[Federal Register: February 27, 2006 (Volume 71, Number 38)]
[Notices]
[Page 9811-9819]
[DOCID:fr27fe06-48]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL06-16-000]

Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead
Brownell, and Suedeen G. Kelly; Investigation of Terms and Conditions
of Public Utility Market-Based Rate Authorizations; Order Revising
Market-Based Rate Tariffs and Authorizations

Issued February 16, 2006.
    1. The Commission has decided to rescind Market Behavior Rules 2
and 6 and to codify the substance of Market Behavior Rules 1, 3, 4, and
5 in the Commission's regulations under the Federal Power Act (FPA).\1\
The central purpose of the Market Behavior Rules \2\ was to prohibit
market manipulation by public utility sellers acting under market-based
rate authority. This prohibition is set out in Market Behavior Rule 2.
Subsequent to the issuance of the Market Behavior Rules, Congress
provided the Commission with specific anti-manipulation authority in
the Energy Policy Act of 2005 (EPAct 2005).\3\ To implement this new
authority, the Commission recently issued Order No. 670, adopting a
final rule making it unlawful for any entity, including public utility
market-based rate sellers, to engage in fraudulent or deceptive conduct
in connection with the purchase or sale of electric energy, natural
gas, or transmission or transportation services subject to the
jurisdiction of the Commission.\4\ In order to avoid regulatory
uncertainty and confusion, to assure that all market participants are
held to the same standard, and to provide clarity to entities subject
to our rules and regulations, we rescind Market Behavior Rule 2
effective upon publication of this order in the Federal Register.
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    \1\ 16 U.S.C. 791a et seq. (2000).
    \2\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, ``Order Amending Market-Based Rate
Tariffs and Authorizations,'' 105 FERC ] 61,218 (2003), reh'g
denied, 107 FERC ] 61,175 (2004) at Appendix A (Market Behavior
Rules Order). The Market Behavior Rules are currently on appeal.
Cinergy Marketing & Trading, L.P. v. FERC, Nos. 04-1168 et al. (DC
Cir. Filed April 28, 2004).
    \3\ Energy Policy Act of 2005, Public Law No. 109-58, 119 Stat.
594 (2005). Congress prohibited the use or employment of ``any
manipulative or deceptive device or contrivance'' in connection with
the purchase or sale of electric energy or transmission services
subject to the jurisdiction of the Commission. Congress directed the
Commission to give these terms the same meaning as under the
Securities Exchange Act of 1934, 15 U.S.C. 78j(b) (2000).
    \4\ Prohibition of Energy Market Manipulation, Order No. 670, 71
FR 4244 (Jan. 26, 2006), FERC Stats. & Regs. ] 31,202, 114 FERC ]
61,047 (Jan. 19, 2006) (Order No. 670).
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    2. In addition, we will remove Market Behavior Rules 1, 3, 4, and 5
from public utility market-based rate tariffs and instead codify them
in our regulations, rescind Market Behavior Rule 6 as no longer
necessary, and rescind Appendix B of the Market Behavior Rules Order as
no longer applicable. Contemporaneously herewith, the Commission is
issuing a Final Rule in Docket No. RM06-13-000 \5\ which is being made
effective immediately upon publication in the Federal Register. The
Market Behavior Rules Codification Order incorporates Rules 1, 3, 4,
and 5 into our FPA regulations with no substantive change. In light of
this action, Market Behavior Rules 1, 3, 4, and 5 will no longer be of
any force or effect in market-based rate tariffs as of the date the
Market Behavior Rules Codification Order is effective.\6\
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    \5\ Compliance for Public Utility Market-Based Rate
Authorization Holders, Docket No. RM06-13-000, issued February 16,
2006 (Market Behavior Rules Codification Order).
    \6\ As provided for in the Market Behavior Rules Order, the
Market Behavior Rules have been included in tariff filings by a
number of market-based rate sellers. As a result of the changes
being made in this order and the contemporaneous Market Behavior
Rules Codification Order, the Market Behavior Rules no longer will
be part of seller's market-based rate tariffs. It would be
burdensome, however, to require sellers to make new tariff filings
for the sole purpose of removing the Market Behavior Rules from
their tariffs. Sellers need not do so, unless we direct otherwise in
the future. In the absence of any such direction, at such time as
sellers make any amendments to their market-based rate tariffs or
seek continued authorization to sell at market-based rates (e.g., in
their three-year update filings), sellers shall at that time remove
the Market Behavior Rules from their tariffs. Nonetheless, Market
Behavior Rules 2 and 6 will be of no force or effect in sellers'
tariffs as of the date this order is published in the Federal
Register, and Market Behavior Rules 1, 3, 4, and 5 will be of no
force and effect as of the effective date of the Market Behavior
Rules Codification Order.
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I. Background

    3. On November 17, 2003, acting pursuant to section 206 of the FPA,
the

Commission amended all market-based rate tariffs and authorizations to
include the Market Behavior Rules. We determined that sellers' market-
based tariffs and authorizations to make sales at market rates would be
unjust and unreasonable unless they included clearly-delineated rules
governing market participant conduct, and that the Market Behavior
Rules fairly apprised market participants of their obligations in
competitive power markets and were just and reasonable.\7\
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    \7\ Market Behavior Rules Order, 105 FERC ] 61,218 at P 3, 158-
74.
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    4. Market Behavior Rule 1 requires sellers to follow Commission-
approved rules and regulations in organized power markets. These rules
and regulations are part of the Commission-approved tariffs of
Independent System Operators (ISO) or Regional Transmission
Organizations (RTO), and, where applicable, market-based rate sellers'
agreements to operate within ISOs and RTOs bind them to follow the
applicable rules and regulations of the organized market.
    5. Market Behavior Rule 2 prohibits ``actions or transactions that
are without a legitimate business purpose and that are intended to or
foreseeably could manipulate market prices, market conditions, or
market rules for electric energy or electricity products.'' Actions or
transactions explicitly contemplated in Commission-approved rules and
regulations of an organized market, or undertaken by a market-based
rate seller at the direction of an ISO or RTO, however, are not
violations of Market Behavior Rule 2. In addition, Market Behavior Rule
2 prohibits certain specific behavior: Rule 2(a) prohibits wash trades,
Rule 2(b) prohibits transactions predicated on submitting false
information, Rule 2(c) prohibits the creation and relief of artificial
congestion, and Rule 2(d) prohibits collusion for the purpose of market
manipulation.
    6. Market Behavior Rule 3 requires sellers to provide accurate and
factual information, and not to submit false or misleading information
or to omit material information, in any communication with the
Commission, market monitors, ISOs, RTOs, or jurisdictional transmission
providers.
    7. Market Behavior Rule 4 deals with reporting of transaction
information to price index publishers. It requires that if a seller
reports transaction data, the data be accurate and factual, and not
knowingly false or misleading, and be reported in accordance with the
Commission's Policy Statement on price indices.\8\ Rule 4 also requires
that sellers notify the Commission of whether they report transaction
data to price index publishers in accordance with the Price Index
Policy Statement, and to update any changes in their reporting status.
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    \8\ Price Discovery in Natural Gas and Electric Markets,
``Policy Statement on Natural Gas and Electric Price Indices,'' 104
FERC ] 61,121 (2003) (Price Index Policy Statement).
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    8. Market Behavior Rule 5 requires that sellers retain for a
minimum three-year period all data and information upon which they
billed the prices charged for electricity and related products in sales
made under their market-based rate tariffs and authorizations or in
transactions the prices of which were reported to price index
publishers.
    9. Finally, Market Behavior Rule 6 directs sellers not to violate,
or to collude with others in actions that violate, sellers' market-
based rate codes of conduct or the Standards of Conduct under part 358
of our regulations.\9\
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    \9\ 18 CFR part 358 (2005). At the same time that the Market
Behavior Rules were adopted for jurisdictional wholesale electric
transactions, the Commission issued Order No. 644, which introduced
parallel provisions in part 284 of our regulations under the Natural
Gas Act governing pipelines and holders of blanket certificate
authority that sell natural gas at wholesale. 18 CFR 284.288 and
284.403 (2005). Not every aspect of the electric Market Behavior
Rules was applicable in the natural gas sales context, however. The
part 284 regulations encompass Market Behavior Rule 2, including
wash sales and collusion to manipulate, and Market Behavior Rules 4
and 5. Contemporaneously herewith, we also are issuing a final rule
in Docket No. RM06-5-000 making parallel changes in sections 284.288
and 284.403 of the Commission's regulations.
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    10. Following enactment of EPAct 2005, the Commission issued a
Notice of Proposed Rulemaking on October 20, 2005, in which we proposed
rules to implement the new statutory anti-manipulation provisions.\10\
In the Anti-Manipulation NOPR, we noted the overlap between Market
Behavior Rule 2 and the proposed EPAct 2005 regulations. We said that
we would retain Market Behavior Rule 2 for the time being, but also
indicated that we would seek comment on whether we should revise or
rescind Market Behavior Rule 2. In the meantime, we assured market
participants that we will not seek duplicative sanctions for the same
conduct in the event that conduct violates both Market Behavior Rule 2
and the proposed new anti-manipulation rule.\11\
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    \10\ Prohibition of Energy Market Manipulation, 113 FERC ]
61,067 (2005) (Anti-Manipulation NOPR).
    \11\ Id. at P 15. See also Enforcement of Statutes, Orders,
Rules, and Regulations, ``Policy Statement on Enforcement,'' 113
FERC ] 61,068 at P 14 (2005).
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    11. In an order dated November 21, 2005,\12\ the Commission, acting
pursuant to section 206 of the FPA, proposed to rescind the Market
Behavior Rules once we issued final regulations implementing the anti-
manipulation provisions of EPAct 2005 and have had the opportunity to
incorporate certain other aspects of the Market Behavior Rules in
appropriate Commission orders, rules, and regulations. The Commission
also requested comment on whether the Market Behavior Rules should be
revised or rescinded. We noted that rescission of the Market Behavior
Rules will simplify the Commission's rules and regulations, avoid
confusion, and provide greater clarity and regulatory certainty to the
industry. We emphasized our belief that rescinding the Market Behavior
Rules is consistent with Congressional intent in EPAct 2005, which
provided the Commission with explicit anti-manipulation authority, and
that rescission will simplify and streamline the rules and regulations
sellers must follow, yet not eliminate beneficial rules governing
market behavior.\13\
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    \12\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, 113 FERC ] 61,190 (2005) (November
21 Order).
    \13\ November 21 Order, 113 FERC ] 61,190 at P 13. At the same
time we issued a Notice of Proposed Rulemaking in Docket No. RM06-5-
000 proposing similar changes to sections 284.288 and 284.403 of the
regulations under the Natural Gas Act, 18 CFR 284.288 and 284.403
(2005).
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    12. The Commission received 21 comments and four reply comments in
response to the November 21 Order.\14\ Many of the comments support the
Commission's overall objectives in this proceeding, that is, to
simplify the Commission's rules and regulations, avoid confusion, and
provide greater clarity and regulatory certainty to the industry, while
not eliminating beneficial rules governing market behavior by
addressing them in other rules and regulations.
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    \14\ Entities filing comments and reply comments are listed in
the Appendix to this order, along with the acronyms for such
commenters. The Commission has accepted and considered all comments
filed, including late-filed comments. With respect to commenters
that also filed motions to intervene, we are treating this
proceeding as a rulemaking seeking comments from all interested
entities. See Investigation of Terms and Conditions of Public
Utility Market-Based Rate Authorizations, ``Order Addressing
Application of Ex Parte Rule and Requests for Extension of Time,''
104 FERC ] 61,132 at P 5 (2003).
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    13. On January 19, 2006, the Commission issued Order No. 670,
adopting regulations implementing the EPAct 2005 anti-manipulation
provisions. In Order No. 670 the Commission adopted a new part 1c of
our regulations under which it is

