requirements that attach to tariff provisions, and thus will give to
interested parties notice and an opportunity to intervene when a tariff
filing is made.
    389. The Commission also proposed that RTOs and ISOs include an MMU
mission statement in the introductory portion of its MMU tariff
section, setting forth the goals to be achieved by the MMU, including
the protection of both consumers and market participants by the
identification and reporting of market design flaws and market power
abuses.
    390. The Commission further proposed that the RTOs and ISOs meet
these requirements at the time they make their compliance filings in
connection with this proceeding.
ii. Comments
    391. Commenters support the proposal to locate all MMU provisions
in one section of the RTO or ISO tariffs.\477\ Two commenters agree
these provisions should include a mission statement.\478\ APPA states
the best starting point for this kind of statement is Attachment M to
the PJM/MMU Settlement Agreement.\479\ FirstEnergy opposes the option
of leaving existing MMU provisions in their current location in
addition to placing them in a new section of the tariff, since it
believes this would be administratively inconvenient and has the
potential to create inconsistencies.\480\ PG&E does not oppose posting
MMU provisions elsewhere than in the MMU section, so long as
appropriate cross-referencing is made.\481\
---------------------------------------------------------------------------

    \477\ Ameren; APPA; California PUC; Constellation; DC Energy;
EEI; FirstEnergy; Industrial Consumers; ISO New England; Midwest
ISO; North Carolina Electric Membership; Old Dominion; PG&E
Reliant; SPP; and Xcel.
    \478\ APPA at 87; EEI at 25.
    \479\ APPA at 87.
    \480\ FirstEnergy at 14.
    \481\ PG&E at 18-19.
---------------------------------------------------------------------------

iii. Commission Determination
    392. We adopt the NOPR proposal and direct RTOs and ISOs to include
in their tariffs, and centralize in one section, all of their MMU
provisions. We also direct RTOs and ISOs to include a mission statement
in the

introductory portion of their MMU tariff section, which is to set forth
the goals to be achieved by the MMU, including the protection of both
consumers and market participants by the identification and reporting
of market design flaws and market power abuses.
    393. We adopt the suggestion that RTOs and ISOs may include various
MMU provisions elsewhere in their tariff as well as in the centralized
MMU section, if they believe context and clarity so require. However,
we are sympathetic to the concern that this duplicative listing may
create confusion. Therefore, we require RTOs and ISOs, if they make
such a duplicative listing, to clearly note that the provision in
question is also found in the centralized MMU section. We also direct
the RTO or ISO to include in its tariff a provision stating that in the
event of any inconsistency between provisions in the centralized MMU
section and provisions set forth elsewhere, the provisions in the
centralized MMU section control. Of course, the RTO or ISO should
attempt to avoid any such inconsistencies.
    394. We direct RTOs and ISOs to include their centralized MMU
tariff sections in their compliance filings to be made in connection
with this Final Rule.
3. Information Sharing
a. Enhanced Information Dissemination
i. Commission Proposal
    395. The Commission carried forward proposals in the NOPR that had
been advanced in the ANOPR, and which were designed to enhance the
dissemination of information by MMUs in several areas. Specifically,
the Commission proposed that MMUs report on aggregate market
performance on no less than a quarterly basis to Commission staff, to
staff of interested state commissions, and to the management and board
of directors of the RTOs or ISOs. The Commission also proposed the MMUs
make one or more of their staff members available for regular
conference calls with representatives from the Commission, state
commissions and the RTO or ISO. In the NOPR, the Commission stated that
the type of information to be released by the MMU may most fruitfully
continue to be developed on a case-by-case basis, so long as it
generally consists of market analyses of the type regularly gathered by
the MMUs in the course of business, and so long as it remains subject
to appropriate confidentiality restrictions.
    396. The Commission proposed that market participants be included
in the dissemination of reports, which could be accomplished via
posting them on the RTO or ISO Web site. However, the Commission stated
that including market participants on conference calls would be
unwieldy, and proposed limiting participation on such calls to
Commission staff, RTO and ISO staff, staff of interested state
commissions, and staff of state attorneys general should they express a
desire to attend.
    397. While the Commission noted that quarterly reports should not
be as extensive as the annual state of the market report, it also
stated that the annual state of the market reports have proven to be
useful documents, and proposed that the RTOs and ISOs include in their
tariffs a requirement for the MMUs to produce them, with the same
dissemination (or broader, if desired) as the quarterly reports.
    398. The Commission also proposed that the time period for the
release of offer and bid data be reduced to three months, but that an
RTO or ISO could propose a shorter period with accompanying
justification or, if it demonstrates a potential collusion concern, a
four-month lag period or some other mechanism to delay the release of a
report if the release were otherwise to occur in the same season as
reflected in the data.
    399. Additionally, the Commission proposed to retain the practice
of masking the identity of participants when releasing offer and bid
data. The Commission further proposed that the RTO or ISO include in
its compliance filing a justification of its policy regarding the
aggregation or lack thereof of offer data and of cost data, discussing
the manner in which it believes its policy avoids participant harm and
the possibility of collusion, while fostering market transparency.
ii. Comments
    400. Commenters in general support information sharing policies for
MMUs,\482\ and many commenters noted that the Commission struck a good
balance between the need for information and the limitations of the
MMUs.\483\
---------------------------------------------------------------------------

    \482\ See, e.g., DC Energy; EEI; EPSA; Exelon; NEPOOL
Participants; and Northeast Utilities.
    \483\ See, e.g., EEI; EPSA.
---------------------------------------------------------------------------

    401. Several commenters generally support the approach of
developing the types of material to be disseminated on a case-by-case
basis.\484\ EEI supports this flexible approach as long as the
information is developed in the ordinary course of business by the MMU
and is subject to the same confidentiality restrictions that are
applied to release of information as determined by each RTO or ISO, or
the Commission.\485\ Midwest Energy comments that as regulators of
retail markets, state commissions should be aware of how the market is
functioning.\486\ New York PSC states that the Commission should
clarify that its proposed rule is the minimum standard for the
dissemination of information and the MMUs that currently provide
information to state commissions under working procedures will not be
limited by the proposal.\487\
---------------------------------------------------------------------------

    \484\ See, e.g., EEI; FirstEnergy; Midwest Energy; Ohio PUC; and
PJM Power Providers.
    \485\ EEI at 26.
    \486\ Midwest Energy at 4-5.
    \487\ New York PSC at 10.
---------------------------------------------------------------------------

    402. APPA does not oppose this proposal but comments that a
provision like the one in PJM's tariff, which allows the MMU to respond
to requests for studies or reports by states, should be included in all
RTO/ISO/MMU tariff sections.\488\ PG&E believes that to the extent that
state commissions need information about markets and market monitoring
reports, it should be made clear that if the MMUs have data available
as part of their overview of markets or preparation of reports, such
data should be made available to state commissions for their use in
analysis and oversight of market efficiency and trends.\489\ Joint
Commenters support an evaluation of the type of data each RTO or ISO
should provide, stating that RTOs and ISOs can further improve their
markets by describing in their compliance filings additional
information they will disseminate.\490\ Joint Commenters urge the
Commission to require each RTO or ISO to engage in a stakeholder
process to develop a detailed document governing the identification of
the type of additional information the RTO or ISO will disseminate, and
to describe the information to be disseminated in the compliance
filing. Joint Commenters recommend that the Commission require each RTO
or ISO to apply the following criteria: (1) RTOs and ISOs should
provide information to the extent it reasonably can be expected (a) to
facilitate improved market transparency, reliability or efficiency; (b)
to assist stakeholders in detecting market design or software flaws
and/or suspected market manipulation; or (c) to assist market
participants in their transaction activity; (2) provided that (a) the
dissemination of the information will not harm the competitive dynamics

of the market and (b) it is feasible from a resource allocation
standpoint for the RTO to disseminate the information.\491\
---------------------------------------------------------------------------

    \488\ APPA at 87.
    \489\ PG&E at 20.
    \490\ Joint Commenters at 5.
    \491\ Id.
---------------------------------------------------------------------------

    403. NARUC believes that the Commission's proposal is a mistake,
commenting that the Commission should provide explicit standards that
assure that the states have the same access to data as does the
Commission.\492\ NARUC comments that (1) by granting such access, the
Commission can leverage market oversight while, as explicitly
acknowledged in the NOPR, giving state regulators access to data they
need to fulfill their statutory responsibilities; (2) states need
underlying data imbedded in aggregate information to verify and analyze
MMU findings; and (3) states also recognize the need to protect from
public disclosure information that could harm market participants or
facilitate collusion.\493\
---------------------------------------------------------------------------

    \492\ NARUC at 13-14.
    \493\ Id.
---------------------------------------------------------------------------

    404. Commenters support the proposal to include market participants
in the dissemination of reports.\494\ NRECA, while supporting the
proposal, is concerned that these reports may be insufficient if they
do not provide the underlying data and assumptions used by the MMU to
reach its conclusions, on the ground recipients may only be getting the
RTO's or ISO's ``spin'' on the situation. NRECA suggests that the
Commission should ensure the MMU reports provide sufficient information
or provide a process whereby stakeholders can obtain access, subject to
appropriate confidentiality restrictions, to the data and findings
underlying MMU reports.\495\ NSTAR strongly supports including market
participants in the dissemination of information on market abuses, and
states that the reporting should be transparent as a deterrent and so
market participants can assess how well the markets are working and
whether changes are necessary.\496\
---------------------------------------------------------------------------

    \494\ See, e.g., APPA; California PUC; Midwest ISO; Old
Dominion; and NSTAR.
    \495\ NRECA at 54-55.
    \496\ NSTAR at 8.
---------------------------------------------------------------------------

    405. Several commenters do not support the Commission's proposal to
limit access by market participants to conference calls.\497\ APPA
recommends that conference calls be archived and posted on the RTO or
ISO Web site for market participants who cannot be on the call.\498\
Steel Producers and TAPS comment that the exclusion of market
participants from such conference call is inappropriate, and that RTO
or ISO stakeholder conference calls with numerous participants are
commonplace.\499\
---------------------------------------------------------------------------

    \497\ See, e.g., APPA; Steel Producers; and TAPS.
    \498\ APPA at 88.
    \499\ Steel Producers at 12; TAPS at 57.
---------------------------------------------------------------------------

    406. Commenters generally supported the Commission's proposal and
conclusions regarding quarterly and state of the market reports.\500\
APPA comments that certain annual state of the market reports are both
over-inclusive with the amount of data reported and under-inclusive in
terms of relevant data provided, and that MMUs should strive for
quality as well as quantity in the data provided. EPSA supports the
Commission's conclusion that the quarterly reports should not be as
extensive as the annual state of the market reports.\501\
---------------------------------------------------------------------------

    \500\ See, e.g., EPSA; California PUC.
    \501\ EPSA at 14-15.
---------------------------------------------------------------------------

    407. Most commenters supported the reduction in lag time for offer
and bid data to three months.\502\ Several others wanted a shorter lag
time: one month,\503\ one week or less,\504\ or immediate
disclosure.\505\ Several commenters suggested giving RTOs and ISOs
flexibility to propose shorter or longer times.\506\ Citing two
studies, APPA argues that system lambdas should be disclosed at the
same time as bid and offer data.\507\ If the Commission requires a
shorter period of time to release offer and bid data, EEI argues it
should maintain and enhance the masking and aggregation features.\508\
Although it supports the three-month period, Midwest ISO prefers
leaving the decision to the stakeholders.\509\
---------------------------------------------------------------------------

