Federal Register / Vol. 81, No. 94 / Monday, May 16, 2016 / Notices 30245 

1 7 U.S.C. 1 et seq. 2Final Order in Response to a Petition From 

Certain Independent System Operators and 

Regional Transmission Organizations to Exempt 

Specified Transactions Authorized by a Tariff or 

Protocol Approved by the Federal Energy 

Regulatory Commission or the Public Utility 

Commission of Texas From Certain Provisions of 

the Commodity Exchange Act Pursuant to the 

Authority Provided in the Act, 78 FR 19880, Apr. 

2, 2013. The RTO–ISO Order was published in the 

Federal Register on April 2, 2013. 

3The foregoing provisions are referred to as the 

‘‘Excepted Provisions.’’ 

4 7 U.S.C. 25. 

5For a fuller discussion, see RTO–ISO Order at 

19881–82. 

6See Dodd-Frank Act, Pub. L. 111–203, 124 Stat. 

1376 (2010). The text of the Dodd-Frank Act may 

be accessed at http://www.cftc.gov/ucm/groups/

public/@swaps/documents/file/hr4173_

enrolledbill.pdf. 

COMMODITY FUTURES TRADING 

COMMISSION 

Notice of Proposed Amendment to and 

Request for Comment on the Final 

Order in Response to a Petition From 

Certain Independent System Operators 

and Regional Transmission 

Organizations To Exempt Specified 

Transactions Authorized by a Tariff or 

Protocol Approved by the Federal 

Energy Regulatory Commission or the 

Public Utility Commission of Texas 

From Certain Provisions of the 

Commodity Exchange Act Pursuant to 

the Authority Provided in the Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed order and 

request for comment. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or 

‘‘Commission’’) is proposing an 

amendment to an order issued on March 

28, 2013 exempting specified 

transactions from certain provisions of 

the Commodity Exchange Act (‘‘CEA’’ or 

‘‘Act’’) and Commission regulations. 

DATES: Comments for the Notice of 

Proposed Order must be received on or 

before June 15, 2016. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• CFTC Web site: http://

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Comments Online process 

on the Web site. 

• Mail: Christopher Kirkpatrick, 

Secretary of the Commission, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 

20581. 

• Hand Delivery/Courier: Same as 

Mail, above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one of these methods. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to http://

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the established procedures in § 145.9 

of the Commission’s regulations, 17 CFR 

145.9. 

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from http://www.cftc.gov that it may 

deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of this action will be retained 

in the public comment file and will be 

considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Robert B. Wasserman, Chief Counsel, 

202–418–5092, rwasserman@cftc.gov, 

Alicia L. Lewis, Special Counsel, 202– 

418–5862, alewis@cftc.gov, or Andre ́e 

Goldsmith, Special Counsel, 202–418– 

6624, agoldsmith@cftc.gov, Division of 

Clearing and Risk; David P. Van 

Wagner, Chief Counsel, 202–418–5481, 

dvanwagner@cftc.gov, or Riva Spear 

Adriance, Senior Special Counsel, 202– 

418–5494, radriance@cftc.gov, Division 

of Market Oversight, in each case at the 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Overview 

The Commission is proposing to 

amend an order issued on March 28, 

2013 pursuant to the authority in 

section 4(c)(6) of the Act 1 exempting 

specified electric energy transactions 

from certain provisions of the CEA and 

Commission regulations (‘‘RTO–ISO 

Order’’).2 The RTO–ISO Order was 

issued in response to a consolidated 

petition from certain regional 

transmission organizations (‘‘RTOs’’) 

and independent system operators 

(‘‘ISOs’’). The RTO–ISO Order exempted 

contracts, agreements, and transactions 

for the purchase or sale of the limited 

electric energy-related products that are 

specifically described within the RTO– 

ISO Order from the provisions of the 

CEA and Commission regulations, with 

the exception of 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 of the Act, and any 

implementing regulations promulgated 

under these sections including, but not 

limited to, Commission regulations 

23.410(a) and (b), 32.4, and part 180.3

The RTO–ISO Order did not specifically 

note that the exemption contained 

therein does not apply to actions 

pursuant to CEA section 22 with respect 

to those substantive provisions that are 

excepted from the exemption (i.e. the 

Excepted Provisions). Although the 

Commission did not intend to provide 

an exemption from the private right of 

action in CEA section 22, the Fifth 

Circuit held that this was the effect of 

the RTO–ISO Order. The Commission is 

thus proposing to amend the text of the 

RTO–ISO Order to explicitly provide 

that the RTO–ISO Order does not 

exempt the entities covered under the 

RTO–ISO Order from the private right of 

action found in section 22 of the CEA 4

with respect to the Excepted Provisions 

(‘‘Proposed Amendment’’). A copy of 

the RTO–ISO Order is available at 78 FR 

19880, and on the Commission’s Web 

site at http://www.cftc.gov/idc/groups/

public/@lrfederalregister/documents/

file/2013-07634a.pdf. 

Table of Contents 

I. Relevant Dodd-Frank Provisions 

II. Background 

A. RTO–ISO Order 

B. Aspire v. GDF Suez 

C. Southwest Power Pool Proposed Order 

III. Proposed Amendment 

A. Private Right of Action Under CEA 

Section 22 

B. Section 4(c) Analysis 

1. Overview of CEA Section 4(c) 

2. Section 4(c) Determinations 

IV. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Cost-Benefit Considerations 

1. Consideration of Costs and Benefits 

2. Consideration of CEA Section 15(a) 

Factors 

V. Request for Comment on the Proposed 

Amendment to the RTO–ISO Order 

I. Relevant Dodd-Frank Provisions 5

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’).6 Title VII of the 

Dodd-Frank Act amended the CEA and 


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7Section 722(e) of the Dodd-Frank Act. 

8See 7 U.S.C. 2(a)(1)(A). The Dodd-Frank Act also 

added section 2(h)(1)(A), which requires swaps to 

be cleared if required to be cleared and not subject 

to a clearing exception or exemption. See 7 U.S.C. 

2(h)(1)(A). 9See 7 U.S.C. 2(a)(1)(I). 10 7 U.S.C. 2(a)(1)(I)(i). 11See 7 U.S.C. 2(a)(1)(I)(ii). 12See 7 U.S.C. 6(c)(6). CEA section 4(c)(6) 

provides that the Commission shall issue an 

exemption only if the Commission determines that 

the exemption would be consistent with the public 

interest and the purposes of the Act. Moreover, the 

Commission must act in accordance with 4(c)(1) 

and 4(c)(2) when issuing an exemption under 

section 4(c)(6). 

13 7 U.S.C. 6(c)(6). 14 7 U.S.C. 6(c)(1). 15 7 U.S.C. 6(c)(2). 16Section 4(c)(3) of the CEA further outlines who 

may constitute an appropriate person for the 

purpose of a particular 4(c) exemption and 

includes, as relevant to the RTO–ISO Order: (a) Any 

person that qualifies for one of ten defined 

categories of appropriate persons; or (b) such other 

persons that the Commission determines to be 

appropriate in light of their financial or other 

qualifications, or the applicability of appropriate 

regulatory protections. 

17 7 U.S.C. 6(c)(2). 18H.R. Rep. No. 102–978, 102d Cong. 2d Sess., 

1992 U.S.C.C.A.N. 3179, 3213 (1992). 19Six entities (the ‘‘Requesting Parties’’) jointly 

filed a petition requesting the exemption provided 

in the RTO–ISO Order: Midwest Independent 

Transmission System Operator, Inc. (‘‘MISO’’), ISO 

New England, Inc. (‘‘ISO NE’’), and PJM 

Interconnection, L.L.C. (‘‘PJM’’) are RTOs subject to 

regulation by FERC; California Independent System 

Operator Corporation (‘‘CAISO’’) and New York 

Independent System Operator, Inc. (‘‘NYISO’’) are 

ISOs subject to regulation by FERC; and the Electric 

Reliability Council of Texas, Inc. (‘‘ERCOT’’) 

performs the role of an ISO and is subject to 

regulation by the Public Utility Commission of 

Texas (‘‘PUCT’’). See RTO–ISO Order at 19882. 

20See id. at 19912–13. 

21See id. at 19913. The exemption in the RTO– 

ISO Order also applies to ‘‘any person or class of 

persons offering, entering into, rendering advice, or 

rendering other services with respect’’ to any of the 

Covered Transactions. See id. at 19912. These 

entities, including the six Requesting Parties (see 

supra note 19) are hereinafter referred to 

collectively as the ‘‘Covered Entities.’’ 

22See id. at 19913–14. 

23See id. at 19912–15. 

24See id. at 19912. 

25See id. 

altered the scope of the Commission’s 

exclusive jurisdiction.7 In particular, it 

expanded the Commission’s exclusive 

jurisdiction, which had included futures 

traded, executed, and cleared on CFTCregulated exchanges and clearinghouses, 

to also cover swaps traded, executed, or 

cleared on CFTC-regulated exchanges or 

clearinghouses.8 As a result, the 

Commission’s exclusive jurisdiction 

now includes swaps as well as futures. 

