United States: CFTC Proposes Amendment To RTO-ISO Order

On May 10, 2016, the Commodity Futures Trading Commission ("CFTC") proposed an amendment ("Proposed Amendment") to an order it issued on March 28, 2013 ("RTO-ISO Order"), exempting certain electric energy transactions from a number of provisions of the Commodity Exchange Act ("CEA") and CFTC regulations other than the general anti-fraud and anti-manipulation provisions, and other scienter-based prohibitions.  If adopted, the Proposed Amendment would clarify that private rights of action under Section 22 of the CEA are not exempt under the RTO-ISO Order.  Accordingly, plaintiffs would be permitted to pursue CEA-based allegations of fraud and market manipulation in connection with wholesale electricity market transactions that are primarily regulated by the Federal Energy Regulatory Commission ("FERC") and the Electric Reliability Council of Texas ("ERCOT") even though the Federal Power Act bars private actions.

The CFTC's statement in the preamble to the proposed Southwest Power Pool exemption order that it did not intend to preclude private actions based upon alleged fraud or manipulation in the RTO-ISO markets introduced uncertainty about the scope of the exemption orders.  The Proposed Amendment only adds to this uncertainty.

In a thoughtful and well-supported dissent, Commissioner Giancarlo noted that the Proposed Amendment is "based . . . on a legal fiction that it intended to reserve Section 22 all along, calls into question the legal certainty of all other section 4(c) orders in which the Commission failed to discuss or reserve the applicability of Section 22 for violations of the Act or regulations reserved for itself."  Even if the CFTC adopts the Proposed Amendment, this uncertainty may linger because the Proposed Amendment does not state that it would be effective retroactively. 

The proposal includes a 30-day public comment period that will begin the day the proposal is published in the Federal Register, which we expect to occur sometime next week.  As part of the comment period, the CFTC asked for comments on several specific questions, including whether the filed-rate doctrine will bar follow-on litigation under Section 22 of the CEA.  Participants in RTO-ISO markets should consider commenting on the Proposed Amendment.

I. Exemptive Relief for ISO-RTO Markets

The CFTC has "exclusive jurisdiction" over futures, options, and swaps on "commodities"; however, CEA section 2(a)(1)(I) preserves the statutory authority of the FERC and state and local authorities over specified agreements, contracts, and transactions entered into pursuant to a FERC- or state-approved tariff or rate schedule.  On March 28, 2013, the CFTC issued an order exempting specified transactions of six RTOs and ISOs from the CFTC's general anti-fraud and anti-manipulation authority, and scienter-based prohibitions, pursuant to section 4(c)(6) of the CEA.  The order did not mention or expressly preserve private rights of action under CEA Section 22.

Southwest Power Pool ("SPP"), a FERC-regulated RTO that was not included in the RTO-ISO Order, filed an application for exemption requesting substantially similar relief granted to other RTOs and ISOs under the RTO-ISO Order.  On May 18, 2015, the CFTC issued a proposed order that would exempt SPP from the CFTC general anti-fraud and anti-manipulation authority, and scienter-based prohibitions, but not from the private right of action under Section 22 of the CEA ("SPP Proposed Order").  The CFTC noted that it did not intend to exempt private rights of action in the RTO-ISO Order and does not propose to do so for SPP.

Subsequently, in Aspire Commodities v. GDF Suez Energy North America, the U.S. District Court for the Southern District of Texas held that plaintiffs may not bring private lawsuits under Section 22 of the CEA pursuant to the RTO-ISO Order.1  Aspire filed a private right of action under Section 22 of the CEA, maintaining that GDF manipulated the Intercontinental Exchange ("ICE") and ERCOT markets.  GDF moved to dismiss Aspire's claim on the ground that the RTO-ISO Order precluded Aspire's claim because it exempts ERCOT transactions from all but certain express provisions of the CEA.  Aspire opposed this motion and argued, among other things, that the RTO-ISO Order did not exempt RTOs and ISOs from the anti-fraud and anti-manipulation provisions of the CEA.  In support of this argument, Aspire referenced the SPP Proposed Order.  The SPP Proposed Order stated that the CFTC intended to preserve private causes of action for fraud and manipulation under Section 22 of the CEA when it issued the RTO-ISO Order despite the fact that this provision was not included in the enumerated list of exceptions.  Ultimately, the District Court found Aspire's arguments unpersuasive and granted GDF's Motion to Dismiss.  On February 26, 2016, the U.S. Court of Appeals for the Fifth Circuit affirmed the district court's decision on appeal.

II. The Proposed Amendment

Responding to the Fifth Circuit's decision in Aspire, the CFTC proposed an amendment to the RTO-ISO Order to clarify that the exemption does not apply to private lawsuits under Section 22 of the CEA.  In the Proposed Amendment, the CFTC observes that it is unclear whether it even has the authority to exempt private rights of action pursuant to section 4(c)(6) of the CEA, under which the RTO-ISO Order was issued.  Section 4(c)(6) permits the CFTC to exempt agreements, contracts, and transactions from "requirements" of the CEA.  However, private rights of action are not necessarily "requirements."

CFTC Commissioner Giancarlo "emphatically dissent[ed]" from the proposed amendment, voicing concerns that he previously raised with the SPP Proposed Order at the Energy and Environmental Markets Advisory Committee meeting earlier this year.2  He stated that the Proposed Amendment "manages to simultaneously toss legal certainty to the wind and threaten the household budgets of low and middle-income ratepayers by permitting private lawsuits in heavily regulated markets that are at the heart of the U.S. economy."

Chairman Massad touted the merits of private rights of action and noted the limited resources of the CFTC as a driver for the Proposed Amendment.  He dismissed Commissioner Giancarlo's concerns about legal uncertainty as unfounded. 

In the interim while the CFTC considers the Proposed Amendment, market participants and potential plaintiffs will need to consider which interpretation of the current RTO-ISO Order is more compelling:  the CFTC's, which asserts that private rights of action are implicitly permitted even though they are not mentioned in the text of the order itself; or the Fifth Circuit's, which holds that plain language of the RTO-ISO Order prevails and private actions are barred unless and until the order is formally amended.  In either case, all participants in RTO-ISO markets should consider the new possibility of private litigation and how such uncertainty may impact their businesses.

The full text of the Proposed Amendment is available here.


1 Cadwalader covered the decision of the U.S. District Court for the Southern District of Texas in Aspire Commodities v. GDF Suez Energy North America in a subsequent Clients & Friends Memo, available here

2 A Cadwalader summary of the meeting is available here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions