggested a number of minor 

revisions to the definition of Exempt 

Non-Financial Energy Transaction in 

order to align the Final Order more 

closely with Congressional intent. First, 

Petitioners requested that the 

Commission substitute the words 

‘‘public service obligations’’ for 

‘‘contractual obligations’’ in Section 

IV.B of the proposed definition to 

account for the fact that ‘‘Exempt 

Entities’ obligations to electric 

customers arise in some cases under 

Federal or state law, or under local 

municipal ordinances or city charters, 

under Tribal laws or, for electric 

cooperatives, under organizational 

charters or by-laws, rather than under 

individual customer contracts.’’ 61 Next, 

for the same reasons applicable to the 

requested revision of the definition of 

Exempt Entity, Petitioners requested 

that the Commission delete the phrase, 

‘‘at the lowest cost possible,’’ when 

referring to the purpose of engaging in 

Exempt Non-Financial Energy 

Transactions.62 Finally, Petitioners 

requested that the Commission delete 

the word ‘‘only’’ from the sentence 

immediately preceding enumerated 

transaction categories in Section IV.B of 

the proposed definition because it is 

industry practice to include these 

transactions as part of larger commercial 

agreements or arrangements that also 

encompass components not covered by 

the relief.63 Petitioners requested that 

the Commission not impose upon 

Exempt Entities the new burden of 

having to compartmentalize their 

commercial relationships in such a way 

as to limit certain arrangements to only 

those six exempted transaction 

categories.64

The Commission agrees with these 

suggestions and has revised the 

definition of Exempt Non-Financial 

Energy Transaction accordingly. The 

Commission notes, however, that by 

allowing Exempt Non-Financial Energy 

Transactions to be included as part of 

larger commercial agreements, it is not 

providing relief to any other type of 

transaction or component of the 

agreement that is not explicitly defined 

in the Final Order. That is, the inclusion 

of an Exempt Non-Financial Energy 

Transaction within a broader 

commercial agreement does not thereby 

provide relief to every transaction 

included within the entire agreement. 

Petitioners also requested certain 

other clarifications with respect to the 

definition of Exempt Non-Financial 

Energy Transaction. First, the 

Commission is confirming that any 

‘‘agricultural product or diesel fuel or 

[other] grade of crude oil that is used as 

fuel for electric generation may be the 

underlying commodity upon which an 

‘Exempt Non-Financial Energy 

Transaction’ is based.’’ 65 Next, the 

Commission is clarifying that there is no 

requirement that Exempt Non-Financial 

Energy Transactions ‘‘involve only fixed 

amounts of goods or services, or fixed 

time frames or only fixed measures.’’ 66

Rather, the Commission confirms that 

the price, duration, quantity and any 

other aspect of these transactions may 

be variable, adjusted or adjustable 

during the term of an agreement, 

contract or transaction, as is customary 

for Exempt Non-Financial Energy 

Transactions.67 The definition in the 

Final Order has been revised to reflect 

these two points. 

Next, the Petitioners’ requested 

certain changes to the proposed 

definition of Exempt Non-Financial 

Energy Transactions regarding what 

ultimate purpose the transactions must 

serve. First, Petitioners requested that 

the Commission substitute the words 

‘‘related to’’ for ‘‘to facilitate’’ in Section 

IV.B of the proposed definition because 

in some cases, such as with an 

agreement to share a generation asset in 

order to more cost-effectively comply 

with environmental standards, the 

transaction may ‘‘limit rather than 

facilitate electric generation, 

transmission or distribution 

operations.’’ 68 Second, Petitioners 

requested that the Commission not 

include the proposed requirement that 

Exempt Non-Financial Energy 

Transactions must be ‘‘intended for 

making or taking physical delivery of 

the commodity upon which the 

agreement, contract or transaction is 

based.’’ 69 Petitioners reiterated their 

original request that in issuing any 4(c) 

relief, the Commission not determine 

the regulatory status of any transaction 

or whether any transaction involves a 

‘‘commodity,’’ including a 

‘‘nonfinancial commodity,’’ as those 

terms are defined in the CEA.70

Specifically, Petitioners provided 

examples of certain transactions that fall 

within the defined ‘‘Other Goods and 

Services’’ transaction category in the 

Proposed Order, but that ‘‘do not always 

involve an identifiable, tangible 

commodity intended for ‘delivery,’ ’’ or 

where it would be objectively 

impractical for counterparties, who 

under an agreement jointly own and 

operate transmission facilities, to 

objectively monitor ‘‘intent’’ because 

there is not a ‘‘single, comprehensive 

operating agreement that embodies the 

relationship.’’ 71

The Commission has determined to 

revise the purpose language to address 

Petitioners’ concerns with the ‘‘intent to 

physically deliver’’ requirement. The 

amended definition no longer directly 

modifies an Exempt Entity’s public 

service obligation as ‘‘facilitating’’ 

generation, transmission and/or delivery 

of electric energy service, and no longer 

includes the ‘‘intent to physically 

deliver’’ language. Rather, the amended 

definition provides that an Exempt NonFinancial Energy Transaction ‘‘would 

not have been entered into, but for an 

Exempt Entities’ need to manage supply 

and/or price risks arising from its 

existing or anticipated public service 

obligations to physically generate, 

transmit, and/or deliver electric energy 

service to customers.’’ 72

The effect of the Commission’s 

revisions to the definition should make 

it clear that Exempt Non-Financial 

Energy Transactions do not necessarily 

result in an immediate net increase in 

generation, transmission, and/or 

delivery of electric energy for each 

Exempt Entity involved. The 

Commission interprets the Final Order 

definition, as amended, in the larger 

context of an Exempt Entity’s public 

service obligations, which can include 

certain reliability, conservation, and 

environmental considerations related to 

their operations and facilities. Thus, 


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73With respect to Petitioners’ comment that they 

specifically requested the Commission to not make 

any determination as to whether any Exempt NonFinancial Energy Transaction involves a 

‘‘commodity,’’ the Commission notes that 

Petitioners originally proposed that ‘‘Electric 

Operations-Related Transactions’’ be defined as 

‘‘involving a ‘commodity’ (as such term is defined 

in the CEA) * * * .’’ See Petition at 4. 

74See supra Section II.E.1 (discussing the 

Commission’s determination to clarify that an 

Exempt Non-Financial Energy Transaction can be 

used to manage the price risk of a commodity 

underlying the transaction). 

75To emphasize the requirement that Exempt 

Non-Financial Energy Transactions be tied to 

obligations in physical electricity markets, the 

Commission has qualified the language in the Final 

Order definition to state that Exempt Entities’ 

‘‘public service obligations’’ are ‘‘to physically 

generate, transmit, and/or deliver electric energy 

service to customers.’’ See supra Section IV.B 

(emphasis added). 

76See Proposed Order at 51010. The Commission 

explained that the scope of the proposed definition 

required that the transaction would ‘‘contemplate 

‘delivery’ of the underlying good or service,’’ but 

that settlement of the transaction could occur in 

some circumstances through a financial book-out 

transaction so long as the transaction was not 

intended for speculative purposes. Id. at 51008, 

n.83 and accompanying text. Without the physical 

delivery requirement, the Commission notes that 

price management transactions under the Final 

Order can be financially settled, so long as the 

underlying physical commodity is being procured 

through a corresponding physical delivery 

agreement. 

77 In response to the Commission asking whether 

the Proposed Order’s definitions would foreclose 

the possibility of exempt speculative trading, the 

Petitioners responded that ‘‘Exempt Entities do not 

execute Exempt Non-Financial Energy Transactions 

for speculative purposes, but only to hedge or 

mitigate commercial risks arising from electric 

operations.’’ Petitioners’ Letter at 10. While the 

Commission appreciates that Petitioners represent 

their intent never will be to use the transactions to 

speculate, the Commission also believes it is in the 

public interest to foreclose the possibility of such 

exempt speculative trading activity through 

additional limiting language in the definition of 

Exempt Non-Financial Energy Transactions. 

78See, e.g., Petition at 6–7 (noting that ‘‘Electric 

Energy Delivered’’ contracts are not fungible and 

cannot be described in electronically reportable 

formats); Petition at 31 (explaining that ‘‘it is highly 

unlikely that any [ ] standardized derivatives 

trading contracts would contain the same 

customized economic terms of any particular 

[Exempt Non-Financial Energy Transactions]’’). The 

Commission notes that Petitioners’ original 

proposed transaction definition stated that the 

exempted transactions ‘‘shall not include 

agreements, contracts or transactions executed, 

traded, or cleared on a registered entity * * * .’’ 

See Petition at 5. 

79Proposed Order at 51013. 

80 Id. at 7–8 (citing the APA, 5 U.S.C. 500 et seq.) 

81CEA section 4(c)(1); 7 U.S.C. 6(c)(1) (providing 

that the Commission may exempt certain 

transactions ‘‘after notice and opportunity for 

hearing’’). 

82Petitioners’ Letter at 8. 

83 Id. 

under the examples posed in 

Petitioners’ Letter, the need to enter into 

a demand-side management agreement 

or generation facility-sharing 

arrangement would still arise from the 

Exempt Entity’s public service 

obligations, even if one Exempt Entity is 

required under the terms of the 

agreement to scale back its generation 

output to comply with demand-side 

management programming criteria, or 

the agreement itself does not directly 

result in physical generation, 

transmission, or delivery of electric 

energy service, but instead enables the 

fulfillment of physical obligations going 

forward. 

These revisions are based on the 

Commission’s recognition that not all 

Exempt Non-Financial Energy 

Transactions necessarily result in 

making or taking physical delivery of 

the ‘‘commodity’’ upon which the 

transaction is based, although many 

will.73 As described in the Final Order, 

all categories of Exempt Non-Financial 

Energy Transactions represent 

agreements entered into by Exempt 

Entities in order to manage price 74 and/ 

or supply risk resulting from the public 

service role they play in physical 

electricity markets. The Commission 

stresses that the revised definition still 

does not allow for Exempt NonFinancial Energy Transactions to be 

purely financial arrangements lacking 

any essential relationship to a physical 

generation, transmission, and/or 

delivery obligation of electric energy 

service to customers.75 The proposed 

4(c) public interest determination was 

premised on Exempt Non-Financial 

Energy Transactions not being 

speculative transactions.76 Without 

requiring more than the ‘‘closed loop’’ 

limitation as advocated for by 

Petitioners, the Commission believes 

that the Exempt Non-Financial Energy 

Transaction definition could be 

interpreted to cover purely financial 

transactions capable of being used for 

speculative purposes, which would not 

be in the public interest for the 

Commission to exempt.77 Thus, the 

Commission has revised the Final Order 

definition to include the ‘‘but for’’ 

language. 

Lastly, while not requested by 

commenters, the Commission has 

further revised the Exempt NonFinancial Energy Transaction definition. 

The descriptions of ‘‘Fuel Delivered’’ 

and ‘‘Cross-Commodity Pricing’’ 

transactions have been modified by 

replacing the operative verb ‘‘include’’ 

with ‘‘consist of.’’ While the category 

description is not necessarily closed, the 

Commission notes that the change is 

intended to reflect that there are certain 

characteristics that must be present for 

these types of transactions. The ‘‘consist 

of’’ language is consistent with the other 

four Exempt Non-Financial Energy 

Transaction category descriptions. 

Additionally, the Commission has 

added the qualification that Exempt 

Non-Financial Energy Transactions are 

not entered into on or subject to the 

rules of a registered entity, submitted for 

clearing to a derivatives clearing 

organization (‘‘DCO’’), and/or reported 

to a swap data repository (‘‘SDR’’). This 

modification is based on Petitioners’ 

representation that Exempt NonFinancial Energy Transactions are not 

standardized instruments suitable for 

exchange trading, clearing, or 

reporting.78 If persons otherwise able to 

claim the relief in the Final Order 

choose to (i) enter into an agreement, 

contract or transaction on or subject to 

the rules of a registered entity, (ii) 

submit an agreement, contract or 

transaction for clearing to a DCO or (iii) 

report an agreement, contract or 

transaction to an SDR, such an 

agreement, contract or transaction will 

be not be an Exempt Non-Financial 

Energy Transaction and will be outside 

the scope of the Final Order. In such 

circumstances, such persons, 

agreements, contracts or transactions 

will be subject to the applicable 

regulatory regime. 

C. Clarification With Respect to the 

Commission’s Right To Revisit the 

Terms of the Relief 

Regarding the condition that the 

Commission reserves the right to revisit 

any of the terms and conditions of the 

exemptive relief,79 the Petitioners 

requested that the Commission clarify 

that any such reconsideration would be 

subject to notice and comment under 

the Administrative Procedure Act 

(‘‘APA’’).80 The Commission clarifies 

that exemptive orders issued pursuant 

to section 4(c) of the CEA are subject to 

‘‘notice and opportunity for hearing.’’ 81

D. Request That Relief Not Be 

Conditioned Upon a Reservation of 

Jurisdiction Under the Commission’s 

Authority Over Options Transactions 

Petitioners requested that the 

Commission remove references in the 

Proposed Order to CEA section 4c(b) 

and Commission regulation 32.4 as nonexclusive provisions being reserved for 

purposes of conditioning the relief on 

the Commission’s general anti-fraud, 

anti-manipulation, and enforcement 

authority.82 Petitioners noted that the 

two ‘‘provisions are not part of the 

general anti-fraud, anti-market 

manipulation and enforcement 

authority, but instead articulate the 

Commission’s jurisdiction over option 

transactions.’’ 83 Specifically, Petitioners 

expressed concern that the references 

were an attempt by the Commission ‘‘to 


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84See id. 

85 7 U.S.C. 6s(h)(1)(A), 6s(h)(4)(A) (as added by 

the Dodd-Frank Act section 731). CEA section 

4s(h)(1)(A) requires a swap dealer (‘‘SD’’) or major 

swap participant (‘‘MSP’’) to comply with all 

Commission rules and regulations related to fraud, 

manipulation, and other abusive practices involving 

swaps, while CEA section 4s(h)(4)(A) makes it 

unlawful for any SD or MSP acting as an advisor 

to employ any deceptive device or scheme to 

defraud a Special Entity. 

