Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54463 

5 18 CFR 380.4(1). 

6 5 U.S.C. 601–12. 

7We similarly find that this rule does not 

substantially affect the rights or obligations of 

parties to Commission proceedings, since it merely 

corrects a reference to a no longer published 

Federal Reserve Statistical Release, and otherwise 

does not change the methods for calculating refunds 

or for determining the applicable interest rates. See 

5 U.S.C. 804(3)(C). 

procedural, ministerial or internal 

administrative actions and 

management.5 This rulemaking is 

exempt under that provision. 

IV. Regulatory Flexibility Act 

4. The Regulatory Flexibility Act of 

1980 (RFA) 6 generally requires a 

description and analysis of final rules 

that will have significant economic 

impact on a substantial number of small 

entities. This final rule makes a 

ministerial correction to the regulations, 

correcting the reference to a Federal 

Reserve Statistical Release. The 

Commission certifies that it will not 

have a significant economic impact on 

a substantial number of small entities. 

An analysis under the RFA is not 

required. 

V. Document Availability 

5. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through the 

Commission’s Home Page (http:// 

www.ferc.gov) and in the Commission’s 

Public Reference Room during normal 

business hours (8:30 a.m. to 5 p.m. 

Eastern time) at 888 First Street, NE., 

Room 2A, Washington, DC 20426. 

6. From the Commission’s Home Page 

on the Internet, this information is 

available on eLibrary. The full text of 

this document is available on eLibrary 

in PDF and Microsoft Word format for 

viewing, printing, and/or downloading. 

To access this document in eLibrary, 

type the docket number excluding the 

last three digits of this document in the 

docket number field. 

7. User assistance is available for 

eLibrary and the Commission’s website 

during normal business hours from 

FERC Online Support at 202–502–6652 

(toll free at 1–866–208–3676) or e-mail 

at ferconlinesupport@ferc.gov, or the 

Public Reference Room at (202) 502– 

8371, TTY (202)502–8659. E-mail the 

Public Reference Room at 

public.referenceroom@ferc.gov. 

VI. Effective Date 

8. These regulations are effective 

October 22, 2009. In accordance with 5 

U.S.C. 553(d)(3), the Commission finds 

that good cause exists to make this Final 

Rule effective immediately. It corrects 

an out-of-date reference in the 

Commission’s regulations to reflect a 

change in the Federal Reserve’s 

Statistical Releases. It will not 

significantly and adversely affect 

persons appearing before the 

Commission. There is therefore no 

reason to make this rule effective at a 

later time. 

9. The Commission is issuing this rule 

as a Final Rule without a period for 

public comment. Under 5 U.S.C. 553(b), 

notice and comment procedures are 

unnecessary where a rulemaking 

concerns only agency procedure and 

practice, or where the agency finds that 

notice and comment are unnecessary.7

The Commission finds that notice and 

comment are unnecessary because the 

Commission is merely correcting a 

reference to a no longer published 

Federal Reserve Statistical Release. No 

new burden or regulatory requirement is 

imposed on regulated entities or the 

general public. Instead, this Final Rule 

merely updates an out-of-date reference 

in the Commission’s regulations to 

reflect a change in the Federal Reserve’s 

Statistical Releases. 

List of Subjects in 18 CFR Part 35 

Electric power rates, Electric utilities, 

Reporting requirements. 

By the Commission. 

Kimberly D. Bose, 

Secretary. 

■ In consideration of the foregoing, the 

Commission amends part 35, Chapter I, 

Title 18, Code of Federal Regulations, as 

follows: 

PART 35—FILING OF RATE 

SCHEDULES AND TARIFFS 

■ 1. The authority citation for part 35 

continues to read as follows: 

Authority: 16 U.S.C. 791a–825r, 2601– 

2645; 31 U.S.C. 9701; 42 U.S.C. 7101–7352. 

§ 35.19 [Amended] 

■ 2. In § 35.19a, paragraph (a)(2)(iii)(A) 

is amended to remove the phrase 

‘‘Statistical Release G. 13’’ and to add 

the phrase ‘‘Statistical Release H. 15’’ in 

its place. 

[FR Doc. E9–25253 Filed 10–21–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 358 

[Docket No. RM07–1–001; Order No. 717– 

A] 

Standards of Conduct for 

Transmission Providers 

Issued October 15, 2009. 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Final rule; order on rehearing 

and clarification. 

SUMMARY: The Federal Energy 

Regulatory Commission (Commission) 

generally reaffirms its determinations in 

Order No. 717, but grants rehearing on 

and clarifies certain provisions. Order 

No. 717–A aims to make the Standards 

of Conduct clearer and to refocus the 

rules on the areas where there is the 

greatest potential for abuse. The order 

addresses requests for rehearing and 

clarification of the following issues: 

Applicability of the Standards of 

Conduct to transmission owners with no 

marketing affiliate transactions; whether 

the Independent Functioning Rule 

applies to balancing authority 

employees; which activities of 

transmission function employees or 

marketing function employees are 

subject to the Independent Functioning 

Rule; whether local distribution 

companies making off-system sales on 

nonaffiliated pipelines are subject to the 

Standards of Conduct; whether the 

Standards of Conduct apply to a 

pipeline’s sale of its own production; 

applicability of the Standards of 

Conduct to asset management 

agreements; whether incidental 

purchases to remain in balance or sales 

of unneeded gas supply subject the 

company to the Standards of Conduct; 

applicability of the No Conduit Rule to 

certain situations; and applicability of 

the Transparency Rule to certain 

situations. 

DATES: Effective Date: This rule will 

become effective November 23, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Leonard Tao, Office of the General 

Counsel—Energy Markets, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 20426, 

(202) 502–8214. 

SUPPLEMENTARY INFORMATION: 


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54464 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

1Standards of Conduct for Transmission 

Providers, Order No. 717, 73 FR 63796 (Oct. 27, 

2008), FERC Stats. & Regs. ¶ 31,280 (2008) (Order 

No. 717). 2 Inquiry Into Alleged Anticompetitive Practices 

Related to Marketing Affiliates of Interstate 

Pipelines, Order No. 497, 53 FR 22139 (Jun. 14, 

1988), FERC Stats. & Regs., Regulations Preambles 

1986–1990 ¶ 30,820 (1988); Order No. 497–A, order 

on rehearing, 54 FR 52781 (Dec. 22, 1989), FERC 

Stats. & Regs., Regulations Preambles 1986–1990 

¶ 30,868 (1989); Order No. 497–B, order extending 

sunset date, 55 FR 53291 (Dec. 28, 1990), FERC 

Stats. & Regs., Regulations Preambles 1986–1990 

¶ 30,908 (1990); Order No. 497–C, order extending 

sunset date, 57 FR 9 (Jan. 2, 1992), FERC Stats. & 

Regs., Regulations Preambles January 1991–June 

1996 ¶ 30,934 (1991), rehearing denied, 57 FR 5815 

(Feb. 18, 1992), 58 FERC ¶ 61,139 (1992); aff’d in 

part and remanded in part sub nom. Tenneco Gas 

v. FERC, 969 F.2d 1187 (D.C. Cir. 1992) (Tenneco) 

(collectively, Order No. 497). 

3Open Access Same-Time Information System 

(Formerly Real-Time Information Network) and 

Standards of Conduct, Order No. 889, 61 FR 21737 

(May 10, 1996), FERC Stats. & Regs., Regulations 

Preambles January 1991–June 1996 ¶ 31,035 (1996); 

Order No. 889–A, order on reh’g, 62 FR 12484 (Mar. 

14, 1997), FERC Stats. & Regs., Regulations 

Preambles July 1996–December 2000 ¶ 31,049 

(1997); Order No. 889–B, reh’g denied, 62 FR 64715 

(Dec. 9, 1997), 81 FERC ¶ 61,253 (1997) 

(collectively, Order No. 889). 

4Standards of Conduct for Transmission 

Providers, Order No. 2004, FERC Stats. & Regs. 

¶ 31,155 (2003), order on rehearing, Order No. 

2004–A, FERC Stats. & Regs. ¶ 31,161, order on 

rehearing, Order No. 2004–B, FERC Stats. & Regs. 

¶ 31,166, order on rehearing, Order No. 2004–C, 

FERC Stats. & Regs. ¶ 31,172 (2004), order on 

rehearing, Order No. 2004–D, 110 FERC ¶ 61,320 

(2005), vacated and remanded as it applies to 

natural gas pipelines sub nom. National Fuel Gas 

Supply Corp. v. FERC, 468 F.3d 831 (D.C. Cir. 2006) 

(National Fuel); see Standards of Conduct for 

Transmission Providers, Order No. 690, FERC Stats. 

& Regs. ¶ 31,237, order on rehearing, Order No. 

690–A, FERC Stats. & Regs. ¶ 31,243 (2007); see 

also Standards of Conduct for Transmission 

Providers, Notice of Proposed Rulemaking, FERC 

Stats. & Regs. ¶ 32,611 (2007); Notice of Proposed 

Rulemaking, FERC Stats. & Regs. ¶ 32,630 (2008). 5The Order 2004 standards of conduct defined an 

energy affiliate as an affiliate of a transmission 

provider that (1) engages in or is involved in 

transmission transactions in U.S. energy or 

transmission markets; (2) manages or controls 

transmission capacity of a transmission provider in 

U.S. energy or transmission markets; (3) buys, sells, 

trades or administers natural gas or electric energy 

in U.S. energy or transmission markets; or (4) 

engages in financial transactions relating to the sale 

or transmission of natural gas or electric energy in 

U.S. energy or transmission markets. Order No. 

2004, FERC Stats. & Regs. ¶ 31,155 at P 40; see also 

18 CFR 358.3(d). Certain categories of entities were 

excluded from this definition in subsequent 

subsections of the regulations. 

6A transmission provider was defined as (1) any 

public utility that owns, operates or controls 

facilities used for transmission of electric energy in 

interstate commerce; or (2) any interstate natural 

gas pipeline that transports gas for others pursuant 

to subpart A of part 157 or subparts B or G of part 

284 of the same chapter of the regulations. Order 

No. 2004, FERC Stats. & Regs. ¶ 31,155 at P 33–34; 

see also 18 CFR 358.3(a). 

TABLE OF CONTENTS

Paragraph 

Nos. 

I. Introduction ......................................................................................................................................................................................... 1 

II. Background ......................................................................................................................................................................................... 2 

III. Discussion ......................................................................................................................................................................................... 6 

A. Jurisdiction and Applicability of the Standards: Applicability to Transmission Providers With No Marketing Affiliate 

Transactions ................................................................................................................................................................................. 6 

B. Independent Functioning Rule .................................................................................................................................................. 19 

1. Transmission Function ........................................................................................................................................................ 22 

2. Transmission Function Employees ..................................................................................................................................... 25 

3. Marketing Functions ............................................................................................................................................................ 28 

a. Electric Industry ............................................................................................................................................................ 30 

b. Natural Gas Industry .................................................................................................................................................... 41 

(i) Off-System Sales by LDCs .................................................................................................................................... 42 

(ii) Sales From Own Production ............................................................................................................................... 50 

(iii) Asset Management Agreements ......................................................................................................................... 60 

(iv) Balancing ............................................................................................................................................................. 64 

(v) Other ..................................................................................................................................................................... 70 

4. Marketing Function Employees .......................................................................................................................................... 77 

5. Long-Range Planning, Procurement and Other Interactions ............................................................................................. 84 

C. The No Conduit Rule ................................................................................................................................................................. 93 

D. Transparency Rule ...................................................................................................................................................................... 99 

E. Other Definitions—Transmission Function Information .......................................................................................................... 126 

F. Training Requirements ............................................................................................................................................................... 137 

G. Miscellaneous Matters ................................................................................................................................................................ 143 

IV. Document Availability ..................................................................................................................................................................... 151 

V. Effective Date ..................................................................................................................................................................................... 154 

Before Commissioners: Jon Wellinghoff, 

Chairman; Suedeen G. Kelly, Marc Spitzer, 

and Philip D. Moeller. 

I. Introduction 

1. On October 16, 2008, the 

Commission issued Order No. 717 

amending the Standards of Conduct for 

Transmission Providers (the Standards 

of Conduct or the Standards) to make 

them clearer and to refocus the rules on 

the areas where there is the greatest 

potential for abuse.1 In this order, the 

Commission addresses requests for 

rehearing and clarification of Order No. 

717. 

II. Background 

2. The Commission first adopted the 

Standards of Conduct in 1988, in Order 

No. 497.2 The Commission adopted 

similar Standards for the electric 

industry in 1996, in Order No. 889,3

prohibiting public utilities from giving 

undue preferences to their marketing 

affiliates or wholesale merchant 

functions. Both the electric and gas 

Standards sought to deter undue 

preferences by (i) separating a 

transmission provider’s employees 

engaged in transmission services from 

those engaged in its marketing services, 

and (ii) requiring that all transmission 

customers, affiliated and non-affiliated, 

be treated on a non-discriminatory 

basis. 

3. In 2003, the Commission issued 

Order No. 2004,4 which broadened the 

Standards to include a new category of 

affiliate, the energy affiliate.5 The new 

Standards were made applicable to both 

the electric and gas industries, and 

provided that the transmission 

employees of a transmission provider 6

must function independently not only 

from the company’s marketing affiliates 

but from its energy affiliates as well, and 

that transmission providers may not 

treat either their energy affiliates or their 

marketing affiliates on a preferential 

basis. Order No. 2004 also imposed 

requirements to publicly post 

information concerning a transmission 

provider’s energy affiliates. On appeal, 

the U.S. Court of Appeals for the D.C. 


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7National Fuel, 468 F.3d at 841. 

8Standards of Conduct for Transmission 

Providers, Order No. 690, 72 FR 2427 (Jan. 19, 

2007); FERC Stats. & Regs. ¶ 31,237 (2007) (Interim 

Rule); clarified by, Standards of Conduct for 

Transmission Providers, Order No. 690–A, 72 FR 

14235 (Mar. 27, 2007); FERC Stats. & Regs. ¶ 31,243 

(2007) . 

9Standards of Conduct for Transmission 

Providers, 72 FR 3958 (Jan. 29, 2007), FERC Stats. 

& Regs. ¶ 32,611 (2007). 

10Standards of Conduct for Transmission 

Providers, 73 FR 16228 (Mar. 27, 2008), FERC Stats. 

& Regs. ¶ 32,630 (2008). 

11 18 CFR 358.1(a) (2009). 

12Order No. 717, FERC Stats. & Regs. ¶ 31,280 at 

P 16. 

13 Id. P 20. 

14 Id. P 23. 

15EPSA Nov. 17, 2008 Request for Clarification at 

2. 

16 Id. at 3. 

17 Id. at 4. 

18 INGAA Nov. 17, 2008 Request for Clarification 

and Rehearing at 4; MidAmerican Nov. 17, 2008 

Request for Rehearing or Clarification at 5; EEI Nov. 

17, 2008 Request for Clarification at 12–13. 

19 INGAA at 7–9. 

20 Id. 

21MidAmerican at 5. 

Circuit overturned the Standards as 

applied to gas transmission providers, 

on the grounds that the evidence of 

energy affiliate abuse cited by the 

Commission was not in the record.7

4. The Commission issued an Interim 

Rule on January 9, 2007,8 which 

repromulgated the portions of the 

Standards not challenged in National 

Fuel as applied to natural gas 

transmission providers. On January 18, 

2007, the Commission issued its initial 

notice of proposed rulemaking (NOPR),9

requesting comment on a variety of 

issues, including whether the concept of 

energy affiliates should be retained for 

the electric industry. Following 

consideration of the comments filed and 

the Commission’s own experience in 

administering the Standards, the 

Commission modified the approach 

advanced in the initial NOPR. The 

Commission issued a second NOPR on 

March 21, 2008,10 and invited comment 

both on its general approach and on its 

specific provisions. In the second 

NOPR, the Commission proposed to 

return to the approach of separating by 

function transmission personnel from 

marketing personnel, an approach that 

had been adopted in Order Nos. 497 and 

889. The Commission also proposed to 

clarify and streamline the Standards in 

order to enhance compliance and 

enforcement, and to increase 

transparency in the area of 

transmission/affiliate interactions to aid 

in the detection of any undue 

discrimination. 

5. The reforms adopted in Order No. 

717 were intended to eliminate the 

elements that have rendered the 

Standards difficult to enforce and apply. 

They combined the best elements of 

Order No. 2004 (especially the 

integration of gas and electric 

Standards, an element not contested in 

National Fuel) with those of the 

Standards originally adopted for the gas 

industry in Order No. 497 and for the 

electric industry in Order No. 889. 

