Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Rules and Regulations 18127 

1Promotion of a More Efficient Capacity Release 

Market, 73 FR 37058 (June 30, 2008), FERC Statutes 

and Regulations ¶ 31,271 (2008), (Order No. 712), 

order on reh’g, Order No. 712–A, 73 FR 72692 

(December 1, 2008), FERC Stats. & Regs. ¶ 31,284 

(2008) (Order No. 712). 

2For purposes of this request for clarification, the 

Marketer Petitioners include Shell Energy 

NorthAmerica (US), L.P., ConocoPhillips Company, 

Chevron U.S.A. Inc., Constellation Energy 

Commodities Group, Inc., Tenaska Marketing 

Ventures, Merrill Lynch Commodities, Inc., Nexen 

Marketing U.S.A. Inc., UBS Energy LLC, and 

Citigroup Energy Inc. 

3The National Grid Gas Delivery Companies 

comprise The Brooklyn Union Gas Company 

d/b/a KeySpan Energy Delivery NY; KeySpan Gas 

East Corporation d/b/a KeySpan Energy Delivery LI; 

Boston Gas Company, Colonial Gas Company, 

EnergyNorth Natural Gas, Inc., and Essex Gas 

Company, collectively d/b/a KeySpan Energy 

Delivery NE; Niagara Mohawk Power Corporation 

d/b/a National Grid; and The Narragansett Electric 

Company d/b/a National Grid, all subsidiaries of 

National Grid USA, (collectively National Grid). 

4Order No. 712 at P 144–153. 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 284 

[Docket No. RM08–1–003, et al.; Order No. 

712–B] 

Promotion of a More Efficient Capacity 

Release Market 

Issued April 16, 2009. 

AGENCY: Federal Energy Regulatory 

Commission. 

ACTION: Final rule; order on rehearing 

and clarification and terminating 

dockets. 

SUMMARY: The Federal Energy 

Regulatory Commission (Commission) is 

issuing an order addressing the requests 

for rehearing and clarification of Order 

No. 712–A [73 FR 72692, December 1, 

2008]. Order No. 712 [73 FR 37058, June 

30, 2008], as modified by Order No. 

712–A, revised the Commission’s 

regulations governing interstate natural 

gas pipelines to reflect changes in the 

market for short-term transportation 

services on pipelines and to improve the 

efficiency of the Commission’s capacity 

release program. The orders lifted the 

maximum rate ceiling on secondary 

capacity releases of one year or less 

provided that such releases take effect 

within a year of the date that a pipeline 

is notified of the release. The revised 

regulations facilitated asset management 

arrangements (AMA) by relaxing the 

Commission’s prohibition on tying and 

on its bidding requirements for certain 

capacity releases. The Commission 

further clarified in Order No. 712 that 

its prohibition on tying does not apply 

to conditions associated with gas 

inventory held in storage for releases of 

firm storage capacity. Finally, the 

Commission waived its prohibition on 

tying and bidding requirements for 

capacity releases made as part of stateapproved retail access programs. 

This Order denies rehearing and 

grants clarification in part and denies 

clarification in part of Order No. 712– 

A. This order also terminates Docket 

Nos. RM06–21–000 and RM07–4–000. 

DATES: Effective Date: This order 

denying rehearing of the final rule will 

become effective May 21, 2009. 

FOR FURTHER INFORMATION CONTACT: 

William Murrell, Office of Energy 

Market Regulation, Federal Energy 

Regulatory Commission, 888 First 

Street, NE., Washington, DC 20426, 

William.Murrell@ferc.gov, (202) 502– 

8703. 

Robert McLean, Office of General 

Counsel, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, 

Robert.McLean@ferc.gov, (202) 502– 

8156. 

David Maranville, Office of the General 

Counsel, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, 

David.Maranville@ferc.gov, (202) 502– 

6351. 

SUPPLEMENTARY INFORMATION: 

Order on Rehearing and Clarification 

and Terminating Dockets 

1. On November 21, 2008, the 

Commission issued Order No. 712–A in 

which it denied rehearing and granted 

clarification in part of Order No. 712.1

Order No. 712, as modified by Order No. 

712–A, revised the Commission’s 

regulations governing interstate natural 

gas pipelines to reflect changes in the 

market for short-term transportation 

services on pipelines and to improve the 

efficiency of the Commission’s capacity 

release program. The orders lifted the 

maximum rate ceiling on secondary 

capacity releases of one year or less 

provided that such releases take effect 

within a year of the date that the 

pipeline is notified of the release. The 

revised regulations facilitated asset 

management arrangements (AMA) by 

relaxing the Commission’s prohibition 

on tying and on its bidding 

requirements for certain capacity 

releases. The Commission further 

clarified in Order No. 712 that its 

prohibition on tying does not apply to 

conditions associated with gas 

inventory held in storage for releases of 

firm storage capacity. Finally, the 

Commission waived its prohibition on 

tying and bidding requirements for 

capacity releases made as part of stateapproved retail access programs. This 

Order denies rehearing and grants 

clarification in part and denies 

clarification in part of Order No. 712– 

A, and terminates Docket Nos. RM06– 

21–000 and RM07–4–000. 