    \502\ See, e.g., EEI; California PUC; Industrial Consumers; ISO
New England; Joint Commenters; Midwest ISO; North Carolina Electric
Membership; NRECA; Reliant; SCE-SDG&E and SPP.
    \503\ Industrial Consumers at 23.
    \504\ TAPS at 53-56.
    \505\ APPA at 89-91.
    \506\ EEI at 26-27 (citing regional factors); California PUC at
44; Joint Commenters at 4; and North Carolina Electric Membership at
19 (citing the need to prevent collusion); National Grid at 9; and
SoCalEdison-SDG&E at 4.
    \507\ APPA at 89-91 (citing McCullough and Stewart, Ann, The
Missing Benchmark in Electricity Deregulation, McCullough Research
(Dec. 20, 2007); Dunn, William, Data Required for Market Oversight--
A Concept Paper for the Electric Market Reform Initiative of the
American Public Power Association, Sunset Point LLC (Dec. 8, 2007)
(Dunn Study)).
    \508\ As an example, bid data should be aggregated in categories
of size and the coding used to describe bidders should be changed
periodically. EEI at 26-27.
    \509\ Midwest ISO at 28-29.
---------------------------------------------------------------------------

    408. PG&E states that it is important that information about offer
and bid data be increasingly available as prices and price caps rise,
with disclosure of bid data sufficiently timely to permit review of
bids before the necessity to undertake any challenge to such sales.
PG&E also states that there is a need for increased market transparency
when prices hit established bid or price caps, as such bidding may be
designed to manipulate market prices and take advantage of temporary
conditions. PG&E requests the Commission to consider modifying its
disclosure requirements to provide for greater market transparency for
bids at caps, with discretionary authority to disclose participants who
bid in the region of any applicable price cap.\510\
---------------------------------------------------------------------------

    \510\ PG&E at 20-22.
---------------------------------------------------------------------------

    409. TAPS proposes immediate disclosure, arguing that competitive
markets thrive on information, not secrecy. More information in the
hands of a larger number of competitors, in its opinion, would reduce
the likelihood of collusion. TAPS cites competitive electric markets
operating successfully in Australia, England and Wales, where the
markets provide near real-time and historical data, including bid and
offer data. TAPS also asserts that large generation-portfolio holders
already know their offers for each of their multiple resources, and
allowing RTOs or ISOs to make it available for free and more quickly
would enable smaller market participants to compete on a level playing
field and assist with market monitoring.\511\
---------------------------------------------------------------------------

    \511\ TAPS at 53-56 (citing the Dunn Study).
---------------------------------------------------------------------------

    410. A few commenters opposed the Commission's proposal to reduce
the lag time from six to three months.\512\ Ameren states that six
months is a more appropriate time period to protect commercially
sensitive data and guard against abuse.\513\ Constellation does not
support the reduction in lag time for release of information, but says
if the Commission decides to do so, it should apply this policy to all
areas of the market and require MMUs to post bid and offer data for
demand and virtual markets under the same confidentiality
provisions.\514\ Ohio PUC states that the entities most likely to use
the data are the market participants themselves, and believes there is
little protection offered by masking the bidders' identities. It agrees
with the Commission's analysis of the tradeoffs in reducing the lag
period.\515\
---------------------------------------------------------------------------

    \512\ See, e.g., Ameren; Constellation; and Ohio PUC.
    \513\ Ameren at 36.
    \514\ Constellation at 17.
    \515\ Ohio PUC at 28.
---------------------------------------------------------------------------

    411. All but two commenters support masking participant
identity.\516\ Ameren emphasizes the need to protect sensitive

market data.\517\ Dominion Resources and EEI oppose unmasking, Dominion
Resources stating that masking is needed to avoid the possibility of
bid or offer fixing, collusion, or other behavior detrimental to the
market.\518\ California PUC suggests unmasking after two years; it also
proposes to change masking on January 1 of each year to prevent market
participants from being able to figure out the market participants in
current data.\519\ SPP requests guidelines from the Commission on
aggregating the data to protect the participant's identity.\520\ Ameren
proposes a mechanism where MMUs could give parties who have submitted
false or inaccurate data the opportunity to correct any inaccuracies
before the report is made final and submitted to the Commission.\521\
---------------------------------------------------------------------------

    \516\ See, e.g., Ameren; California PUC; Dominion Resources;
EEI; ISO New England; Midwest ISO; SoCalEdison and SDG&E and SPP.
    \517\ Ameren at 36.
    \518\ Dominion Resources at 8; EEI at 26.
    \519\ California PUC at 44.
    \520\ SPP at 9.
    \521\ Ameren at 36-37.
---------------------------------------------------------------------------

    412. Two commenters oppose masking bidders' identities. Ohio PUC
and OMS believe there is little protection offered by such masking,
arguing that the more sophisticated market participants will infer
those identities and thus gain some further advantage over less
sophisticated market participants. These commenters further assert that
allowing third-party analysts to access data would increase the number
of parties examining the bid and offer data to determine if collusive
behavior exists.\522\ APPA states that market bid and offer data should
not be kept confidential, and the term ``commercially sensitive''
should not be used as a blanket exception.\523\
---------------------------------------------------------------------------

    \522\ Ohio PUC at 28; OMS at 9-10.
    \523\ APPA at 93.
---------------------------------------------------------------------------

iii. Commission Determination
    413. We adopt the proposal made in the NOPR, with certain
modifications. The Commission's goal of broadening information sharing
by the MMUs met with widespread approval, with a number of commenters
expressing the opinion that the Commission had struck the right balance
between the need for information on the one hand while recognizing the
MMUs' inability to provide unrestricted and unlimited amounts and types
of information on the other.
    414. The information to be disseminated should consist of market
trends and the performance of the wholesale market, with details to be
developed on a case-by-case basis. In response to our request for
comments on whether there were a generic standard or test that could be
used to determine what specific information should be provided to state
commissions, Joint Commenters propose a two-part test, which we find
generally helpful. However, the test does not include some of the
confidentiality protections we have determined to be necessary, and we
decline to adopt it. We also hesitate to require RTOs and ISOs to
include in their tariffs specific details of the types of information
that an MMU might find useful to provide, or that stakeholders might
request. The nature of the information that may be helpful may vary
from region to region, and may well evolve over time. Therefore, while
an RTO or ISO is free to propose in its tariff details of the
information it desires its MMU to provide, we will not require any
particular menu. We are confident that MMUs will be responsive to
reasonable requests from interested parties, subject to time and
resource commitments.
    415. Moreover, the degree of inclusion of underlying data and
assumptions is an area also best dealt with on a case-by-case basis. It
is not to be expected that MMUs would include all the raw data in their
possession. However, we would expect that they would provide, or make
available on request, sufficient data to enable users of their reports
to reasonably test the validity of their conclusions.
    416. We also clarify that our proposed rule is not intended to
limit existing arrangements between MMUs and state commissions
regarding the provision of information, subject to appropriate
restrictions related to confidentiality concerns. Such arrangements are
an example of the sort of case-by-case determination we envision
developing in the area of information dissemination.
    417. We disagree with NARUC's suggestion that explicit standards be
put in place guaranteeing that states have the same access to data as
does the Commission. While we favor the enhanced dissemination of
information to the states, there are some matters that are uniquely
within the purview of the Commission, such as referrals by MMUs of
suspected tariff violations or manipulation. We therefore decline to
adopt such explicit standards.
    418. We agree with EPSA that quarterly reports should not be as
extensive as the annual state of the market reports. It was not our
intention that MMUs should be required to spend all their time on
report preparation, which could easily be the case if quarterly reports
were too extensive. Rather, we envision such quarterly reports as
serving the function of timely updates to the annual state of the
market report, emphasizing issues of concern. The details of what
should be included in these reports can be worked out by the MMUs with
input from interested stakeholders. We also agree with APPA that
quality rather than quantity is crucial, and urge MMUs to ensure that
the data they include in both their quarterly and their annual reports
meets the anticipated needs of the extended community that will make
use of them.
    419. Several commenters object to the Commission's suggestion that
market participants be excluded from conference calls regarding market
updates. They note that stakeholder conference calls are commonplace,
and see no reason why a similar practice should not be adopted with
respect to MMU briefings. Upon reflection, we agree that the current
state of the technology permits such calls with little difficulty.
Therefore, we determine that market participants should not be excluded
from such calls, absent pressing technical concerns in any given
situation.
    420. Our proposal to reduce the lag time for release of offer and
bid data to three months was supported by most commenters. Some
commenters requested a shorter lag time or immediate release. Others
proposed the release of additional information, such as system lambda.
    421. Our proposal cuts the current lag time for most RTOs and ISOs
in half. Because this is a substantial change, RTOs and ISOs should
become accustomed to the new release time and observe its effects
before committing to an even shorter time. However, as we proposed in
the NOPR, we permit the RTOs and ISOs to propose a shorter time, with
accompanying justification, or a longer time of four months if they can
demonstrate a collusion concern. Alternatively, they may propose an
alternative mechanism if release of a report were otherwise to occur in
the same season as reflected in the data. These options provide the
flexibility requested by commenters.
    422. We assume the data to be released would consist not only of
physical offers and bids but demand and virtual offer and bids as well.
However, if RTOs and ISOs object to such inclusion, they may address it
in their compliance filings. Likewise, if they desire to release
additional data such as system lambda, they may propose it in their
filings.
    423. We adopt the NOPR proposal to retain the masking of
identities. The objection that sophisticated market participants may be
able to infer identities of those submitting offers and

bids does not resolve confidentiality concerns; if anything, it argues
for more protection, rather than less. We decline to establish a time
period for the eventual unmasking of identities, but invite RTOs and
ISOs to propose a period when such unmasking might be permitted, if
they believe it to be desirable.
    424. We therefore adopt the proposals advanced in the NOPR,
modified as indicated. Each RTO and ISO is to include in its tariff a
requirement that the MMU is to prepare an annual state of the market
report on market trends and the performance of the wholesale market, as
well as less extensive quarterly reports, all of which are to be
disseminated to Commission staff, to staff of interested state
commissions, to the management and board of directors of the RTOs or
ISOs, and to market participants, with the understanding that
dissemination may be accomplished by posting on the RTO's or ISO's Web
site. MMUs are also to make one or more of their staff members
available for regular conference calls, which may be attended,
telephonically or in person, by Commission and state commission staff,
by representatives of the RTO or ISO, and by market participants. The
information to be provided in the MMU reports and in the conference
calls may be developed on a case-by-case basis, but is generally to
consist of market data and analyses of the type regularly gathered and
prepared by the MMU in the course of its business, subject to
appropriate confidentiality restrictions. We also determine that the
lag time for the release of offer and bid data be reduced to three
months; however, an RTO or ISO may propose a shorter period with
accompanying justification. Furthermore, if the RTO or ISO demonstrates
a potential collusion concern, it may propose a four-month lag period
or, alternatively, some other mechanism to delay release of the data if
it were otherwise to occur in the same season as reflected in the data.
The identity of market participants is to remain masked, although the
RTO or ISO may propose a time period for eventual unmasking. The RTO or
ISO is to include in its compliance filing a justification of its
policy regarding the aggregation or lack thereof of offer data and of
cost data, discussing the manner in which it believes its policy avoids
participant harm and the possibility of collusion, while fostering
market transparency.
b. Tailored Requests for Information
i. Commission Proposal
    425. In the NOPR, the Commission carried forward the ANOPR proposal
allowing state commissions to make tailored requests for information
from MMUs regarding general market trends and performance, not to
include information designed to aid state enforcement actions against
individual companies. The Commission also proposed that a state
commission could, on a case-by-case basis, request the Commission to
authorize the release of otherwise proscribed data, if the state
commission demonstrated a compelling need for the information and could
insure adequate protections for commercially sensitive material. The
Commission proposed that before an MMU be allowed to release
information pertaining to a particular market participant, that the
participant be given the opportunity to object and to correct any
inaccurate information proposed to be released, and that the
availability of this protection be included in the RTO or ISO tariff.
The Commission also proposed that RTOs and ISOs develop, and include in
theirtariffs, confidentiality provisions that would protect
commercially sensitive material, but which would not be so restrictive
as to permit the release of little if any information.
ii. Comments
    426. Several commenters generally support the Commission's proposal
regarding tailored requests for information.\524\ APPA comments that
the Commission should not bar MMUs from providing such assistance to
the states if MMUs believe they can do so without harming their own
mission.\525\ ISO New England states it has an information policy that
already allows it to release confidential market information to state
commissions under certain circumstances and subject to non-disclosure
protections.\526\ Duke Energy is concerned with giving the MMUs too
much discretion and potentially imposing an unreasonable burden on
them, but states that the guiding parameters set out by the Commission
make the proposal more acceptable.\527\ FirstEnergy states the MMU
should share analyses and information with state commissions only when
directly necessary to support state regulatory obligations, and agrees
that tailored requests from state commissions should not detract from
the MMU's core duties and must be made in light of budget and time
limitations.\528\
---------------------------------------------------------------------------