Specifically, Order No. 717 (i) 

eliminated the concept of energy 

affiliates and (ii) eliminated the 

corporate separation approach in favor 

of the employee functional approach 

used in Order Nos. 497 and 889. In 

addition, the reforms adopted in Order 

No. 717 conformed the Standards with 

the National Fuel opinion. 

III. Discussion 

A. Jurisdiction and Applicability of the 

Standards: Applicability to 

Transmission Providers With No 

Marketing Affiliate Transactions 

6. In Order No. 717, we addressed the 

question of whether the Standards’ 

applicability to interstate pipelines in 

§ 358.1(a) should parallel the Standards’ 

applicability to the electric industry in 

§ 358.1(b). Section 358.1(a) generally 

states that part 358 applies to any 

interstate pipeline that transports gas for 

others and conducts transmission 

transactions with an affiliate that 

engages in marketing functions.11 In 

contrast, the NOPR proposed that 

§ 358.1(b) should state only that this 

part applies to any public utility that 

owns, operates, or controls facilities 

used for the transmission of electric 

energy in interstate commerce. The 

specific question addressed in Order 

No. 717 concerned the phrase ‘‘and 

conducts transmission transactions with 

an affiliate that engages in marketing 

functions’’ and whether this language 

should be retained in § 358.1(a).12

7. We determined that the language in 

§ 358.1(a) should parallel the language 

in § 358.1(b) since there was no 

evidence in the record that pipelines 

that do not conduct transmission 

transactions with an affiliate engaged in 

marketing functions are in a position to 

engage in the type of affiliate abuse to 

which the Standards are directed.13 We 

concluded that rather than remove the 

phrase in question from § 358.1(a), this 

provision should be added to § 358.1(b) 

so that the limitation would apply to 

public utilities as well as pipelines.14

We found that a public utility or a 

pipeline that does not engage in any 

transmission transactions with a 

marketing affiliate should be excluded 

from the Standards coverage. 

Requests for Rehearing and Clarification 

8. Several parties raise the issue of the 

applicability of the Standards to 

marketing function employees of 

affiliates that do not conduct 

transmission transactions with affiliated 

transmission providers. For example, 

the Electric Power Supply Association 

(EPSA) interprets these provisions as 

applying the Standards only to 

transmission companies that conduct 

transactions with their marketing 

affiliates. According to EPSA, some 

pipeline/transmission providers have 

multiple marketing affiliates and these 

providers do not engage in transactions 

with all of their affiliates.15 EPSA states 

that it is unclear whether that pipeline 

or transmission provider is subject to 

the Standards with all of its marketing 

affiliates, or just those with which it 

conducts transactions.16 EPSA argues 

that the Independent Functioning Rule 

in § 358.5 should only apply to the 

relationship between the transmission 

function employees and the marketing 

function employees of those marketing 

affiliates with which the provider 

conducts transactions.17

9. The Interstate Natural Gas 

Association of America (INGAA), 

MidAmerican Energy Holdings 

Company (MidAmerican), and the 

Edison Electric Institute (EEI) also 

interpret the Standards as not extending 

to employees of affiliates that do not 

conduct transmission transactions with 

the pipeline or public utility 

transmission provider.18 INGAA states 

that it is unclear how the regulations 

apply where a pipeline has at least one 

affiliate engaged in marketing functions 

that conducts transmission transactions 

on the pipeline, but has other affiliates 

that do not. INGAA argues that the 

Standards cannot lawfully be applied to 

marketing function employees of 

affiliates that do not conduct 

transmission transactions with the 

affiliated pipeline.19 INGAA contends 

that if the Standards are intended to 

apply to the relationship between a 

pipeline and the marketing function 

employees of affiliates that do not 

conduct transmission transactions on 

that affiliated pipeline, the Commission 

has exceeded its authority.20

10. MidAmerican argues that when an 

affiliate does not engage in transmission 

transactions on an affiliated 

transmission provider’s system, there is 

little or no potential for affiliate abuse, 

and to the extent that there could be 

inappropriate interaction with affiliates, 

such conduct is already proscribed by 

the No Conduit Rule in § 358.6 and the 

Transparency Rule in § 358.7.21


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22 Id. at 7. 

23 Id. at 7–11. 

24 Id. at 8. 

25EEI at 12. 

26 Id. 

27 Id. at 13. 

28 Id. at 11–12. 

29TAPS Nov. 17, 2008 Petition for Rehearing or 

Clarification at 29. 

30 Id. at 30. 

31 Id. at 31. 

32 Id. 

33 Id. at 33. 

34Order No. 717, FERC Stats. & Regs. ¶ 31,280 at 

P 20 and P 23. 

35 Id. P 23. 

36 Id. P 40. 

11. MidAmerican is concerned that 

paragraph 104 of Order No. 717 suggests 

that all marketing function employees 

within a corporate holding company 

structure are to be considered marketing 

function employees of all affiliated 

transmission providers.22 MidAmerican 

contends that employees of an affiliate 

who engage in marketing functions are 

not likely to be privy to non-public 

transmission function information of an 

affiliated transmission provider unless 

the affiliate engages in transmission 

transactions with that transmission 

provider.23 MidAmerican further argues 

that to the extent that an employee of an 

affiliate engaged in marketing functions 

became privy to non-public 

transmission function information about 

another affiliated transmission 

provider’s system, he or she is still 

proscribed from being a conduit for that 

information under the Standards and 

the transmission provider would also 

have the obligation to post the disclosed 

information pursuant to the 

Transparency Rule.24

12. EEI requests clarification that, 

regardless of whether a corporate family 

owns electric transmission providers, 

gas transmission providers, or both, that 

the Standards of Conduct apply only (a) 

between transmission function 

employees of a gas transmission 

provider and employees within the 

corporate family engaged in gas 

marketing functions, and (b) between 

transmission function employees of an 

electric transmission provider and 

employees within the corporate family 

engaged in electric marketing 

functions.25 EEI contends that it would 

be unfair to subject companies with 

both gas and electric transmission 

providers to restrictions on 

relationships that do not apply to the 

same relationships in companies that 

have only gas or only electric 

transmission providers.26

13. EEI states that paragraphs 16–23 of 

Order No. 717 indicate that the rules 

only apply between transmission 

function employees and those marketing 

function employees who are employed 

by a company that conducts 

transmission transactions with the 

transmission provider. EEI requests 

clarification as to whether this 

interpretation is accurate.27

14. Under EEI’s interpretation of these 

provisions, an employee that makes 

sales of electric energy is performing a 

marketing function only if that 

employee works for a public utility 

transmission provider or a company that 

is affiliated with such a provider.28 EEI 

requests confirmation of this 

interpretation. 

15. The Transmission Access Policy 

Study Group (TAPS) argues that the 

Commission should either eliminate the 

exemption for electric transmission 

providers that do not conduct 

transmission transactions with 

marketing affiliates, or clarify that 

transmission owners in regional 

transmission organizations (RTOs) 

remain subject to the Standards absent 

a waiver.29 TAPS contends that if this 

exemption is not eliminated for the 

electric transmission providers, 

transmission owners in RTO regions 

may interpret § 358.1(b) as exempting 

them from the Standards regardless of 

whether they have sought and obtained 

a waiver.30 Specifically, TAPS argues 

that the Commission should expand 

upon ‘‘conduct transmission 

transactions with an affiliate that 

engages in marketing functions.’’ 31

According to TAPS, transmission 

owners within an RTO may argue that 

only the RTO conducts transmission 

transactions with market participants 

and thus these transmission owners 

would be exempt from the Standards.32

Alternatively, TAPS asks that the 

Commission clarify that the new 

language in § 358.1(b) does not exempt 

transmission owners in RTO regions 

who conduct marketing activities (or 

who have affiliates that are engaged in 

marketing activities) in the RTO 

market.33

Commission Determination 

16. Consistent with our findings in 

Order No. 717 that a public utility or 

interstate natural gas pipeline that does 

not engage in any transmission 

transactions with a marketing affiliate 

should be excluded from the Standards’ 

coverage,34 we clarify that the term 

‘‘marketing function employee’’ of a 

transmission provider, as defined in 

§ 358.3(d), does not include an 

employee of an affiliate that does not 

engage in transmission transactions on 

the affiliated transmission provider’s 

transmission system. Furthermore, we 

note that § 358.1(a) and (b) generally 

limit the applicability of the Standards 

of Conduct to transmission providers 

that conduct transmission transactions 

with an affiliate that engages in 

marketing functions. 

17. In response to EEI, we confirm 

that an employee who makes sales of 

electric energy is performing a 

marketing function only if the employee 

works for a public utility transmission 

provider or a company affiliated with 

such a provider. 

18. We deny TAPS’ request that we 

eliminate the exemption for electric 

transmission providers that do not 

conduct transmission transactions with 

marketing affiliates. As described above, 

the Commission determined in Order 

No. 717 that ‘‘a public utility that does 

not engage in any transmission 

transactions with a marketing affiliate 

should be excluded from the Standards’ 

coverage’’ 35 because there is no 

evidence that this type of relationship 

triggers concerns that the public utility 

will engage in undue preference in favor 

of an affiliate. However, we clarify that 

a public utility transmission owner that 

is in a Commission-approved RTO or 

that is part of a Commission-approved 

independent system operator (ISO) and 

has access to non-public transmission 

function information remains subject to 

the Standards of Conduct unless it has 

obtained a waiver. 

B. Independent Functioning Rule 

19. In Order No. 717, we continued 

the policy of requiring transmission 

function employees of a transmission 

provider to function independently of 

the marketing function employees of the 

transmission provider. This policy is 

referred to as the Independent 

Functioning Rule. The relevant 

consideration for purposes of applying 

the Independent Functioning Rule is the 

function performed by the employee 

himself. To implement this approach, 

we defined several key terms, including 

‘‘transmission functions’’ (§ 358.3(h)), 

‘‘marketing functions’’ (§ 358.3(c)), and 

‘‘transmission function employees’’ 

(§ 358.3(i)). 

20. We defined ‘‘transmission 

functions’’ as ‘‘the planning, directing, 

organizing or carrying out of day-to-day 

transmission operations, including the 

granting and denying of transmission 

service requests.’’ 36 Through this 

definition, we intended to focus on 

‘‘those areas most susceptible to affiliate 

abuse,’’ which we identified as ‘‘shortterm real time operations, including 

those decisions made in advance of real 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54467 

37 Id. 

38 Id. P 46. 

39 Id. P 47. 

40 Id. P 48. 

41 Id. P 122. 

42Wisconsin Electric Nov. 17, 2008 Request for 

Clarification at 3; EEI at 7. 

43EEI at 7. 

44Wisconsin Electric at 4. 

45 Id. 

46 Id. at 5. 

47Order No. 717 at P 48. 

48We reiterate that the No Conduit Rule still 

applies and would prohibit the transmission 

provider from using personnel who balance load 

with energy or generating capacity as conduits for 

the disclosure of non-public transmission 

information to marketing function employees. 

49TAPS at 41. 

50 Id. 

51 Id. 

52 Id. at 42–43. 

53 Id. at 42–43 (citing 18 CFR 358.3(h)). 

54 18 CFR 258.3(h). 

time but directed at real time 

operations.’’ 37

21. With regard to the definition of 

transmission function employee, we 

agreed that field, maintenance and 

construction workers, as well as 

engineers and clerical workers, are not 

normally involved in the day-to-day 

operations of the transmission system. 

Thus, in general they would not fall 

within the scope of the definition of 

transmission function employee.38

However, we declined to add a further 

exclusion in the definition for de 

minimis involvement.39 We also found 

that the question of whether balancing 

authority personnel are included in the 

definition of transmission function 

employee depends on the 

circumstances. If the transmission 

provider also serves as a balancing 

authority and an employee’s duties 

encompass both transmission provider 

and balancing authority activities, the 

employee is a transmission function 

employee.40 We also provided several 

examples of what activities constitute 

the day-to-day operation of the 

transmission system. Included in these 

examples was balancing load with 

energy or capacity.41

1. Transmission Function 

22. Both Wisconsin Electric Power 

Company (Wisconsin Electric) and EEI 

request further clarification of whether 

personnel that balance load with energy 

or capacity are considered 

‘‘transmission function employees’’ 

under the Standards.42 EEI contends 

that economic decisions regarding the 

source of energy or capacity to be used 

to balance load may be made by 

marketing function employees and 

requests that the Commission 

affirmatively find that such activities are 

not transmission functions.43 Wisconsin 

Electric argues that the Commission’s 

statement in paragraph 122 of Order No. 

717 that balancing load with energy or 

capacity is among the day-to-day 

operations of the transmission system is 

inconsistent with the Commission’s 

statement in paragraph 48 of Order No. 

717 that excluded a balancing authority 

from the definition of a ‘‘transmission 

function employee’’ where the 

balancing authority and transmission 

functions are separate, and the 

employee performs no duties outside of 

those specific to a balancing authority 

employee.44

23. Wisconsin Electric requests that 

the Commission clarify that a balancing 

area employee who balances load with 

generation (including scheduled 

interchange) and performs no other 

transmission functions is not a 

‘‘transmission function employee’’ for 

purposes of the Standards.45 If the 

Commission intends that balancing load 

with energy or capacity is a 

transmission function, then Wisconsin 

Electric requests that the Commission 

clarify and identify which of the other 

balancing authority requirements under 

the NERC Reliability Standards are also 

transmission functions and which are 

not.46

Commission Determination 

24. We clarify that paragraph 122 of 

Order No. 717 incorrectly included 

‘‘balancing load with energy or 

capacity’’ as an example of what is 

included in the day-to-day operation of 

the transmission system. As we stated in 

Order No. 717, ‘‘[i]f the transmission 

provider also serves as a balancing 

authority, and an employee’s duties 

encompass both transmission provider 

and balancing authority activities, such 

an employee would be a transmission 

function employee (provided his or her 

duties are encompassed by the 

definition of transmission function 

employee). If, however, the two 

functions are separate, and the 

employee performs no duties outside of 

those specific to a balancing authority 

employee, he or she would not be 

considered a transmission function 

employee.’’ 47 Thus, personnel who 

balance load with energy or generating 

capacity are not considered 

‘‘transmission function employee[s]’’ 

under the Standards where the 

balancing authority and transmission 

functions are separate, and the 

employee does not perform duties or 

tasks of a transmission function 

employee.48

2. Transmission Function Employees 

25. TAPS is concerned that the 

transmission function definition places 

too much emphasis on short-term or 

real-time operations in an effort to 

exclude long-term planning employees 

from the transmission function and that 

this emphasis might be misconstrued.49

Specifically, TAPS is concerned that the 

short-term focus might be 

misinterpreted as limiting the 

Commission’s determination that 

employees engaged in the ‘‘granting and 

denying of transmission service 

requests’’ are transmission function 

employees.50 TAPS asks the 

Commission to clarify that personnel 

engaged in ‘‘granting or denying 

transmission service requests’’ are 

transmission function employees 

regardless of the duration of service 

requested.51

26. TAPS also asks the Commission to 

clarify that the transmission function 

includes not just the employees who 

post on the OASIS that a particular 

request has been granted or denied but, 

also, the employees who are responsible 

for performing the underlying system 

impact studies or otherwise determining 

whether the transmission system can 

support the requested services.52 TAPS 

asserts that engineers who make 

engineering decisions regarding the 

operation and maintenance of 

transmission facilities and engineers 

who determine whether transmission 

requests can be accommodated by the 

existing transmission system are clearly 

performing activities that are integral to 

a transmission provider’s administration 

of its tariff and are central to the 

‘‘planning, directing, organizing or 

carrying out of day-to-day transmission 

operations, including the granting and 

denying of transmission service 

requests.’’ 53

Commission Determination 

27. The Commission clarifies that 

personnel engaged in ‘‘granting or 

denying transmission service requests’’ 

are transmission function employees 

regardless of the duration of service 

requested. We find that granting or 

denying of transmission service requests 

is an integral part of ‘‘planning, 

directing, organizing or carrying out of 

day-to-day transmission operations.’’ 54

The Commission also clarifies that 

‘‘transmission function employee’’ 

includes an employee responsible for 

performing system impact studies or 

determining whether the transmission 

system can support the requested 

services as this type of employee is 

planning, directing, organizing or 


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54468 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

55 18 CFR 358.1(b). 56 18 CFR 358.1(a). 57 18 CFR 358.3(c)(1). 58Order No. 717, FERC Stats. & Regs. ¶ 31,280 at 

P 83. 59EEI at 14–15. 

60 Id. 

61 Id. 

62TAPS at 13–22. 