The Dodd-Frank Act also added a 

savings clause that addresses the roles 

of the Commission, the Federal Energy 

Regulatory Commission (‘‘FERC’’), and 

state regulatory authorities as they relate 

to certain agreements, contracts, or 

transactions traded pursuant to the tariff 

or rate schedule of an RTO or ISO that 

has been approved by FERC or the state 

regulatory authority.9 That savings 

clause, paragraph (I)(i) of CEA section 

2(a)(1), preserves the statutory authority 

of FERC and state regulatory authorities 

over agreements, contracts, or 

transactions entered into pursuant to a 

tariff or rate schedule approved by FERC 

or a State regulatory authority, that are 

(1) not executed, traded, or cleared on 

an entity or trading facility subject to 

registration, or (2) executed, traded, or 

cleared on a registered entity or trading 

facility owned or operated by an RTO or 

ISO.10 However, paragraph (I)(ii) of CEA 

section 2(a)(1) also preserves the 

Commission’s statutory authority over 

such agreements, contracts, or 

transactions.11

The Dodd-Frank Act granted the 

Commission specific powers to exempt 

certain contracts, agreements, or 

transactions from duties otherwise 

required by statute or Commission 

regulation by adding, as relevant here, 

new section 4(c)(6) to the CEA. Section 

4(c)(6) provides that the Commission 

shall, if certain conditions are met, issue 

exemptions from the ‘‘requirements’’ of 

the CEA for certain transactions entered 

into pursuant to a tariff or rate schedule 

approved or permitted to take effect by 

FERC or a state regulatory authority.12

The Commission must act ‘‘in 

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

(2) of the CEA when issuing an 

exemption under section 4(c)(6).13

Section 4(c)(1) grants the Commission 

the authority to exempt any agreement, 

contract, or transaction or class of 

transactions, including swaps, from 

certain provisions of the CEA, in order 

to promote responsible economic or 

financial innovation and fair 

competition.14 Section 4(c)(2) 15 of the 

Act further provides that the 

Commission may not grant exemptive 

relief unless it determines that: (1) The 

exemption would be consistent with the 

public interest and the purposes of the 

CEA; (2) the transaction will be entered 

into solely between ‘‘appropriate 

persons’’ as that term is defined in 

section 4(c); 16 and (3) the exemption 

will not have a material adverse effect 

on the ability of the Commission or any 

contract market to discharge its 

regulatory or self-regulatory 

responsibilities under the CEA.17 In 

enacting section 4(c), Congress noted 

that the purpose of the provision is to 

give the Commission a means of 

providing certainty and stability to 

existing and emerging markets so that 

financial innovation and market 

development can proceed in an effective 

and competitive manner.18

II. Background 

A. RTO–ISO Order 

On March 28, 2013, the Commission 

issued the RTO–ISO Order, which 

exempts specified transactions of 

particular RTOs and ISOs 19 from 

certain provisions of the CEA and 

Commission regulations. The scope of 

the RTO–ISO Order includes 

transactions that fall within the 

definitions of ‘‘Financial Transmission 

Rights,’’ ‘‘Energy Transactions,’’ 

‘‘Forward Capacity Transactions,’’ or 

‘‘Reserve or Regulation Transactions’’ 20

(collectively, the ‘‘Covered 

Transactions’’) and that are offered or 

sold in a market administered by one of 

the petitioning RTOs or ISOs pursuant 

to a tariff, rate schedule, or protocol that 

has been approved or permitted to take 

effect by FERC or PUCT.21 In addition, 

to be eligible for the exemption in the 

RTO–ISO Order, all parties to the 

agreements, contracts, or transactions 

that are covered by the RTO–ISO Order 

must be: (1) ‘‘Appropriate persons,’’ as 

defined in section 4(c)(3)(A) through (J) 

of the CEA; (2) ‘‘eligible contract 

participants,’’ as defined in section 

1a(18)(A) of the CEA and in 

Commission regulation 1.3(m); or (3) in 

the business of (i) generating, 

transmitting, or distributing electric 

energy, or (ii) providing electric energy 

services that are necessary to support 

the reliable operation of the 

transmission system.22 To be eligible for 

the exemption in the RTO–ISO Order, 

the transactions must comply with all 

other enumerated terms and conditions 

in the RTO–ISO Order.23

In the RTO–ISO Order, the 

Commission excepted from the 

exemption 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 of the Act, and any 

implementing regulations promulgated 

under these sections including, but not 

limited to, Commission regulations 

23.410(a) and (b), 32.4, and part 180.24

The RTO–ISO Order did not discuss the 

application of CEA section 22 with 

respect to those substantive provisions 

that are excepted from the exemption 

(i.e. the Excepted Provisions).25

B. Aspire v. GDF Suez 

In February 2015, the United States 

District Court for the Southern District 

of Texas dismissed a private lawsuit on 

the ground that the CEA section 22 

private right of action was not available 

to the plaintiffs under the RTO–ISO 


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26Aspire Commodities, L.P. v. GDF Suez Energy 

N. Am., Inc., No. H–14–1111, 2015 WL 500482 (S.D. 

Tex. Feb. 3, 2015). 

27 Id. at *1–*2. 

28 Id. at *2. 

29See id. 

30 Id. at *5. 

31See Aspire Commodities, L.P. v. GDF Suez 

Energy N. Am., Inc., No. 15–20125, 2016 WL 

758689 (5th Cir. Feb. 25, 2016). 

32SPP filed an amended Exemption Application 

on August 1, 2014. Citations herein to ‘‘Exemption 

Application’’ are to the amended Exemption 

Application. 

33 7 U.S.C. 6(c)(6). 

34See section 712(f) of the Dodd-Frank Act. 

35See Exemption Application at 1. SPP was not 

one of the entities that petitioned for the RTO–ISO 

Order because SPP did not at that time offer the 

types of transactions covered by that order. See id. 

at 7. 

36See id. at 2. 

37Notice of Proposed Order and Request for 

Comment on an Application for an Exemptive 

Order From Southwest Power Pool, Inc. From 

Certain Provisions of the Commodity Exchange Act 

Pursuant to the Authority Provided in Section 

4(c)(6) of the Act, 80 FR 29490, May 21, 2015. The 

SPP Proposed Order was published in the Federal 

Register on May 21, 2015. 38SPP Proposed Order at 29516. 39 Id. at 29493. 40 Id. 41 Id. 42 Id. 

43 Id. 

44 Id. 

45All comment letters received in response to the 

SPP Proposed Order are available through the 

Commission’s Web site at: http://

comments.cftc.gov/PublicComments/

CommentList.aspx?id=1586. 

46See RTO–ISO Order at 19912. 

47See supra section II.B. 

Order.26 The lawsuit alleged that certain 

electricity generators in ERCOT’s market 

manipulated the market price of 

electricity by, among other things, 

intentionally withholding electricity 

generation during times of tight 

supply.27 The suit further alleged that 

this conduct created artificial and 

unpredictable prices in the secondary 

futures markets.28 The claim thus 

alleged that defendants were 

manipulating contract prices in the 

derivatives commodities market in 

violation of the Act.29 The District Court 

dismissed the claim, finding that under 

the RTO–ISO Order, the private right of 

action in CEA section 22 was 

‘‘unavailable to [p]laintiffs.’’ 30 In 

February 2016, the United States Court 

of Appeals for the Fifth Circuit affirmed 

the District Court’s ruling.31

C. Southwest Power Pool Proposed 

Order 

Southwest Power Pool (‘‘SPP’’) is an 

RTO subject to regulation by FERC. On 

October 17, 2013, SPP filed an 

Exemption Application 32 with the 

Commission requesting that the 

Commission exercise its authority under 

section 4(c)(6) of the CEA 33 and section 

712(f) of the Dodd-Frank Act 34 to 

exempt certain contracts, agreements, 

and transactions for the purchase or sale 

of specified electric energy products, 

that are offered pursuant to a FERCapproved tariff, from most provisions of 

the Act.35 The relief that SPP requested 

was substantially similar to the relief 

the Commission granted in the RTO– 

ISO Order.36

On May 18, 2015, the Commission 

issued a proposed order with respect to 

SPP’s Exemption Application (‘‘SPP 

Proposed Order’’).37 The exemptive 

relief proposed in the SPP Proposed 

Order was substantially similar to the 

exemptive relief granted by the 

Commission in the RTO–ISO Order. 

Like the RTO–ISO Order, the SPP 

Proposed Order excepted from the 

exemption 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 any implementing 

regulations promulgated thereunder 

including, but not limited to, 

Commission regulations 23.410(a) and 

(b), 32.4, and part 180.38

As proposed, the SPP Proposed Order 

would not exempt SPP from the private 

right of action under CEA section 22 for 

violations of the manipulation, fraud, 

and scienter-based provisions from 

which SPP will not be exempted. The 

Commission explained in the SPP 

Proposed Order that neither the 

proposed nor the final RTO–ISO Order 

discussed, referred to, or mentioned 

CEA section 22, which provides for 

private rights of action for damages 

against persons who violate the CEA, or 

persons who willfully aid, abet, counsel, 

induce, or procure the commission of a 

violation of the Act.39 The Commission 

explained that by enacting CEA section 

22, Congress provided private rights of 

action as a means for addressing 

violations of the Act as an alternative or 

supplement to Commission enforcement 

action.40 The Commission observed that 

it would be highly unusual for the 

Commission to reserve to itself the 

power to pursue claims for fraud and 

manipulation—a power that includes 

the option of seeking restitution for 

persons who have sustained losses from 

such violations or a disgorgement of 

gains received in connection with such 

violations—while at the same time, 

without explanation, denying private 

rights of action and damages remedies 

for the same violations.41 The 

Commission stated that if it intended to 

take such a differentiated approach (i.e., 

to limit the rights of private persons to 

bring such claims while reserving to 

itself the right to bring the same claims), 

the RTO–ISO Order would have 

included a discussion or analysis of the 

reasons therefore.42 The Commission 

therefore stated that it did not intend to 

create such a limitation, and that, in the 

Commission’s view, the RTO–ISO Order 

does not prevent private claims for 

fraud or manipulation under the CEA.43

The Commission further stated that this 

view would apply equally to the SPP 

Proposed Order.44

The public comment period on the 

SPP Proposed Order ended on June 22, 

2015. The Commission received thirteen 

(13) comment letters on the SPP 

Proposed Order,45 the majority of which 

argued that the exemptions contained in 

the RTO–ISO Order extended to include 

private claims for fraud and 

manipulation under section 22 of the 

CEA, and that the exemption in the final 

SPP exemptive order should also 

include those private claims. 

III. Proposed Amendment 

A. Private Right of Action Under CEA 

Section 22 

Currently, Paragraph 1 of the RTO– 

ISO Order states that the Commission: 

Exempts, subject to the conditions and 

limitations specified herein, the execution of 

the electric energy-related agreements, 

contracts, and transactions that are specified 

in paragraph 2 of this Order and any person 

or class of persons offering, entering into, 

rendering advice, or rendering other services 

with respect thereto, from all provisions of 

the CEA, except, in each case, the 

Commission’s general anti-fraud and antimanipulation 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 any 

implementing regulations promulgated under 

these sections including, but not limited to, 

Commission regulations 23.410(a) and (b), 

32.4, and part 180.46

Under the RTO–ISO Order, for those 

CEA requirements from which the RTOs 

and ISOs are exempt, it follows that 

there can be no claim under CEA 

section 22 with respect to those 

requirements. The RTO–ISO Order did 

not specifically note that the exemption 

contained therein does not apply to 

actions pursuant to CEA section 22 with 

respect to the Excepted Provisions. 

In light of the Aspire court ruling 

discussed above,47 the Commission is 

proposing to amend the text of the 

RTO–ISO Order to clarify that the 

Covered Entities are not exempt from 

the private right of action in CEA 

section 22 with respect to the Excepted 

Provisions. Specifically, the 

Commission proposes to amend 


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48The Commission’s Proposed Amendment to the 

RTO–ISO Order does not alter any of the other 

terms or conditions of the RTO–ISO Order. 

