The CFTC approved by seriatim a final order to exempt certain contracts, agreements and transactions of a Regional Transmission Organization ("RTO") for the purchase or sale of specified limited electric energy-related products from most provisions of the CEA, with the exception of those prohibiting fraud and manipulation. The final order also exempts such transactions expressly from private actions that might be brought under CEA section 22, which represents a reversal of the position held by the CFTC as recently as last May, when it proposed an amendment clarifying that private actions could be brought against RTOs and Independent System Operators ("ISOs") concerning such transactions.

The final order mandated that, in addition to satisfying other conditions for obtaining exemption, the RTO's contract, agreement or transaction must:

  • be entered into or offered in a market administered by the RTO pursuant to its tariff, rate schedule, or protocol (collectively, "Tariff"), and the Tariff must have been approved by the Federal Energy Regulatory Commission; and
  • be entered into by persons who are "appropriate persons," "eligible contract participants" or persons who are in the business of (i) generating, transmitting, or distributing electric energy, or (ii) providing electric energy services that are necessary to support the reliable operation of the transmission system.

In his statement of support for the final order, CFTC Chair Timothy Massad explained his change of position on the application of the private right of action provision. He affirmed that he still favors the existence of private rights of action as a general matter, but added that he has been "persuaded that, in this limited instance, they could cause instability and adversely affect consumers without necessarily enhancing supervision of markets or consumer protection."

CFTC Commissioner J. Christopher Giancarlo also voiced support for the prohibition of private lawsuits against public utilities in wholesale energy markets, a position that he asserted is "just commonsense." He emphasized that the order will benefit consumers as well as utility companies:

Without today's practical decision, power utilities across the country may have hesitated or delayed building such new power plants because of the regulatory uncertainty and costs associated with private litigation – costs that surely would be passed on to millions of ratepayers throughout the country.

The final order will become effective on the date of its publication in the Federal Register.

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