63 Id. at 22–26. 

64 Id. at 26–29. 

65 Id. at 33–36. 

66 Id. at 37–40. 

67TDUS Nov. 17, 2008 Request for Clarification 

or Rehearing at 2–3. 

68 Id. at 2. 

69 Id. 

70 Id. 

71 Id. at 3. 

72Preventing Undue Discrimination and 

Preference in Transmission Service, Order No. 890, 

FERC Stats. & Regs. ¶ 31,241, order on rehearing, 

Order No. 890–A, FERC Stats. & Regs. ¶ 31,261 

(2007), order on rehearing, Order No. 890–B, 123 

FERC ¶ 61,299 (2008) order on rehearing, Order No. 

890–C, 126 FERC ¶ 61,228 (2009). 

73Order No. 717, FERC Stats. & Regs. ¶ 31,280 at 

P 77. 

carrying out the day-to-day transmission 

operations. 

3. Marketing Functions 

28. In Order No. 717, we made the 

Standards applicable to ‘‘any public 

utility that owns, operates, or controls 

facilities used for the transmission of 

electric energy in interstate commerce 

and conducts transmission transactions 

with an affiliate that engages in 

marketing functions’’ 55 and also any 

interstate natural gas pipeline that 

transports gas for others and ‘‘conducts 

transmission transactions with an 

affiliate that engages in marketing 

functions.’’ 56

29. As noted above, we defined 

several terms in the order. Marketing 

functions include ‘‘in the case of public 

utilities and their affiliates, the sale for 

resale in interstate commerce, or the 

submission of offers to sell in interstate 

commerce, of * * * financial or 

physical transmission rights.’’ 57 We 

adopted the following definition of 

marketing functions for pipelines and 

their affiliates: ‘‘The sale for resale in 

interstate commerce, or the submission 

of offers to sell in interstate commerce, 

natural gas, subject to the following 

exclusions: (i) Bundled retail sales, (ii) 

Incidental purchases or sales of natural 

gas to operate interstate natural gas 

pipeline transmission facilities, (iii) 

Sales of natural gas solely from a seller’s 

own production, (iv) Sales of natural gas 

solely from a seller’s own gathering or 

processing facilities, and (v) Sales by an 

intrastate natural gas pipeline, by a 

Hinshaw pipeline exempt from the 

Natural Gas Act (NGA), or by a local 

distribution company making an onsystem sale.’’ 58 We also defined a 

marketing function employee as ‘‘an 

employee, contractor, consultant or 

agent of a transmission provider or of an 

affiliate of a transmission provider who 

actively and personally engages on a 

day-to-day basis in marketing 

functions.’’ 

a. Electric Industry 

30. EEI seeks clarification as to which 

sales of transmission rights are 

marketing functions, and which sales 

are transmission functions.59 EEI 

suggests that as a general rule, any sale 

of transmission service under an open 

access transmission service or a preOrder No. 888 grandfathered agreement 

be considered a transmission function, 

while any resale or reassignment of such 

service should be considered a 

marketing function.60 EEI also suggests 

that the rule must allow the limited 

sorts of ‘‘resale’’ that occur from a 

facility that has been leased, or when 

transmission is being provided on a 

back-to-back basis, to be treated as 

transmission functions, not marketing 

functions.61

31. TAPS requests that the 

Commission restore (1) the Order 889- 

era separation of transmission function 

employees from employees engaged in 

purchases for wholesale sales; 62 and (2) 

Order 2004’s required separation of 

transmission function personnel from 

employees making purchases for retail 

load.63 TAPS also contends that the 

Commission should require the 

separation of transmission function 

personnel from employees making 

bundled retail sales.64 TAPS argues that 

the marketing definition should be 

revised to include bids to buy products 

traded in organized markets, 

particularly financial transmission 

rights.65 Finally, TAPS requests 

reconsideration of the Commission’s 

decision to exempt from the marketing 

definition retail sales by a provider of 

last resort (POLR).66

32. Transmission Dependent Utility 

Systems (TDUS) asks that the 

Commission exclude from the definition 

of marketing functions sales by 

generation and transmission 

cooperatives to their members.67

According to TDUS, Order No. 717 

eliminated purchasing-related activities 

from coverage under the Standards.68

TDUS states that under the new 

Standards, employees of generation and 

transmission cooperatives will not be 

subject to the Standards due to their 

purchasing activities alone.69 However, 

TDUS believes that there is a question 

left as to whether such employees’ 

involvement in sales of power to 

members will subject them to the 

Standards and asserts that it should 

not.70 TDUS asserts that because the 

generation and transmission 

cooperative’s role with respect to its 

member load is nearly identical to that 

of a vertically integrated investor-owned 

utility’s role with respect to its retail 

load, employees of generation and 

transmission cooperatives should have 

the same access to generation and 

transmission function information as 

the employees of investor-owned 

utilities.71

Commission Determination 

33. We grant EEI’s request for 

clarification that any sale of 

transmission service under an open 

access transmission service or a preOrder No. 888 grandfathered agreement 

be considered a transmission function, 

while any resale or reassignment of such 

service be considered a marketing 

function. Under Order No. 890, a 

transmission customer may sell all or a 

portion of its transmission rights to an 

eligible customer (i.e., an assignee). 

When this type of transaction occurs, 

the transmission customer becomes a 

reseller and the assignee must sign a 

service agreement with the transmission 

provider. The transmission provider is 

obligated to credit or charge the reseller 

for any difference in price between the 

assignee’s agreement and the reseller’s 

original agreement.72 Thus, the 

transmission provider continues in the 

role of providing transmission service 

and makes the payments to both the 

reseller and its customer. However, the 

resale or reassignment between the 

reseller and the assignee is a marketing 

function. 

34. While we grant EEI’s requested 

clarification as discussed above, we 

reject its suggestion that limited sorts of 

‘‘resale’’ that occur from a facility being 

leased, or transmission that is provided 

on a back-to-back basis, be treated as 

transmission functions. We deny this 

clarification because EEI has failed to 

adequately support or explain its 

request. We note, however, that EEI 

appears to be describing a narrow set of 

circumstances that may be more suitable 

for a waiver request. 

35. We deny TAPS’ request for 

rehearing that the marketing function 

definition be amended to include 

purchases as well as sales. As we noted 

in Order No. 717, restricting the 

definition of marketing function to 

include only sales more closely matches 

the statutory prohibitions against undue 

preference.73 Specifically, sections 205 

and 206 of the Federal Power Act 

prohibit undue preference or advantage 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54469 

74 16 U.S.C. 824d(b) and 16 U.S.C. 824e(a) 

(emphasis added). 

75 15 U.S.C. 717c(b) and 15 U.S.C. 717d(a) 

(emphasis added). 

76Order No. 717, FERC Stats. & Regs. ¶ 31,280 at 

P 77 (footnote omitted). 

77We note that the courts have held that an 

agency may alter its past interpretation in light of 

reconsideration of relevant facts and its mandate. 

American Trucking Ass’n v. Atchison, Topeka & 

Santa Fe Ry., 387 U.S. 397, 416 (1967). See also 

Hatch v. FERC, 654 F.2d 825, 834 (D.C. Cir. 1981). 

See also New York v. FERC, 535 U.S. 1 at 28 (2002) 

(The Commission’s choice not to assert jurisdiction 

represents a statutorily permissible policy choice). 

78The term ‘‘bundled retail sales employees’’ 

means those employees of the public utility 

transmission provider or its affiliates who market or 

sell the bundled electric energy product (including 

generation, transmission, and distribution) 

delivered to the transmission provider’s firm and 

non-firm retail customers. Order No. 2004–A, FERC 

Stats. & Regs. ¶ 31,161 at P 119 n.80. 

79Promoting Wholesale Competition Through 

Open Access Non-Discriminatory Transmission 

Services by Public Utilities; Recovery of Stranded 

Costs by Public Utilities and Transmitting Utilities, 

Order No. 888, FERC Stats. & Regs. ¶ 31,036, 31,781 

(1996), order on reh’g, Order No. 888–A, FERC 

Stats. & Regs. ¶ 31,048 (1997), order on reh’g, Order 

No. 888–B, 81 FERC ¶ 61,248, order on reh’g, Order 

No. 888–C, 82 FERC ¶ 61,046 (1998), aff’d in 

relevant part sub nom. Transmission Access Policy 

Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), 

aff’d sub nom. New York v. FERC, 535 U.S. 1 

(2002). 

80 Id. 

81New York v. FERC, 535 U.S. 1 at 28. 

82TAPS at 39–40. 

83See Order No. 2004–A, FERC Stats. & Regs. 

¶ 31,161 at P 127. 

84See, e.g., Revision of Annual Charges Assessed 

to Public Utilities, 94 FERC ¶ 61,290, at 62,037 

(2001). We note that the Supreme Court has 

described ‘‘bundled’’ as meaning that consumers 

pay a single charge that includes both the cost of 

electric energy and the cost of its delivery. New 

York v. FERC, 535 U.S. 1, 5 (2002). 

85We note that even if the rates or prices for 

components are separately stated, or itemized, on 

the end users’ bills this does not render the POLR 

service ‘‘unbundled.’’ See, e.g., Northern Natural 

Gas Co., v. FERC, 929 F.2d 1261, 1273 (8th Cir. 

1991). (Stating a rate separately from the related 

jurisdictional rate does not ‘‘magically unbundle’’ 

the activity). 

86TAPS’ reliance on the few cases in which we 

denied a waiver request is misplaced. None of the 

denials were based on the risk of abuse being too 

great. For example, in Allegheny Power Service 

Corp., 85 FERC ¶ 61,390 (1998), Allegheny 

requested a waiver of the functional unbundling 

requirement with regard to employees who made 

wholesale purchases for unbundled retail sales. 

Thus, this decision does not constitute precedent 

regarding a request for a bundled retail sales waiver. 

See also, PECO, 89 FERC ¶ 61,014 (1999). (PECO’s 

Supply Acquisition unit performed unbundled 

retail merchant services and thus the Standards 

applied). 

87See, e.g., High Island Offshore System, 116 

FERC ¶ 61,047 (2006). 

to any person with respect to ‘‘any 

transmission or sale subject to the 

jurisdiction of the Commission 

* * *.’’ 74 Similarly, sections 4 and 5 of 

the Natural Gas Act prohibit undue 

preference with respect to ‘‘any 

transportation or sale of natural gas 

subject to the jurisdiction of the 

Commission * * *.’’ 75 Because the 

Commission’s authority to impose the 

Standards of Conduct to prevent undue 

preference is rooted in these sections, 

we find that TAPS’ request to expand 

the marketing function definition to 

include purchases to be inconsistent 

with our statutory authority. 

36. In response to the TAPS statement 

that excluding employees responsible 

for purchases from the reach of the 

Standards of Conduct alters the 

Commission’s approach in Order No. 

889, we note that in Order No. 717 the 

Commission found that the removal of 

purchases from the definition of 

marketing function ‘‘frees companies to 

conduct the informational exchanges 

necessary to engage in integrated 

resource planning, and eliminates the 

difficulties which might otherwise be 

experienced by executive personnel 

who have overall procurement 

responsibilities that include both 

transmission and marketing. At the 

same time, it preserves the protection 

against affiliate abuse, as it is those 

employees who are making wholesale 

sales of electricity, not purchases, who 

can improperly benefit from 

transmission function information 

obtained from the affiliated 

transmission provider.’’ 76 Given these 

findings and the Commission’s 

consideration of its more than decadelong experience implementing the Order 

No. 889 provisions, we reiterate that 

there is no need to include purchases in 

the marketing function definition as a 

means of preventing undue 

preference.77 For these same reasons, we 

also deny TAPS’ request that we require 

the separation of transmission function 

employees from those employees 

making purchases for retail load and its 

request that we include bids to buy 

products within the definition of 

marketing function. 

37. Similarly, we reject TAPS’ request 

that employees making bundled retail 

sales 78 be included in the definition of 

marketing function. In Order No. 888, 

the Commission stated that it had 

exclusive jurisdiction over the rates, 

terms and conditions of unbundled 

retail transmission in interstate 

commerce.79 However, the Commission 

declined to assert jurisdiction over 

bundled retail transmission, reasoning 

that ‘‘when transmission is sold at retail 

as part and parcel of the delivered 

product called electric energy, the 

transaction is a sale of electric energy at 

retail.’’ 80 The U.S. Supreme Court 

affirmed the Commission’s decision to 

assert jurisdiction over unbundled but 

not bundled retail transmission, finding 

that the Commission made a statutorily 

permissible choice.81 TAPS essentially 

is asking us to end this long-standing 

jurisdictional divide, at least with 

regard to the Standards. We decline to 

do so. 

38. We also deny TAPS’ request that 

we reconsider the decision to exempt 

retail sales by a POLR from the 

definition of marketing functions. TAPS 

asserts that POLR service constitutes 

unbundled retail sales.82 However, the 

Commission stated in Order No. 2004 

that POLR sales could be accorded 

treatment equivalent to that accorded to 

bundled retail sales.83 Bundled retail 

sales are sales where the power and 

transmission components associated 

with the sale of electric energy to retail 

customers are provided together in a 

single bundled package.84 The 

important distinction between 

unbundled and retail sales is that the 

generation component may be 

purchased separately in unbundled 

service.85 Under POLR service the 

generation offered can only be 

purchased through the regulated public 

utility as a part of the ‘‘bundled’’ 

package of transmission, distribution 

and generation. Generally, POLR service 

is offered in states that permit retail 

competition. POLR service is also 

generally state-mandated with either 

state-approved rates or a part of a stateapproved and regulated process for 

deriving the generation price. The POLR 

service is provided to retail customers 

on a default basis and POLR employees 

do not market POLR service. 

39. Previously, we declined to accord 

POLR service the same exemption as 

other bundled retail sales, opting 

instead to consider its status on a caseby-case basis.86 The Commission has 

granted past waivers based on the fact 

that POLR employees do not market 

POLR service, do not engage in 

competitive functions and do not 

schedule or reserve transmission 

service.87 This experience with waiver 

requests has led us to the conclusion 

that no justification exists for treating 

POLR sales differently than other 

bundled retail sales. Therefore, we will 

deny TAPS’ request for rehearing 

concerning POLR. 

40. Finally, as TDUS requests, we 

clarify that if an employee of a 

generation and transmission cooperative 

simply serves retail load and does not 

engage in activities included in the 

‘‘marketing functions’’ definition in 

§ 358.3, then this employee is not a 

‘‘marketing function employee.’’ 


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54470 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

88Order No. 717, FERC Stats. & Regs. ¶ 31,280 at 

P 91. 

89AGA Nov. 17, 2008 Request for Clarification or 

Rehearing at 8; Duke Nov. 17, 2008 Request for 

Rehearing or Clarification at 4; National Fuel Nov. 

17, 2008 Motion for Clarification or Rehearing or, 

in the Alternative, Request for Limited Waiver at 7– 

8; NYPSC Nov. 17, 2008 Request for Rehearing or 

Clarification at 3–4; and Southwest Gas at 9–10. 

90See, e.g., AGA Request at 4. 

91 64 FERC ¶ 61,192 (1993). 

92See, e.g., AGA at 9 (citing National Fuel Gas 

Supply Corp.). 

93See, e.g., id. at 11. 

94 Duke Request at 3. 

95Southwest Gas at 9–10. 

96 Id. at 11–12. Southwest Gas also states in its 

pleading that there is no evidence that regulated 

LDCs could abuse their relationship with an 

affiliated pipeline if the LDC sells gas outside its 

retail service area and none of the off-system gas is 

transported on an affiliated pipeline. Southwest Gas 

at 2. Southwest Gas argues that Order No. 717 

improperly expands the applicability criteria from 

those in effect under Order No. 497 to cover any 

transportation by a pipeline for an affiliate that 

engages in marketing functions even if none of 

those transactions involved transportation by the 

affiliate pipeline. Id. 

97National Fuel at 31. National Fuel also requests 

a waiver of the Standards as they may pertain to 

de minimis sales necessary to remain in balance. 

This waiver request is addressed infra. 

98NYPSC at 7. The NYPSC disputes the 

interpretation of National Fuel Gas Supply Corp., 

64 FERC ¶ 61,192 (1993), as the granting of a waiver 

request. However, if the Commission concludes that 

a waiver was granted in that proceeding, the NYPSC 

contends that the waiver should be continued. 

99AGA Request for Clarification or Rehearing at 

14 (quoting 18 CFR 358.3(c)(2)(v)). 

100 Id. at 14. 

101 Id. 

102Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 91. 

103 Id. 

104 64 FERC ¶ 61,192 (1993). 