86These regulations prohibit an SD or MSP from 

perpetrating fraud, manipulation, or other abusive 

trading practices on ‘‘Special Entities,’’ as such term 

is defined in Commission regulation 23.401(c), and 

provide an affirmative defense against charges of 

perpetrating such abusive schemes. See 77 FR 

9822–23 (Feb. 17, 2012). 

87See 77 FR 52138, 52166 (August 28, 2012) 

(‘‘Proposed RTO/ISO Order’’). The Proposed RTO/ 

ISO Order exempted certain electric energy 

transactions that occur pursuant to a RTO/ISO tariff 

approved by the Federal Energy Regulatory 

Commission, subject to the Commission’s general 

anti-fraud, anti-manipulation, and enforcement 

authority. Similar to the FPA section 201(f) 

Petitioners, the RTO/ISO petitioners requested 

relief pursuant to the Commission’s new authority 

in CEA section 4(c)(6). 

88See 7 U.S.C. 6(d). 

89Proposed Order at 51014. In making its public 

interest determination in the Proposed Order, the 

Commission represented that it understood Exempt 

Entities to use Exempt Non-Financial Energy 

Transactions mainly to manage supply risk, and not 

price risk, of an underlying commodity. See id. at 

51010. Therefore, the Commission declined to 

adopt Petitioners’ proposed definition incorporating 

the phrase, ‘‘ ‘to hedge or mitigate commercial risks’ 

(as such phrase is used in CEA Section 

2(h)(7)(A)(ii),’’ because the Commission generally 

did not interpret this phrase to refer to the full 

scope of transactions described in the Petition and 

incorporated into the Proposed Order through 

enumerated categories of Exempt Non-Financial 

Energy Transactions. Id. at 51007–08, n.81. 

90See Petitioners’ Letter at 12. 

91CEA section 2(h)(7)(A), 7 U.S.C. 2(h)(7)(A) 

(providing relief from the clearing and trade 

execution mandate for swap transactions entered 

into where at least one counterparty is not a 

financial entity and uses the swap to hedge or 

mitigate commercial risk). As Petitioners note, 

while the end-user exception would provide some 

relief for Exempt Non-Financial Energy 

Transactions, the transactions ‘‘nonetheless [would 

be] subject to other regulatory requirements.’’ 

Petitioners’ Letter at 12. 

92See id. Petitioners argue that by providing both 

the ‘‘general end-user exception’’ and the ‘‘specific 

4(c)(6) public interest waiver,’’ ‘‘Congress clearly 

intended that that the Commission waive its 

jurisdiction over [transactions entered into between 

FPA section 201(f) entities], not merely that such 

entities would have the end-user exception.’’ Id. 

reserve the right to decide later that it 

has jurisdiction over [a ‘‘Generation 

Capacity’’ transaction between ‘‘Exempt 

Entities’’] as an option.’’ 84

The Commission has declined to 

remove the reference to CEA section 

4c(b) and Commission regulation 32.4 

from the Conditions of the Final Order. 

As is standard practice with past 

exemptive orders issued pursuant to 

CEA section 4(c), the Commission 

reserves its general anti-fraud and antimanipulation authority, as well as the 

ability to revisit the terms and 

conditions of the relief at any time and 

determine that certain transactions are 

jurisdictional in order to execute the 

Commission’s duties and advance the 

public interests and purposes of the 

CEA. The Commission also believes it 

prudent to reserve certain scienter-based 

prohibitions in the Act and Commission 

regulations (without finding it necessary 

in this particular context to preserve 

other enforcement authority), and has 

modified the language in the Final 

Order to make the scope of this 

reservation clear. While Petitioners are 

correct that the provisions in question 

do not articulate the Commission’s 

general anti-fraud, anti-manipulation 

and enforcement authority directly, the 

provisions exemplify a possible 

statutory basis for bringing an 

enforcement action, were a need to arise 

for the Commission to do so, and notes 

that the inclusion of these provisions is 

not intended to bring any transactions 

under CFTC jurisdiction for purposes 

other than enforcement. 

The Commission also has determined 

to add new CEA sections 4s(h)(1)(A) and 

4s(h)(4)(A) 85 and Commission 

regulations 32.410(a) and (b) 86 to the 

non-exclusive list of provisions that 

could provide a possible statutory basis 

for an enforcement action, as it has done 

in a similar proposed exemption for 

certain regional transmission 

organizations (‘‘RTO’’) and independent 

system operators (‘‘ISO’’).87 The 

inclusion of CEA sections 4c(b), 

4s(h)(1)(A) and 4s(h)(4)(A), and 

Commission regulation 32.4, as 

examples of reserved authority in no 

way indicates the Commission’s belief 

that a certain Exempt Non-Financial 

Energy Transaction is or could be a 

commodity option or other type of 

swap; to the contrary, consistent with 

the Commission’s interpretation of the 

authority contained in section 4(c), the 

Commission has taken no position in 

issuing the Final Order as to the product 

category or jurisdictional or nonjurisdictional nature of any of the 

exempted transactions. 

Finally, the Commission is adding 

CEA section 4(d) to the non-exclusive 

list of reserved enforcement authority. 

The Commission believes it is important 

to highlight that, as with all exemptions 

issued pursuant to CEA section 4(c), the 

exemption ‘‘shall not affect the 

authority of the Commission under any 

other provision of [the CEA] to conduct 

investigations in order to determine 

compliance with the requirements or 

conditions of such exemption or to take 

enforcement action for any violation of 

any provision of [the CEA] or any rule, 

regulation or order thereunder caused 

by the failure to comply with or satisfy 

such conditions or requirements.’’ 88

E. Other Clarification and Comments 

The Commission is providing further 

clarification with respect to the 

appropriate uses of Exempt NonFinancial Energy Transactions and 

responding to other comments made by 

the Petitioners. 

1. Clarification With Respect to the 

Ability of Exempt Entities To Use 

Exempt Non-Financial Energy 

Transactions To Manage Price Risks 

The Commission requested comment 

on whether Exempt Non-Financial 

Energy Transactions, as defined in the 

Proposed Order, could be used to hedge 

price risk in an underlying commodity, 

and if so, whether the Commission 

explicitly should exclude such pricehedging transactions.89 Petitioners 

responded that they use Exempt NonFinancial Energy Transactions to 

‘‘ ‘hedg[e] or mitigat[e] commercial risks’ 

arising from electric operations,’’ and 

that commercial risks include ‘‘both 

price and availability risks of the 

nonfinancial commodities required as 

fuel for generation or the goods or 

services that the entity sells or 

anticipates selling.’’ 90 If the 

Commission explicitly were to exclude 

price hedging transactions from the 

scope of relief, Petitioners argued they 

would be required to rely on the more 

limited end-user exception to clearing 

for such transactions,91 which Congress 

could not have intended because it 

added additional relief specifically for 

FPA section 201(f) entities in section 

4(c)(6) of the CEA.92

The Commission is persuaded that 

Congress intended for the Commission 

to consider providing relief for 

transactions managing price risk entered 

into between FPA section 201(f) entities 

that goes beyond the relief available 

through the end-user exception for price 

hedging transactions, if in the public 

interest. Therefore, the Commission has 

made explicit in the Final Order 

definition that the scope of relief covers 

transactions entered into not only to 

manage supply risk arising from an 

Exempt Entity’s public service 

obligation to physically generate, 

transmit, and/or deliver electric energy 

service, but also any price risk 

associated with an underlying 

commodity used to facilitate the public 

service obligation. The Commission 

believes that the overall effect of the 

revisions to the definition of Exempt 

Non-Financial Energy Transaction 


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93See supra Section II.B. 

94As previously noted, the Commission’s public 

interest determination was premised on an Exempt 

Entity’s inability to use Exempt Non-Financial 

Energy Transactions as purely financial transactions 

for speculative purposes only. See supra Section 

II.B. 

95The Commission also confirms its 

determination, as expressed in the Proposed Order, 

that Exempt Non-Financial Energy Transactions 

entered into solely between Exempt Entities do not 

materially impair price discovery in Commissionregulated markets. See supra Section III.C. In 

response to the Commission asking whether there 

could be any circumstances where it should revisit 

this determination and require reporting of swap 

transactions to a swap data repository for price 

transparency purposes, Petitioners responded by 

reiterating their argument that because Exempt 

Non-Financial Energy Transactions are bespoke and 

occur within a ‘‘closed loop’’ of Exempt Entities, 

they do not affect price discovery in Commissionregulated markets. Petitioners’ Letter at 9–10. 

Petitioners also argued that were FERC to require 

regulatory reporting of electric energy transactions 

entered into by FPA section 201(f) entities, the 

nature of the reporting and regulatory purposes 

behind requiring such reporting would be very 

different from those behind price transparency 

reporting of swaps as required by the CEA and 

Commission regulations. See id. At this time, the 

Commission agrees that any incremental regulatory 

benefit that might be gained from requiring 

regulatory reporting of Exempt Non-Financial 

Energy Transactions entered into between Exempt 

Entities is not necessary for purposes of making the 

required public interest determinations in issuing 

the Final Order, regardless of whether FERC 

requires reporting for FPA 201(f) entities in the 

future. 

96Proposed Order at 51013. 

97Petitioners’ Letter at 11. 

98CEA section 4(c)(1) provides that the 

Commission may exempt any agreement, contract, 

or transaction ‘‘either retroactively or prospectively, 

or both * * *.’’ 7 U.S.C. 6(c)(1). 

99Proposed Order at 51013. 

100 Id. at 11–12. 

101 Id. Petitioners specifically noted their 

disagreement with the Commission’s interpretation 

of CEA section 4(c)(6) ‘‘as requiring an analysis of, 

or a limitation on, the transactions or class of 

transactions to be exempted * * *.’’ Id. at 2, n.5. 

102See id. at 5. 

103CEA section 4(c)(6), 7 U.S.C. 6(c)(6). 

104 Id. 

105See 7 U.S.C. 2(a)(1)(A), as amended by the 

Dodd-Frank Act section 722(a). The provision 

already codified the Commission’s exclusive 

jurisdiction with respect to commodity futures and 

options transactions. 

106The Commission notes that such a carve-out 

would not be without precedent. See, e.g., CEA 

section 2(c)(1), 7 U.S.C. 2(c)(1) (providing that, 

subject to certain exceptions, the CEA does not 

govern or apply to an agreement, contract, or 

transaction in foreign currency, government 

securities, security warrants, security rights, resales 

of installment loan contracts, repurchase 

transaction in an excluded commodity, or 

mortgages or mortgage purchase commitments); 

CEA section 2(a)(1)(C)(i), 7 U.S.C. 2(a)(1)(C)(i) 

(providing that the CEA shall not apply to, and the 

Commission shall not have jurisdiction with respect 

to, designating a contract market for any transaction 

in which a party to such transaction acquires a put, 

call, or other option on one or more securities). 

previously discussed 93 also helps to 

clarify that the Final Order clearly 

covers price-risk management 

transactions directly related to an 

Exempt Entity’s public service 

obligation. The Commission notes, 

however, that because these transactions 

cannot be used for speculative 

purposes,94 any Exempt Non-Financial 

Energy Transaction used to manage the 

price risk of an underlying commodity 

must always be associated with an 

obligation to make or take physical 

delivery of that underlying 

commodity.95

2. Request That Relief Be Retroactive to 

the Date of Enactment of the DoddFrank Act 

The Commission sought comment on 

whether it should grant Petitioners’ 

original request for the effective date of 

any 4(c) relief issued to be retroactive to 

the date of enactment of the Dodd-Frank 

Act.96 Petitioners reiterated their 

rationale from the Petition that certain 

transactions covered by the proposed 

definition of Exempt Non-Financial 

Energy Transactions ‘‘might otherwise 

require analysis as to whether they are 

‘historical swaps,’ and might otherwise 

require reporting by one or the other of 

the Exempt Entities, both of which are 

non-SDs/MSPs under the Dodd-Frank 

Act.’’ 97 In order to prevent Exempt 

Entities from passing along the costs of 

such historical swap analysis and 

reporting to electric energy consumers, 

the Commission has provided that the 

relief in the Final Order applies 

retroactively to the date of enactment of 

the Dodd-Frank Act.98 The Commission 

is persuaded that the representations 

made by Petitioners with respect to the 

public service obligations of government 

and cooperatively-owned not-for-profit 

electric utility companies and the 

transactions entered into to satisfy such 

obligations apply equally to the period 

between the enactment of the DoddFrank Act and the issuance of the Final 

Order contained herein, and thus the 

same public interest determinations 

support retroactive 4(c) relief. 

3. Request That Relief Be Categorical 

In response to the Commission’s 

specific request for comments on the 

topic,99 Petitioners reiterated their 

support for the Commission issuing 

categorical relief that would apply to all 

Electric Operation-Related Transactions, 

regardless of whether a transaction was 

described by one of the six defined 

categories.100 Petitioners interpreted the 

‘‘public interest waiver’’ codified in 

CEA section 4(c)(6) as a mandate to the 

Commission to exempt all transactions 

that occur between the ‘‘closed loop’’ of 

FPA section 201(f) entities, and that 

‘‘[n]othing in the statute require[d] the 

Commission to analyze or categorize 

[such] transactions * * * .’’ 101 The 

Commission rejects this interpretation 

of Congressional intent. 

As acknowledged by Petitioners 

elsewhere in their comment letter, 

Congress intended for all transactions 

occurring within the closed-loop of FPA 

section 201(f) entities to be ‘‘eligible 

for’’ an exemption,102 rather than 

automatically exempt without further 

Commission consideration or action. 