2. Several parties seek clarification 

and/or rehearing of Order No. 712–A. 

The Marketer Petitioners seek 

clarification concerning an asset 

manager’s delivery obligation when an 

AMA includes released capacity on 

upstream and downstream pipelines.2

The National Grid Gas Delivery 

Companies 3 request clarification, and 

National Fuel Gas Distribution 

Corporation (National Fuel) requests 

clarification, rehearing, or a limited 

waiver, concerning what releases 

qualify as releases to a marketer 

participating in a state-regulated retail 

access program. Consolidated Edison of 

New York Inc., (Con Ed) and Orange 

and Rockland Utilities, Inc., (O&R) 

(filing collectively), Energy America, 

New York State Electric and Gas 

Corporation (NYSEG) and Rochester Gas 

and Electric Corporation (RG&E) (filing 

collectively) seek clarification of Order 

No. 712–A or alternatively request 

waivers on the same issue raised by 

National Grid and National Fuel. The 

New York State Energy Marketers 

Coalition (NYSEMC) moved to intervene 

out of time and filed comments 

opposing the requests for clarification 

and waivers sought by National Fuel 

others on the retail access issue. The 

Commission denies rehearing of Order 

No. 712–A and grants in part, and 

denies in part, clarification of Order No. 

712–A. The clarification granted in this 

order moots the requests for waivers. 

Upstream Pipeline Delivery Obligations 

Request for Clarification 

3. In Order No. 712, the Commission 

exempted capacity releases that were 

meant to implement AMAs from the 

Commission’s prohibition against tying 

and its bidding requirements. As part of 

the definition of AMAs that would 

qualify for these exemptions, the 

Commission determined that there must 

be a significant delivery or purchase 

obligation on the replacement shipper to 

deliver gas to, or purchase gas from, the 

releasing shipper in order to distinguish 

AMAs from standard capacity releases.4

Accordingly, the Commission required 

that the release contain a condition that 

the ‘‘releasing shipper may call upon 

the replacement shipper to deliver to, or 

purchase, from, the releasing shipper a 

volume of gas up to 100 percent of the 

daily contract demand of the released 

transportation or storage capacity. 

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18128 Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Rules and Regulations 

5 18 CFR 284.8(h)(3), as adopted by Order No. 

712–A. 

6 Id. 

7See Order No. 712–A at P 79–82. 

8 Id. P 86–87. 

9 Id. P 87. 

10 Id. P 88. 

11Marketer Petitioners’ clarification request at 3. 

12 Id. at 4. 

13 Id. The example in Figure 1 substantially 

replicates the example filed by the Marketer 

Petitioners except that they included storage 

withdrawal right figures that we omit here. 

* * *’’ 5 That obligation must apply for 

the greater of five months or five/ 

twelfths of the term of the release.6 In 

Order No. 712–A, the Commission also 

clarified the delivery/purchase 

obligation portion of the AMA 

definition in several respects not at 

issue here.7

4. In addition, the Commission denied 

a request by the Public Service 

Company of North Carolina, South 

Carolina Electric and Gas Company and 

Scana Energy Marketing, Inc., 

(collectively Scana) to clarify that in a 

situation where parties include released 

capacity on both an upstream and 

downstream pipeline in an AMA, the 

asset manager’s delivery obligation only 

applies to the released capacity on the 

downstream pipeline that directly 

connects to the releasing shipper’s 

delivery point.8 The Commission 

explained that if the delivery obligation 

did not apply to the full amount of the 

upstream released capacity, the 

releasing shipper could include capacity 

in the upstream release that it does not 

need for its own legitimate business 

purposes during the term of the release. 

The Commission concluded that while 

Scana was correct that the delivery/ 

purchase obligation is not cumulative of 

the capacity in a released chain of 

contracts that constitute a single 

capacity path, the asset manager must 

have a delivery/purchase obligation up 

to the contract demand of each specific 

contract released to it.9

5. The Commission also denied 

Scana’s and BP Energy Company’s (BP) 

request for clarification that where 

released storage and transportation 

capacity are combined in an AMA, the 

delivery/purchase obligations associated 

with the release only apply to the 

transportation contract. The 

Commission ruled again that while the 

delivery/purchase obligation is not 

cumulative of the released 

transportation and storage capacity, to 

qualify for the exemptions provided for 

AMAs an asset manager must have the 

necessary purchase/delivery obligation 

for each separate contract for released 

capacity.10

6. The Marketer Petitioners seek 

clarification of both these rulings. 