105The change to include a local distribution 

company operating under section 7(f) of the Natural 

Gas Act in 18 CFR 358.3(c)(2)(v) is discussed infra. 

b. Natural Gas Industry 

41. We noted in Order No. 717 that if 

a local distribution company (LDC) does 

not conduct transmission transactions 

with an affiliated pipeline, its off-system 

sales on non-affiliated pipelines are 

irrelevant as far as the Standards are 

concerned.88 However, there may be 

situations where an affiliated LDC, an 

intrastate pipeline, and a Hinshaw 

pipeline could be subject to the 

Standards of Conduct, such as when one 

of these affiliates engages in off-system 

sales of gas that has been transported on 

the affiliated pipeline. In such a case, 

the pipeline and the affiliate (which is 

engaging in marketing functions) will be 

required to observe the Standards of 

Conduct by, among other things, having 

the marketing function employees 

function independently from the 

transmission function employees. 

(i) Off-System Sales by LDCs 

42. The American Gas Association 

(AGA), Duke Energy Corporation 

(Duke), National Fuel Gas Distribution 

Corporation and National Fuel Gas 

Supply Corporation (National Fuel), the 

New York Public Service Commission 

(NYPSC), and Southwest Gas 

Corporation (Southwest Gas) all ask the 

Commission to clarify that an LDC may 

make off-system sales on non-affiliated 

pipelines without being subject to the 

Standards.89 Specifically, the concern 

raised is whether an LDC that makes offsystem sales on non-affiliated pipelines 

would be subject to the Standards for 

those sales because it also conducts 

transmission transactions with an 

affiliated interstate pipeline for the 

purpose of making bundled retail sales 

or on-system sales.90 These parties all 

rely on Order No. 497 and National Fuel 

Gas Supply Corp.91 to support their 

contention that the Commission should 

find that the Standards do not apply in 

this instance. 92

43. The parties argue that failing to 

make this clarification will have 

effectively expanded the Standards 

beyond those adopted under Order No. 

497 to encompass all of an LDC’s offsystem sales for resale including those 

sales where the gas was not transported 

on the affiliated interstate pipeline.93 To 

resolve this matter, Duke suggests that 

the Commission either (1) revise the 

definition of ‘‘marketing function’’ in 

§ 358.3(c)(2) of the regulations to 

exempt off-system sales by an LDC that 

do not involve the use of transmission 

capacity of an affiliated transmission 

provider; or (2) revise the applicability 

language of § 358.1(a) to make clear that 

the Standards of Conduct do not apply 

to an interstate pipeline’s transportation 

of gas for an affiliate, if it ‘‘does not 

involve transportation of gas for the 

affiliate’s marketing function.’’ 94

44. Southwest Gas contends that both 

Order Nos. 497 and 690 excluded LDC 

sales from the definition of ‘‘marketing’’ 

if the gas was sold on-system to retail 

end-users, as well as if the gas was sold 

outside of its service territory as long as 

none of the gas sold off-system was also 

transported by an affiliated interstate 

pipeline.95 Southwest Gas states that an 

LDC’s sale of gas outside its retail 

service area in a transaction that does 

not involve the affiliated pipeline 

should not trigger the Standards nor 

should they be triggered if the LDC 

ships gas on an affiliated pipeline in 

other transactions for sale within the 

LDC’s retail service territory.96

45. If the Commission denies the 

request for clarification or rehearing, 

National Fuel requests a waiver of the 

Standards necessary for National Fuel 

Distribution Corporation to conduct offsystem sales that do not involve its 

affiliated pipeline.97 Similarly, the 

NYPSC seeks clarification that the 

waiver previously granted to National 

Fuel remains in effect pursuant to the 

Commission’s related determination 

that all existing waivers relating to the 

Standards remain in full force and 

effect.98

46. Finally, AGA states that in Order 

No. 717, the Commission exempted 

from the definition of ‘‘marketing 

functions’’ as applied to natural gas 

pipelines ‘‘sales by an intrastate natural 

gas pipeline, by a Hinshaw interstate 

pipeline exempt from the Natural Gas 

Act, or by a local distribution company 

making an on-system sale.’’ 99 AGA 

states that the comma placements in 

separating each entity suggests that only 

an LDC’s on-system sales are exempt 

and that all of a Hinshaw pipeline’s 

sales are exempt.100 AGA requests that 

the Commission clarify whether it 

intended to exempt all of a Hinshaw 

pipeline’s sales or only its on-system 

sales.101

Commission Determination 

47. In Order No. 717, the Commission 

stated that if a pipeline does not 

conduct transmission transactions with 

an affiliate that engages in marketing 

functions, it is not subject to the 

Standards under § 358.1(a).102 We 

further explained that if an LDC does 

not conduct transmission transactions 

with an affiliated interstate pipeline, its 

off-system sales on an unaffiliated 

pipeline are irrelevant insofar as the 

Standards are concerned.103

48. Consistent with National Fuel Gas 

Supply Corp.,104 we further clarify that 

an LDC making off-system sales of gas 

that has been transported on nonaffiliated pipelines is not subject to the 

Standards of Conduct if it conducts 

transmission transactions with an 

affiliated interstate pipeline for the 

purpose of making bundled retail sales 

or on-system sales. In light of this 

clarification we reject Duke Energy’s 

suggested amendments to the Standards. 

We also reject National Fuel’s request 

for a waiver of the Standards because it 

has been rendered moot. 

49. We agree with AGA that the 

comma placements separating each 

entity in the definition of ‘‘marketing 

functions’’ in § 358.3(c) creates 

confusion. The Commission clarifies 

that we intended to exempt all onsystem sales by an intrastate natural gas 

pipeline, by a Hinshaw interstate 

pipeline exempt from the NGA, or by a 

local distribution company and we will 

accordingly revise § 358.3(c)(2)(v).105


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106APGA Nov. 17, 2009 Request for Rehearing at 

4. 

107 Id. at 5. 

108 Id. at 6. 

109 Id. 

110Calypso Nov. 17, 2009 Request for 

Clarification or Rehearing at 4. 

111 Id. 

112 Id. at 5. 

113 Id. 

114 Id. at 7. 

115Order No. 497–A, FERC Stats. & Regs. ¶ 30,868 

at P 12 (footnotes omitted). 

116 Id. 

117Order No. 2004–A, FERC Stats. & Regs. 

¶ 31,161 at P 97. 

118 Id.; see also Order No. 2004–B, FERC Stats. & 

Regs. ¶ 31,166 at P 77. 

119The Commission has not found evidence of 

undue preference that was exclusively a result of 

sales of natural gas solely from a seller’s own 

production or its own gathering or processing 

facilities. 

120See, e.g., Dominion Resources, Inc., 108 FERC 

¶ 61,110 (2004) (Hackberry); The Williams 

Companies, Inc., 111 FERC ¶ 61,392 (2005); Idaho 

Power Co.,103 FERC ¶ 61,182 (2003); Cleco Corp., 

104 FERC ¶ 61,125 (2003); and Transcontinental 

Gas Pipe Line Corp., 102 FERC ¶ 61,302 (2003). 

(ii) Sales From Own Production 

50. The American Public Gas 

Association (APGA) objects to the 

Commission’s determination to exclude 

from the definition of ‘‘marketing 

functions’’ the sale of natural gas from 

a seller’s own production and from a 

seller’s own gathering or processing 

facilities.106 APGA states that there is no 

logical, legal or factual basis for 

including within the Standards 

affiliated sellers of third party gas, but 

excluding from the rule the pipeline 

itself and affiliated sellers where they 

are selling from their own 

production.107

51. APGA argues that because the 

Commission has adopted an employee 

functional approach, the available 

evidence of actual abuse between sales 

employees and affiliated transmission 

providers fully supports a rule requiring 

their separation.108 APGA states that 

while these cases may not have been 

sufficient under the corporate 

separation approach to the Standards 

under Order No. 2004 and that the court 

reviewed in National Fuel, under the 

employee functional approach, certain 

cases of abuse support the discrete 

proposition that all employees who 

actively and personally engage on a dayto-day basis in natural gas sales should 

be prohibited from obtaining non-public 

information about the day-to-day 

transmission operations of affiliated 

pipelines. APGA asserts that the origin 

of the natural gas involved should have 

no bearing on the issue whatsoever.109

52. Calypso U.S. Pipeline LLC and 

Calypso LNG LLC (Calypso) ask the 

Commission to further clarify the term 

‘‘seller’s own production’’ in 

§ 358.3(c)(3). Specifically, Calypso 

contends that the exemption should 

encompass foreign-sourced gas 

regardless of whether the transmission 

provider owns the mineral rights at the 

foreign wellhead or acquires ownership 

of the gas at the outlet of the 

liquefaction facility, or on board a 

liquefied natural gas (LNG) vessel, so 

long as it owns the gas when it is 

introduced into the transmission 

provider’s facilities as the only gas that 

the transmission provider is 

transporting.110 Calypso interprets the 

term ‘‘own production’’ to mean gas 

owned by the transmission provider’s 

marketing affiliate rather than gas that 

was owned when still in the ground or 

was extracted by the transmission 

provider (or its marketing affiliate).111

53. To the extent that the Commission 

intended to confine the exemption to 

foreign-sourced gas that was owned by 

the transmission provider’s marketing 

affiliate at the foreign wellhead or some 

other point upstream being introduced 

into the transmission provider’s 

facilities, then Calypso seeks rehearing 

on this point.112 Calypso asserts that 

when the only gas the transmission 

provider transports is owned by the 

transmission provider’s marketing 

affiliate, the transmission provider 

should be exempt from the requirement 

that its transmission function employees 

function independently from its 

marketing function employees. Calypso 

argues that this result would be the 

same as the case where the only gas 

flowing was the domestic production of 

the transmission provider.113

54. Calypso states that the key factor 

in applying this exemption is not 

ownership at the wellhead, but rather (i) 

the absence of someone against whom 

the transmission provider can 

discriminate, and (ii) the proposition 

that the Commission ‘‘cannot impede 

vertical integration between a pipeline 

and its affiliates without ‘adequate 

justification.’ ’’ 114

Commission Determination 

55. We deny APGA’s request for 

rehearing concerning the Commission’s 

determination to exclude from the 

definition of ‘‘marketing functions’’ the 

sale of natural gas from a seller’s own 

production and from a seller’s own 

gathering and processing facilities. In 

Order No. 497–A, the Commission 

excluded from the scope of the rule 

‘‘[p]roducers, gatherers or processors, 

acting in their traditional roles, that sell 

gas solely from their own production, 

gathering, or processing facilities.’’ 115 In 

excluding these sellers of gas from the 

scope of the rule, the Commission 

explained that these entities do not act 

within the scope of the term 

‘‘marketing’’ as it is used in the rule 

because these ‘‘entities are acting in the 

roles that their names imply’’ 116 rather 

than engaging in ‘‘marketing functions.’’ 

We do not see, nor has APGA 

demonstrated, how these entities’ roles 

have changed since Order No. 497 that 

would require the Commission to now 

conclude that they are engaging in 

marketing functions for the purposes of 

the Standards of Conduct. 

56. In Order No. 2004–A, the 

Commission also found that the roles of 

gatherers or processors did not support 

their inclusion as energy affiliates 

subject to the standards of conduct. 

Specifically, the Commission stated in 

Order No. 2004–A that if a gatherer or 

processor merely provides gathering or 

processing services, only purchases 

natural gas to supply operational needs, 

and does not engage in other 

transmission-related activities, then it is 

not an energy affiliate subject to the 

standards of conduct.117 Moreover, we 

found that ‘‘when gatherers and 

processors engage only in gathering and 

processing, they provide services to 

wholesale market participants but do 

not compete with them.’’ 118

57. We also do not agree with APGA 

that the adoption in Order No. 717 of an 

employee functional approach from a 

corporate functional approach dictates 

that we eliminate these exclusions from 

the definition of ‘‘marketing functions.’’ 

The adoption of the employee 

functional approach in Order No. 717 is 

simply a reversion to the employee 

functional approach in effect under 

Order No. 497. Over the Commission’s 

decades-long experience implementing 

standards of conduct, the Commission 

has not found a pattern of abuse 

concerning sales of natural gas solely 

from a seller’s own production or a 

seller’s own gathering and processing 

facilities that would necessitate a 

change to this exclusion to the 

‘‘marketing functions’’ definition, even 

under the employee functional 

approach.119 The Commission has 

addressed through its enforcement 

actions, including civil penalties, the 

few cases of sales personnel and affiliate 

transmission providers improperly 

sharing non-public transmission 

function information.120

58. Notwithstanding the fact that the 

Standards of Conduct do not govern the 

relationship between a transmission 

provider and producers, gatherers or 

processors, acting in their traditional 

roles, that sell gas solely from their own 


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121 15 U.S.C. 717b–1. 

122Hackberry LNG Terminal L.L.C., 101 FERC 

¶ 61,294 (2002), order issuing certificates and 

granting rehearing, 104 FERC ¶ 61,269 (2003). 

Some LNG terminals continue to allow open access 

service pursuant to Part 284. 

123See Hackberry, 101 FERC ¶ 61,294 at P 27. 

124See 15 U.S.C. 717b. 

125Southwest Gas at 5. 

126 Id. at 6. 

127 Id. at 8. 128 Id. at 9. 129Promotion of a More Efficient Capacity 

Release Market, Order No. 712, 73 FR 37058 (June 

30, 2008), FERC Stats. & Regs. ¶ 31,271 (2008), 

order on rehearing, Order No. 712–A, 73 FR 72692 

(Dec. 1, 2008), FERC Stats. & Regs. ¶ 31,284 (2008). 130Order No. 712–A, FERC Stats. & Regs. ¶ 31,284 

at P 68 and P 71. 131 Id. P 70. 132Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 97. 

133AGA at 13. As noted above, we defined 

marketing functions for pipelines and their affiliate 

as ‘‘the sale for resale in interstate commerce, or the 

submission of offers to sell in interstate commerce, 

of natural gas,’’ subject to several exclusions 

including an exclusion for incidental purchases or 

sales of natural gas to operate interstate natural gas 

pipeline transmission facilities. See Order No. 717, 

FERC Stats. & Regs. ¶ 31,280 at P 83. 

134AGA at 13. 

135National Fuel at 11–12. 

136 INGAA at 12. 

production, gathering, or processing 

facilities, we note that section 4 of the 

Natural Gas Act prohibits a pipeline 

from granting any undue preference or 

advantage to any person or subjecting 

any person to any undue prejudice or 

disadvantage.121 For all of the above 

reasons, we deny APGA’s request to 

change the ‘‘marketing functions’’ 

exclusions in § 358.3(c)(2). 

59. We grant Calypso’s request that 

we clarify the term ‘‘seller’s own 

production’’ in § 358.3(c)(3). In 

Hackberry, we adopted a light-handed 

regulatory approach to LNG 

terminals,122 viewing LNG import 

terminals as analogous to production 

facilities.123 This revised approach to 

LNG regulation was subsequently 

reflected in EPAct 2005.124 In light of 

our view that LNG import terminals are 

analogous to production facilities, we 

clarify that the exemption encompasses 

foreign sourced gas regardless of 

whether the seller owns the mineral 

rights at the foreign wellhead or 

acquires ownership on board an LNG 

vessel, so long as it owns the gas before 

it enters the transmission provider’s 

transmission facilities and the gas is the 

only gas the transmission provider is 

transporting. In this scenario, there is no 

one for the transmission provider to 

discriminate against. 

(iii) Asset Management Agreements 

60. Southwest Gas asserts that the 

Commission failed to address (1) the 

applicability of the Standards to 

pipelines affiliated with shippers 

releasing capacity to asset managers 

under asset management agreements, 

and (2) the question of whether NGA 

section 7(f) companies are within the 

scope of the LDC exemption.125

Southwest Gas seeks clarification that 

where a party releases capacity to an 

asset manager under an asset 

management agreement where there is 

also an assignment of gas supply, the 

releasing party under the asset 

management agreement does not engage 

in a marketing function and its affiliated 

pipelines are not subject to the 

Standards.126

61. Southwest Gas contends that even 

where a party to an asset management 

agreement assigns gas supply, there is 

no basis for the party’s participation in 

the asset management agreement to 

trigger the Standards for a pipeline 

affiliated with that releasing party.127

Southwest Gas further asserts that there 

is ‘‘no record evidence or a 

demonstrated theoretical threat to bring 

releasing parties under an asset 

management agreement and their 

affiliated pipelines within the scope of 

the Standards merely by virtue of their 

participation in an asset management 

agreement.’’ 128

Commission Determination 

62. In Order Nos. 712 and 712–A,129

the Commission revised its capacity 

release regulations to facilitate the use 

of asset management agreements. The 

Commission found that these 

agreements were in the public interest 

because they are beneficial to numerous 

market participants and to the market in 

general.130 In the asset management 

agreement context, the releasing shipper 

is not releasing unneeded capacity but 

capacity it needs to serve its own supply 

function. Releasing shippers are thus 

releasing capacity for the primary 

purpose of transferring the capacity to 

entities that they perceive as having 

greater skill and expertise in both 

purchasing low cost gas supplies and 

maximizing the value of the capacity 

when it is not needed to meet the 

releasing shipper’s gas supply needs. 