First, the plain language of CEA section 

4(c)(6) added by the Dodd-Frank Act is 

unambiguous: Categorical relief is not 

mandatory and any relief provided 

requires an analysis of, and possible 

limitation to, the transactions being 

exempted. The provision begins with an 

explicit ‘‘if’’ clause pre-conditioning any 

relief upon the Commission 

‘‘determin[ing] that the exemption 

would be consistent with the public 

interest and purposes of [the] Act.’’ 103

If this determination can be made, the 

provision then instructs the 

Commission to issue relief ‘‘in 

accordance with’’ CEA sections 4(c)(1) 

and 4(c)(2), implying that additional 

analysis and limitations may be 

necessary and/or appropriate in the 

judgment of the Commission.104

Second, the Commission notes that the 

Dodd-Frank Act also amended CEA 

section 2(a)(1)(A) to codify the 

Commission’s exclusive jurisdiction 

with respect to swap transactions.105

Had Congress intended for any 

transaction entered into between FPA 

section 201(f) entities to be exempt from 

this exclusive jurisdiction, it could have 

explicitly carved out these entities and 

any transactions occurring between 

them as categorically exempt.106

Instead, the Commission believes that 

Congress explicitly recognized 

transactions between entities described 

in FPA section 201(f) as eligible for a 

mandatory exemption, subject to those 

pre-conditions which the Commission 

deems appropriate. 

Accordingly, as stated in the Proposed 

Order, the Commission does not believe 

it can determine conclusively that it 

would be in the public interest to 

exempt any transaction entered into 

between Exempt Entities. Even if a 

transaction were to meet the 

requirements of the Exempt NonFinancial Energy Transactions 

definition, but not be described by one 

of the six enumerated transaction 

categories, the Commission would lack 

the necessary information about the 

specific nature of the transaction in 

order to make the requisite public 

interest determination. 


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107To the extent that the Final Order applies to 

entities not explicitly described in FPA section 

201(f), the Commission is using its general 

exemptive authority found in CEA section 4(c)(1). 

108These determinations include that (i) CEA 

section 4(a)—the exchange trading requirement— 

should not apply; (ii) the exemption is consistent 

with the public interest and purposes of the CEA; 

(iii) the exemption is available only for 

‘‘appropriate persons,’’ as such term is defined in 

CEA section 4(c)(3); and (iv) the exemption will not 

have a materially adverse effect on the ability of the 

Commission or any contract market to discharge its 

regulatory or self-regulatory duties under the CEA. 

See 7 U.S.C. 6(c)(2). 

109See generally Proposed Order at 51009–12 

(proposing the Commission’s CEA section 4(c) 

determinations). 

110These public interests include ‘‘providing a 

means for managing and assuming price risks, 

discovering prices, or disseminating pricing 

information through trading in liquid, fair and 

financially secure trading facilities.’’ CEA section 

3(a), 7 U.S.C. 5(a). 

111 Given that Petitioners represented that 

exchange-traded instruments are, by their nature, 

primarily standardized, and therefore in many or 

most cases may be less effective for purposes of 

hedging the risks that Exempt Non-Financial Energy 

Transactions are specifically tailored to offset (e.g., 

due to the contract sizes not matching the risk being 

hedged, inconvenient delivery points, and/or 

unavailability of a contract overlying the specific 

commodity, the risk of which a market participant 

seeks to hedge), the Commission likewise presently 

considers any price link between Exempt NonFinancial Energy Transactions and transactions 

executed on exchange-traded derivative markets too 

attenuated to materially impair price discovery of 

exchange-traded derivatives. 

112The Joint Associations agreed with this 

determination in the Proposed Order. See Joint 

Associations’ Letter at 3. 

113See supra Section II.E.1. 

114 In the Proposed Order, the Commission noted 

that Exempt Non-Financial Energy Transactions 

generally are variable-priced transactions, as 

opposed to fixed-price, and therefore are entered 

into for the purposes of hedging supply risk 

resulting from unpredictable fluctuations in 

demand for electric energy. See Proposed Order at 

51010. The Commission understands this to still be 

true, but also understands that in limited 

circumstances, fixed-price arrangements exist such 

that Exempt Entities can hedge price risk. 

115The Final Order, however, still does not 

exempt transactions that are speculative. Unlike 

price and supply risk management, speculative 

swap activity is not necessary to allow Exempt 

Entities to carry out their public service mission. 

116 In order to foster the public interests, it is the 

purpose of the CEA ‘‘to deter and prevent price 

manipulation or any other disruptions to market 

integrity; to ensure the financial integrity of all 

transactions subject to [the CEA] and the avoidance 

of systemic risk; to protect all market participants 

from fraudulent or other abusive sale practices and 

misuses of customer assets; and to promote 

responsible innovation and fair competition among 

boards of trade, other markets and market 

participants.’’ CEA section 3(b), 7 U.S.C. 5(b). 

117See supra note 11 and accompanying text. 

118The Joint Associations agreed with this 

determination in the Proposed Order. See Joint 

Associations’ Letter at 2. 

119The Commission notes that the Final Order 

retains the Commission’s general anti-fraud and 

Continued 

III. CEA Section 4(c) Determinations 

The Commission is issuing the Final 

Order pursuant its authority in CEA 

sections 4(c)(1) and 4(c)(6).107 As 

required under both sections, the 

Commission must make certain 

determinations prior to issuing 

exemptive relief.108 Generally, the 

Commission confirms the 

determinations it made in the Proposed 

Order because it believes that such 

determinations continue to support 

adopting the Final Order.109 Where 

substantive changes have been made to 

the scope of the Final Order, the 

Commission is addressing such changes 

with additional discussion. In some 

instances, the Commission is expanding 

upon its proposed determinations to 

further support adoption of final 

exemptive relief for Exempt NonFinancial Energy Transactions entered 

into between Exempt Entities. 

A. Applicability of CEA Section 4(a) 

Due to the bespoke nature of Exempt 

Non-Financial Energy Transactions, the 

Commission does not believe that the 

exchange-trading requirement of CEA 

section 4(a) should apply. Generally, the 

exchange-trading requirement is meant 

to facilitate the price discovery and 

price transparency processes. Because 

(i) exchange-traded contracts are less 

effective at adequately performing as 

risk management substitutes for Exempt 

Non-Financial Energy Transactions; and 

(ii) Exempt Non-Financial Energy 

Transactions are executed within a 

closed-loop of Exempt Entities, and thus 

are not market facing, Exempt NonFinancial Energy Transactions do not 

materially impair price discovery in 

Commission-regulated markets and can 

continue to be executed bilaterally. For 

that reason, the Commission is limiting 

the Final Order to Exempt NonFinancial Energy Transactions entered 

into between Exempt Entities. 

B. Public Interest and Purposes of the 

CEA 

The Commission continues to believe 

that the scope of the Final Order is 

consistent with the public interest 

supported by the CEA.110 As previously 

noted, Exempt Non-Financial Energy 

Transactions are bespoke and not 

suitable for trading as standardized 

products on a board of trade. 

Furthermore, the Final Order applies 

only to Exempt Non-Financial Energy 

Transactions entered into between 

Exempt Entities, which are transacting 

within a closed loop, and therefore do 

not materially impair price discovery in 

Commission-regulated markets.111

Therefore, exempting these types of 

transactions from the Commission’s 

jurisdiction will not materially impair 

price discovery of electricity-related 

commodities in Commission-regulated 

markets.112

As discussed previously in response 

to Petitioners’ comments, the 

Commission has clarified in the Final 

Order that Exempt Non-Financial 

Energy Transactions can be used to 

hedge prices of underlying 

commodities, so long as the transaction 

meets the other definitional criteria and 

falls into one of the delineated 

transaction categories.113 The 

Commission believes that exempting 

price hedging transactions is still in the 

public interest because of Exempt 

Entities’ unique public service mission 

and not-for-profit operational structure. 

Like all public utilities, Exempt Entities 

have a need to manage the risk 

associated with fluctuations in both the 

supply and price of a commodity 

underlying a transaction.114 While 

managing supply risk goes to the 

reliability aspect of Exempt Entities’ 

public service mission, hedging price 

risk goes to providing electric energy 

service that is low-cost as well. 

Therefore, it is in the public interest to 

allow Exempt Entities to continue 

engaging in price hedging transactions 

with one another, such that they can 

continue to provide both reliable and 

affordable electric energy service to 

customers.115

The Commission also believes that the 

Final Order is consistent with the 

purposes of the CEA.116 As recognized 

by Congress in passing FPA section 

201(f),117 the not-for-profit structure and 

governance model—elected or 

appointed government officials or 

citizens, or cooperative members or 

consumers—of all Exempt Entities 

reduce the incentives and other 

conditions that traditionally lead to 

fraudulent or manipulative trading 

activity, and thus should mitigate the 

need for prescriptive federal 

oversight.118 As previously noted, the 

Commission has clarified in the Final 

Order that some Exempt Entities may 

have a corporate for-profit form, but 

must nonetheless be wholly owned by 

other not-for-profit Exempt Entities. The 

Commission takes notice of the 

petitioner’s representation that a forprofit subsidiary of an Exempt Entity, 

when engaged in Exempt Non-Financial 

Energy Transactions with other Exempt 

Entities, is less likely to engage in 

abusive trading practices than other 

entities, particularly in light of the nonprofit, public service nature of the 

parent Exempt Entity (or Exempt 

Entities).119


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anti-manipulation authority, and certain scienterbased prohibitions, in addition to all public 

utilities, regardless of FPA section 201(f) status, 

being subject to FERC’s market manipulation 

authority. See FPA section 222v, 16 U.S.C. 824v. 

120CEA section 4(c)(2)(B)(i) requires that the 

Commission exercise its 4(c) exemptive authority 

with respect to transactions entered into solely 

between ‘‘appropriate persons.’’ See 7 U.S.C. 

6(c)(2)(B)(i). CEA section 4(c)(3) provides various 

criteria an entity can meet for purposes of 

qualifying as an appropriate person. 7 U.S.C. 

6(c)(3). The Joint Associations supported the 

Commission’s proposed determination and 

underlying rationale that all Exempt Entities were 

appropriate persons. See Joint Associations’ Letter 

at 2. 

121CEA section 4(c)(6)(C), 7 U.S.C. 6(c)(6)(C). 

Under CEA section 4(c)(3)(K), the Commission can 

determine other persons not explicitly enumerated 

in section 4(c)(3) ‘‘to be appropriate in light of their 

financial or other qualifications, or the applicability 

of appropriate regulatory protections.’’ 7 U.S.C. 

6(c)(3)(K). The Commission believes that Congress’ 

explicit recognition of FPA section 201(f) entities as 

being eligible for exemptive relief under CEA 

section 4(c)(6) constitutes an ‘‘other qualification’’ 

in support of such entities being appropriate 

persons, regardless of whether they otherwise 

would qualify under one of the enumerated 

appropriate person categories in CEA sections 

4(c)(3)(A)–(J). 

122The Commission notes that many FPA section 

201(f) entities would qualify as appropriate persons 

under other CEA section 4(c)(3) criteria. See, e.g., 

CEA section 4(c)(3)(F) (providing that a business 

entity with a net worth exceeding $1,000,000 or 

total assets exceeding $5,000,000 is an appropriate 

person); CEA section 4(c)(3)(H) (providing that a 

government entity or political subdivision thereof, 

or any instrumentality, agency, or department of a 

government entity or political subdivision thereof, 

is an appropriate person). 

123The Commission notes that such entities are 

being exempted pursuant to the Commission’s 

general exemptive authority in CEA section 4(c)(1). 

124Compared to 201(f) cooperatives, non-201(f) 

electric cooperatives are still treated as ‘‘public 

utilities’’ for purposes of Part II of the FPA, and 

thus must receive FERC authorization under FPA 

section 203 to sell, merge or consolidate their 

electric facilities, or to purchase, acquire, or take 

any security of any other public utility. See Petition 

at 16 (citing 18 CFR Parts 2 and 33, Transactions 

Subject to FPA Section 203). Additionally, such 

cooperatives must seek approval under FPA 

sections 205 and 206 when altering rates and 

charges to be collected in transmitting or selling 

electric energy service in interstate commerce. See 

id. (citing Promoting Wholesale Competition 

Through Open Access Non-discriminatory 

Transmission Services by Public Utilities, Recovery 

of Stranded Costs by Public Utilities and 

Transmitting Utilities, 78 FERC ¶ 61,315 at 62,270 

(2005)). 

125To the extent that an electric cooperative 

would not otherwise qualify as an appropriate 

person, regardless of whether it qualifies as an FPA 

section 201(f) entity, the Commission notes that its 

determination that such cooperatives are 

appropriate persons applies only in the context of 

the Final Order, and should not be interpreted to 

mean that all electric cooperatives are appropriate 

for purposes of any existing or future exemptions 

issued by the Commission pursuant to CEA section 

4(c). 

126 5 U.S.C. 601 et seq. 

127U.S. Small Business Administration, Table of 

Small Business Size Standards Matched to North 

C. Appropriate Persons 

The Commission believes that Exempt 

Entities, as defined in the Final Order, 

are all ‘‘appropriate persons’’ for 

purposes of satisfying the CEA section 

4(c)(2) requirement.120 As a starting 

point, the Commission believes that 

there is a presumption that entities 

explicitly described in FPA section 

201(f) are appropriate persons because 

of Congress’ mandate to the Commission 

to exempt, in accordance with CEA 

sections 4(c)(1) and 4(c)(2) (which 

precludes the Commission from 

granting a CEA section 4(c) exemption 

to persons other than appropriate 

persons), transactions entered into 

between such entities if it is in the 

public interest and consistent with the 

purposes of the Act.121 That is, the 

Commission infers that Congress would 

not have added CEA section 4(c)(6)(C), 

which explicitly identifies FPA section 

201(f) entities as eligible for an 

exemption, unless it had presumed such 

entities were appropriate beneficiaries 

of an exemption for purposes of the CEA 

section 4(c)(2) requirement, and 

subjected CEA section 4(c)(6) to CEA 

section 4(c)(2) simply so that the 

Commission would verify that 

presumption. For the reasons discussed 

throughout this release, the Commission 

believes that FPA section 201(f) entities 

are appropriate persons.122

The Commission believes that Exempt 

Entities not explicitly described in FPA 

section 201(f) are also appropriate 

persons.123 First, the Commission 

interprets Federally-recognized Indian 

tribes as appropriate persons under CEA 

section 4(c)(3)(H) because they are 

analogous to governmental entities. 

