On June 15, 2023, FERC issued Order No. 895, adopting new regulations permitting regional transmission organizations (“RTO”) and independent system operators (“ISO”) to share, amongst each other, credit-related information of their market participants, and requiring RTOs/ISOs to adopt tariff or similar rules for providing credit-related information sharing in order to better assess market participants’ credit risks.

FERC’s final rule: (1) permits RTOs/ISOs to share credit-related information about any market participant without obtaining prior consent or providing prior notice to said market participant; (2) permits an RTO/ISO to use credit-related information received from other RTOs/ISOs to the same extent as credit-related information received from its own market participants; and (3) requires any RTO/ISO that receives credit-related information from another RTO/ISO to treat that information as confidential, just as it would for credit-related information received from its own market participants.

Prior to this rule, the tariffs of RTOs/ISOs effectively restricted them from sharing credit-related information with each other. This final rule, however, concluded that these limitations hindered the ability of RTOs/ISOs to assess and mitigate credit risks in their markets and increased the risk of mutualized defaults. Ultimately, FERC found these restrictions to be unjust and unreasonable.

Currently, RTOs/ISOs assess market participants’ financial condition using credit-related information exclusively provided by current and prospective market participants. Such credit-related information is typically reviewed when a new generator is seeking interconnection rights, an entity first seeks membership to an RTO/ISO, when an existing entity is seeking to renew its membership with the RTO/ISO, or when the RTO/ISO is prompted to provide such information, usually in response to a credit-related event. According to FERC, the final rule will improve RTOs/ISOs’ ability to accurately assess and mitigate credit risks in their markets. In turn, RTOs/ISOs will be able to minimize credit-related defaults and respond to credit events more quickly.

FERC’s Order No. 895 and its implementing regulations will take effect on August 21, 2023.

A copy of FERC’s Order, issued in Docket No. RM22-13-000, can be found here.