Essentially, asset management 

agreements entail a releasing shipper 

transferring capacity to a third party 

expert who will perform the functions 

that the releasing shipper would 

normally have to do itself, i.e. purchase 

gas supplies and releasing capacity or 

making bundled sales when the 

releasing shipper does not need the 

capacity to satisfy its own needs.131

63. In Order No. 717, we clarified that 

under the Independent Functioning 

Rule and the No Conduit Rule, it would 

be the employees of the asset manager 

acting as agents or contractors for the 

pipeline or LDC, who would qualify as 

marketing function employees after the 

asset management arrangement was 

concluded and not the employees of the 

releasing party.132 Therefore, we grant 

Southwest Gas’ request for clarification 

and find that the releasing shipper is not 

performing a marketing function when 

it assigns gas supply pursuant to an 

asset management agreement. However, 

if the specific asset management 

agreement leaves the releasing shipper 

any ability to conduct sales for resale or 

provides that the releasing shipper is to 

retain control of the transactions entered 

into by the asset manager, the releasing 

shipper would remain subject to the 

Independent Functioning Rule with 

regard to that specific agreement. 

(iv) Balancing 

64. In Order No. 717, the Commission 

exempted from the definition of 

marketing functions incidental 

purchases or sales of natural gas to 

operate interstate natural gas pipeline 

transmission facilities. AGA requests 

that the Commission clarify that an 

affiliate of an interstate pipeline is not 

engaged in ‘‘marketing functions’’ under 

§ 358.3(c)(2)(ii) to the extent that such 

affiliate makes incidental purchases or 

sales of natural gas to remain in balance 

under applicable pipeline tariffs.133

AGA believes that the scope of the 

exemption should not be limited to the 

pipeline itself because there is a 

counterparty (often a shipper) for each 

sale and purchase the pipeline makes to 

keep its system in balance.134 AGA 

contends that such purchases and sales 

do not present any significant 

opportunity for a pipeline to unduly 

discriminate in favor of an affiliate 

because the affiliate must follow the 

pipeline’s cash-out and balancing tariff 

provisions. 

65. Both National Fuel and INGAA 

request that the Commission clarify that 

de minimis off-system sales that are 

related to an LDC’s balancing 

requirements are not captured in the 

definition of marketing function.135

INGAA requests that the Commission 

either reestablish the separate 

exemption for sales by an affiliate that 

are made in order to remain in balance 

under a pipeline tariff or operational 

balancing agreement, or explicitly 

clarify that § 358.3(c)(2)(ii) covers such 

exemptions.136 In the alternative, 

National Fuel requests rehearing to 

revise the regulations to provide 

specifically that de minimis off-system 

sales that are in connection with the 

resolution of the LDC’s inadvertent 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54473 

137National Fuel at 25. 

138 INGAA at 13. 

139 Id. 

140Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 83. 

141Order No. 2004, FERC Stats. & Regs. ¶ 31,155 

at P 77. 

142Order No. 2004–A, FERC Stats. & Regs. 

¶ 31,161 at P 61. 

143MidAmerican Request for Rehearing or 

Clarification at 15. 

144Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 103. 

145MidAmerican at 15. 

146 Id. at 16. 

147Southwest Gas at 13. 

148 Id. 

149 Id. 

150Williams Nov. 17, 2009 Request for 

Clarification or Rehearing at 7. 

151Standards of Conduct for Transmission 

Providers, Order No. 690–A, order on clarifications 

and rehearing, FERC Stats. & Regs. ¶ 31,243, at P 

13 (2007). 

152Standards of Conduct for Transmission 

Providers, FERC Stats. & Regs. ¶ 32,630, at P 36 

(2008). 

153Williams at 8–9. 

154 Id. at 9. 

imbalances pursuant to pipeline tariffs, 

do not fit within the definition of 

‘‘marketing function.’’ 137

66. INGAA also requests clarification 

that the § 358.3(c)(2)(ii) incidental 

exemption applies to LNG terminals.138

INGAA states that the same general 

reasoning that justifies the operational 

sales exemption for pipelines and their 

affiliates should apply to LNG 

terminals.139

Commission Determination 

67. We clarify that an affiliate of an 

interstate pipeline is not engaged in 

‘‘marketing functions’’ under 

§ 358.3(c)(2)(ii) to the extent that such 

affiliate makes incidental purchases or 

sales of natural gas to remain in balance 

under applicable pipeline tariffs. We 

agree with AGA that these transactions 

do not present a significant opportunity 

for undue discrimination. This 

clarification is consistent with our 

finding in Order No. 717 that, in the 

case of interstate pipelines and their 

affiliates, incidental purchases or sales 

of natural gas to operate interstate 

natural gas pipeline transmission 

facilities do not constitute a marketing 

function.140 Furthermore, we note that 

under the previous regulations adopted 

in Order No. 2004, we found that an 

energy affiliate did not include an 

interstate pipeline that makes incidental 

purchases or sales of de minimis 

volumes of natural gas to remain in 

balance under applicable pipeline tariff 

requirements.141

68. In response to National Fuel and 

INGAA, the Commission clarifies that 

de minimis off-system sales that are 

related to an LDC’s balancing 

requirements are not included in the 

definition of marketing function. As we 

stated in Order No. 2004–A, ‘‘an LDC 

serving only its on-system customers 

must comply with pipeline balancing 

requirements and may be required to 

buy or sell de minimus [sic] quantities 

of natural gas in the wholesale 

commodity market, purchase short-term 

park and loan and storage services, buy 

or sell imbalances in the pipeline’s cash 

out mechanism, or take other steps to 

meet pipeline tariff balancing tolerances 

on a daily or monthly basis. LDCs with 

limited participation in wholesale 

markets to satisfy these needs will 

continue to be exempt from the 

definition of Energy Affiliate as long as 

they are not participating in the other 

activities described in § 358.3(d)’’ 142 i.e. 

marketing activities. While the 

Commission has eliminated the concept 

of an energy affiliate, the rationale and 

its application to marketing activities of 

LDCs remain unchanged. Accordingly, 

we clarify that the exclusion in 

§ 358.3(c)(2)(ii) includes de minimis offsystem sales that are related to an LDC’s 

balancing requirements under interstate 

pipeline tariffs. 

69. We deny INGAA’s request for 

clarification regarding LNG terminals 

and the ‘‘incidental exemption.’’ INGAA 

has not explained how an incidental 

exemption would be applied to an LNG 

facility. 

(v) Other 

70. MidAmerican asks the 

Commission to clarify that employees of 

an electric public utility purchasing and 

selling natural gas for generation or 

local distribution company functions 

are not marketing function employees of 

the electric public utility.143 The 

Commission addressed this issue in 

Order No. 717, finding that the question 

was rendered moot by the exclusion of 

purchases of gas from the definition of 

marketing function.144 However, 

MidAmerican states that gas acquisition 

at retail for generation usually involves 

incidental sales of unneeded gas supply 

and therefore, the Commission must 

address this issue directly.145

MidAmerican states that while an LDC 

employee may not be considered to 

engage in a marketing function at a 

pipeline if the LDC is excluded by 

§ 358.3(c)(2), there is no similar 

exemption of LDCs under the definition 

of the electric marketing function and 

there is no evidence to suggest that a gas 

acquisition employee is privy to electric 

transmission function information.146

71. Southwest Gas requests that the 

Commission clarify the phrase ‘‘the 

submission of offers to sell in interstate 

commerce’’ in the definition of natural 

gas marketing function activities.147

Southwest Gas explains that the 

submission of an offer sweeps within its 

scope not only sales of natural gas in 

interstate commerce but also activity 

between market participants prior to the 

actual sales agreement becoming 

effective. Southwest Gas believes that in 

application ‘‘submission of offers’’ is 

unclear.148 Southwest Gas requests 

clarification of the definition of 

‘‘marketing functions’’ to reflect only 

the sale of gas in interstate 

commerce.149

72. The Williams Companies, Inc. 

(Williams) request clarification that the 

exclusion in § 358.3(c)(2)(iii) for ‘‘sales 

of natural gas solely from a seller’s own 

production’’ will be interpreted 

consistent with the similar exclusion 

adopted in Order No. 497–A as 

including ‘‘situations in which a 

producer is selling gas that it owns or 

is selling gas of other interest owners in 

the same well and reservoir to the extent 

that the producer has contractual 

authority to sell such gas.’’ 150 Williams 

states that this clarification is consistent 

with the Commission’s intent, as 

expressed in Order No. 690–A, to ‘‘track 

the scope of the standards of conduct 

requirements for natural gas 

transmission providers in Order No. 

497’’ 151 and to carry forward the 

historical exclusions in Order No. 

717.152

73. Alternatively, should the 

Commission choose not to clarify the 

exclusion in § 358.3(c)(iii) as described 

above, Williams requests rehearing, and 

claims that the Commission has 

provided no rationale to support 

interpreting the exclusion in a manner 

differently from that which was in effect 

under Order No. 497–A.153 Williams 

argues that the Commission should, 

therefore, grant rehearing and provide 

that the exclusion in § 358.3(c)(2)(iii) 

includes sales of gas of other interest 

owners in the same well and reservoir 

to the extent that the producer has 

contractual authority to sell such gas.154

Commission Determination 

74. We deny MidAmerican’s request 

for clarification regarding electric public 

utility employees selling unneeded 

natural gas supply originally purchased 

for generation or local distribution 

company functions. MidAmerican asks 

that these employees not be considered 

marketing function employees. 

However, MidAmerican does not 

provide adequate support for the broad 

exemption requested. Moreover, 

MidAmerican does not explain the 


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54474 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

155Order No. 497–A, FERC Stats. & Regs. ¶ 30,868 

at 31,591 n.19. 

156 Id. at 31,591–2. 

157 Id. 

158Wisconsin Electric Nov. 17, 2009 Request for 

Clarification at 6. 

159 Id. at 7. 

160 Id. at 8. 

161EEI at 9–10. 

162 Id. 

163 Id. 

164Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 122. 

165See id. P 117. 

166Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 119. 

167MidAmerican at 14. 

168 Id. 

circumstances under which the 

exemption should apply. For example, 

MidAmerican does not explain how 

‘‘unneeded’’ should be defined. 

75. We deny the request for 

clarification by Southwest Gas to 

remove ‘‘the submission of offers to sell 

in interstate commerce’’ from the 

definition of natural gas marketing 

function activities so that it reflects only 

the sale of gas in interstate commerce. 

The submission of an offer to sell is an 

indication that a party intends to sell. 

As such, marketing function employees 

should not be in contact with 

transmission function employees once 

they have submitted offers to sell. 

76. The Commission grants the 

request for clarification by Williams and 

states that the exclusion in 

§ 358.3(c)(2)(iii) for ‘‘sales of natural gas 

solely from a seller’s own production’’ 

is consistent with the similar exclusion 

adopted in Order No. 497–A that 

includes ‘‘situations in which a 

producer is selling gas that it owns or 

is selling gas of other interest owners in 

the same well and reservoir to the extent 

that the producer has contractual 

authority to sell such gas.’’ 155 As we 

stated in Order No. 497–A, this does not 

mean that such entities can never be 

considered to be marketers of gas as the 

term is used in the Standards of 

Conduct. If a producer sells gas that was 

produced by another, it is acting as a 

marketer of the gas.156 Furthermore, a 

gatherer or processor that sells gas from 

facilities other than its own is a 

marketer.157

4. Marketing Function Employees 

77. Wisconsin Electric seeks 

clarification as to whether an employee 

in the legal, finance or regulatory 

division of a jurisdictional entity, whose 

intermittent day-to-day duties include 

the drafting and redrafting of non-price 

terms and conditions of, or exemptions 

to, umbrella agreements would be 

considered a ‘‘marketing function 

employee’’ under the standards.158

78. Wisconsin Electric asks the 

Commission to provide guidance with 

respect to which types of activities it 

considers to be ‘‘day-to-day’’ activities 

of a marketing function employee.159

Specifically, Wisconsin Electric requests 

that the Commission clarify whether 

individuals responsible for contract 

administration are ‘‘marketing function 

employees’’ under the rule and whether 

the preparation of monthly or annual 

requests for financial transmission 

rights and auction revenue rights 

constitutes ‘‘day-to-day’’ activities 

pursuant to the rule.160

79. EEI understands that an officer 

may disapprove a power sales contract 

without becoming a marketing function 

employee.161 However, EEI requests 

clarification as to whether the officer is 

permitted to explain why a contract is 

being disapproved.162 EEI argues that 

the ability to provide such overall 

feedback, which may effectively become 

general parameters for contract 

renegotiation, is important for efficient 

discharge of fiduciary duties and an 

important part of corporate 

governance.163

Commission Determination 

80. The Commission clarifies that an 

employee in the legal, finance or 

regulatory division of a jurisdictional 

entity, whose intermittent day-to-day 

duties include the drafting and 

redrafting of non-price terms and 

conditions of, or exemptions to, 

umbrella agreements is a ‘‘marketing 

function employee.’’ ‘‘Marketing 

functions’’ are not limited to only price 

terms and conditions of a contract, 

because non-price terms and conditions 

of a contract could contain information 

that an affiliate could use to its 

advantage. For example, delivery or hub 

locations in a contract are non-price 

terms that could be used to favor an 

affiliate. In addition, negotiated terms 

and conditions could affect the 

substantive rights of the parties. For this 

reason, we decline to make a generic 

finding to limit ‘‘marketing functions’’ 

to only price terms and conditions, but 

will consider waiver requests 

concerning an employee whose 

intermittent duties involve drafting nonprice terms and conditions. 

81. Wisconsin Electric requests that 

the Commission clarify whether 

individuals responsible for contract 

administration are ‘‘marketing function 

employees’’ under the rule. As stated in 

Order No. 717, the ‘‘development of 

general negotiating parameters for 

wholesale contracts’’ is not considered a 

‘‘day-to-day’’ activity that characterizes 

a transmission function or the duties of 

a marketing function employee.164

However, if the employee responsible 

for contract administration ‘‘regularly 

carries out or supervises * * * or is 

actively and personally engaged’’ in the 

negotiation of the contracts, then he or 

she is considered a marketing function 

employee.165 Because Wisconsin 

Electric has not provided any 

information about the duties of its 

employee responsible for contract 

administration, the Commission is 

unable to provide any further 

clarification. 

82. Wisconsin Electric also requests 

clarification concerning employees who 

prepare monthly or annual requests for 

financial transmission rights and 

auction revenue rights allocations to 

hedge the costs of serving load. The 

Commission states that if these 

employees are not actively and 

personally engaged in sales for resale of 

these products, but only involved in 

purchases through requests for financial 

transmission rights and auction revenue 

rights allocations, then they are not 

marketing function employees. 

83. EEI requests that we clarify that a 

supervisor is not engaged in a marketing 

function when that supervisor explains 

why a contract is being disapproved. As 

stated in Order No. 717, a supervisor is 

not engaged in the marketing function 

activity, if that supervisor is ‘‘simply 

signing off on a deal negotiated or 

proposed by someone else, and is not 

providing input into the 

negotiations.’’ 166 Similarly, we clarify 

that as long as the supervisor is not 

actively and personally engaged on a 

day-to-day basis in the contract 

negotiations and is simply providing an 

explanation concerning the disapproval 

of a contract, the supervisor is not 

engaged in a marketing function. 

However, in this scenario, the 

supervisor remains subject to the No 

Conduit Rule. 

5. Long-Range Planning, Procurement 

and Other Interactions 

84. MidAmerican asks the 

Commission to delete the 

communication bars and acknowledge 

that communications between 

marketing and transmission function 

employees are permitted, but must 

comply with the Standards.167

MidAmerican argues that the 

Commission has too narrowly described 

and too broadly restricted 

communications between transmission 

and marketing function employees.168

MidAmerican asserts that there are 

circumstances that may give rise to a 

need for business communication 


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169 Id. 

170EEI at 7. 

171 Id. at 8. 

172 Id. 

173 Id. 

174 Id. 

175 Id. at 9. 

176Western Utilities is comprised of Arizona 

Public Service Company, Avista Corporation, El 

Paso Electric Company, Idaho Power Company, 

Pacific Gas and Electric Company, PacifiCorp, 

Portland General Electric Company, Puget Sound 

Energy, Southern California Edison Company, and 

Tucson Electric Power Company. 