    \524\ See, e.g., PJM Power Providers; SoCalEdison-SDG&E.
    \525\ APPA at 92-93.
    \526\ ISO New England at 26.
    \527\ Duke Energy at 11.
    \528\ FirstEnergy at 16.
---------------------------------------------------------------------------

    427. The California PUC agrees that requests by state commissions
should not overly burden the MMUs but comments that this need not be
the case, noting that in California, CAISO and the California PUC have
been able to work out the wording, scope and timing of the California
PUC information requests in a reasonable and cooperative manner,
including the protection of sensitive commercial information with a
nondisclosure agreement. The California PUC and PG&E also comment that
the MMU's core function of reviewing and reporting on the performance
of wholesale markets should be understood to include reporting to state
commissions, and assert that data used in making MMU assessments of
market efficiency or competitiveness, reports to CAISO management or
boards, or reports to the Commission should be available to state
commissions as well.\529\
---------------------------------------------------------------------------

    \529\ See, e.g., California PUC; PG&E.
---------------------------------------------------------------------------

    428. EEI and Reliant support allowing the MMUs to be receptive to
requests for information, as long as the information pertains to market
trends and is developed in the ordinary course of business. EEI and
Reliant comment that it is not reasonable for the MMUs to provide new
studies or analysis beyond their annual and quarterly reports, and
assert that state commissions may not treat MMUs as private consultants
to perform studies. These commenters also assert that states have their
own enforcement programs and should not rely on the MMU. Reliant
suggests that, if a state commission requesting MMU information cannot
agree with the RTO's or ISO's confidentiality provisions, the
Commission should clarify that the MMU should not be required to
disclose information to the state commission.\530\
---------------------------------------------------------------------------

    \530\ See, e.g., EEI; Reliant.
---------------------------------------------------------------------------

    429. The Kansas CC agrees with the Commission's proposal not to
require MMUs to provide information to aid in state enforcement efforts
or actions against individual utilities. However, it suggests that
sensitive market information could be provided to state commissions in
a manner that would uphold the confidential nature of the information
and protect the market. The Kansas CC requests that the Commission
consider alternative solutions that will preserve confidentiality,
while providing state commissions with

information necessary to fulfill their statutory and regulatory
charges.\531\
---------------------------------------------------------------------------

    \531\ Kansas CC at 2.
---------------------------------------------------------------------------

    430. The Ohio PUC, noting the interconnectedness of retail rates to
wholesale markets, proposes a test to determine the type of information
that should be disseminated to state commissions. In its view, if a
state commission asks for it, and the MMU has it or can get it without
undue burden, it should be provided subject to confidentiality
provisions.\532\
---------------------------------------------------------------------------

    \532\ Ohio PUC at 27, 29.
---------------------------------------------------------------------------

    431. Several commenters do not support various aspects of the
Commission's proposal on tailored requests from state commissions. The
California PUC contends that the restrictions would cripple state
market monitoring, and asks the Commission how it would distinguish
between information designed to aid state enforcement actions from
information designed to allow states to monitor the market.\533\
---------------------------------------------------------------------------

    \533\ California PUC at 48-49.
---------------------------------------------------------------------------

    432. NARUC states that imposing the proposed limitations on state
access to information is inefficient and unnecessary, observing that
states operate in the public interest. NARUC argues that requiring
unnecessary proceedings over specific requests, at taxpayer or
ratepayer expense, is not good policy, and asserts that state
commissions have demonstrated their ability to maintain the integrity
of commercially sensitive materials.\534\
---------------------------------------------------------------------------

    \534\ NARUC at 15.
---------------------------------------------------------------------------

    433. The New York PSC states that limiting its ability to obtain
such information is unnecessary and unsupported by the record in this
proceeding, contending that the Commission has not demonstrated that
providing information to state commissions for state enforcement
purposes violates any provision of law or policy, and noting that the
purpose of the information may not be apparent in any event. It
suggests that in the event the MMU is concerned about budgetary and
time limitations, it could simply provide the state commission with the
raw data and allow the state commission to employ its resources to
derive the information or analysis sought. It proposes that if a state
commission is able to maintain the information on a confidential basis,
the MMU should be allowed to determine whether to provide the requested
information.\535\
---------------------------------------------------------------------------

    \535\ New York PSC at 10-12.
---------------------------------------------------------------------------

    434. OMS disagrees with the Commission that its proposed
restrictions on information access by state commissions are reasonable.
It asserts that the NOPR proposal limiting state commission requests to
the MMU to ``general market trends and performance'' represents a
significant reduction in the information its members already receive in
accordance with the Midwest ISO's tariff. OMS states that the
Commission should respect the arrangement currently in place for the
Midwest ISO, and permit that arrangement to be expanded, as necessary,
to meet the need of OMS and its state commission members. OMS also
asserts that state commissions should not be put in a position of
merely having to trust the findings of the MMU, but rather, should be
provided with the data and information necessary to evaluate and verify
the MMU's findings. It also states that the Commission's proposal to
prohibit state commissions from seeking information from the MMU that
would aid state enforcement is unreasonable, as many state commissions
do not have access to the data and information necessary to initiate
investigative actions that might eventually lead to enforcement
actions.\536\
---------------------------------------------------------------------------

    \536\ OMS at 13-14.
---------------------------------------------------------------------------

    435. Other commenters provided suggestions and points of
clarification. The FTC encourages the Commission to devise ways that
would allow MMUs to provide services to state and federal agencies even
when the MMU does not have the extra resources. For example, it
suggests that the Commission could authorize fees to be paid by state
and federal agencies for services that primarily assemble and organize
existing MMU data, which is similar to how other agencies deal with
FOIA requests.\537\ The California PUC comments it is unclear if
``information regarding general market trends and performance'' would
be limited to aggregated data or if the state commissions would also
have access to raw data. It also states that this proposal would
restrict existing access to data, and would require states to obtain
Commission authorization and make a showing of a ``compelling need''
for that information.\538\ CAISO states that the Commission should
clarify whether its proposal applies only to requests or also to
subpoenas and court orders.\539\ TAPS opposes giving state commission
staffs preferential treatment in the ability to make requests for
information from the MMU.\540\
---------------------------------------------------------------------------

    \537\ FTC at 31.
    \538\ California PUC at 47-48.
    \539\ CAISO at 16-17.
    \540\ TAPS at 57.
---------------------------------------------------------------------------

    436. Several of the commenters support the provision regarding the
development of confidentiality provisions, with limitations. The
California PUC asserts that the language is too vague, and suggests it
be revised to read ``The RTO should develop confidentiality provisions
in their tariffs that will protect commercially sensitive material, but
will be no more restrictive than necessary to protect that
information.'' The California PUC also notes that the California PUC
and CAISO have an established practice for sharing market information
that preserves confidentiality of data, and argues that the proposed
limitations are unnecessary and would disrupt already existing state
access to market data.\541\
---------------------------------------------------------------------------

    \541\ California PUC at 46, 49.
---------------------------------------------------------------------------

    437. The Maine PUC stresses the need for a greater level of
information sharing by ISO New England with state commissions. It
proposes that where there are protections in place to ensure that
confidential information remains confidential when disclosed to a state
commission, the Commission should direct ISO New England to share
confidential information with the state commissions in the same or
similar manner to its information sharing with the Commission.\542\
---------------------------------------------------------------------------

    \542\ Maine PUC at 8-9.
---------------------------------------------------------------------------

    438. The Ohio PUC and PJM request clear rules and definitions
relating to confidential information. The Ohio PUC states that the
Commission should require RTOs or ISOs to revisit the definitions of
``Confidential Information'' in their tariffs, asserting that in the
cases of PJM and the Midwest ISO, confidential information is whatever
a market participant declares it to be. PJM is concerned about the
treatment of confidential information, such as cost data, particularly
in the area of aggregated data that may be ``reverse engineered.'' PJM
states that the release of these data, in conjunction with other
industry information not necessarily known or even available to PJM,
could inflict commercial harm on a market participant and adversely
impact the competitiveness of the market. PJM requests clear, bright-
line rules regarding the treatment of confidential information, noting
it must deal with large volumes of such information that frequently are
the subject of requests from numerous public and private entities.\543\
---------------------------------------------------------------------------

    \543\ See, e.g. , Ohio PUC; PJM.
---------------------------------------------------------------------------

    439. Reliant and SPP are concerned about the treatment of
confidential materials once in the hands of the state commissions.
Reliant is of the view that

state commissions should be required to identify the person who will
have access to the information, the person who will be the official
custodian for the information, and the purpose for the request. It
states that a state official should be required to sign a non-
disclosure agreement as a pre-condition of receiving data and, in
situations where the state cannot guarantee data confidentiality, such
as in the case where a state's public records regulations might require
disclosure, such data should not be shared. SPP is concerned that
unless the state commission can provide proof that information can and
will be kept confidential, that SPP should not be required to provide
that information to the state commission, and asks that the Commission
address the issue of relieving the RTO or ISO from any liability.\544\
---------------------------------------------------------------------------

    \544\ See, e.g., Reliant; SPP.
---------------------------------------------------------------------------

    440. PJM Power Providers states that given the serious potential
consequences associated with an improper release of sensitive market
data, the Commission should go to great lengths to ensure the
confidentiality of this information.\545\
---------------------------------------------------------------------------

    \545\ PJM Power Providers at 18.
---------------------------------------------------------------------------

    441. Commenters generally agree with the proposal to permit market
participants the opportunity to contest any data specific to them that
the MMU proposes to release. Duke Energy supports allowing market
participants an opportunity to contest information, but comments that
market participants should also have an opportunity to respond to data
and not just contest them, as they may want to provide context to data
even if they do not wish to dispute them.\546\ FirstEnergy agrees that
affected utilities should be given notice and have the opportunity to
comment.\547\
---------------------------------------------------------------------------

    \546\ Duke at 11-12.
    \547\ FirstEnergy at 16.
---------------------------------------------------------------------------

    442. Several commenters support the Commission's proposal to allow
state commissions to request release of data from the Commission, with
limitations or additions. EEI supports the Commission releasing data if
the state demonstrates a compelling need and cannot obtain the data
from any other source, and if the Commission can adequately protect
commercially sensitive data.\548\ APPA believes that state entities
(including commissions, state attorney generals, legislators,
governors, and relevant electric retail regulatory authorities for
public power systems) and third parties should be allowed to request
information on a case-by-case basis directly from an MMU; if the MMU
believes it can provide the needed information it should not have to go
through the Commission, and only in the event the requestor is refused
the information by the MMU, would it be necessary to petition the
Commission.\549\ Duke Energy comments that affected market participants
should have recourse to appeal an MMU decision to the Commission, just
as a requester can petition the Commission.\550\
---------------------------------------------------------------------------

    \548\ EEI at 28.
    \549\ APPA at 94.
    \550\ Duke at 12.
---------------------------------------------------------------------------

    443. Other commenters strongly oppose the Commission's proposal
regarding submitting a request for the release of otherwise proscribed
information. NARUC believes the proposal is likely to hamper proper
state oversight, and argues that the Commission should not impose a
gatekeeper function to evaluate state commission information needs or
the legitimacy of their requests. NARUC argues this can only waste both
state and federal resources and ratepayer funds on unnecessary
proceedings.\551\
---------------------------------------------------------------------------

    \551\ NARUC at 15-16.
---------------------------------------------------------------------------