``unlawful for any entity, directly or indirectly, in connection with
the purchase or sale of electric energy or the purchase or sale of
transmission services subject to the jurisdiction of the Commission,
(1) to use or employ any device, scheme, or artifice to defraud, (2) to
make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading,
or (3) to engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon any entity.''\15\
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    \15\ 18 CFR 1c.2(a), 71 FR 4244, 4258 (2006).
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II. Discussion

A. Market Behavior Rule 2

    14. In the November 21 Order the Commission sought comment on
whether there is a need or basis for retaining existing Market Behavior
Rule 2 in light of the then-proposed anti-manipulation rule, and
whether the Commission should retain any of the affirmative defenses
against a claim of manipulation, that is, actions or transactions
explicitly contemplated by Commission rules, or undertaken at the
direction of an ISO or RTO, or actions taken for a ``legitimate
business purpose.''
1. Should the Commission Retain or Rescind Market Behavior Rule 2?
a. Comments
    15. Commenters were divided on the issue of whether Rule 2 should
be retained or rescinded in light of the anti-manipulation provisions.
Those in favor of retaining Rule 2 argue two principal points: first,
the foreseeability standard of Rule 2 reaches negligent conduct or
other conduct that falls short of being ``provably'' intentional but
nonetheless has a foreseeable impact on rates; and second, Rule 2 has
lasting utility because it provides a remedy for activities that may
not be fraudulent, but could nevertheless function to manipulate prices
for wholesale electric power and transmission services.\16\
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    \16\ CEOB at 4-7; CAISO at 3-7; CPUC at 5-9; NASUCA at 5-10;
NECPUC at 5-6; NJBPU at 5-7; NYISO at 7-12; PG&E at 7-12; PJMICC at
7-11; TDUS at 17-20.
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    16. Several commenters argue that Rule 2 should be retained because
it prohibits conduct that ``foreseeably could manipulate market
prices,'' and does not require the showing of scienter (intentional or
reckless conduct), which means that Rule 2 reaches a broader range of
conduct that may adversely affect consumers and energy markets than
would the proposed anti-manipulation rule alone.\17\ CPUC and others
argue that nothing in EPAct 2005 dictates or justifies the repeal of
Rule 2. They argue that, in determining whether rates are just and
reasonable, the Commission should only focus on the effect of a
seller's action and not on the seller's intent, and that relying solely
on intent may result in rates becoming unjust and unreasonable because
it would limit the Commission's ability to remedy conduct falling short
of being intentional but whose rate-altering effect is foreseeable.\18\
PG&E and others argue that there is no risk of confusion or double
jeopardy created by having both the Market Behavior Rules and the anti-
manipulation rule promulgated pursuant to EPAct 2005, and TDUS argues
that repeal of the Market Behavior Rules may well create confusion
rather than promote clarity.\19\ More generally, TDUS argues that the
need for vigilant consumer protection is just as strong today as it was
in 2003 when the Market Behavior Rules were adopted.\20\ NYISO comments
that the scienter standard of the proposed anti-manipulation
regulations will make extensive discovery a necessity and greatly
increase the cost of enforcement for all parties involved.\21\
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    \17\ CAISO at 1-2, 8; CPUC at 4, 6-9; NASUCA at 5; NECPUC at 2,
6; NJBPU at 5-6; PJMICC at 3, 7-8, 10-11; TDUS (Reply) at 11-12.
    \18\ CPUC at 7-8; CEOB at 4; NASUCA at 5, 8; NECPUC at 6; PJMICC
at 10.
    \19\ PG&E at 12; NYISO at 14; TDUS at 14.
    \20\ TDUS at 5.
    \21\ NYISO at 11.
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    17. APPA/TAPS (which argue that Rule 2 should be interpreted to
include a scienter requirement) and others comment that Rule 2 should
be retained because it prohibits the exercise of market power.\22\ SMUD
notes that a tariff condition that protects the rights of consumers to
refunds of charges that are the product of the exercise of market power
or collusion is critical to customers who may have no antitrust remedy
for such conduct.\23\ PJM supports repeal of the Market Behavior Rules
(including Rule 2), but encourages the Commission to amplify its
continuing authority to take action to curb the exercise of market
power in particular transactions in contexts not necessarily including
fraud.\24\
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    \22\ APPA/TAPS at 3, 8-12; ISO-NE (Reply) at 11; PJM at 4-5;
TDUS at 2, 7.
    \23\ SMUD at 2-3.
    \24\ PJM at 1, 4-5.
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    18. Commenters advocating rescission of Rule 2 argue three main
points. First, commenters argue that the Commission should not retain
the foreseeability standard of proof of Rule 2 because of the clear
Congressional intent in section 1283 of EPAct 2005, which directs the
Commission to adopt a standard of proof based upon scienter.\25\
Second, commenters supporting rescission argue that there should be
only one definition or standard to define what constitutes market
manipulation. Retaining two sets of proscriptions, they argue, could
lead to regulatory uncertainty and confusion, and would be unduly
discriminatory because of the dual standard applicable to market-based
rate sellers of electricity while the remaining industry participants
would be covered solely by the new standard of section 1c.2.\26\ Third,
the anti-manipulation regulations represent an improvement over Rule 2
because, among other things, the language of new section 1c.2 provides
stakeholders with clarity of language not present in Rule 2, and
similarly, the broad language of section 1c.2 means that any behavior
forbidden by Rule 2 would also act as a fraud within the meaning of the
anti-manipulation regulations.\27\
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    \25\ Ameren at 7; Cinergy at 7-8; EEI at 4-5, 8-9; EPSA at 6-7;
PNMR at 8.
    \26\ Cinergy at 6-7; EEI at 5; PJM at 1-2.
    \27\ Ameren at 6, 9; Cinergy at 7.
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    19. EEI disagrees with commenters who argue for retention of the
Market Behavior Rules in market-based rate tariffs on the theory that
they provide an additional check on unlawful exercise of market
power.\28\ To the contrary, EEI thinks the Commission has established
an increasingly sophisticated screening process to identify and require
mitigation of any potential market power a tariff applicant may
possess, prior to granting or reauthorizing market-based rate
authority, and has developed several other tools, including RTO market
rules and tariffs, market monitor oversight, and OMOI enforcement
capabilities, to prevent and remedy the exercise of market power.\29\
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    \28\ EEI (Reply) at 7-8.
    \29\ EEI (Reply) at 8.
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    20. Some commenters supporting rescission of Rule 2, however, do so
with the qualification that the specifically prohibited activities in
Rule 2(a) through 2(d) (i.e. wash trades, transactions predicated on
submitting false information, transactions creating and relieving
artificial congestion, and collusion for the purpose of market
manipulation) be retained to provide clearer guidance to market
participants.\30\ SUEZ supports rescission, but thinks the Commission
should take steps to explain that it intends to retain the precedent
that has

