Federal Register / Vol. 70, No. 228 / Tuesday, November 29, 2005 / Notices 71487 

18Fraud and collusion are often used 

interchangeably. See, e.g., Martin v. Wilks, 490 U.S. 

755, 772 (1989). The Supreme Court long ago found 

fraud to be implicit in collusion. Wheeler v. Denver, 

229 U.S. 342, 350 (1913) (‘‘of course, the existence 

of collusion implies the existence of fraud’’); 

Dickerman v. Northern Trust Co., 176 U.S. 181, 190 

(1900) (‘‘Collusion * * * implies the existence of 

fraud of some kind, the employment of fraudulent 

means, or lawful means for the accomplishment of 

an unlawful purpose * * *.’’). 

1 18 CFR 388.104(a) (2005). 

2 18 CFR part 358 (2005). 

3Order Amending Market-Based Rate Tariffs and 

Authorizations, 105 FERC ¶ 61,218 (2003) at 

Appendix A, reh’g denied, 107 FERC ¶ 61,175 

(2004) (electric power); 18 CFR 284.288 and 

284.403 (2005) (natural gas); appeal as to both 

electric power and natural gas Market Behavior 

Rules filed sub nom. Cinergy Marketing & Trading, 

L.P. v. FERC, Nos. 04–1168 et al. (DC Cir., appeal 

filed April 28, 2004). 

requirement. We believe that doing so 

would eliminate the need to retain 

Market Behavior Rule 5. 

23. Finally, Market Behavior Rule 6 

requires adherence to codes of conducts 

and the Standards of Conduct, and 

prohibits collusion to violate the codes 

of conduct or the Standards of Conduct. 

The codes of conduct are issued 

specifically to each market-based rate 

seller as part of their authorization, and 

the Standards of Conduct are applicable 

by rule to all market-based rate sellers 

engaged in or having affiliates engaged 

in transmission services. Our view is 

that Market Behavior Rule 6 restates 

requirements independently applicable 

to market-based rate sellers, except for 

the prohibition on colluding to violate 

the codes of conduct or Standards of 

Conduct. But collusion is a type of 

fraud,18 and thus collusion to violate 

codes of conduct or Standards of 

Conduct would be subject to the 

proposed part 47 regulations. 

24. In addition to simplifying our 

behavior rules, avoiding confusion, and 

providing more regulatory certainty, it is 

also our view that a smooth transition 

from the existing Market Behavior Rules 

to the proposed part 47 regulations and 

other rules and regulations achieves our 

original goal in adopting the Market 

Behavior Rules, that is, to assure that 

wholesale market rates for electric 

energy are just, reasonable, and not 

unduly discriminatory or preferential. 

In EPAct 2005, Congress has provided 

broad and strong prohibitions of market 

manipulation, and reliance on rules 

implementing these statutory 

prohibitions will likewise assure that 

wholesale markets reflect competitive 

forces and produce just and reasonable 

rates. 

25. We seek comment on whether the 

Market Behavior Rules should be 

repealed prospectively, including 

responses to the following questions: 

1. Are there any aspects of the Market 

Behavior Rules that should be retained 

in market-based rate sellers’ tariffs and 

authorizations, or can all substantive 

provisions of the Market Behavior Rules 

be reflected in the proposed part 47 

regulations and other Commission rules 

and regulations? 

2. Is there a need or basis for retaining 

existing Market Behavior Rule 2 in light 

of the anti-manipulation provisions set 

forth in the proposed part 47 

regulations? 

3. Should the Commission 

incorporate the qualification that no 

action or transaction explicitly 

contemplated by Commission rules, or 

undertaken at the direction of an ISO or 

RTO, is a violation of Market Behavior 

Rule 2 into the proposed part 47 

regulations? 

4. Should the affirmative defense of 

‘‘legitimate business purpose’’ in 

existing Market Behavior Rule 2 be 

retained in any form? 

5. Is there any aspect of behavior 

forbidden by Market Behavior Rule 3 

that would not act as a fraud or deceit 

in connection with the purchase or sale 

of electric energy or transmission 

services subject to the Commission’s 

jurisdiction? 

6. Is the requirement of Market 

Behavior Rule 4 to report transaction 

information accurately, to the extent a 

seller reports such information to price 

index publishers, necessary in light of 

the proposed part 47 regulations? 