Marketer Petitioners argue that while 

the rulings reflect the Commission’s 

intent to confirm that the releases at 

issue are associated with bona fide 

AMAs, they will lead to uncertainty 

about the ultimate contractual delivery/ 

purchase obligation at any specific 

delivery or receipt points under an 

AMA contract. For example, they state 

that a releasing shipper may have 

sequential transportation contracts on 

interconnected pipelines to bring gas to 

a delivery point on the downstream 

pipeline at the releasing shipper’s city 

gate. For various reasons, however, the 

contract demands of the contracts on the 

upstream pipeline(s) may exceed the 

contract demand on the downstream 

pipeline that directly connects to the 

releasing shipper’s city gate. Marketer 

Petitioners assert that this could occur 

as a result of the need for a shipper to 

provide fuel and lost and unaccounted 

for gas (LAUF) to each transporting 

pipeline in the chain.11 While the 

Marketer Petitioners recognize that 

Order No. 712–A stated that the asset 

manager’s delivery obligation to the 

releasing shipper’s city gate is not 

cumulative of the contract demands 

under each contract, they argue that 

Order No. 712–A could be read to 

suggest that the asset manager has the 

obligation to deliver to the releasing 

shipper’s city gate a volume equal to the 

full amount of the contract demand on 

the upstream pipeline, even though that 

volume exceeds the contract demand on 

the downstream pipeline. They contend 

that such a result appears inconsistent 

with Order No. 712’s intent to promote 

efficient AMAs.12

7. The Marketer Petitioners claim the 

same may be true where a releasing 

shipper has options for both (1) long 

haul transportation from the production 

area and (2) short haul transportation 

from market area storage that form a 

‘‘network’’ whereby the releasing 

shipper can serve its needs at its city 

gate delivery point. According to the 

Marketer Petitioners, this may result in 

optional capacity paths for an asset 

manager to transport gas, or withdraw 

gas from storage, to meet the releasing 

shipper’s city gate delivery point 

obligations. Marketer Petitioners assert 

that requiring the asset manager’s 

delivery/purchase obligation to apply to 

the full contract demand under each 

capacity release in the transportation 

chain creates significant uncertainty as 

to the delivery obligation at the delivery 

points on the upstream pipelines and on 

the downstream pipeline at the 

releasing shipper’s city gate. 

8. The Marketer Petitioners posit an 

example in their pleading where the 

releasing shipper has capacity on 

upstream Pipelines A and B, and on 

downstream Pipeline C. Pipeline C 

connects with the releasing shipper’s 

city gate. Both Pipelines A and B 

interconnect with Pipeline C at Point Y, 

which is the releasing shipper’s receipt 

point on Pipeline C. (See Figure 1 

below).13 The releasing shipper has 

1,000 Dth per day of short haul capacity 

on Pipeline A from market area storage 

to Point Y. The releasing shipper has 

5,000 Dth per day of long haul capacity 

on Pipeline B from the production area 

to Point Y. The releasing shipper also 

has 5,000 Dth per day of capacity on 

Pipeline C from Point Y to its city gate. 

Thus the releasing shipper has the 

ability to transport 5,000 Dth from the 

production area over Pipelines B and C 

to its city gate. The releasing shipper 

also has the option to move 1,000 Dth 

per day from market area storage over 

Pipelines A and C to its city gate, if it 

is unable to obtain the full 5,000 Dth/ 

day to fill pipeline B or because storage 

gas may be more economical on some 

days. 

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Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Rules and Regulations 18129 

14Order No. 712–A at P 87. 

9. The Marketer Petitioners state it is 

unclear in this situation if the asset 

manager’s delivery obligation at the 

releasing shipper’s city gate is equal to 

(1) the releasing shipper’s 5,000 Dth 

contract demand on Pipeline C, or (2) 

the releasing shipper’s 6,000 Dth total of 

the releasing shipper’s 1,000 Dth 

contract demand on Pipeline A and 

5,000 Dth contract demand on Pipeline 

B. Marketer Petitioners also question 

whether, if the delivery obligation is 

only 5,000 Dth at the city gate, the asset 

manager nevertheless has a 6,000 Dth 

delivery obligation at Point Y. Marketer 

Petitioners state that, without certainty 

as to the Commission’s view of the 

location and amount of the required 

delivery obligation, it is unclear if all of 

the transportation and storage capacity 

is eligible for inclusion in an AMA. 