accumulated under the Market Behavior Rules.\31\
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    \30\ EEI at 6; Indicated Market Participants at 12-13; PNMR at
6-7; SCE at 4.
    \31\ SUEZ at 6, 10, referring to Intertie Bidding in the
California Independent System Operator's Supplemental Energy Market,
``Order Authorizing Public Disclosure of Staff Report of
Investigation,'' 112 FERC ] 61,333 (2005); see generally EPSA at 9-
10, 13.
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b. Commission Determination
    21. The Commission finds it unnecessary to retain Rule 2. Congress
prohibited market manipulation by any entity and defined manipulation
to include the requirement of scienter.\32\ It would be inconsistent
with Congress' direction if foreseeability were retained as a lesser
standard of proof for market manipulation perpetrated by public utility
market-based rate sellers. To avoid the potential for uneven
application of regulatory requirements based on whether an entity is a
public utility under the FPA and a ``non-jurisdictional'' entity, or
whether an entity is a public utility selling under market-based rate
authority or selling at cost-based rates, the same standard of proof
should apply to all entities and all jurisdictional sales for purposes
of determining whether market manipulation occurred. It is not
appropriate, as some commenters suggest, for the Commission to maintain
a lesser standard of proof for only certain market participants or
certain types of sales.
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    \32\ In new section 222 of the FPA, Congress used the terms
``manipulative or deceptive device or contrivance'' and directed
that they be given the same meaning as used in section 10b of the
Securities Exchange Act of 1934. It is well settled that those terms
require a showing of scienter, that is, an intent to deceive,
manipulate or defraud. Ernst & Ernst v. Hochfelder, 425 U.S. 185,
201 (1976). See Order No. 670, 114 FERC ] 61,047 at P 52-53.
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    22. The Commission rejects comments that suggest Rule 2 has a
purpose other than to prevent market manipulation, that is, also to
curb market power or anti-competitive conduct that does not meet the
deceptive conduct criteria for manipulation. Rule 2 focused on actions
or transactions intended to manipulate market prices, conditions, or
rules, not the existence or use of market power absent some
manipulation. Market power, of course, can be used by a seller to
manipulate markets; in such cases it is the act of manipulation--
perpetrating a fraud or deceit of some kind--that is the violation of
Rule 2 or of the new anti-manipulation rule.
    23. Generally speaking, however, market power is a structural issue
to be remedied, not by behavioral prohibitions, but by processes to
identify and, where necessary, mitigate market power that a tariff
applicant may possess or acquire. This occurs in the screening process
before the Commission grants an application for market-based rate
authority, on consideration of changes in the seller's status or
operations, and in the triennial review of market-based rate
authorization, all of which are designed to assure just and reasonable
rates. In addition, the Commission requires RTOs and ISOs to have
independent market monitors,\33\ and the Office of Market Oversight and
Investigations monitors market operations. When such monitoring detects
market abuse or structural problems, they will be addressed under FPA
sections 205 or 206 to assure that reliance on market mechanisms
produces just and reasonable rates.
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    \33\ The Commission issued a policy statement on market monitors
which discussed, among other things, referrals by market monitors to
the Commission when a market monitor finds actions by a market
participant that may be a violation of the Market Behavior Rules.
Market Monitoring Units in Regional Transmission Organizations and
Independent System Operators, ``Policy Statement on Market
Monitoring Units,'' 111 FERC ] 61,267 at P 6 and Appendix A
(Protocols on Referrals). We clarify that this Policy Statement
applies to potential violations of the new Order No. 670 anti-
manipulation rule in lieu of Market Behavior Rule 2, and will apply
to the requirements of Market Behavior Rules 1, 3, 4, 5, and 6 to
the extent they are incorporated into other parts of the
Commission's regulations.
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    24. With respect to the suggestion that the specific proscribed
behaviors in Market Behavior Rule 2(a)-(d) be retained, the Commission
finds this unnecessary. As we stated in issuing the new anti-
manipulation rule, the specifically prohibited actions in Rule 2 (i.e.,
wash trades, transactions predicated on submitting false information,
transactions creating and relieving artificial congestion, and
collusion for the purpose of market manipulation) all are prohibited
activities under new section 1c.2 of our regulations and are subject to
sanctions and remedial action.\34\ Furthermore, we recognize that fraud
is a very fact-specific violation, the permutations of which are
limited only by the imagination of the perpetrator. Therefore, no list
of prohibited activities could be all-inclusive. The absence of a list
of specific prohibited activities does not lessen the reach of the new
anti-manipulation rule, nor are we foreclosing the possibility that we
may need to amplify section 1c.2 as we gain experience with the new
rule, just as the SEC has done.\35\
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    \34\ Order No. 670, 114 FERC ] 61,047 at P 59.
    \35\ After considerable experience with Rule 10b-5, upon which
our new anti-manipulation rule is modeled, the SEC has expanded the
original Rule 10b-5 to add a number of specific provisions
describing prohibited conduct. See 17 CFR 240.10b-5-1 through
240.10b-5-14.
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    25. In short, rescission of Rule 2 is consistent with Congressional
direction and will not dilute customer protection. If conduct occurs
that is not the result of fraud or deceit but nonetheless results in
unjust and unreasonable rates, a person may file a complaint at the
Commission under FPA section 206, or the Commission on its own motion
may institute a proceeding under section 206, to modify the rates that
have become unjust and unreasonable. In many respects customers are
better protected by section 1c.2's breadth and purposeful design as a
broad ``catch all'' anti-fraud provision.\36\
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    \36\ Aaron v. SEC, 446 U.S. 680, 690 (1980); see also Schreiber
v. Burlington Northern, Inc., 472 U.S. 1, 6-7 (1985) (describing
section 10(b) as a ``general prohibition of practices * * *
artificially affecting market activity in order to mislead investors
* * * .''); Affiliated Ute Citizens of Utah v. United States, 406
U.S. 128, 151-53 (1972) (noting that the repeated use of the word
``any'' in section 10(b) and SEC Rule 10b-5 denotes a congressional
intent to have the provisions apply to a wide range of practices).
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2. Affirmative Defenses
a. Actions or Transactions Undertaken at the Direction of a Commission-
approved ISO or RTO
i. Comments
    26. Several commenters argue that actions undertaken at the
direction of a Commission-approved ISO or RTO should have explicit safe
harbor status because market participants should be able to rely on the
directives of an ISO or RTO without fear of prosecution for market
manipulation for following such provisions.\37\ CEOB and PJM, however,
caution that such an affirmative defense should not be allowed in
circumstances where: (1) The market participant does not have ``clean
hands'' in creating the situation that necessitated the directions of
the ISO/RTO; (2) the rule/direction is general or ambiguous; or (3)
there is any associated fraudulent conduct because a market seller
should not be able to use the RTO as a shield for those activities not
explicitly permitted by market rules or where the RTO did not
specifically prohibit the behavior.\38\ Similarly, SCE, informed by its
experience during the California energy crisis of 2001-2002, argues
that actions which were individually contemplated by ISO/RTO rules
should not categorically be exempt from punishment should the
Commission find that, in combination, intentional, unlawful market
manipulation has nevertheless occurred.\39\

ii. Commission Determination
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    \37\ Ameren at 8; CAISO at 11; EEI at 6; Indicated Market
Participants at 11-12; NYISO at 16-17; PG&E at 14; SUEZ at 1, 7.
    \38\ CEOB at 7; PJM at 6.
    \39\ SCE at 4.
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    27. Comments that market participants should be able to rely on the
directives of an ISO or RTO make a valid point. As the Commission
stated in Order No. 670, if a market participant undertakes an action
or transaction that is explicitly contemplated in Commission-approved
rules and regulations, we will presume that the market participant is
not in violation of section 1c.2. If a market participant undertakes an
action or transaction at the direction of an ISO or RTO that is not
approved by the Commission, the market participant can assert this as a
defense for the action taken.\40\ Of course, if a market participant
acting with the requisite scienter has provided inaccurate or
incomplete information to the ISO or RTO, and the ISO and RTO acts in
reliance on the false or incomplete information, following such ISO or
RTO directions is no defense to such manipulative conduct for that
market participant. Just as we reject calls for inclusion of a list of
prohibited conduct in section 1c.2, we similarly reject a list-type
approach to defenses. Instead, we will evaluate all of the facts and
circumstances of an allegation of market manipulation before deciding
how to proceed.
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    \40\ Order No. 670 at P 67.
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b. Legitimate Business Purpose
i. Comments
    28. Commenters are divided on whether the Commission should retain
the ``legitimate business purpose'' provision of Rule 2. CEOB and CAISO
oppose retention because in their view there is simply no manner in
which activity taken with intent to defraud can constitute a legitimate
business practice.\41\ CPUC argues that no such ``good faith'' defense
exists in the context of SEC Rule 10b-5.\42\ NASUCA argues that the
Commission should not keep only aspects of Rule 2 that are favorable to
market-based rate sellers.\43\ EEI, however, thinks the affirmative
defense of legitimate business purpose was part of a generic definition
of market manipulation that was vague and confusing to many in the
industry, but it believes that the concept of legitimate business
purpose should be maintained as an affirmative defense.\44\ NYISO says
it would be appropriate to continue the legitimate business purpose
defense now specified in Rule 2 because this defense would ensure
proper consideration of the economic, commercial and physical
complexities of competitive energy markets, including such practices as
valid arbitrage between real-time and forward markets.\45\ EPSA argues
that the legitimate business purpose affirmative defense should also be
preserved given the intent standard required by EPAct 2005.\46\
Similarly, Indicated Market Participants argue that a legitimate
business purpose should be a complete defense to an allegation of
market manipulation whether under Market Behavior Rule 2 or under the
anti-manipulation rule.\47\
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    \41\ CEOB at 7; CAISO at 11-12.
    \42\ CPUC at 11.
    \43\ NASUCA at 20.
    \44\ EEI at 11.
    \45\ NYISO at 16-17.
    \46\ EPSA at 10, 13-14.
    \47\ Indicated Market Participants at 10-11.
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ii. Commission Determination
    29. In promulgating section 1c.2, the Commission purposefully
modeled its anti-manipulation rule after SEC Rule 10b-5 to provide
stakeholders with as much regulatory certainty and clarity as possible,
given the large body of precedent interpreting SEC Rule 10b-5.\48\ SEC
Rule 10b-5 does not include provisions for ``good faith'' defenses.
However, in all cases, the intent behind and rationale for actions
taken by an entity will be examined and taken into consideration as
part of determining whether the actions were manipulative behavior. The
reasons given by an entity for its actions are part of the overall
facts and circumstances that will be weighed in deciding whether a
violation of the new anti-manipulation regulation has occurred.
Therefore, the Commission rejects calls for inclusion of a ``legitimate
business purpose'' affirmative defense.
---------------------------------------------------------------------------