7. Is there any aspect of Market 

Behavior Rule 6 that is not covered 

directly and explicitly by each seller’s 

code of conduct as contained in tariff 

authorizations, or by the Standards of 

Conduct in part 358 of our regulations, 

or by the proposed part 47 regulations? 

26. We encourage responses to the 

specific questions above as well as 

additional relevant comments regarding 

whether the Market Behavior Rules 

should be repealed. 

27. The Commission invites interested 

persons to submit comments on the 

matters, issues, and specific questions 

identified in this order. Comments are 

due thirty (30) days from the date of 

publication of this order in the Federal 

Register, and reply comments are due 

fifteen (15) days from the date that 

initial comments are due. To facilitate 

the Commission’s review of the 

comments, the Commission requests 

that commentors provide an executive 

summary of their position. In addition, 

the Commission requests that 

commentors identify each specific 

question addressed by their comments 

and use appropriate headings. 

The Commission Orders 

(A) Pursuant to the authority 

contained in and subject to the 

jurisdiction conferred upon the 

Commission by section 402(a) of the 

Department of Energy Organization Act 

and by the FPA, particularly section 206 

thereof, and pursuant to the 

Commission’s Rules of Practice and 

Procedure and the regulations under the 

FPA (18 CFR Chapter I), the 

Commission proposes to revise all 

public utility sellers’ market-based rate 

tariffs and authorizations as discussed 

in the body of this order. 

(B) Interested entities may file 

comments and reply comments 

regarding the proposed prospective 

repeal of the Market Behavior Rules set 

forth herein. Initial comments will be 

due 30 days from the date this order is 

published in the Federal Register, and 

reply comments will be due 15 days 

from the date that initial comments are 

due to be filed. 

(C) The Secretary shall promptly 

publish this order in the Federal 

Register. 

By the Commission. 

Magalie R. Salas, 

Secretary. 

[FR Doc. 05–23467 Filed 11–28–05; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

[Docket No. PL06–4–000] 

Informal Staff Advice on Regulatory 

Requirements; Interpretive Order 

Regarding No-Action Letter Process 

Issued November 18, 2005. 

Before Commissioners: Joseph T. 

Kelliher, Chairman; Nora Mead 

Brownell, and Suedeen G. Kelly 

1. The Commission clarifies that 

section 388.104(a) of its regulations 1

may be used to obtain informal staff 

advice regarding certain matters. 

Specifically, this regulation may be used 

to request and obtain staff ‘‘no-action’’

letters, effective immediately, with 

respect to whether staff will recommend 

that the Commission take no 

enforcement action with respect to 

specific proposed transactions, practices 

or situations that may raise issues under 

the Commission’s regulations relating to 

the Standards of Conduct for 

Transmission Providers,2 Market 

Behavior Rules 3 and, when a final rule 

is effective, the Commission’s proposed 

Prohibition of Energy Market 

71488 Federal Register / Vol. 70, No. 228 / Tuesday, November 29, 2005 / Notices 

4Prohibition of Energy Market Manipulation, 113 

FERC ¶ 61,067 (2005). 

5No public notice or comment on this order is 

necessary pursuant to section 4(b)(A) of the 

Administrative Procedure Act, 5 U.S.C. 553(b)(A) 

(2000), which exempts from such notice or 

comment ‘‘interpretative rules, general statements 

of policy or rules of agency organization, procedure 

or practice.’’ We herein establish procedures by 

which entities, if they choose to do so, may seek 

no-action letters as a form of staff informal advice 

that does not bind the Commission. See James V. 

Hurson Associates, Inc. v. Glickman, 229 F.3d 277, 

280 (DC Cir. 2000) (The critical feature of agency 

actions that satisfy the section 553(b)(A) exception 

is that they do not themselves ‘‘alter the rights or 

interests of parties,’’ although they ‘‘may alter the 

manner in which the parties present themselves or 

their viewpoints to the agency,’’ quoting Batterton 

v. Marshall, 648 F.2d 694, 707 (DC Cir. 1980)). 

6Energy Policy Act of 2005, Public Law No. 109–

58, 119 Stat. 594 (2005). 

7Prohibition of Energy Market Manipulation, 113 

FERC ¶ 61,067 (2005). 

8Policy Statement on Enforcement, 113 FERC ¶

61,068 (2005). 