Next, some non-FPA section 201(f) 

electric cooperatives may qualify as 

appropriate persons under the CEA 

section 4(c)(3)(F) criteria by having a net 

worth exceeding $1,000,000 or total 

assets exceeding $5,000,000. For any 

non-FPA section 201(f) cooperative that 

does not otherwise qualify as an 

appropriate person under the specific 

provisions of section 4(c)(3), the 

Commission believes that such entities 

are at least as financially sophisticated 

and operationally capable as FPA 

section 201(f) cooperatives. Such 

cooperatives would not qualify as FPA 

section 201(f) entities because they sell 

in excess of 4,000,000 megawatt hours 

of electricity per month, and/or receive 

financing from lenders other than the 

RUS. In either case, such cooperatives 

likely would have greater assets due to 

the increased sales, which could qualify 

them for better financing terms than 

those offered by the RUS. Additionally, 

the Commission notes that such 

cooperatives are not exempt from 

FERC’s jurisdiction, and thus subject to 

more regulatory oversight than FPA 

section 201(f) electric cooperatives. The 

Commission interprets such FERC 

oversight of non-FPA section 201(f) 

electric cooperatives as the type of 

‘‘appropriate regulatory protections’’ 

within the meaning of CEA section 

4(c)(3)(K) that Congress had in mind 

when promulgating new exemptive 

authority for FPA 201(f) entities in CEA 

section 4(c)(6)(C).124 Therefore, under 

the Commission’s discretionary 

authority in CEA section 4(c)(3)(K) to 

determine non-enumerated entities as 

appropriate persons based upon 

financial or other qualifications, or the 

applicability of other appropriate 

regulatory protections, the Commission 

believes that such non-FPA section 

201(f) cooperatives are appropriate 

persons.125

D. Ability to Discharge Regulatory or 

Self-Regulatory Duties 

As stated previously, Exempt NonFinancial Energy Transactions are 

bespoke and executed within the 

closed-loop of Exempt Entities, meaning 

they do not materially affect trading or 

pricing of transactions involving the 

same underlying commodity in 

Commission-regulated markets. 

Additionally, the Commission has 

retained its anti-fraud and antimanipulation authority, as well as 

certain scienter-based prohibitions. 

Accordingly, the Commission does not 

believe that the exemptive relief 

provided in the Final Order will have a 

materially adverse effect on the ability 

of the Commission or any contract 

market to discharge their regulatory or 

self-regulatory duties under the CEA. As 

noted above, the Commission is limiting 

the Final Order to Exempt NonFinancial Energy Transactions entered 

into other than on or subject to the rules 

of a registered entity, submitted for 

clearing to a DCO, and/or reported to a 

SDR. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires that Federal agencies 

consider whether proposed rules will 

have a significant economic impact on 

a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis on the impact.126

The relief provided in the Final Order 

may be available to some small entities, 

because they may fall within standards 

established by the Small Business 

Administration (‘‘SBA’’) defining 

entities with electric energy output of 

less than 4,000,000 megawatt hours per 

year as a ‘‘small entity.’’ 127


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 19681 

American Industry Classification System Codes, 

footnote 1 (effective March 26, 2012), available at 

http://www.sba.gov/sites/default/files/files/Size_

Standards_Table.pdf. 

128Petitioners’ Letter at 8. The SBREFA amended 

the RFA. 

129See 5 U.S.C. 605. 

130Petitioners’ Letter at 11. 

131See supra Section II.E.2. 

132Petitioners highlighted that the majority of the 

entities their respective organizations represent fall 

within the definition of ‘‘small entity’’ under the 

SBREFA, which incorporates by reference the SBA 

definition. Petitioners’ Letter at 2. 133 44 U.S.C. 3501 et seq. 

134 44 U.S.C. 3502(3)(a)(1). See also 44 U.S.C. 

3518(c)(1)(B)(i) and (ii) (excluding collections of 

information related to administrative investigations 

against specific individuals or entities, and any 

subsequent civil actions). 

135CEA section 4(a). See also CEA sections 1a(19) 

(‘‘the term ‘future delivery’ does not include any 

sale of a cash commodity for deferred shipment or 

delivery’’); 1a(47)(B)(ii) (excluding from the swap 

definition ‘‘any sale of a nonfinancial commodity 

* * * for deferred shipment or delivery, so long as 

the transaction is intended to be physically 

settled’’). 

136CEA section 1a(36). 

137Public Law 111–203, 124 Stat. 1376 (2010). 

More specifically, Title VII of the Dodd-Frank Act 

amended the CEA to establish a comprehensive 

new regulatory framework for swaps, a term defined 

by the statute. See Section 4(c)(1) of the CEA. The 

legislative framework seeks to reduce risk, increase 

transparency, and promote market integrity within 

the financial system by, among other things: (1) 

Providing for the registration and comprehensive 

regulation of swap dealers (‘‘SDs’’) and major swap 

participants (‘‘MSPs’’); (2) imposing clearing and 

trade execution requirements on standardized 

derivative products; (3) creating robust 

recordkeeping and real-time reporting regimes; and 

(4) enhancing the Commission’s rulemaking and 

enforcement authorities with respect to, among 

others, all registered entities and intermediaries 

subject to the Commission’s oversight. Futures, 

options, and swaps are referred to collectively 

herein as ‘‘derivatives.’’ 

138Section 4(c)(1) of the CEA. 

In response to the Proposed Order, the 

Commission received several comments 

from the Petitioners relevant to the RFA. 

The Petitioners requested that the 

Commission conduct future analyses of 

the impact on small entities the 

Petitioners represent if the Commission 

ever were to revisit the terms and 

conditions of the relief, and that the 

Commission provide relief retroactively 

to the enactment of the Dodd-Frank Act 

in the Final Order. In response to the 

request that the Commission conduct a 

future Small Business Regulatory 

Enforcement Fairness Act (‘‘SBREFA’’) 

analysis,128 the Commission notes that 

it does not conduct RFA analyses based 

upon requests; rather, all Commission 

rulemaking are subject to the legal 

requirements of the RFA, which 

provides that a RFA analysis shall not 

apply if the head of the agency certifies 

that the rule will not, if promulgated, 

have a significant economic impact on 

a substantial number of small 

entities.129 In response to the request 

that the Commission conduct a full RFA 

analysis if it were to decide not to grant 

the relief provided herein retroactively 

to the enactment of the Dodd-Frank 

Act,130 the Commission has addressed 

this comment by providing retroactive 

relief in the Final Order.131 To the 

extent that these comments are 

preemptive in nature or have been 

addressed in the Final Order, the 

Commission is of the view that the Final 

Order would not have a significant 

economic impact on a substantial 

number of small entities, including any 

Exempt Entities that may qualify as a 

small entity. 

With regards to the Petitioners’ 

general conclusion that the 

organizations that they represent fall 

within the definition of ‘‘small 

entity,’’ 132 the Commission notes that it 

has considered carefully the potential 

effect of this Final Order on small 

entities and has determined that it will 

not have a significant economic impact 

on any Exempt Entity, including any 

entities that may be small. Rather, the 

Final Order relieves the economic 

impact that the Exempt Entities, 

including any small entities that may 

opt to take advantage of the Final Order, 

by exempting certain of their 

transactions from the application of 

substantive regulatory compliance 

requirements of the CEA and 

Commission regulations thereunder. 

Significantly, the Final Order prevents 

new requirements for swaps, such as 

clearing, trade execution and regulatory 

reporting, from affecting transactions 

that Exempt Entities traditionally have 

engaged in to serve their unique public 

service mission of providing reliable, 

affordable electric energy service to 

customers. Absent such relief and to the 

extent Exempt Non-Financial Energy 

Transactions would qualify as swaps, 

small entities covered by the Final 

Order could be subject to compliance 

with all aspects of the CEA and its 

implementing regulations. Accordingly, 

the Chairman, on behalf of the 

Commission, hereby certifies pursuant 

to 5 U.S.C. 605(b) that the Final Order 

will not have a significant economic 

impact on a substantial number of small 

entities. 

B. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

(‘‘PRA’’), an agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number from the Office of 

Management and Budget (‘‘OMB’’). The 

Commission determined that the 

Proposed Order did not contain any 

new information collection 

requirements, and did not receive any 

comments regarding this determination. 

As the Commission has left the 

conditions that were contained in the 

Proposed Order unchanged, the Final 

Order therefore also does not contain 

any new information collection 

requirements that would require 

approval of OMB under the PRA.133

While the Commission reserves its 

authority to inspect books and records 

kept in the normal course of business 

that relate to Exempt Non-Financial 

Energy Transactions between Exempt 

Entities pursuant to the Commission’s 

regulatory inspection authorities, the 

Commission is not imposing a 

recordkeeping burden with respect to 

the books and records of Exempt NonFinancial Energy Transactions that 

already are kept in the normal course of 

business. Moreover, any inspection of 

books and records typically only will 

occur in the event that circumstances 

warrant the need to gain greater 

visibility with respect to Exempt NonFinancial Energy Transactions as they 

relate to Exempt Entities’ overall market 

positions and to ensure compliance 

with the terms of this Final Order. 

Accordingly, each inquiry would be 

specific to the facts triggering the 

inquiry, and thus will not involve 

‘‘answers to identical questions posed to 

* * * ten or more persons,’’ as the term 

‘‘collection of information’’ is defined in 

the PRA in pertinent part.134

C. Consideration of Costs and Benefits 

Prior to the passage of the Dodd-Frank 

Act, swap market activity was largely 

unregulated. In the wake of the financial 

crisis of 2008, Congress adopted the 

Dodd-Frank Act, in part, to address 

conditions with respect to swap market 

activities. Among other things, the 

Dodd-Frank Act amends the CEA to 

expand its scope beyond regulation of 

‘‘contract[s] of sale of a commodity for 

future delivery’’ 135 (commonly referred 

to as futures) and options,136 by 

establishing a comprehensive regulatory 

framework for swaps as well.137 In 

amending the CEA, however, the DoddFrank Act preserved the Commission’s 

authority under CEA section 4(c)(1) to 

exempt any transaction or class of 

transactions, including swaps, from 

select provisions of the CEA.138 It also 

added new subparagraph 4(c)(6)(C) to 

the CEA specifically directing the 

Commission, in accordance with 4(c)(1) 

and 4(c)(2), to exempt agreements, 

contracts, or transactions entered into 

between FPA 201(f) entities if doing so 

‘‘is consistent with the public interest 


srobinson on DSK4SPTVN1PROD with NOTICES
19682 Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 

139CEA sections 4(c)(2) and 4(c)(3) further 

articulate the conditions precedent to granting an 

exemption under CEA section 4(c)(1), including 

that the exempted agreements, contracts, or 

transactions be entered into between ‘‘appropriate 

persons,’’ as that term is defined in CEA section 

4(c)(3). 

140Section V.B., infra. ‘‘Exempt Non-Financial 

Energy Transactions’’ consist of ‘‘any agreement, 

contract, or transaction based upon a ‘commodity,’ 

as such term is defined and interpreted by the CEA 

and regulations thereunder, that would not have 

been entered into, but for an Exempt Entity’s need 

to manage supply and/or price risks arising from its 

existing or anticipated public service obligations to 

physically generate, transmit, and/or deliver 

electric energy service to customers. The term 

‘Exempt Non-Financial Energy Transaction’ 

excludes agreements, contracts, and transactions 

based upon, derived from, or referencing any 

interest rate, credit, equity or currency asset class, 

or any grade of a metal, or any agricultural product, 

or any grade of crude oil or gasoline that is not used 

as fuel for electric energy generation. The term 

‘Exempt Non-Financial Energy Transaction’ also 

excludes agreements, contracts, or transactions 

entered into on or subject to the rules of a registered 

entity, submitted for clearing to a derivatives 

clearing organization, and/or reported to a swap 

data repository. Exempt Non-Financial Energy 

Transactions are limited to the following categories, 

which may exist as stand-alone agreements or as 

components of larger agreements that combine the 

following categories of transactions: [electric energy 

delivered, generation capacity, transmission 

services, fuel delivered, cross-commodity pricing, 

and other goods and services].’’ 

141Section IV.A., infra. An Exempt Entity is: (i) 

Any electric facility or utility that is wholly owned 

by a government entity, as described in Federal 

Power Act (‘‘FPA’’) section 201(f), 16 U.S.C. 824(f); 

(ii) any electric facility or utility that is wholly 

owned by an Indian tribe recognized by the U.S. 

government pursuant to section 104 of the Act of 

November 2, 1994, 25 U.S.C. 479a–1; (iii) any 

electric facility or utility that is wholly owned by 

a cooperative, regardless of such cooperative’s 

status pursuant to FPA section 201(f), so long as the 

cooperative is treated as such under Internal 

Revenue Code section 501(c)(12) or 1381(a)(2)(C), 

26 U.S.C. 501(c)(12), 1381(a)(2)(C), and exists for 

the primary purpose of providing electric energy 

service to its member/owner customers at cost; or 

(iv) any other entity that is wholly owned, directly 

or indirectly, by any one or more of the foregoing. 

A ‘‘financial entity’’ as defined in CEA section 

2(h)(7)(C) is not an Exempt Entity. 

142Section V.C., infra. 

143 7 U.S.C. 19(a). 

144As discussed earlier, to exempt transactions 

under CEA section 4(c), the Commission need not 

first determine—and is not determining—whether 

the transactions subject to the exemption fall within 

the CEA. However, to capture potential costs and 

benefits, this consideration assumes that the 

transactions may now or in the future be 

jurisdictional. 

