The Federal Energy Regulatory Commission (FERC or Commission) on July 18 issued a rule, initially proposed in July 2016,[1] restructuring the way it collects certain data for market-based rate (MBR) purposes and significantly expanding the information it collects from MBR holders. Under the Final Rule, FERC will now collect MBR application and certain compliance information in a new database with multiple data tables relating to one another via entity-specific, unique identification numbering (FERC’s new “relational database”), an intricate and entirely new electronic reporting system that will become compulsory in early 2021.[2] Order 860 also adopts changes to the ownership and the gas and electricity “affiliate” information required in an MBR Seller’s compulsory disclosures.
The Final Rule will take effect on October 1, 2020, and baseline submissions will be due by February 1, 2021.[3] As of February 1, 2021, prior to filing an application for initial MBR authority, a new Seller will be required to make a submission into the relational database, which will itself create the required asset appendices and indicative screens that filers had previously prepared independently. FERC affirmed that after January 31, 2021, a Seller will no longer report its affiliated generating and related electric and gas assets in the current .XLS format (an Appendix B Excel spreadsheet).[4] Instead, the information will now be submitted in XML format and the data to be collected in the relational database, which the Final Rule claims will generate an asset appendix.[5]
Although FERC touted the Final Rule as a “streamlining” effort, the Final Rule will require all existing and new Sellers to submit into the relational database extensive information concerning their upstream affiliates, generation assets, long-term firm sales and purchases, vertical assets (such as affiliated pipelines), and numerous other data points. A single MBR Seller may need to list up to 17 different classes of dates into the relational database, covering topics that appear only tenuously related to MBR authority or compliance with FERC regulations such as an exhaustive recitation of various plant-in-service dates, and names of both persons and entities who may have poorly defined relationships to a Seller.
In addition, the Final Rule expands the periodic “Notice of Change in Status” requirements for reporting certain affiliation, power sales, and related matters, separating it into a two-step process. Under current regulations, when an MBR Seller experiences a change in status involving a newly affiliated generator, power seller, transmission owner, or similar business event, the MBR Seller typically makes a single “Notice of Change in Status” filing that reports the facts to the Commission. Under the Final Rule this reporting obligation will become a two-step process. First, the affected Seller will need to update the relational database by the 15th day of the month following a change. Then, after the monthly update, the Seller must file a Notice of Change in Status on a quarterly basis (rather than the prior rolling 30-day deadline for MBR notices of change in status), contemporaneously with the Electric Quarterly Report (EQR) submission.[6]
FERC did not change the existing Commission policy regarding exempt (non-MBR) QFs and behind-the-meter generation. Sellers do not need to include such entities in their asset appendix or indicative screens and should not include these assets as part of the relational database submission for MBR purposes.
Some MBR Sellers are owned by or associated with “passive” investors that do not have the right, or only have very limited rights, to control the Seller’s business activities. Passive investments of this nature can sometimes be subject to requirements, under existing case law, to demonstrate through filed question-and-answer formatted text that the passive investors should be disregarded for regulatory purposes. The Final Rule eliminates the requirement to prepare and file these question-and-answer disclosures, if a Seller affirms to the Commission that the ownership interests consist solely of passive rights that are necessary to protect the passive investors’ or owners’ investments and do not confer control. The Final Rule indicates that it is not changing existing Commission policy regarding the definition of a passive investor (and noting that specific clarifications on the policy are beyond the scope of the Order 860 proceeding), but the Final Rule appears to reverse the existing construct regarding passive ownership interests. Many entities might exhibit “passive” ownership structures under existing regulations and therefore avoid the need to be identified by name even in the filing where the passive status of the investment is demonstrated, but the Final Rule appears to reverse that well-established treatment and require the public disclosure of these investors. These passive investor changes are the subject of several requests for clarification and/or rehearing, and we would not be surprised to see modifications of the Final Rule on this issue.[7]
As part of the Final Rule, a “data dictionary” has been posted on the Commission website to define the framework for Sellers to follow when submitting information. Minor or nonmaterial changes to the MBR Data Dictionary will be posted to the Commission website as is the method for EQRs, avoiding the need for formal proceedings to update these requirements for insignificant changes.
MBR Sellers and their investors should closely monitor FERC action on the multiple requests for clarification and rehearing that are now pending before the Commission. Some of those pleadings assert that the proposed technical disclosures for the relational database are burdensome, unclear, and repetitive. Others have asked the Commission to clarify its affiliation requirements that trigger disclosure in the database, suggesting that an investor (or investor group) should not be considered a Seller’s ultimate upstream affiliate based solely on holdings of publicly traded securities unless the facts and circumstances suggest that a holder of 10% or more of the publicly traded voting securities has an intent and ability to exercise control.
Entities subject to these requirements should also consider collecting and assembling the information required in the relational database at least several months prior to the October 2020 Final Rule effective date. Given prior experiences with FERC’s adoption of new IT-based filing and disclosure requirements, MBR Sellers may wish to develop and informally submit “sandbox” filings, to test the workability of the relational database, in advance of the February 1, 2021, filing requirement.
[1] Data Collection for Analytics and Surveillance and Market-Based Rate Purposes, Notice of Proposed Rulemaking, 156 FERC ¶ 61,045 (2016).
[2] Data Collection for Analytics and Surveillance and Market-Based Rate Purposes, Docket No. RM16-17-000, Final Rule, Order No. 860, 168 FERC ¶ 61,039 (2019)(hereinafter, Order 860 or Final Rule).
[3] Sellers that have MBR authority as of December 31, 2020, and Sellers that have filed for MBR authority, but have not received an order granting such authority as of January 1, 2021, must make a baseline submission into the relational database by February 1, 2021. Although these Sellers with pending MBR applications are required to submit their information into the relational database during this interim period, this information will not be used to process their filings. Therefore, Sellers with pending applications during this window of time must continue to submit their indicative screens and asset appendices as attachments to their MBR filings through the eFiling system.
[4] Sellers are currently required to submit an asset appendix that contains information regarding the generation assets, long-term firm purchases, and vertical assets that they and all of their affiliates own or control. Order No. 697, 119 FERC ¶ 61,295 at Appendix B; Order No. 816, 153 FERC ¶ 61,065 at P 20.
[5] FERC adopted the requirement that a Seller include, in its relational database submission, “any assets” that are owned or controlled by an affiliate that does not have MBR authority. FERC clarified that “any assets” refers to assets that are reportable in the asset appendix: generation assets, long-term PPAs, and vertical assets.
[6] 18 C.F.R. § 35.42.
[7] See Final Rule at ¶ 139.