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FERC Issues Duty of Candor NOPR in Docket No. RM22-20-000

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Currently, there is no broadly applicable regulatorily-established duty imposed upon Federal Energy Regulatory Commission (“FERC”) market participants in the various FERC markets (power, natural gas, oil/liquids, hydroelectric) to communicate with candor when communicating with the Commission or certain Commission-approved entities. To date, FERC has relied upon a variety of its regulations – applicable in defined circumstances – in setting the expectation that persons and entities communicating with FERC will be accurate and truthful when addressing FERC-jurisdictional issues.

At its July Open Meeting on July 28, 2022, FERC proposed to revise 18 C.F.R. Pt. 1 to require that all entities communicating with FERC or other specified organizations on a matter related to FERC’s jurisdiction submit accurate and factual information, and not submit false or misleading information or omit material information.

If adopted, this proposed rule would broaden FERC’s Office of Enforcement’s purview to investigate potential violations of a duty of candor. The proposed rule would also subject a much broader group of energy market participants to potential investigation by the Office of Enforcement’s Division of Investigations.

Description of Proposed Duty of Candor Rule

  • The proposal is premised on FERC’s market behavior rule – 18 CFR 35.41(b) – which currently applies only to Market-Based Rate-authorized sellers of electricity, capacity, and ancillary services.

  • The new rule would apply to communications with FERC, its staff, and specific organizations involved in natural gas pipeline approval, operations, and sales under the NGA and NGPA (including Section 311 pipelines), oil and liquids transportation under the ICA, and hydroelectric licensing operations and electric reliability under the FPA – not just communications involving MBR sellers.

  • The proposed rule includes a safe harbor for the inadvertent disclosure of inaccurate or incomplete information that may apply if the entity has exercised due diligence to prevent such occurrences.

  • FERC seeks comments on the following:

    • Definition of “entity.” Should the term cover companies and individuals, as well as non-employee agents who communicate on behalf of said companies and individuals (e.g., outside counsel)?

      • Should any specific types of organizations or individuals be exempted?

    • Definition of “communication.” Should the term cover formal and informal, verbal and written, and all other methods of transmission?

    • Definition of “due diligence.” What facts and circumstances should be considered in raising this defense (e.g., steps taken to assure accuracy and the context in which communications are made).

      • What exceptions (if any) should be recognized for inadvertently providing inaccurate information?

  • Application. Should the rule apply to communications with the certain specified organizations that administer, participate in, or operate markets and facilities subject to the FERC’s jurisdiction, including:

    • FERC-approved market monitors;

    • FERC-approved RTOs/ISOs;

    • Jurisdictional transmission and transportation providers (power, natural gas, oil, liquids); and

    • NERC and its Reliability Entities?

  • DEADLINE TO COMMENT: Comments to the Notice of Proposed Rulemaking (NOPR) are due 60 days after publication in the Federal Register (approx. September 29, 2022).

The final vote on the NOPR was 4-1. Commissioner Danly dissented asserting, among other things, the proposed rule is “chillingly broad in its scope and, by its plain terms, would encompass constitutionally protected speech.”

Please contact Baker Botts with any questions you may have about this NOPR or if you need assistance in preparing or evaluating comments.


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