9Order Amending Market-Based Rate Tariffs and 

Authorizations, 105 FERC ¶ 61,218 at 62,170 

(Appendix A) (electric power); 18 CFR 284.288(a) 

and 284.403(a) (natural gas). 

10Prohibition of Energy Market Manipulation, 

113 FERC ¶ 61,067 at P 15. 

11Policy Statement on Enforcement, 113 FERC ¶

61,068 at P 1. 

12 Id. at PP 22–23. 

13See 17 CFR 202.1(d) (2005) (SEC) and 17 CFR 

140.99 (2005) (CFTC). 

14For example, the SEC’s regulations state: ‘‘The 

informal procedures of the [SEC] are largely 

concerned with the rendering of advice and 

assistance by the [SEC’s] staff to members of the 

public dealing with the [SEC]. While opinions 

expressed by members of the staff do not constitute 

an official expression of the [SEC’s] views, they 

represent the views of persons who are 

continuously working with the provisions of the 

statute involved.’’ 17 CFR 201.1(d) (2005). 

15The first two sentences of section 388.104(a) of 

our regulations state, ‘‘The Commission staff 

provides informal advice and assistance to the 

general public and to prospective applicants for 

licenses, certificates and other Commission 

authorizations. Opinions expressed by the staff do 

not represent the official views of the Commission, 

but are designed to aid the public and facilitate the 

accomplishment of the Commission’s functions.’’

These statements are functionally equivalent to the 

parallel sentences of the SEC’s regulation 

recognizing its staff’s ability to issue no-action 

letters. 

Manipulation Rules.4 This ‘‘no-action 

letter’’ process will make available 

informal, advance advice by staff on 

transactions that otherwise could lead to 

enforcement action.5

Background 

2. In recent months, a number of 

industry participants have expressed 

concerns about the perceived ambiguity 

and vagueness of the Standards of 

Conduct and Market Behavior Rules and 

uncertainty about how they apply to the 

varied corporate structures, business 

operations and trading strategies of 

companies subject to the Commission’s 

jurisdiction. There have been several 

suggestions that the Commission 

consider implementing a no-action 

letter process similar to those made 

available by the staffs of the Securities 

and Exchange Commission (SEC) and 

the Commodity Futures Trading 

Commission (CFTC) to provide, in 

advance, increased certainty on whether 

particular transactions, practices or 

situations would be subject to agency 

enforcement action. 

3. The potential risks of failure to 

comply with the Commission’s 

regulatory requirements increased 

significantly on August 8, 2005, with 

the enactment of the Energy Policy Act 

of 2005 (EPAct 2005).6 EPAct 2005 for 

the first time granted the Commission 

authority to assess civil penalties for 

violations of the Natural Gas Act (NGA) 

and rules, regulations, restrictions, 

conditions and orders thereunder, 

expanded the Commission’s Federal 

Power Act (FPA) civil penalty authority 

to encompass violations of all 

provisions of FPA Part II and rules and 

orders thereunder, and established the 

maximum civil penalty the Commission 

could assess under the NGA, FPA Part 

II and the Natural Gas Policy Act of 

1978 as $1 million per day per violation. 