10. Marketer Petitioners thus request 

clarification that the ruling that an asset 

manager’s delivery/purchase obligation 

must apply to the full contract demand 

under each capacity release in a 

transportation chain is not intended to 

alter that asset manager’s obligation at a 

particular point, or in other words, that 

it does not add additional delivery 

points to an AMA. Specifically, in the 

example described above, they request 

clarification that, while the asset 

manager may have a delivery obligation 

associated with the releases on 

Pipelines A, B, and C, of 1,000 Dth/day, 

5,000 Dth/day, and 5,000 Dth per day, 

respectively, that would not alter the 

asset manager’s contractual 5,000 Dth/ 

day delivery obligation to the releasing 

shipper at its city gate. They claim that 

such a clarification would affirm the 

Commission’s holding that it does not 

intend the delivery/purchase obligation 

under an AMA to be cumulative of the 

total contract demands associated with 

the capacity in a released chain and 

make clear that the Commission did not 

intend to allow AMA customers to use 

the Commission’s rulings to enlarge 

their delivery/purchase entitlements at a 

particular receipt or delivery point 

under an AMA. 

11. The Marketer Petitioners note that 

any concern that the Commission may 

have about ‘‘unneeded’’ capacity being 

included in an AMA could be addressed 

by the Commission clarifying that when 

an AMA encompasses capacity released 

on more than one pipeline, the posting 

should indicate that the AMA also 

involves capacity on other pipeline(s) 

and should be posted by all the 

pipelines involved. They assert that 

such a posting requirement would 

illuminate the totality of the release 

capacity to be included in the AMA. 

Commission Determination 

12. The Commission grants 

clarification in part and denies 

clarification in part. As we stated in 

Order No. 712–A, the asset manager’s 

delivery/purchase obligation must apply 

to the full contract demand under each 

capacity release in the transportation 

chain.14 In other words, each release to 

an asset manager is a separate capacity 

release that must have its own delivery/ 

purchase obligation in order to qualify 

as an AMA. As we also noted in Order 

No. 712–A, in the situation where there 

is a capacity chain on several pipelines, 

the delivery purchase obligation need 

not be cumulative to the extent that gas 

delivered from the upstream pipeline to 

the downstream pipeline can be 

transported using the released capacity 

on the downstream pipeline. 

13. The Commission grants 

clarification that the asset manager’s 

delivery obligation at the releasing 

shipper’s city gate need only be up to 

the contract demand of the released 

capacity on the downstream pipeline 

that interconnects directly with the 

releasing shipper’s city gate. The fact 

the releasing shipper may have also 

released to the asset manager capacity 

on an upstream pipeline or pipelines 

with total contract demand exceeding 

the released capacity on the 

downstream pipeline does not increase 

the asset manager’s required delivery 

obligation at the releasing shipper’s city 

gate on the downstream pipeline. Thus, 

in the example set forth in Figure 1, the 

asset manager’s delivery obligation at 

the releasing shipper’s city gate would 

be equal to the 5,000 Dth/day released 

capacity on Pipeline C, despite the fact 

the released capacity on Pipelines A and 

B totals 6,000 Dth/day. 

14. While a releasing shipper may 

release capacity to an asset manager on 

an upstream pipeline(s) that exceeds the 

released downstream capacity, the asset 

manager must have a delivery obligation 


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18130 Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Rules and Regulations 

15The same analysis applies if the releasing 

shipper reserves storage withdrawal rights in excess 

of its contract demand on the interconnecting 

pipeline. See Marketer Petitioners’ request for 

clarification at 5. 

16The Commission’s additional explanation of its 

rule should remove any uncertainty the Marketer 

Petitioners have concerning the need to reflect fuel 

and LAUF in the contracts on each pipeline in the 

chain. An asset manager may include the extra 

volumes necessary to cover fuel retention and 

LAUF charges at each interconnecting point in the 

pipeline chain. The customer may not, however, 

require that the asset manager deliver the 

cumulative volume to the most downstream 

delivery point. (See example on page 3 of the 

Marketer Petitioners’ clarification request). 

17Order No. 712 at P 199; Order No. 712–A at P 

115. 

18Order No. 712 at P. 200; Order No. 712–A at 

P 115. 

19Order No. 712–A at P 118. 

20 Id. P 121–122. 21 Id. P 122. 

under each such upstream capacity 

release up to the contract demand of 

that release. In the Figure 1 example, the 

asset manager’s delivery obligations on 

Pipelines A and B must be 1,000 Dth/ 

day and 5,000 Dth/day, respectively. 

