CFTC Issues Final Order to Exempt Certain Specified Transactions of Regional Transmission Organizations and Independent System Operators
The CFTC approved a final order that exempts certain specified transactions of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) from certain provisions of the Commodity Exchange Act (CEA) and Commission regulations. Cadwalader represented PJM Interconnection, L.L.C and the Electric Reliability Council of Texas, Inc. in obtaining the exemptive order.The Commission voted to approve the relief 5 to 0 via seriatim. The final order exempts the purchase or sale of specifically defined "financial transmission rights," "energy transactions," "forward capacity transactions," and "reserve or regulation transactions" that are offered or sold in a market administered by one of the petitioning RTOs or ISOs pursuant to a tariff or protocol that has been approved or permitted to take effect by FERC or PUCT. The final order also exempts persons offering, entering into, rendering advice, or rendering other services with respect to those transactions.
To be eligible for the exemption, the transactions must be entered into by persons who are: (1) "appropriate persons," as defined in Section 4(c)(3)(A)-(J) of the CEA; (2) "eligible contract participants," as defined in Section 1a(18) of the CEA and Commission regulations; or (3) in the business of (i) generating, transmitting, or distributing electric energy, or (ii) providing electric energy services that are necessary to support the reliable operation of the transmission system. Under the order, the Commission’s anti-fraud and anti-manipulation authority and scienter-based prohibitions will continue to apply. The exemption is also subject to certain conditions stated within the final order.
View Final Order in full here (links externally to CFTC website).See also: Q&A; Chairman Gensler's Statement of Support.Related News: "Requests by Independent System Operators and Regional Transmission Organizations for No-Action Relief" (March 26, 2013) and "CFTC Issues Final Order to Exempt Certain Non-Financial Energy Derivative Transactions between Government and/or Cooperatively-Owned Electric Utilities" (March 28, 2013).For a compilation of recent news items on the subject of jurisdiction over particular products and transactions, see "Current Topics - Product Characterization."