    \48\ Order No. 670, 114 FERC ] 61,047 at P 30-31.
---------------------------------------------------------------------------

B. Remedies and Sanctions

1. Comments
    30. A number of commenters arguing for retention of the Market
Behavior Rules express concern that the Market Behavior Rules provide
the Commission with remedies, such as disgorgement of unjust profits
for tariff violations, that may not be available under the anti-
manipulation regulations.\49\ These commenters also contend that civil
penalties may not be a sufficient deterrent and, regardless, such
sanctions are paid to the United States Treasury and not to the damaged
customers. NYISO seeks clarification on whether the Commission has
discretion to use monies it receives in the form of civil penalties to
compensate victims of market manipulation.\50\
---------------------------------------------------------------------------

    \49\ APPA/TAPS at 3, 13; CEOB at 3; NASUCA at 5, 7-8, 11-13;
NECPUC at 1, 3; NYISO at 10-13; PJMICC at 8-9; SMUD at 3; TDUS at
24-27, TDUS (Reply) at 14. ISO-NE, for instance, urges the
Commission to clarify that, under new FPA section 222, we are not
limited to imposing civil penalties in the event of market
manipulation, but may also order disgorgement of profits or other
economic benefits to be returned to ratepayers. ISO-NE (Reply) at
14-17.
    \50\ NYISO at 13.
---------------------------------------------------------------------------

    31. Arguing for repeal of the Market Behavior Rules, EEI submits
that, under new FPA section 222, disgorgement of profits proximately
linked to well-defined acts of market manipulation is a remedy
available to the Commission and applicable to all, and not limited to
market-based rate sellers.\51\
---------------------------------------------------------------------------

    \51\ EEI (Reply) at 4-5, 12-14.
---------------------------------------------------------------------------

2. Commission Determination
    32. Concerns over the extent of the Commission's remedial powers
are misplaced. The Market Behavior Rules Order addressed a concern,
stemming from the abuses in Western markets in 2000-2001, that there
were not clear rules to deal with abusive market conduct. By fashioning
tariff rules prohibiting manipulation, we established a clear basis for
ordering disgorgement of unjust profits, along with other remedial
actions, in the event of violations of such rules.\52\ With the
issuance of Order No. 670 and the availability of significant civil
monetary penalties for violations, the Commission now has a more
complete set of enforcement tools--both rules and remedies and/or
sanctions--to deal with market manipulation. The Commission will use
these authorities as the facts and circumstances of each case indicate,
as our discretion is at its zenith in determining an appropriate remedy
for violations.\53\ Accordingly, if companies subject to our
jurisdiction violate the statutes, orders, rules, or regulations
administered by the Commission, the Commission can order, among other
things, disgorgement of unjust profits.\54\

The Commission also has the option of conditioning, suspending, or
revoking market-based rate authority, certificate authority, or blanket
certificate authority.\55\ Moreover, while section 206 of the FPA does
not permit the Commission to establish just and reasonable rates prior
to the refund effective date established under section 206, the
Commission clearly has authority to order disgorgement of profits
associated with an illegally charged rate, i.e., a rate other than the
rate on file or in violation of a Commission rule, order, regulation,
or tariff on file.\56\ Therefore, the Commission may use disgorgement
of unjust profits where appropriate, including to remedy a violation of
the new anti-manipulation regulations.
---------------------------------------------------------------------------

    \52\ Market Behavior Rules Order, 105 FERC ] 61,218 at P 149
(stating ``in approving these Market Behavior Rules and requiring
sellers to be fully accountable for any unjust gains attributable to
their violation, we do not foreclose our reliance on existing
procedures or other remedial tools, as may be necessary, including
generic rule changes or the approval of new market rules applicable
to specific markets''). See also Market Behavior Rules Order, order
on reh'g, 107 FERC ] 61,175 at P 129.
    \53\ See Niagara Mohawk Power Corp. v. FERC, 379 F.2d 153, 159
(DC Cir. 1967); accord 16 U.S.C. 825h (2000); Mesa Petroleum Co. v.
FERC, 441 F.2d 182, 187-88 (DC Cir. 1971); Gulf Oil Corporation v.
FPC, 563 F.2d 588, 608 (3rd Cir. 1977), cert. denied 434 U.S. 1062,
reh'g denied, 435 U.S. 981 (1978); Consolidated Gas Transmission
Corp. v. FERC, 771 F.2d 1536, 1549 (DC Cir. 1985).
    \54\ See, e.g., Transcontinental Gas Pipe Line Corp. v. FERC,
998 F.2d 1313, 1320 (5th Cir. 1993) (holding the remedy of
disgorgement of ill-gotten profits for a violation of the Natural
Gas Act ``well within [the Commission's] equitable powers'');
Coastal Oil & Gas Corp. v. FERC, 782 F.2d 1249, 1253 (5th Cir. 1986)
(profits from illegal intrastate sales of gas in excess of a just
and reasonable rate may be subject to disgorgement).
    \55\ See, e.g., Enron Power Marketing, Inc., 103 FERC ] 61,343
at P 52 (2003); Fact-Finding Investigation of Potential Manipulation
of Electric and Natural Gas Prices, 99 FERC ] 61,272 at 62,154
(2002); San Diego Gas & Electric Company, 95 FERC ] 61,418 at
62,548, 62,565, order on reh'g, 97 FERC ] 61,275 (2001), order on
reh'g, 99 FERC ] 61,160 (2002); accord Enron Power Marketing, Inc.,
``Order Proposing Revocation of Market-Based Rate Authority and
Termination of Blanket Marketing Certificates,'' 102 FERC ] 61,316
at P 8 and n.10 (2003), and cases cited therein.
    \56\ Transcontinental Gas Pipe Line Corp., 998 F.2d 1313 at
1320; see also Dominion Resources, Inc. et al., 108 FERC ] 61,110
(2004) (disgorgement for violations of the Commission's Standards of
Conduct); El Paso Electric Company, 105 FERC ] 61,131 at P35 (2003)
(finding disgorgement an ``appropriate and proportionate remedy''
for a violation of the Federal Power Act); Kinder Morgan Interstate
Gas Transmission LLC, 90 FERC ] 61,310 (2000) (disgorgement ordered
to remedy preferential discounts to affiliates); Stowers Oil & Gas
Company, 44 FERC ] 61,128 (1988), reh. denied in part and granted in
part, 48 FERC ] 61,230 at 61,817 (1989), appeal dismissed sub nom.
Northern Natural Gas Co. v. FERC, Case Nos. 89-1512 et al., (DC Cir.
1992) (Commission ``properly exercised its broad equitable power''
in requiring disgorgement of unjust enrichment resulting from
illegal sales of gas).
---------------------------------------------------------------------------

    33. EPAct 2005 has enhanced the Commission's civil penalty
authority.\57\ Civil penalties, however, serve a different purpose from
disgorgement or other equitable remedies. As we have said, the purpose
of civil penalties is to ``encourage compliance with the law.'' \58\
The purpose of disgorgement, on the other hand, is to remedy unjust
enrichment. The Commission will choose from the full range of available
remedies and penalties--revocation, suspension, or conditioning of
authority, disgorgement, and civil penalties--according to the nature
of the violation and all of the facts presented. The imposition of both
remedies and civil penalties in tandem may be necessary under certain
circumstances to reach a fair result.\59\ These are separate powers
available to the Commission, as they arise under different provisions
of the FPA.\60\
---------------------------------------------------------------------------

