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Responding to strong feedback, FERC changes reporting requirement initiatives

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Responding to strong feedback, FERC changes reporting requirement initiatives

Afterreceiving plenty of critical feedback on an initial information collectionproposal, FERC on July 21 revised its planned approach for ensuring that it hasenough information to adequately oversee wholesale power markets.

Insteadof issuing a new rule requiring market operators to report the entities "connected"with their market participants and a separate new rule revising the ownershipinformation that entities with market-based rates must submit, FERC abandonedtwo previous rulemakings and issued a whole new one streamlining and combiningthose two efforts.

FERCreceived a lot of flakin the wake of its September 2015 proposal(RM15-23) to have regional market and grid operators provide reports on theirmarket participants and any connected entities and describe the relationshipsbetween those entities. The agency said it needed the data to help trackactivities across markets and understand any underlying incentives thatentities may have with the end goal of ensuring that markets are notmanipulated.

Butcertain industry trade groups and others found the proposal to be confusing andexpressed concern that its requirements may be overly burdensome. After FERCheld a technical conference on the matter in December 2015, some of those sameparties told the agency that the proposal it was pursuing at the time appearedto be very different from the original proposal. They also complained aboutcontinuing substantial uncertainty regarding the scope of the proposal, therange of the data to be collected and the need for the data.

Stakeholderswere more supportive of a separate December 2015 FERC (RM16-3) to no longer requirepower sellers seeking to obtain or retain market-based rate, or MBR, authorityto provide the names of all their owners.

Theagency explained that since the existing information requirements were put inplace in 2008, corporate families, structures and ownership in the energyindustry have become increasingly complex. As a result, many power sellers donot know the names of all of their owners, especially those with less than 10%voting interests, and finding that information can be very difficult.

Explainingthat it listened to the feedback, FERC's new proposed rule (RM16-17) wouldcombine and streamline the MBR authority ownership information and connectedentity information into one relational database. As such, the agency said itwould eliminate duplication, minimize compliance burdens, modernize the agency'sdata collections, and make the information more usable and accessible.

Specifically,the new proposed rule would define a connected entity in a way that reflectsexisting MBR affiliate definitions and eliminate references to non-voting stockand limited partnership shares to address passive ownership concerns. Therevised definition also would limit upstream and downstream ownership andcommon control relationship reporting to only those entities engaged incommission-jurisdictional markets and those that buy or sell financial energyderivatives.

Inaddition, the proposed rule would not require debt instruments or structuredtransactions to be reported. It also would clarify the definition of a traderand require entities to only report information about traders employed by thecompany. It further proposes to clarify the types of contracts that must bereported and seeks comments on an alternate method of collecting contractinformation through electric quarterly report filings. Entities would berequired to report changes in connections within 30 days.

RegardingMBR ownership information, the new proposed rule would make the same changesregarding ownership information outlined in the December 2015 proposal. Thus,it would reduce and clarify the scope of ownership information that MBR sellersmust provide, revise the information required in asset appendices and eliminatea requirement for MBR sellers to submit corporate organizational charts.

FERCalso proposed to collect the connected entity and MBR ownership informationusing an extensible markup language schema submitted to acommission-administered "relational" database that will be used tomanage the information the agency collects.

FERCwill convene technical workshops and engage in other outreach to gatherfeedback on the data dictionary and the submittal process. The first workshopon the data dictionary will be held Aug. 11. Comments on the new proposed ruleare due 45 days from its publication in the Federal Register.

Beforevoting on the order during the commission's July 21 open monthly meeting,Commissioner Cheryl LaFleur said she was pleased with the new proposed rule,noting that she had expressed concerns about the earlier connected entitiesproposal.

"Ithink it's very sensible that it combines the definitions and the formatting ofthe connected entities proposal with our MBR applications," she said. Shealso applauded staff for the amount of outreach in which they engaged tofurther inform the process.

Pickingup that theme, Commissioner Tony Clark noted that FERC at times wants feedbackon ideas that are not yet well "fleshed out" and said that "wasprobably the case" with the connected entity proposal. He suggested thatFERC used that feedback to craft a proposal that still provides the agency withthe information it needs to oversee power markets but in a more streamlined andefficient fashion.

"Ithink this order reflects that we heard the concerns of stakeholders," addedCommissioner Colette Honorable. She nevertheless questioned whether FERC shouldbe collecting some of the information in electric quarterly reports instead ofseparately.

Honorablealso stressed that the original connected entity proposal required gridoperators to gather and submit the required information, while the new proposalwould require entities to submit that information directly to the commission.She said the change does not mean FERC cannot share the information with RTOsand ISOs and their market monitors, however.