145Petition at 33. 

146See, e.g., CEA sections 2(a)(1)(B), 4(d), 4b, 

4c(b), 4o, 6(c), 6(d), 6(e), 6c, 6d, 8, 9 and 13, and 

Commission rules 32.4, 23.410(a) and (b), and Part 

180. CEA section 2(h)(7) (the ‘‘end-user exception’’), 

excepts a swap from the swap clearing requirement 

of CEA section 2(h)(1)(A) (it ‘‘shall be unlawful for 

any person to engage in a swap unless that person 

submits such swap for clearing * * * if the swap 

is required to be cleared’’) and the trade execution 

requirement of CEA section 2(h)(8) (transactions 

subject to the clearing requirement of CEA section 

2(h)(1) must be executed on either a designated 

contract market (‘‘DCM’’) or a swap execution 

facility (‘‘SEF’’)). The end-user exception applies if 

one counterparty is ‘‘not a financial entity; * * * 

is using swaps to hedge or mitigate commercial risk; 

and * * * notifies the Commission, in a manner set 

forth by the Commission, how it generally meets its 

financial obligations associated with entering into 

non-cleared swaps.’’ 

147CEA section 4(a). The same is true for options 

on futures. See 17 CFR 33.3(a). The discussion of 

cost-benefit implications of this Final Order with 

respect to futures contracts applies equally to 

options on futures. 

148The CEA as amended by the Dodd-Frank Act 

contemplates two types of reporting to SDR. First, 

is real-time reporting: For every swap executed, 

certain transaction information, including price and 

volume, is to be reported to an SDR’’) ‘‘as soon as 

technologically practicable.’’ CEA section 

2(a)(13)(A) & (C); see also Real-Time Public 

Reporting of Swap Transaction Data, 77 FR 1182 

(Jan. 9, 2012) (adopting 17 CFR part 43 regulations 

to implement real-time reporting). For swaps 

executed off of a DCM or SEF and for which neither 

counterparty is an SD or MSP—as the Commission 

expects Exempt Non-Financial Energy Transactions 

engaged in between Exempt Entities would be—the 

real-time reporting obligation for the transaction 

falls to one of the counterparties, as agreed between 

themselves. 17 CFR 43.3(a)(3) Second, for each 

swap, additional information beyond that required 

in real-time reports must be reported to an SDR in 

a ‘‘timely manner as may be prescribed by the 

Commission.’’ CEA section 2(a)(13)(G); see also 

Swap Data Recordkeeping and Reporting 

Requirements 77 FR 2136 (Jan. 13, 2012) (adopting 

17 CFR part 45); Swap Data Recordkeeping and 

Reporting Requirements: Pre-enactment and 

Transition Swaps 77 F.R. 35200 (June 12, 2012) 

(adopting 17 CFR part 46). 

149Swap Data Recordkeeping and Reporting 

Requirements, 77 FR 2136 (Jan. 13, 2012) (adopting 

17 CFR part 45); Swap Data Recordkeeping and 

Reporting Requirements: Pre-enactment and 

Transition Swaps 77 F.R. 35200 (June 12, 2012) 

(adopting 17 CFR part 46). 

150See Further Definition of ‘‘Swap Dealer,’’ 

‘‘Security-Based Swap Dealer,’’ ‘‘Major Swap 

Participant,’’ ‘‘Major Security-Based Swap 

Participant,’’ and ‘‘Eligible Contract Participant,’’ 77 

FR 30596 (May 23, 2012). 

151 7 U.S.C. 2(e). Additionally, absent the Final 

Order, in the event that executing Exempt Nonfinancial Energy Transactions required an Exempt 

Entity to register as an SD or MSP, additional 

regulatory requirements would apply. See, e.g., 

Confirmation, Portfolio Reconciliation, Portfolio 

Compression, and Swap Trading Relationship 

Documentation Requirements for Swap Dealers and 

and the purposes of’’ the CEA.139 The 

Commission, through this Final Order, 

is exercising its exemptive authority 

under CEA section 4(c)(1) and 4(c)(6) 

with respect to ‘‘Exempt Non-Financial 

Energy Transactions’’ 140 entered into 

solely between ‘‘Exempt Entities,’’ 141

subject to certain conditions.142 These 

conditions are, among others, that the 

relief provided in the Final Order is 

subject to (i) the Commission’s general 

anti-fraud and anti-manipulation 

authority, and scienter-based 

prohibitions under CEA sections 

2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 

4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9 

and 13, and Commission rules 32.4, 

23.410(a) and (b), and Part 180; and, ii) 

the Commission’s reserved authority to 

inspect the books and records related to 

Exempt Non-Financial Energy 

Transactions kept by Exempt Entities in 

the normal course of business pursuant 

to the Commission’s regulatory 

inspection authorities. 

1. The Statutory Mandate To Consider 

the Costs and Benefits of the 

Commission’s Action: Section 15(a) of 

the CEA 

Section 15(a) of the CEA 143 requires 

the Commission to ‘‘consider the costs 

and benefits’’ of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

section 15(a) factors. 

The Commission considers the costs 

and benefits of the Final Order to the 

public and market participants, 

including Exempt Entities, against the 

backdrop of the CEA regulatory regime 

for derivatives, as amended by the 

Dodd-Frank Act, and absent the relief 

provided by the Final Order.144 Under 

the post-Dodd-Frank Act regulatory 

regime, Exempt Entities that, as 

represented in the Petition, are 

‘‘nonfinancial end-users of [Exempt 

Non-Financial Energy Transactions 

entered into] only to hedge or mitigate 

commercial risks,’’ 145 are subject to the 

Commission’s general anti-fraud and 

anti-manipulation authority, as well as 

certain scienter-based prohibitions 

under the CEA.146 Absent the Final 

Order, to the extent that Exempt NonFinancial Energy Transactions are 

futures transactions within the meaning 

of the CEA, they would be subject to the 

statute’s exchange-trading requirement 

and a comprehensive regulatory 

scheme.147 Similarly, absent the Final 

Order, to the extent that Exempt NonFinancial Energy Transactions are 

swaps as defined in the CEA, the 

Exempt Entity counterparties to these 

transactions would be subject to 

requirements for swap data reporting 148

and recordkeeping; 149 in addition, 

unless both Exempt Entity 

counterparties to a swap transaction are 

eligible contract participants 

(‘‘ECPs’’),150 CEA section 2(e) would 

prohibit them from executing the swap 

other than on or subject to the rules of 

a registered DCM.151


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 19683 

Major Swap Participants, 77 FR 55904 (Sept. 11, 

2012); Swap Dealer and Major Swap Participant 

Recordkeeping, Reporting, and Duties Rules; 

Futures Commission Merchant and Introducing 

Broker Conflicts of Interest Rules; and Chief 

Compliance Officer Rules for Swap Dealers, Major 

Swap Participants, and Futures Commission 

Merchants, 77 FR 20128 (Apr. 3, 2012); Business 

Conduct Standards for Swap Dealers and Major 

Swap Participants With Counterparties, 77 FR 9734 

(Feb. 17, 2012). 

152 77 FR 50988, 51019 (Aug. 23, 2012). 

153 In the Proposed Order, the Commission noted 

that it could not quantify the costs and benefits of 

the relief provided therein because it did not have 

such information available to it; accordingly, the 

Commission requested commenters provide specific 

figures for its consideration. See Proposed Order at 

51019. Because the core requirements of the DoddFrank Act are currently being implemented, the 

Commission’s ability to quantify the costs and 

benefits of the Final Order is unchanged from when 

it published the Proposed Order. 

154More specifically, as discussed above in 

section II, these refinements include several 

modifications to clarify: The definition of ‘‘Exempt 

Entity,’’ the definition of ‘‘Exempt Non-Financial 

Energy Transaction,’’ the Commission’s right to 

revisit the terms of relief, the ability to manage 

price risk, retroactivity, and the categorical nature 

of relief. 

155For example, Exempt Entities that receive 

financing from the RUS are required to keep records 

of all master agreements and term contracts for the 

procurement of goods and services. See 18 CFR 

125.3 (Schedule of records and periods of 

retention); RUS Bulletin 180–2. Under the books 

and records inspection authority contained in the 

Proposed Order, the Commission could request any 

of these procurement agreements that document an 

Exempt Non-Financial Energy Transaction for the 

purchase or sale of ‘‘electric energy delivered,’’ as 

such term is defined in the Proposed Order. 

156 In the Proposed Order, the Commission noted 

its belief that the commercial risks that Exempt 

Non-Financial Energy Transactions face generally 

are not related to fluctuations in the price of a 

commodity, but are rather related to ensuring 

Exempt Entities’ ability to meet production, 

transmission, and/or distribution obligations. 

Proposed Order at 51010. As previously discussed, 

however, the Commission has determined in the 

Final Order that Exempt Non-Financial Energy 

Transactions can also be used to hedge price risk 

of an underlying commodity, but only if ‘‘arising 

from its existing or anticipated public service 

obligations to physically generate, transmit, and/or 

deliver electric energy service to customers.’’ See 

supra Section II.E.1; section B of the Final Order. 

The additional cost/benefit implications of this 

clarification are discussed in context of the 

Commission’s Consideration of Alternatives, infra 

Section IV.C.4. 

157As discussed in section II.A, above, to avoid 

confusion, the Commission has struck the explicit 

‘‘non-profit’’ modifier from the fourth clause of the 

definition of Exempt Entity in the Final Order. As 

explained, FPA section 201(f) utilities may include 

for-profit subsidiaries that are wholly-owned by 

other not-for profit FPA section 201(f) utilities. 

Subsequent short-hand references in this 

Consideration of Costs and Benefits to ‘‘not-forprofit electric utility entities’’ or ‘‘not-for-profit 

Exempt Entities’’ are intended to include all 

subsidiary entities captured by Final Order, 

including those for-profit subsidiaries. 

158See Proposed Order, 77 FR 51011. 

The Commission remains cognizant of 

the regulatory landscape as it existed 

before the enactment of Dodd-Frank. As 

such, the Commission notes that any 

Exempt Non-Financial Energy 

Transactions engaged in between 

Exempt Entities that are swaps 

(excluding options) under the statutory 

definition and Commission rules were 

not regulated prior to Dodd-Frank. 

Thus, measured against a pre-DoddFrank Act reference point, Exempt 

Entities engaging in such swaps could 

experience costs attributable to the 

conditions placed upon the Final Order. 

For example, Exempt Entities were not 

subject to the Commission’s routine 

regulatory inspection authorities with 

respect to records of Exempt NonFinancial Energy Transactions 

transacted bilaterally away from a 

trading facility prior to the enactment 

and effectiveness of the Dodd-Frank 

Act. The same was not true to the extent 

Exempt Non-Financial Energy 

Transactions are futures contracts, as 

such contracts have always been 

regulated by the Commission and DoddFrank did not fundamentally alter the 

futures regulatory scheme. 

The Proposed Order expressly 

requested public comment on the 

Commission’s cost-benefit 

considerations, including with respect 

to reasonable alternatives; the 

magnitude of specific costs and benefits 

(including data or other information to 

estimate a dollar valuation); and any 

impact on the public interest factors 

specified in CEA section 15(a).152

Neither of the two comments received 

specifically addressed the Proposed 

Order’s consideration of costs and 

benefits or otherwise provided data or 

other information to enable the 

Commission to better quantify the 

expected costs and benefits attributable 

to the Final Order. While, as a general 

matter, the Commission endeavors to 

quantify estimated costs and benefits 

where reasonably feasible, it considers 

the costs and benefits of this Final Order 

in qualitative terms only given that 

commenters did not provide data or 

information necessary for 

quantification.153

In the discussion that follows, the 

Commission considers the costs and 

benefits of the Final Order to the public 

and market participants, generally, and 

to Exempt Entities, specifically. As 

discussed above, the Commission has 

refined the Final Order to clarify several 

issues identified in the Petitioners’ 

comment letter.154 To the extent these 

refinements reflect a substantive choice 

among alternatives with potential costbenefit significance, they are included 

in the discussion of alternatives, below. 

Finally, the Commission considers the 

Final Order’s costs and benefits relative 

to the public interest factors enumerated 

in CEA section 15(a). 

2. Costs 

To Exempt Entities 

The Final Order provides Exempt 

Entities with relief from regulatory 

requirements of the CEA for the narrow 

category of Exempt Non-Financial 

Energy Transactions engaged in between 

them. As with any exemption, this order 

is permissive, meaning that potentially 

eligible entities are not required to avail 

themselves of the relief it offers. 

Accordingly, the Commission presumes 

that an entity would rely on the Final 

Order only if the anticipated benefits 

warrant the costs. Here, the Final Order 

provides for the continued application 

of the Commission’s general anti-fraud 

and anti-manipulation authority, and 

certain scienter-based prohibitions, 

under the CEA and its implementing 

regulations, and additionally reserves 

the Commission’s inspection authority 

for books and records that the Exempt 

Entities currently prepare and retain.155

Accordingly, and to the extent Exempt 

Non-Financial Energy Transactions are 

jurisdictional agreements, contracts or 

transactions, the incorporation of these 

conditions within the Final Order 

generates no incremental costs beyond 

those that currently exist under the 

CEA, a point that no commenter 

disputed. 

To Market Participants and the Public 

The Commission has considered 

whether an exemption from the CEA for 

Exempt Non-Financial Energy 

Transactions engaged in between 

Exempt Entities will expose market 

participants and the public to the risks 

that the CEA guards against—a potential 

cost. For a variety of reasons, the 

Commission believes that it does not. 

