On April 15, 2010, FERC issued an Order on Clarification denying a request that the Commission interpret its market-based rate affiliate restrictions to permit sharing of employees who are neither transmission function employees nor marketing function employees.  FERC also issued a Notice of Proposed Rulemaking (“NOPR”) proposing a revision to the market-based rate affiliate restrictions to reflect the clarification provided in its Order on Clarification.

Order No. 697 sets forth market-based rate affiliate restrictions between franchised public utilities with captive customers and their power sales affiliates with market-based rate authority.  Order No. 697 required that the employees of power sales affiliates must operate separately from employees of the affiliated franchised utility, with exceptions for certain categories of employees who may be shared.  On October 16, 2008, the Commission issued Order No. 717 and eliminated the concept of “shared employees” since only those employees engaged in transmission or marketing functions are required to function independently from one another (see November 20, 2009 edition of the WER).

On March 9, 2009, the Compliance Working Group (“Compliance”), an organization made up of 27 energy companies, filed a request for clarification of Order No. 697 regarding which employees can be shared.  Compliance asked the Commission to interpret the market-based rate affiliate rules so that sharing of employees who are not “transmission function employees” or “marketing function employees” is allowed under the Standards of Conduct Rule.  The Commission denied Compliance’s request, stating that such an interpretation of Order No. 697 would be “inappropriate.”

However, FERC granted clarification in order to provide guidance on which employees may not be shared under the market-based rate affiliate restrictions in Order No. 697.  The Commission stated that a franchised public utility with captive customers and its market regulated power sale affiliates cannot share employees that make economic dispatch decisions, determine timing of scheduled outages, or are responsible for resource planning and fuel procurement.  Along with the Order on Clarification, FERC issued a NOPR, proposing to revise its separation of functions and information sharing rules set forth by Order No. 697 to reflect these clarifications.  Comments to the Commission’s NOPR are due 60 days after publication in the Federal Register.

A copy of the Commission’s Order on Clarification is available at www.ferc.gov under Docket No. RM04-7-007 and a copy of the NOPR is available under Docket No. RM10-20-000.