Thus, to the extent the Marketer 

Petitioners seek clarification that an 

asset manager’s delivery obligation at 

delivery points on upstream pipeline(s) 

cannot exceed its delivery obligation at 

the city gate delivery point on the 

downstream pipeline, the Commission 

denies that request. As the Commission 

held in Order No. 712–A, if the asset 

manager’s delivery obligation on the 

upstream pipeline did not apply to the 

full amount of upstream released 

capacity, the releasing shipper could 

include capacity in the upstream release 

that it does not need for its own 

legitimate business purposes during the 

term of the release. 

15. In such a situation, however, if the 

releasing shipper requires the asset 

manager to deliver volumes on the 

upstream pipelines that exceed the 

contract demand on the downstream 

pipeline, the releasing shipper would be 

required to take delivery of the excess 

volumes at points on the upstream 

pipeline or pipelines, and would also be 

responsible for transporting that excess 

gas away from those points. In the 

example in Figure 1, for instance, the 

releasing shipper could require the asset 

manager to deliver 6,000 Dth to Point Y. 

That releasing shipper, however, would 

have to take delivery of 1,000 Dth of that 

gas at Point Y and make its own 

additional arrangements to have the gas 

transported away from Point Y, since 

this quantity exceeds the asset 

manager’s released capacity rights on 

the downstream pipeline. The releasing 

shipper could not require the asset 

manager to transport more than 5,000 

Dth/day on Pipeline C from Point Y to 

the city gate. The asset manager could 

only be held responsible for 

transporting to the releasing shipper’s 

city gate a volume up to the contract 

demand on the downstream pipeline.15

16. The Commission finds that this 

rule is straightforward, nondiscriminatory and the most reasonable 

to administer for both parties and the 

Commission. It is also consistent with 

the Commission’s clarification in Order 

No. 712–A that the delivery obligations 

for AMAs associated with a chain of 

upstream and downstream pipelines 

and contracts are not cumulative. 

Further, it minimizes the potential for 

parties to include unneeded upstream 

capacity in an AMA.16

Retail Access Programs 

Requests for Clarification and/or 

Waivers 

17. In Order No. 712, as affirmed in 

Order No. 712–A, the Commission 

determined that capacity releases by 

local distribution companies (LDC) to 

implement state-approved retail access 

programs should be granted the same 

blanket exemptions from the prohibition 

against tying and the bidding 

requirements as capacity releases made 

in the AMA context.17 In order to 

qualify for the exemptions, the 

Commission determined that the 

released capacity must be used by the 

replacement shipper to provide the gas 

supply requirements of retail consumers 

pursuant to a retail access program 

approved by the state agency with 

jurisdiction over the LDC that provides 

delivery service to such retail 

consumers.18 In Order No. 712–A, the 

Commission clarified that a marketer 

participating in a state-approved retail 

choice program can re-release its 

capacity to an asset manager that will 

fulfill the marketer’s obligation under 

the state-approved program.19 The 

Commission declined to grant a request 

for clarification, however, that a 

wholesale supplier who obtains 

capacity directly from an LDC as part of 

an unbundling program but who is not 

a marketer under the program 

nonetheless qualifies for the tying and 

bidding exemptions.20 The Commission 

determined that such a clarification was 

not appropriate for this generic 

rulemaking proceeding because BP was 

requesting the Commission to approve a 

specific deal structure that does not 

meet the criteria under which the rule 

generally grants exemptions. The 

Commission noted that BP or any other 

parties are free to file separately on a 

case-by-case basis for approval of 

individual arrangements that it believes 

may merit a waiver of the Commission’s 

bidding and tying strictures.21

18. Several parties seek clarification 

of that ruling. National Grid seeks 

clarification that an LDC releasing 

capacity as part of a state-approved 

retail access program may release 

directly to a marketer’s asset manager as 

long as the asset manager has an 

identical obligation to supply gas to the 

marketer as the marketer’s obligation to 

supply gas to the releasing LDC. 

National Grid asserts that certain 

marketers that participate in its stateapproved retail access program are 

requesting that they be allowed to 

release directly to their asset manager so 

that the asset manager, not the marketer, 

will be the one who has to meet the 

creditworthiness standards of the 

pipeline. National Grid asserts that 

cutting out the middle man will enable 

marketers to avoid having to post scarce 

credit assurances. 

19. National Grid also requests 

clarification that an LDC that releases to 

an asset manager can require the asset 

manager to release capacity to marketers 

serving under the retail choice program 

and that such a release will qualify for 

the exemptions. National Grid asserts 

that the need for this clarification arises 

from the fact that the number of 

customers participating in an LDC’s 

retail choice program may change from 

time to time and thus the LDC may 

release to an asset manager only to find 

out that some sales customers have 

changed to transportation only service. 

National Grid claims this change 

necessitates a release by the LDC to the 

converting customers’ marketers. 