49One commenter on the SPP Proposed Order 

expressed the concern that if the final SPP 

exemptive order contained preamble language to 

the effect that SPP would not be exempt from the 

CEA section 22 private right of action, it would be 

inconsistent with the RTO–ISO Order. In amending 

the RTO–ISO Order and finalizing the SPP 

exemptive order, the Commission will ensure that 

the language of both orders and both preambles is 

consistent. 

50For this reason, the Commission does not 

believe that the Proposed Amendment to the RTO– 

ISO Order undermines any reasonable reliance 

interests on the part of the Covered Entities. The 

affected parties should have been aware of, and 

complying with, the CEA provisions on fraud and 

manipulation whether or not a private plaintiff 

could sue for violating them, because they knew or 

should have known that the Commission could 

bring an action to redress violations of those 

provisions. 

51To the extent that a court, during a civil 

proceeding alleging fraud or manipulation under 

CEA section 22, deems one of the Covered 

Transactions to be a swap, such a finding would not 

affect FERC’s or PUCT’s authority over the Covered 

Transactions. Section 2(a)(1)(I)(i) of the CEA 

provides that nothing in the Act shall limit or affect 

any statutory authority of FERC or a State regulatory 

authority with respect to an agreement, contract, or 

transaction that is entered into pursuant to a tariff 

or rate schedule approved by FERC or a State 

regulatory authority and is—(1) not executed, 

traded, or cleared on a registered entity or trading 

facility; or (2) executed, traded, or cleared on a 

registered entity or trading facility owned or 

operated by an RTO] or ISO. 

By the terms of the RTO–ISO Order, all of the 

Covered Transactions must be offered or sold 

pursuant to a Requesting Party’s tariff that has been 

approved or permitted to take effect by FERC or 

PUCT (which is a state regulatory authority). See 

RTO–ISO Order at 19913. In addition, the RTO–ISO 

Order exempts the Covered Entities from 

registration requirements under the CEA, and the 

Proposed Amendment does not change that. As a 

result, none of the Covered Entities is a ‘‘registered 

entity’’ as defined in CEA section 1a(40). Thus, the 

Covered Transactions, to the extent they are 

cleared, would fall within CEA section 

2(a)(1)(I)(i)(I). Moreover, to the extent the Covered 

Transactions are executed or traded on a ‘‘trading 

facility,’’ any such trading facility would be owned 

or operated by an RTO or ISO, since the Covered 

Transactions are offered or sold in a market 

administered (i.e., owned or operated by) one of the 

Requesting Parties. As such, the Covered 

Transactions would fall within CEA section 

2(a)(1)(I)(i)(II). Therefore, given the savings clause 

in CEA section 2(a)(1)(I)(i), nothing in the CEA 

could limit or otherwise affect FERC’s or PUCT’s 

authority over the Covered Transactions, regardless 

of any judicial finding regarding the nature of the 

Covered Transactions. 

52E.g., 7 U.S.C. 9(4). 

53See 7 U.S.C. 13a–1. 

54H.R. Rep. No. 97–565, at 57 (1982). 

55See FPA section 222(a), 16 U.S.C. 824v(a) 

(prohibiting the use of any manipulative or 

deceptive device or contrivance in connection with 

the purchase or sale of electric energy or 

transmission services subject to the jurisdiction of 

FERC) and FPA section 222(b), 16 U.S.C. 824v(b) 

(stating that nothing in that section shall be 

construed to create a private right of action.). 

Under section 306 of the FPA, however, a person 

or entity may initiate an administrative proceeding 

with FERC for a violation of the FPA, see 16 U.S.C. 

825e, and FERC has ruled that a person or entity 

may initiate an administrative proceeding alleging 

market manipulation in violation of 16 U.S.C. 824v. 

See Blumenthal v. ISO New England Inc., 128 FERC 

¶ 61,182, at para. 56 (Aug. 24, 2009). 

56See 7 U.S.C. 6(c)(6). 

57 7 U.S.C. 25(a)(1). 

Paragraph 1 of the RTO–ISO Order to 

read as follows (the additional language 

is italicized): 

Exempts, subject to the conditions and 

limitations specified herein, the execution of 

the electric energy-related agreements, 

contracts, and transactions that are specified 

in paragraph 2 of this Order and any person 

or class of persons offering, entering into, 

rendering advice, or rendering other services 

with respect thereto, from all provisions of 

the CEA, except, in each case, the 

Commission’s general anti-fraud and antimanipulation 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 any 

implementing regulations promulgated under 

these sections including, but not limited to, 

Commission regulations 23.410(a) and (b), 

32.4, and part 180. This exemption also does 

not apply to actions pursuant to CEA section 

22 with respect to the foregoing enumerated 

provisions.48

The Commission believes that the 

treatment of the section 22 private right 

of action should be consistent across all 

RTOs and ISOs.49 The Commission 

therefore proposes the foregoing 

amendment to the RTO–ISO Order in 

order to ensure clarity, and for the 

additional reasons stated below. 

It has been suggested that preserving 

the private right of action in CEA 

section 22 would cause regulatory 

uncertainty or inconsistent or 

duplicative regulation. However, the 

Covered Entities will be subject to the 

same substantive CEA provisions, 

including judicial interpretations of 

those provisions, regardless of whether 

the plaintiff who brings an action 

alleging a violation of one of those 

provisions is the Commission or a 

private party acting under CEA section 

22.50 When such interpretations are 

necessary in a civil action, the identity 

of the plaintiff is of little significance. 

Thus, any potential for conflict among 

regulators and others or for conflicting 

judicial interpretations does not depend 

on whether the plaintiff is a private 

litigant or the Commission. The 

Commission also notes that the CFTC 

frequently participates as amicus curiae 

in cases where significant interpretive 

issues arise under the CEA. The 

existence of a private right of action also 

is not inconsistent with or detrimental 

to cooperation between the CFTC and 

FERC. Therefore, amending the RTO– 

ISO Order to explicitly preserve the 

private right of action with respect to 

fraud and manipulation will not cause 

regulatory uncertainty or duplicative or 

inconsistent regulation. Moreover, 

conflicting judicial interpretations 

regarding the nature of the Covered 

Transactions would not affect the 

jurisdiction of FERC or any relevant 

state regulatory authority.51

Second, the private right of action in 

the CEA is instrumental in protecting 

the American public, deterring bad 

actors, and maintaining the credibility 

of the markets subject to the 

Commission’s jurisdiction. Private 

claims serve the public interest by 

empowering injured parties to seek 

compensation for damages where the 

Commission lacks the resources to do so 

on their behalf. Moreover, the prospect 

of private rights of action serves the 

public interest by deterring misconduct 

in and maintaining the integrity of the 

markets subject to the Commission’s 

jurisdiction. 

Third, the private right of action 

under CEA section 22 was established 

by Congress as an integral part of the 

CEA’s enforcement and remedial 

scheme. The Act grants the Commission 

various administrative tools to enforce 

the statute,52 and it also authorizes the 

Commission to seek redress in court in 

the form of injunctions, penalties, and 

restitution for injured parties.53 But 

Congress deemed those tools 

insufficient, and, in the Futures Trading 

Act of 1982, codified an express private 

right of action because it found that 

private damages actions are ‘‘critical to 

protecting the public and fundamental 

to maintaining the creditability of the 

futures market.’’ 54 The Federal Power 

Act (‘‘FPA’’), on the other hand, 

expressly prohibits private rights of 

action for fraud and manipulation with 

respect to the purchase or sale of 

electric energy subject to FERC’s 

jurisdiction.55 The fact that Congress 

made different judgments with respect 

to a private right of action in the CEA 

and the FPA does not persuade the 

Commission to strip injured parties of 

their remedy under the CEA, nor does 

it amount to a conflict between the two 

statutes. The difference between the two 

statutes in this respect is by Congress’s 

design, subject to the proviso that the 

Commission is to issue exemptions 

where it determines exemptions would 

be in the public interest.56

Finally, the Commission’s 

preservation of section 22 liability with 

respect to the Excepted Provisions is 

consistent with the Commission’s 

actions in prior 4(c) orders. Section 22 

establishes liability for any person ‘‘who 

violates’’ the Act or ‘‘who willfully aids, 

abets, counsels, induces, or procures the 

commission of a violation’’ of the Act.57


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58Effective Date for Swap Regulation, 76 FR 

42508, Jul. 19, 2011. 

59 Id. at 42517. 

60See, e.g., Exemptive Order for SPDR Gold 

Futures Contracts, 73 FR 31979, 31979–80, June 5, 

2008 (exempting transactions in SPDR gold futures 

contracts ‘‘from those provisions of the Act and the 

Commission’s regulations thereunder that, if the 

underlying were considered to be a commodity that 

is not a security, would be inconsistent with the 

trading and clearing of SPDR gold futures contracts 

as security futures’’); Order: (1) Pursuant to Section 

4(c) of the Commodity Exchange Act (a) Permitting 

Eligible Swap Participants To Submit for Clearing 

and ICE Clear U.S., Inc. and Futures Commission 

Merchants To Clear Certain Over-The-Counter 

Agricultural Swaps and (b) Determining Certain 

Floor Brokers and Traders To Be Eligible Swap 

Participants; and (2) Pursuant to Section 4d of the 

Commodity Exchange Act, Permitting Certain 

Customer Positions in the Foregoing Swaps and 

Associated Property To Be Commingled With Other 

Property Held in Segregated Accounts, 73 FR 

77015, 77016 n.4, Dec. 18, 2008 (noting that 

jurisdiction over the subject transactions was 

retained for the ‘‘provisions of the CEA proscribing 

fraud and manipulation’’); Order Exempting the 

Trading and Clearing of Certain Products Related to 

the CBOE Gold ETF Volatility Index and Similar 

Products, 75 FR 81977, 81979, Dec. 29, 2010 

(exempting the trading and clearing of certain 

products ‘‘from the provisions of the CEA and the 

regulations thereunder, to the extent necessary to 

permit such products to be so traded and cleared’’ 

on SEC-regulated entities). 