    444. The Ohio PUC questions how enforcement can occur without
access to market information, which it argues the Commission currently
controls. It asserts that the Commission must reevaluate its position
on this matter to ensure that state commissions have timely access to
market information and possess all the necessary tools to make certain
that customers' interests are protected against market abuses and
manipulation. It also suggests that it could take entity-specific
information subject to a confidentiality agreement, and then use that
information to pursue its own discovery under state law, in order to
pursue an enforcement action.\552\ OMS states that state commissions
should not be required to petition the Commission for access to data
and information that it feels should be theirs in the first place. OMS
strongly urges the Commission to reconsider its position in this
regard.\553\
---------------------------------------------------------------------------

    \552\ Ohio PUC at 35.
    \553\ OMS at 14-15.
---------------------------------------------------------------------------

    445. OPSI does not agree with the Commission's proposal and
recommends that any rules adopted in this proceeding reflect the data
availability practices established in the PJM/MMU Settlement Agreement.
iii. Commission Determination
    446. The enhanced information sharing provisions we adopt in this
Final Rule significantly expand the materials that state commissions
may receive. However, we are cognizant that state commissions might
from time to time desire additional information pertinent to their
particular needs. Therefore, we adopt the NOPR proposal that state
commissions may make tailored requests for information from the MMUs,
so long as the request is limited to information regarding general
market trends and the performance of the wholesale market. This
limitation is needed in light of the limited resources of the MMUs,
whose first order of business is evaluating market design, monitoring
the markets, and referring suspected wrongdoing to the Commission. If
this limitation were not imposed, the MMU could rapidly become an
unpaid consultant for the states, and would be unable to perform its
core functions.
    447. We are cognizant of the observations by EEI and Reliant that
state commission requests for information, which would necessarily be
in addition to the information already produced in the MMUs' annual and
quarterly reports, may place an unreasonable burden on the MMUs. We
therefore direct that the MMUs, in the first instance, determine
whether a request would be unduly burdensome. If so, it need not
perform the requested study.
    448. Many comments centered on the need for the confidentiality of
the materials provided by the MMU, and the means by which
confidentiality concerns could be addressed. Inasmuch as the material
to be provided in response to tailored requests for information will
consist of market trends and the performance of the wholesale market,
such confidentiality concerns may not prove to be as great a stumbling
block as some suggest. Where information to be provided raises
confidentiality concerns, the information may nonetheless be provided,
if appropriate non-disclosure agreements are executed. We direct the
RTOs and ISOs to develop confidentiality provisions for their tariffs,
and adopt the California PUC suggestion that such provisions be
designed so as to protect commercially sensitive material, but be no
more restrictive than necessary to protect that information. It will be
up to each RTO or ISO, together with its stakeholders, to propose the
confidentiality provisions they deem most appropriate, and to propose
them to the Commission in a tariff filing.
    449. We note that our directive regarding the ability of state
commissions to make tailored requests for information is designed to
increase the dissemination of information, not

restrict it. As we have indicated elsewhere, the type of information to
be provided by the MMU may vary from region to region, and is governed
principally by the workload such requests impose on the MMU. Therefore,
unless the information violates confidentiality restrictions regarding
commercially sensitive material, is designed to aid state enforcement
actions, or impinges on the confidentiality rules of the Commission
with regard to referrals, it may be produced, so long as it does not
interfere with the MMU's ability to carry out its core functions.
    450. We decline to require MMUs to turn over raw data if they do
not have the time to comply with a tailored request for information. If
the MMU determines that raw data may be provided, appropriately
redacted to meet confidentiality concerns, it may do so. However, it is
quite possible that gathering, organizing, reviewing, and explaining
such data might prove nearly as time consuming as responding in a
narrative fashion to a request for information. The MMU is not a
consultant for the states, and should not be placed in the position of
having to respond to every request for information submitted to it.
    451. We also decline to eliminate our restriction on the state
commissions' ability to request information designed to aid state
enforcement actions. Of course, if a state receives information
regarding general market performance, and chooses to pursue a more
focused study with its own resources, there is no prohibition to its
doing so. The key considerations here are the burden placed on the MMU,
the nature of the material to be provided, and the need for
confidentiality. The MMU will be in the best position to determine if
the material requested would be unduly burdensome to produce. And the
RTO or ISO confidentiality provisions, as well as those of the
Commission, will govern whether the state commission can receive
information of a confidential nature.
    452. A state commission need not turn an MMU into an arm of its
investigatory processes in order to carry out its duties. If a state
has information suggesting the need for an investigation, it can use
the full panoply of its powers and resources to pursue the matter on
its own. We know from long experience that investigations are very time
and resource-intensive, and were states to enlist the MMU's assistance
in this regard, it would leave the MMU with little ability to carry out
its core functions.
    453. We note, however, that from time to time Commission staff
investigates matters of mutual interest to state commissions. It has
been staff's practice to work cooperatively with the states in such
cases, bearing in mind the confidentiality of materials obtained by
Commission staff in the course of an investigation. We direct staff to
continue its practice in this regard.
    454. Whether requested information is designed to aid an
enforcement action can generally be answered by the particularized
nature of the request and the extent of the questions. As we have
stated, the information to be provided in response to a tailored
request for information should consist of market trends and the
performance of the wholesale market. At least one comment reinforces
the need for caution in this regard. The comment suggested that a state
body could take entity-specific information subject to a
confidentiality agreement and then use that information to pursue its
own discovery. This end run around the confidentiality provisions might
raise liability concerns on the part of both the MMU and the RTO or
ISO, and possibly the Commission itself, and underscores the need to be
sensitive to requests designed to support enforcement actions.
    455. We adopt the NOPR proposal that market participants be given
the opportunity to contest any data specific to them. We also adopt the
proposed expansion of this provision to include the right to provide
context to the data, so long as the process does not unduly delay
release of the information.
    456. CAISO asks that we clarify whether our proposal applies only
to requests or also to subpoenas and court orders. We clarify that our
proposal applies to requests. Whether subpoenas or court orders are to
be honored or contested lies outside the scope of this Final Rule and
is a matter to be addressed by the MMU and by the RTO or ISO, in
consultation with their attorneys.
    457. We decline to adopt the FTC's suggestion that state and
federal agencies be given the ability to obtain data from the MMU
through the payment of fees. Such a fee arrangement could raise
conflict of interest concerns. More significantly, however, it would
reduce the MMU to the position of a consultant for hire, a role which
would necessarily distract it from its core functions.
    458. We also adopt our NOPR proposal permitting state commissions
to petition the Commission for the release of otherwise proscribed
information. This provision is intended as a safety net to increase the
ability of states to receive information, not as a further restriction.
State commissions are free to direct their requests to the MMUs in the
first instance, but such requests should comply with the restrictions
we note above. If they do not, waiver of such restrictions is up to the
Commission, not to the MMUs.
    459. Therefore, we carry forward our proposal from the NOPR,
modified as noted herein. MMUs are to entertain from state commissions
tailored requests for information regarding general market trends and
the performance of the wholesale market, but not for information
designed to aid state enforcement actions. Granting or refusing such
requests will be at the MMU's discretion, based on agreements worked
out between the RTO or ISO and the states, or otherwise based on time
and resource availability. Release of any confidential information is
to be subject to the confidentiality provisions in the RTO's or ISO's
tariff, and to the Commission's confidentiality restrictions. RTOs and
ISOs are to develop confidentiality provisions that will protect
commercially sensitive material, but which will be no more restrictive
than necessary to protect that information. State commissions are also
free to petition the Commission for the release of information that
does not fall within the parameters noted. And market participants are
free to contest the factual content of information to be released, or
to provide context for it, so long as such material does not unduly
delay release of the information.
c. Commission Referrals
i. Commission Proposal
    460. In the NOPR, the Commission noted that its rules require that
information regarding its investigations be kept nonpublic unless, in
any given case, the Commission authorizes that it be publicly
disclosed. We proposed that the existing provisions regarding the
confidentiality of MMU referrals to the Commission, as well as the
confidentiality of the progress and results of its own investigations,
be retained. The Commission also noted that it intended to continue the
practice of Commission staff providing the MMUs with generic feedback
regarding enforcement issues.
ii. Comments
    461. Several commenters support the Commission's proposal.\554\
APPA also suggests that the Commission has the obligation to act as
quickly as possible, so other government entities with a

legitimate interest in the matter are kept informed.\555\ ISO New
England comments that the proposed referral provisions are generally
consistent with, but more detailed than, ISO New England's existing
rules concerning the obligation of its MMU to identify and report on
market design flaws and to refer potential market manipulation to the
Commission.\556\
---------------------------------------------------------------------------

    \554\ See, e.g., APPA, EEI, Midwest ISO, Reliant, and SPP.
    \555\ APPA at 94.
    \556\ ISO New England at 27.
---------------------------------------------------------------------------

    462. Many commenters urge the Commission to reconsider its position
that state commissions not be informed when an MMU refers a matter to
the Commission.\557\ Some commenters assert that several states
maintain sufficient safeguards against public disclosure of
information, and any assumptions regarding the potential mishandling of
confidential information are misdirected and should be discounted.\558\
The California PUC and NRECA comment that the Commission should provide
information to the MMUs and state commissions about matters an MMU has
referred to the Commission, because it would help increase confidence
that the Commission investigates attempts to manipulate the
market.\559\ The Ohio PUC maintains that there must be a free exchange
of market data among the RTO or ISO, the MMU, and state commissions to
ensure markets are flourishing and to avoid manipulation.\560\
---------------------------------------------------------------------------

    \557\ See, e.g., California PUC, NARUC, New York PSC, NRECA,
Ohio PUC, and OMS.
    \558\ See, e.g., New York PSC, Ohio PUC, and OMS.
    \559\ California PUC at 52-53.
    \560\ Ohio PUC at 32.
---------------------------------------------------------------------------

    463. NARUC comments that the Commission should inform affected
state commissions of MMU referrals because the commissions need
information about specific market participants both to properly
exercise their own regulatory authority and to avoid potentially
inconsistent outcomes and duplicative efforts.\561\ The New York PSC
comments that it is vital that state commissions be able to demonstrate
that the presence of a competitive market does not disable the state
from protecting retail ratepayers, and that the state commission is
capable of carrying out its statutory obligation in a competitive
market.\562\
---------------------------------------------------------------------------

    \561\ NARUC at 16.
    \562\ New York PSC at 13-15.
---------------------------------------------------------------------------

    464. NRECA believes that an appropriate balance can be struck with
respect to information and emphasized that it is not seeking the
release of the names of individual entities or any competitively
sensitive information but is merely requesting statistical information
on, for example, numbers of entities referred, types of infractions,
and the resolution of referrals.\563\ OMS comments that state
commissions could be effective allies with the Commission in the
investigation and evaluation of the market participant behavior that
led the MMU to make the referral, and the Commission's concern that
informing state commissions of MMU referrals might discourage market
participants from self-reporting objectionable behavior is not
applicable to MMU referrals, as these referrals happen only because a
market participant has failed to self-report.\564\
---------------------------------------------------------------------------

    \563\ NRECA at 56.
    \564\ OMS at 11.
---------------------------------------------------------------------------

iii. Commission Determination
    465. We adopt the NOPR proposal retaining the confidentiality of
MMU referrals to the Commission, as well as the confidentiality of any
investigations that result from such referrals. By Commission rule, all
information and documents obtained during the course of an
investigation are non-public. They may not be released except to the
extent the Commission directs or authorizes in a given instance, unless
the material is already made public during an adjudicatory proceeding
or disclosure is required by the Freedom of Information Act.\565\ There
are sound policy reasons for this rule. As we noted in the NOPR,
release of such confidential information would impede the willingness
of market participants to cooperate in the investigation and to self-
report in the future. It could also injure innocent persons who might
be erroneously implicated or adversely affected by simply being
associated with an investigation.
---------------------------------------------------------------------------

    \565\ 18 CFR 1b.9.
---------------------------------------------------------------------------