177Western Utilities at 5. INGAA supports this 

request for clarification. See INGAA August 4, 2009 

Answer at 4. 

178 Id. at 6. 

179 Id. at 8. These include award ceremonies, 

community service activities, training on 

leadership, EEO safety and ethics as well as utilitywide management meetings. INGAA states that this 

category of meetings would also apply to interstate 

pipelines. INGAA Answer at 4. 

180 Id. at 9. Essentially, Western Utilities’ question 

is whether these meetings and communications 

would be permitted under the exception regarding 

meetings ‘‘to maintain or restore operation of the 

transmission system or generating units.’’ See 18 

CFR 358.7(h)(2). 

181 Id. INGAA states that this category of meetings 

also would apply to interstate pipelines. INGAA 

Answer at 4. 

182 INGAA Answer at 7. 

183 Id. INGAA provided examples of the topics at 

such meetings including changes to business 

processes, an upcoming tariff filing or the status of 

on-going regulatory proceedings. 

184 Id. at 8. According to INGAA, this involves 

marketing the pipeline’s services, not gas 

marketing. These meetings would include 

discussions of the affiliate’s own contracts, sales 

presentations involving posted available capacity or 

expansion projects and services. 

185AGA Sept. 11, 2009 Supplemental Comments 

at 4. 

between these groups that would not in 

any way impute restricted non-public 

transmission function information such 

as human resources matters.169

85. EEI notes that there is a range of 

business-related activities that have 

nothing to do with transmission or 

marketing functions, such as meetings 

to discuss long term strategic corporate 

goals, benefit options, safety training, 

leadership development, and charity 

drives.170 EEI requests clarification that 

the scope of permitted interactions 

extends to these types of activities.171

EEI requests clarification that meetings 

that include transmission function and 

marketing function employees, but do 

not relate to transmission or marketing 

functions, are not barred under the 

Standards, but remain subject to the No 

Conduit Rule.172

86. EEI suggests that there are other 

areas that may relate tangentially to 

transmission or marketing functions for 

which meetings should be allowed.173

These include design and 

implementation of FERC or other 

compliance programs, and investigation 

and remediation of potential 

violations.174 Accordingly, EEI requests 

clarification that joint participation in 

public or quasi-public meetings is 

permitted, and that joint meetings 

regarding legal, regulatory, rate, 

compliance, enforcement, or other 

corporate or business matters are 

permitted, subject to the No Conduit 

Rule.175

87. Western Utilities Compliance 

Group (Western Utilities) 176 also seeks 

clarification that certain joint meetings 

and communications between marketing 

function employees and transmission 

function employees are permissible. 

Specifically, Western Utilities requests 

that we clarify that the Standards do not 

prohibit joint meetings and 

communications that do not violate the 

separation of functions requirement 

provided in 18 CFR 358.5(b) and that do 

not include any disclosure of nonpublic transmission function 

information to marketing function 

employees.177 Western Utilities 

contends that previously only joint 

meetings and communications about 

transmission related matters were 

prohibited and that it has established 

safeguards and procedures to ensure 

that no sharing of non-public 

transmission function information 

occurs at these meetings.178 According 

to Western Utilities, examples of the 

types of joint meetings and 

communications that should be 

permitted under the Standards include 

corporate meetings and training,179 the 

development process for reliability 

standards, ISO/RTO issues, disaster/ 

outage preparedness training,180 and 

joint participation in FERC and State 

regulatory and compliance functions.181

88. INGAA also discusses a variety of 

other examples of the types of joint 

meetings that should be permitted 

under the Standards, including affiliate 

participation in regulatory or industry 

proceedings or conferences; 182 pipeline 

sponsored meetings with customers; 183

and pipeline marketing.184 AGA also 

believes the Independent Functioning 

Rule of the Standards of Conduct should 

not be interpreted to preclude businessrelated meetings and discussions 

between transmission function 

employees and marketing function 

employees where non-public 

transmission function information will 

not be disclosed.185

Commission Determination 

89. The Commission clarifies that 

certain communications between 

marketing and transmission function 

employees are permitted. Specifically, 

the Commission clarifies that meetings 

including both transmission function 

and marketing function employees are 

not barred under the Standards of 

Conduct as long as the meetings do not 

relate to transmission or marketing 

functions. However, the No Conduit 

Rule still applies to these meetings. 

90. We decline to provide a generic 

clarification regarding EEI’s request that 

we allow meetings that ‘‘relate 

tangentially to transmission or 

marketing functions,’’ as this phrase is 

too nebulous for us to determine the 

extent to which non-public transmission 

function information might be disclosed 

at these meetings. However, we do 

clarify that so long as non-public 

transmission function information is not 

disclosed between transmission and 

marketing function employees as part of 

the development process for reliability 

standards, then joint meetings including 

both transmission and marketing 

function employees are permissible. 

Similarly, joint meetings including both 

transmission and marketing function 

employees to discuss RTO and ISO 

issues are permissible if non-public 

transmission function information is not 

disclosed between transmission and 

marketing function employees. 

Furthermore, we clarify that 

transmission function employees and 

marketing function employees may 

jointly participate in regulatory and 

compliance functions, including Federal 

Energy Regulatory Commission 

compliance activities, as long as these 

discussions do not include any 

disclosure of non-public transmission 

function information. 

91. However, we decline the Western 

Utilities’ request that we find that joint 

meetings for disaster/outage 

preparedness training fit within the 

permitted interactions ‘‘to maintain or 

restore operation of the transmission 

system or generating units, * * *’’ as 

described in § 358.7(h)(2). The 

exclusion described in § 358.7(h)(2) is 

limited to true emergency situations, 

rather than preparation for a disaster. 

However, we clarify that joint meetings 

including both transmission and 

marketing function employees for 

disaster/outage preparedness training 

are permissible as long as these 

employees do not share non-public 

transmission function information. 

Furthermore, the Commission will 

consider on a case-by-case basis 

requests for waiver of this prohibition 

against joint meetings for disaster/ 

outage preparedness training during 

which non-public transmission function 

information will be discussed. 


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54476 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

186See 18 U.S.C. 358.6. 

187Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 201–02. 

188Wisconsin Electric at 8. 

189 Id. 

190 Id. 

191 Id. 

192 Id. at 8–9. 

193 Id. at 9. 

194Order No. 717, FERC Stats. & Regs. ¶ 61,280 

at P 202. See also 18 CFR 358.3(d) (Marketing 

function employee includes an affiliate of a 

transmission provider). 

195Order No. 717, FERC Stats. & Regs. ¶ 61,280 

at P 205. 

196MidAmerican at 11. 

197 Id. at 12. 

198 INGAA at 9. 

199 Id. 

92. With regard to the examples of 

joint meetings suggested by INGAA, we 

reiterate that so long as non-public 

transmission function information is not 

disclosed between transmission and 

marketing function employees, the 

meetings are permissible. If INGAA or 

another entity has a concern about 

whether the meeting would run afoul of 

the Standards of Conduct, then the 

entity should apply for a waiver in 

advance. 

C. The No Conduit Rule 

93. In Order No. 717, we continued 

the no conduit prohibition of the then 

existing Standards, but modified the 

rule to encompass only marketing 

function employees. The No Conduit 

Rule prohibits employees of a 

transmission provider from disclosing 

non-public transmission function 

information to the transmission 

provider’s marketing function 

employees.186 Contractors, consultants, 

agents, marketing function employees of 

an affiliate are covered by this 

prohibition.187

94. Wisconsin Electric states that as 

currently written, the text of § 358.6 

prohibits the disclosure of non-public 

transmission function information to 

any of the transmission provider’s 

‘‘marketing function employees.’’ 188

Wisconsin Electric contends that the 

Standards of Conduct do not extend the 

prohibition to the ‘‘marketing function 

employees’’ of the transmission 

provider’s affiliate.189 Wisconsin 

Electric requests that the Commission 

clarify that this omission was 

intentional.190

95. Wisconsin Electric further states 

that it is unclear whether the 

Commission intended the No Conduit 

Rule in § 358.6(b) to require that the 

employees, contractors, consultants or 

agents of an affiliate of a transmission 

provider that is engaged in marketing 

functions be prohibited from disclosing 

non-public transmission function 

information to any of the transmission 

provider’s ‘‘marketing function 

employees’’ or whether the Commission 

intended only to proscribe the activities 

of employees, contractors, consultants 

or agents of an affiliate of a transmission 

provider that are engaged in 

transmission functions from disclosing 

non-public transmission function 

information to any of the transmission 

provider’s ‘‘marketing function 

employees.’’ 191

96. Additionally, Wisconsin Electric 

notes that § 358.8(b)(2) does not extend 

the requirement to distribute the written 

procedures in § 358.7(d) to the 

transmission provider’s affiliates.192

Wisconsin Electric requests clarification 

that the omission was intentional.193

Commission Determination 

97. Wisconsin Electric contends that 

as currently written, the No Conduit 

Rule does not prohibit employees of a 

transmission provider from disclosing 

non-public transmission function 

information to marketing function 

employees of a transmission provider’s 

affiliate. That is not the case. The No 

Conduit Rule prohibits disclosure of 

non-public transmission function 

information to any of the ‘‘marketing 

function employee[s]’’ of the 

transmission provider or its affiliate. As 

previously stated in Order No. 717, 

‘‘[m]arketing function employees are 

defined in § 358.3(d) to include 

employees, contractors, consultants or 

agents not only of the transmission 

provider, but also of an affiliate of the 

transmission provider.’’ 194 Therefore, 

the No Conduit Rule extends to 

‘‘marketing function employee[s]’’ of the 

transmission provider’s affiliate. For 

this same reason, Wisconsin Electric 

misunderstands the scope of the 

Implementation Requirements in 

§ 358.8(b)(2). Because ‘‘marketing 

function employee’’ includes an 

employee of ‘‘an affiliate of a 

transmission provider,’’ the 

Implementation Requirements in 

§ 358.8(b)(2) extend its distribution 

requirement to include marketing 

function employees of the transmission 

provider’s affiliate. 

98. Wisconsin Electric asks whether 

the Commission intended the No 

Conduit Rule to prohibit employees, 

contractors, consultants or agents of an 

affiliate of a transmission provider that 

are engaged in transmission functions 

from acting as a conduit to disclose nonpublic transmission function 

information to any of the transmission 

provider’s ‘‘marketing function 

employees.’’ Wisconsin Electric’s 

requested clarification to the No 

Conduit Rule would prohibit only 

transmission function employees from 

acting as a conduit. However, the No 

Conduit Rule generally states that a 

transmission provider is prohibited 

from using anyone as a conduit to 

disclose non-public transmission 

function information to the transmission 

provider’s marketing function 

employees. The No Conduit Rule is not 

simply limited to transmission function 

employees from acting as a conduit. 

Because Wisconsin Electric’s 

clarification request would defeat the 

purpose of the No Conduit Rule, we 

decline to change the meaning of this 

section. 

D. Transparency Rule 

99. In Order No. 717, we also adopted 

a Transparency Rule, the provisions of 

which are designed to alert interested 

persons and the Commission to 

potential acts of undue preference. The 

previously existing posting 

requirements were moved to this 

section.195

100. MidAmerican states that the 

rules should recognize that support 

employees may be employed by one 

transmission provider but assist other 

transmission providers in the same 

holding company without triggering a 

requirement for equal access to nonpublic transmission function 

information used in their jobs.196 While 

MidAmerican does not suggest revival 

of the concept of shared employees, it 

suggests a change to the language in 

§ 358.2(d) to clarify that transmission 

providers within the same holding 

company may have shared business 

functions that may exchange non-public 

transmission function information 

without the need for disclosure.197

101. INGAA urges the Commission to 

delete, or in the alternative, amend the 

‘‘General Principle’’ stated in § 358.2(d) 

that ‘‘[a] transmission provider must 

provide equal access to non-public 

transmission function information to all 

its transmission function customers, 

affiliated and non-affiliated, except in 

the case of confidential customer 

information or Critical Energy 

Infrastructure information’’ so that it 

conforms to the transparency rules 

under § 358.7.198 INGAA believes that 

§ 358.2(d) fails to recognize the 

disclosure exemption for specific 

requests for transmission service. 

INGAA points out that § 358.7(b) 

indicates that there is no obligation to 

disclose a marketing function 

employee’s specific request for 

transmission service.199 INGAA asserts 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54477 

200 Id. 

201National Fuel at 34. 

202 Id. at 33–34. 

203 Id. at 34. 

204 Id. 

205AGA at 16. 

206AGA at 15–16. 

207EEI at 13. 

208NGSA Nov. 17, 2008 Request for Clarification 

or Rehearing at 5. 

209 Id. at 6. 

210 Id. 

211 Id. at 8. 

212 Id. at 9. 

213 Id. 

214 Id. at 11. 

215 Id. at 12. 

216 Id. 

217 Id. 

218 Id. 

219 Id. at 15. 

220 Id. 

221 Id. at 16. 

222TAPS at 45. 

223 Id. at 46. 

224EEI at 18. 

that § 358.2(d) can be read broadly to 

suggest that all discussion between a 

transmission function employee and an 

employee of an affiliate who is not a 

marketing function employee must be 

disclosed if it is non-public 

transmission function information.200

102. National Fuel asks that the 

Commission remove or modify the new 

‘‘equal access’’ principle set out at 

§ 358.2(d) by limiting its scope to nonpublic transmission information 

provided to marketing function 

employees, and eliminating its 

confusing partial list of exceptions.201

National Fuel argues that because its 

applicability is not limited to nonpublic transmission function 

information provided to marketing 

function employees, § 358.2(d) is far 

broader than the Transparency Rule it 

attempts to summarize.202 National Fuel 

further asserts that another problem 

with § 358.2(d) is that, unlike the 

Standards of Conduct’s other principles, 

this principle includes specific 

exceptions, but in so doing implicitly 

excludes mention of other exceptions 

contained in the Transparency Rule.203

National Fuel contends that reference to 

specific regulatory exceptions in a 

statement of general principle should be 

unnecessary and reference to some but 

not all of the specific regulatory 

exceptions creates confusion in the 

regulations.204

103. AGA notes that pipelines are no 

longer required to post on the Internet 

within 24 hours each emergency that 

resulted in a deviation from the 

Standards, as § 358.4(a)(2) had required 

pipelines to do prior to Order No. 

717.205 However, AGA notes that 

§ 358.7(h) retains the requirement that a 

transmission provider make available to 

the Commission upon request the record 

of certain non-public transmission 

function information exchanges 

between transmission function 

employees and marketing function 

employees. AGA requests that the 

Commission clearly define a process by 

which interested persons may obtain 

from the Commission the records it 

receives from pipelines regarding 

emergency deviations from the 

Standards, and a process by which 

interested persons may request that the 

Commission seek such records for a 

pipeline.206

104. EEI requests clarification that the 

‘‘internet Web site’’ posting 

requirements can be met by posting 

information on publicly accessible 

portions of OASIS.207

105. The Natural Gas Supply 

Association (NGSA) argues that the 

Commission erred by removing the 

discount posting provision from the 

Standards as proposed in the NOPR.208

Specifically, NGSA contends that the 

reporting requirement under 18 CFR 

284.13(b)(1)(iii) is not sufficient to 

satisfy the transparency goals of the 

Standards.209 NGSA remarks that the 

Commission failed to notice the 

distinction between the timing of the 

posting required under 18 CFR 

284.13(b)(1)(iii) and that required under 

the Standards. The former provision 

requires postings no later than the first 

nomination under a transaction whereas 

the Standards would have required a 

contemporaneous posting had the 

language been adopted as proposed in 

the NOPR.210 NGSA requests that the 

Commission adopt the discount posting 

provisions in the Standards of Conduct 

as proposed in the NOPR in order to 

retain the contemporaneous timing of 

posting. 