With respect to the last 4(c) order listed above, 

the Commission exempted the trading and clearing 

of the subject transactions from the CEA only ‘‘to 

the extent necessary’’ to permit them to be traded 

and cleared on SEC-regulated entities. The 

Commission notes that this exemption does not 

extend to the fraud and manipulation provisions of 

the CEA because it is not ‘‘necessary’’ to act 

fraudulently or manipulatively in order to trade and 

clear such contracts on SEC-regulated entities, nor 

is exemption from the private right of action for 

acting fraudulently or manipulatively ‘‘necessary’’ 

to permit the trading and clearing of such contracts 

on SEC-regulated entities. Moreover, in all of the 

orders listed above, specific mention of CEA section 

22 was not needed because, to the extent the orders 

did not provide an exemption from the anti-fraud 

and anti-manipulation provisions of the CEA, any 

violation of such provisions would be subject to a 

private right of action. 

61See, e.g., Exemption for Certain Swap 

Agreements, 58 FR 5587, 5594, Jan. 22, 1993; 

Exemption for Certain Contracts Involving Energy 

Products, 58 FR 21286, 21294, Apr. 20, 1993. 

62The Commission notes that it has, in two prior 

4(c) orders, specifically enumerated section 22 as 

one of the reserved provisions. See A New 

Regulatory Framework for Clearing Organizations, 

65 FR 78020, 78027, Dec. 13, 2000; A New 

Regulatory Framework for Multilateral Transaction 

Execution Facilities, Intermediaries and Clearing 

Organizations, 65 FR 77962, 77986, Dec. 13, 2000. 

However, the fact that section 22 was explicitly 

preserved in two orders but not in others does not 

provide a counterexample for the proposition that 

the Commission has never reserved its own ability 

to sue for fraud and manipulation while at the same 

time denying private rights of action for the same 

conduct. 

63The exemption language in section 4(c)(6) 

states that if the Commission determines that the 

exemption would be consistent with the public 

interest and the purposes of the Act, the 

Commission shall, in accordance with paragraphs 

(1) and (2), exempt from the requirements of this 

Act an agreement, contract, or transaction that is 

entered into (A) pursuant to a tariff or rate schedule 

approved or permitted to take effect by the Federal 

Energy Regulatory Commission; (B) pursuant to a 

tariff or rate schedule establishing rates or charges 

for, or protocols governing, the sale of electric 

energy approved or permitted to take effect by the 

regulatory authority of the State or municipality 

having jurisdiction to regulate rates and charges for 

the sale of electric energy within the State or 

municipality; or (C) between entities described in 

section 201(f) of the Federal Power Act (16 U.S.C. 

824(f)). 

64 7 U.S.C. 6(c)(6). 

65 7 U.S.C. 6(c)(6). 

66 7 U.S.C. 6(c)(1). 

67See supra section I. 

The beneficiary of an order under 

section 4(c) does not violate the Act by 

noncompliance with CEA requirements 

from which it is exempt. For instance, 

in a 4(c) order issued in 2011, the 

Commission granted temporary 

exemptive relief from certain provisions 

of the CEA added or amended by Title 

VII of the Dodd-Frank Act that 

referenced certain terms that the 

Commission had not yet defined.58 That 

order expressly stated that exemption 

from section 22 liability was ‘‘not 

necessary’’ because, ‘‘[t]o the extent that 

the Final Order provides exemptive 

relief under CEA section 4(c) [from 

certain provisions of the CEA], such 

exemptive relief would, in effect, 

preclude a person from succeeding in a 

private right of action under CEA 

section 22(a) for a violation of such 

provisions.’’ 59 In other words, no 

private right of action exists for 

noncompliance with exempted CEA 

provisions, as such conduct would not 

‘‘violate[ ]’’ the Act within the meaning 

of section 22. On the other hand, 

exempting the Covered Entities from 

private liability for violations of CEA 

requirements with which they must 

comply—the prohibitions on fraud and 

manipulation—would not be consistent 

with the Commission’s actions in prior 

4(c) exemptive orders. 

Moreover, in prior 4(c) exemptive 

orders issued by the Commission that 

reserved anti-fraud and antimanipulation provisions, the 

Commission has never reserved its own 

ability to sue for such behavior while at 

the same time denying private rights of 

action for the same conduct.60 In certain 

instances, the Commission specifically 

reserved certain substantive CEA 

provisions prohibiting fraud and 

manipulation, but did not include 

section 22 in that list.61 In such cases, 

however, the orders did not explicitly 

preserve any means of enforcing those 

prohibitions, including Commission 

enforcement actions or private lawsuits. 

The Commission does not believe that 

these exemptions were intended to 

preserve the prohibitions on fraud and 

manipulation but to eliminate any 

means of enforcing them. Therefore, the 

Proposed Amendment, which explicitly 

clarifies that section 22 is reserved with 

respect to claims for fraud and 

manipulation, is consistent with the 

Commission’s treatment of such claims 

in prior 4(c) exemptive orders.62

B. Section 4(c) Analysis 

1. Overview of CEA Section 4(c) 

a. Sections 4(c)(6)(A) and (B) 

As discussed above in section I., the 

Dodd-Frank Act amended CEA section 

4(c) to add sections 4(c)(6)(A) and (B), 

which provide authority to exempt 

certain transactions ‘‘from the 

requirements’’ of the CEA entered into: 

(a) Pursuant to a tariff or rate schedule 

approved or permitted to take effect by 

FERC, or (b) pursuant to a tariff or rate 

schedule establishing rates or charges 

for, or protocols governing, the sale of 

electric energy approved or permitted to 

take effect by the regulatory authority of 

the State or municipality having 

jurisdiction to regulate rates and charges 

for the sale of electric energy within the 

State or municipality.63 Indeed, section 

4(c)(6) provides that if the Commission 

determines that the exemption would be 

consistent with the public interest and 

the purposes of the Act, the Commission 

shall issue such an exemption.64

However, any exemption considered 

under section 4(c)(6)(A) and/or (B) must 

be done ‘‘in accordance with [CEA 

section 4(c)(1) and (2)].’’ 65

Based on the difference in language 

between section 4(c)(6), under which 

the RTO–ISO Order was issued, and 

section 4(c)(1), the Commission notes 

that it is not clear that section 4(c)(6) 

provides the Commission with the 

authority to exempt the Covered Entities 

from the private right of action found in 

section 22. Section 4(c)(1) authorizes the 

Commission to grant exemptions from 

the Act’s ‘‘requirements’’ or ‘‘from any 

other provision of this Act,’’ with 

certain exceptions.66 Section 4(c)(6), by 

contrast, empowers the Commission to 

exempt agreements, contracts, or 

transactions from ‘‘requirements’’ of the 

Act only. It is not clear that the section 

22 private right of action itself is a 

‘‘requirement’’ and, therefore, it is not 

clear that the power to provide an 

exemption from section 22 is within the 

scope of the power granted to the 

Commission by section 4(c)(6). 

b. Section 4(c)(1) 

As described above,67 CEA section 

4(c)(1) requires that the Commission act 

by rule, regulation, or order, after notice 

and opportunity for hearing. It also 

provides that the Commission may act 

either unconditionally or on stated 

terms or conditions or for stated periods 


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68See 7 U.S.C. 6(c)(2)(B)(i). See also the 

discussion of CEA section 4(c)(3) below. 

69See 7 U.S.C. 6(c)(2)(B)(ii). CEA section 

4(c)(2)(A) also requires that the exemption would be 

consistent with the public interest and the purposes 

of the CEA, but that requirement duplicates the 

requirement of section 4(c)(6). 

70See 7 U.S.C. 6(c)(3). CEA section 4(c)(3) 

provides that the term ‘‘appropriate person’’ shall 

be limited to the following persons or classes 

thereof: (A) A bank or trust company (acting in an 

individual or fiduciary capacity); (B) A savings 

association; (C) An insurance company; (D) An 

investment company subject to regulation under the 

Investment Company Act of 1940 (15 U.S.C. 80a– 

1 et seq.); (E) A commodity pool formed or operated 

by a person subject to regulation under this Act; (F) 

A corporation, partnership, proprietorship, 

organization, trust, or other business entity with a 

net worth exceeding $1,000,000 or total assets 

exceeding $5,000,000, or the obligations of which 

under the agreement, contract or transaction are 

guaranteed or otherwise supported by a letter of 

credit or keepwell, support, or other agreement by 

any such entity or by an entity referred to in 

subparagraph (A), (B), (C), (H), (I), or (K) of this 

paragraph; (G) An employee benefit plan with 

assets exceeding $1,000,000, or whose investment 

decisions are made by a bank, trust company, 

insurance company, investment adviser registered 

under the Investment Advisers Act of 1940 (15 

U.S.C. 80a–1 et seq.), or a commodity trading 

advisor subject to regulation under this Act; (H) 

Any governmental entity (including the United 

States, any state, or any foreign government) or 

political subdivision thereof, or any multinational 

or supranational entity or any instrumentality, 

agency, or department of any of the foregoing; (I) 

A broker-dealer subject to regulation under the 

Securities Exchange Act of 1934 (15 U.S.C. 78a et 

seq.) acting on its own behalf or on behalf of 

another appropriate person; (J) A futures 

commission merchant, floor broker, or floor trader 

subject to regulation under this Act acting on its 

own behalf or on behalf of another appropriate 

person; (K) Such other persons that the Commission 

determines to be appropriate in light of their 

financial or other qualifications, or the applicability 

of appropriate regulatory protections. 

71See RTO–ISO Order at 19894–95, 19900–02. 

The Commission’s prior determination was based 

on a number of findings, including that (a) the 

Covered Transactions have been, and are, subject to 

a long-standing, regulatory framework for the offer 

and sale of the Transactions established by FERC 

or PUCT; (b) the Covered Transactions administered 

by the RTOs, ISOs, or ERCOT are part of, and 

inextricably linked to, the organized wholesale 

electric energy markets that are subject to FERC and 

PUCT regulation and oversight; (c) the Covered 

Transactions are entered into primarily by 

commercial participants that are in the business of 

generating, transmitting, and distributing electric 

energy; (d) the Requesting Parties were established 

for the purpose of providing affordable, reliable 

electric energy to consumers within their 

geographic region; (e) the Covered Transactions that 

take place on the Requesting Parties’ markets are 

overseen by Market Monitoring Units, required by 

FERC and PUCT to identify manipulation of electric 

energy on the Covered Entities’ markets; (f) the 

Covered Transactions are inextricably tied to the 

Requesting Parties’ physical delivery of electric 

energy; (g) the RTO–ISO Order is explicitly limited 

to Covered Transactions taking place on markets 

that are monitored by either an independent Market 

Monitoring Unit, a market administrator (the RTO, 

ISO, or ERCOT), or both, and a government 

regulator (FERC or PUCT); (h) the standards set 

forth in FERC regulation 35.47 appear to achieve 

goals similar to the regulatory objectives of the 

Commission’s DCO Core Principles, and substantial 

compliance with such requirements was key to the 

Commission’s determination that the tariffs and 

activities of the Requesting Parties and supervision 

by FERC or PUCT are congruent with, and—in the 

context of the Covered Transactions—sufficiently 

accomplish, the regulatory objectives of each DCO 

Core Principle; (i) the Requesting Parties’ policies 

and procedures appear to be consistent with, and 

to accomplish sufficiently for purposes of the RTO– 

ISO Order, the regulatory objectives of the DCO 

Core Principles in the context of the Covered 

Transactions; and (j) the Requesting Parties’ policies 

and procedures appear to be consistent with, and 

to accomplish sufficiently for purposes of the RTO– 

ISO Order, the regulatory objectives of the SEF Core 

Principles in the context of the Covered 

Transactions. Id. 