    \57\ EPAct 2005 expanded the Commission's FPA civil penalty
authority to encompass violations of all provisions of FPA part II
(EPAct 2005 section 1284(e)(1), amending FPA section 316A(a)), and
established the maximum civil penalty the Commission can assess
under FPA part II as $1 million per day per violation. EPAct 2005
section 1284(e)(2), amending FPA section 316A(b).
    \58\ Procedures for the Assessment of Civil Penalties under
Section 31 of the Federal Power Act, Order No. 502, 53 FR 32035
(Aug. 23, 1988), FERC Stats. & Regs. ] 30,828 (Aug. 17, 1988).
    \59\ Policy Statement on Enforcement, 113 FERC ] 61,068 at P 12
(2005) (``Our enhanced civil penalty authority will operate in
tandem with our existing authority to require disgorgement of unjust
profits obtained through misconduct and/or to condition, suspend, or
revoke certificate authority or other authorizations, such as
market-based rate authority for sellers of electric energy'').
    \60\ The authority to order disgorgement and other equitable
remedies arises under the ``necessary or appropriate'' powers of
section 309 of the FPA. Towns of Concord v. FERC, 955 F.2d 67, 73
(DC Cir. 1992). The authority to impose civil penalties arises under
section 316A of the FPA as amended by EPAct 2005.
---------------------------------------------------------------------------

    34. We note that other agencies also impose civil penalties and
equitable remedies in tandem. For example, the SEC can require an
accounting and disgorgement to investors for losses and also impose
penalties for the misconduct, and the CFTC can order restitution or
obtain disgorgement and also impose fines for violations.\61\
Similarly, in the environmental context, the government is free to seek
an equitable remedy in addition to, or independent of, civil
penalties.\62\ When we impose disgorgement as a remedy, we have broad
discretion in allocating monies to those injured by the violations. As
we noted in our Policy Statement on Enforcement, each case depends on
the circumstances presented, and the Commission will not predetermine
which remedy and/or sanction authorities it will use.\63\
---------------------------------------------------------------------------

    \61\ See sections 21-21C of the Securities Exchange Act, 15
U.S.C. 78u-78u-3 (2000); SEC v. Happ, 392 F.3d 12, 31-33 (1st Cir.
2004) (upholding SEC's imposition of both disgorgement and a civil
penalty equal to the amount of disgorgement; further, the court
noted that the wrongdoer bears the risk of uncertainty in
calculating the amount of disgorgement). The CFTC can revoke or
suspend a registration, suspend or prohibit certain trading, issue
cease and desist orders, order restitution, and seek equitable
remedies (injunction, rescission, or disgorgement), all in addition
to imposing a monetary fine. 7 U.S.C. 13a and 13b (2000); Comm. Fut.
L. Rep. (CCH) ] 26,265 at 42,247 (1994).
    \62\ See, e.g., Tull v. United States, 481 U.S. 412, 425 (1987)
(holding that the Clean Water Act does not intertwine equitable
relief with the imposition of civil penalties; instead, each kind of
relief is separately authorized in distinct statutory provisions).
    \63\ Policy Statement on Enforcement, 113 FERC ] 61,068 at P 13
(2005) (``[W]e will not prescribe specific penalties or develop
formulas for different violations. It is important that we retain
the discretion and flexibility to address each case on its merits,
and to fashion remedies appropriate to the facts presented,
including any mitigating factors.'').
---------------------------------------------------------------------------

C. Market Behavior Rules 1, 3, 4, 5, and 6

    35. In the November 21 Order, we indicated that some provisions of
the Market Behavior Rules, such as Rules 1 and 6, restate existing
obligations, and that other parts of the Market Behavior Rules, such as
Rule 3 and the first part of Rule 4, would be covered by the new anti-
manipulation rule. Other rules, we noted, should be incorporated into
other regulatory requirements. \64\ We indicated that action on the
Market Behavior Rules would be taken in such a way as to assure there
would be no gap in regulatory requirements.
---------------------------------------------------------------------------

    \64\ November 21 Order at P 19-23.
---------------------------------------------------------------------------

1. Comments
    36. Some commenters addressed Rule 1, arguing that a requirement to
comply with organized market rules should be retained because these
markets may not have adequate remedies for violations of their rules,
or that such rules can be violated without fraudulent behavior.\65\
NASUCA argues that Rule 1 provides a disgorgement remedy when a
seller's conduct violates the tariff rules of another utility (the
RTO).\66\ On the other hand, Indicated Market Participants support
elimination of Rule 1, but ask the Commission to make clear that
compliance with the requirements of an organized market is an
affirmative defense to a claim of manipulation.\67\
---------------------------------------------------------------------------

    \65\ APPA/TAPS at 3; CAISO at 10; CPUC at 3, 5-6; NYISO at 14-
15.
    \66\ NASUCA at 6-7. NASUCA notes that disgorgement is available
as a remedy when a seller violates its own tariff but, absent Rule
1, it is not clear that the disgorgement remedy (as opposed to
penalties that may apply under the RTO tariff) would be available
for a seller's violation of RTO tariff provisions or rules.
    \67\ Indicated Market Participants at 15-16.
---------------------------------------------------------------------------

    37. Other commenters addressed Rule 3, suggesting that the
requirement of providing accurate and factual information in
communications is broader than prohibiting manipulation. NASUCA
believes that Rule 3 covers misinformation that could be harmful but
that does not amount to intentional misrepresentation, such as
negligent transaction reporting that could manipulate index prices.\68\
NYISO agrees and urges the Commission to retain a broad requirement for
accurate and complete information provided to RTOs, ISOs, and the
Commission.\69\ PJM likewise says that Rule 3 is needed to impose an
affirmative duty to provide accurate information even in circumstances
involving no intent to

deceive.\70\ CAISO argues that Rule 3 prohibits submitting any false
information, not just material information.\71\ SCE argues that Rule 3
is a superior formulation to the anti-manipulation rule and urges that
it be used instead of the Rule 10b-5 language.\72\
---------------------------------------------------------------------------

    \68\ NASUCA at 21.
    \69\ NYISO at 19.
    \70\ PJM at 7-8; TDUS at 21.
    \71\ CAISO at 12.
    \72\ SCE at 6; see also Ameren at 11; PG&E at 14.
---------------------------------------------------------------------------

    38. Some commenters believe Rule 4 is unnecessary, arguing that
false reporting to an index publisher would be a violation of the new
anti-manipulation rule. EPSA, for instance, urges the Commission to
repeal Rule 4 but reaffirm the applicability of the Policy Statement on
price indices.\73\ Ameren, on the other hand, proposes that Rule 4 be
added to the anti-manipulation regulations to explicitly require any
entity to provide accurate and factual information to price index
publishers.\74\ CAISO believes that it is necessary to maintain a
separate requirement in Rule 4 to report transaction information
accurately to the extent a seller reports such information to price
index publishers, because the accuracy of the information published
should not depend upon whether the provider of the information had an
intent to defraud.\75\ EEI sees value in the guidance provided by Rule
4 and suggests that it be adopted as a Commission rule, thereby
applying to all market participants.\76\ TDUS calls for the retention
of requirements to report changes in reporting status.\77\
---------------------------------------------------------------------------

    \73\ EPSA at 11-12, 15-16. See also SUEZ at 10-11; Indicated
Market Participants at 16-19.
    \74\ Ameren at 11; SCE at 6.
    \75\ CAISO at 12.
    \76\ EEI at 12-13.
    \77\ TDUS at 27.
---------------------------------------------------------------------------

    39. There was little controversy over Rule 5, as parties generally
recommended that the record retention requirement be retained. CAISO
says the data retention requirement is crucial to the Commission's
enforcement powers.\78\ The Indicated Market Participants say that the
record retention requirement more appropriately belongs in the
Commission's general regulations so that it will be applicable to more
than just market-base rate sellers.\79\ EEI supports keeping the three-
year retention requirement, noting that otherwise the default ten-year
period of part 125 of the Commission's regulations might be deemed to
apply.\80\ NASUCA, however, is concerned that moving the record
retention requirement to another rule might limit ``remedies for the
benefit of consumers when records are not kept.''\81\
---------------------------------------------------------------------------

    \78\ CAISO at 10. See also CPUC at 9; TDUS at 27.
    \79\ Indicated Market Participants at 17-18.
    \80\ EEI at 13.
    \81\ NASUCA at 7.
---------------------------------------------------------------------------

    40. There also was general agreement that Rule 6, for the most
part, restates requirements independently applicable to market-based
rate sellers under each seller's code of conduct or by the Standards of
Conduct in Part 358 of the Commission's regulations. PJM, EEI, and EPSA
think Rule 6 may be rescinded as duplicative and unnecessary.\82\ APPA/
TAPS, however, believes that Rule 6 should be retained because market-
based rate sellers' codes of conduct and the Standards of Conduct do
not identify remedies for violations, thus potentially leaving the
Commission without an appropriate remedy.\83\ SCE, on the other hand,
expresses concern that aspects of Rule 6, particularly its prohibition
of collusion, may not be captured by the proposed anti-manipulation
regulations because there are collusive activities that do not amount
to fraud.\84\
---------------------------------------------------------------------------

    \82\ PJM at 8; EEI at 13; EPSA at 16.
    \83\ APPA/TAPS at 13. APPA/TAPS agrees that Rule 6 does not
itself impose any new obligation, but notes that the Market Behavior
Rules also provide for remedies for rule violations. Id.
    \84\ SCE at 7. SCE is concerned that market participants could
collude, through a combination of lawful means, to accomplish an
unlawful purpose. Id.
---------------------------------------------------------------------------