These reasons—which were identified 

in the Proposed Order and not disputed 

by commenters—include the following: 

• Exempt Non-Financial Energy 

Transactions are ill-suited for exchange 

trading, as evidenced by their bespoke 

nature to manage Exempt Entities’ 

operational risks, and thus do not serve 

a material price discovery function.156

• The incentive structure for Exempt 

Entities—as generally limited to not-forprofit governmental, tribal, and IRC 

section 501(c)(12) or section 

1381(a)(2)(c) electric cooperative 

entities 157—is different than that of 

investor-owned entities and, according 

to Petitioners, mitigates incentives for 

fraud, manipulation, or other abusive 

practices against which Commission 

oversight and trading facility rules 

guard.158

• Exempt Non-Financial Energy 

Transactions are executed bilaterally 


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19684 Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 

159See Proposed Order, 77 FR 51010. 

160More specifically with respect to competition, 

absent the exemptive relief provided herein, it is 

unclear whether Exempt Entities otherwise would 

qualify as ECPs, and thus be able to continue 

transacting Exempt Non-Financial Energy 

Transactions bilaterally with one another at all. 

Because many of the transactions exempted under 

the Final Order relate to longstanding and exclusive 

agreements between Exempt Entities, the limited 

relief provided in the exemption is not likely, in 

and of itself, to cause Exempt Entities to change the 

nature or frequency of conducting Exempt NonFinancial Energy Transaction with one another; 

rather, they will continue to carry out their public 

service obligations under standard industry 

practices, as was intended by Congress in adding 

CEA section 4(c)(6)(c). 

161See supra Section II. 

162See supra Section IV.C.4. 

163The refinements that the Commission has 

made in the Final Order to clarify its terms and 

application reinforce these benefits. As discussed 

below with respect to benefits to market 

participants and the public, Exempt Entities’ 

members and other customers should be the 

indirect beneficiaries of these avoided costs. The 

Commission is aware, however, that the Final Order 

stops short of providing the categorical relief 

requested by Petitioners, and thus does not give 

Exempt Entities exact certitude that any electric 

energy transactions not specifically covered under 

the terms of this Order entered into between 

Exempt Entities will not be subject to the 

requirements of the CEA. 

164That is, have ‘‘a demonstrable ability, directly 

or through separate contractual arrangements, to 

make or take delivery of the underlying commodity 

[or] incur * * * risks, in addition to price risk, 

related to the commodity.’’ CEA section 1a(17)(A)(i) 

& (2) (as referenced in CEA section 

1a(18)(A)(vii)(aa)). CEA section 1a(18)(A)(vii) 

specifies alternative criteria to qualify for 

governmental-entity ECP status that do not appear 

relevant given that Exempt Entities are not SDs, 

MSPs, or financial entities. 

165CEA section 1a(18)(A)(vii)(bb). 

166CEA section 1a(18)(A)(v). 

within a closed-loop of non-financial, 

not-for-profit electric utility entities, are 

not market facing, and therefore have 

little, if any, ability to materially impact 

liquidity, fairness or financial security 

of derivative products trading on 

regulated exchanges.159

Besides carefully defining the 

boundaries for Exempt Non-Financial 

Energy Transactions between Exempt 

Entities, the Final Order incorporates 

conditions designed to protect the 

markets subject to the Commission’s 

jurisdiction. Specifically, the 

Commission retains its general antifraud and anti-manipulation authority, 

and certain scienter-based prohibitions, 

contained in the CEA and its 

implementing regulations. Additionally, 

the Commission retains authority to 

inspect books and records kept in the 

normal course of business, pursuant to 

its regulatory inspection authorities, in 

the event that circumstances warrant 

greater visibility with respect to Exempt 

Non-Financial Energy Transactions as 

they relate to Exempt Entities’ overall 

market positions and compliance with 

this Final Order. This retained authority 

to inspect books and records also 

provides a tool for the Commission to 

monitor any evolution and/or change in 

the usage of Exempt Non-Financial 

Energy Transactions to ensure that they 

conform to the expectations described 

in this order and that the relief provided 

herein remains appropriate and in the 

public interest. Accordingly, for the 

narrow subset of electric industry 

transactions covered by this Final 

Order, the Commission believes that the 

risk potential, at most, is remote and the 

prescribed conditions appropriate to 

contain it. The Final Order, therefore, 

should not give rise to any costs 

attributable to increased risk. 

Next, the Commission considered the 

potential that price discovery in 

jurisdictional, non-exempt markets 

could be diminished because Exempt 

Entities, acting under the relief provide 

in this Final Order, eschewed such 

markets in favor of performing 

production and price risk management 

via Exempt Non-Financial Energy 

Transactions with one another. The 

Commission deems the risk of this 

occurring to be insignificant. While an 

underlying commodity may be similar 

or identical to that which underlies a 

standardized product available for 

trading in a non-exempt, jurisdictional 

market, the bespoke nature of Exempt 

Non-Financial Energy Transactions is 

such that it is unlikely that non-exempt 

market transactions would be an 

effective substitute for Exempt Entities 

going forward. As such, and in addition 

to the Commission’s anticipation that 

the number of Exempt Entity 

transactions will be small relative to the 

total number of transactions in related 

non-exempt markets, any distortive 

impact on price discovery in 

Commission-regulated markets would 

be immaterial. 

Similarly, the Commission considered 

whether the Final Order would have 

any impact on the efficiency, 

competitiveness,160 and financial 

integrity of markets regulated under the 

CEA. Since Exempt Non-Financial 

Energy Transactions are executed 

bilaterally between non-financial 

entities primarily in order to satisfy 

existing or expected operations-related 

public service obligations, and since 

they are bespoke transactions, the 

Commission expects the exemptive 

relief provided herein to have little, if 

any, negative effect on market 

efficiency, competitiveness, or financial 

integrity of markets regulated by the 

CFTC. 

The Commission does not view the 

various refinements that it incorporated 

in the Final Order in response to 

comments as altering the continuing 

logic or validity of these reasons; rather, 

as explained above,161 these refinements 

are mostly technical in nature and 

clarify the Commission’s intended scope 

and operation of the relief as 

necessitated by certain practical issues 

highlighted by commenters. Substantive 

changes are addressed below in the 

‘‘Consideration of Alternatives.’’ 162

3. Benefits 

To Exempt Entities 

Relative to no exemption, the Final 

Order will benefit Exempt Entities by 

lessening the likelihood that compliance 

with the CEA and Commission 

regulations would diminish their ability 

and/or incentives to continue to engage 

in Exempt Non-Financial Energy 

Transactions that, as described in the 

Petition, the Proposed Order, and above, 

are an operational tool relied upon by 

Exempt Entities to effectively execute 

their public service mission. The 

exemption will benefit Exempt Entities 

by providing assurances that these 

Exempt Non-Financial Energy 

Transactions upon which they rely are 

not subject to the CEA and Commission 

regulations.163

To the extent Exempt Non-Financial 

Energy Transactions are swaps, as a 

threshold matter, absent Commission 

action, CEA section 2(e) would prohibit 

Exempt Entities from executing them 

away from a registered DCM unless both 

Exempt Entity counterparties qualify as 

ECPs. The relevant criteria for 

determining ECP status varies for 

Exempt Entities that are governmental 

entities (or political subdivisions of 

governmental entities) and those that 

are not. For the former, governmental 

Exempt Entities must meet certain line 

of business requirements,164 or ‘‘own 

* * * and invest * * * on a 

discretionary basis $50,000,000 or more 

in investments.165 For the latter, nongovernmental Exempt Entities either 

must have: (a) Assets exceeding 

$10,000,000; (b) a guarantee for 

obligations; or, (c) greater than 

$1,000,000 net worth and ‘‘enter * * * 

into an agreement, contract, or 

transaction in connection with the 

conduct of the entity’s business or to 

manage the risk associated with an asset 

or liability owned or incurred or 

reasonably likely to be owned or 

incurred by the entity in the conduct of 

the entity’s business.’’ 166 While some of 

the larger Exempt Entities in particular 

may meet the definitional requirements 

to be ECPs, the Petition does not 

provide information evidencing that all 

Exempt Entities for all types of Exempt 


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167Furthermore, a comment letter submitted by 

two of the Petitioners in connection with the 

Commission rulemaking on the Further Definition 

of ‘‘Swap Dealer,’’ ‘‘Security-Based Swap Dealer,’’ 

‘‘Major Swap Participant,’’ ‘‘Major Security-Based 

Swap Participant,’’ and ‘‘Eligible Contract 

Participant,’’ states that some not-for-profit 

consumer-owned electric utilities ‘‘may not meet 

the financial tests listed in the definition of ECP due 

to the relatively small size of their physical assets.’’ 

Letter from NRECA, APPA and LPPC dated 

February 22, 2011, RIN 3235–AK65, at 12. 

168 77 FR 30596, 30744–45 (May 23, 2012). 

169Further, to the extent the potential for 

triggering a registration requirement might 

otherwise deter Exempt Entities from engaging in 

Exempt Non-Financial Energy Transactions with 

one another, the Final Order benefits Exempt 

Entities by maintaining the current number of 

available counterparties for such transactions and 

exempting Exempt Entities from otherwise 

applicable reporting and recordkeeping 

requirements applicable to non-SDs/MSPs. 

170See Real-Time Public Reporting of Swap 

Transaction Data, 77 FR 1182, 1232–40 (Jan. 9, 

2012) (adopting 17 CFR part 43 regulations to 

implement real-time reporting). Swap Data 

Recordkeeping and Reporting Requirements 77 FR 

2136, 2176–93 (Jan. 13, 2012) (adopting 17 CFR part 

45); Swap Data Recordkeeping and Reporting 

Requirements: Pre-enactment and Transition Swaps 

77 FR 35200, 35217–25 (June 12, 2012) (adopting 

17 CFR part 46). 

Swap Data Recordkeeping and Reporting 

Requirements 77 FR 2136 (Jan. 13, 2012) (adopting 

17 CFR part 45); Swap Data Recordkeeping and 

Reporting Requirements: Pre-enactment and 

Transition Swaps 77 FR 35200 (June 12, 2012) 

(adopting 17 CFR part 46); see also supra Section 

II.E.3 (clarifying that exemptive relief is granted 

retroactively to the date of Dodd-Frank Act 

enactment to avoid costs associated with the 

reporting requirements for historical swaps). 

171 In that the impacted transactions are 

undertaken exclusively in a closed-loop 

environment from which financial participants are 

absent, the Commission does not foresee that 

derivative market participants beyond Exempt 

Entities will realize either a cost (as earlier 

discussed) or benefit impact. 

172See Proposed Order, 77 FR 51009–10. 

173See House Conf. Report No. 102–978, 1992 

U.S.C.C.A.N. 3179, 3213 (‘‘4(c) Conf. Report’’). 

Non-Financial Energy Transaction 

clearly would.167

If Exempt Entities are not ECPs, and 

given that Petitioners have represented 

that Exempt Non-Financial Energy 

Transactions are bespoke and therefore 

unsuitable for exchange trading, absent 

Commission action, non-ECP Exempt 

Entities would be unable to engage 

bilaterally in any Exempt Non-Financial 

Energy Transactions that are swaps. 

Relative to a circumstance that would 

preclude non-ECP Exempt Entities from 

continuing to engage in Exempt NonFinancial Energy Transactions that are 

swaps, the Final Order allows for the 

continued use of transactions that are 

closely related to Exempt Entities’ 

public service mission to provide 

affordable, reliable electricity—a 

benefit. The Final Order also saves 

Exempt Entities the time and expense 

necessary to determine if they are ECPs. 

While under the Final Order, ECP status 

becomes largely irrelevant, without it, 

Exempt Entities may have to concern 

themselves with ECP status 

determinations as a threshold for 

engaging in certain transactions. 

Even assuming, arguendo, that all 

Exempt Entities are ECPs, absent this 

Final Order, Exempt Non-Financial 

Energy Transactions engaged in by 

Exempt Entities in the normal course of 

carrying out their public service 

obligations would count towards the de 

minimis swap dealing threshold, and 

thus impact whether an Exempt Entity 

would need to register with the 

Commission as an SD or MSP.168 The 

Final Order eliminates this possibility 

and any attendant compliance costs it 

might entail.169

Lastly, to the extent that Exempt NonFinancial Energy Transactions are 

swaps, the Final Order also avoids 

potential costs that Exempt Entities 

might incur to comply with swap data 

reporting and recordkeeping 

requirements as articulated in 

Commission regulations.170

Even for Exempt Non-Financial 

Energy Transactions that are not swaps, 

if Exempt Entities perceived some 

potential that they could be swaps (now 

or as they evolve in the future), Exempt 

Entities would likely need to expend 

resources to monitor contemplated 

transactions and make status 

determinations as to them. Moreover, 

the bespoke nature of these transactions 

could complicate the ability to 

generalize conclusions across 

transactions, potentially resulting in a 

need for more frequent, individualized 

assessments that could multiply 

determination costs. While the 

Commission lacks a basis to 

meaningfully project any such benefit in 

dollar terms, qualitatively it expects that 

the benefit would include the avoided 

costs of training staff to differentiate 

between swap and non-swap 

transactions and, in some cases at least, 

to obtain an expert legal opinion to 

support a determination. Additionally, 

uncertainty about whether a certain 

transaction would or would not be 

deemed a swap could prompt an 

Exempt Entity to forego a beneficial 

transaction or to substitute a transaction 

that served the operational needs less 

effectively. The Commission considers 

avoiding a result that would diminish 

the use of operationally-efficient 

Exempt Non-Financial Energy 

Transactions to be an important benefit. 