72The Commission notes that, since the 

Commission did not intend to provide an 

exemption from the private right of action in CEA 

section 22 in the RTO–ISO Order, the RTO–ISO 

Order did not consider or make any determination 

that it would be in the public interest to do so. 

73See 7 U.S.C. 5(b) (listing the purposes of the 

CEA). 

74See RTO–ISO Order at 19893–94; see also CEA 

section 4(c)(6). 

and either retroactively or 

prospectively, or both and that the 

Commission may provide an exemption 

from any provisions of the CEA except 

subparagraphs (C)(ii) and (D) of section 

2(a)(1). 

c. Section 4(c)(2) 

As set forth above in section I., CEA 

section 4(c)(2) requires the Commission 

to determine that: To the extent an 

exemption provides relief from any of 

the requirements of CEA section 4(a), 

the requirement should not be applied 

to the agreement, contract or 

transaction; the exempted agreement, 

contract, or transaction will be entered 

into solely between appropriate 

persons; 68 and the exemption will not 

have a material adverse effect on the 

ability of the Commission or any 

contract market to discharge its 

regulatory or self-regulatory duties 

under the CEA.69

d. Section 4(c)(3) 

As explained in section I. above, CEA 

section 4(c)(3) outlines who may 

constitute an appropriate person for the 

purpose of a 4(c) exemption, including 

as relevant to the RTO–ISO Order: (a) 

Any person that fits in one of ten 

defined categories of appropriate 

persons; or (b) such other persons that 

the Commission determines to be 

appropriate in light of their financial or 

other qualifications, or the applicability 

of appropriate regulatory protections.70

2. Section 4(c) Determinations 

a. Consistent With the Public Interest 

and the Purposes of the CEA 

As required by CEA section 4(c)(2)(A), 

as well as section 4(c)(6), the 

Commission previously determined that 

the exemption set forth in the RTO–ISO 

Order is consistent with the public 

interest and the purposes of the CEA.71

The Proposed Amendment does not 

alter the Commission’s prior 

determinations with respect to the 

public interest and purposes of the CEA, 

and the Commission proposes to 

incorporate such prior determinations 

herein.72

In addition, the Commission proposes 

to determine that the Proposed 

Amendment to the RTO–ISO Order, 

which would explicitly preserve the 

section 22 private right of action with 

respect to the Excepted Provisions, 

serves the public interest by helping to 

deter fraudulent conduct and maintain 

the credibility of the markets under the 

Commission’s jurisdiction. In the same 

vein, private civil actions for fraud and 

manipulation serve the public interest 

by supplementing the Commission’s 

ability to address the same conduct. 

Further, the Commission proposes to 

determine that the Proposed 

Amendment is consistent with the 

purposes of the CEA because it will 

deter and prevent price manipulation or 

any other disruptions to market 

integrity.73

b. Other 4(c) Determinations 

In the RTO–ISO Order, the 

Commission made a number of other 

determinations under CEA section 4(c), 

including: 

• The Dodd-Frank Act applies to 

contracts and instruments traded in 

RTO or ISO markets pursuant to a 

FERC- or state-approved tariff or rate 

schedule, subject to the Commission’s 

authority under CEA section 4(c)(6) to 

exempt contracts, agreements, or 

transactions traded pursuant to such a 

tariff or rate schedule upon determining 

that the exemption would be in the 

public interest and consistent with the 

purposes of the CEA; that the exemption 

would be applied only to agreements, 

contracts, or transactions that are 

entered into solely between appropriate 

persons; and that the exemption will not 

have a material adverse effect on the 

ability of the Commission or any 

contract market to discharge its 

regulatory or self-regulatory duties 

under the CEA.74

• Due to the FERC or PUCT 

regulatory scheme and the RTO or ISO 

market structure already applicable to 

the Covered Transactions, the linkage 

between the Covered Transactions and 

those regulatory schemes, and the 

unique nature of the market participants 

that are eligible to rely on the exemption 

in the RTO–ISO Order, CEA section 4(a) 

should not apply to the Covered 


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75See RTO–ISO Order at 19895; see also CEA 

section 4(c)(2)(A). 

76See RTO–ISO Order at 19896; see also CEA 

section 4(c)(2)(B)(i). 

77See RTO–ISO Order at 19897; see also CEA 

section 4(c)(2)(B)(i). 

78See RTO–ISO Order at 19903–04; see also CEA 

section 4(c)(2)(B)(ii). 

79 5 U.S.C. 601 et seq. 

80See RTO–ISO Order at 19906–07. The RFA 

analysis in the RTO–ISO Order determined that the 

Requesting Parties (CAISO, NYISO, PJM, MISO, ISO 

NE., and ERCOT) are not small entities. See id. 

81The regulations of the Small Business 

Administration (‘‘SBA’’) define the threshold for a 

small Electric Bulk Power Transmission and 

Control entity to be 500 employees. See 13 CFR 

121.201 (Sector 22, Subsector 221; NAICS code 

221121). FERC has previously determined under 

this standard that five of the Requesting Parties 

(CAISO, NYISO, PJM, MISO, and ISO NE) are not 

small entities. See Settlement Intervals and 

Shortage Pricing in Markets Operated by Regional 

Transmission Organizations and Independent 

System Operators, 80 FR 58393, 58403, Sept. 29, 

2015. Additionally, the Commission understands 

that ERCOT is not a small entity, as defined by 

SBA’s regulations. 

82See RTO–ISO Order at 19906; see also A New 

Regulatory Framework for Clearing Organizations, 

66 FR 45604, 45609, Aug. 29, 2001 (DCOs); Policy 

Statement and Establishment of Definitions of 

‘‘Small Entities’’ for Purposes of the Regulatory 

Flexibility Act, 47 FR 18618, 18618–19, Apr. 30, 

1982 (DCMs). 

83See RTO–ISO Order at 19906; see also Opting 

Out of Segregation, 66 FR 20740, 20743, Apr. 25, 

2001. 

84See RTO–ISO Order at 19907; see also supra 

note 81. 

85 44 U.S.C. 3501 et seq. 

86 44 U.S.C. 3502(3). 

87See RTO–ISO Order at 19907–08. 

Transactions under the RTO–ISO 

Order.75

• Eligible contract participants, as 

defined in section 1a(18)(A) of the CEA 

and in Commission regulation 1.3(m), 

are appropriate persons for purposes of 

the RTO–ISO Order in light of their 

financial or other qualifications, or the 

applicability of regulatory protections.76

In addition, a ‘‘person who actively 

participates in the generation, 

transmission, or distribution of electric 

energy,’’ as defined within the RTO–ISO 

Order, is an appropriate person for 

purposes of the exemption provided 

therein.77

• The exemption in the RTO–ISO 

Order for the Covered Transactions 

would not have a material adverse effect 

on the Commission’s or any contract 

market’s ability to discharge its 

regulatory function.78

The Proposed Amendment does not 

alter the Commission’s determination 

with respect to any of the above 4(c) 

determinations. Therefore, the 

Commission proposes to incorporate 

such prior 4(c) determinations, and the 

findings on which such determinations 

are based, herein. All transactions that 

were permitted pursuant to the 

exemption set forth in the RTO–ISO 

Order would still be permitted under 

the RTO–ISO Order with the Proposed 

Amendment. The only change to the 

RTO–ISO Order made by the Proposed 

Amendment is that the Proposed 

Amendment would provide explicitly 

an additional means of deterring 

fraudulent or manipulative conduct— 

conduct that was already prohibited 

under the RTO–ISO Order—consistent 

with the public interest and the 

purposes of the Act. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires that the Commission 

consider whether the Proposed 

Amendment to the RTO–ISO Order will 

have a significant economic impact on 

a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact.79 In the RTO–ISO Order, the 

Commission determined that the RTO– 

ISO Order would not have a significant 

economic impact on a substantial 

number of small entities,80 and the RFA 

analysis in the RTO–ISO Order is still 

valid. Specifically, the RTOs and ISOs 

covered by the RTO–ISO Order should 

not be considered small entities based 

on the central role they play in the 

operation of the electronic transmission 

grid and the creation of organized 

wholesale electric markets that are 

subject to FERC and PUCT regulatory 

oversight,81 analogous to functions 

performed by DCMs and DCOs, which 

the Commission has previously 

determined not to be ‘‘small entities.’’ 82

In addition, the RTO–ISO Order, with 

the amendment proposed herein, 

includes entities that qualify as (1) 

‘‘appropriate persons’’ pursuant to CEA 

sections 4(c)(3)(A) through (J), (2) ECPs, 

as defined in CEA section 1a(18)(A) and 

Commission regulation 1.3(m), or (3) 

persons who are in the business of: (i) 

Generating, transmitting, or distributing 

electric energy, or (ii) providing electric 

energy services that are necessary to 

support the reliable operation of the 

transmission system. The Commission 

has previously determined that ECPs are 

not ‘‘small entities’’ for purposes of the 

RFA.83 The Commission is of the view 

that, based on the Commission’s 

existing information about the RTOs’ 

and ISOs’ markets, their market 

participants consist mostly of entities 

exceeding the thresholds defining 

‘‘small entities.’’ 84

Also, the RTO–ISO Order, with the 

amendment proposed herein, would 

continue to alleviate the economic 

impact that the exempt entities, 

including any small entities that may 

opt to take advantage of the exemption 

set forth in the RTO–ISO Order, 

otherwise would be subjected to by 

continuing to exempt certain of their 

transactions from the application of 

substantive regulatory compliance 

requirements of the CEA and 

Commission regulations thereunder. In 

addition, there is no evidence of any 

substantial litigation with respect to 

fraud and manipulation under CEA 

section 22 in the RTO or ISO markets, 

particularly against any small entities 

that opt to take advantage of the 

exemption set forth in the RTO–ISO 

Order. Accordingly, the Commission 

does not expect the RTO–ISO Order, 

with the Proposed Amendment, to have 

a significant economic impact on a 

substantial number of small entities. 