2. Commission Determination
    41. The Commission already indicated that certain requirements of
the Market Behavior Rules would be recast in other Commission rules or
regulations. Upon consideration of the comments, we have determined
that there is benefit to incorporating most of the non-manipulation
provisions of the Market Behavior Rules into the Commission's
regulations, and we do so contemporaneously in the Market Behavior
Rules Codification Order. While the basis for incorporating Rules 1, 3,
4, and 5 in our regulations is discussed there, we note the value
provided by these rules briefly below. We also discuss the reason for
rescinding Rule 6 as unnecessary.
    42. Market Behavior Rule 1 is applicable in organized RTO or ISO
markets. While it is essentially a restatement of existing obligations
that are in the tariffs of the RTOs and ISOs, applicable to market
participants through their participant agreements, there is value to
customers in reinforcing the obligation to operate in accordance with
Commission-approved rules and regulations by placing this expectation
in the Commission's regulations. Accordingly, the Market Behavior Rules
Codification Order includes Market Behavior Rule 1 in the Commission's
regulations.
    43. Market Behavior Rule 3 requires accurate and factual
communications with the Commission, Commission-approved market
monitors, Commission-approved RTOs and ISOs, or jurisdictional
transmission providers. In the November 21 Order we commented that this
requirement would be covered by the new anti-manipulation rule, and it
could be confusing to have a duplicate rule regarding accurate and
factual information.\85\ As commenters point out, however, this rule is
somewhat broader than the new anti-manipulation rule, as it applies to
all communications, not just those that are material in furtherance of
a fraudulent or deceptive scheme. Accordingly, we believe the substance
of Rule 3 can be incorporated in our regulations without duplicating or
causing undue confusion with respect to the new anti-manipulation rule.
---------------------------------------------------------------------------

    \85\ November 21 Order at P 19.
---------------------------------------------------------------------------

    44. Market Behavior Rule 4 requires sellers to provide accurate
data to price index publishers, if the seller is reporting transactions
to such publishers, and includes a requirement that sellers notify the
Commission of their price reporting status and of any changes in that
status. While a deliberate false report would be a violation of the new
anti-manipulation rule, there is no confusion in stating this in our
regulations and thereby reinforcing the importance of the Price Index
Policy Statement. The second aspect of Market Behavior Rule 4,
notification to the Commission of the market participant's price
reporting status and of any changes in that status, is not otherwise
provided for. This is a simple and non-burdensome way for the
Commission to be informed of the prevalence of price reporting to price
index developers, and is included in the Market Behavior Rules
Codification Order.\86\
---------------------------------------------------------------------------

    \86\ As is discussed in the Market Behavior Rules Codification
Order, codification of the notification requirement does not mean
that sellers who have previously provided notifications pursuant to
Rule 4 now must repeat that notification. Only sellers who have not
previously provided a notification of their price reporting status,
and sellers who have a change in their reporting status, are
required to notify the Commission. In other words, codification of
Rule 4 does not increase the burden of, or requirements for,
notification in any way.
---------------------------------------------------------------------------

    45. Market Behavior Rule 5 requires sellers to maintain certain
records for a period of three years to reconstruct prices charged for
electricity and related products. This is different from the record
retention requirements in part

125 of our regulations, which largely are related to cost-of-service
rate requirements.\87\ Given the importance of records related to
charges under market-based rate authority to any investigation of
possible wrongdoing, a separate record retention requirement
specifically for market-based transactions is necessary. We include the
Rule 5 record retention requirement in the Market Behavior Rules
Codification Order.\88\
---------------------------------------------------------------------------

    \87\ 18 CFR Part 125 (2005).
    \88\ Order No. 670, 114 FERC ] 61,047 at P 62-63. In a Notice of
Proposed Rulemaking in Docket No. RM06-14-000, issued
contemporaneously herewith, we propose to extend the record
retention period to five years. We encourage sellers to take the
proposed change into account in their record retention policies.
---------------------------------------------------------------------------

    46. Market Behavior Rule 6 requires adherence to a market-based
rate seller's code of conduct and to the Order No. 2004 Standards of
Conduct, and prohibits collusion to violate codes of conduct or the
Standards of Conduct. The Standards of Conduct are already in our
regulations. Many market-based rate sellers have a code of conduct in
their tariff as a result of the authorization granted by the Commission
to make market-based rate sales.\89\ As for collusion, to the extent a
seller colludes to violate either a code of conduct or the Standards of
Conduct, the collusion would be a violation of the new anti-
manipulation rule. In light of these facts, we find it unnecessary to
codify Rule 6. Accordingly, we will rescind Market Behavior Rule 6
effective upon publication of this order in the Federal Register.
---------------------------------------------------------------------------

    \89\ To safeguard against affiliate abuse, the Commission
requires affiliates of public utilities, when they request market-
based rate authority, to submit a code of conduct to govern their
relationship with the affiliated utility. See, e.g., Potomac
Electric Power Company, 93 FERC ] 61,240 at 61,782 (2000); Heartland
Energy Services, Inc., 68 FERC ] 61,223 at 62,062-63 (1994). Not all
market-based rate sellers have codes of conduct. In addition, the
Commission may waive the code of conduct requirement where there are
no captive customers and, therefore, no potential for affiliate
abuse. Alcoa, Inc. 88 FERC ] 61,045 at 61,119 (1999).
---------------------------------------------------------------------------

D. Miscellaneous Issues

1. The Commission Can Rescind the Market Behavior Rules in a Section
206 Order
a. Comments
    47. A few commenters advocating retention of the Market Behavior
Rules argue that the Commission has not found the Market Behavior Rules
unjust and unreasonable. NASUCA, PG&E, and PJMICC contend that such a
finding is a necessary prerequisite to acting under FPA section 206 to
remove the Market Behavior Rules from market-based tariffs and
authorizations. These commenters contend that there have been no
changed circumstances warranting rescission of the Market Behavior
Rules.\90\ Other commenters, however, argue that it is unduly
discriminatory, confusing, and duplicative to retain the Market
Behavior Rules given the implementation of the new anti-manipulation
rule applicable to all entities, not just market-based rate
sellers.\91\
---------------------------------------------------------------------------

    \90\ NASUCA at 14; PG&E at 4, 7; PJMICC at 6-7.
    \91\ EEI (reply) at 15; Cinergy at 4. EEI also argues that the
Commission has ample evidence to find that retaining the Market
Behavior Rules in market-based rate tariffs would be unduly
discriminatory and, therefore, unjust and unreasonable. EEI (reply)
at 15.
---------------------------------------------------------------------------

b. Commission Determination
    48. The Commission is acting within the scope of its authority
under section 206 of the FPA in rescinding the Market Behavior Rules 2
and 6. Although the Commission in most circumstances would need to find
that existing rates, terms or conditions are unjust, unreasonable,
unduly discriminatory or preferential in order to modify them under
section 206, here such a finding is not necessary because, as discussed
in greater detail below, we are basing our changes to public utility
tariffs on the change in law in EPAct 2005 and the incorporation of
substitute anti-manipulation provisions in our regulations.
Additionally, were we not to modify public utility tariffs to delete
Market Behavior Rule 2, public utilities would be subject to two
differing standards for manipulative practices while other market
participants would be subject to one standard for manipulative
practices. We do not believe this non-comparable treatment is
justified.
    49. The Market Behavior Rules were based upon the Commission's
findings in 2003 that market-based rate sellers' existing tariffs were
unjust and unreasonable without provisions to prohibit market
manipulation.\92\ Since that time, circumstances have changed
significantly with enactment of EPAct 2005. Congress has provided the
Commission with an anti-manipulation statute and expressly required
that manipulation include the requirement of scienter. Consistent with
this Congressional mandate, the Commission has adopted a comprehensive
new rule prohibiting energy market manipulation.
---------------------------------------------------------------------------

    \92\ Market Behavior Rules Order, 107 FERC ] 61,175 at P 162;
order on reh'g, 107 FERC ] 61,175 at P 161.
---------------------------------------------------------------------------

    50. The central reason for adopting the Market Behavior Rules in
2003 was the absence of any rules or regulations concerning market
manipulation. That is no longer the case. Given the adoption of
implementing regulations for the Commission's new statutory anti-
manipulation authority, it would be inappropriate to maintain a
differently worded tariff rule barring manipulation, that is, a rule
that may not fully comport with Congressional intent. There should not
be any inconsistency or conflict between two prohibitions governing the
same conduct. The protection from manipulation of wholesale energy
markets needed for tariffs to be just and reasonable is still in
effect, but now through a rule of general applicability governing all
entities, not just market-based rate sellers. Circumstances have
changed. The protection needed to assure that market-based rate
transactions are just and reasonable remains, but in a new regulation
consistent with Congressional direction. The Commission thus has
retained important protections for wholesale energy markets, but has
done so in a way that reinforces regulatory certainty.
    51. Likewise, there is no barrier to removal of Market Behavior
Rules 1, 3, 4, 5, and 6. Rules 1, 3, 4, and 5 will remain in effect in
another form, as we are adopting the substantive provisions of these
rules in the Commission's regulations. To the extent these provisions
are incorporated elsewhere, there is no substantive change and
therefore no need to address whether these behavior rules are no longer
just and reasonable. Finally, there is no barrier to rescinding Market
Behavior Rule 6. As discussed, this rule repeats existing requirements
to follow applicable codes of conduct and the Standards of Conduct in
the Commission's regulations, and any collusion to violate these
requirements would be in violation of the new anti-manipulation rule.
There is no substantive change in regulatory requirements.
2. Time Limits on Complaints
    52. A few commenters ask the Commission to retain the 90-day
requirement of the Market Behavior Rules' remedies and complaint
procedures.\93\ EEI says these are important provisions that should be
preserved in the new anti-manipulation rule.\94\ Similarly, EPSA argues
that

absence of a 90-day limit on bringing complaints will cause regulatory
uncertainty and present significant cost and risks to market
participants.\95\ Because the Market Behavior Rules are being
rescinded, the 90-day time limit will no longer apply. In Order No.
670, we noted that a five-year statute of limitations is applicable to
the imposition of civil penalties, and specifically rejected requests
to retain the 90-day period used for the Market Behavior Rules.\96\
Consistent with the discussion of this issue in Order No. 670, we
reject requests to retain the 90-day requirement and rescind Appendix B
of the Market Behavior Rules Order.
---------------------------------------------------------------------------