    466. The Commission can only answer for its own abilities to keep
material confidential, and cannot put itself in the position of having
to interpret the extent of protections afforded by all the relevant
state rules, statutes, and case law that govern disclosure. Nor can it
expose itself to the potential liability it might incur by turning over
confidential materials, should such materials be misused by agencies or
individual state employees over whom the Commission has no control.
    467. We also are not persuaded that release of information about
MMU referrals would avoid potentially inconsistent outcomes and
duplicative efforts. For that to be true, one would have to assume that
the scope of jurisdiction and the governing laws of the states in
question are identical to those of the Commission, which is clearly not
the case.
    468. We are sympathetic to NRECA's request for statistical
information, and agree that, to the extent we can make our enforcement
actions more transparent, it is desirable to do so. To that end, we
recently announced that the staff of the Office of Enforcement will
prepare and publicly release annual reports summarizing its enforcement
activities for the preceding year, to be released at the close of our
fiscal year, September 30.\566\ The first such report was released on
November 14, 2007.\567\ In addition, it is the practice of Commission
staff to provide the MMU with generic feedback regarding enforcement
issues, and we will ensure that staff continues to do so.
---------------------------------------------------------------------------

    \566\ Revised Policy Statement on Enforcement, 123 FERC ]
61,156, at P 12 (2008).
    \567\ Report on Enforcement, Docket No. AD07-13-000 (2007).
---------------------------------------------------------------------------

    469. We therefore decline to alter our rule and policy regarding
the confidential nature of MMU referrals to the Commission.
4. Pro Forma Tariff
a. Commission Proposal
    470. In the NOPR, the Commission declined to propose a pro forma
tariff for the MMU sections of an RTO or ISO OATT, instead proposing
that RTOs and ISOs conform their tariffs to the requirements set forth
in this Final Rule. The Commission also proposed that each RTO or ISO
include protocols for the referral of tariff, rule, and market
manipulation violations to the Office of Enforcement, and for the
referral of perceived market design flaws and recommended tariff
changes to the Office of Energy Market Regulation.
b. Comments
    471. A limited number of entities filed comments on the
Commission's proposal. The Midwest ISO agrees that requiring each RTO
or ISO to conform its tariff to the requirements of the Final Rule is
preferable to a pro forma tariff.\568\ EEI agrees that the Commission
has appropriately permitted RTOs and ISOs flexibility to tailor their
market monitoring provisions to their own regional variations.\569\
APPA suggests that the Commission use, as a possible template for the
relevant tariff provisions, the revised Attachment M to the PJM tariff
approved in the PJM MMU Settlement Order.\570\ SPP believes that it
already complies with the majority of the proposals the

Commission has set forth in this proceeding, but will comply with any
revisions that may be required by the Final Rule.\571\
---------------------------------------------------------------------------

    \568\ Midwest ISO at 27.
    \569\ EEI at 24.
    \570\ PJM MMU Settlement Order, 122 FERC ] 61,257.
    \571\ SPP at 10.
---------------------------------------------------------------------------

    472. The California PUC, on the other hand, states that it does not
support a pro forma tariff because of its objections to several of the
MMU proposals in the NOPR, particularly the issues surrounding state
access to data.\572\
---------------------------------------------------------------------------

    \572\ California PUC at 53.
---------------------------------------------------------------------------

c. Commission Determination
    473. Given the degree of discretion this Final Rule allows RTOs and
ISOs to structure their relationship with their MMUs in the manner they
deem most suitable, a pro forma MMU tariff section would be
impractical. Therefore, we will not impose one.
    474. We also decline to adopt PJM's MMU tariff section, Attachment
M, as a template for a centralized MMU tariff section. That document is
particularized to the needs of that RTO, and we therefore will not
require other RTOs and ISOs to follow it. We agree, however, that some
uniformity is desirable, particularly for market participants who
operate in multiple regions, and for regulators who often have occasion
to compare and contrast tariff provisions amongst the various RTOs and
ISOs.
    475. We therefore suggest, but do not require, that RTOs and ISOs
consider structuring their MMU tariff sections to include the following
general categories, preferably in this general order: Introduction and
Purpose; Definitions; Independence and Oversight; Structure; Duties of
Market Monitor; Duties of RTO or ISO; Data Access, Collection, and
Retention; Information Sharing; Ethics; RTO- or ISO-Specific
Provisions; Protocol on Referrals of Investigations to the Office of
Enforcement; Protocol on Referrals of Perceived Market Design Flaws and
Recommended Tariff Changes to the Office of Energy Market Regulation.
    476. We note that in our Policy Statement on Market Monitoring
Units,\573\ we prescribed the form and contents of an MMU referral to
the Office of Enforcement. We likewise include in this Final Rule
updated protocols for such referrals, as well as protocols for
referrals to the Office of Energy Market Regulation of perceived market
design flaws and recommended tariff changes.
---------------------------------------------------------------------------

    \573\ Policy Statement, 111 FERC ] 61,267 at Appendix A.
---------------------------------------------------------------------------

D. Responsiveness of RTOs and ISOs to Customers and Other Stakeholders

    477. In this section of the Final Rule, the Commission requires
RTOs and ISOs to establish a means for customers and other stakeholders
to have a form of direct access to the board of directors, and thereby
to increase the boards of directors' responsiveness to these entities.
(By responsiveness, we mean an RTO or ISO board's willingness, as
evidenced in its practices and procedures, to directly receive concerns
and recommendations from customers and other stakeholders, and to fully
consider and take actions in response to the issues that are raised.)
The Commission requires each RTO or ISO to submit a compliance filing
demonstrating that it has in place, or will adopt, practices and
procedures to ensure that its board of directors is responsive to
customers and other stakeholders. The Commission will assess each RTO's
or ISO's filing using four criteria: (1) Inclusiveness; (2) fairness in
balancing diverse interests; (3) representation of minority positions;
and (4) ongoing responsiveness.
    478. The Commission also directs each RTO and ISO to post on its
Web site its mission statement or organizational charter. The
Commission encourages each RTO and ISO to set forth in these documents
the organization's purpose, guiding principles, and commitment to
responsiveness to customers and other stakeholders, and ultimately to
the consumers who benefit from and pay for electricity services.
1. Background
    479. Neither Order No. 888 \574\ nor Order No. 2000 \575\ mandated
specific RTO board governance requirements. In Order No. 2000, the
Commission stated that, given the early stage of RTO formation, it
would be counterproductive to impose a one-size-fits-all approach to
governance when RTOs may have varying structures based on their
regional needs.\576\ Therefore, the Commission indicated that it would
review governance proposals on a case-by-case basis.\577\ The
Commission also emphasized the importance of stakeholder input
regarding both the creation of RTOs and ongoing operations.\578\ The
Commission added that, in the case of a non-stakeholder board, it is
important that the board not become isolated.\579\
---------------------------------------------------------------------------

    \574\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery
of Stranded Costs by Public Utilities and Transmitting Utilities,
Order No. 888, FERC Stats. & Regs. ] 31,036 (1996), order on reh'g,
Order No. 888-A, FERC Stats. & Regs. ] 31,048, order on reh'g, Order
No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 888-C,
82 FERC ] 61,046 (1998), aff'd in relevant part sub nom.
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (DC
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
    \575\ Regional Transmission Organizations, Order No. 2000, FERC
Stats. & Regs. ] 31,089 (1999), order on reh'g, Order No. 2000-A,
FERC Stats. & Regs. ] 31,092 (2000), aff'd sub nom. Pub. Util. Dist.
No. 1 of Snohomish County, Washington v. FERC, 272 F.3d 607 (DC Cir.
2001).
    \576\ The Commission noted that existing ISOs have varying forms
of governance. Some used a two-tier form of governance with a non-
stakeholder board and advisory committees of stakeholders while one,
CAISO, employed a decision making board consisting of both
stakeholders and non-stakeholders. Order No. 2000-A, FERC Stats. &
Regs. at 31,073.
    \577\ Id. at 31,073-74.
    \578\ Id.
    \579\ Id.
---------------------------------------------------------------------------

    480. In the ANOPR, the Commission noted stakeholders' concerns that
RTOs and ISOs are not sufficiently responsive to customers and other
stakeholders, and that those parties should have some form of effective
direct access to the RTO or ISO board of directors.\580\ The Commission
inquired whether RTOs and ISOs should be required to create and
institute practices and procedures to ensure that customers and other
stakeholders have such access.\581\ The Commission also made a
preliminary proposal that the goal of enhancing customer and other
stakeholder access to the board could be achieved by either a board
advisory committee or a hybrid board.\582\
---------------------------------------------------------------------------

    \580\ ANOPR, FERC Stats. & Regs. ] 32,617 at P 148.
    \581\ Id. P 149.
    \582\ Id. P 151, 153. The Commission explained that a hybrid
board would be composed of both independent members and stakeholder
members, with each member holding a seat on the board and
participating fully in board decisions with an equal vote. Id. P
152.
---------------------------------------------------------------------------

2. Commission Proposal
Responsiveness Obligation and Proposed Criteria
    481. In the NOPR, the Commission proposed to require that customers
and other stakeholders have some form of effective direct access to the
RTO or ISO board of directors. The Commission indicated that while it
viewed the board advisory committee as particularly suitable for
enhancing responsiveness, it anticipated that each RTO or ISO and its
stakeholders would develop practices and procedures that best suit
their needs.\583\ The Commission reiterated its position that a one-
size-fits-all approach may not be beneficial given the varying
structure and needs of each regional entity. It therefore proposed to
establish a set of four criteria for RTOs and ISOs designed to ensure
that RTO and ISO

boards are responsive to their customers and other stakeholders.\584\
---------------------------------------------------------------------------

    \583\ Id. P 277.
    \584\ NOPR, FERC Stats. & Regs. ] 32,628 at P 275.
---------------------------------------------------------------------------

    482. In order to demonstrate that RTOs and ISOs meet the
responsiveness obligation, the Commission proposed to require each one
to submit a compliance filing showing that it has in place or will
adopt practices and procedures to ensure responsiveness. The Commission
proposed to assess the filed practices and procedures of each RTO and
ISO using four criteria:
     Inclusiveness--The business practices and procedures must
ensure that any customer or other stakeholder affected by the operation
of the RTO or ISO, or its representative, is permitted to communicate
its views to the RTO's or ISO's board of directors.
     Fairness in Balancing Diverse Interests--The business
practices and procedures must ensure that the interests of customers or
other stakeholders are equitably considered and that deliberation and
consideration of RTO and ISO issues are not dominated by any single
stakeholder category.
     Representation of Minority Positions--The business
practices and procedures must ensure that, in instances where
stakeholders are not in total agreement on a particular issue, minority
positions are communicated to the RTO's or ISO's board of directors at
the same time as majority positions.
     Ongoing Responsiveness--The business practices and
procedures must provide for stakeholder input into the RTO's or ISO's
decisions as well as mechanisms to provide feedback to stakeholders to
ensure that information exchange and communication continue over time.
    483. The Commission proposed that each RTO or ISO compliance filing
would be required to be submitted within six months of the date the
Final Rule is published in the Federal Register, and stated that it
would assess whether each filing satisfies the proposed requirement and
issue additional orders as necessary.\585\
---------------------------------------------------------------------------

    \585\ Id. P 92.
---------------------------------------------------------------------------

3. Comments
    484. Most of the commenters support the Commission's proposal and
the four responsiveness criteria that the Commission proposed in the
NOPR.\586\ Many also express support for the Commission not proposing a
one-size-fits-all solution, but instead allowing regions flexibility in
meeting the criteria.\587\ The comments fall loosely into three
categories: (1) Whether to establish an obligation for responsiveness;
(2) whether the four responsiveness criteria are appropriate or need
greater specificity; and (3) whether additional criteria should be
required.
---------------------------------------------------------------------------

    \586\ See, e.g., Ameren; Comverge; Constellation; EEI; Exelon;
Indianapolis P&L Midwest ISO; New York PSC; NYISO; PJM; and PG&E.
    \587\ See, e.g., Ameren; ATC; Constellation; Midwest ISO; NYISO;
PJM; and SoCal Edison-SDG&E.
---------------------------------------------------------------------------