To Market Participants and the Public 

For reasons similar to those discussed 

in the Commission’s analysis of the 

Proposed Order under CEA sections 

4(c)(1) and 4(c)(6), the Commission 

asserts that this Final Order will benefit 

the public, generally.171

First, in that the Exempt Entities share 

the same public-service mission of 

providing affordable, reliable electricity 

to their customers, those aspects of the 

Final Order that benefit Exempt Entities 

directly should benefit their customers 

indirectly as well. For example, the 

Final Order would enable non-ECP 

Exempt Entities to engage in Exempt 

Non-Financial Energy Transactions, to 

the extent they are swaps, that would be 

barred to them under CEA section 2(e), 

or facilitate the likelihood that they 

would continue to engage in Exempt 

Non-Financial Energy Transactions that 

they might choose to forego for 

regulatory uncertainty or cost reasons 

absent the exemption. In these 

circumstances, Exempt Entity customers 

likely would be the ultimate 

beneficiaries (via supply reliability and 

affordability) of the operational riskmanagement and efficiencies that 

Exempt Non-Financial Energy 

Transactions afford. Similarly, to the 

extent that the Final Order enables 

Exempt Entities to avoid compliance 

and/or monitoring costs they would 

otherwise incur, the non-profit 

structure, conformance with requisite 

Internal Revenue Code guidelines, and 

public service mission that Exempt 

Entities share means that the cost 

savings should be passed through to 

members and other customers in the 

form of lower electricity prices. 

Second, the public also benefits by 

the promotion of economic and 

financial innovation that this Final 

Order facilitates.172 The unique 

environment in which these electric 

utilities must operate to reliably serve 

their customer load in the face of 

constantly fluctuating demand— 

compounded by the fact that many of 

these Exempt Entities do not enjoy the 

same economies of scale as investorowned utilities—places a premium on 

innovative solutions to operational 

issues. Exempt Non-Financial Energy 

Transactions represent one such 

innovation. The Commission intends for 

the Final Order, as contemplated by 

Congress,173 to provide Exempt Entities 

with regulatory certainty important to 

their ability to continue to develop and 

deploy innovative solutions through 

bespoke, closed-loop agreements, 

contracts, and transactions. 

Accordingly, the Final Order provides 

an overall benefit to the public. 

4. Consideration of Alternatives 

The chief alternatives to this Final 

Order are for the Commission to (i) 


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174See Petitioners’ Letter at 5–6, 12. 

175See CEA sections 2(h)(1) and 2(h)(8), 7 U.S.C. 

2(h)(1), 2(h)(8). The same is true for swap clearing 

and DCM or SEF trade execution mandates. 

176For the same reasons as represented by 

Petitioners, a foundational basis for exempting 

Exempt Non-Financial Energy Transactions that 

may be swaps is that they are not suited to SEF 

trading. 

177The Final Order’s reservation of authority to 

revisit terms and conditions serves as adequate 

protection that, over time, transactions subject to 

the exemption retain their foundational 

characteristics, including that they be (i) 

undertaken solely to manage supply and/or price 

risks arising from Exempt Entities’ public service 

obligation to supply electric energy to customers 

and (ii) bespoke and are not otherwise suitable for 

exchange trading as futures. In the hypothetical 

event that, over time, this proves untrue, the 

Commission anticipates it would use its reserved 

authority to revisit the terms and conditions of this 

Final Order’s exemptive relief to realign it with the 

Commission’s understanding and expectations in 

this regard. 

178See supra Section II.E.3. 

179Petitioners’ Letter at 11–12; see also Petition 

at 4–5. 

180CEA section 4(c)(6), 7 U.S.C. 6(c)(6). 

181As explained in the Proposed Order, the 

Commission believes that this reservation of 

authority serves important beneficial ends to ensure 

the integrity of commodity and commodity 

derivatives markets within its jurisdiction. To the 

extent Exempt Entities incur some cost to remain 

compliant with the CEA’s anti-fraud and antimanipulation regime, and the specified scienterbased prohibitions, the Commission considers such 

costs warranted by the importance of maintaining 

commodity market integrity. The Commission also 

decline to exercise its exemptive 

authority; (ii) adopt the Proposed Order 

without certain substantive changes 

made to the Final Order; or (iii) exercise 

its exemptive authority more broadly 

and without conditions as requested in 

the Petition or reiterated in the 

Petitioners’ comment letter. 

With respect to the first alternative— 

decline to exempt—the costs and benefit 

consideration is the mirror-image of that 

discussed above. A decision not to 

provide an exemption in this 

circumstance would preserve the 

current post-Dodd-Frank regulatory 

environment. 

Relative to the second alternative— 

adopting the exemption as proposed— 

the Commission has made two 

substantive changes to the definition of 

Exempt Non-Financial Energy 

Transaction based upon Petitioners’ 

comments. These are: i) Striking the 

requirement that Exempt Non-Financial 

Energy Transactions be ‘‘intended for 

making or taking physical delivery of 

the commodity upon which the 

agreement, contract, or transaction is 

based’’ (the ‘‘physical delivery 

requirement’’); and ii) consistent with 

the first change, explicitly clarifying 

that Exempt Non-Financial Energy 

Transactions can be used to ‘‘manage 

supply and/or price risk.’’ As explained 

above, the Commission premised these 

changes on the Petitioners’ 

representation that, absent such 

changes, certain benefits sought through 

the exemption would be lost, namely 

regulatory certainty of knowing that 

price management transactions falling 

within one of the six defined transaction 

categories would be afforded greater 

regulatory relief than otherwise would 

be provided through the end-user 

exception.174

Eliminating the physical delivery 

requirement and clarifying that Exempt 

Non-Financial Energy Transactions may 

be used to manage price risk (as well as 

supply risk) arguably blurs the 

definitional distinction that the 

Proposed Order otherwise would have 

expressly provided between Exempt 

Non-Financial Energy Transactions and 

jurisdictional futures contracts. 

However, even without the physicaldelivery requirement and with the 

price-risk management clarification, the 

Commission does not expect the Final 

Order to undermine the exchange 

trading requirement for, or the 

Commission’s oversight of, futures.175

Indeed, the Commission intends the 

protection of the public interest affected 

through Commission oversight of such 

activity to be fully preserved. As clearly 

stated throughout the Final Order, a 

foundational basis for granting this 

exemptive relief is the Commission’s 

understanding, based on Petitioners’ 

representations, that Exempt NonFinancial Energy Transaction are 

undertaken solely to manage supply 

and/or price risks arising from Exempt 

Entities’ public service obligation to 

supply electric energy to customers and 

are bespoke to meet the needs of 

particular Exempt Entities, and thus not 

suited to DCM trading (or DCO 

clearing).176 The Commission expects 

this to continue to remain the case.177

Accordingly, the Commission views the 

revised terms of the Final Order as 

preserving similar protections as the 

Proposed Order, while affording 

enhanced direct benefits for Exempt 

Entities. 

The Commission also has revised the 

Final Order from what was proposed to 

accommodate Petitioners’ request that 

final exemptive relief apply 

retroactively to the enactment of the 

Dodd-Frank Act. As a consequence, 

Exempt Entities will be saved any costs 

associated with determining whether 

certain Exempt Non-Financial Energy 

Transactions entered into prior to the 

effective date of the Final Order were 

historical swaps or not, and reporting 

those historical transactions to an 

SDR.178 Given the Commission’s 

understanding of the nature and volume 

of Exempt Non-Financial Energy 

Transactions between Exempt Entities, 

it believes that any diminution in 

benefit attributable to historical swap 

reporting will be de minimis, if any. 

Relative to the third alternative of 

exercising its exemptive authority more 

broadly and in a manner that would 

provide categorical relief from all of the 

requirements of the CEA as requested by 

Petitioners in their original Petition, the 

Commission purposefully has defined 

the categories of exempt transactions 

more narrowly, and preserved certain 

aspects of CEA jurisdiction with respect 

to them. As reiterated in their comment 

letter,179 Petitioners sought categorical 

relief for all Electric Operation-Related 

Transactions, regardless of whether the 

transactions fell within a specificallydefined category. The more open-ended 

categorical relief sought by Petitioners 

theoretically would lessen the burden 

on Exempt Entities to determine 

whether a transaction engaged in 

between them is or is not exempted 

compared to the more refined and 

limited definition of Exempt NonFinancial Energy Transactions that the 

Commission proposed. As stated 

previously in this release, however, 

while transactions may be relief-eligible 

under 4(c)(6), the Commission must 

‘‘determine that the exemption would 

be consistent with the public interest 

and purposes of [the] Act.’’ 180

Commenters have not provided 

sufficient information for the 

Commission to make such a 

determination, or meaningfully quantify 

the costs and benefits that categorical 

relief, as distinguished from the relief 

provided in the Final Order, would 

confer on market participants and the 

public. Given the inability to foresee 

how these transactions may develop, the 

Commission considers it prudent and in 

the public interest to ring-fence the 

definition within stated parameters to 

restrict the potential for the transactions 

to evolve in a manner incompatible with 

the public interest and purposes of the 

CEA. 

Finally, the exemption reserves the 

Commission’s general anti-fraud and 

anti-manipulation authority, and certain 

scienter-based prohibitions, as well as 

the Commission’s authority to review 

books and records already kept in the 

ordinary course of business in the event 

that circumstances warrant the need to 

gain greater visibility with respect to 

Exempt Non-Financial Energy 

Transactions as they relate to Exempt 

Entities’ overall market positions, and to 

ensure compliance with the terms of 

this Final Order.181 Petitioners’ 


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believes that authority to inspect books and records 

kept in the ordinary course of business, pursuant 

to its regulatory inspection authority, as they relate 

to Exempt Non-Financial Energy Transactions is 

important to assure visibility into activity in such 

transactions on an as-needed basis. Further, as a 

general matter, the Commission expects to exert its 

regulatory inspection authority with respect to 

Exempt Non-Financial Energy Transactions 

infrequently; and, such authority would involve 

only records that Exempt Entities keep in the 

ordinary course of business, and only be exercised 

in the event that circumstances warrant the need to 

gain greater visibility with respect to Exempt NonFinancial Energy Transactions as they relate to 

Exempt Entities’ overall market positions, and to 

ensure compliance with the terms of this Final 

Order. The Commission believes that any costs 

occasioned by this condition are de minimis. 

182See supra Section II.D. 

183These conditions include the reservation of 

the Commission’s anti-fraud and anti-manipulation 

authority, and certain scienter-based prohibitions, 

as well as its authority to inspect books and records 

already kept in the normal course of business. 

Further, the Commission reserves the right to revisit 

the terms and conditions of the Final Order’s relief 

and alter or revoke them as appropriate. See Section 

V.C. 

184Exempt Entities may still incur minimal 

episodic compliance costs with respect to Exempt 

Non-Financial Energy Transactions if the 

Commission has a need to exercise its reserved 

authority. 

comment letter did not challenge the 

Proposed Order’s imposition of these 

conditions on cost-benefit grounds, 

generally, though it did request that the 

Commission’s reserved authority not 

explicitly include CEA section 4c(b) and 

regulation 32.4, as those provisions 

could be interpreted as a Commission 

determination that certain Exempt NonFinancial Energy Transactions 

constituted commodity options.182

Reserving CEA section 4c(b) and 

regulation 32.4 should not be so 

interpreted. Furthermore, such 

reservations impose no additional costs 

on Exempt Entities, as currently they are 

subject to the Commission’s authority 

under these provisions to the extent 

their transactions are options. 

5. Consideration of CEA Section 15(a) 

Factors 

a. Protection of Market Participants and 

the Public 

As explained above, the Commission 

does not foresee that the Final Order 

will negatively affect the protection of 

market participants and the public. 

More specifically, Exempt NonFinancial Energy Transactions, as 

transacted bilaterally and in a closed 

loop between Exempt Entities in the 

highly specialized and unique electricindustry circumstances, do not appear 

to generate risks of the nature addressed 

by the CEA. The Commission has 

delineated the definitional boundaries 

for Exempt Entities and Exempt NonFinancial Energy Transactions in a 

manner that appropriately ring-fences 

against the possibility that they could 

generate such risks, either now or as 

they may evolve in the future. 

Moreover, the exemption incorporates 

conditions 183 to counter residual risk 

that conceivably, though unexpectedly, 

might survive notwithstanding the Final 

Order’s definitional crafting. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Futures Markets 

The Commission foresees little, if any, 

negative impact from the Final Order on 

the efficiency, competitiveness, and 

financial integrity of markets regulated 

under the CEA. This is because, to the 

extent any are jurisdictional, Exempt 

Non-Financial Energy Transactions 

entered into between Exempt Entities 

constitute only a narrow market 

segment limited to bespoke transactions, 

executed bilaterally between nonfinancial entities primarily in order to 

satisfy existing or expected operationsrelated public service obligations. 

Moreover, the Commission anticipates 

the Final Order will help to maintain 

the competitive landscape and 

efficiency of the market segment for 

Exempt Non-Financial Energy 

Transactions entered into between 

Exempt Entities. As previously 

discussed, the Final Order maintains the 

number of counterparties that Exempt 

Entities will be able to face—namely, 

other Exempt Entities with which they 

already conduct Exempt Non-Financial 

Energy Transactions—by exempting 

Exempt Non-Financial Energy 

Transactions between Exempt Entities 

from CEA section 2(e), and eliminates 

the possibility that entering into Exempt 

Non-Financial Energy Transactions will 

subject Exempt Entities to the full array 

of compliance costs arising from the 

Commission’s ongoing oversight 

regime.184 In addition, the Commission 

expects that the Final Order will 

contribute to operational efficiency in 

the market segment where Exempt 

Entities conduct Exempt Non-Financial 

Energy Transactions with one another 

by eliminating costs necessary to 

determine their regulatory status or the 

status of Exempt Non-Financial Energy 

Transactions. 