    \93\ In Appendix B to the Market Behavior Rules Order, the
Commission required that complaints alleging a violation be filed
within 90 days of the end of the calendar quarter in which a
transaction occurred or, if the party could not then know of the
alleged violation, 90 days from when the party should have known of
the violation.
    \94\ EEI at 7.
    \95\ ESPA at 8.
    \96\ Order No. 670, 114 FERC ] 61,047 at P 62-63.
---------------------------------------------------------------------------

3. Additional Comments
    53. A few parties requested an additional opportunity to comment
once the Commission has finalized the proposed new anti-manipulation
rule. The CEOB, for instance, asked that we provide the final language
of the new anti-manipulation rule, then permit another round of
comments in this proceeding on the appropriate scope and nature of
changes to the Market Behavior Rules.\97\ Similarly, SCE asks the
Commission to institute a comprehensive, omnibus proceeding to adopt a
new regulatory regime and, as appropriate, eliminate the current Market
Behavior Rules.\98\ This is not necessary. Order No. 670 adopted the
proposed anti-manipulation rule with no substantive changes. As a
result, comments predicated on the proposed anti-manipulation rule
remain valid, and there is no need to have yet another round of
comments on proposed changes to the Market Behavior Rules.
---------------------------------------------------------------------------

    \97\ CEOB at 6.
    \98\ SCE at 3, 9.
---------------------------------------------------------------------------

III. Conclusion

    54. The Market Behavior Rules played a beneficial role as the
Commission's oversight of wholesale energy markets continued to evolve.
With the enactment of specific anti-manipulation authority in EPAct
2005, however, the time has come to shift our regulatory tools to focus
on the anti-manipulation authority we now have under new FPA section
222 and the new rule in part 1c of our regulations. This will allow us
to continue to protect customers with respect to manipulation by any
entity, but in a manner consistent with Congressional guidance. The
Commission will continue to monitor wholesale markets as they evolve
and will consider changes in its regulations as may be necessary to
assure that wholesale markets are well-functioning and result in just
and reasonable energy prices. With respect to the other provisions of
the Market Behavior Rules, the substantive aspects of these Rules are
being codified in our regulations and being made applicable to market-
based rate sellers.

The Commission Orders

    (A) Market Behavior Rules 2 and 6 and Appendix B of the Market
Behavior Rules Order are hereby rescinded, effective upon publication
of this order in the Federal Register. As discussed in the body of this
order, Market Behavior Rules 1, 3, 4, and 5 are removed from sellers'
market-based rate tariffs as of the date they are codified in the
Commission's regulations under the Federal Power Act.
    (B) Market-based rate sellers are hereby notified that they need
not refile or amend their tariffs with respect to the rescission and
removal of the Market Behavior Rules, unless we direct otherwise in the
future. In the absence of any such direction, at such time as sellers
make any amendments to their market-based rate tariffs or seek
continued authorization to sell at market-based rates (e.g., in their
three-year update filings), sellers shall at that time remove the
Market Behavior Rules from their tariffs. Notwithstanding this, as of
the date this order is published in the Federal Register, Market
Behavior Rules 2 and 6 will be of no force or effect in sellers'
tariffs, and Market Behavior Rules 1, 3, 4, and 5 will be of no force
and effect in seller's tariffs as of the effective date of the Market
Behavior Rules Codification Order.
    (C) The Secretary shall promptly publish this order in the Federal
Register.

    By the Commission.
Magalie R. Salas,
Secretary.

Appendix--List of Parties Filing Comments and Reply Comments and
Acronyms

Ameren Services Company (Ameren).
American Public Power Association and the Transmission Access Policy
Study Group (APPA/TAPS).
California Electricity Oversight Board (CEOB).
California ISO (CAISO).
California Public Utilities Commission (CPUC).**
Cinergy Services, Inc. and Cinergy Marketing & Trading, LP
(Cinergy).
Constellation Energy Group Inc., et al. (Indicated Market
Participants).
Edison Electric Institute (EEI).**
Electric Power Supply Association (EPSA).
ISO New England (ISO-NE).*
National Association of State Utility Consumer Advocates (NASUCA).
New England Conf. of Public Utilities Commissioners and Vermont
Department of Public Service (NECPUC).
New Jersey Board of Public Utilities (NJBPU).
New York Independent System Operator, Inc. (NYISO).
Pacific Gas and Electric Company (PG&E).
PJM Industrial Customer Coalition (PJMICC).
PJM Interconnection, L.L.C. (PJM).
PNM Resources (PNMR).
Sacramento Municipal Utility District (SMUD).
Southern California Edison Company (SCE).
SUEZ Energy North America, Inc. (SUEZ).
Transmission Dependent Utility Systems (TDUS).**

    * Entities filing reply comments only.
    ** Entities filing reply comments in addition to initial
comments.
[FR Doc. 06-1720 Filed 2-24-06; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 82, Number 152 (Wednesday, August 9, 2017)]
[Notices]
[Pages 37232-37233]
[FR Doc No: 2017-16718]

-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2017-D-2802]

Chemistry, Manufacturing, and Controls Postapproval Manufacturing
Changes for Specified Biological Products To Be Documented in Annual
Reports; Draft Guidance for Industry; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice of availability.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA or Agency) is announcing
the availability of a draft guidance for industry entitled ``CMC
Postapproval Manufacturing Changes for Specified Biological Products To
Be Documented in Annual Reports.'' This draft guidance provides
recommendations to holders of biologics license applications (BLAs) for
specified products regarding the types of changes to be documented in
annual reports. Specifically, the draft guidance describes chemistry,
manufacturing, and controls (CMC) postapproval manufacturing changes
that the Agency generally considers to have a minimal potential to have
an adverse effect on the identity, strength, quality, purity, or
potency of the product as they may relate to the safety or
effectiveness of the product. Under FDA regulations, such minor changes
in the product, production process, quality controls, equipment,
facilities, or responsible personnel must be documented by applicants
in an annual report.

DATES: Although you can comment on any guidance at any time (see 21 CFR
10.115(g)(5)), to ensure that the Agency considers your comment on this
draft guidance before it begins work on the final version of the
guidance, submit either electronic or written comments on the draft
guidance by October 10, 2017.

ADDRESSES: You may submit comments as follows:

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on https://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket No.
FDA-2017-D-2802 for ``CMC Postapproval Manufacturing Changes for
Specified Biological Products To Be Documented in Annual Reports.''
Received comments will be placed in the docket and, except for those
submitted as ``Confidential Submissions,'' publicly viewable at https://www.regulations.gov or at the Dockets Management Staff between 9 a.m.
and 4 p.m., Monday through Friday.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on https://www.regulations.gov.
Submit both copies to the Dockets Management Staff. If you do not wish
your name and

contact information to be made publicly available, you can provide this
information on the cover sheet and not in the body of your comments and
you must identify this information as ``confidential.'' Any information
marked as ``confidential'' will not be disclosed except in accordance
with 21 CFR 10.20 and other applicable disclosure law. For more
information about FDA's posting of comments to public dockets, see 80
FR 56469, September 18, 2015, or access the information at: https://www.gpo.gov/fdsys/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852.
    Submit written requests for single copies of the draft guidance to
the Division of Drug Information, Center for Drug Evaluation and
Research, Food and Drug Administration, 10001 New Hampshire Ave.,
Hillandale Building, 4th Floor, Silver Spring, MD 20993-0002 or to the
Office of Communication, Outreach and Development, Center for Biologics
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 71, Rm. 3128, Silver Spring, MD 20993-0002. Send
one self-addressed adhesive label to assist that office in processing
your requests. See the SUPPLEMENTARY INFORMATION section for electronic
access to the draft guidance document.