    485. Among the RTOs and ISOs, CAISO, Midwest ISO, NYISO, PJM and
SPP argue that they already have responsiveness policies that they
believe satisfy the Commission's proposed criteria. Some stakeholders
concur that their RTO's or ISO's policies meet the proposed
criteria.\588\ APPA is skeptical that the proposals would have any
effect, arguing that the RTOs and ISOs would likely say that their
practices are already sufficiently responsive.\589\
---------------------------------------------------------------------------

    \588\ See Ameren and ATC discussing Midwest ISO; California PUC
discussing CAISO; New York PSC discussing NYISO; and NEPGA, NEPOOL
and NU discussing ISO New England.
    \589\ APPA at 9, 97.
---------------------------------------------------------------------------

    486. Many commenters present examples of RTO or ISO practices that
are not fully effective. For example, IID notes that during
consideration of CAISO's proposal to subsidize the financing of certain
interconnection facilities, CAISO did not adopt any of the specific
tariff language IID recommended or sufficiently explain why it was
rejecting so many of IID's suggestions.\590\ TANC opines that time
frames for stakeholder review of CAISO initiatives are too short and
therefore appear to diminish the value of stakeholder input. As a
result, TANC submits that the Commission should require RTOs and ISOs
to employ methods of interacting with stakeholders that are intended to
achieve consensus on issues and that incorporate stakeholders early in
the decision-making process.\591\
---------------------------------------------------------------------------

    \590\ IID at 5.
    \591\ TANC at 12.
---------------------------------------------------------------------------

    487. Connecticut and Massachusetts Municipals encourage the
Commission to not solely rely on an inclusive stakeholder process to
ensure that organized wholesale electric markets and market
administrators are providing, or facilitating the provision of,
reliable electric service at the lowest reasonable cost. They do not
agree that developing a stakeholder process that meets the four
criteria will alleviate the need for the Commission to conduct its own
investigation into the justness and reasonableness of proposed rates,
charges, market rules, and design changes.\592\
---------------------------------------------------------------------------

    \592\ Connecticut and Massachusetts Municipals at 9-10.
---------------------------------------------------------------------------

    488. Several commenters make recommendations about the four
criteria proposed by the Commission. For instance, Ameren urges the
Commission to make sure that the third criterion, representation of
minority positions, is not allowed to outweigh the second criterion,
fairness in balancing diverse interests. One way to do this, Ameren
argues, would be to ensure that entities that will ultimately incur a
major portion of the costs related to the changes to RTO or ISO market
rules have a proportionate say in the development of these rules and
any related modifications, through bicameral voting.\593\
---------------------------------------------------------------------------

    \593\ Ameren at 15-16, 37-40.
---------------------------------------------------------------------------

    489. TAPS asserts that the balancing criterion invites greater
deference to well-represented classes to the detriment of other
customers that the FPA requires the Commission to protect. CAISO
requests that the Commission consider clarifying one of the four
proposed criteria, fairness in balancing diverse interests, regarding
how an RTO or ISO would be expected to establish generically that the
consideration given to diverse interests is equitable.\594\
---------------------------------------------------------------------------

    \594\ CAISO at 10.
---------------------------------------------------------------------------

    490. Constellation asks the Commission to clarify its definition of
the term ``customer'' in its statement that ``access by customers and
other stakeholders to the board based on these criteria will provide
them with the opportunity to ensure that their concerns are
considered.'' It states that the term customer could be applied to non-
jurisdictional entities such as retail customers, and the Commission
has already ensured that state agencies that regulate the retail market
have access to RTO and ISO boards.\595\
---------------------------------------------------------------------------

    \595\ Constellation at 19.
---------------------------------------------------------------------------

    491. Other commenters recommend more detail regarding the
application of the proposed criteria. For example, APPA suggests new
mandates for RTO and ISO stakeholder processes to help meet the
proposed criteria: \596\ Mandated direct stakeholder access to RTO and
ISO boards at frequent intervals; presentation of minority positions on
RTO and ISO proposals directly to the board by minority stakeholders;
consideration of the use of both stakeholder advisory committees and
hybrid boards; open RTO and ISO board meetings, with agendas made
public in advance and opportunity for stakeholder comment on agenda
items;

elimination of ``self-perpetuating'' RTO and ISO boards; directors
elected by stakeholder vote, with multiple candidates for each seat and
stakeholder input into the slate selection; and administration of
customer satisfaction surveys by outside entities. ATC wants a
formalized mechanism within an RTO's or ISO's main stakeholder
committee for communicating minority views of stakeholder sectors to an
RTO's or ISO's board of directors.
---------------------------------------------------------------------------

    \596\ APPA at 10, 102.
---------------------------------------------------------------------------

    492. SMUD states that RTOs and ISOs should be required to
demonstrate that: (1) There is evenly divided industry sector
representation, (2) no one sector (or entity) can dominate the process,
(3) votes are taken to measure stakeholder sentiment, (4) there is a
formal process for the RTO or ISO to consider adoption of stakeholder
initiatives and (5) before the RTO or ISO can reject a stakeholder
position supported by a supermajority of stakeholders, it must
articulate its reasons in writing, including in any filing it makes
with the Commission.\597\
---------------------------------------------------------------------------

    \597\ SMUD at 9.
---------------------------------------------------------------------------

    493. Others suggest new criteria for improving responsiveness, such
as providing opportunities for customer and other stakeholder feedback
on budgets and costs. The Maine PUC argues that ISO New England has
insufficient cost incentives, and that the Commission should consider
requiring RTOs and ISOs to place a stronger emphasis on cost-
containment in administration and development of wholesale electric
markets.\598\ North Carolina Electric Membership and NRECA suggest an
additional criterion: Reliable service at just and reasonable rates.
According to NRECA, the Commission's goals in creating RTOs and ISOs
require that these entities ensure accountability to stakeholders for
keeping costs down while maintaining a high level of service quality.
NRECA also states that the Commission should require RTOs and ISOs to
present annual budget information to customers and stakeholders, along
with adequate detail, transparent assumptions and calculations of
estimates, and cost support. It further recommends that the Commission
require RTOs or ISOs with formula rates to develop their budget
presentations for stakeholders and customers using the format required
for a filing with the Commission to change previously approved rates.
NRECA states that the RTO's or ISO's budgeting process should ensure
that customers and other stakeholders have a timely opportunity for
review of the budget proposals offered and that each RTO or ISO should
submit to the Commission, as an informational filing, all of the budget
materials provided to stakeholders for review.\599\
---------------------------------------------------------------------------

    \598\ Maine PUC at 8.
    \599\ NRECA at 59.
---------------------------------------------------------------------------

    494. Ameren suggests that RTOs and ISOs should be required to post
longer-term budgets, such as five-year budgets, so that market
participants can better monitor the costs and benefits of participating
in RTO and ISO Day 2 markets.\600\ NRECA states that the NOPR is silent
with respect to the matter of transparency in RTO and ISO budgets. Old
Dominion also requests that the Commission reinstate the proposals
contained in the ANOPR that would have improved transparency in the
budget process.\601\
---------------------------------------------------------------------------

    \600\ Ameren at 15-16, 37-40.
    \601\ Old Dominion at 5.
---------------------------------------------------------------------------

    495. Some commenters ask for a formal cost-benefit review of any
significant action. Connecticut and Massachusetts Municipals request
that the Commission require RTOs and ISOs to perform cost-benefit
studies in support of proposed rates, charges, and related rules.
FirstEnergy also recommends that significant new RTO or ISO proposals
should require a formal cost-benefit analysis before being submitted to
the stakeholder process. If these proposals are implemented, they
argue, post-implementation cost-benefit analyses should be employed to
see if actual benefits have materialized. RTO or ISO initiatives that
fail to produce stakeholder benefits or achieve their stated objectives
should be modified, or if necessary, rescinded.\602\ LPPC also suggests
that the Commission should require cost-benefit analyses to be filed in
conjunction with any significant capital expenditures or tariff
changes. These cost-benefit analyses would be submitted with the annual
budgets for approval by the Commission in the case of capital
expenditures, or with section 205 filings for tariff changes.\603\
---------------------------------------------------------------------------

    \602\ FirstEnergy at 17.
    \603\ LPPC at 19.
---------------------------------------------------------------------------

    496. Other commenters want improvements regarding notice of
meetings and time to review new proposals. TANC asserts that the
Commission should set minimal standards as to what constitutes
sufficient notice for convening stakeholder meetings and conference
calls, for the submission of stakeholder comments, and for subsequent
consideration of those comments prior to the RTO or ISO taking
action.\604\ ATC calls for a minimum amount of time afforded to
stakeholders to review and provide suggestions and feedback on final
versions of RTO or ISO filings before they are submitted to the
Commission. California Munis suggests that unless there is a physical
threat to system reliability or an exigent market condition, no
stakeholder meeting should be held without two weeks, and preferably
four weeks, minimum notice. It also argues that major market design and
policy meetings should not be held the same day, and preferably not on
back-to-back days. It further suggests that policy white papers should
be available no less than two weeks before the relevant stakeholder
meeting.
---------------------------------------------------------------------------

    \604\ TANC at 13.
---------------------------------------------------------------------------

    497. Other commenters want feedback from the RTO or ISO on how
their views were taken into account in the decision-making process. ATC
calls for establishment of a formal ``feedback loop'' that would
provide greater transparency in how stakeholder views are received,
reviewed, and considered in an RTO's or ISO's decision-making process.
TANC argues that the Commission should require RTOs and ISOs to explain
how they considered comments during their decision-making
processes.\605\ TANC also asks the Commission to require the RTO or ISO
to answer specific questions that would describe the stakeholder
process employed for developing tariff revisions, and how customer and
other stakeholder concerns were rectified.
---------------------------------------------------------------------------

    \605\ Id. at 20.
---------------------------------------------------------------------------

    498. Other commenters call for periodic reviews of the
effectiveness of stakeholder processes. LPPC suggests having a periodic
survey of customer satisfaction. ATC recommends that RTOs and ISOs be
required to submit annual reports to the Commission detailing their
adherence to the proposed responsiveness criteria. These reports would
provide the Commission with an ongoing mechanism for assessing whether
an RTO or ISO is following its approved practices for adhering to the
Commission's responsiveness criteria, whether those practices maintain
their effectiveness in meeting stakeholders' needs, and whether these
practices should be changed.\606\ California Munis believes that RTOs
and ISOs should be required to make a regular showing to the Commission
reviewing their stakeholder processes. NSTAR also encourages the
Commission to require RTOs and ISOs to undergo a periodic, independent
review of its stakeholder processes including sector membership
qualifications, voting weights, and other measures. It contends that
the Commission should oversee the review rather than leave it to the
stakeholders. This review and recommendation

should then be used to make constructive changes to the stakeholder
processes to ensure that all parties are properly represented.\607\
---------------------------------------------------------------------------

    \606\ ATC at 10.
    \607\ NSTAR at 11.
---------------------------------------------------------------------------

    499. Other commenters want RTOs and ISOs to adopt one another's
best practices. For example, NRECA states that the Commission should
add a criterion for RTOs and ISOs to follow best practices. NRECA
describes the PJM liaison committee meeting process, which allows for
direct board access by requiring board member attendance at such
meetings, and criteria for vote reporting. NRECA further states that
requiring board member participation in substantive committee meetings
would provide opportunity for improved communications between
stakeholders and the board.\608\
---------------------------------------------------------------------------

    \608\ NRECA at 60.
---------------------------------------------------------------------------

    500. Other commenters have further suggestions for improving
responsiveness to the needs of customers and other stakeholders. Joint
Commenters urge the Commission to adopt three additional requirements
for RTOs and ISOs to include in their compliance filings: (1) Improved
dissemination of information, (2) well-designed independent operational
audits of RTOs and ISOs with stakeholder input, and (3) clarification
of the need to adhere to manuals and market rules except under clearly
predefined circumstances.\609\ LPPC suggests requiring the annual
publication of a strategic plan.
---------------------------------------------------------------------------

    \609\ Joint Commenters at 3.
---------------------------------------------------------------------------

