Lines in the Sand: FERC Clarifies Its Jurisdiction Over “Practices Affecting” Wholesale Rates Related to RTO and ISO Rules

January 27, 2020

During its January open meeting, the Federal Energy Regulatory Commission denied rehearing on two orders affecting transparency in regional transmission organization (RTO) and independent system operator (ISO) processes, and clarified the commission’s jurisdiction over RTO and ISO rules as “practices affecting” wholesale rates.

In August 2018, RTO Insider, a trade publication that reports on the electric industry, filed a complaint against New England Power Pool (NEPOOL), challenging NEPOOL’s then-recently enacted policy prohibiting press and public attendance at and reporting on NEPOOL meetings (Docket No. EL18-196). NEPOOL filed a motion to dismiss, arguing that, among other things, the commission lacked jurisdiction over NEPOOL’s meeting policies.

In April 2019, the commission dismissed the complaint, finding that NEPOOL’s policy for meeting attendance did not fall within the commission’s jurisdiction over “all rules and regulations affecting or pertaining to” rates and charges by a public utility for jurisdictional service. While the commission noted that the stakeholder process within an RTO/ISO is a practice that affects rates, terms and conditions of jurisdictional service, that jurisdiction is “necessarily limited to aspects of an RTO/ISO stakeholder process that have a direct effect on jurisdictional rates.” NEPOOL rules prohibiting press and public attendance at NEPOOL meetings, the commission noted, do not directly affect rates because they do not affect either who may vote on NEPOOL proposals, or the filings that are ultimately submitted to the commission. Commissioner Richard Glick filed a separate concurrence, noting that while he agreed with the ruling, he “believe[s] th[e] rules are misguided.”

In a parallel docket, the commission rejected revisions to the NEPOOL agreement that would have prevented members of the press from becoming NEPOOL members or from being designated a representative of a NEPOOL member (Docket No. ER18-2208). The revisions would limit the definition of “press” to individuals working for the purposes of reporting for a press organization, rather than the organization itself. The commission rejected the amendments in January 2019. The commission stated that NEPOOL’s membership rules fall within the commission’s jurisdiction because they directly affect commission-jurisdictional rates. Membership in NEPOOL confers voting rights, and the outcome of votes signals to the commission stakeholder approval and has the potential to generate proposals for commission consideration. Therefore, the commission determined, RTO/ISO membership rules directly affect jurisdictional rates.

In its January open meeting, the commission denied rehearing in both cases. In the RTO Insider complaint docket, the commission rejected contentions that attendance at the NEPOOL meetings would directly affect rates because allowing non-members to witness and report on NEPOOL’s deliberations would alter NEPOOL member behavior and could even affect voting. The commission instead found that “what Public Citizen refers to here are, at best, indirect effects on rates.” In the NEPOOL agreement docket, however, the commission upheld its rejection of the proposed revisions. Further, the commission rejected assertions that NEPOOL was not an RTO and therefore not subject to the commission’s jurisdiction, stating that the “scope [of Federal Power Act Section 205] is broad enough to encompass” actions by NEPOOL.

When taken together, these cases draw new lines in the sand regarding the longstanding debate over commission jurisdiction over RTO/ISO business practices. For one, other RTOs may follow NEPOOL’s lead, and work to impede press attendance and reporting on stakeholder meetings, or otherwise limit the transparency of RTO/ISO operations, while escaping commission review under the premise of not “directly” affecting jurisdictional rates. RTO Insider has already expressed in trade press that it intends to appeal the decision in the RTO Insider complaint docket, so it appears the courts will decide if the lines the commission has drawn are legitimate.

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