EPAct 2005 also amended the NGA and 

FPA to make unlawful the use or 

employment of manipulative or 

deceptive devices or contrivances in 

connection with the purchase or sale of 

natural gas, electric energy, gas 

transportation or electric transmission 

subject to the Commission’s jurisdiction 

in violation of regulations issued by the 

Commission. These statutory provisions 

grant the Commission new authority 

against manipulation in transactions in 

energy markets and enhance the 

Commission’s ability to impose 

sanctions for violations. On October 20, 

2005, we proposed rules to implement 

the new EPAct 2005 anti-manipulation 

authority.7

4. While we intend to exercise our 

expanded enforcement authorities 

diligently in a firm but fair manner, we 

seek to temper the need to use those 

powers by increasing regulatory 

certainty and providing notice to the 

regulated community of the factors we 

will consider in responding to 

violations.8 More importantly, it is in 

the best interests of all segments of the 

energy industry that compliance with 

the statutes administered by the 

Commission and its orders and 

regulations should be emphasized. In 

announcing proposed rules to 

implement increased anti-manipulation 

authority under the FPA and NGA, we 

noted our intention to seek comments 

on whether to revise or repeal existing 

Market Behavior Rule 2 9 because both 

it and the new anti-manipulation 

authority prohibit manipulative 

conduct.10 Concurrently with this order, 

we are instituting proceedings in Docket 

Nos. EL06–16–000 and RM06–5–000 on 

this topic. On October 20, 2005, we 

issued a Policy Statement on 

Enforcement that provides guidance on 

how we intend to implement our 

enhanced enforcement powers to 

provide ‘‘firm but fair enforcement of 

our rules and regulations.’’ 11 In 

particular, we encouraged entities 

subject to our jurisdiction to take 

proactive steps to emphasize 

compliance.12 It is entirely consistent 

with this objective for us to permit 

entities to inquire of Commission staff 

in advance of transactions, practices or 

situations that may raise compliance 

issues. 

5. The SEC and CFTC both provide 

no-action letter processes whereby they 

permit their staffs to review certain 

types of proposed matters and provide 

informal advice on whether the staff 

will recommend enforcement action if a 

matter under review is put into effect as 

proposed.13 Although this advice does 

not bind the agency, it is understood 

that agency staff who issue the no-action 

letters are themselves well-acquainted 

with the statutes, regulations, rules and 

orders the agency administers.14

Initial No-Action Letter Process and 

Procedures 

6. After reviewing requests for a noaction letter process and studying efforts 

of other governmental agencies to 

maximize compliance with complicated 

statutory and regulatory schemes, we 

have concluded that we also can 

increase regulatory certainty and 

fairness by permitting entities to seek 

no-action letters similar to those issued 

by the SEC and CFTC staffs. We believe 

that a no-action letter process can yield 

significant benefits to the entities 

subject to the statutes, regulations, rules 

and orders administered by the 

Commission, particularly by reducing 

such entities’ risk of failing to comply 

with our rules and regulations. 

7. Our regulations already recognize 

the ability of our staff to provide 

informal advice on matters pertaining to 

regulatory requirements.15 Staff spends 

a significant amount of time in these 

informal activities, such as conducting 

pre-filing meetings with persons who 

wish to submit an application to us. 

These activities are valuable, and we 

fully intend that staff continue its 

present efforts to render informal, nonbinding advice. However, we also 

Federal Register / Vol. 70, No. 228 / Tuesday, November 29, 2005 / Notices 71489 

16These processes are consistent with procedures 

used by the SEC and the CFTC in their no-action 

letter programs to address concerns about the 

treatment of assertedly confidential or proprietary 

information in requests for no-action letters. See 17 

CFR 144.98(b) (2005) (CFTC) and 17 CFR 200.81(b) 

(2005) (SEC). 

17 18 CFR 385.207 (2005). 

believe that it is appropriate to allow 

entities to use the existing regulation as 

a means to obtain advance notice on 

whether staff will recommend 

enforcement action against a particular 

transaction, practice or situation. 

Therefore, we are implementing a noaction letter process, initially on a 

limited basis, as set forth below. 

8. We will initially limit no-action 

inquiries to questions relating to 

whether particular transactions, 

practices, situations or other matters 

would violate the Standards of Conduct, 

the Market Behavior Rules, or, when 

issued, the final Prohibition of Energy 

Market Manipulation Rules. Based on 

concerns raised by industry 

participants, we recognize that these 

rules may present interpretive 

challenges and substantial exposure to 

potential enforcement actions. As we 

gain experience with the no-action letter 

process concerning these rules, in the 

future we may change the matters that 

may be the subject of requests for noaction letters. At some future time, we 

may need to adopt formal regulations 

governing the no-action letter process 

and possibly establish a filing fee for noaction letters. Initially, however, no fee 

will be charged. 

9. The experience of the SEC and 

CFTC shows that it is important that noaction letters be issued by staff who are 

familiar with the regulations on which 

the no-action letter process is focused. 

Requests for no-action letters should 

initially be submitted on a non-public 

basis to the General Counsel. The 

regulated community should 

understand that staff experts in a 

number of Commission offices will be 

consulted as appropriate in responding 

to no-action letter requests, and that 

responses to such requests should be 

treated as a consensus view of the 

Commission staff. 

