On January 29, 2013, FERC approved the California Independent System Operator Corporation’s (“CAISO”) tariff revisions that permit the CAISO to share confidential or commercially sensitive information with the Commodity Futures Trading Commission (“CFTC”) without notifying the affected market participant.   The change was intended to satisfy a requirement for exempting independent system operators (“ISOs”) and regional transmission operators (“RTOs”) from reporting “swap” transactions to the CFTC. 

In 2010, the CFTC’s authority was expanded to include the regulation of “swaps” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  According to CAISO, the term “swaps” has been defined broadly and in a way that “could be construed to cover certain transactions in the CAISO market.”  As such, CAISO and other ISOs and RTOs petitioned the CFTC to exempt certain transactions made within their markets from CFTC oversight.  In response, the CFTC issued a proposed order granting the requested exemption if certain conditions were met.  One of those conditions was that an ISO or RTO tariff must specify that the ISO or RTO will not “notify any member prior to providing information to the CFTC in response to a subpoena or other information request.”   

In order to comply with the CFTC’s exemption requirement, CAISO revised its tariff so that the CAISO’s response to any CFTC subpoena or information request would mirror its response to an information request by FERC and its staff – i.e., that affected market participants would not be notified of the request.  However, CAISO did state that it will notify the affected market participants if the CFTC or its staff either requests to disclose, or decides to disclose the confidential or commercially sensitive information.

FERC accepted CAISO’s tariff effective January 30, 2013.  Additionally, the order noted that FERC and the CFTC are in discussions to finalize information sharing agreements between the two agencies, but that it was required to rule on CAISO’s filing under section 205 of the Federal Power Act by January 29, 2013.

 A copy of the order is available here.