106. NGSA also argues that the 

Commission erred by eliminating the 

requirement of posting tariff waivers for 

non-affiliates.211 NGSA argues that the 

complete elimination of the requirement 

to post when a pipeline waives its filed 

tariff in favor of a non-affiliate shields 

such actions from disclosure, thereby 

making it impossible for pipeline 

shippers to determine whether they are 

being treated comparably and not in an 

unduly discriminatory manner.212

NGSA requests that the Commission 

require that the waiver posting apply to 

all waivers granted and not only those 

granted to an affiliate.213

107. NGSA also contends that the 

Commission erred by eliminating all 

posting requirements with respect to 

exercises of discretion provided for in 

the pipeline’s tariff.214 NGSA argues 

that the simple fact that certain acts are 

permitted under a pipeline’s tariff is not 

sufficient reason to eliminate posting 

requirements because exercises of 

discretion can still result in 

discriminatory behavior.215 NGSA notes 

that discounting rates is an act of 

discretion that is nonetheless subject to 

posting because it allows others to 

monitor whether they are being treated 

similarly or not.216 NGSA claims that 

there is no reason for the Commission 

to treat other acts of discretion any 

differently.217 NGSA asserts that the 

Commission should adopt a rule of 

thumb whereby a pipeline would post 

individual acts of discretion that are not 

generic in application, which are not 

available to all shippers and that cannot 

be denied when requested.218

108. NGSA requests that the 

Commission clarify that (1) a marketing 

function employee who believes that he 

may have received non-public 

transmission function information must 

notify the transmission provider 

regardless of how such information was 

obtained and (2) if the transmission 

provider determines that the 

information disclosed to the marketing 

function employee was, in fact, a 

violation, it must post the disclosed 

information.219 NGSA states that Order 

No. 717 eliminates the proposal for 

transmission providers to post nonpublic information disclosed to a 

marketing affiliate by a third party.220

NGSA contends that the Commission 

went from proposing to bar marketing 

function employees from receiving nonpublic transmission function 

information from any source, and 

requiring posting of such information if 

received, to a final rule that eliminates 

both of these requirements and requests 

the clarification as a middle ground.221

109. TAPS contends that the 

Commission should require 

transmission providers to identify their 

marketing function employees by name, 

job title and description, and position in 

the chain of command on their 

websites.222 TAPS argues that this 

requirement would facilitate monitoring 

of compliance with the Independent 

Functioning Rule and help employees 

comply with the No Conduit Rule by 

providing a centralized and 

authoritative list of the employees to 

whom employees may not provide nonpublic transmission function 

information.223

110. EEI requests clarification that 

transmission providers are not required 

to post the names of transmission 

function employees on the Internet.224


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54478 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

225 Id. 

226EEI at 17. 

227EEI at 17. 

228National Fuel at 36–37. 

229 Id. 230NOPR, FERC Stats. & Regs. ¶ 32,630 at P 33. 

231 Id. 

232Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 247. 

233 Id. P 214. 

EEI states that the regulatory text makes 

no mention of posting of names, but 

paragraph 246 of Order No. 717 does 

make reference to ‘‘section 358.7(f)(1) 

covering the posting of job titles and 

names of transmission function 

employees.’’ 225

111. EEI notes that Order No. 717 

retains the concept that an ‘‘affiliate’’ 

can include a ‘‘functional unit’’ of a 

transmission provider and that the rules 

also require that a transmission provider 

maintain its books of account and 

records separately from its affiliates that 

employ or retain marketing function 

employees.226 EEI requests clarification 

that a ‘‘functional unit’’ of a 

transmission provider that performs 

marketing functions is not required to 

keep its books separately from those of 

the transmission provider.227

112. National Fuel contends that the 

language in § 358.7(b) regarding the 

transaction specific exemption is 

unduly narrow and should be 

refined.228 National Fuel argues that the 

regulation should encompass 

communications related to 

transportation agreements (not merely 

service requests) and those concerning 

requests for interconnections and new 

infrastructure.229

Commission Determination 

113. We grant the clarification 

requested by MidAmerican to clarify 

one of the General Principles in 

§ 358.2(d) so that it is consistent with 

other sections of part 358. Specifically, 

we clarify that transmission providers 

may allow their transmission function 

employees to exchange non-public 

transmission function information to 

non-marketing function employees 

without the need for disclosure. While 

we do not revive the concept of shared 

employees, we agree with MidAmerican 

that the language in § 358.2(d) needs to 

be clarified so as not to imply that 

transmission providers would have to 

provide equal access to non-public 

transmission function information to all 

customers following disclosure of nonpublic transmission function 

information to non-marketing function 

employees. For example, if a unit of one 

transmission provider provides 

information technology support for 

other transmission providers in a 

holding company system, these nonmarketing function employees may 

become privy to non-public 

transmission function information. 

However, we note that these employees 

remain obligated to abide by the No 

Conduit Rule. We will revise the 

language in § 358.2(d) to reflect this 

clarification. 

114. The Commission agrees with 

INGAA and National Fuel that the 

‘‘General Principle’’ in § 358.2(d) does 

not identify the disclosure exemption 

for specific requests for transmission 

service under § 358.7. While we agree 

with National Fuel that § 358.2(d) 

applies to non-public information 

provided to marketing function 

employees, it was not the Commission’s 

intention to have the ‘‘General 

Principle’’ describe all exemptions more 

fully described in subsequent sections 

of the Standards of Conduct. However, 

to alleviate any confusion surrounding 

the scope of the ‘‘General Principle,’’ we 

will revise the language in § 358.2(a), 

§ 358.2(b), § 358.2(c), and § 358.2(d) as 

noted herein. 

115. We deny AGA’s request that the 

Commission define a process by which 

interested persons may obtain from the 

Commission the records it receives from 

pipelines regarding emergency 

deviations from the Standards, and a 

process by which interested persons 

may request that the Commission seek 

such records for a pipeline. Under 

§ 358.7(h)(1), a transmission provider’s 

transmission function employees are 

allowed to exchange certain non-public 

transmission function information with 

marketing function employees as 

necessary to maintain or restore 

operation of the transmission system 

and according to the requirements in 

§ 358.7(h)(2) without making a 

contemporaneous record of the 

exchange during emergency situations. 

For these emergency situations, a record 

must be made as soon as practicable 

following the emergency and must be 

made available to the Commission upon 

request. 

116. The Commission has never 

required the information exchanged 

under this emergency exception be 

made publicly available and declines to 

create such a process here or to create 

a process for an entity to ask the 

Commission to exercise its discretion in 

requesting such records. The 

Independent Functioning Rule in former 

§ 358.4(a)(2) only required posting of a 

notice of an emergency, not posting of 

any information exchanged. As we 

stated in the NOPR with respect to 

employee interactions regarding 

reliability functions, ‘‘it [is] the first 

order of business on the part of a 

transmission provider to ensure 

reliability of operations.’’ 230 We 

therefore provided this exception to the 

Independent Functioning Rule to ensure 

that an entity can focus on responding 

to the emergency without concern for 

contemporaneous recordkeeping.231

117. We grant EEI’s request and 

provide confirmation for purposes of 

compliance with the Internet posting 

requirements under the Standards of 

Conduct that it is acceptable to post 

information on a publicly accessible 

portion of OASIS that can be reached 

from a transmission provider’s Web site 

by Internet link. As we noted in Order 

No. 717, some transmission owners who 

are members of RTOs or ISOs may not 

have their own OASIS 232 and this 

clarification ensures that information 

will be accessible to all interested 

entities. 

118. The Commission denies NGSA’s 

request to adopt the discount posting 

provisions in the Standards of Conduct 

as proposed in the NOPR. Posting no 

later than the first nomination is 

consistent with how all other shippers 

are treated and provides the necessary 

transparency. 

119. We deny NGSA’s request to 

require that the waiver posting 

requirement apply to all waivers granted 

and not only those granted to an 

affiliate. Section 284.13(b)(1)(viii) 

already requires posting of all instances 

where a transportation contract deviates 

from the pipeline’s tariff, and the 

Standards of Conduct are not intended 

to be duplicative of the panoply of 

pipeline-specific posting requirements. 

Rather, the gravamen of the abuse 

targeted by the Standards is undue 

preference to affiliates. And, as Order 

No. 717 stated, a blanket requirement to 

post all waivers and exercises of 

discretion goes beyond what is needed 

to alert customers and others to possible 

acts of undue discrimination or 

preferences in favor of an affiliate.233

Furthermore, we note that if a tariff does 

not permit a particular waiver, a 

pipeline must come to the Commission 

to request a waiver, which would 

provide notice of the request. If the tariff 

gives the pipeline discretion to waive 

provisions, then the Commission would 

have already considered whether notice 

was necessary for that particular waiver 

provision after the pipeline first 

proposed such tariff language. In many 

cases such tariff provisions require the 

pipeline to provide some sort of notice. 

Because NGSA has not shown a need for 

a blanket posting requirement 

applicable to all tariff waivers granted to 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54479 

234See, e.g., Norstar Operating LLC. v. Columbia 

Gas Transmission Corp., 118 FERC ¶ 61,221, at P 

147 (2007) (tariff requires posting of waiver of gas 

quality provision). 

235Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 216. 

236 Id. P 200–01. 

237 Id. P 236. 

238 Id. P 306. 

239EEI at 1–2. 

240Western Utilities at 12. See also EEI at 6. 

241EEI at 5 (citing 18 CFR 358.7(h)(1)). 

242 Id. (citing 18 CFR 358.7(h)(2)). 

non-affiliates, we decline to grant 

NGSA’s request for rehearing.234

120. The Commission denies NGSA’s 

request to adopt a rule of thumb 

whereby a pipeline would post 

individual acts of discretion that are not 

generic in application, which are not 

available to all shippers and that cannot 

be denied when requested. As we stated 

in support of our determination in 

Order No. 717, an act of discretion 

occurs when the specific tariff provision 

involves an exercise of judgment on the 

part of the transmission provider, e.g., 

which type of credit is acceptable. 

When a pipeline submits a specific tariff 

provision that allows the pipeline to 

exercise discretion to the Commission 

for review and approval, the pipeline 

also serves copies of the filing on its 

customers. The Commission also 

provides notice of the filing and the 

opportunity for comments, as such, the 

Commission considers customers to 

have had notice that the pipeline could 

exercise discretion under that particular 

tariff provision. Transmission providers 

exercise their discretion and make 

judgment calls on an ongoing basis and 

recording all of these matters would 

place a substantial administrative 

burden on them when the customers 

have already had notice that the 

pipeline can exercise such discretion for 

a specific tariff provision.235

Furthermore, audits would reveal acts of 

discriminatory discounting. 

121. The Commission denies NGSA’s 

request for clarification that marketing 

function employees be required to 

report any disclosure of non-public 

transmission function information to the 

transmission provider. The No Conduit 

Rule will continue to prohibit a 

transmission provider from using 

anyone as a conduit for disclosure of 

non-public transmission function 

information to a marketing function 

employee including an employee, 

contractor, consultant or agent of an 

affiliate of a transmission provider that 

is engaged in marketing functions. As 

we stated in Order No. 717, we 

eliminated the prohibition in proposed 

section 358.6(a)(2), which would have 

prohibited marketing function 

employees from receiving non-public 

transmission function information from 

any source because of the difficulties in 

determining whether a marketing 

function employee may have willingly 

and knowingly or inadvertently 

received such information.236 However, 

we reiterate, as we said in Order No. 

717, that ‘‘if a transmission provider 

uses anyone as a conduit for improper 

disclosures, such an event would be 

considered an improper disclosure and 

should be posted.’’ 237 We also noted in 

Order No. 717 in discussing Standards 

of Conduct training that transmission 

function employees and marketing 

function employees are the two core 

categories of employees that should be 

most cognizant of the rules. Although 

we deleted the prohibition against 

marketing function employees receiving 

transmission function information due 

to the possibility such receipt could be 

inadvertent, ‘‘it is expected that if 

someone attempted to pass such 

information to a marketing function 

employee, the marketing function 

employee would not only refuse it but 

would report the individual to the 

company’s chief compliance officer or 

other appropriate individual.’’ 238

122. The Commission denies TAPS’ 

request that we require transmission 

providers to identify their marketing 

function employees by name, job title 

and description, and position in the 

chain of command on their Web sites. 

Specifically, we find no basis for TAPS’ 

contention that names of marketing 

function employees and their position 

in the chain of command are necessary 

for either monitoring a transmission 

provider’s compliance with the 

Independent Functioning Rule or 

facilitating employee compliance with 

the No Conduit Rule. Based on our past 

experience, we find that a listing of job 

title and description is sufficient for 

Standards of Conduct compliance. 

Furthermore, any benefit that would 

result from a listing of names and an 

explanation of the chain of command 

would be marginal at best. 

123. We grant EEI’s clarification 

request with regard to posting of names 

of transmission function employees on 

the Internet. We clarify that 

transmission providers are not required 

to post the names of transmission 

function employees on the Internet. 

Order No. 717 incorrectly mentioned 

‘‘names’’ in explaining the requirement 

in § 358.7(f)(1) in P 246. 

124. We will also grant EEI’s request 

and clarify that a ‘‘functional unit’’ of a 

transmission provider that performs 

marketing functions is not required to 

keep its books separately from those of 

the transmission provider. However, we 

note that the No Conduit Rule prohibits 

a transmission provider from allowing 

non-public transmission function 

information to be disclosed to marketing 

function employees through a joint set 

of books and records. 

125. The Commission denies National 

Fuel’s request to revise § 358.7(b) to 

encompass communications related to 

transportation agreements and those 

concerning requests for 

interconnections and new 

infrastructure. However, we clarify that 

the transaction specific exemption is not 

limited to communications concerning 

requests for transmission service. The 

transaction specific exemption includes 

communications related to 

transportation agreements, specific 

interconnections and new infrastructure 

needed for the specific request. 

E. Other Definitions—Transmission 

Function Information 

126. EEI seeks clarification that 

information needed to make economic 

decisions affecting generation dispatch, 

such as unit commitment, purchase and 

sale decisions, should not be classified 

as non-public transmission function 

information and is thus not subject to 

the recordation requirement in 18 CFR 

358.7(h).239 Western Utilities agrees 

with EEI’s contention that information 

related to generation dispatch should 

not be considered non-public 

transmission function information.240

Western Utilities argues that this 

exception should be expanded to 

include unit commitment. 

127. EEI notes that the regulatory text 

adopted by Order No. 717 provides that 

‘‘a transmission provider’s transmission 

function employees and marketing 

function employees may exchange 

certain non-public transmission 

function information * * * in which 

case the transmission provider must 

make and retain a contemporaneous 

record of all such exchanges except in 

emergency circumstances’’ and 

therefore by its terms applies only to 

exchanges of non-public transmission 

function information.241 EEI further 

states that the types of information that 

may be exchanged subject to this 

recordation process include 

‘‘[i]nformation necessary to maintain or 

restore operation of the transmission 

system or generating units, or that may 

affect the dispatch of generating 

units.’’ 242 EEI notes that the confusion 

surrounds whether the new exclusion, 

and its recordation process, is intended 

to apply to all information used in 


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54480 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

243 Id. at 5. 244 Id. at 6. 245 Id. 246Western Utilities at 8. 247MidAmerican at 16. 248MidAmerican at 16–17. 249EEI at 6. 250 Id. 

251 Id. at 16. 252 Id. 253EEI at 16. 

generation dispatch.243 EEI requests 

clarification concerning whether 

information about a company’s own 

generation and load, such as the type of 

information discussed in Indianapolis 

Power & Light Co., 90 FERC ¶ 61,174 at 

61, 575–76 and Indianapolis Power & 

Light Co., 92 FERC ¶ 61,002 at 61,003, 

may be provided to marketing function 

employees without being subject to the 

recordation requirement.244

128. EEI also requests clarification 

that the other categories of information 

identified in § 358.7(h)(2)—i.e., 

information pertaining to compliance 

with Reliability Standards and 

information necessary to maintain or 

restore operation of the transmission 

system or generating units—are not per 

se deemed transmission function 

information subject to the recordation 

requirement.245 Western Utilities also 

requests clarification of this subsection, 

arguing that § 358.7(h)(2)(i) creates two 

types of information subject to the 

exclusion, information pertaining to 

compliance with Reliability Standards 

as well as information necessary to 

maintain or restore operations.246

Similarly, MidAmerican requests that 

the Commission clarify that not all 

information involving reliability and 

generation dispatch is non-public 

transmission function information.247

For example, MidAmerican notes that 

while unit economics or rail outage may 

affect the dispatch of generating units, 

this type of information does not fall 

within the scope of non-public 

transmission function information.248

129. EEI also requests further 

specificity on the content required for 

records for purposes of ensuring 

compliance with the recordation 

requirement.249 EEI believes that a 

record of the names of employees 

participating, the date, time, duration, 

and subject matters discussed should be 

sufficient and asks the Commission to 

confirm this interpretation.250

130. EEI requests clarification 

regarding the treatment of information 

that is not close in time to current dayto-day transmission operations.251

Specifically, EEI requests clarification as 

to (i) whether information that was 

transmission function information in 

real-time is no longer transmission 

function information when the events in 

question have passed, and if so, how 

much time should pass before 

information is no longer regarded as 

transmission function information, and 

(ii) whether information about future 

occurrences, such as a transmission 

outage planned thirteen months in the 

future, is transmission function 

information, and again, where the line 

is drawn.252

Commission Determination 

131. We clarify for EEI that certain 

types of information about a company’s 

own generation, load, and generation 

dispatch are not subject to the 

recordation requirement in § 358.7(h). 