Further, as an exercise of the 

Commission’s CEA section 4(c) 

authority to provide legal certainty for 

novel instruments as Congress intended, 

the Final Order affords Exempt Entities 

transactional flexibility that the 

Commission understands to be valuable 

to their ability to efficiently deploy their 

limited resources. 

c. Price Discovery 

The Commission does not believe that 

the Final Order will materially impair 

price discovery in non-exempt, 

jurisdictional markets. The Commission 

recognizes that a desire to avoid 

regulation in theory could incentivize 

Exempt Entities to participate in Exempt 

Non-Financial Energy Transactions to a 

greater extent than they otherwise might 

choose to do, vis-a`-vis related nonexempt markets. This is unlikely, 

however, due to the requirement that 

Exempt Non-Financial Energy 

Transactions be entered into only to 

manage supply and/or price risk arising 

from their public service obligations to 

physically supply electric energy 

service to customers, and only with 

other Exempt Entities. The relatively 

small size of trading in this market 

segment also renders it unlikely that the 

Final Order will materially impair price 

discovery in jurisdictional markets even 

were the Final Order to incentivize 

Exempt Entities to execute some of their 

customer-serving transactions pursuant 

to the Final Order instead of on a 

registered entity. Thus, against the 

backdrop of Congress’ mandate to 

consider exempting transactions 

between FPA 201(f) entities, the 

Commission believes that the Final 

Order would not materially distort price 

discovery in non-exempt, jurisdictional 

markets. 

d. Sound Risk Management Practices 

The Final Order will promote the 

ability of Exempt Entities to manage the 

operational risks posed by unique 

electricity market characteristics, 

including the non-storable nature of 

electricity and demand that can and 

frequently does fluctuate dramatically 

within a short time-span. As discussed 

above, the Commission understands that 

Exempt Non-Financial Energy 

Transactions are an important tool 

facilitating the ability of Exempt Entities 

to efficiently manage operational risk in 

fulfillment of their public service 

mission to provide affordable, reliable 

electricity. 

e. Other Public Interest Considerations 

In exercising its exemptive authority 

under CEA sections 4(c)(1) and 4(c)(6) 

in the Final Order, the Commission is 

acting to promote the broader public 

interest in facilitating the generation, 

transmission, and delivery of affordable, 

reliable electric energy service as 

Congress contemplated. 

V. Final Order 

Based on the Petitioners’ 

representations, and for the reasons set 

forth above, the Commission hereby 


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exempts, pursuant to Commodity 

Exchange Act (‘‘CEA’’) sections 4(c)(1) 

and 4(c)(6), from all requirements of the 

CEA and Commission regulations issued 

thereunder, except those specified 

below, all Exempt Non-Financial Energy 

Transactions (as defined below) entered 

into solely between Exempt Entities (as 

defined below), retroactive to the date of 

enactment of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act, and subject to certain conditions 

(as detailed below): 

A. Exempt Entity means (i) any 

electric facility or utility that is wholly 

owned by a government entity, as 

described in Federal Power Act (‘‘FPA’’) 

section 201(f), 16 U.S.C. 824(f); (ii) any 

electric facility or utility that is wholly 

owned by an Indian tribe recognized by 

the U.S. government pursuant to section 

104 of the Act of November 2, 1994, 25 

U.S.C. 479a–1; (iii) any electric facility 

or utility that is wholly owned by a 

cooperative, regardless of such 

cooperative’s status pursuant to FPA 

section 201(f), so long as the cooperative 

is treated as such under Internal 

Revenue Code section 501(c)(12) or 

1381(a)(2)(C), 26 U.S.C. 501(c)(12), 

1381(a)(2)(C), and exists for the primary 

purpose of providing electric energy 

service to its member/owner customers 

at cost; or (iv) any other entity that is 

wholly owned, directly or indirectly, by 

any one or more of the foregoing. The 

term ‘‘Exempt Entity’’ does not include 

any ‘‘financial entity,’’ as defined in 

CEA section 2(h)(7)(C). 

B. Exempt Non-Financial Energy 

Transaction means any agreement, 

contract, or transaction based upon a 

‘‘commodity,’’ as such term is defined 

in CEA section 1a(9) and Commission 

regulation 1.3(e), that would not have 

been entered into, but for an Exempt 

Entity’s need to manage supply and/or 

price risks arising from its existing or 

anticipated public service obligations to 

physically generate, transmit, and/or 

deliver electric energy service to 

customers. The term ‘‘Exempt NonFinancial Energy Transaction’’ excludes 

agreements, contracts, and transactions 

based upon, derived from, or 

referencing any interest rate, credit, 

equity or currency asset class, or any 

grade of a metal, or any agricultural 

product, or any grade of crude oil or 

gasoline that is not used as fuel for 

electric energy generation. The term 

‘‘Exempt Non-Financial Energy 

Transaction’’ also excludes agreements, 

contracts, or transactions entered into 

on or subject to the rules of a registered 

entity, submitted for clearing to a 

derivatives clearing organization, and/or 

reported to a swap data repository. 

Exempt Non-Financial Energy 

Transactions are limited to the 

following categories, which may exist as 

stand-alone agreements or as 

components of larger agreements that 

combine the following categories of 

transactions: 

1. Electric Energy Delivered 

transactions consist of arrangements in 

which a provider Exempt Entity agrees 

to deliver electric energy to a recipient 

Exempt Entity within a geographic 

service territory, load, or electric system 

over a period of time. Such transactions 

include ‘‘full requirements’’ contracts, 

under which one Exempt Entity 

becomes obligated to provide, and the 

recipient Exempt Entity becomes 

obligated to take, all of the electric 

energy the recipient needs to provide 

reliable electric service to its fluctuating 

electric load over a specified delivery 

period at one or multiple delivery 

points or locations, net of any electric 

energy the recipient is able to produce 

through generation assets that it owns. 

2. Generation Capacity transactions 

consist of agreements in which a 

recipient Exempt Entity purchases from 

a provider Exempt Entity the right to 

call upon the provider Exempt Entity’s 

electric energy generation assets to 

supply electric energy within a 

geographic area, regardless of whether 

such right is ever exercised for the 

purposes of the recipient Exempt Entity 

meeting its location-specific reliability 

obligations. Such transactions also may 

specify certain conditions that must 

exist prior to exercising the right to use 

an Exempt Entity’s generation assets, or 

establish an agreement between Exempt 

Entities to share pooled electric 

generation assets in order to satisfy 

regionally-imposed demand side 

management program requirements. 

3. Transmission Services transactions 

consist of arrangements in which a 

provider Exempt Entity owning 

transmission lines sells to a recipient 

Exempt Entity the right to deliver the 

recipient Exempt Entity’s electric energy 

from one designated point on the 

transmission lines to another, at a price 

per wattage and over a period of time, 

in order for the recipient Exempt Entity 

to provide electric energy to its 

customers. Such transactions may 

include ancillary services related to 

transmission such as congestion 

management and system losses. 

4. Fuel Delivered transactions consist 

of arrangements used to buy, sell, 

transport, deliver, or store fuel used in 

the generation of electric energy by an 

Exempt Entity. Additionally, Fuel 

Delivered transactions may include an 

agreement to manage the operational 

basis or exchange (i.e., location or time 

of delivery) risk of an Exempt Entity 

that arises from its location-specific, 

seasonal or otherwise variable 

operational need for fuel to be 

delivered. 

5. Cross-Commodity Pricing 

transactions consist of arrangements 

such as heat rate transactions and 

tolling agreements in which the price of 

electric energy delivered is based upon 

the price of the fuel source used to 

generate the electric energy. CrossCommodity transactions also include 

fuel delivered agreements in which the 

price paid for fuel used to generate 

electric energy is based upon the 

amount of electric energy produced. 

6. Other Goods and Services 

transactions consist of arrangements in 

which the Exempt Entities enter into an 

agreement to share the costs and 

economic benefits related to 

construction, operation, and 

maintenance of facilities for the 

purposes of generation, transmission, 

and delivery of electric energy to 

customers. In a full requirements 

contract between Exempt Entities that 

share ownership of generation assets, 

the provider Exempt Entity may 

determine how generation to meet the 

recipient Exempt Entity’s full 

requirements will be allocated among 

the provider’s independent generation 

assets, the jointly-owned generation 

assets, and the recipient’s independent 

generation assets. Other Goods and 

Services transactions also may include 

agreements between Exempt Entities to 

operate each other’s facilities, share 

equipment and employees, and interface 

on each other’s behalf with third parties 

such as suppliers, regulators and 

reliability authorities, and customers, 

regardless of whether such agreements 

are triggered as contingencies in 

emergency situations only or are 

applicable during the normal course of 

operations of an Exempt Entity. 

C. Conditions. The relief provided 

herein is subject to the Commission’s 

general anti-fraud and antimanipulation authority, and scienterbased prohibitions, under CEA sections 

2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 

4s(h)(4)(A), 6(c), 6(d), 6(e), 6c, 6d, 8, 9 

and 13, and any implementing 

regulations promulgated under these 

sections including, but not limited to, 

Commission regulations 23.410(a) and 

(b), 32.4, and Part 180. Additionally, the 

Commission reserves its authority to 

inspect books and records kept in the 

normal course of business that relate to 

Exempt Non-Financial Energy 

Transactions between Exempt Entities 

pursuant to the Commission’s regulatory 

inspection authorities. The relief 

provided herein does not affect the 

jurisdiction of FERC or any other 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Notices 19689 

government agency over the entities and 

transactions described herein. 

Furthermore, the Commission reserves 

the right to revisit any of the terms and 

conditions of the relief provided herein 

and alter or revoke such terms and 

conditions as necessary in order for the 

Commission to execute its duties and 

advance the public interests and 

purposes under the CEA, including a 

determination that certain entities and 

transactions described herein should be 

subject to the Commission’s full 

jurisdiction. 

Issued in Washington, DC, on March 28, 

2013, by the Commission. 

Christopher J. Kirkpatrick, 

Deputy Secretary of the Commission. 

Appendices to Order Exempting, 

Pursuant to Authority in Section 4(c) of 

the Commodity Exchange Act, Certain 

Transactions Between Entities 

Described in Section 201(f) of the 

Federal Power Act, and Other Electric 

Cooperatives—Commission Voting 

Summary and Statement of the 

Chairman 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Sommers, Chilton, O’Malia 

and Wetjen voted in the affirmative. No 

Commissioner voted in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the final order regarding certain 

electricity and electricity-related energy 

transactions between rural electric 

cooperatives and/or federal, state, municipal, 

and tribal power authorities (as defined in 

section 201F of the Federal Power Act). 

Congress authorized that these transactions 

be exempt from certain provisions of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, which is consistent 

with previous exemptions Congress has 

granted from the Federal Power Act. For 

decades, these entities have been generally 

recognized as performing a public service 

mission to provide their customers or 

cooperative members with reliable, 

affordable electric energy service. They have 

been largely exempt from regulation by the 

Federal Energy Regulatory Commission 

because of their government entity status or 

their not-for-profit cooperative status. 

This final order responds to a petition filed 

by a group of these cooperatives and 

authorities and has benefitted from public 

input. 

The scope of the final order is carefully 

tailored to physically backed electricity and 

electricity-related energy transactions that are 

necessary for the generation, transmission 

and delivery of electric energy services to 

customers. 

[FR Doc. 2013–07633 Filed 4–1–13; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

[Docket ID DoD–2013–OS–0069] 

Proposed Collection; Comment 

Request 

AGENCY: Office of the Under Secretary of 

Defense for Personnel and Readiness, 

DoD. 

ACTION: Notice. 

In compliance with Section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995, the Office of the 

Under Secretary of Defense for 

Personnel and Readiness announces a 

proposed public information collection 

and seeks public comment on the 

provisions thereof. Comments are 

invited on: (a) Whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information shall have 

practical utility; (b) the accuracy of the 

agency’s estimate of the burden of the 

proposed information collection; (c) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (d) ways to minimize the 

burden of the information collection on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

DATES: Consideration will be given to all 

comments received by June 3, 2013. 

ADDRESSES: You may submit comments, 

identified by docket number and title, 

by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Federal Docket Management 

System Office, 4800 Mark Center Drive, 

East Tower, Suite 02G09, Alexandria, 

VA 22350–3100. 

Instructions: All submissions received 

must include the agency name, docket 

number and title for this Federal 

Register document. The general policy 

for comments and other submissions 

from members of the public is to make 

these submissions available for public 

viewing on the Internet at http:// 

www.regulations.gov as they are 

received without change, including any 

personal identifiers or contact 

information. Any associated form(s) for 

this collection may be located within 

this same electronic docket and 

downloaded for review/testing. Follow 

the instructions at http:// 

www.regulations.gov for submitting 

comments. Please submit comments on 

any given form identified by docket 

number, form number, and title. 

FOR FURTHER INFORMATION CONTACT: To 

request more information on this 

proposed information collection or to 

obtain a copy of the proposal and 

associated collection instruments, 

please write to the Defense Manpower 

Data Center, ATTN: Daniel McCarthy, 

400 Gigling Road, Seaside, CA 93955, or 

call the DBIDS Office at 831–583–2400 

x4744. 

Title; Associated Form; and OMB 

Number: Application for Department of 

Defense Access Card—Defense 

Biometric Identification System (DBIDS) 

Enrollment; OMB Control Number 

0704–0455. 

Needs and Uses: This information 

collection requirement is needed to 

obtain the necessary data to verify 

eligibility for a Department of Defense 

physical access card for personnel who 

are not entitled to a Common Access 

Card or other approved DoD 

identification card. The information is 

used to establish eligibility for the 

physical access to a DoD installation or 

facility, detect fraudulent identification 

cards, provide physical access and 

population demographic reports, 

provide law enforcement data, and in 

some cases provide anti-terrorism 

screening. 

Affected Public: Individuals or 

Households. 

Annual Burden Hours: 195,929. 

Number of Respondents: 1,621,487. 

Responses per Respondent: 1. 

Average Burden per Response: 7.25 

Minutes. 

Frequency: On Occasion. 

SUPPLEMENTARY INFORMATION: 

Summary of Information Collection 

Respondents are individuals who 

require physical access to DoD 

installations. Basic identifying 

information is collected from the 

individuals including several 

biometrics. Additional information may 

also be collected (such as contact 

information, vehicle information, 

organization affiliation, etc.) but is not 

required for that person to be registered 

and gain access to the controlled 

installation. 

Dated: March 27, 2013. 

Aaron Siegel, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

[FR Doc. 2013–07508 Filed 4–1–13; 8:45 am] 

BILLING CODE 5001–06–P 


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