On November 16, 2009, FERC issued Order No. 717-B in an attempt to clarify its confusing decision in Order No. 717-A regarding what utility employees should be considered “marketing function employees.” The rule will become effective on November 23, 2009.
On October 16, 2008, the Commission issued Order No. 717, amending the Standards of Conduct for Transmission Providers (see October 17, 2008 edition of the WER). The Standards of Conduct are Commission regulations that limit the interaction and prohibit the sharing of information between certain employees. The Standards of Conduct bar information sharing between transmission function and marketing function employees, and both sets of employees must operate independently from each other to ensure impartiality in their job functions.
On October 15, 2009, FERC issued Order No. 717-A, which focused on areas for potential abuse (see October 17, 2009 edition of the WER). In Order No. 717-A, the Commission discussed the definition of what employees were considered “marketing function employees.” Particularly confusing was the Commission’s statement in paragraph 80 of Order 717-A which stated in pertinent part that, “The Commission clarifies that an employee in the legal, finance or regulatory division of a jurisdictional entity, whose intermittent day-to-day duties include the drafting and redrafting of non-price terms and conditions of, or exemptions to, umbrella agreements is a ‘marketing function employee.’” This one paragraph caused confusion as it appeared to be at odds with prior Commission precedent. As the Edison Electric Institute stated in its “Request for Expedited Action”, the paragraph can be read “as suggesting that lawyers or others can become ‘marketing’ function employees simply by ‘drafting’ a contract term, even if they are doing such drafting at the direction of another.”
In Order No. 717-B, the Commission agreed with intervenors that its definition of a marketing function employee was overly broad. The Commission clarified that an employee making business decisions about non-price terms and conditions can be considered a marketing function employee because that employee is “actively and personally engaged in marketing functions.” However, an employee that drafts or redrafts a contract, including non-price terms and conditions, and does not make business decisions is not a marketing function employee.
The Commission further clarified that it “did not intend to depart from the finding in paragraph 131 of Order No. 717 that employees are not subject to the Independent Functioning Rule if they do not perform transmission functions or marketing functions…” Additionally, lawyers, regulatory personnel, and risk management may serve both transmission and marketing function employees, as long as they adhere to the Commission’s No Conduit Rule and refrain from relaying information back and forth from the marketing and transmission employees.
The Commission’s order is available under docket number RM07-1-002 at www.ferc.gov.