4. Commission Determination
    501. Based on the various aspects of the proposed responsiveness
criteria that the comments address, we discuss three topics in order:
Whether to establish an obligation for responsiveness and whether the
four responsiveness criteria are appropriate; whether the criteria need
greater specificity; and whether additional criteria should be
required.
a. Responsiveness Obligation and Appropriateness of the Four
Responsiveness Criteria
    502. The Commission adopts its proposal from the NOPR and
establishes by rule an obligation for each RTO and ISO to make reforms,
as necessary, to increase its responsiveness to the needs of customers
and other stakeholders. As further detailed below, each RTO and ISO
must explain in a filing to the Commission how it is fulfilling, or
will fulfill, this obligation. The Commission will assess each RTO's or
ISO's filing using the responsiveness criteria discussed below.
    503. Although some commenters argue that this requirement is not
needed or that RTOs and ISOs are already sufficiently responsive, we
find this requirement necessary. For those RTOs and ISOs that may
already be satisfying customer needs adequately, this formal
requirement will help to focus the attention of RTO and ISO boards and
senior management on improvements in this area of great concern to
their customers and other stakeholders. As RTOs and ISOs developed, the
Commission emphasized that their decision-making processes must be
independent of control of any market participant or class of
participants. RTO and ISO independence remains fundamental, and we will
preserve it; however, we find that RTOs and ISOs must provide an avenue
for customers and other stakeholders to present their views on RTO and
ISO decision-making, and to have those views considered. Establishing
practices and procedures that would allow RTO and ISO boards to be
responsive to the concerns of customers and other stakeholders is
important to providing these entities with confidence in RTOs' and
ISOs' independent governance processes.
    504. We will adopt the four responsiveness criteria as proposed in
the NOPR. Based on the comments received, we conclude that each of the
four criteria has a role in helping us to assess each separate
dimension of responsiveness. We also require each RTO and ISO to submit
a compliance filing demonstrating how it is responsive to customers and
other stakeholders, and we will assess each demonstration based on the
four criteria adopted herein.
    505. In adopting the four criteria, we have carefully sought to
balance customers' and other stakeholders' need for effective access to
the boards of RTOs and ISOs, with the need for the independent
management of each RTO and ISO. Upon consideration of the comments, the
Commission finds that the four criteria are appropriate, balanced, and
suitably tailored to improve the responsiveness of RTOs and ISOs to
customers and stakeholders.
    506. The first criterion, inclusiveness, is intended to ensure that
existing or newly-developed practices and procedures, are adequate to
bring the views of all customers or other stakeholders before the
board. Meeting this criterion will demonstrate that the RTO or ISO
actively provides for presenting customer and other stakeholder issues,
concerns, or proposals to its boards.
    507. The second criterion, fairness in balancing diverse interests,
requires that each RTO and ISO ensures that its practices and
procedures for decision making consider and balance the interests of
their customers and stakeholders, and ensures that no single
stakeholder group can dominate. This is necessary to ensure that the
RTO or ISO may make well-informed decisions that reflect the full range
of competing interests that may be affected.
    508. The third criterion, representation of minority interests to
the RTO and ISO boards, is also critical to ensure that customers and
other stakeholders have confidence in the decisions that come out of
RTO and ISO processes. This criterion will ensure that the minority
views of customers and stakeholders are forwarded, at the same time as
the majority views, to the boards during the deliberation process. The
Commission has often been notified that RTO and ISO decisions have been
made based only on the single view of the majority vote. While the
Commission will not intrude on the governance and decision-making
process of RTO and ISO boards and management, it will require that
those processes provide for appropriate consideration of minority
interests.
    509. Finally, through the fourth criterion, ongoing responsiveness,
the Commission will require that RTOs and ISOs continue over time to
consider customer and other stakeholder needs as the architecture or
market environment of the RTO or ISO changes. This criterion is
necessary to ensure that responsiveness continues into the future. As
with the overall operations of each RTO and ISO, responsiveness to
customers and other stakeholders should continually be evaluated for
improvement.
    510. In response to comments, we clarify that compliance with each
criterion must not diminish or limit the requirements for compliance
with the remaining criteria. For example, in response to Ameren, we
note that the third criterion does not mandate that minority interests
overrule majority decisions, rather it requires that the board be made
aware of the minority position where necessary. Taken together, the
criteria require that RTO and ISO boards be fully aware of the
positions of customers and other stakeholders to ensure that issues are
fully and fairly vetted.

b. Specificity of the Responsiveness Criteria
    511. While some commenters state that the four responsiveness
criteria should be more specific,\610\ others support the criteria as
proposed, and we conclude that the Commission struck the appropriate
balance in the NOPR. The Commission's approach in addressing the
responsiveness of RTO and ISO boards is to create a regulatory
obligation for RTOs and ISOs to provide greater access in order to
better serve the needs of customers and other stakeholders, and to
leave the detailed implementation of this obligation for the RTOs and
ISOs to work out with their own customers and other stakeholders.
---------------------------------------------------------------------------

    \610\ See, e.g., APPA; ATC; California Munis; NRECA; and SMUD.
---------------------------------------------------------------------------

    512. As was discussed in the NOPR, and the ANOPR prior to that,
during the evolution of RTOs and ISOs, the Commission has allowed each
RTO and ISO to develop the necessary operational practices that best
suit the needs of its customers and other stakeholders. Differing
market designs, governance structures, and existing stakeholder
processes should be balanced with the need for independent decision
making to provide the greatest benefits to customers and other
stakeholders. To create a more expansive set of one-size-fits-all rules
would undo that long-held determination.
    513. As a result, we do not agree with those commenters who contend
that the criteria should be made more specific or set out in more
detail. To the contrary, the requirements in this Final Rule will
achieve the Commission's goal: RTOs and ISOs will be obligated to
demonstrate that they are responsive to the needs of customers and
other stakeholders through a direct collaboration among the RTOs and
ISOs and their constituencies. Therefore, to specify how an RTO or ISO
would be expected to demonstrate compliance with the criteria, as
requested by some commenters, would not be consistent with our stated
objective in this section of the Final Rule. Upon each RTO's or ISO's
submittal of its compliance filing, parties will be free to raise
responsiveness issues specific to each RTO or ISO that they believe
have not been resolved satisfactorily. With regard to Constellation's
request, we clarify that we define ``customer'' as is defined in the
RTO's or ISO's tariff.
    514. Each RTO or ISO should consider in a collaborative process
prior to the submittal of compliance filings the issues or methods that
customers and other stakeholders want to raise that they believe will
be helpful in satisfying the responsiveness criteria. As suggested in
comments filed on the NOPR, such issues and/or methods may include, but
need not be limited to, changes of stakeholder processes, board
selection methodologies, and monitoring and reporting on the
effectiveness of the RTO or ISO in meeting the responsiveness criteria.
c. Additional Criteria
    515. We do not agree that additional criteria for responsiveness
are necessary at this time. Many of the criteria commenters propose
would require specific mandates from the Commission on items that could
be resolved by RTOs and ISOs through their own stakeholder procedures.
For example, establishing cost-containment requirements or requiring
the application of cost/benefit analyses for each RTO or ISO decision
in and of themselves are not measures of responsiveness, but rather are
practices and procedures that are best developed through the
collaborative efforts of each RTO or ISO and their respective customers
and other stakeholders. Our objective in requiring RTOs and ISOs to
demonstrate their responsiveness to customers and other stakeholders is
to ensure that the RTOs and ISOs, in collaboration with their customers
and other stakeholders, work toward developing regional solutions
suited to the region's needs.
5. Board Advisory Committee and Hybrid Board
    516. In the NOPR, the Commission emphasized that various approaches
may satisfy the responsiveness criteria and encouraged each RTO or ISO
to develop an approach that best suits its own governance structure and
stakeholder needs. The Commission asked for comments on two proposed
approaches for achieving board responsiveness--a board advisory
committee composed of stakeholders and a hybrid board that includes
both independent and stakeholder members. The Commission indicated that
a board advisory committee would be a particularly strong approach to
improving RTO and ISO responsiveness.\611\
---------------------------------------------------------------------------

    \611\ NOPR, FERC Stats. & Regs. ] 32,628 at P 277.
---------------------------------------------------------------------------

a. Comments
    517. Commenters generally express support for the board advisory
committee as a method of ensuring board responsiveness.\612\ They argue
that the advisory committee is the better method of balancing the
interests of stakeholders without sacrificing the independence of RTO
or ISO boards. Others argue, however, that advisory boards do not
always allow for meaningful input from stakeholders because they do not
have decisional authority.
---------------------------------------------------------------------------

    \612\ See, e.g., DRAM at 27; Duke Energy at 2-3; Exelon at 16-
17; FirstEnergy at 17; ITC at 12-13; Midwest ISO at 38; NARUC at 19;
Old Dominion at 5; OMS at 17-18; Pennsylvania PUC at 20; PJM Power
Providers at 12 (board liaison committee); and Steel Producers at
14.
---------------------------------------------------------------------------

    518. National Grid urges the Commission to resist the inclination
to micromanage RTO and ISO governance structure. It states that
stakeholders who voluntarily participate in an RTO or ISO should be
able to develop their own governance.\613\ National Grid states that
the governance structures already in place among RTOs and ISOs are
products of stakeholder agreements and the Commission should not
overturn these compromises.\614\
---------------------------------------------------------------------------

    \613\ National Grid at 9.
    \614\ Id. at 10.
---------------------------------------------------------------------------

    519. Several RTOs and ISOs note their support for the advisory
board concept by pointing to their own existing advisory boards. For
example, the Midwest ISO's Advisory Committee consists of 23
representatives from nine stakeholder groups. The Advisory Committee is
required to consider separately any measure that is the product of a
close vote in committee.\615\ PJM states that it successfully worked
with its stakeholders to develop and implement a Liaison Committee in
2007. PJM describes the Liaison Committee structure as an attempt to
respect the Board's independence in decision making while ensuring
accountability and clear communication with the membership.\616\
---------------------------------------------------------------------------

    \615\ Midwest ISO at 38.
    \616\ PJM at 8.
---------------------------------------------------------------------------

    520. Commenters provide several suggestions to the Commission on
how best to structure an advisory board. NARUC suggests that the
Commission require that these advisory committees have open positions
for state commissions and state consumer advocates.\617\ PJM Power
Providers recommends that the Commission encourage RTOs or ISOs that
select an advisory board approach to recognize diversity as an
essential attribute for compliance with the Commission's criteria.
---------------------------------------------------------------------------

    \617\ NARUC at 19.
---------------------------------------------------------------------------

    521. PJM Power Providers also suggests that representation on the
advisory board should be subject to term limits to ensure diversity
over time.\618\ PJM Power Providers urges that the Commission encourage
representation on the advisory board to be limited to

a defined period with rotating membership. PJM Power Providers
recommends that no entity or its affiliates be permitted to have more
than one representative on the board advisory committee simultaneously.
The Midwest ISO TOs suggest that the advisory committee structure be
changed so that transmission owners have a percentage of votes
commensurate with the costs they would bear on major expenditures. DRAM
agrees with the use of a representative board advisory committee and
supports equal representation for demand resources.\619\ IID recommends
the establishment of an advisory committee to the CAISO Board
comprising voluntary representatives from neighboring balancing
authority areas bordering or internal to the CAISO.\620\
---------------------------------------------------------------------------

    \618\ PJM Power Providers at 11.
    \619\ DRAM at 27.
    \620\ IID at 8-9.
---------------------------------------------------------------------------

    522. ATC suggests that the Commission should require stakeholder
sector representatives to explain the degree to which a vote they cast
was supported by their sector's members, and why any minority within a
sector disagreed with the majority position. ATC also recommends that
RTOs and ISOs and their stakeholders should be allowed to propose
exactly how sectors' minority views on main stakeholder committee votes
should be conveyed to RTO and ISO boards.\621\
---------------------------------------------------------------------------

    \621\ ATC at 9. IID also suggests that the Commission's
oversight would be aided by requiring RTOs and ISOs to report both
majority and minority stakeholder positions to the Commission when
they file proposed changes to their rates and tariffs.
---------------------------------------------------------------------------