Section 358.3(j) defines ‘‘transmission 

function information’’ as ‘‘information 

relating to transmission functions.’’ 

Section 358.3(h) defines ‘‘transmission 

function’’ as ‘‘the planning, directing, 

organizing, or carrying out of day-to-day 

transmission operations, including the 

granting and denying of transmission 

service requests.’’ To the extent that 

information concerning a company’s 

own generation, load, and generation 

dispatch is not ‘‘transmission function 

information’’ as defined in § 358.3(j), 

then this information may be provided 

to marketing function employees 

without being subject to the recordation 

requirement. 

132. We grant EEI’s clarification 

request and clarify that the other 

categories of information identified in 

§ 358.7(h)(2) are not per se transmission 

function information subject to the 

recordation requirement, but could be if 

the information falls within the 

definition of transmission function 

information in § 358.3. In response to 

EEI and Western Utilities, we also 

clarify that information related to unit 

commitment is not ‘‘non-public 

transmission function information’’ per 

se. However, should transmission 

function employees inadvertently 

provide ‘‘non-public transmission 

function information’’ to the marketing 

function employees, as transmission 

function employees work with 

marketing function employees to 

develop the unit commitment and 

dispatch plan, we remind transmission 

providers that § 358.7(h) would require 

recordation of this inadvertent 

disclosure. 

133. In response to Western Utilities’ 

request regarding information subject to 

the exclusion in § 358.7(h)(2), we clarify 

that the ‘‘and’’ is intended to mean that 

there are two types of information 

subject to the exclusion. The regulatory 

text in § 358.7(h)(2) is simply a list. 

134. We grant EEI’s request for more 

specificity on the content required for 

records for purposes of ensuring 

compliance with the recordation 

requirement. We agree that names, date, 

time, duration, and subject matter are 

sufficient content for purposes of the 

records. When recording the subject 

matter, transmission providers should 

record details that are clear enough to 

allow the Commission to determine 

what non-public information was 

exchanged and why this exchange of 

information was necessary. 

135. We grant EEI’s clarification 

request in part and deny it in part 

regarding the treatment of information 

that is not close in time to current dayto-day transmission operations, whether 

the events are past or future. Given the 

differences in how various entities 

operate, we decline to create a general 

rule regarding the staleness of nonpublic transmission function 

information. Individual waivers may be 

sought from the Commission for those 

instances in which an entity desires to 

share non-public transmission function 

information otherwise prohibited by the 

Standards of Conduct. However, we 

clarify that information about a planned 

transmission outage is always 

transmission function information no 

matter how far in the future the planned 

transmission outage will occur. 

136. The Commission clarifies that 

not all generation dispatch and 

reliability information is non-public 

transmission function information. 

MidAmerican states that unit economics 

or rail outage may affect the dispatch of 

generating units, but that this type of 

information does not fall within the 

scope of non-public transmission 

function information. We agree with its 

statement and so clarify. 

F. Training Requirements 

137. EEI states that if read literally, 

the training requirements could suggest 

that all supervisory employees within 

the company require training. EEI 

requests clarification as to whether the 

training requirements apply to all 

supervisory employees within the 

company or just those supervisors who 

are likely to become privy to 

transmission function information 

themselves or who supervise the other 

employees subject to the Standards.253

138. MidAmerican believes that the 

requirements in § 358.8(b)(2) are 

adequate to ensure that employees with 

the greatest potential to provide undue 

preference to marketing function 

personnel have received information 

and training on the Standards. 

MidAmerican argues that § 358.8(b)(1) is 

unnecessary and inconsistent with 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 54481 

254MidAmerican at 13–14. 

255 Id. at 13. 

256 Id. 

257Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 309 (emphasis added). 

258Western Utilities at 14. 

259Order No. 717, FERC Stats. & Regs. ¶ 31,280 

at P 307. 

260EEI at 18. 

261 Id. at 17. 

262 Id. 

263EPSA at 1–2. 

264 Id. at 2. 

265 Id. 

266Southwest Gas at 12. 

267 Id. 

268Standards for Business Practices and 

Communication Protocols for Public Utilities, FERC 

Stats. & Regs. ¶ 32,640, at P 16 (2009). 

§ 358.8(2).254 MidAmerican states that 

by using the term ‘‘affiliates’’ in 

§ 358.8(b)(1), the Commission appears to 

be requiring transmission providers to 

somehow provide Standards 

information to all of their affiliates’ 

employees, including, potentially, nonenergy companies, foreign companies 

and companies that would not have any 

understanding of the Commission.255

MidAmerican also argues that this 

obligation is inconsistent with 

§ 358.8(b)(2), which limits the 

distribution of written procedures to 

transmission provider employees likely 

to become privy to transmission 

function information.256

139. Western Utilities claims that the 

Commission’s explanation of how often 

employees must be trained conflicts 

with § 358.8(c)(1). In Order No. 717, the 

Commission stated the following: 

Furthermore, it is not necessary for the 

transmission provider to track annual dates 

for each employee; if the transmission 

provider prefers, it may train all its 

employees, or all its employees in a given 

category, at a certain time each year. New 

employees, after their initial training, can be 

fit within this schedule. However, the 

employee should not go longer than a year 

without participating in training.257

However, § 358.8(c)(1) provides that a 

transmission provider ‘‘must provide 

annual training.’’ Western Utilities 

requests that the Commission clarify 

that ‘‘a year’’ refers to a calendar year, 

not 365 days.258 Western Utilities 

contends that if training must occur 

every 365 days, each new employee will 

need to be on an individual schedule 

rather than simply fitting into the 

company’s regular training schedule. 

Commission Determination 

140. The Commission grants 

clarification regarding which 

supervisory employees are subject to the 

training requirements. In Order No. 717, 

we stated that there is a clear need for 

officers, directors, and supervisory 

employees to have an understanding of 

the Standards since they will ‘‘be in a 

position to interact with both 

transmission function employees and 

marketing function employees, or be 

responsible for responding to any 

questions or concerns about the 

Standards from the employees who 

report to them.’’ 259 We clarify in 

response to EEI that the training 

requirement applies to supervisory 

employees who supervise other 

employees subject to the Standards or 

who may come in contact with nonpublic transmission function 

information. 

141. The Commission disagrees with 

MidAmerican that § 358.8(b)(1) is 

unnecessary and inconsistent with 

§ 358.8(b)(2) and denies its request to 

delete § 358.8(b)(1). Section 358.8(b)(1) 

is a general requirement that a 

transmission provider have measures in 

place to ensure that the Independent 

Functioning Rule and the No Conduit 

Rule are observed by its employees and 

those of its affiliates. While the number 

of employees subject to the Independent 

Functioning Rule may be smaller, the 

No Conduit Rule prohibits a 

transmission provider from using 

anyone as a conduit. Therefore, a 

transmission provider must have 

measures in place to ensure that these 

requirements are followed. It is up to 

the transmission provider to design and 

implement those measures. However, in 

§ 358.8(b)(2) we specifically require that 

transmission providers distribute 

written procedures to those employees 

likely to become privy to transmission 

function information. 

142. We clarify in response to 

Western Utilities that we intended ‘‘a 

year’’ to mean a calendar year and not 

‘‘365 days’’ in our explanation of how 

often employees must be trained in 

Order No. 717. 

G. Miscellaneous Matters 

143. EEI notes that § 358.2(d) uses the 

term ‘‘transmission function customers’’ 

and recommends that this undefined 

term be changed to ‘‘transmission 

customers.’’ 260

144. EEI requests clarification that the 

NAESB requirements that have been 

rendered obsolete by Order No. 717 may 

be disregarded.261 Specifically, EEI 

refers to Business Practices for OASIS 

Standards and Communication 

Protocols (WEQ–002), which provides 

requirements for posting on OASIS links 

to information that was required by the 

pre-Order No. 717 Standards, but is no 

longer required, such as organizational 

charts.262

145. EPSA requests clarification on 

whether generators scheduling 

transmission through an RTO or ISO 

must adhere to the posting requirements 

of the Independent Functioning Rule 

under § 358.1.263 EPSA asserts that the 

waiver found in § 358.1(c) of the 

Commission’s regulations applies, on its 

face, only to wholesale transmission 

providers.264 EPSA states that while 

transmission providers may file for a 

waiver of the Standards of Conduct if 

they belong to a Commission-approved 

ISO or RTO, it is not clear whether an 

affiliated wholesale generator would 

still be subject to the posting 

requirements of the Independent 

Functioning Rule if it is scheduled 

through an RTO.265

146. Southwest Gas contends that the 

phrase ‘‘by a local distribution 

company’’ contained within 

§ 358.3(c)(2)(v) does not reflect clearly 

the fact that the exemption from 

marketing function includes those LDCs 

that operate across state lines under 

NGA section 7(f).266 Southwest Gas 

argues that while these companies are 

natural gas companies under the NGA, 

they function as LDCs and there is no 

evidence of affiliate abuse by NGA 

section 7(f) companies.267 Southwest 

Gas requests revision of the regulatory 

text of § 358.3(c)(2)(v) to include NGA 

section 7(f) companies. 

Commission Determination 

147. We grant the clarification request 

by EEI in regards to changing the term 

‘‘transmission function customers’’ in 

§ 358.2(d) and change the term to 

‘‘transmission customers.’’ 

148. We grant the clarification request 

of EEI regarding compliance with the 

NAESB Business Practice Standards to 

note that, as stated in a NOPR issued 

earlier this year,268 the Commission will 

not require public utilities to comply 

with the NAESB Business Practice 

Standards incorporated by reference by 

the Commission that require 

information to be posted in a manner 

inconsistent with Order No. 717 until 

such time as the Commission issues a 

new standard conforming to the changes 

in Order No. 717. While the NOPR made 

this determination for the requirements 

of WEQ–001–13.1.2, version 1.5, we 

note that the same is true for all aspects 

of the NAESB Business Practice 

Standards that are inconsistent with 

Order No. 717’s posting requirements. 

We understand that NAESB is working 

on making appropriate revisions. 

149. We deny EPSA’s request for 

clarification concerning whether a 

wholesale generator scheduling 

transportation transactions with an RTO 

is obligated by the posting requirements 


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54482 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Rules and Regulations 

269The change to the regulatory language moving 

‘‘on-system sale’’ to the beginning of section 

358.3(c)(2)(v) is discussed supra. 

of the Independent Functioning Rule. 

We note that the Independent 

Functioning Rule in § 358.5 no longer 

contains posting requirements. For this 

reason, we find that EPSA’s request for 

clarification has been rendered moot. 

150. The Commission grants the 

clarification request by Southwest Gas 

to include NGA section 7(f) companies 

within the LDC exemption, and will 

revise the regulatory text of 

§ 358.3(c)(2)(v) to read, ‘‘On-system 

sales by an intrastate natural gas 

pipeline, by a Hinshaw interstate 

pipeline exempt from the Natural Gas 

Act, by a local distribution company, or 

by a local distribution company 

operating under section 7(f) of the 

Natural Gas Act.’’ 269 While section 7(f) 

companies are natural gas companies 

under the NGA, they function as LDCs 

and should be treated the same as LDCs 

for purposes of the LDC exemption 

under the Standards of Conduct. 

IV. Document Availability 

151. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through 

FERC’s Home Page (http://www.ferc.gov) 

and in FERC’s Public Reference Room 

during normal business hours (8:30 a.m. 

to 5 p.m. Eastern time) at 888 First 

Street, NE., Room 2A, Washington, DC 

20426. 

152. From FERC’s Home Page on the 

Internet, this information is available on 

eLibrary. The full text of this document 

is available on eLibrary in PDF and 

Microsoft Word format for viewing, 

printing, and/or downloading. To access 

this document in eLibrary, type the 

docket number excluding the last three 

digits of this document in the docket 

number field. 

153. User assistance is available for 

eLibrary and the FERC’s Web site during 

normal business hours from FERC 

Online Support at 202–502–6652 (toll 

free at 1–866–208–3676) or e-mail at 

ferconlinesupport@ferc.gov, or the 

Public Reference Room at (202) 502– 

8371, TTY (202) 502–8659. E-mail the 

Public Reference Room at 

public.referenceroom@ferc.gov. 

V. Effective Date 

154. Changes to Order No. 717 

adopted in this order on rehearing and 

clarification are effective November 23, 

2009. 

List of Subjects in 18 CFR Part 358 

Electric power plants, Electric 

utilities, Natural gas, Reporting and 

recordkeeping requirements. 

By the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

■ In consideration of the foregoing, the 

Commission amends Part 358, Chapter I, 

Title 18, Code of Federal Regulations, as 

follows. 

PART 358—STANDARDS OF 

CONDUCT 

■ 1. The authority citation continues to 

read as follows: 

Authority: 15 U.S.C. 717–717w, 3301– 

3432; 16 U.S.C. 791–825r, 2601–2645; 31 

U.S.C. 9701; 42 U.S.C. 7101–7352. 

■ 2. Section 358.2 is revised to read as 

follows: 

§ 358.2 General principles. 

(a) As more fully described and 

implemented in subsequent sections of 

this part, a transmission provider must 

treat all transmission customers, 

affiliated and non-affiliated, on a not 

unduly discriminatory basis, and must 

not make or grant any undue preference 

or advantage to any person or subject 

any person to any undue prejudice or 

disadvantage with respect to any 

transportation of natural gas or 

transmission of electric energy in 

interstate commerce, or with respect to 

the wholesale sale of natural gas or of 

electric energy in interstate commerce. 

(b) As more fully described and 

implemented in subsequent sections of 

this part, a transmission provider’s 

transmission function employees must 

function independently from its 

marketing function employees, except 

as permitted in this part or otherwise 

permitted by Commission order. 

(c) As more fully described and 

implemented in subsequent sections of 

this part, a transmission provider and its 

employees, contractors, consultants and 

agents are prohibited from disclosing, or 

using a conduit to disclose, non-public 

transmission function information to the 

transmission provider’s marketing 

function employees. 

(d) As more fully described and 

implemented in subsequent sections of 

this part, a transmission provider must 

provide equal access to non-public 

transmission function information 

disclosed to marketing function 

employees to all its transmission 

customers, affiliated and non-affiliated, 

except as permitted in this part or 

otherwise permitted by Commission 

order. 

■ 3. In § 358.3, paragraph (c)(2)(v) is 

revised to read as follows: 

§ 358.3 Definitions. 

* * * * * 

(c) * * * 

(2) * * * 

(v) On-system sales by an intrastate 

natural gas pipeline, by a Hinshaw 

interstate pipeline exempt from the 

Natural Gas Act, by a local distribution 

company, or by a local distribution 

company operating under section 7(f) of 

the Natural Gas Act. 

* * * * * 

[FR Doc. E9–25252 Filed 10–21–09; 8:45 am] 

BILLING CODE 6717–01–P 

SOCIAL SECURITY ADMINISTRATION 

20 CFR Part 404 

[Docket No. SSA–2007–0066] 

RIN 0960–AG57 

Revised Medical Criteria for Evaluating 

Malignant Neoplastic Diseases 

AGENCY: Social Security Administration. 

ACTION: Final rule; correction. 

SUMMARY: This document corrects the 

preamble to a final rule published in the 

Federal Register on October 6, 2009, 

regarding a revision of a medical listing 

for malignant neoplastic diseases. In 

that preamble, we cited an incorrect 

date of publication for the Notice of 

Proposed Rule Making (NPRM) that had 

preceded the final rule. 

DATES: Effective November 5, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Mark Kuhn, 410–965–1020. 

SUPPLEMENTARY INFORMATION: 

Correction 

In the preamble to the final rule 

published October 6, 2009 (74 FR 

51229) we stated the NPRM (73 FR 

22871) was published on April 24, 2008. 

The NPRM was actually published on 

April 28, 2008. 

In FR Doc. E9–23896 appearing on 

page 51229 in the Federal Register of 

Tuesday, October 6, 2009, make the 

following correction in the 

SUPPLEMENTARY INFORMATION section. On 

page 51229, in the third column, in the 

fifth line of the first paragraph under 

Background, change ‘‘April 24, 2008’’ to 

‘‘April 28, 2008.’’ 

Dated: October 16, 2009. 

Dean Landis, 

Associate Commissioner for Regulations, 

Social Security Administration. 

[FR Doc. E9–25424 Filed 10–21–09; 8:45 am] 

BILLING CODE 4191–02–P 


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