American Oil and Gas Reporter - December 2015 - 25

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WASHINGTONWATCH
FERC's NOPR
On RTO And ISO Data
Affects Producers
The Federal Energy Regulatory Commission issued a notice
of proposed rule making in mid-September that would require each
regional transmission organization (RTO) and independent system operator (ISO) to collect data from its market participants and
then submit this detailed information to FERC.
At first blush, this would appear to be an issue for electric folks
to worry about; it shouldn't affect natural gas producers. However,
the NOPR would reach producers and marketers engaged in tolling
or asset management agreements with gas-fired generators.
FERC's NOPR, "Collection of Connected Entity Data from
RTOs and ISOs," builds on data requirements already in place
in RTO and ISO tariffs. FERC uses these data, as well as information collected by the Commodity Futures Trading Commission, to investigate potential market manipulation, fraud, or abuse.
However, FERC claims, "Despite increased access to trading
data, (the agency) cannot fully utilize this information to detect
and deter market manipulation because of uncertainty regarding
the identity of a given market participant, which may trade under different identifiers in different markets and venues. Without an understanding of . . . who may function in key employment or other contractual roles (such as asset management), it can
be difficult to ascertain which individuals or companies may benefit from a given transaction or, indeed, who may be jointly participating in a common course of conduct."
Hence, the NOPR would establish a definition for "connected entity," make the definition uniform across the organized electric markets, and require each connected entity to obtain a unique
legal entity identifier. Using its authority under the Federal Power Act, FERC claims the additional information will allow it to
better monitor and enhance its ability to establish intent and "protect the markets from wrongdoing, if these (connected) relationships are known fully."
Preventing manipulation is critical to a well-functioning market. Government agencies often must play catch-up to the private
sector and new business models. As discussed in previous
columns (e.g., the Extractive Industries Transparency Initiative, October 2012, September 2014, and October 2015), the goal of transparency is laudable. However, there are some reasons for concern.
Agencies imposing new regulations must weigh costs versus
benefits. The oil and gas industry is wrestling with this balance
in a number of pending regulations to reduce methane emissions.
RTOs and ISOs will be submitting their arguments on burden in
comments due to FERC by Jan. 22.
Commissioner Cheryl LaFleur concurred with the NOPR, stating, "The requirements in the (NOPR) would create a significant
new reporting regime for all market participants, as well as the
RTOs and ISOs."
She encouraged market participants to comment on the benefits as well as the incremental costs or burdens. From an industry
perspective, this is instructive as to how agencies and ultimately the courts address these comments and concerns.
For market participants compiling and submitting these data,
it is critical to understand how they will be used and whether commercially sensitive data can be kept confidential. According to

"The NOPR would reach producers and
marketers engaged in tolling or asset

management agreements.

the NOPR, "Connected entity information that is commercially
sensitive, such as all or part of the contractual arrangements among
entities, may satisfy the requirements of exemption four in the
Freedom of Information Act."
The NOPR continues, "The nonpublic information to be gathered . . . also may fall within the ambit of FOIA exemption seven, which protects certain 'records and information compiled for
law enforcement purposes.'"
Informally, FERC staff has indicated the focus of the NOPR
is on whether a connected entity has financial or operational control over the electric generator's output, and that a gas supply
arrangement is not intended to be swept up in the reporting. Under this informal guidance, a gas supplier would not be considered a connected entity. However, the NOPR seems clear that entities providing asset management or tolling arrangements
would fall within the scope.
FERC has stepped up its monitoring and surveillance activities in meeting the objectives of detecting and deterring market
manipulation, as set forth in its fiscal 2014-18 strategic plan. With
FERC's jurisdiction over organized electric markets, the NOPR
would encompass 90 percent of reported wholesale electricity
sales. The proposed scope of the NOPR should not be minimized.
While FERC moves in the direction of seeking additional data
from RTOs and ISOs, it has stepped back from additional reporting
contemplated in a 2012 notice of inquiry: "Enhanced Natural Gas
Market Transparency." The notice sought comment on the concept of requiring quarterly reporting of every jurisdictional natural gas transaction that entailed physical delivery for the next
day or next month.
After comments strongly opposed the proposal, in a Nov. 17
order, FERC terminated the proceeding in light of its ongoing access to additional physical natural gas market data.
Yet the quest for additional data undoubtedly will continue. ❒

SUSAN GINSBERG is vice
president of crude oil and natural gas regulatory affairs for
the Independent Petroleum
Association of America. She
covers legislation and regulation, focusing on the CFTC
and FERC. Her experience in
natural gas regulatory affairs
spans 25 years.

DECEMBER 2015 25

American Oil and Gas Reporter - December 2015

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