FOR FURTHER INFORMATION CONTACT: Michail Alterman, Center for Drug
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 51, Rm. 4245, Silver Spring, MD 20993, 240-402-
9355; or Stephen Ripley, Center for Biologics Evaluation and Research,
Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm.
7301, Silver Spring, MD 20993-0002,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    FDA is announcing the availability of a draft guidance for industry
entitled ``CMC Postapproval Manufacturing Changes for Specified
Biological Products To Be Documented in Annual Reports.'' Applicants
must notify the Agency of a change to an approved BLA in accordance
with all statutory and regulatory requirements--including section 506A
of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C.
356a) and 21 CFR 601.12. Section 506A of the FD&C Act provides
requirements for making and reporting manufacturing changes to an
approved application or license and for distributing a drug product
made with such changes. Under Sec.  601.12, each post-approval change
in the product, production process, quality controls, equipment,
facilities, or responsible personnel established in an approved BLA is
categorized into one of three reporting categories:
     Major change: Applicants must submit and receive FDA's
approval of a supplement to the BLA before the product produced with
the manufacturing change is distributed.
     Moderate change: Applicants must submit a supplement at
least 30 days before the product is distributed or, in some cases, the
product may be distributed immediately upon FDA's receipt of the
supplement.
     Minor change: Applicants may proceed with the change but
must notify FDA of the change in an annual report.
    This draft guidance provides recommendations for changes that
generally should be documented in an annual report. It discusses the
contents of an annual report notification and lists examples of
postapproval manufacturing changes for BLAs that FDA generally
considers to have a minimal potential to have an adverse effect on the
identity, strength, quality, purity, or potency of the product as they
may relate to the safety or effectiveness of the product and,
therefore, generally should be documented in an annual report.
    This draft guidance is being issued consistent with FDA's good
guidance practices regulation (21 CFR 10.115). The draft guidance, when
finalized, will represent the current thinking of FDA on CMC
postapproval manufacturing changes for specified biological products to
be documented in annual reports. It does not establish any rights for
any person and is not binding on FDA or the public. You can use an
alternative approach if it satisfies the requirements of the applicable
statutes and regulations.

II. The Paperwork Reduction Act of 1995

    This draft guidance refers to previously approved collections of
information found in FDA regulations. These collections of information
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The
collections of information in Sec.  601.12 have been approved under OMB
control number 0910-0338.

III. Electronic Access

    Persons with access to the internet may obtain the draft guidance
at either http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/default.htm, http://www.fda.gov/BiologicsBloodVaccines/GuidanceComplianceRegulatoryInformation/default.htm, or https://www.regulations.gov.

    Dated: August 3, 2017.
Anna K. Abram,
Deputy Commissioner for Policy, Planning, Legislation, and Analysis.
[FR Doc. 2017-16718 Filed 8-8-17; 8:45 am]
 BILLING CODE 4164-01-P


[Federal Register Volume 83, Number 183 (Thursday, September 20, 2018)]
[Notices]
[Pages 47623-47625]
[FR Doc No: 2018-20472]

-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2015-D-2167]

Heparin-Containing Medical Devices and Combination Products:
Recommendations for Labeling and Safety Testing; Guidance for Industry
and Food and Drug Administration Staff; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice of availability.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA or Agency) is announcing
the availability of a final guidance entitled ``Heparin-Containing
Medical Devices and Combination Products: Recommendations for Labeling
and Safety Testing.'' The United States Pharmacopeia (USP) drug
substance monograph for Heparin Sodium, and drug product monographs for
Heparin Lock Flush Solution and Heparin Sodium Injection, recently have
undergone several revisions following serious and fatal events related
to the use of heparin sodium products. Investigation of heparin product
overdose errors identified the expression of drug strength in the
labels as a major contributing factor in these errors. This guidance
document addresses these safety concerns by clarifying new expectations
for labeling with regard to the revised heparin USP monographs, as well
as outlining safety testing recommendations.

DATES: The announcement of the guidance is published in the Federal
Register on September 20, 2018.

ADDRESSES: You may submit either electronic or written comments on
Agency guidances at any time as follows:

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your

comment does not include any confidential information that you or a
third party may not wish to be posted, such as medical information,
your or anyone else's Social Security number, or confidential business
information, such as a manufacturing process. Please note that if you
include your name, contact information, or other information that
identifies you in the body of your comments, that information will be
posted on https://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket No.
FDA-2015-D-2167 for ``Heparin-Containing Medical Devices and
Combination Products: Recommendations for Labeling and Safety
Testing.'' Received comments will be placed in the docket and, except
for those submitted as ``Confidential Submissions,'' publicly viewable
at https://www.regulations.gov or at the Dockets Management Staff
between 9 a.m. and 4 p.m., Monday through Friday.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on https://www.regulations.gov.
Submit both copies to the Dockets Management Staff. If you do not wish
your name and contact information to be made publicly available, you
can provide this information on the cover sheet and not in the body of
your comments and you must identify this information as
``confidential.'' Any information marked as ``confidential'' will not
be disclosed except in accordance with 21 CFR 10.20 and other
applicable disclosure law. For more information about FDA's posting of
comments to public dockets, see 80 FR 56469, September 18, 2015, or
access the information at: https://www.gpo.gov/fdsys/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852.
    You may submit comments on any guidance at any time (see 21 CFR
10.115(g)(5)).
    An electronic copy of the guidance document is available for
download from the internet. See the SUPPLEMENTARY INFORMATION section
for information on electronic access to the guidance. Submit written
requests for a single hard copy of the guidance document entitled
``Heparin-Containing Medical Devices and Combination Products:
Recommendations for Labeling and Safety Testing'' to the Office of the
Center Director, Guidance and Policy Development, Center for Devices
and Radiological Health, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 66, Rm. 5431, Silver Spring, MD 20993-0002. Send
one self-addressed adhesive label to assist that office in processing
your request.

FOR FURTHER INFORMATION CONTACT: Andrew Yeatts, Center for Devices and
Radiological Health, Food and Drug Administration, 10903 New Hampshire
Ave., Bldg. 66, Rm. 1643, Silver Spring, MD 20993-0002,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    The USP \1\ heparin monographs have recently undergone several
revisions following serious and fatal events related to the use of
heparin sodium products. Investigation of heparin product overdose
errors identified the expression of drug strength in the labels as a
major contributing factor in these errors. This guidance document
addresses these safety concerns by clarifying new expectations for
labeling with regard to the revised heparin USP monographs, as well as
outlining safety testing recommendations.
---------------------------------------------------------------------------

    \1\ USP is a scientific nonprofit organization that develops
standards for the identity, strength, quality, and purity of drugs
and drug ingredients marketed in the United States. These standards
are published in USP's official compendia, U.S. Pharmacopeia and
National Formulary.
---------------------------------------------------------------------------

    In addition, the outbreak of serious and often fatal events due to
heparin contamination with over-sulfated chondroitin sulfate in 2008
led the USP to include in its monograph additional testing of heparin
source material to ensure its quality and purity. This guidance also
outlines use of conformance to the monograph in premarket submissions,
specifically testing and documentation requirements and/or
recommendations contained in the current USP monographs and the
guidance document ``Heparin for Drug and Medical Device Use: Monitoring
Crude Heparin for Quality'' (https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM291390.pdf).\2\
---------------------------------------------------------------------------

    \2\ The Agency updates guidances periodically. To make sure you
have the most recent version of this guidance, check the FDA
guidance page at https://www.fda.gov/RegulatoryInformation/Guidances/default.htm.
---------------------------------------------------------------------------

    FDA considered comments received on the draft guidance that
appeared in the Federal Register of July 9, 2015 (80 FR 39440). FDA
revised the guidance as appropriate in response to the comments.

II. Significance of Guidance

    This guidance is being issued consistent with FDA's good guidance
practices regulation (21 CFR 10.115). The guidance represents the
current thinking of FDA on ``Heparin-Containing Medical Devices and
Combination Products: Recommendations for Labeling and Safety
Testing.'' It does not establish any rights for any person and is not
binding on FDA or the public. You can use an alternative approach if it
satisfies the requirements of the applicable statutes and regulations.
This guidance is not subject to Executive Order 12866.

III. Electronic Access

    Persons interested in obtaining a copy of the guidance may do so by
downloading an electronic copy from the internet. A search capability
for all Center for Devices and Radiological Health guidance documents
is available at https://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/default.htm. This

guidance is also available at https://www.regulations.gov. Persons
unable to download an electronic copy of ``Heparin-Containing Medical
Devices and Combination Products: Recommendations for Labeling and
Safety Testing'' may send an email request to [email protected]
to receive an electronic copy of the document. Please use the document
number 1817 to identify the guidance you are requesting.

IV. Paperwork Reduction Act of 1995

    This guidance refers to previously approved collections of
information. These collections of information are subject to review by
the Office of Management and Budget (OMB) under the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520). The collections of information in
the following FDA regulations and guidance have been approved by OMB as
listed in the following table:

------------------------------------------------------------------------
 21 CFR part; guidance; or FDA                              OMB control
              form                        Topic                 No.
------------------------------------------------------------------------
211............................  Current good                  0910-0139
                                  manufacturing practice
                                  for finished
                                  pharmaceuticals.
807, subpart E.................  Premarket notification.       0910-0120
814, subparts A through E......  Premarket approval.....       0910-0231
814, subpart H.................  Humanitarian Device           0910-0332
                                  Exemption.
812............................  Investigational Device        0910-0078
                                  Exemption.
``De Novo Classification         De Novo classification        0910-0844
 Process (Evaluation of           process.
 Automatic Class III
 Designation)''.
801............................  Medical Device Labeling       0910-0485
                                  Regulations.
803............................  Medical Devices;              0910-0437
                                  Medical Device
                                  Reporting;
                                  Manufacturer
                                  reporting, importer
                                  reporting, user
                                  facility reporting,
                                  distributor reporting.
820............................  Quality System (QS)           0910-0073
                                  Regulation.
------------------------------------------------------------------------

    Dated: September 17, 2018.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2018-20472 Filed 9-19-18; 8:45 am]
 BILLING CODE 4164-01-P