    523. Others comment on board selection and composition. The
Pennsylvania Commission suggests that the Commission may wish to
increase board responsiveness to stakeholders through modifications to
the board nominating and selection process. It says that one approach
might be to require that all board nominees be selected from an outside
consultant's list by a nominating committee that is largely or entirely
composed of stakeholder representatives, and/or representatives of the
states that the RTO or ISO serves. The Pennsylvania Commission further
offers that the Commission should consider prohibiting RTO or ISO
management from being part of, or participating in the deliberations
of, the board member nominating committee; this will avoid obligating
board members to management for their nomination or retention.\622\
---------------------------------------------------------------------------

    \622\ Pennsylvania PUC at 19.
---------------------------------------------------------------------------

    524. NSTAR states that while there are requirements for business
and technical expertise to serve on the ISO New England board, there is
no requirement that any of the members have any experience serving the
customers who ultimately pay for the entire market. As a result, NSTAR
requests that the Commission consider providing guidance on the
composition of boards to include more consumer representatives.\623\
The Ohio Commission recommends that the Commission require each RTO and
ISO to include on its board at least one individual with extensive
state regulatory experience.\624\ Moreover, it states that the
Commission should compel the RTO's or ISO's board to work with the
relevant regional state advisory committee.
---------------------------------------------------------------------------

    \623\ NSTAR at 10.
    \624\ Ohio PUC at 38.
---------------------------------------------------------------------------

    525. Regarding hybrid boards, commenters are split on whether a
hybrid board represents a valid approach to ensuring board
responsiveness. Some commenters argue that a hybrid board is a good
alternative to a board advisory committee, and would provide a good way
for stakeholders to have input on RTO and ISO decision making. Many
more commenters, however, argue that the Commission should not allow
hybrid boards. They point to the potential to endanger the independence
of the RTO or ISO board and to create conflict of interest for
stakeholder board members.
    526. TAPS supports the hybrid board approach and says that, with
adequate protections, appropriately structured hybrid boards are a
better means of achieving a responsive, accountable RTO or ISO than
another board advisory committee of stakeholders.\625\ TAPS also notes
that, by making stakeholders vested partners in board decision making,
hybrid boards can change the dynamic of the RTO or ISO, which, it
claims, often pits stakeholders against the RTO or ISO. Industrial
Consumers also support the hybrid board approach, and suggest that
stakeholder members be split equally between representatives of
supplier and consumer interests.\626\
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    \625\ TAPS at 64.
    \626\ Industrial Consumers at 24.
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    527. Other commenters object to the idea of hybrid boards.
Industrial Coalitions state that hybrid boards would be unlikely to
provide adequate representation for end-use customers, and would
further diminish customers' already limited voice in RTO and ISO
governance. Industrial Coalitions argue that the proposed criteria for
hybrid boards are not sufficient to prevent conflicts of interest on
the part of board members.\627\ Also, NARUC argues that a hybrid board
conflicts with the goal of RTO and ISO independence, and would be
unwieldy and ineffective.\628\
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    \627\ Industrial Coalitions at 24-32.
    \628\ NARUC at 18-19.
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    528. Duke Energy argues that hybrid boards could create the
appearance of, and provide the opportunity for, undue preference in
favor of stakeholder board members.\629\ ITC argues that mandating or
allowing hybrid boards would be a mistake, as this would sacrifice RTO
and ISO independence. ITC states that as long as the Commission allows
hybrid boards, there will be tremendous pressure on RTOs and ISOs to
form a hybrid board, or else be seen as being ``unresponsive'' by
stakeholder groups. ITC argues that hybrid boards would violate the
principles outlined in Order No. 890, and would allow stakeholders with
no interest in new development to block transmission projects. ITC also
states that hybrid boards will make it more difficult to develop
appropriate transmission pricing systems; for example, stakeholder
board members may seek to serve their own interests through allocation
of new project costs to others.
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    \629\ Duke Energy at 2-3.
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    529. The Pennsylvania PUC also notes concern regarding stakeholder
board members when the board may be required to review competitively
sensitive information in making decisions. It states that it is unclear
how, or whether, non-independent members would be prevented from
reviewing such material.\630\
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    \630\ Pennsylvania PUC at 18.
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    530. FirstEnergy opposes giving particular stakeholder
constituencies preferential rights or privileges under the name of
responsiveness, and states that attempts by state commissions to
elevate their stakeholder status to advice and approval over RTO or ISO
initiatives represent a serious threat to RTO and ISO
independence.\631\
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    \631\ FirstEnergy at 17.
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    531. OMS argues that allowing market participants to hold seats on
an RTO or ISO board would jeopardize independence. OMS explains that
stakeholder board members can be expected to act in the interests of
the companies with which they are affiliated.\632\ OMS is also
concerned that the members of a hybrid board would create directors
unable to fully and fairly exercise their business judgment

consistent with general corporate governance law.\633\
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    \632\ OMS at 15.
    \633\ Id. at 15-16.
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    532. PJM concurs that hybrid boards are a poor solution given the
legal and practical pitfalls associated with these structures.\634\ PJM
concludes that the NOPR does not demonstrate how the inherent conflicts
in fiduciary duties (as well as issues of access to confidential data)
would be resolved through a hybrid board structure.\635\
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    \634\ PJM at 9.
    \635\ Id. at 10.
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    533. The California PUC is sympathetic to the Commission's
objectives to improve customer access to RTO and ISO boards of
directors and believes that the Commission's proposal of flexibility on
this issue is appropriate. However, it states that the requirement that
RTOs and ISOs establish a board advisory committee is preferred over
the hybrid board approach and the CAISO already has such a mechanism in
place and could easily demonstrate to the Commission that it already
satisfies the objectives of the NOPR on this issue.\636\ The California
PUC also states that it is questionable whether the Commission has the
legal authority to take the type of actions to reform RTO and ISO
boards of directors that are being considered in the NOPR and urges the
Commission to proceed only by means of an RTO- or ISO-specific
adjudicative process under section 206 of the Federal Power Act. It
states that the creation of a hybrid board of directors would violate
Order Nos. 888 and 2000, and that the Commission lacks legal authority
to impose any reform pertaining to the makeup of the board of directors
of a state-created ISO.\637\
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    \636\ Id. at 56.
    \637\ California PUC at 54.
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b. Commission Determination
    534. The Commission will not require RTOs or ISOs to adopt a
specific form of board structure--whether board advisory committee,
hybrid board, or other--in this rule or when evaluating their
compliance filings to determine whether their existing or proposed
structures and procedures are appropriately responsive to customers and
other stakeholders. The Commission agrees with commenters that a one-
size-fits-all approach is not appropriate, given the different needs of
each region. As the Commission noted in the NOPR, it views the board
advisory committee as a particularly strong mechanism for enhancing
responsiveness, and expects each RTO and ISO to work with its
stakeholders to develop the mechanism that best suits its needs.
    535. The Commission will not require, as proposed by the Ohio
Commission, that at least one member of RTO or ISO boards have state
regulatory experience. Similarly, the Commission will not require, as
proposed by NARUC, that board advisory committees have open positions
for state commissions and state consumer advocates. However, these
suggestions may be considered by RTOs and ISOs during their own
deliberations on compliance with this Final Rule.
    536. In response to the comments of California PUC, the Commission
notes that the approach adopted in this Final Rule to require each RTO
or ISO to submit a compliance filing demonstrating that it has in place
or will adopt practices and procedures to ensure that its board of
directors is responsive to customers and other stakeholders is within
its jurisdictional authority.\638\ The Commission is not mandating a
specific approach such as a hybrid board of directors in this
rulemaking, but is instead establishing a responsiveness objective that
each RTO or ISO may meet in its own way.
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    \638\ See Order No. 2000, FERC Stats & Regs ] 31,089 at 31,039.
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    537. Several commenters argue that the Commission should not allow
hybrid boards for legal or practical reasons, including concerns over
the independence of RTO and ISO boards. The Commission denied similar
requests to disallow hybrid boards in Order No. 2000, noting that RTOs
take many different forms to reflect the various needs of each
region.\639\ The Commission found that a case-by-case review of each
RTO board structure was best, with the general guidance that any board
including market participants should ensure that no one class would be
allowed to veto a decision reached by the rest of the board and that no
two classes could force through a decision that is opposed by the rest
of the board.\640\ We choose to follow our decision on hybrid boards in
Order No. 2000 here. As the Commission has found in other
circumstances, a hybrid governance structure may be constructed in a
way that allows for the expertise of various groups to inform the
decision-making process, while still remaining independent such that no
individual market participant is given undue influence over the
decisions of the board.\641\ Our ruling here is not meant to imply that
all hybrid board structures are acceptable. RTOs or ISOs wishing to
adopt a hybrid board will have to show in their compliance filings that
their proposals are consistent with the principles of Order No. 2000
and other relevant precedent. Commenters are free to raise any specific
objections to a hybrid board proposal in response to the RTO's or ISO's
compliance filing, and the Commission will be able to determine the
validity of those objections against a concrete proposal from the RTO
or ISO, if any such proposal is made.
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    \639\ Id. at 31,073-74.
    \640\ Id.
    \641\ See Western Systems Coordinating Council, 96 FERC ]
61,348, at 62,296 (2001) (approving a hybrid board for WECC). While
the WECC is not an RTO, the Commission applied a similar standard to
the formation of the WECC board as it applied to RTOs in Order No.
2000.)
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6. Supermajority Requirement
    538. In the NOPR, the Commission requested comment on whether RTOs
and ISOs should be encouraged (or required) to base their process for
selecting non-independent members of a board advisory committee, or the
board itself, on a supermajority vote of eligible stakeholders.
a. Comments
    539. The few commenters that address the issue are split on whether
the Commission should require members of advisory boards or hybrid
boards to be chosen by a supermajority of stakeholders. Some commenters
are skeptical of using a supermajority. Others, such as Steel
Producers, believe that it could be beneficial for ensuring that
minority perspectives are heard, as those elected to the board by a
supermajority would be more likely to be responsive to viewpoints
beyond those of their own company or stakeholder segment. Steel
Producers argue that a supermajority voting requirement would provide
``minority'' stakeholders a meaningful voice and prevent one group of
stakeholders from selecting a disproportionate number of board
members.\642\
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    \642\ Steel Producers at 14.
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    540. A few commenters suggest that supermajority requirements may
be more useful for choosing representatives for specific market
sectors; members of each market sector would be allowed to choose their
own representatives by a supermajority rather than having voting among
the RTO or ISO as a whole.\643\ Other commenters argue that the
Commission should leave the decision on whether to require a
supermajority to regional preference.
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    \643\ See APPA; California Munis.
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    541. On the other hand, Comverge is concerned that the use of a
supermajority vote to choose board

representatives would make it difficult to reconcile minority positions
with demand response interests and suggests that the Commission
consider support for separate board advisory committees that are
intended primarily to represent demand response and demand-side
resources.\644\
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    \644\ Comverge at 24.
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    542. Xcel believes that the Commission should narrowly define
``stakeholder'' to ensure that a stakeholder is not simply any person
in the room. For example, in some organized markets, e.g., the Midwest
ISO, the advisory structure permits each stakeholder sector to ballot
only within its own sector, which reduces the risk of one sector
dominating the overall ballots.\645\
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    \645\ Xcel at 14.
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    543. SMUD indicates that its comments on the ANOPR urged adoption
of requirements that: (1) The RTO or ISO give stakeholders a formal
voting process to express their views, and (2) the RTO or ISO explain
when it ignores supermajority sentiments.\646\ SMUD claims that the
NOPR's more vague requirements are insufficient; thus specific
directives should be set forth in any final action.
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    \646\ Id. at 12.
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    544. PJM suggests that a supermajority requirement is not a
necessary or sufficient one, and argues that the Commission should
instead encourage RTOs or ISOs that choose to establish an advisory
board to recognize diversity as an essential attribute for compliance
with the Commission's guidelines.
    545. Finally, ITC notes that a supermajority requirement, as
suggested in the NOPR, may or may not be beneficial for hybrid boards