National Grid stated that the requested 

clarification will allow for more 

efficient releases because the LDC could 

direct the asset manager to effectuate 

those new releases. 

20. National Fuel seeks clarification 

that the prohibition against tying and 

the bidding requirements do not apply 

to releases by an LDC to a marketer 

when the marketer is acting as an agent 

of a retail access marketer pursuant to 

a state-mandated retail access program. 

It asserts the situation described by BP 

in BP’s request for clarification of Order 

No. 712—where a wholesale entity 

receives releases as part of a stateapproved program, for the purpose of 

selling gas to another retail marketer 

that makes sales directly to retail 

customers—is not a unique situation 

and should be the subject of the general 

rulemaking proceeding. National Fuel 

asserts that not all marketers 

participating in state-approved retail 

unbundling programs sell directly to 

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Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Rules and Regulations 18131 

22National Fuel request for clarification at 7. 23Con Ed/O&R support for clarification at 4. 

consumers. They claim that in New 

York, for example, the state choice 

program allows both the release of 

capacity to retail marketers selling 

directly to consumers and for the release 

of capacity to marketers that are 

contractually entitled to act as agents for 

the retail marketers selling to 

consumers.22 National Fuel explains 

that the latter arrangements may occur 

because retail marketers may have 

difficulty acquiring all the releases 

necessary to meet their obligations 

under the program, often due to credit 

issues. National Fuel states that in the 

agency situation the retail marketer will 

enter into an agency agreement through 

which a second marketer becomes the 

first marketer’s agent for purposes of 

acquiring the released capacity from the 

LDC. The agent marketer agrees to 

acquire the necessary capacity from the 

LDC and to sell gas to the retail marketer 

at the city gate for the purposes of 

fulfilling the retail marker’s obligations 

under the program. According to 

National Fuel, this sort of arrangement 

does not raise the same concerns as that 

described by BP because of the 

‘‘agency’’ relationship. National Fuel 

asserts that if the Commission does not 

grant clarification of the regulation, then 

it should amend the regulations to 

include both retail marketers in stateapproved programs and their agents. 

21. Alternatively, National Fuel seeks 

a limited waiver for the situation 

described above. It states the waiver 

would only apply under the following 

circumstances: (1) Releases to these 

marketers would occur only when there 

is a valid, written agency agreement 

between the retail marketer and the 

marketer receiving releases of capacity, 

requiring the marketer to act as agent for 

the retail marketer and obligating the 

agent to meet the retail marketer’s gas 

supply needs; and (2) the marketer 

acting as agent must do so as part of a 

state-approved customer choice program 

and under published state-approved 

tariffs and/or procedures. National Fuel 

argues that the result would be fully 

consistent with both the goal of the 

exemptions for state choice programs 

and the non-discriminatory and 

efficiency goals of Order No. 712. 

22. The New York State Public 

Service Commission (NYPSC) filed in 

support of both National Grid’s and 

National Fuel’s clarification requests. 

The NYPSC asserts that Order No. 712– 

A should be clarified to avoid 

‘‘hindering’’ state retail access programs. 

It claims that the releases at issue are 

made to effect service to the very same 

customers for whose benefit the 

pipeline capacity was purchased by the 

releasing LDC and that without the 

exemptions provided by Order No. 712 

it would be more difficult for marketers 

to provide service to their end use 

customers. The NYPSC further argues 

that requiring the issue to be resolved 

on a case by case basis does not foster 

the Commission’s goals and harms state 

retail access programs. 

23. Other LDCs located in New York 

also filed in support of National Grid’s 

and National Fuel’s requests. Con Ed 

and O&R assert that a release to a 

‘‘wholesale marketer acting as agent for 

a retail marketer participating in a stateapproved retail choice program is 

equivalent to a capacity release directly 

to a retail marketer.’’ 23 They assert that 

based on the principles of agency law 

the principal and agent are equally 

bound by the contract made by an agent 

acting within the scope of an agency 

relationship, and thus a wholesale 

marketer that obtains capacity as a 

replacement shipper, when acting as 

agent for the retail marketer, is obtaining 

capacity for the direct benefit of the 

retail marketer and state retail access 

program. They also support the 

arguments regarding the potential 

creditworthiness difficulties of the retail 

choice marketers. Con Ed and O&R seek 

company specific waivers in the event 

the Commission denies the clarification 

requests. 

24. NYSEG and RG&E lend similar 

support to the clarification requests 

claiming that state retail access releases 

involve storage as well as transportation 

and that without the ability to use an 

agent to obtain the capacity and serve 

the retail load many retail marketers 

may not be able to participate in the 

program. They also seek a waiver in the 

event the Commission denies 

clarification. 