Therefore, the Chairman, on behalf of 

the Commission, hereby certifies, 

pursuant to 5 U.S.C. 605(b), that the 

exemption set forth in the RTO–ISO 

Order, with the amendment proposed 

herein, would not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

The purposes of the Paperwork 

Reduction Act of 1995 (‘‘PRA’’) 85 are, 

among other things, to minimize the 

paperwork burden to the private sector, 

ensure that any collection of 

information by a government agency is 

put to the greatest possible uses, and 

minimize duplicative information 

collections across the government. The 

PRA applies to all information, 

‘‘regardless of form or format,’’ 

whenever the government is ‘‘obtaining, 

causing to be obtained [or] soliciting’’ 

information, and includes and requires 

‘‘disclosure to third parties or the 

public, of facts or opinions,’’ when the 

information collection calls for 

‘‘answers to identical questions posed 

to, or identical reporting or 

recordkeeping requirements imposed 

on, ten or more persons.’’ 86

The Commission previously 

determined that the RTO–ISO Order did 

not impose any new recordkeeping or 

information collection requirements, or 

other collections of information on ten 

or more persons that require OMB 

approval.87 The Commission’s Proposed 

Amendment to the RTO–ISO Order does 

not impose any recordkeeping or 

information collection requirements, or 

other collections of information on ten 

or more persons that require OMB 

approval. 


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88 7 U.S.C. 19(a). 

89See RTO–ISO Order at 19912. 

90See supra section III.A. 

91See supra section IV.C.1.b. 

92See supra section IV.C.1.b. 93See supra section II.B. 

C. Cost-Benefit Considerations 

1. Consideration of Costs and Benefits 

a. Introduction 

Section 15(a) of the CEA 88 requires 

the Commission to ‘‘consider the costs 

and benefits’’ of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. In 

proposing this amendment to the RTO– 

ISO Order, the Commission is required 

by CEA section 4(c)(6) to ensure the 

same is consistent with the public 

interest. In much the same way, 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. 

As discussed above, the RTO–ISO 

Order currently exempts contracts, 

agreements, and transactions for the 

purchase or sale of the limited electric 

energy-related products that are 

specifically described within the RTO– 

ISO Order from certain provisions of the 

CEA and Commission regulations, with 

the exception of 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 180.89 The RTO–ISO 

Order does not specifically note that the 

exemption contained therein does not 

apply to actions pursuant to CEA 

section 22 with respect to the Excepted 

Provisions. The Commission is 

proposing to amend the RTO–ISO Order 

to clarify that the RTO–ISO Order does 

not exempt the Covered Entities from 

the private right of action found in 

section 22 of the CEA with respect to 

the Excepted Provisions.90 The 

Commission’s Proposed Amendment to 

the RTO–ISO Order does not alter any 

of the other terms or conditions of the 

RTO–ISO Order. 

In the discussion that follows, the 

Commission considers the costs and 

benefits of the Proposed Amendment to 

the RTO–ISO Order to the public and 

market participants generally, and to the 

Covered Entities specifically. It also 

considers the costs and benefits of the 

Proposed Amendment in light of the 

public interest factors enumerated in 

CEA section 15(a). 

b. Proposed Baseline 

The Commission’s proposed baseline 

for consideration of the costs and 

benefits of the Proposed Amendment to 

the RTO–ISO Order is the costs and 

benefits that the public and market 

participants would experience if the 

existing RTO–ISO Order is interpreted 

to exempt market participants from 

liability under the CEA section 22 

private right of action. 

In the discussion that follows, where 

reasonably feasible, the Commission 

endeavors to estimate quantifiable 

dollar costs of the Proposed 

Amendment to the RTO–ISO Order. The 

costs and benefits of the Proposed 

Amendment, however, are not presently 

susceptible to meaningful 

quantification. Where it is unable to 

quantify, the Commission discusses 

proposed costs and benefits in 

qualitative terms. 

c. Benefits 

Using the hypothetical baseline 

described above,91 the Commission 

notes that preserving the CEA section 22 

private right of action with respect to 

fraud and manipulation will benefit the 

market because private claims for fraud 

and manipulation protect market 

participants and the public generally, as 

well as the financial markets for electric 

energy products. Moreover, making the 

preservation of the CEA section 22 

private right of action with respect to 

fraud and manipulation explicit will 

benefit the market because it will clarify 

the scope of the RTO–ISO Order and 

prevent future uncertainty regarding the 

availability of the private right of action 

under CEA section 22 with respect to 

fraud and manipulation. 

d. Costs 

Using the hypothetical baseline 

described above,92 the Commission 

recognizes that subjecting market 

participants to the CEA section 22 

private right of action with respect to 

fraud and manipulation may increase 

legal and compliance costs due to a 

marginally increased chance of 

litigation, particularly to the extent that 

private counsel may pursue litigation 

based upon private, rather than public, 

concerns. However, this is a common 

criticism of private rights of action 

generally, and the Commission does not 

believe that such a possibility is a 

sufficient reason to exempt the Covered 

Transactions and Covered Entities from 

the private right of action that Congress 

explicitly provided for by statute. Thus, 

the Commission elects to propose to 

amend the RTO–ISO Order to expressly 

retain the CEA section 22 private right 

of action with respect to Excepted 

Provisions. 

e. Consideration of Alternatives 

The Commission considered not 

issuing the Proposed Amendment to the 

RTO–ISO Order. The Commission 

considered the uncertainty that has 

arisen with respect to the scope of the 

RTO–ISO Order and the availability of 

a private right of action under the RTO– 

ISO Order, particularly following the 

court rulings in the Aspire v. GDF Suez 

action,93 and proposes to determine that 

a no-amendment alternative would 

prolong such uncertainty and thus be 

contrary to the public interest. 

The Commission also considered the 

costs and benefits of amending the 

RTO–ISO Order to explicitly exempt the 

CEA section 22 private right of action 

with respect to fraud and manipulation. 

In the absence of the availability of a 

private right of action to address 

fraudulent and manipulative conduct, 

the potential for market disruption 

would increase since market 

participants would not be able to 

address such conduct through private 

claims. On the other hand, the costs of 

private litigation would be avoided 

under this alternative. The Commission 

has considered these costs and benefits 

and has declined to elect the alternative 

of explicitly exempting the Covered 

Entities from the CEA section 22 private 

right of action. 

The Commission has considered the 

costs and benefits of retaining the CEA 

section 22 private right of action with 

respect to fraud and manipulation that 

the Commission determined to except 

from the RTO–ISO Order, and has 

elected to propose to amend the RTO– 

ISO Order to expressly retain the CEA 

section 22 private right of action with 

respect to the Excepted Provisions. 

2. Consideration of CEA Section 15(a) 

Factors 

a. Protection of Market Participants and 

the Public 

The Commission believes that the 

Proposed Amendment, by clarifying the 

existence of a private right of action 

with respect to fraud and manipulation, 

will serve to protect market participants 


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94See Nantahala Power & Light Co. v. Thornburg, 

106 S. Ct. 2349, 2354–57 (1986); Texas Commercial 

Energy v. TXU Energy, Inc., 413 F.3d 503, 508–10 

(5th Cir. 2005). 

95Letter from Paul J. Pantano, Jr. to Christopher 

Kirkpatrick, Secretary of the Commission, Feb. 24, 

2016, at 4, available at http://www.cftc.gov/idc/

groups/public/@aboutcftc/documents/file/

eemac022516_pantano.pdf. 

96 Id. at 5. 

and the public because private actions 

for fraud and manipulation will help to 

deter misconduct in and maintain 

credibility of the markets subject to 

Commission jurisdiction. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Futures Markets 

The Commission does not believe that 

the Proposed Amendment will have an 

effect on the efficiency, 

competitiveness, and financial integrity 

of the futures markets. 

c. Price Discovery 

The Commission does not believe that 

the Proposed Amendment will have an 

effect on price discovery. 

d. Sound Risk Management Practices 

The Commission does not believe that 

the Proposed Amendment will have a 

material effect on sound risk 

management practices. 

e. Other Public Interest Considerations 

The Commission does not believe that 

there are any additional public interest 

considerations with respect to the 

Proposed Amendment. 

3. Request for Public Comment on Costs 

and Benefits 

The Commission invites public 

comment on its cost-benefit 

considerations of the Proposed 

Amendment to the RTO–ISO Order, 

including the consideration of 

reasonable alternatives. Commenters are 

invited to submit any data or other 

information that they may have 

quantifying or qualifying the costs and 

benefits of the proposal with their 

comment letters. 

V. Request for Comment on the 

Proposed Amendment to the RTO–ISO 

Order 

The Commission requests comment 

on all aspects of its Proposed 

Amendment to the RTO–ISO Order. In 

addition, the Commission specifically 

requests comment on the specific 

provisions and issues highlighted in the 

discussion above and on the issues 

presented in this section. For each 

comment submitted, please provide a 

detailed rationale supporting the 

response. 

1. To the extent there are concerns 

that explicitly amending the RTO–ISO 

Order to preserve private claims for 

fraud and manipulation under CEA 

section 22 would result in frivolous 

litigation, the Commission requests 

comment on the following issues 

regarding such litigation. 

a. Please provide details as to the 

specifics of such litigation, including: 

i. What type of entity might sue what 

other type of entity? 

ii. What are the theories under which 

such litigation might be brought? 

iii. How might the causes of action in 

such litigation derive from the 

enumerated fraud and manipulation 

provisions of the CEA that are excepted 

from the RTO–ISO Order? 

b. To the extent there is a concern 

about an increase in litigation regarding 

filed rates, how would such litigation 

survive a motion to dismiss based on 

the filed rate doctrine? 94

2. In a letter submitted to the 

Commission’s Energy and 

Environmental Markets Advisory 

Committee, PJM, ERCOT, and CAISO 

argued that ‘‘[a]llowing private actions 

will undermine the legal certainty 

provided by the exemptions and 

potentially could divest FERC and the 

PUCT of jurisdiction over certain ISO 

and RTO transactions.’’ 95 The letter 

then set forth a hypothetical scenario 

involving alleged market manipulation 

in the RTO–ISO markets, and noted 

that, ‘‘[b]ecause the CFTC’s jurisdiction 

over swaps is ‘exclusive,’ if a number of 

federal circuits hold that [financial 

transmission rights] or other ISO and 

RTO transactions are swaps or futures 

contracts, no other federal or state 

agency could regulate ISOs and RTOs or 

their transactions.’’ 96 The Commission 

requests comment on how, given the 

effect of the savings clause in CEA 

section 2(a)(1)(I)(i), discussed supra in 

note 51, FERC or PUCT would be 

divested of jurisdiction in the event of 

a judicial finding that one or more of the 

Covered Transactions is a swap. More 

broadly, the Commission requests 

comment on how, given that savings 

clause, preservation of the private right 

of action would result in regulatory 

uncertainty and/or inconsistent rulings. 

