Communications of Market Information Between Affiliates; Declaratory Order

[Federal Register Volume 64, Number 67 (Thursday, April 8, 1999)]
[Notices]
[Pages 17150-17151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8746]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission
[Docket No. IN99-2-000]


Communications of Market Information Between Affiliates; 
Declaratory Order

Issued April 1, 1999.
    Before Commissioners: James J. Hoecker, Chairman; William L. 
Massey, Linda Breathitt, and Curt Hebert, Jr.

    The Enforcement section, Office of the General Counsel 
(Enforcement), received a complaint on the Enforcement Hotline that a 
public utility informed its affiliate by phone to look the next day on 
the public utility's Internet website for an offer to sell energy. The 
following day, the public utility advertised discounted energy on its 
website for only a half-hour. The affiliate and another non-affiliated 
entity arranged to purchase the discounted energy from the public 
utility based on the posting. Three weeks later, another non-affiliate 
requested the same discount terms. The public utility refused to sell 
energy to that non-affiliate on the same terms at that time.
    This scenario raises an issue of whether the public utility gave 
its affiliate an undue preference by telling the affiliate in advance 
to look on the public utility's website for information about an offer 
to sell energy. To provide guidance and eliminate any future 
uncertainty, the Commission clarifies that a public utility must not 
alert its affiliate to check for an electronic posting. Such a tip is 
market information that a utility cannot selectively disclose to an 
affiliate.

Background

    The Hotline learned that a public utility was called by its power 
marketing affiliate which sought inexpensive energy for a specified 
term. Several days later, the public utility told its affiliate that 
the public utility would post on its web page an offer for energy sales 
with price information the following day.
    The next day, the public utility posted on its website an offer to 
sell a certain quantity of megawatts of installed capacity and energy 
for a specified term at a particular price. The public utility posted 
the offer for 30 minutes.
    On the day the offer was posted, the affiliate requested all of the 
megawatts posted. Later the same day, a non-affiliated entity requested 
a quantity of energy under the same terms given to the affiliate. The 
public utility agreed to that request as well.
    Three weeks later, a second non-affiliated entity requested energy 
on the same terms that the public utility had given the affiliate and 
the first non-affiliated entity. The public utility responded that it 
could only offer capacity and energy on a month-to-month basis and at a 
different price than it had given the affiliate. When the second non-
affiliated entity asked about the sales that the public utility had 
made to its affiliate and the first non-affiliated entity, the public 
utility replied that that offering was posted on its website on one 
day, and that the price had to go up after that day because the public 
utility faced new environmental requirements and other restrictions.

Discussion

    This sale raises the issue of whether the public utility provided 
an undue preference to its affiliate by telling the affiliate to look 
for an offer prior to posting the offer on its website.\1\ The

[[Page 17151]]

Commission clarifies such an advance communication to an affiliate 
provides an undue preference in violation of section 205 of the Federal 
Power Act (FPA).
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    \1\ There are several problems with this communication: the 
public utility gave advance notice of the posting to the affiliate--
shortly after the affiliate's telephone request for power. The 
public utility offered the power for sale for only a half-hour the 
following day. The short duration of the posting enhanced the value 
of the tip to look for the posting.
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    Under section 205 of the FPA, the Commission has jurisdiction over 
all rates and charges for the transmission or sale of electric energy 
for resale in interstate commerce by public utilities. Section 205(b) 
prohibits a public utility from making or granting undue preference or 
advantage to any person or subjecting any person to any undue 
preference or disadvantage or maintaining any unreasonable difference 
in rates, charges, services or facilities with respect to 
jurisdictional transmission or sales.
    In Detroit Edison Company, et al. (Detroit Edison), 80 FERC para. 
61,348 at 62,197-98 (1997), and Allegheny Power Service Corporation 
(Allegheny), 82 FERC para. 61,245 (1998), the Commission provided 
procedures for notice and posting of affiliate transactions. In 
particular, Detroit Edison established three conditions to guard 
against preferences to affiliates in sales: (1) A public utility may 
sell power to its affiliate only at a rate that is no lower than the 
rate it charges non-affiliates; (2) a public utility offering to sell 
power to an affiliated marketer must make the same offer, at the same 
time, to non-affiliated entities via its electronic bulletin board; and 
(3) the public utility must post simultaneously on its electronic 
bulletin board the actual price charged to its affiliate for all 
transactions.\2\ However, Detroit Edison does not directly address 
whether a public utility may alert an affiliate to a prospective 
offering prior to actually posting the offering on its website.
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    \2\ The Commission did not specify what it means to ``post'' 
information on an ``electronic bulletin board.'' With more pervasive 
use of the Internet, ``posting'' information regarding electric 
sales or transmission transactions generally means to place it on an 
Internet site.
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    In UtiliCorp United, Inc., et al. (in which the Commission 
authorized a public utility to sell power at market-based rates), the 
Commission specifically required that all market information that is 
shared with an affiliate must be shared with non-affiliates:
    All market information shared with an affiliated power marketer 
must be disclosed simultaneously [to non-affiliates]. This includes 
information on sales or purchases that will not be made. . . . If there 
is any communication between the two concerning the utility's power or 
transmission business--broker-related or not, present or future, 
positive or negative, concrete or potential, significant or slight--it 
must be simultaneously communicated to all non-affiliates.\3\
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    \3\ 75 FERC para. 61,168 at 61,557 (1996), reh'g denied, 76 FERC 
para. 61,192 (emphasis in original); accord Cambridge Electric Light 
Company, et al., 85 FERC para. 61,217 at 61,898 (1998).
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    Notifying an affiliate to look for a posting is market information 
that a public utility must communicate simultaneously to non-
affiliates. This is consistent with the Commission's ruling in the 
transmission context that direct communication by phone is not equal to 
posting information on OASIS. In American Electric Power Service 
Corporation, et al., The Commission ruled that transmission providers 
may not disseminate transmission information to merchant function 
employees or affiliated marketers by phone, while requiring non-
affiliates to search the OASIS. Indeed, the Commission stated that 
transmission employees may not ``selectively inform wholesale merchant 
employees that transmission information will be posted on the OASIS at 
a specific time.'' \4\
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    \4\ 81 FERC para. 61,332 at 62,516 (1997).
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    Therefore, the Commission clarifies that market information is not 
limited to an actual offer to sell or purchase power; it includes the 
timing of electronic postings. Public utilities may not selectively 
communicate any market information to or with affiliates. Market 
information that is given to an affiliate must be disclosed 
simultaneously to all non-affiliates.

    By the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 99-8746 Filed 4-7-99; 8:45 am]
BILLING CODE 6717-01-M