On November 15, 2013, the Federal Energy Regulatory Commission (“FERC”) issued a Final Rule amending its regulations to authorize electric transmission providers and interstate natural gas pipelines (collectively, “transmission operators”) to share non-public, operational information to promote reliability and enhance operational planning for both public utilities and pipelines. FERC is allowing transmission operators to share operational information, including non-public, commercially sensitive, customer-specific information, on a day-to-day basis.  The Commission states it seeks to encourage “robust communications . . . whenever necessary to promote reliable service.”  The sharing of such information is voluntary, and each transmission operator will determine what non-public information, if any, it will share with other transmission operators to promote reliability and operational planning.  FERC says that if this voluntary approach proves to be inadequate, it may revisit the need to require certain communications or information sharing between transmission operators.

This new rule is a result of FERC’s examination of gas-electric interdependence and coordination.  The increasing reliance on natural gas as fuel for electric generation makes communication between transmission operators in the electric and gas industries more important to ensuring the reliability and effectiveness of both systems.  Because gas pipelines require advance nominations, short-term swings in demand by gas-fired generators present challenges, particularly when the peak load times on interstate gas pipelines and electric transmission systems coincide.

After conducting multiple technical conferences, FERC has determined that one way to enhance coordination between gas pipelines and the electric industry is through better communication and the sharing of operational information among operators of pipelines and electric systems.  However, some transmission operators expressed reluctance to share information routinely because of concerns that such conduct could violate statutory prohibitions against undue discrimination or preferences, or the FERC’s Standards of Conduct. Multiple transmission operators asked FERC for guidance on whether the sharing of information among transmission operators was lawful and, if so, what types of information may be shared.

In the Final Rule, FERC has determined that the voluntary sharing of non-public operational information in accordance with the rule is not unjust, unreasonable, or unduly discriminatory or preferential under the Federal Power Act and the Natural Gas Act.  Accordingly, the Final Rule permits communication of a broad range of information that transmission operators deem necessary to promote reliable service to electric and gas transmission customers.  This information sharing can occur in all operational situations, not just emergencies.  Importantly, the Final Rule applies only to communications between and among interstate natural gas pipelines and public utilities that own, operate, or control facilities used for transmission of energy in interstate commerce subject to FERC’s jurisdiction.  The Final Rule does not authorize disclosure of non-public customer information to local distribution companies (LDCs), intrastate pipelines, or gatherers.  Electric utilities seeking to share information with LDCs, and presumably other non-jurisdictional entities, must seek approval to amend their tariffs to permit such disclosure.  In addition, FERC has adopted a “No-Conduit Rule” that prohibits recipients of non-public, operational information obtained under authority of the Final Rule from disclosing that information to a third party or any employee involved in marketing of gas or electric services, as defined by section 358.3(d) of the Commission’s regulations.

The Final Rule also includes FERC’s answers to certain questions on which it requested comments in its notice proposing the new regulations.  Among other things, FERC found it unnecessary to require a generator to notify its electric transmission operator that its natural gas service may be disrupted. However, FERC said that an electric transmission operator may file tariff provisions requiring generators to provide the transmission operator with information the operator requires for reliability purposes, such as anticipated fuel disruptions.  In addition, FERC will not require three-way communications involving the affected customer when that customer’s information is shared between electric transmission owners and interstate gas pipelines.

In response to this rule, interstate gas pipelines, electric utilities, and ISOs/RTOs should consider whether tariff revisions are necessary to facilitate communications encouraged by the rule.  Likewise, customers should be aware of proposed tariff revisions, so that they are in a position to assess their impact and comment, if necessary, in a timely manner.

Please contact Michael Thompson, Andrew Swers (Swers@wrightlaw.com), or David Shaffer or call (202) 393-1200 if you have any questions or would like further information regarding the Final Rule, or other natural gas or electric industry regulatory matters.