3. To the extent any commenters 

believe that preserving the private right 

of action in the RTO–ISO Order will 

have any other detrimental effect(s) on 

the RTO–ISO markets or market 

participants, the Commission requests 

that such commenters provide a specific 

and detailed basis for such a conclusion. 

Issued in Washington, DC, on May 9, 2016, 

by the Commission. 

Robert N. Sidman, 

Deputy Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Notice of Proposed 

Amendment To and Request for 

Comment on the Final Order in 

Response to a Petition From Certain 

Independent System Operators and 

Regional Transmission Organizations 

To Exempt Specified Transactions 

Authorized by a Tariff or Protocol 

Approved by the Federal Energy 

Regulatory Commission or the Public 

Utility Commission of Texas From 

Certain Provisions of the Commodity 

Exchange Act Pursuant to the Authority 

Provided in the Act—Commission 

Voting Summary, Chairman’s 

Statement, and Commissioner’s 

Statement 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Massad and 

Commissioner Bowen voted in the 

affirmative. Commissioner Giancarlo voted in 

the negative. 

Appendix 2—Statement of Chairman 

Timothy Massad in Support of the 

Proposed Amendment to the RTO–ISO 

Order 

The proposal we have approved today 

would amend a 2013 CFTC order that 

exempted specified transactions of six 

independent system operators (‘‘ISOs’’) and 

regional transmission organizations (‘‘RTOs’’) 

from certain provisions of the Commodity 

Exchange Act (CEA). That order explicitly 

did not exempt ISOs and RTOs from the 

general CEA provisions that prohibit fraud 

and manipulation. If adopted, the proposed 

amendment would make clear that this 

exemption does not prohibit private rights of 

action for violations of the very same antifraud and anti-manipulation provisions that 

are explicitly reserved in the order. 

Private rights of action have been 

instrumental in helping to protect market 

participants and deter bad actors. These 

actions can also augment the limited 

enforcement resources of the CFTC, and 

serve the public interest by allowing harmed 

parties to seek damages in instances where 

the Commission lacks the resources to do so 

on their behalf. 

I appreciate the desire of businesses to 

have as little regulatory uncertainty as 

possible. Indeed, providing certainty for 

market participants is something upon which 

we’re always striving to improve. But we also 

must make sure there is adequate recourse for 

those participants. 

Moreover, private rights of action were 

called for by Congress under the CEA, to 

ensure wronged parties were provided with 

an appropriate remedy. Congress determined 

that the benefits to the public good outweigh 


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1RTO–ISO Order, 78 FR 19880, 19912 (Apr. 2, 

2013) (emphasis added) (referring to 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). 

2Under well-accepted canons of construction, 

when a general rule is stated, ‘‘[but] there are 

enumerated exceptions[,] ‘additional exceptions are 

not to be implied . . . .’ ’’ In re Condor Ins. Ltd., 

601 F3d 319, 324 (5th Cir. 2010) (quoting Andrus 

v. Glover Constr. Co., 446 U.S. 608, 616–17 (1980)). 

This is a well-settled application of the canon 

expressio unius est exclusio alterius, which 

provides that when some provisions are listed, but 

other related provisions are omitted, courts infer 

‘‘that items not mentioned were excluded by 

deliberate choice, not inadvertence.’’ Barnhart v. 

Peabody Coal Co., 537 U.S. 149, 168 (2003). 

Moreover, the Supreme Court has explained that 

ordinarily, silence does not convey any meaning, 

much less the potential for sweeping liability. See 

Cmty. For Creative Non-Violence v. Reid, 490 U.S. 

730, 749 (1989) (‘‘Ordinarily, Congress’ silence is 

just that—silence.’’). 

3Aspire Commodities, L.P. v. GDF Suez Energy N. 

Am., Inc., No. H–14–1111, 2015 WL 500482 (S.D. 

Tex. Feb. 3, 2015), aff’d, No. 15–20125, 2016 WL 

758689 (5th Cir. Feb. 25, 2016). 

4The Supreme Court has cautioned that when an 

administrative agency changes its mind, which the 

Commission has clearly done here—its claim of 

clarification notwithstanding—it must be mindful 

of reliance interests that regulated persons have 

formed in the interim. FCC v. Fox Television 

Stations, Inc., 556 U.S. 502, 514–16 (2009) (citing 

Smiley v. Citibank (South Dakota), N.A., 517 U.S. 

735, 742 (1996)). 

5 It is not unusual for the Commission to reserve 

its anti-fraud or anti-manipulation authority 

without also reserving section 22; the Commission 

has done so in the past. See, e.g., A New Regulatory 

Framework for Clearing Organizations, 65 FR 

78020, 78025, 78027 (Dec. 13, 2000) (specifically 

enumerating section 22 as reserved for reserved 

provisions of the Act and regulations); A New 

Regulatory Framework for Multilateral Transaction 

Execution Facilities, Intermediaries and Clearing 

Organizations, 65 FR 77962, 77976, 77986 (Dec. 13, 

2000) (specifically enumerating section 22 as 

reserved for reserved violations of the Act and 

regulations in connection with transactions 

executed of Derivatives Transaction Execution 

Facilities and as not reserved for certain purposes); 

Effective Date for Swap Regulation, 76 FR 42508, 

42517 (Jul. 19, 2011) (discussing exemption from 

section 22); see also RTO–ISO Comment Letter at 

6–7, n.11 (Jun. 22, 2015). To remove all doubt, 

treating the failure to reserve section 22 as 

intentional is consistent with Commission practice. 

As the 4(c) orders cited above demonstrate, when 

the Commission intends to reserve section 22, it has 

had little trouble either specifically enumerating 

section 22 as reserved, or including a discussion of 

its applicability or inapplicability. 

6FERC Comment Letter on Proposed Order and 

Request for Comment on Petition of ISOs and RTOs 

for Exemption of Specified Transactions from 

Certain Provisions of the CEA, at 2 (Sept. 27, 2012). 

7 Id. at 1. 

8 Id. at 2. 

9 15 U.S.C. 8308(a)(1). 

10 16 U.S.C. 824v (2012). 

any potential costs that may be incurred. Our 

job is to ensure that determination is 

properly implemented and enforced. 

While some believe the Commission must 

have intended to exempt ISOs from private 

rights of action in the original order because 

it did not specifically preserve them, the 

proposal points out that it would be unusual 

for the Commission to have such an intention 

and say nothing about it, given that it 

expressly excluded general anti-fraud and 

anti-manipulation authority from the 

exemption. Regardless, we should decide the 

issue now on the merits. The proposal invites 

comment from all market participants and 

members of the public. 

Finally, let me say that we are giving this 

proposal careful thought and consideration. 

We want to balance the value of regulatory 

certainty with the need to make sure that 

there is adequate recourse for market 

participants. We have heard from market 

participants in a number of venues, including 

a February meeting of the Energy and 

Environmental Markets Advisory Committee, 

and in other requests for comment. And we 

have tried to incorporate those concerns into 

the discussion of this proposal. This Notice 

of Proposed Amendment poses a number of 

specific questions that seek further detail 

with respect to the concerns we have heard 

from market participants. I encourage all 

interested parties to carefully consider these 

questions, and provide the Commission with 

your feedback. 

I thank all those who have already 

provided us with the benefit of their 

perspective, as well as the CFTC staff and my 

fellow Commissioners for their work on this 

proposal. I look forward to hearing more as 

the comment period transpires. 

Appendix 3—Statement of Dissent by 

Commissioner J. Christopher Giancarlo 

I dissent from the proposed amendment to 

the final RTO–ISO Order issued by the 

Commission in 2013. 

For over three years, U.S. power market 

participants have been operating in reliance 

on the RTO–ISO Order. They have trusted in 

the reasonable, unambiguous understanding 

that transactions covered by the Order are 

exempt from all provisions of the Commodity 

Exchange Act (‘‘CEA or Act’’) except for 

those specifically enumerated as reserved 

(the ‘‘Reserved Provisions’’). They have 

relied on the plain language of the RTO–ISO 

Order that ‘‘[e]xempts . . . the execution of 

[specified] electric energy-related 

agreements, contracts and transactions . . . 

and any person or class of persons offering, 

entering into, rendering advice or rendering 

other services with respect thereto, from all 

provisions of the CEA except, in each case, 

the Commission’s general anti-fraud and antimanipulation authority, and scienter-based 

prohibitions . . . ’’ 1 Too bad for them. 

Today’s proposal manages to 

simultaneously toss legal certainty to the 

wind and threaten the household budgets of 

low and middle-income ratepayers by 

permitting private lawsuits in heavily 

regulated markets that are at the heart of the 

U.S. economy. 

By this action, the Commission contends 

that its silence with respect to section 22 of 

the CEA should be interpreted as evincing its 

intention all along to retain a private right of 

action for violations of the Reserved 

Provisions and that the proposed addition of 

section 22 to that list is nothing more than 

a technical clarification. 

With all due respect, the Commission’s 

position is disingenuous. It flies in the face 

of well-accepted legal precedent established 

by the U.S. Supreme Court,2 and was 

soundly rejected recently by the courts in the 

Aspire litigation.3

Of course, the Commission is free to 

change its mind and amend final orders 

through the notice and comment process, as 

it proposes to do now. Still, by taking this 

action the Commission is introducing a 

disturbing precedent regarding the legal 

certainty of its orders.4 In particular, the 

Commission’s proposal to change the scope 

of the RTO–ISO Order, based not on any 

change in facts or circumstances but on a 

legal fiction that it intended to reserve 

section 22 all along, calls into question the 

legal certainty of all other section 4(c) orders 

in which the Commission failed to discuss or 

reserve the applicability of section 22 for 

violations of the Act or regulations reserved 

for itself.5 Commission orders should not be 

amended, expanded or withdrawn absent a 

change in facts or circumstances or the law. 