25. Energy America filed support for 

the clarification requests stating that it 

has acted as agent for Direct Energy 

Services and other retail marketers with 

respect to sourcing needs and managing 

transportation and storage capacity. 

Energy America states that as agent, it 

signs an agency agreement with the LDC 

making clear that it is acting as an agent 

to provide service to the retail marketer 

under the retail access program. The 

LDC then releases capacity to the agent 

who transports and sells gas to the retail 

marketer at the city gate. Energy 

America asserts that without a 

clarification or waiver, retail marketers 

may be unable to participate in retail 

access programs. 

26. The NYSEMC filed comments 

requesting that the Commission reject 

National Grid’s clarification. It asserts 

that National Grid seeks a blanket 

exemption for all marketers acting as 

agents in retail choice programs, not a 

company specific waiver as suggested in 

Order No. 712–A. Further, NYSEMC 

takes issue with the claim that the 

Commission should grant the 

clarification because some marketers 

may not be able to meet the financial or 

technical requirements of interstate 

pipelines. It asserts that lack of financial 

capability is not a reason to expand the 

scope of exemptions granted by Order 

No. 712. 

27. NYSEMC argues that granting a 

broad exemption as requested by the 

New York utilities that also operate in 

Pennsylvania and elsewhere would 

effectively result in a blanket waiver of 

the type denied in Order No. 712–A. It 

also argues that granting the requested 

relief would increase the risk of defaults 

by permitting less creditworthy 

suppliers access to systems they would 

not otherwise be able to obtain. It claims 

that it would not be in the public 

interest to allow circumvention of 

creditworthiness standards in the 

current credit climate and that relaxed 

credit requirements were actually one of 

the causes of the current economic 

situation. It further argues that the 

Commission would hinder the 

continued development of a viable and 

robust competitive market by affording 

certain marketers preferential credit 

treatment. 

28. National Grid answers NYSEMC’s 

comments, claiming that NYSEMC 

mischaracterizes National Grid’s 

clarification request by framing it as a 

request for an open-ended exemption. 

National Grid asserts that it is 

requesting an exemption only where the 

wholesale marketer supplier advises the 

LDC that the marketer has an obligation 

to supply gas to the retail marketer that 

is equivalent to the retail marketer’s 

obligation to supply gas to the releasing 

LDC’s customers. National Grid claims 

such obligation could be created by an 

agency relationship or some other 

contractual framework. National Grid 

also states that NYSEMC’s concerns 

about creditworthiness of small 

customers are misplaced because the 

wholesale supplier would still be 

required to meet the pipeline’s 

creditworthiness standards. National 

Grid also notes that granting its 

clarification would provide retail 

customers with a greater choice of 

providers. 

Commission Determination 

29. The Commission clarifies that the 

exemptions from bidding and the 

prohibition against tying for releases to 

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18132 Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Rules and Regulations 

24See 18 CFR 284.8(h)(1). 25 18 CFR 284.8(h)(4). 26Some of the parties requesting clarification 

describe an ‘‘agency’’ relationship whereby the 

agent would obtain the released capacity and then 

sell gas to its principal, the retail marketer. See 

National Fuel’s request at 7. This arrangement, as 

well as what we understand as a traditional agency 

arrangement, where the principal would continue 

to hold title to the capacity and the gas, and thus 

there would be no need for a ‘‘resale’’ to the retail 

marketer (principal), are both acceptable to the 

Commission as releases eligible for the exemptions 

from tying and bidding provided the ‘‘agent’’ is 

obligated to serve the retail marketer’s needs as 

described above under the retail access program. 

marketers participating in stateregulated retail access programs apply 

to any release where the marketer 

replacement shipper is obligated to use 

the capacity to provide the gas supply 

requirement of retail consumers in the 

program. Even if the marketer does not 

itself make sales directly to the subject 

retail consumers, this condition can be 

satisfied so long as the marketer has a 

contractual obligation to use the full 

amount of the released capacity to 

supply gas to the retail access marketer 

and the retail access marketer is, in turn, 

obligated to supply that gas to the retail 

consumers pursuant to a state-regulated 

retail access program. 

30. As stated above, in Order Nos. 712 

and 712–A the Commission exempted 

from bidding releases ‘‘to a marketer 

participating in a state-regulated retail 

access program as defined in paragraph 

(h)(4) of this section * * *.’’ 24 In 

section 284.8(h)(4) of the revised 

regulations, the Commission defined 

releases to a ‘‘marketer participating in 

a state-regulated retail access program’’ 

as ‘‘any prearranged capacity release 

that will be utilized by the replacement 

shipper to provide the gas supply 

requirement of retail consumers 

pursuant to a retail access program 

* * *.’’ 25 This definition applies to any 

replacement shipper which is obligated 

to use the released capacity to transport 

gas which will be used to provide the 

gas supply requirement of the retail 

consumers, whether that shipper makes 

the retail sales itself or sells the gas to 

the retail marketer who then resells the 

gas to the retail consumers.26 The 

Commission’s rationale in Order No. 

