United States: FERC Opposes CFTC Proposal To Permit Private Rights Of Action In RTO-ISO Markets

The Federal Energy Regulatory Commission ("FERC") expressed strong opposition to a CFTC proposal that would allow private rights of action under Section 22 of the CEA, regarding certain electric energy transactions by FERC-regulated public utilities known as independent system operators ("ISOs") and regional transmission organizations ("RTOs").

The proposal, published last month by the CFTC to amend an order issued on March 28, 2013 (the "RTO-ISO Order"), would exempt certain electric energy transactions from a number of provisions of the CEA and CFTC rules (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.

Noting that RTOs and ISOs are "pervasively regulate[d]" by FERC, and that the Federal Power Act bars private actions under FERC's anti-manipulation rule, FERC staff opposed the "introduction to FERC-jurisdictional markets of a private right of action under the CEA." They argued that such a private right of action to these markets would conflict with Congress' intention to rely on public enforcement by a specialized agency, and also would create jurisdictional conflicts between the CFTC and FERC. They stated that the proposal would conflict with Congress's directive that the CFTC and FERC establish cooperative procedures for avoiding conflicts where the agencies' jurisdiction may overlap.

FERC staff asked the CFTC to clarify that it does not have exclusive jurisdiction over transactions covered by the RTO-ISO Order if the CFTC chooses to go ahead with the proposal.

A separate comment letter issued by ISO/RTO Council emphasized that "[p]ermitting private claims is likely to have a number of additional unintended consequences that do not serve the public interest, and that create the same uncertainty that the ISO-RTO Order was designed to avoid."

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