10. An entity that seeks a no-action 

letter must describe in writing the 

proposed transaction, practice, situation 

or other matter in complete detail, 

including identifying to the extent 

possible each of the corporate entities, 

counterparties or other persons that 

would be involved, the purpose of the 

matter, the requester’s role in the 

proposed matter and the regulatory 

issues that the matter poses. Although 

requesters may seek guidance on both 

existing practices and anticipated future 

practices or transactions, the General 

Counsel or designee will not respond to 

no-action letter requests that raise 

purely hypothetical inquiries. Instead, 

our no-action letter process is intended 

to assist regulated entities in seeking 

guidance on the real world application 

of our regulations and orders. To 

accomplish this objective, requesters 

must provide sufficient detail for staff 

adequately to address the factual and 

legal issues presented in the request. We 

also note that the General Counsel or 

designee will not respond to a request 

for a no-action letter that relates to the 

merits of an on-the-record proceeding 

currently before the Commission. 

11. In addition, a no-action letter 

request must be accompanied by a 

statement that, to the best of the 

requester’s personal information, 

knowledge and belief, the request is 

accurate and complete and does not 

contain any untrue statement of a 

material fact, that there is no omission 

of a material fact in the request, and that 

the request does not raise any issue that 

relates to the merits of an on-the-record 

proceeding currently before the 

Commission. 

12. The issuance of a response to a noaction letter request is entirely within 

the discretion of the General Counsel or 

designee. If the information submitted 

with the no-action letter request is not 

sufficient, staff may request additional 

information or inform the requester that 

it will not respond to the request and 

give a reason. The timing of a response 

to a no-action letter request is also 

within the discretion of the General 

Counsel or designee. 

13. In response to a request for a noaction letter, the General Counsel or 

designee may state that staff: (1) Will 

not recommend enforcement action if 

the matter is implemented as described 

in the request and in any additional 

information provided; (2) will not 

recommend enforcement action if the 

matter is implemented as so described 

only under conditions stated in the 

response, or as modified in the 

response; or (3) may recommend 

enforcement action if the matter is 

implemented as so described. 

14. Until the date on which the 

General Counsel or designee issues a 

response to a request for a no-action 

letter, the Commission and its staff will 

treat the request and any other 

documents relating to it as non-public. 

However, the Commission believes that 

public disclosure of requests for noaction letters and responses is important 

to notify interested entities of staff’s 

views with respect to regulatory matters 

at issue. Therefore, if the General 

Counsel or designee responds to a 

request for a no-action letter, we 

ordinarily intend to make public the 

request and the response at the time of 

the response. We note that this practice 

is consistent with that of the SEC and 

CFTC, both of which generally make 

public no-action letter requests and the 

agency staff’s response after the 

response is issued. 

15. We understand that in some 

circumstances a proposed matter that is 

the subject of a request for a no-action 

letter may be confidential or 

proprietary, at least until the matter is 

implemented or until sufficient time has 

passed for the requester to determine, 

after receiving a response, whether to 

implement the matter. Thus, in unusual 

cases a requester may seek non-public 

treatment of its request for a no-action 

letter and a staff response, at least to the 

extent that the request and response 

describe the proposed matter or matters 

that are under review, for a specified 

period of time not in excess of 120 days 

from the date of any response. 

16. If our staff agrees with the period 

of non-public treatment the requester 

seeks, the Commission will not make 

the request and the response public 

until the expiration of the time period 

sought by the requester. If staff disagrees 

with the non-public period sought by 

the requester, it will so notify the 

requester, who may then withdraw the 

request within 30 days of the date of the 

staff notice. In that case, the General 

Counsel or designee will not respond to 

the request, and the Commission and 

staff will treat the request and the staff 

notice as non-public. If the request is 

not withdrawn after the requester 

receives a staff notice, the Commission 

will make public on the date of issuance 

of the response the request, any 

additional information provided by the 

requester and the response.16

17. As with other informal advice 

provided by our staff, responses by the 

General Counsel or designee to requests 

for no-action letters will not bind the 

Commission and will not operate as 

agency action that would be subject to 

rehearing or judicial review. Any person 

who seeks a binding Commission 

determination concerning a proposed 

transaction, practice, situation or other 

matter may file a petition for a 

declaratory order pursuant to section 

385.207 of our regulations.17

By the Commission. 

Magalie R. Salas, 

Secretary. 

[FR Doc. 05–23406 Filed 11–28–05; 8:45 am] 

BILLING CODE 6717–01–P