It can be argued that private claims may 

serve the public interest by empowering 

injured parties to seek compensation for 

damages where the Commission lacks the 

resources to do so on their behalf. Yet, the 

extensive regulation and monitoring of RTOs 

and ISOs significantly obviates the policing 

role of private suits in these markets. The six 

entities covered by the RTO–ISO Order are 

subject to extensive and effective regulation 

by the RTO–ISO’s primary regulator (the 

Federal Energy Regulatory Commission, 

‘‘FERC’’ or the Public Utility Commission of 

Texas, ‘‘PUCT’’), and overseen by an 

independent market monitor responsible to 

the RTO–ISO’s primary regulator. As the 

FERC has explained, RTOs and ISOs operate 

not only transmission facilities, but also 

markets for trading electric energy among 

utilities, and the ‘‘RTO and ISO markets and 

transmission services are tightly integrated 

and are regulated to a greater extent than 

other commodity markets.’’ 6 The FERC has 

explained that these entities are ‘‘critical 

components in carrying out the FERC’s 

statutory responsibilities,’’ 7 and the FERC 

therefore regulates them ‘‘more extensively 

than other public utilities.’’ 8

I believe that with the protection provided 

by such extensive regulatory oversight the 

Commission should not permit private 

litigation. Doing so would result in too many 

cooks in the proverbial oversight kitchen. It 

will lead to conflicting outcomes depriving 

market participants of the regulatory 

certainty and coherence Congress intended 

when it directed the CFTC and the FERC to 

apply ‘‘their respective authorities in a 

manner so as to ensure effective and efficient 

regulation in the public interest,’’ to resolve 

conflicts concerning their overlapping 

jurisdiction and to avoid, ‘‘to the extent 

possible, conflicting or duplicative 

regulation.’’ 9 Moreover, exempting the 

transactions from section 22 would promote 

the congressionally-directed harmony 

between the CEA and the Federal Power Act 

(‘‘FPA’’), which expressly disclaims any 

private right of action for manipulative or 

deceptive trade practices.10

Disallowing private suits under the CEA 

does not leave persons alleging harm from 

fraudulent or manipulative practices without 

recourse. The CFTC may seek restitution on 


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11 7 U.S.C. 13a-1(d)(3) (2012). 

12See Joint Trade Associations, Comment Letter 

on Proposed Order and Request for Comment on an 

Application for an Exemptive Order From 

Southwest Power Pool, Inc. From Certain 

Provisions of the Commodity Exchange Act 

Pursuant to the Authority Provided in Section 

4(c)(6) of the Act, at 7 n.17 (Jun. 22, 2015) (citations 

omitted); see also PUCT Comment Letter at 6–7 

(Jun. 22, 2015) (explaining that market participants 

regulated by the Electric Reliability Council of 

Texas (‘‘ERCOT’’) aggrieved by the activities of 

other market participants may bring complaints for 

adjudication by ERCOT, whose decisions are 

subject to review by PUCT and the Texas state 

courts). 

13Aspire, 2015 WL 500482, at *1; see also 16 Tex. 

Admin. Code 25.504(c) (2006). I take no position on 

the specific PUCT Rule at issue, other to note that 

it appears to be backed by a broad consensus of 

Texas electricity stakeholders and vigorously 

defended by the PUCT. See Aspire, 2016 WL 

758689, Brief for PUCT as Amicus Curiae, at 27– 

29. 

14Aspire, 2015 WL 500482, at *1. 

15See PUCT Comment Letter on Proposed Order 

and Request for Comment on an Application for an 

Exemptive Order From Southwest Power Pool, Inc. 

From Certain Provisions of the Commodity 

Exchange Act Pursuant to the Authority Provided 

in Section 4(c)(6) of the Act, at 7–10 (Jun. 22, 2014) 

(describing the Aspire litigation and its potential 

deleterious effects on the RTO–ISO markets). 

16 7 U.S.C. 6(c); see also Feb. 25, 2016 Energy and 

Environmental Markets Advisory Committee 

Meeting, transcript at 21–70 (discussing the 

consequences for consumers and rate payers that 

would flow from permitting private rights of action 

against RTO–ISO participants). 

17Tex. Commercial Energy v. TXU Energy, 413 

F.3d 503, 508 (5th Cir. 2005 (quoting Wegoland, 

Ltd. v. NYNEX Corp., 27 F.3d 17, 18 (2d Cir. 1994) 

(barring otherwise valid antitrust law claim on the 

basis of the filed-rate doctrine based on PUCT 

oversight over the relevant electricity market). 

18Memorandum of Understanding between the 

FERC and the CFTC (Jan. 2, 2014), http://

www.cftc.gov/idc/groups/public/@newsroom/

documents/file/cftcfercjmou2014.pdf. 

their behalf.11 In addition, section 306 of the 

FPA permits the filing of private complaints 

with the FERC for any violation of the FPA.12

Aside from the injustice of changing the 

scope of the RTO–ISO Order three years after 

it was issued, subjecting the transactions 

covered by the Order to private suits under 

the CEA undermines carefully considered 

policy designed to promote affordable and 

reliable electricity for millions of American 

consumers. The defendants’ conduct in the 

Aspire litigation was explicitly permitted 

under Texas law and related PUCT 

regulations.13 Indeed, the plaintiffs in Aspire 

brought suit only after they tried and failed 

to convince the PUCT to change its rules 

permitting the conduct at issue.14

In my view, the Aspire case is a telling 

example of the problems with subjecting 

RTO–ISO transactions to private section 22 

litigation. Even if a firm is only involved in 

the generation or transmission of electric 

power (and not in the derivatives markets), 

it may nonetheless be subject to extensive 

litigation—lasting years, exacting significant 

sums in defense costs, subjecting ratepayers 

to potential damages and distracting the firm 

from its core business—all for merely 

complying with standards crafted and 

enforced by its primary regulator.15

Moreover, subjecting electricity providers to 

private litigation will deprive them of the 

certainty that the RTO–ISO Order was 

supposed to provide; if private section 22 

claims are allowed, it will be impossible for 

market participants to be certain which FERC 

or state rules governing power markets can be 

adhered to without incurring liability. I fail 

to see how permitting these kinds of suits 

would ‘‘promote responsible economic or 

financial innovation and fair competition’’ 

that the Commission’s exemptive authority is 

supposed to provide.16

Indeed, permitting these suits is in tension 

with long-standing jurisprudence disallowing 

private litigants from collaterally attacking a 

rate, tariff, protocol and/or rule approved or 

permitted to take effect by the PUCT and/or 

the FERC. Courts have regularly relied on the 

so-called ‘‘filed rate doctrine,’’ which 

deprives them of jurisdiction to hear 

otherwise valid private rights of action where 

such action seeks to undermine or attack 

‘‘any ‘filed rate’—that is, one approved by the 

governing regulatory agency—[because such 

a rate] is per se reasonable and unassailable 

in judicial proceedings brought by 

ratepayers.’’ 17

Here, the Commission dismisses concerns 

that preserving the section 22 private right of 

action may cause regulatory uncertainty or 

inconsistent or duplicative regulation by 

arguing that the same result could occur if 

the CFTC were to bring enforcement actions 

for violations of the Reserved Provisions. 

This is a concern, to be sure. But the CFTC 

may bring suit only after an affirmative vote 

of a majority of Commissioners and in 

accordance with its Memorandum of 

Understanding with the FERC under which 

staff of the CFTC and the FERC have agreed 

to consult each other on matters of mutual 

interest and overlapping jurisdiction.18 The 

CFTC would therefore be far likelier than a 

private plaintiff to consider the impact an 

action for violating the CEA could have on 

the regulatory policy of co-equal regulators 

operating in their primary field. Furthermore, 

unlike private plaintiffs, the CFTC would 

have a thorough appreciation of a potential 

defendant’s positions in derivatives markets 

and access to a potential defendant’s 

positions in the cash markets, ensuring that 

only cases of true merit would be brought. 

One would expect the CFTC to conduct an 

extensive investigation and carefully 

consider any impact an action for CEA 

violations would have on electricity 

regulation before bringing suit. I certainly 

will. As commenters have pointed out, 

private parties—who may be interested 

primarily in winning a cash award and/or 

securing attorneys’ fees—will not consider 

the matter so broadly. 

In conclusion, adding section 22 to the list 

of Reserved Provisions is a serious misstep. 

At a time of stagnant wage growth, today’s 

proposal may needlessly subject millions of 

American ratepayers to higher utility bills as 

a result of the almost certain increase in 

litigation, court costs and settlement 

damages. Permitting private rights of action 

in the heavily regulated RTO–ISO markets is 

in great tension with the congressional 

command that the CFTC, the FERC and 

where applicable, state regulators, work to 

ensure effective, efficient regulation that 

provides the RTO–ISO market participants 

with legal certainty. 

As such, I emphatically dissent from the 

proposal. 

[FR Doc. 2016–11385 Filed 5–13–16; 8:45 am] 

BILLING CODE 6351–01–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

[Docket No: CFPB–2016–0021] 

Agency Information Collection 

Activities: Submission for OMB 

Review; Comment Request 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Notice and request for comment. 

SUMMARY: In accordance with the 

Paperwork Reduction Act of 1995 

(PRA), the Consumer Financial 

Protection Bureau (Bureau) is proposing 

to renew the Office of Management and 

Budget (OMB) approval for an existing 

information collection titled, 

‘‘Application Process for Designation of 

Rural Area under Federal Consumer 

Financial Law.’’ 

DATES: Written comments are 

encouraged and must be received on or 

before June 15, 2016 to be assured of 

consideration. 

ADDRESSES: You may submit comments, 

identified by the title of the information 

collection, OMB Control Number (see 

below), and docket number (see above), 

by any of the following methods: 

• Electronic: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

• OMB: Office of Management and 

Budget, New Executive Office Building, 

Room 10235, Washington, DC 20503 or 

fax to (202) 395–5806. Mailed or faxed 

comments to OMB should be to the 

attention of the OMB Desk Officer for 

the Bureau of Consumer Financial 

Protection. 

Please note that comments submitted 

after the comment period will not be 

accepted. In general, all comments 

received will become public records, 

including any personal information 

provided. Sensitive personal 

information, such as account numbers 

or social security numbers, should not 

be included. 

FOR FURTHER INFORMATION CONTACT: 

Documentation prepared in support of 

this information collection request is 

available at www.reginfo.gov (this link 

active on the day following publication 

of this notice). Select ‘‘Information 

Collection Review,’’ under ‘‘Currently 


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