712 for granting the exemptions from 

the tying prohibition and bidding 

requirements for capacity releases by 

LDCs to implement state-approved retail 

access programs applies equally to the 

situation where an LDC releases 

capacity directly to the retail marketer 

or to another entity which is obligated 

to transport the gas on behalf of the 

retail marketer. The essential 

requirement is that the replacement 

shipper either (1) is itself the retail 

marketer or (2) has a contractual 

relationship with the retail marketer 

and/or the LDC requiring it to use up to 

the full amount of the released capacity 

to satisfy the retail marketer’s 

obligations under the state-approved 

retail access program to provide the gas 

supply requirement of retail consumers. 

31. The Commission rejects the 

argument that granting this clarification 

will allow circumvention of interstate 

pipeline creditworthiness standards. If a 

retail marketer is unable to satisfy these 

standards, the replacement shipper 

supplier will be required to satisfy the 

pipeline’s creditworthiness criteria. If 

no party can meet these standards then 

the pipeline does not have to allow the 

release. 

32. The Commission also grants 

National Grid’s requested clarification 

that an LDC that releases to an asset 

manager can require the asset manager 

to release capacity to marketers serving 

under the retail choice program and that 

such a release will qualify for the 

exemptions from the tying prohibition 

and bidding requirements. This 

condition is one that can be addressed 

in the agreement between the releasing 

shipper and asset manager, and will 

allow LDCs and asset managers to 

operate efficiently to effectuate the goals 

of retail access programs. 

33. The clarifications granted above 

render the various requests for waiver 

moot. 

Termination of Dockets 

34. The Commission initiated Docket 

Nos. RM06–21 and RM07–4 to address 

a petition filed by Pacific Gas and 

Electric Co. and Southwest Gas 

Corporation concerning the potential 

removal of the maximum rate ceiling on 

capacity release transactions and a 

petition filed by the Marketer 

Petitioners seeking clarification of the 

operation of the Commission’s capacity 

release rules in the context of asset 

management services. The issues raised 

in the petitions have been fully 

addressed in the instant docket. 

Accordingly, the Commission hereby 

terminates Docket Nos. RM06–21 and 

RM07–4. 

The Commission orders: 

(A) The requests for rehearing of 

Order No. 712–A are denied and the 

requests for clarification of Order No. 

712–A are granted in part and denied in 

part as discussed above. 

(B) Docket Nos. RM06–21 and RM07– 

4 are hereby terminated. 

By the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

[FR Doc. E9–9111 Filed 4–20–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

29 CFR Parts 403 and 408 

RIN 1215–AB62 

Labor Organization Annual Financial 

Reports 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, Department of Labor. 

ACTION: Final rule; delay of effective 

date and applicability date. 

SUMMARY: This final rule delays the 

effective date and applicability date of 

regulations pertaining to the filing by 

labor organizations of annual financial 

reports required by the LaborManagement Reporting and Disclosure 

Act of 1959, as amended (LMRDA) that 

were published in the Federal Register 

on January 21, 2009. They revised Labor 

Organization Annual Report Form LM– 

2 and established a procedure whereby 

the Department may revoke, when 

warranted, a labor organization’s 

authorization to file the simplified 

Labor Organization Annual Report Form 

LM–3. These regulations were to have 

gone into effect on February 20, 2009, 

but were delayed until April 21, 2009, 

by a final rule published on February 

20, 2009 (74 FR 7814). This final rule 

postpones the effective date of the 

regulations from April 21, 2009, until 

October 19, 2009, and the applicability 

date of the regulations from July 1, 2009, 

until January 1, 2010. This will allow 

additional time for the agency and the 

public to consider a proposal to 

withdraw the January 21 regulations 

and, meanwhile, to permit unions to 

delay costly development and 

implementation of any necessary new 

accounting and recordkeeping systems 

and procedures, pending this further 

consideration. At the same time, the 

Department has published a Notice of 

Proposed Rulemaking elsewhere in this 

issue of the Federal Register, seeking 

public comment on its proposal to 

withdraw the regulations. 

DATES: The effective date of the rule 

amending 29 CFR Parts 403 and 408, 

published January 21, 2009, at 74 FR 

3678, is delayed until October 19, 2009, 

and its applicability date is delayed 

until January 1, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Denise M. Boucher, Director, Office of 

Policy Reports and Disclosure, Office of 

Labor-Management Standards, 

Employment Standards Administration, 

U.S. Department of Labor, 200 

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