United States: FERC Proposes Streamlined Reporting Requirements And Data Collection For Connected Entity And Market-Based Rate Ownership Information

Last Updated: July 28 2016
Article by Russell Kooistra and Christopher Zentz

On July 21, 2016, FERC proposed new data collection and reporting requirements for market-based rate ("MBR") sellers and entities trading virtual products or holding financial transmission rights in organized wholesale markets ("Virtual/FTR Participants"). Specifically, in an effort to streamline and reduce the burden of proposed information collection, FERC proposed in the Notice of Proposed Rulemaking (the "Data Collection NOPR") to (1) revise the information to be submitted on ownership, employee, debt, and contractual connections ("Connected Entity Information") from a prior proposed rule (the "Connected Entity NOPR"); (2) better align the information to be provided on "affiliates" in connection with Connected Entity Information submissions with the information MBR sellers must provide on "affiliate owners" under FERC's MBR regulations; and (3) remove the existing requirement that MBR sellers submit corporate organization charts adopted in Order No. 816.

On September 17, 2015, FERC issued the Connected Entity NOPR, which proposed submitting Connected Entity Information to regional transmission organizations ("RTOs") and independent system operators ("ISOs") for market surveillance purposes (see September 21, 2015 edition of the WER). In addition, on December 17, 2015, FERC issued a Notice of Proposed Rulemaking which sought to clarify the scope of ownership information that MBR sellers must provide under FERC's MBR regulations (the "Ownership NOPR") (see December 21, 2015 edition of the WER). In the Data Collection NOPR, FERC explains that commenters objected to the proposed collection of Connected Entity Information under the Connected Entity NOPR on the grounds that the information was largely duplicative of FERC's MBR program. FERC further explains that commenters objected to FERC's definition of Connected Entity and to the burden of submitting Connected Entity Information to RTOs and ISOs. FERC also states that commenters suggested collecting the Connected Entity Information and the ownership information under the Ownership NOPR contemporaneously to eliminate the burden of submitting duplicative information.

In the Data Collection NOPR, FERC proposes to revise the Connected Entity Information requirements for MBR sellers and Virtual/FTR Participants by: (1) limiting ownership reporting to "affiliates," as defined in FERC's rules regarding MBR requirements, that are either an "ultimate affiliate owner" of the entity, an entity that participates in wholesale markets, or an entity that transacts in natural gas or electricity derivatives markets; (2) replacing the category of "employees" in the Connected Entity NOPR with the category of "Trader," which FERC proposes to define as a person who makes trading decisions or devises trading strategies; (3) eliminating the debt instruments and structured transactions reporting requirement; and (4) narrowing the category of Connected Entities by limiting the definition of "Contracts" to agreements conferring control over electric generation assets that are used or offered into wholesale markets. FERC specifies that MBR sellers and Virtual/FTR Participants would make a filing updating Connected Entity Information within 30 days of an entity becoming or ceasing to be a Connected Entity in relation to the MBR seller or Virtual/FTR Participant. Furthermore, FERC proposes that MBR sellers and Virtual/FTR Participants submitting Connected Entity Information must obtain and submit a Legal Entity Identifier ("LEI"), but that obtaining LEIs for their Connected Entities or affiliate owners would not be required.

To streamline reporting requirements—and consistent with the requirements of the Ownership NOPR—FERC proposes to better align the information MBR sellers must submit on "affiliate owners" in FERC's MBR requirements with the information on "affiliates" to be submitted under the Connected Entity Information proposal. In doing so, FERC proposes that MBR sellers need only identify those affiliate owners that either: (1) are an "ultimate affiliate owner," which FERC defines as the furthest upstream affiliate owner(s) in the ownership chain; or (2) have a franchised service area, MBR authority, or directly own or control inputs to electric power production, as defined in FERC's regulations. In addition, FERC proposes that MBR sellers affirm that owners identified as passive owners own a separate class of securities, have limited consent rights, do not exercise day-to-day control over the company, and cannot remove the manager without cause. FERC further proposes that MBR sellers submit their asset appendix information in the database with the Connected Entity Information and MBR ownership information, and that MBR sellers no longer be required to report assets owned by affiliates with MBR authority.

To avoid multiple or duplicative submissions, FERC proposes that the Connected Entity Information and MBR ownership information be submitted together in an extensible markup language (XML) format directly to FERC, rather than to RTOs/ISOs. Finally, FERC withdrew the Connected Entity NOPR and Ownership NOPR, terminated those dockets, and proposes to remove the requirement that MBR sellers submit corporate organizational charts.

Comments on the Data Collection NOPR are due 45 days after publication in the Federal Register. A copy of the Data Collection NOPR 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.

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Russell Kooistra
Christopher Zentz
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